CHAPTER 7: ORGANIZATIONAL STRUCTURE AND DESIGNMultiple Choice Questions

1. Organizational _____ illustrate relationships among an organization’s units and lines of authority.a. chartsb. channelsc. structuresd. paradigms

2. _____ is the sum of the ways an organization divides its labor into distinct tasks and then coordinates them.a. Differentiation b. Organizational designc. Operations managementd. Organizational structure

3. _____ is the extent to which tasks are divided into subtasks and performed by specialists.a. Integrationb. Differentiationc. Formalizationd. Interdependence

4. _____ occurs when several groups, that are largely independent in their functions, collectively contribute to a common output. a. Pooled interdependenceb. Cognitive interdependencec. Sequential interdependenced. Reciprocal interdependence

5. _____ is the extent to which various parts of organizations cooperate and interact.a. Integrationb. Differentiationc. Formalizationd. Interdependence

6. _____ exists when two or more groups depend on one another for inputs. a. Task interdependenceb. Pooled interdependencec. Reciprocal interdependenced. Sequential interdependence

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7. _____ is the degree to which one unit, or one person, must use the work or resources of another unit or person to accomplish tasks.a. Differentiationb. Formalizationc. Integrationd. Interdependence

8. Company ABC produces widgets. Timely delivery to Company XYZ is critical since the widgets are essential to the production of Company XYZ’s gadgets. This is an example of _____.a. pooled interdependenceb. reciprocal interdependencec. sequential interdependenced. cross-functional interdependence

9. Which of the following is the best example of cognitive differentiation?a. At a civil engineering firm, some engineers specialize in construction engineering,

while others specialize in environmental engineering.b. An auto manufacturer produces a luxury automobile in order to enhance the

image of its other vehicles.c. At a shoe company, the product development department relies on marketing data

to generate ideas for promising new products.d. Accountants may view an organization’s overall performance in terms of financial

results, whereas marketers may view that same performance in terms of customer satisfaction.

10. One of the driving forces behind the integration of tasks is _____.a. globalizationb. interdependencec. localizationd. unity of command

11. A construction company orders windows from one division of a manufacturing company and roofing from another division of the same company. To meet this customer’s overall needs, the manufacturing company should exercise _____ interdependence.a. intermittentb. pooledc. reciprocald. sequential

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12. Generally, the more _____ that exists within the organization, the more useful ____ are as an integration mechanism.a. task independence; rulesb. task interdependence; rulesc. task independence; valuesd. task independence; goals

13. As task uncertainty and interdependence increase, _____ are a more effective coordination mechanism than _____.a. goals; rulesb. rules; goalsc. rules; valuesd. goals; values

14. Why are “values” an important coordinating mechanism in conditions of high task uncertainty and interdependence?a. They represent measurable outcomes and specify how to obtain them.b. Those holding the same values will maintain standard operating procedures.c. They establish guidelines for behavior and consequences in specific conditions.d. Those holding the same values will all work toward the same outcomes while

maintaining flexibility in how they are accomplished.

15. What sort of interdependence exists when two or more groups within a company depend upon one another for inputs?a. pooledb. intermittentc. reciprocald. sequential

16. Subordinates and managers with very high capabilities are required for _____ organizations with _____ spans of control to be successful.a. flat; wideb. tall; widec. flat; narrowd. tall; narrow

17. What is meant by the term “unity of command”?a. the idea that the line of authority should be clear and directb. the idea that interdependence within a firm should be kept to a minimumc. the idea that managers should have a limited span of control

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d. the idea that every employee should have one, and only one, boss

18. A firm with strong formalization would be less likely to emphasize _____.a. narrow spans of controlb. clear lines of authorityc. informal meetingsd. unity of command

19. A firm’s _____ specifies who reports to whom within an organization. a. structureb. frameworkc. line of authorityd. span of control

20. A _____ span of control throughout an organization will lead to a _____ organization structure with multiple reporting layers.a. narrow; flatb. narrow; tallc. wide; talld. wide; flat

21. All of the following EXCEPT _____ are factors that influence the span of control. a. technologyb. job complexityc. cognitive differentiation d. abilities of employees

22. The _____ is the unofficial but influential means of communication, decision making, and control that are part of the habitual way things get done in an organization. a. pipeline b. informal organizationc. information tunneld. interpersonal channel

23. In which of the following organizations is decision-making authority pushed down to its lowest possible level?a. centralized organizationsb. decentralized organizations

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c. flat organizationsd. formal organizations

24. Japanese multinational firms tend to operate as _____, announcing decisions from home offices to subsidiaries. European multinational operations tend to operate as _____, pushing decision-making authority to the lowest possible level.a. centralized organizations; decentralized organizationsb. decentralized organizations; centralized organizationsc. functional organizations; geographic organizationsd. geographic organizations; functional organizations

25. The term “bamboo ceiling” refers to _____.a. the exclusion of host nationals from strategic decision making in centrally

controlled Japanese subsidiariesb. the reluctance of Japanese managers to allow centralized decision making among

their subordinatesc. the lack of information flow from the Japanese-owned subsidiaries in foreign

countries back to headquarters in Japand. the tendency of Japanese firms to delegate decisions more frequently than

European or American firms

26. Which of the following structural combinations best depicts the U.S. military?a. formal/decentralizedb. informal/decentralizedc. formal/centralizedd. informal/centralized

27. Which of the following is NOT a characteristic of a functional structure?a. The structure creates a clear, broad view of overall organizational goals.b. The structure facilitates specialization of functional knowledge.c. The structure reduces duplication of functional resources.d. The structure is suited for mid-sized firms with limited product diversification.

28. A bank organizes itself around the basic services it provides: retail banking, business banking, and investment banking. Each service group has its own finance, marketing, operations, and human resource management department. The bank is using a _____.a. functional structureb. product structurec. division structured. matrix structure

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29. In a product structure, each product is treated as a _____; that is, the expenses related to a product are subtracted from the revenues generated by selling it.a. profit centerb. locus of valuec. core competencyd. functional division

30. Which of the following is NOT a characteristic of a product structure?a. It maximizes economies of scale for functional areas. b. The performance of the firm’s products is typically easier to evaluate.c. There is usually greater product responsiveness to market changes.d. It often reduces the operating decision-making burden of the top executive.

31. In which of the following ways are product and customer structures similar?a. They both decrease companies’ ability to leverage global scale economies.b. They both increase the international orientation of all managers.c. They both boost responsiveness to changing market conditions.d. They both create ambiguous lines of authority.

32. H and H Industries is a large industrial firm that manufactures and sells a wide range of electrical goods; ranging from turbines in power stations to electric engines for trains to household toasters and coffee pots. Based on this, which of the following would be the most appropriate structure for H and H Industries to adopt?a. a regional structureb. a customer structurec. a matrix structured. a division structure

33. One of the major weaknesses of the _____ structure is that it can inhibit coordination and communication among different regions.a. divisionb. functionalc. geographicd. product

34. There are major disadvantages in all of the following areas of a matrix structure EXCEPT _____.a. the flow of informationb. the level of accountabilityc. the complexity of performance evaluations

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d. the ability to respond to changing conditions

35. Companies that advocate unity of command would be least likely to adopt which organizational structure?a. customerb. divisionc. functionald. matrix

36. When a firm decides to outsource its manufacturing operations, a _____ allows it to maintain close contact with the firms to which it is outsourcing the work.a. division structureb. network structurec. functional structured. geographic structure

37. Which of the following statements characterizes a firm that operates within a “high-networked” structure?a. It uses outside organizations for limited activities only. b. It has little contact with firms to which work has been outsourced.c. It owns and executes most of its primary and support value chain activities.d. It has more value chain activities networked to external organizations than it owns

and executes internally.

38. One of the greatest potential advantages of using a _____ is that it allows managers to focus on core competencies. a. product structureb. network structurec. regional structured. functional structure

39. A manager prepares a report that details her firm’s diversity of customers and competitors. This manager is engaged in assessing her firm’s _____.a. global strategyb. marketing strategyc. corporate structured. environmental complexity

40. Which of the following is NOT a core category of environmental complexity?a. quality

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b. customersc. technologyd. competitors

41. “White water” environments are _____.a. stableb. formalc. dynamicd. stationary

42. Computer software companies compete against a wide array of competitors and must continually struggle to lead, or even stay abreast of, industry changes. Thus, we may say that software companies exist in _____and _____ external environments.a. complex; staticb. complex; dynamicc. simple; staticd. simple; dynamic

43. Assume that a firm operates in a highly complex and dynamic business environment. Its organizational structure would most likely be _____.a. centralizedb. formalizedc. decentralizedd. mechanized

44. A firm with _____ would most likely use global product divisions to manage foreign sales.a. high foreign sales and high product diversification b. high foreign sales and low product diversification c. low foreign sales and high product diversification d. low foreign sales and low product diversification

45. A mining company supplies materials such as sand, gravel, and lime for the local building trade. It has few export sales. What is the most likely structure that this firm will use to manage international sales?a. a matrix structure b. global product divisionsc. a geographic structure d. an international division

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46. Firms with _____ and _____ usually employ a geographic structure to manage international sales. a. low foreign sales; low product diversificationb. high foreign sales; low product diversificationc. low foreign sales; high product diversificationd. high foreign sales; high product diversification

47. As firms venture into foreign markets, _____.a. they usually begin with a limited number of productsb. the products to be sold are typically designed and produced domesticallyc. the primary international task is exporting products to foreign marketsd. all of the above

48. When designing an organizational structure for an international context, management must choose between a _____, which integrates activities on a coordinated worldwide basis and a _____, which differentiates activities in each country served. a. global approach; local approachb. local approach; global approachc. functional approach; network approachd. centralized approach; decentralized approach

49. Firms involved in international business can use _____ to help them deal with the pressures for both integration and differentiation. a. teamsb. liaisonsc. direct contactd. all of the above

50. _____ are individuals who are designated to act as a bridge between different areas, such as quality or manufacturing processes.a. Enablersb. Liaisonsc. Facilitatorsd. Fact-finders

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Short Essay Questions

51. Compare organizational structure and organizational design? (p. 170)

Organizational structure is the sum of the ways an organization divides its labor into distinct tasks and then coordinates them; organizational design is the process of assessing the organization’s strategy and environmental demands and then determining the appropriate organizational structure.

52. What is an organizational chart? (p. 170)

An organizational chart uses labeled boxes and connecting lines to illustrate relationships among units and lines of authority among supervisors and subordinates. While it can provide a view of an organization’s structure, an organizational chart does not show the complete organizational structure.

53. Describe the concept of “differentiation” in an organization. (pp. 170 – 171)

Differentiation is the extent to which tasks are divided into sub-tasks and performed by individuals with specialized skills. Differentiation’s main benefit is greater specialization of knowledge and skills. Task differentiation relates to what employees do. Cognitive differentiation involves the way employees think. Although differentiation contributes to greater specialization, it can create challenges to the integration of the various specialized capabilities needed to deliver a product or service to the customer.

54. Describe the types of interdependence among organizational units? (p. 171)

Interdependence is the degree to which each person depends on other units or people to accomplish a required task. Pooled interdependence occurs when various groups are largely independent in their functions but collectively contribute to a common output. Sequential interdependence exists when the outputs of one group become the inputs of another group. Reciprocal interdependence exists when two or more groups depend on one another for inputs.

55. Explain unity of command. (p. 173)

Formal organizations tend to stress the unity of command; that is, the notion that an employee should have one and only one boss. Thus, people working in a highly formal organization with a strong orientation toward unity of command are likely to have one boss who directs their work and evaluates their performance.

56. Discuss the term “span of control.” (p. 173)

Span of control refers to the number of employees reporting to a given supervisor. Consistent span-of-control patterns can affect the overall “shape” of an organization. Wide spans of control throughout the organization generally lead to a flat organization

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structure. Narrow spans of control throughout the organization tend to result in a tall organization structure.

57. What can be said about decision making in centralized organizations and decentralized organizations? (p. 176)

Centralized organizations tend to restrict decision making to fewer individuals, usually at the top of the organization. Decentralized organizations tend to push decision-making authority down to the lowest possible level.

58. What role does outsourcing play in a networked organization? (pp. 185 – 186)

A major part of creating a networked structure involves reconfiguring the firm’s value chain in an effort to cut costs, promote specialization, and improve integration and coordination. Outsourcing a value chain activity is one of the most common ways of networking with an external organization; i.e., contracting a significant organizational activity out to an independent party. Increasingly, critical activities that used to be done internally (such as IT, human resources, manufacturing, and customer service) are being outsourced. Much of the outsourcing that occurs today is to companies outside the United States. Technology has made it possible to network these activities while retaining reliability and lowering costs.

59. What factors, or core categories, impact environmental complexity? (p. 188)

Environmental complexity involves the breadth and depth of differences and similarities in an organization’s external environment. Complex environments have greater depth and breadth of differences than do simple environments. The differences and similarities can be assessed along many dimensions, but there are several core categories: products, customers, technology, competitors, suppliers, and geography.

60. Within the context of international business, what is the relationship between the nature of a company and its structure? (pp. 190 – 191)

The first dimension of the relationship between the nature of a company and its structure is the extent of foreign sales. The second dimension is product diversification; that is, the extent to which a firm has many different products across many different segments. Firms with low foreign sales and low product diversification generally form an international division to manage their international sales. Firms with low product diversification and high foreign sales usually employ a geographic structure. Firms with low foreign sales and high product diversification typically use global product divisions. Firms with high foreign sales and high product diversification frequently use a matrix structure.

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61. Within the context of the increasingly international environment in which organizations compete, contrast the global approach and the local approach to business. (p. 192)

A global approach involves the integration of activities on a coordinated, worldwide basis. Firms are likely to use a global approach if the benefits gained from worldwide volumes, efficiencies, or economies of scale are significant. A local approach involves the tendency to differentiate activities country-by-country in order to meet the needs of the local markets. Firms often use a local approach when the benefits from location-specific differentiation and adaptation are significant and economies of scale are small.

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