Chapter 7 Principles of Planning
1) Planning is the process of determining how the organization can get where it wants to go and
what it will do to accomplish its objectives.
Answer: True
Rationale:
Planning involves setting objectives and determining the best course of action to achieve them. It
is about deciding in advance what needs to be done, how it will be done, and who will do it.
2) The affirmative purpose of planning is to minimize risk by reducing the uncertainties
surrounding business conditions and clarifying the consequences of related management actions.
Answer: False
Rationale:
While planning does aim to reduce uncertainties and clarify consequences, its primary purpose is
to set goals and outline the actions necessary to achieve them, rather than simply minimizing
risk.
3) A potential disadvantage of planning is that it can take up too much managerial time.
Answer: True
Rationale:
Planning can be time-consuming, especially if not done efficiently. Managers need to balance the
time spent on planning with other important managerial tasks.
4) Of the four primary management functions, organizing usually precedes planning.
Answer: False
Rationale:
In the management process, planning typically precedes organizing. Planning sets the direction
and goals, while organizing involves arranging resources and tasks to achieve those goals.
5) Premises are the assumptions upon which alternatives to reaching organizational objectives
are based.
Answer: True
Rationale:
Premises are the underlying assumptions upon which plans are based. They provide the
foundation for decision-making and help in evaluating alternative courses of action.
6) The last step in the planning process focuses on developing plans to pursue the chosen
alternative for reaching organizational objectives.
Answer: False
Rationale:
The last step in the planning process is usually implementing the plans that have been developed,
not developing new plans. Implementation involves putting the plans into action and monitoring
their progress.
7) Organizational objectives are the targets toward which the open management system is
directed.
Answer: True
Rationale:
Organizational objectives are the specific targets or outcomes that an organization aims to
achieve. They provide a clear direction for the organization and guide decision-making.
8) An organization's vision is what the organization exists to do, given a particular group of
customers and customer needs.
Answer: False
Rationale:
An organization's vision is a broad statement of its future direction and aspirations. It describes
what the organization hopes to achieve or become in the long term, not just in relation to
customers and their needs.
9) Organizations exist for various purposes but have the same types of objectives.
Answer: False
Rationale:
Organizations can have different purposes and missions, which can lead to different types of
objectives. For example, a for-profit organization may have different objectives than a nonprofit
organization.
10) Managers should establish performance objectives that are within easy reach for employees.
Answer: False
Rationale:
Performance objectives should be challenging yet achievable. Setting objectives that are too easy
can lead to complacency, while setting objectives that are too difficult can lead to frustration. It's
important to find a balance that motivates employees to perform at their best.
11) According to Drucker, management should set objectives that indicate the company's
responsibilities to its customers and society but should not specify the extent to which the
company intends to live up to these responsibilities.
Answer: False
Rationale:
Drucker emphasized that management should not only set objectives indicating responsibilities
to customers and society but also specify the extent to which the company intends to fulfill these
responsibilities. Clarity in objectives is crucial for effective management.
12) Short-term objectives are targets to be achieved within five to seven years.
Answer: False
Rationale:
Short-term objectives are typically targets to be achieved within one year or less. Objectives with
a timeframe of five to seven years would be considered long-term objectives.
13) One of the primary guidelines for establishing quality objectives is that management should
set objectives only in relation to other organizational objectives.
Answer: True
Rationale:
Quality objectives should be aligned with and support other organizational objectives. They
should not be set in isolation but should contribute to the overall goals of the organization.
14) Suboptimization is the process of assigning subobjectives to the various people or units in
the organization based on the organizational objectives.
Answer: False
Rationale:
Suboptimization refers to the situation where individual units or departments in an organization
focus only on their own objectives, potentially to the detriment of the overall organizational
goals. It is not about assigning subobjectives but about the negative impact of narrow focus on
individual units.
15) The management by objectives (MBO) approach has been found to be ineffective for
nonprofit organizations.
Answer: False
Rationale:
The MBO approach can be effective for nonprofit organizations as well as for-profit
organizations. It helps align individual and team goals with the organization's overall objectives,
improving performance and accountability.
16) A key element of any management by objectives (MBO) program is top management support
and commitment.
Answer: True
Rationale:
Top management support and commitment are crucial for the success of an MBO program. It
sets the tone for the entire organization and ensures that the objectives set are aligned with the
overall strategic direction.
17) A drawback of the management by objectives (MBO) program is that it can be time
consuming.
Answer: True
Rationale:
Implementing an MBO program requires time and effort, particularly in setting clear objectives,
monitoring progress, and providing feedback. However, the benefits of improved performance
and alignment often outweigh the time invested.
18) The jury of executive opinion method is a sales forecasting technique that predicts future
sales by analyzing the opinions of customers as a group.
Answer: False
Rationale:
The jury of executive opinion method involves gathering the opinions of a group of executives or
experts within the organization to forecast future sales, not the opinions of customers.
19) PERT is a network of project activities showing both the estimates of time necessary to
complete each activity and the sequence of activities that must be followed to complete the
project.
Answer: True
Rationale:
PERT (Program Evaluation and Review Technique) is a project management tool that helps to
analyze and represent the tasks involved in completing a given project. It shows the estimated
time for each activity and the sequence in which they need to be completed.
20) Plans fail when management fails to grasp the overall planning process.
Answer: True
Rationale:
Effective planning requires a clear understanding of the overall process, including setting
objectives, developing strategies, implementing plans, and evaluating results. Failure to
understand and follow this process can lead to plans that are ineffective or unachievable.
21) The process of determining how an organization can get where it wants to go and what it will
do to accomplish its objectives is known as ________.
A) organizing
B) influencing
C) planning
D) controlling
E) analyzing
Answer: C
Rationale:
Planning involves setting objectives and determining the best course of action to achieve them. It
is about deciding in advance what needs to be done, how it will be done, and who will do it.
22) The protective purpose of planning is to ________.
A) ensure integration among the organization's various business units
B) increase the degree of organizational success
C) optimize the use of organizational resources
D) minimize risk by reducing the uncertainties surrounding business conditions
E) maximize the organization's ability to leverage environmental opportunities
Answer: D
Rationale:
The protective purpose of planning is to minimize risk by reducing uncertainties and clarifying
the consequences of related management actions.
23) The affirmative purpose of planning is to ________.
A) increase the degree of organizational success
B) increase the level of workplace diversity
C) optimize the use of organizational resources
D) refine work methods and reduce production costs
E) improve organizational compliance with industry standards
Answer: A
Rationale:
The affirmative purpose of planning is to increase the degree of organizational success by setting
clear objectives and determining the best ways to achieve them.
24) Which of the following is the fundamental purpose of planning?
A) eliminating risk
B) helping the organization reach its objectives
C) optimizing the use of resources
D) identifying organizational objectives
E) organizing work processes
Answer: B
Rationale:
The fundamental purpose of planning is to help the organization reach its objectives by setting
goals and outlining the actions necessary to achieve them.
25) Which of the following is an advantage of planning?
A) It eliminates all risks.
B) It enhances decision coordination.
C) It emphasizes immediate goals.
D) It suboptimizes the use of resources.
E) It promotes individual performance.
Answer: B
Rationale:
Planning enhances decision coordination by ensuring that all activities are aligned with the
organization's objectives and strategies.
26) A disadvantage of planning is that it ________.
A) causes managers to focus on the future
B) reduces organizational flexibility once plans are set
C) requires organizational resources
D) can take up too much managerial time
E) involves planning for situations that may not occur
Answer: D
Rationale:
A potential disadvantage of planning is that it can take up too much managerial time, especially
if not done efficiently.
27) ________ is the primary management function.
A) Organizing
B) Influencing
C) Controlling
D) Planning
E) Staffing
Answer: D
Rationale:
Planning is often considered the primary management function because it sets the direction and
goals for the organization.
28) ________ is a standing plan that designates specific required action.
A) A resource
B) A rule
C) A budget
D) A strategy
E) A responsibility
Answer: B
Rationale:
A rule is a standing plan that designates specific required action. Rules are often used to guide
employee behavior and decision-making.
29) A single-use financial plan that covers a specified length of time is known as a(n) ________.
A) offshoot
B) microsystem
C) spinoff
D) subsystem
E) budget
Answer: E
Rationale:
A budget is a single-use financial plan that covers a specified length of time, typically one year.
30) The first step in the planning process is to ________.
A) list alternative ways of reaching objectives
B) state organizational objectives
C) develop the premises upon which each alternative is based
D) develop plans to pursue the chosen alternative
E) put plans into action
Answer: B
Rationale:
The first step in the planning process is to state organizational objectives, which provide a clear
direction for the planning process.
31) Which of the following steps in the planning process should precede the others?
A) develop premises upon which each alternative is based
B) develop plans to pursue the chosen alternative
C) list alternative ways of reaching objectives
D) choose the best alternative for reaching objectives
E) put plans into action
Answer: C
Rationale:
Listing alternative ways of reaching objectives should precede developing premises or plans, as
it involves generating different options for achieving the organization's goals.
32) After identifying the alternative ways in which the organization can reach its objectives, a
manager should ________.
A) develop plans for each alternative
B) choose the best alternative for reaching objectives
C) rank each alternative according to complexity
D) develop premises on which to base each alternative
E) choose the alternative which is most cost effective
Answer: D
Rationale:
Developing premises on which to base each alternative helps ensure that the decision-making
process is grounded in relevant and reliable information.
33) Alternatives to reach an organizational objective are based on assumptions known as
________.
A) objectives
B) missions
C) goals
D) premises
E) priorities
Answer: D
Rationale:
Premises are assumptions upon which alternatives are based. They provide the foundation for
decision-making and help in evaluating alternative courses of action.
34) The last step in the planning process is to ________.
A) put the plans into action
B) evaluate the organizational goals
C) choose the best alternative for reaching objectives
D) develop the premises upon which each alternative is based
E) state the organizational objectives
Answer: A
Rationale:
The final step in the planning process is to put the plans into action, implementing the chosen
course of action to achieve the organizational objectives.
35) ________ is the key to a successful planning process.
A) Classification
B) Repetition
C) Implementation
D) Evaluation
E) Standardization
Answer: C
Rationale:
Implementation is crucial for the success of a planning process. It involves executing the plans
and strategies developed during the planning phase.
36) The targets toward which an open management system is directed are known as ________.
A) organizational purposes
B) operational plans
C) organizational objectives
D) business processes
E) objective indicators
Answer: C
Rationale:
Organizational objectives are the targets toward which the organization is directed. They provide
a clear direction for the organization and guide decision-making.
37) ________ refers to what a firm exists to do, given a particular group of customers and
customer needs.
A) An operational plan
B) A unique selling proposition
C) An organizational purpose
D) A long-term goal
E) A vision statement
Answer: C
Rationale:
An organizational purpose defines why a firm exists and what it aims to achieve for its
customers. It provides a sense of direction and purpose for the organization.
38) Which of the following is an example of a statement of organizational purpose?
A) to increase the company's market share by 20 percent by 2011
B) to execute all projects in a timely and professional manner
C) to be the leading provider of professional health care services
D) to provide our employees with a challenging and rewarding work environment
E) to build long-lasting customer relationships based on trust
Answer: C
Rationale:
The statement "to be the leading provider of professional health care services" is an example of
an organizational purpose as it defines what the organization aims to achieve in its industry.
39) According to John F. Mee, which of the following points is an organizational objective for
businesses?
A) Service to society is the motivating force for managers.
B) The people responsible for attaining objectives should have a voice in setting them.
C) Managers are not bound by the ethical codes of the society in which the business operates.
D) Managers should establish performance objectives that they know are within reach for
employees.
E) Service to customers by the provision of desired economic values justifies the existence of the
business.
Answer: E
Rationale:
According to John F. Mee, service to customers by providing desired economic values justifies
the existence of a business. This is an organizational objective that focuses on meeting customer
needs.
40) It is important for an organization to ensure that the objectives set for its employees are
________.
A) unrealistically high
B) within easy reach
C) low
D) within reach, but not easy reach
E) out of reach
Answer: D
Rationale:
Objectives set for employees should be challenging yet achievable, to motivate employees to
perform at their best. Setting objectives that are too easy may lead to complacency, while setting
objectives that are too difficult may lead to frustration.
41) Which of the following is NOT one of the key areas in which Drucker advised managers to
set management system objectives?
A) market standing
B) profitability
C) government regulation
D) innovation
E) public responsibility
Answer: C
Rationale:
Drucker did not include government regulation as one of the key areas in which managers should
set management system objectives. Instead, he focused on areas such as market standing,
profitability, innovation, and public responsibility.
42) According to Drucker, which of the following goal areas relates to a tangible, impersonal
characteristic of organizational operations?
A) number of employees
B) innovation
C) managerial performance and development
D) worker performance and attitude
E) public responsibility
Answer: B
Rationale:
Innovation relates to a tangible, impersonal characteristic of organizational operations, as it
involves the development of new products, services, or processes.
43) One of the organizational objectives of Valpo Industries, a pharmaceutical firm, is "to
develop a new line of drugs for the treatment of life-threatening diseases such as cancer and
AIDS, through the use of patented technology and processes." According to Drucker, this
objective relates to ________.
A) market standing
B) innovation
C) productivity
D) profitability
E) public responsibility
Answer: B
Rationale:
Drucker considered innovation as a key area for organizational objectives, and developing a new
line of drugs would fall under this category.
44) According to Drucker, which of the following statements is an example of an organizational
objective related to productivity?
A) to reduce overall inventory management costs by 15 percent
B) to increase the use of environmentally friendly workplace practices
C) to lower the rate of attrition in the organization within the next 6 months
D) to increase the unit's monthly output by 10 percent within the next 12 months
E) to reduce total overhead costs by 5 percent by the end of the year
Answer: D
Rationale:
Increasing the unit's monthly output by 10 percent within the next 12 months is an example of an
organizational objective related to productivity, as it focuses on improving the efficiency of
operations.
45) One of the short-term objectives of Alport Corporation, a manufacturer of construction
equipment, is "to achieve a 15 percent return on investment (ROI) by September 2011."
According to Drucker, this objective relates to ________.
A) innovation
B) productivity
C) market standing
D) managerial performance
E) profitability
Answer: E
Rationale:
Achieving a 15 percent return on investment (ROI) by September 2011 is an example of an
organizational objective related to profitability, as it focuses on achieving a financial target.
46) According to Drucker, which of the following key areas for organizational objectives is more
personal and subjective in nature, and hence likely to arouse managerial opposition?
A) productivity
B) innovation
C) worker performance and attitude
D) physical and financial resources
E) market standing
Answer: C
Rationale:
Worker performance and attitude are more personal and subjective in nature compared to other
key areas for organizational objectives, and hence may arouse managerial opposition.
47) One of the corporate objectives of Supra Inc. is "to enrich the quality of life in the
community by providing education, training, and employment opportunities." According to
Drucker, this organizational objective relates to ________.
A) managerial performance and development
B) innovation
C) public responsibility
D) worker performance and attitude
E) market standing
Answer: C
Rationale:
Providing education, training, and employment opportunities to enrich the quality of life in the
community relates to public responsibility, as it focuses on fulfilling the organization's
obligations to society.
48) Targets to be achieved in one year or less are called ________.
A) time-bound actions
B) departmentalized goals
C) short-term objectives
D) long-term objectives
E) intermediate-term plans
Answer: C
Rationale:
Short-term objectives are targets to be achieved in one year or less, providing a specific
timeframe for achieving organizational goals.
49) HomeTurf is a retailer of wooden furniture. The firm currently has three stores and has plans
to set up two more within the next eight months. This is an example of a(n) ________.
A) intermediate-term objective
B) short-sighted objective
C) long-term objective
D) short-term objective
E) suboptimal objective
Answer: D
Rationale:
HomeTurf's plan to set up two more stores within the next eight months is an example of a shortterm objective, as it involves achieving a specific goal within a relatively short timeframe.
50) Intermediate-term objectives are targets to be achieved in ________.
A) one year or less
B) one to five years
C) three to seven years
D) five to seven years
E) five to ten years
Answer: B
Rationale:
Intermediate-term objectives are targets to be achieved in one to five years, providing a
timeframe that is longer than short-term objectives but shorter than long-term objectives.
51) Tandem Industries is a cycle manufacturer. As part of its planning activities, it sets an
objective to increase its market share by 5 percent within 3 years. This is an example of a(n)
________.
A) short-term objective
B) intermediate-term objective
C) long-term objective
D) suboptimal objective
E) principled objective
Answer: B
Rationale:
An objective to increase market share by 5 percent within 3 years is considered an intermediateterm objective, as it falls between short-term (less than a year) and long-term (more than five
years) time frames.
52) Which of the following refers to targets to be achieved within a time frame of five to seven
years?
A) short-term objectives
B) intermediate-term plans
C) long-term objectives
D) operational goals
E) medium-term objectives
Answer: C
Rationale:
Long-term objectives typically span a time frame of five to seven years, providing a roadmap for
achieving the organization's vision and strategic goals.
53) Plaxo Industries is a large-scale manufacturer of commercial kitchen equipment. Its products
are currently sold in Europe and the Middle East. Plaxo wants to foray into the Asian market,
and the company's management has set a target of entering the Chinese market by 2018. This is
an example of a(n) ________.
A) short-term objective
B) intermediate-term objective
C) long-term objective
D) medium-term objective
E) operational objective
Answer: C
Rationale:
Entering the Chinese market by 2018 is a long-term objective for Plaxo Industries, as it involves
expanding into a new market within a timeframe of more than five years.
54) A management guideline that recommends managers to clearly determine, understand, and
state organizational objectives before initiating any action is known as the ________.
A) management-by-objectives approach
B) hierarchy of needs
C) principle of the objective
D) hierarchy of objectives
E) concept of suboptimization
Answer: C
Rationale:
The principle of the objective emphasizes the importance of clearly determining and stating
organizational objectives before taking any action, ensuring that all activities are aligned with the
organization's goals.
55) In order to increase the quality of their objectives, managers should ________.
A) set employees' goals as high as possible
B) ensure that they set objectives entirely by themselves
C) establish goals that are within easy reach
D) let the people responsible for attaining the objectives have a voice in setting them
E) avoid relating objectives to specific actions
Answer: D
Rationale:
Allowing the people responsible for attaining objectives to have a voice in setting them helps
increase the quality of objectives by ensuring that they are relevant, achievable, and aligned with
organizational goals.
56) Which of the following is the rationale behind letting the people responsible for attaining
certain objectives have a voice in setting them?
A) Employees are more capable than managers and are better at establishing objectives.
B) Managers are motivated when their employees are allowed to have a say in goal setting.
C) Employees can showcase their managerial potential when they are allowed to set their own
goals.
D) Managers tend to set objectives that are often easily achievable and do not challenge
employees.
E) The people responsible for attaining the objectives know their job better than the managers
do.
Answer: E
Rationale:
The rationale behind letting the people responsible for attaining objectives have a voice in setting
them is that they often have a better understanding of their job and the challenges they face,
leading to more realistic and effective objectives.
57) When setting objectives, managers should state objectives as specifically as possible because
________.
A) it ensures that employees have explicit directions for what they should do
B) it ensures that employee productivity will vary according to the needs of the situation
C) it allows employees to make inferences about what they should do to accomplish their goals
D) it allows them to set the pace for employees' work
E) it reduces the risk of suboptimization
Answer: A
Rationale:
Stating objectives as specifically as possible ensures that employees have clear and explicit
directions for what they should do to accomplish their goals, reducing ambiguity and increasing
the likelihood of goal attainment.
58) A sales manager sets the following performance objective for members of his sales team: To
increase customer sales by 10 percent within the next 6 months. Which of the following is a valid
criticism of this objective?
A) It does not pinpoint expected results.
B) It is not stated in simple fashion.
C) It is not achievable.
D) It does not relate to specific actions.
E) It is not related to other organizational objectives.
Answer: D
Rationale:
The objective does not relate to specific actions that the sales team should take to increase
customer sales by 10 percent within the next 6 months, making it less actionable and measurable.
59) At Enviro Corp employees do not have to infer what they should do to accomplish their
goals. Which of the following guidelines does this refer to?
A) Pinpoint expected results.
B) Specify when goals are expected to be achieved.
C) Set goals high enough that employees will have to strive to meet them.
D) Relate objectives to specific actions whenever necessary.
E) Set objectives only in relation to other organizational objectives.
Answer: D
Rationale:
This refers to the guideline of relating objectives to specific actions whenever necessary,
ensuring that employees have clear direction on what they should do to accomplish their goals.
60) Which of the following is NOT a guideline for establishing quality objectives?
A) Let people responsible for attaining objectives have a voice in setting them.
B) State objectives as specifically as possible.
C) Pinpoint expected results.
D) Set objectives that are not related to other organizational objectives.
E) Specify when goals are expected to be achieved.
Answer: D
Rationale:
Setting objectives that are not related to other organizational objectives can lead to disconnected
efforts and suboptimal outcomes. It is important for objectives to be aligned with the overall
goals of the organization.
61) Which of the following guidelines helps employees know exactly how managers will
determine whether an objective has been reached?
A) Let people responsible for attaining objectives have a voice in setting them.
B) State objectives as specifically as possible.
C) Pinpoint expected results.
D) Set objectives only in relation to other organizational objectives.
E) Specify when goals are expected to be achieved.
Answer: C
Rationale:
Pinpointing expected results helps employees understand exactly what is expected of them and
how their performance will be evaluated against the objective.
62) In line with the organization's objectives, the sales managers at MagnaCorp must ensure that
all products are sufficiently stocked so that customer orders are fulfilled and stockout situations
do not arise. The operations managers, on the other hand, were instructed to lower inventory
costs and hence, prefer to keep stock levels to a minimum. This situation is an example of
________.
A) management by objectives
B) secondary objectives
C) intermediate-term plans
D) planning subsystems
E) suboptimization
Answer: E
Rationale:
This situation exemplifies suboptimization, where the objectives of one part of the organization
(sales) conflict with those of another part (operations), leading to inefficient outcomes for the
organization as a whole.
63) Which of the following guidelines for establishing quality objectives helps in keeping the
risk of suboptimization to a minimum?
A) relating objectives to specific actions whenever necessary
B) stating objectives as specifically as possible
C) setting objectives only in relation to other organizational objectives
D) specifying when goals are expected to be achieved
E) stating objectives clearly and simply
Answer: C
Rationale:
Setting objectives only in relation to other organizational objectives helps ensure that the
objectives of different parts of the organization are aligned, reducing the risk of suboptimization.
64) It is important to provide employees with a time frame for accomplishing their objectives
because ________.
A) it instills a sense of urgency in employees
B) it allows employees to pace themselves accordingly
C) it makes the goals more meaningful
D) it reduces the risk of suboptimization
E) it motivates employees to improve their performance
Answer: B
Rationale:
Providing a time frame allows employees to pace themselves accordingly and prioritize their
tasks to achieve the objectives within the specified timeframe.
65) "To lower the rate of employee attrition within the organization by 5 percent through the use
of effective employee retention and motivation techniques." Which of the following is a valid
criticism of this objective?
A) It is not stated in a simple fashion.
B) It does not provide a time frame for achieving objectives.
C) It is not related to specific actions.
D) It is not achievable.
E) It does not pinpoint expected results.
Answer: B
Rationale:
The objective does not provide a time frame for achieving the 5 percent reduction in employee
attrition, making it less specific and measurable.
66) Which of the following management writers popularized management by objectives (MBO)?
A) Tom Peters
B) Frederick Taylor
C) Peter Drucker
D) Abraham Maslow
E) Henry Fayol
Answer: C
Rationale:
Peter Drucker popularized the concept of management by objectives (MBO) in his 1954 book
"The Practice of Management."
67) Which of the following is the first step in the management by objectives (MBO) process?
A) set worker objectives
B) review organizational objectives
C) develop performance evaluation criteria
D) evaluate past performance
E) establish rewards
Answer: B
Rationale:
The first step in the MBO process is to review organizational objectives to ensure that worker
objectives are aligned with the organization's goals.
68) Which of the following is an accurate statement in reference to management by objectives
(MBO)?
A) Rewards are given to workers independent from their objective attainment.
B) Managers and workers meet to agree on worker objectives.
C) Managers and workers do not meet to monitor progress.
D) Managers set objectives for workers without their input.
E) Rewards are given on the basis of the manager's effort.
Answer: B
Rationale:
In MBO, managers and workers meet to agree on worker objectives, ensuring that the objectives
are understood and accepted by both parties.
69) After setting worker objectives, the next step in a management by objectives (MBO)
program is to ________.
A) develop performance evaluation criteria
B) review organizational objectives
C) establish rewards
D) monitor progress
E) evaluate past performance
Answer: D
Rationale:
Once worker objectives are set, the next step is to monitor progress towards achieving those
objectives, providing feedback and support as needed.
70) Which of the following is the last step in the management by objectives (MBO) process?
A) review performance objectives
B) evaluate performance
C) give rewards
D) monitor progress
E) set performance goals
Answer: C
Rationale:
The last step in the MBO process is to give rewards based on the achievement of objectives,
providing motivation and reinforcement for future performance.
71) Which of the following is NOT a necessary factor for a successful management by objectives
(MBO) program?
A) Management must follow through on employee performance evaluations by rewarding
employees accordingly.
B) Top management must be committed to the MBO process and set appropriate objectives for
the organization.
C) Managers and subordinates together must develop and agree on each individual's goals.
D) Employee performance should be conscientiously evaluated against established objectives.
E) Managers must conclude automatically that employees have produced at an acceptable level
because they have reached their objectives.
Answer: E
Rationale:
The statement in option E is incorrect because managers should not automatically conclude that
employees have produced at an acceptable level simply because they have reached their
objectives. Evaluation should consider the quality of the work and how it aligns with
organizational objectives.
72) In a management by objectives program (MBO), why must managers be careful not to
conclude automatically that employees have produced at an acceptable level simply because they
have reached their objectives?
A) The objectives may have been set too low in the first place, and managers may have failed to
recognize it at the time.
B) The MBO framework is naturally flawed and requires managers to use subjective criteria to
evaluate performance.
C) The employees may have reached their objectives by means that the organization had not
considered.
D) The MBO approach is merely on goal attainment and not on the level of effort expended.
E) The objectives set for employees may not be aligned with the overall organizational
objectives.
Answer: A
Rationale:
Option A is correct because if objectives are set too low, employees may reach them easily
without necessarily performing at an optimal level. This highlights the importance of setting
challenging yet achievable objectives.
73) One of the primary advantages of management by objectives (MBO) is that ________.
A) it saves time
B) it is an easy process
C) it gains employee commitment
D) it reduces the volume of paperwork
E) it places the responsibility of goal attainment solely on managers
Answer: C
Rationale:
Option C is correct because one of the primary advantages of MBO is that it can lead to
increased employee commitment by involving them in the goal-setting process and aligning
individual goals with organizational objectives.
74) One of the disadvantages of management by objectives (MBO) is that ________.
A) the program is very quick and informal
B) the process has no effect on worker commitment
C) the program only emphasizes what should be done in an organization
D) the process is time-consuming and requires additional paperwork
E) the process is a mere duplication of other management practices
Answer: D
Rationale:
Option D is correct because one of the disadvantages of MBO is that it can be time-consuming
and require additional paperwork, especially if not implemented efficiently.
75) ________ are techniques managers can use to help develop plans.
A) Departmental planners
B) Organizational planners
C) Sales forecasts
D) Planning tools
E) Product stages
Answer: D
Rationale:
Option D is correct because planning tools are techniques or methods used by managers to help
develop plans, such as flowcharts, Gantt charts, and decision trees.
76) ________ is the process of predicting future environmental happenings that will influence
the operation of the organization.
A) Forecasting
B) Disturbance
C) Planning
D) Scheduling
E) Monitoring
Answer: A
Rationale:
Option A is correct because forecasting is the process of predicting future environmental
happenings, such as market trends or demand for products, to help guide the organization's
planning and decision-making processes.
77) Which of the following methods of sales forecasting is the most straightforward?
A) jury of executive opinion method
B) salesforce estimation method
C) moving average method
D) regression method
E) disturbance handler method
Answer: A
Rationale:
Option A is correct because the jury of executive opinion method is a straightforward approach
to sales forecasting that involves gathering the opinions of a group of executives or experts.
78) ________ method utilizes historical data to predict future sales levels.
A) Resource allocator
B) Disturbance handler
C) Salesforce estimation
D) Regression
E) Moving average
Answer: E
Rationale:
Option E is correct because the moving average method uses historical data to calculate an
average, which is then used to predict future sales levels based on trends.
79) Introduction, growth, maturity, saturation, and decline are stages of ________.
A) product allocation
B) product history
C) product lifecycle
D) service methods
E) resource allocation
Answer: C
Rationale:
Option C is correct because these stages represent the product lifecycle, which describes the
stages a product goes through from introduction to decline in the market.
80) ________ is the process of formulating a detailed listing of activities that must be
accomplished to attain an objective, allocating the resources necessary to attain the objective,
and setting up and following timetables for completing the objective.
A) Forecasting
B) Interacting
C) Regression
D) Scheduling
E) Networking
Answer: D
Rationale:
Option D is correct because scheduling involves detailing the activities needed to achieve an
objective, allocating resources, and setting timelines for completion.
81) Which of the following techniques is used for scheduling resources?
A) timetable
B) Gantt chart
C) horizontal axis
D) vertical axis
E) review
Answer: B
Rationale:
The Gantt chart is a commonly used technique for scheduling resources. It provides a visual
representation of project tasks, their durations, and their dependencies.
82) The main weakness of the Gantt chart is that ________.
A) it does not contain information about the interrelationship of tasks to be performed
B) it does not provide information about how organizational resources are being employed
C) it contains too much information about the interrelationship of tasks to be performed
D) it does not help in establishing realistic worker output standards
E) it contains information about the intrarelationship of tasks to be performed
Answer: A
Rationale:
Option A is correct because while Gantt charts are useful for visualizing project timelines, they
do not explicitly show the interrelationships between tasks, which can be a limitation in complex
projects.
83) ________ is a network of project activities showing both the estimates of time necessary to
complete each activity and the sequence of activities that must be followed to complete the
project.
A) Gantt bar graph evaluation technique
B) Target skill objective
C) Product lifecycle technique
D) Program evaluation and review technique
E) Organizational evaluation technique
Answer: D
Rationale:
The description provided corresponds to the Program Evaluation and Review Technique (PERT),
which is used to analyze and represent the tasks involved in completing a project.
84) Which of the following best describes the difference between an activity and an event?
A) An activity is the completion of major project tasks, and an event focuses on the resources to
be used for the task.
B) An activity avoids describing the attainment of objectives in operational terms, whereas an
event does not.
C) Activity emphasizes the internal environment, as opposed to an event which emphasizes the
external environment.
D) An activity is a specified set of behaviors within a project, and an event is the completion of
major project tasks.
E) Activities focus on present opportunities, while events focus on potential opportunities that
may not materialize.
Answer: D
Rationale:
Option D is correct because an activity refers to a specified set of behaviors or tasks within a
project, while an event is a point in time representing the completion of a major project task.
85) An organization's plans fail when ________.
A) corporate planning is not integrated into the total management system
B) the plans developed need considerable effort to be realized
C) responsibility for planning is vested in the planning department, as well as other departments
D) financial projections and planning are not integrated
E) too little is attempted at once in starting formal planning
Answer: A
Rationale:
Option A is correct because when corporate planning is not integrated into the total management
system, it can lead to disjointed efforts and ineffective implementation of plans.
86) What is planning? What are the advantages and potential disadvantages of planning?
Answer: Planning is the process of determining how the organization can get where it wants to
go, and what it will do to accomplish its objectives.
A vigorous planning program produces many benefits. First, it helps managers to be futureoriented. They are forced to look beyond their everyday problems to project what situations may
confront them in the future. Second, a sound planning program enhances decision coordination.
Third, planning emphasizes organizational objectives. Because organizational objectives are the
starting points for planning, managers are continually reminded of exactly what their
organization is trying to accomplish. Planning does not eliminate risk, but it does help managers
identify and deal with organizational problems before they cause havoc in a business.
If the planning function is not well executed, planning can have several disadvantages for the
organization. For example, an overemphasized planning program can take up too much
managerial time. Managers must strike an appropriate balance between time spent on planning
and time spent on organizing, influencing, and controlling. If they don't, some activities that are
extremely important to the success of the organization may be neglected. Overall, the advantages
of planning definitely outweigh the disadvantages. Usually, the disadvantages of planning result
from using the planning function incorrectly.
87) Describe the steps in the planning process.
Answer: The planning process consists of the following six steps:
1. State organizational objectives - Because planning focuses on how the management system
will reach organizational objectives, a clear statement of those objectives is necessary before
planning can begin. Objectives stipulate those areas in which organizational planning must
occur.
2. List alternative ways of reaching objectives - A manager should list as many available
alternatives as possible for reaching objectives.
3. Develop premises on which to base each alternative - The feasibility of using any one
alternative to reach organizational objectives is determined by the premises, or assumptions, on
which the alternative is based. A manager should list all of the premises for each alternative.
4. Choose the best alternative for reaching objectives - An evaluation of alternatives must
include an evaluation of the premises on which the alternatives are based. A manager usually
finds that some premises are unreasonable and can therefore be excluded from further
consideration. This elimination process helps the manager determine which alternative would
best accomplish organizational objectives.
5. Develop plans to pursue the chosen alternative - After an alternative has been chosen, a
manager begins to develop strategic (long-range) and tactical (short-range) plans.
6. Put the plans into action - Once plans that furnish the organization with both long-range and
short-range direction have been developed, they must be implemented.
88) What is the difference between an organizational objective and a statement of organizational
purpose?
Answer: An organizational objective is a target toward which the open management system is
directed. The organizational purpose, or mission, is what the organization exists to do, given a
particular group of customers and customer needs. Properly developed organizational objectives
reflect the purpose of the organization — they flow naturally from the organization's mission.
89) Describe the eight key areas in which Drucker advised managers to set management system
objectives.
Answer: Managers should strive to develop and attain a variety of objectives in all areas where
activity is critical to the operation and success of the management system. According to Drucker,
management should set management system objectives indicating where it would like to be in
relation to its competitors (market standing), outlining its commitment to the development of
new methods of operation (innovation), outlining target levels of production (productivity),
regarding the use, acquisition, and maintenance of capital and monetary resources (physical and
financial resources), specifying the profit the company would like to generate (profitability),
specifying rates and levels of managerial productivity and growth (managerial performance and
development), specifying rates of worker productivity as well as desirable attitudes for workers
to possess (worker performance and attitude), and indicating the company's responsibilities to its
customers and society and the extent to which the company intends to live up to those
responsibilities (public responsibility).
90) Explain the management by objectives approach (MBO) and explain the three basic parts
included in most MBO programs.
Answer: Management by objectives is a management approach that uses organizational
objectives as the primary means of managing organizations. To effectively organize an MBO
program, all individuals within an organization are assigned a specialized set of objectives that
they try to reach during a normal operating period. These objectives are mutually set and agreed
upon by individuals and their managers. Performance reviews are conducted periodically to
determine how close individuals are to attaining their objectives. Finally, rewards are given to
individuals on the basis of how close they come to reaching their goals.
Test Bank for Modern Management: Concepts and Skills
Samuel C. Certo, S. Trevis Certo
9780133059922, 9780133254105, 9780135983546
