Deck 11: Decentralization and Performance Evaluation

Question 1

To be of any value, a measure of performance must be measurable, meaning that it is complete and accurate, and is based on actual results rather than on estimates.

Answer 1

True

Question 2

When choosing the right performance measures, the best measures relate to day-to-day operations.

Answer 2

False
The best measures relate to corporate strategy and are SMART,

Question 3

Return on investment, residual income, and EVA all have qualitative components.

Answer 3

False
Return on investment, residual income, and EVA are quantitative measures,

Question 4

The balanced scorecard includes one or two measures in each of six perspectives.

Question 5

A performance dashboard is a management tool that integrates performance measures (performance) across four different perspectives (dashboard) to guide operations toward achieving an organization's strategy.

Question 6

A lagging indicator "lags" the time period when a performance is measured.

Question 7

A performance dashboard is a visual display of the key measures related to an organization's operational goals and strategies.

Question 8

Although executives recognize the importance of nonfinancial performance measures, companies are not particularly good at using them.

Question 9

Measures that can be determined only after something is finished are called lagging indicators.

Question 10

The balanced scorecard assists in communicating the corporate strategy throughout the organization.

Question 11

Measures that are predictors of your ultimate performance on a particular activity are referred to as predictor indicators.

Question 12

Lagging indicators can be used to predict future results.

Question 13

The key to using key performance indicators to drive performance is to understand the cause-and-effect relationships they represent.

Question 14

Earnings per share, although taken from accounting reports, is a qualitative measure.

Question 15

When a company creates a balanced scorecard, managers are stating a hypothesis about the results that will occur if certain performance measures are stressed.

Question 16

The learning and growth perspective answers the question, "Are we improving our business processes in order to deliver maximum value to our customers."

Question 17

Identifying whether a measure is a leading or lagging indicator can be difficult, because a lagging indicator of one event can be a leading indicator of another.

Question 18

Nonfinancial measures, which are not based on accounting results, can be either qualitative or quantitative.

Question 19

Even if an organization relies solely on one performance strategy, it cannot easily be misled into thinking all is well, when in reality, all is not well.

Question 20

As a measure of a salesperson's performance, corporate profit margin is an example of an actionable measure.

Question 21

The time between an order's placement and its shipment is referred to as the delivery cycle time.

Question 22

Direct materials variances, direct labor variances, return on investment, residual income and EVA are performance measures that are

Question 23

Perfect manufacturing cycle efficiency would yield a ratio of zero - that is, no processing time would be non-value-added.

Question 24

Direct materials variances, direct labor variances, return on investment, residual income and EVA are performance measures that are

Question 25

Which of the following is not an example of a lagging indicator?

A)Earnings per share
B)Grade point average
C)Number of customer complaints
D)Cost of goods sold

Question 26

The goal of benchmarking is to identify those best practices that improve both quality and productivity.

Question 27

In determining whether benchmarking is worth the effort, a company must assess the potential return from a benchmarking project.

Question 28

Benchmarking is appropriate only within a company's industry.

Question 29

Residual income is a measurement of

A)inputs.
B)outcomes.
C)quality.
D)production efficiency.

Question 30

Which of the following is not an example of an employee-oriented nonfinancial measure?

A)Absenteeism
B)Labor productivity
C)Accidents per month
D)Employee empowerment

Question 31

Which of the following is not an example of a customer-oriented nonfinancial measure?

A)Market share
B)Delivery performance
C)Product flexibility
D)Product defects

Question 32

Benchmarking is the practice of using data from other organizations to identify the processes and practices associated with world-class performance.

Question 33

Which of the following is not an example of an internal operating nonfinancial measure?

A)Labor productivity
B)Product defects
C)Product flexibility
D)Setup efficiency

Question 34

A direct material variance is a measure of

A)outcomes.
B)inputs.
C)qualitative factors.
D)waste.

Question 35

Lagging indicators can be used to

A)measure past performance.
B)help managers determine if they are on the right track.
C)provide evidence that a certain result has been obtained.
D)provide information to take timely corrective action.

Question 36

Benchmarking participants should adhere to the Benchmarking Code of Conduct which provides general principles to follow during the benchmarking process.

Question 37

Benchmarking is about trying to achieve another company's metrics.

Question 38

Measures that can be determined only after something is finished are called

A)post-operations indicators.
B)lagging indicators.
C)input indicators.
D)objective indicator.

Question 39

For processes that are not identical, companies cannot benefit from benchmarking outside their industry.

Question 40

The balanced scorecard is a system that forces managers to consider how different parts of their company affect one another.

Question 41

Which of the following is not a reason companies use key performance indicators?

A)To align business activity with corporate strategy
B)To improve company performance
C)To improve timeliness of business decisions
D)To measure production efficiency in the past few months

Question 42

Which of the following is an example of a customer-oriented nonfinancial measure?

A)Product flexibility
B)Product defects
C)Production volume
D)New product introductions

Question 43

Measures that help predict a future result are referred to as

A)lagging indicators.
B)earnings per share.
C)leading indicators.
D)EVA.

Question 44

Nonfinancial measures can be

Question 45

A difference in quantitative indicators and qualitative indicators is

A)quantitative indicators differ based of who is doing the measuring whereas qualitative indicators are the same among individuals since each one has a unique perspective.
B)qualitative indicators are subjective while quantitative indicators are objective.
C)quantitative indicators always consist of numerical amounts while qualitative indicators are not numerical.
D)quantitative indicators are financial and qualitative indicators are non-financial.

Question 46

Qualitative indicators tend to be based on

A)feelings or accounting records.
B)feelings or perceptions.
C)accounting records or perceptions.
D)perceptions or clarifications.

Question 47

Which of the following is an example of an employee-oriented nonfinancial measure?

A)Setup efficiency
B)Labor productivity
C)Accidents per month
D)Time to respond to customer problems

Question 48

Which of the following is an example of an internal operating nonfinancial measure?

A)Accidents per month
B)Labor productivity
C)Market share
D)Product flexibility

Question 49

Before deciding whether a measure is a leading or lagging indicator, a manager should be sure to know

A)to what event the measure is related.
B)whether the measure is used by companies in the industry.
C)whether the measure is financial or non-financial.
D)the effect the indicator will illustrate.

Question 50

The best measures relate to corporate Strategy and SMART.Which of the following is not a component of SMART?

A)Measurable
B)Timeliness
C)Actionable
D)Responsibility

Question 51

For managers to adequately monitor the organization's performance, they need to use

A)leading and cycle indicators.
B)lagging and budget indicators.
C)leading indicators and lagging indicators.
D)lagging and cycle indicators.

Question 52

Return on investment is a financial measure that is

Question 53

The best measures relate to corporate strategy and SMART.Which of the following is not a component of SMART?

A)Tangible
B)Measurable
C)Relevant
D)Specific

Question 54

Which of the following not a qualitative measure that McDonald's may use?

A)Accidents per month
B)Customer retention
C)Current ratio
D)Number of orders filled incorrectly

Question 55

Which of the following is not a main barrier to the effective use of nonfinancial performance measures by organizations?

A)Skepticism that the measures are directly related to the bottom line
B)Lack of management skill needed to implement the measures
C)Lack of familiarity with the measures on the part of the board members
D)Undeveloped tools for analyzing the measures

Question 56

Earnings per share is a financial measure that is

Question 57

Qualitative indicators

A)tend to be based on feelings and perceptions.
B)tend to be based on perceptions and are non-financial amounts.
C)rely upon accounting records.
D)are also referred to as non-financial.

Question 58

Measures that provide managers with information they need to take timely, corrective action are referred to as

A)budget indicators.
B)variance indicators.
C)cycle indicators.
D)leading indicators.

Question 59

Leading indicators provide managers with the information they need to

A)calculate direct material and direct labor variances.
B)take timely, corrective action.
C)prepare GAAP-based financial statements.
D)All of these answer choices are correct.

Question 60

Which of the following is not a reason companies use key performance indicators?

A)To mandate to report company performance to stakeholders
B)To increase accuracy of business decisions
C)To improve company performance
D)To identify costs that may be non-value-added

Question 61

A manager can use a performance dashboard

A)for driving strategy and focusing of critical measures.
B)to focus on critical measures and to identify the cause of any issues.
C)to identify the cause of any issues and to correct any negative issues.
D)to identify the cause of any issues and to correct any negative issues.

Question 62

As decision windows and operating cycles continue to shorten, which of the following characteristics of a measure become more important?

A)Specific
B)Measurable
C)Actionable
D)Timely

Question 63

A visual display of the key measures related to an organization's operational goals and strategies is referred to as a

A)balanced scorecard.
B)performance dashboard.
C)strategy map.
D)benchmark report.

Question 64

A management tool that integrates performance measures across four different perspectives to guide operations toward achieving an organization's strategy is called

A)a performance dashboard.
B)a balanced scorecard.
C)key performance measures.
D)a company satisfaction benchmark.

Question 65

According to a Bain & Company survey, approximately what percentage of global business executives use a balanced scorecard to monitor performance?

A)16%
B)29%
C)38%
D)91%

Question 66

A performance dashboard is most helpful when it

A)directly links employee satisfaction with customer satisfaction.
B)identifies and measures cause-and-effect relationships.
C)is customized for particular managers.
D)identifies whether a measure is leading or lagging.

Question 67

Indicators that measure successful progression toward the organization's goals are referred to as

A)key performance indicators.
B)SMART indicators.
C)lagging indicators.
D)dashboard indicators.

Question 68

When using the balanced scorecard to monitor performance, the learning and growth perspective answers which of the following questions?

A)Are we developing employees and providing technologies that facilitate change and improvement?
B)Are we creating products and hiring employees with skills to create product and deliver them in a timely manner?
C)Are we meeting our stakeholders' expectations?
D)Are we growing in a manner to be competitive in the industry?

Question 69

Which of the following is not one of the four balanced scorecard perspectives?

A)Internal business processes
B)Customer
C)Industry
D)Financial

Question 70

Which of the following is not one of the four balanced scorecard perspectives?

A)Customer
B)Financial
C)Learning and growing
D)Performance

Question 71

A performance measure is specific if it

A)measures only one activity.
B)relates clearly and directly to the process it measures.
C)is either qualitative or nonfinancial, but not both.
D)is complete and accurate.

Question 72

A balanced scorecard

A)integrates performance measures across four different perspectives.
B)assists in communicating the corporate strategy throughout the organization.
C)helps managers understand the interrelationships between various areas of an organization.
D)illustrates cause-and-effect relationships.

Question 73

Before a balanced scorecard can be developed, managers must

A)be clear about the strategy they are trying to achieve.
B)understand the lagging and leading indicators that affect operations.
C)utilize a performance dashboard to develop operational goals.
D)utilize SMART measures.

Question 74

A performance measure is measurable if it

A)measures only one activity.
B)relates clearly and directly to the process it measures.
C)relates to a corporate strategic objective.
D)is complete and accurate.

Question 75

Which of the following uses five to seven measures of performance across four perspectives?

A)Balanced scorecard
B)Key performance measure
C)Performance dashboard
D)Leading and lagging indicators

Question 76

A performance dashboard does which of the following?

A)Offers a numerical display of key performance measures
B)Offers managers the opportunity to drill down into data to obtain information
C)Displays a clear picture of a company's financial condition
D)Is a list of cause-and-effect relationship between quantitative and qualitative amounts

Question 77

A balanced scorecard does not

A)integrate performance measures across different perspectives.
B)provide a visual display of the key measures related to an organization's operational goals and strategies.
C)help managers understand the interrelationships between various areas of an organization.
D)help guide operations toward achieving an organization's strategy.

Question 78

A performance measure is actionable if

A)something can be done to influence its value.
B)it is complete and accurate.
C)it is clearly and directly related to the process it measures.
D)it is based on actual results rather than on estimates.

Question 79

A measure is relevant if

A)It is complete and accurate.
B)It is clearly and directly related to the process it measures.
C)It relates to a corporate strategic objective.
D)something can be done to influence its value.

Question 80

Which of the following is not one of the four balanced scorecard perspectives?

A)Learning and growth
B)Production
C)Customer
D)Financial