Question 1

A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

Accepted Answer

Ambidexterity describes a firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation-applying current knowledge to enhance firm performance in the short term-with exploration-searching for new knowledge that may enhance a firm's future performance.

Question 2

An open innovation model reduces a firm's absorptive capacity.

Accepted Answer

One key assumption underlying the open innovation model is that combining the best of internal and external R&d will more likely lead to a competitive advantage. This requires that the company must continuously upgrade its internal R&d capabilities to enhance its absorptive capacity-its ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.

Question 3

Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

Accepted Answer

Inertia, a firm's resistance to changing the status quo, can set the stage for the firm's subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or external pressures occur. To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action.

Question 4

Which of the following statements is true of strategy in an organization?
A) Strategy implementation is considered unsuccessful if it requires changes within an organization.
B) To implement a strategy successfully, an organization's structure must be rigid.
C) Strategy implementation does not affect resource allocation and power distribution within an organization.
D) Organizational structure must follow strategy in order for firms to achieve superior performance.

Accepted Answer

Organizational structure must follow strategy in order for firms to achieve superior performance. This tenet implies that to implement a strategy successfully, organizational design must be flexible enough to accommodate the formulated strategy and future growth and expansion.

Question 5

Which of the following real-world scenarios best exemplifies formalization?
A) Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts
B) McDonald's use of standard operating procedures across the world
C) W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses
D) Yahoo's decision to fire its CEO after incurring huge losses

Accepted Answer

McDonald's use of standard operating procedures across the world best exemplifies formalization. Formalization captures the extent to which employee behavior is controlled by explicit and codified rules and procedures.

Question 6

Tina is the inventor of a personal fitness tracking device, and she is in the process of hiring employees after receiving investment funding. When considering how to structure her company, she should
A) emulate the structure of the leading firm in the industry.
B) first establish a strategy and let that be her guide.
C) choose the structure that will give her the most control.
D) ask employees what structure they are most comfortable with.

Accepted Answer

As demonstrated by business historian Alfred Chandler in his seminal book Strategy and Structure, organizational structure must follow strategy in order for firms to achieve superior performance: "Structure can be defined as the design of organization through which the enterprise is administered…structure follows strategy."

Question 7

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should
A) be prepared to restructure as the landscape changes.
B) stick with the structure that brought it success no matter what happens.
C) attempt to implement an unstructured organization.
D) switch to whichever structure is most common in the industry.

Accepted Answer

Organizational inertia refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure. To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action. Ideally the firm would maintain a virtuous cycle of reconsidering organization, particularly in industries where the rate of change is high and potential disruption frequent.

Question 8

Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

Accepted Answer

ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation, which is driven by the employee's interest in and the meaning of the work itself. In contrast, extrinsic motivation is driven by external factors such as awards and higher compensation, or punishments like demotions and layoffs (the carrot-and-stick approach).

Question 9

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.
A) norm
B) culture
C) structure
D) control

Accepted Answer

Some of the key decisions managers must make when designing effective organizations pertain to the firm's organizational structure. That structure determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

Question 10

A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

Accepted Answer

Though it is appealing in theory, the matrix structure does have shortcomings. It is usually difficult to implement: Implementing two layers of organizational structure creates significant organizational complexity and increases administrative costs. Also, reporting structures in a matrix are often not clear. In particular, employees can have trouble reconciling goals presented by their two (or more) supervisors. Adding an additional layer of hierarchy can also slow decision making and increase bureaucratic costs.

Question 11

Why does strategy implementation often require changes within an organization?
A) Strategy implementation is less important than strategy formulation.
B) Strategy implementation transforms strategy into actions and business models.
C) Strategy always follows structure.
D) Strategy implementation does not affect resource allocation and power distribution within an organization.

Accepted Answer

Because strategy implementation transforms strategy into actions and business models, it often requires changes within the organization. However, strategy implementation often fails because managers are unable to make the necessary changes due to its effects on resource allocation and power distribution within an organization.

Question 12

A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

Accepted Answer

Top-down strategic planning takes place in highly centralized organizations. Planned emergence is found in more decentralized organizations.

Question 13

Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

Accepted Answer

Firms in the closed innovation model are extremely protective of their intellectual property. This not only allows the firm to capture all the benefits from its own R&d, but also prevents competitors from benefiting from it. The mind-set of firms in the closed innovation model is that to profit from R&d, the firm must come up with its own discoveries, develop them on its own, and control the distribution channels. Strength in R&d is equated with a high likelihood of benefiting from first-mover advantages.

Question 14

________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.
A) PESTEL factors
B) Formalization
C) Organizational inertia
D) Centralization

Accepted Answer

Organizational inertia refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.

Question 15

Organizational design involves establishing a firm's structure, culture, and control mechanisms.

Accepted Answer

Organizational design is the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. The key components of organizational design are structure, culture, and control.

Question 16

Organizational design is
A) the process of creating, implementing, and modifying the structure of an organization.
B) primarily focused on replacing a firm's competitive advantage with competitive parity.
C) a process that always functions independently of strategy formulation.
D) primarily focused on formulating effective strategies, not implementing them.

Accepted Answer

Organizational design is the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. The key components of organizational design are structure, culture, and control.

Question 17

Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

Accepted Answer

Organic organizations have a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making. Organic organizations typically exhibit a higher rate of entrepreneurial behaviors and innovation. Organic structures allow firms to foster R&D and/or marketing, for example, as a core competency.

Question 18

A change in company culture is most commonly accompanied by a change in leadership.

Accepted Answer

The primary means of cultural change is for the corporate board of directors to bring in new leadership at the top, which is then charged to make changes in strategy and structure. After all, executives shape corporate culture in their decisions on how to structure the organization and its activities, allocate its resources, and develop its system of rewards.

Question 19

What most likely happens when a firm optimizes its organizational structure to its current situation?
A) It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.
B) It achieves superior performance.
C) It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution.
D) It transforms strategy into actions and business models.

Accepted Answer

Inertia, a firm's resistance to changing the status quo, can set the stage for the firm's subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or external pressures occur.

Question 20

InSeason Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, InSeason defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, InSeason developed a
A) resistance to change.
B) innovative approach.
C) significant value gap.
D) holacratic system.

Accepted Answer

Success in the current environment can lead to a firm's downfall in the future, when the tightly coupled system of strategy and structure experiences internal or external shifts. First, the managers achieve a mastery of the firm's current environment. Second, the firm often defines and measures success by financial metrics, with a focus on short-term performance. Third, the firm puts in place metrics and systems to accommodate and manage increasing firm size due to continued success. Finally, as a result of a tightly coupled system, organizational inertia sets in-and with it, resistance to change.

Quiz 11: Organizational Design: Structure, Culture, and Control

A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

An open innovation model reduces a firm's absorptive capacity.

Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

Which of the following statements is true of strategy in an organization?

Which of the following real-world scenarios best exemplifies formalization?

Tina is the inventor of a personal fitness tracking device, and she is in the process of hiring employees after receiving investment funding. When considering how to structure her company, she should

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should

Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

Why does strategy implementation often require changes within an organization?

A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.

Organizational design involves establishing a firm's structure, culture, and control mechanisms.

Organizational design is

Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

A change in company culture is most commonly accompanied by a change in leadership.

What most likely happens when a firm optimizes its organizational structure to its current situation?