Chapter 18Emerging Management Practices

LEARNING OBJECTIVES
LO 1
LO 2
LO 3
LO 4
LO 5
LO 6
LO 7

How does business process reengineering cause radical changes in the way firms
execute processes?
Why are competitive forces driving decisions to downsize and restructure operations?
In what ways and why are operations of many firms becoming more diverse? How
does the increasing diversity affect the roles of the firms accounting systems
Why are firms adopting enterprise resource planning systems, and what are their
purposes?
What are strategic alliances, what forms do they take, and why do firms engage in
them?
What are the characteristics of open-book management, and why does its adoption
require changes in accounting methods and practices?
What are the three generic approaches that firms can take in controlling
environmental costs?

QUESTION GRID
True/False
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Difficulty Level
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ShortAnswer
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Learning Objectives
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TRUE/FALSE
1. The focus of business process reengineering is on the improvement of specific processes.
ANS: T

DIF: Easy

OBJ: 18-1

2. Accountants have little involvement with BPR initiatives.

ANS: F

DIF: Easy

OBJ: 18-1

3. To increase the probability of success, it is important to involve customers in BPR projects.

ANS: T

DIF: Easy

OBJ: 18-1

4. Firms that are downsizing should engage in other innovative practices to improve efficiency.
ANS: F

DIF: Moderate

OBJ: 18-2

5. Downsizing often results in one-time charges against income.

ANS: T

DIF: Easy

OBJ: 18-2

6. Downsizing has no effect on materials and labor inputs used to produce outputs.
ANS: F

DIF: Moderate

OBJ: 18-2

7. Diversity among employees leads to increased employee turnover.

ANS: F

DIF: Moderate

OBJ: 18-3

8. Management talent is increased in a diverse group of employees.

ANS: T

DIF: Easy

OBJ: 18-3

9. In an ERP system, data is decentralized among an organizations divisions.

ANS: F

DIF: Moderate

OBJ: 18-4

10. The key concept to an ERP system is a central site for all the data of an organization.
ANS: T

DIF: Easy

OBJ: 18-4

11. Data mining employs statistical techniques to uncover answers to issues about business operations.
ANS: T

DIF: Easy

OBJ: 18-4

12. Strategic alliances can result in improved operating efficiencies for multiple organizations.
ANS: T

DIF: Easy

OBJ: 18-5

13. If a strategic alliance is to function effectively, all parties involved must feel that they are being fairly
treated.

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ANS: T

DIF: Easy

OBJ: 18-5

14. Top management personnel are the key players in open-book management.
ANS: F

DIF: Moderate

OBJ: 18-6

15. Open-book management is most effective in decentralized organizations.

ANS: T

DIF: Moderate

OBJ: 18-6

16. In an open-book management setting, financial information is often shared with employees who have
little knowledge of accounting concepts.
ANS: T

DIF: Easy

OBJ: 18-6

17. One method to improve the effectiveness of open-book management is through game playing.
ANS: T

DIF: Easy

OBJ: 18-6

18. Open-book management systems are usually easy to implement.

ANS: F

DIF: Moderate

OBJ: 18-6

19. One of the obstacles to implementing open-book management is reluctance of an organization to

release sensitive financial data.
ANS: T

DIF: Easy

OBJ: 18-6

20. In a pollution prevention system, managers produce the pollutant, and then clean it up.
ANS: F

DIF: 18-7

OBJ: Moderate

21. In an end-of-pipe strategy, managers produce the pollutant, and then clean it up.
ANS: T

DIF: 18-7

OBJ: Moderate

COMPLETION
1. A method of examining processes to identify and eliminate or reduce functions that add little customer
value to products or services is referred to as ______________________________.
ANS: business process reengineering
DIF: Easy

OBJ: 18-1

2. Any management action that reduces employment upon restructuring is known as

___________________.
ANS: downsizing
DIF: Easy

OBJ: 18-2

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3. Packaged software programs that allow companies to automate and integrate the majority of their
business processes, share data, and produce information in a real-time environment are referred to as
_____________________________________.
ANS: enterprise resource planning (ERP) systems
DIF: Easy

OBJ: 18-4

4. An analysis tool employing statistical techniques to answer business-related questions is referred to as

_________________________________.
ANS: data mining
5. An agreement involving two or more firms with complementary core competencies to jointly
contribute to the supply chain is referred to as a(n) _________________________________.
ANS: strategic alliance
DIF: Easy

OBJ: 18-5

6. A management philosophy that allows all workers access to information necessary to do their jobs
effectively is referred to as _____________________________.
ANS: open-book management
DIF: 18-6

OBJ: Easy

7. A system that accounts for both environmental costs and the impact of environmental issues is referred
to as a(n) ______________________________.
ANS: environmental management system.
MULTIPLE CHOICE
1. The focus of BPR is improving
a. products.
b. processes.
c. cost reduction.
d. decision making.
ANS: B

DIF: Easy

OBJ: 18-1

2. BPR is not associated with

a. employee layoffs.
b. outsourcing initiatives.
c. technology acquisition.
d. plant expansion.
ANS: D

DIF: Easy

OBJ: 18-1

3. BPR stands for

a. business product reengineering.
b. business purchase reengineering.
c. business process reengineering.

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d. business process reduction.

ANS: C

DIF: Easy

OBJ: 18-1

4. Who is not involved in the successful implementation of BPR?

a. investors
b. customers
c. suppliers
d. top management
ANS: A

DIF: Easy

OBJ: 18-1

5. Which of the following is not a trend promoting the increased use of BPR?
a. advancement of technology
b. pursuit of increased quality
c. price competition caused by globalization
d. business expansion
ANS: D

DIF: Easy

OBJ: 18-1

6. Downsizing results in a(n)

a. reduction in workforce.
b. restructuring of processes.
c. elimination of noncore businesses.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-2

7. An advantage of downsizing is
a. decreased costs in the long run.
b. layoffs.
c. one-time losses.
d. reduced communication.
ANS: A

DIF: Easy

OBJ: 18-2

8. Outsourcing and marketing worldwide enable firms to

a. develop new markets.
b. reduce input costs.
c. manage effects of peaks and valleys in local economies.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-2

9. Diversity applies to differences in

a. race.
b. religion.
c. culture.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-3

10. ERP stands for

a. enterprise resource production.
b. enterprise resource purchasing.
c. enterprise resource planning.

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d. enterprise resource processing.

ANS: C

DIF: Easy

OBJ: 18-4

11. ERP systems are

a. packaged software.
b. methods of examining processes.
c. ways to downsize.
d. ways to expand geographical operations.
ANS: A

DIF: Easy

OBJ: 18-4

12. ERP systems should help a company

a. improve quality.
b. improve service.
c. reduce overhead.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-4

13. Data mining is used to

a. uncover quality problems.
b. study customer retention.
c. identify cost drivers.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-4

14. Data mining

a. is packaged software.
b. is a method of examining processes.
c. uses statistical techniques to solve problems.
d. is a way to downsize.
ANS: C

DIF: Easy

OBJ: 18-4

15. A strategic alliance is a

a. packaged software.
b. way for two companies to jointly contribute to the supply chain.
c. way to downsize.
d. method of examining processes.
ANS: B

DIF: Easy

OBJ: 18-5

16. Strategic alliances take the form of

a. joint ventures.
b. technology swaps.
c. licensing.
d. all of the above.
ANS: D

DIF: Easy

OBJ: 18-5

17. (A) __________ allows a company to accomplish a technology swap.

a. data mining
b. strategic alliance
c. diversity

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d. BPR
ANS: B

DIF: Easy

OBJ: 18-5

18. _____________ is a philosophy of increasing a firm's performance by involving all workers.

a. Open-book management
b. Data mining
c. Diversity
d.Strategic alliance
ANS: A

DIF: Easy

OBJ: 18-6

19. Disclosing detailed financial information to all employees is a characteristic of

a. open-book management.
b. data mining.
c. diversity.
d. strategic alliance.
ANS: A

DIF: Easy

OBJ: 18-6

20. _____________ is a way of teaching accounting concepts to financially unsophisticated employees.

a. Data mining
b. Open-book management
c. Game playing
d. BPR
ANS: C

DIF: Easy

OBJ: 18-6

21. To make game playing successful, the employees must be able to

a. mine data.
b. form strategic alliances.
c. win.
d. use ERP.
ANS: C

DIF: Easy

OBJ: 18-6

22. For game playing to work, motivation must come from

a. individual employees.
b. lower management.
c. the board of directors.
d. upper management.
ANS: D

DIF: Easy

OBJ: 18-6

23. _____________ is a characteristic of a company that is best suited for open-book management.
a. Large size
b. Decentralized management
c. Centralized management
d. Service-oriented
ANS: B

DIF: Easy

OBJ: 18-6

24. EMS stands for

a. environmental manufacturing system.
b. employee management system.
c. emergency medical services.

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d. environmental management system.

ANS: D

DIF: Easy

OBJ: 18-7

25. ____________ is (are) a strategy for dealing with environmental effects.

a. End-of-pipe strategies
b. Process improvements
c. Pollution prevention
d. All of the above
ANS: D

DIF: Easy

OBJ: 18-7

26. EMS has to do with handling

a. pollution.
b. manufacturing.
c. scrap.
d. by-products.
ANS: A

DIF: Easy

OBJ: 18-7

SHORT ANSWER
1. Define business process reengineering (BPR).
ANS:
Business process reengineering is a tool to achieve large, quick gains in effectiveness or efficiency
through redesigning the execution of specific business functions. It is a method of examining processes
to identify and then eliminate, reduce, or replace functions and processes that add little customer value
to products or services. BPR is designed to bring radical changes to an organization's operations. BPR
is often associated with employee layoffs, outsourcing initiatives, and technology acquisition.
DIF: Moderate

OBJ: 18-1

2. Why has BPR usage increased?

ANS:
1.

The advancement of technology has made possible electronic remittance of accounts

payable and the use of robotic equipment to move and assemble components in a
manufacturing facility. Advancements in technology have improved efficiencies
throughout the supply chain.

2.

The pursuit of increased quality is necessary because global competition allows consumers
to purchase products and services from the highest quality providers in the world. BPR is a
useful tool for increasing quality because it focuses attention on processes associated with
poor quality and indicates ways in which quality can be improved by replacing, changing,
or eliminating those processes.

3.

BPR usage is increasing because of the increase in price competition caused by

globalization. To successfully compete on the basis of price, firms must identify ways to
become more efficient and thus reduce costs.

DIF: Moderate

OBJ: 18-1

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3. What is downsizing and how is it accomplished?

ANS:
Downsizing is any management action that reduces employment upon restructuring operations in
response to competitive pressures. Events typical of downsizing are reduction of the workforce,
restructuring of jobs and processes, and reduction or elimination of noncore businesses.
DIF: Moderate

OBJ: 18-2

4. What are the risks and dangers of downsizing?

ANS:
1. Firms can find that layoffs have depleted the in-house talent pool; therefore the ability to
solve problems creatively and generate ideas may have been diminished.
2. Downsizing may reduce trust and morale between employees and management. In turn,
communication between these two groups may decrease.
3. Downsizing can destroy a corporate culture that embraced lifetime employment as a key
factor in attracting new employees. In turn, this can diminish morale and trust.
DIF: Moderate

OBJ: 18-2

5. To what does workforce diversity refer?

ANS:
It refers to the fact that companies often find that their employees have very diverse backgrounds such
as religion, race, values, work habits, cultures, political ideologies, and education levels.
DIF: Moderate

OBJ: 18-3

6. What are enterprise resource planning systems (ERPs)?

ANS:
They are packaged software programs that allow companies to:
(1) automate and integrate the majority of their business processes, (2) share common data and
practices across the entire enterprise, and (3) produce and assess information in a real-time
environment. ERP software includes brand names such as SAP, R/3, PeopleSoft, and Baan.
DIF: Moderate

OBJ: 18-4

7. What is data mining and how is it used?

ANS:
Data mining uses statistical techniques and is useful in uncovering quality problems, studying
customer retention, determining which promotions generate the greatest sales impact, and identifying
cost drivers.
DIF: Easy

OBJ: 18-4

8. Define a strategic alliance.

ANS:
It is an interorganizational agreement that goes beyond normal customer/supplier arrangements
involving two or more firms with complimentary core competencies to jointly contribute to the supply
chain.

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DIF: Easy

OBJ: 18-5

9. What forms can strategic alliances take?

ANS:
Strategic alliances can take the forms of joint ventures, equity investment, licensing, joint R&D
arrangements, technology swaps, and exclusive buyer/seller agreements.
DIF: Easy

OBJ: 18-5

10. What is open-book management?

ANS:
It is a philosophy about increasing a firm's performance by involving all workers and ensuring that all
workers have access to operational and financial information necessary to achieve performance
improvements.
DIF: Easy

OBJ: 18-6

11. What are the principles of open-book management?

ANS:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Turn the management of a business into a game that employees can win.
Open the books and share financial and operating information with employees.
Teach the employees to understand the company's financial statements.
Show employees how their work influences financial results.
Link nonfinancial measures to financial results.
Target priority areas and empower employees to make improvements.
Review results together and keep employees accountable.
Post results and celebrate successes.
Distribute bonus awards based on employee contributions to financial outcomes.
Share the ownership of the company with employees (i.e., stock options).

DIF: Moderate

OBJ: 18-6

12. How should employees be motivated so open-book management will succeed?

ANS:
The obvious way for upper management to motivate workers is to link their compensation to increases
in profits from the effective use of the financial and operating information provided to them.
DIF: Easy

OBJ: 18-6

13. What are the characteristics of firms best-suited to open-book management?

ANS:
Characteristics of best-suited firms are small size, decentralized management, a history of employee
empowerment, and the presence of trust between employees and managers.
DIF: Easy

OBJ: 18-6

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14. Define an environmental management system (EMS).

ANS:
EMS is a system that accounts for both environmental costs and the impact of environmental issues in
every aspect of operations. Accountants are increasingly concerned with measuring business
performance with regard to environmental issues and management of environmental cost. In the
future, investors are likely to evaluate a company's environmental track record along with its financial
record when making financial decisions. Primary environmental issues are energy consumption and
pollution.
DIF: Moderate

OBJ: 18-7

15. What are the three generic strategies for dealing with environmental effects of operations?
ANS:
1.
2.
3.

End-of-pipe strategies. With this approach, managers produce the waste or pollutant
and then find a way to clean it up.
Process improvements. This approach involves changes to recycle wastes internally,
reduce production of waste, or adopt production processes that generate no waste.
Pollution prevention. This approach involves eliminating production of pollutants.

DIF: Moderate

OBJ: 18-7

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