Sample Questions for Chapter 3

True/False
Indicate whether the statement is true or false.
____

1. Having a large number of performance measures is much better than having a selected few.

____

2. Measuring and reporting performance results can be a motivator for many workers.

____

3. The only important measurement category in business is financial.

____

4. Return on assets would normally be classified as a productivity measure.

____

5. Good customer satisfaction measurement systems are designed to provide information about future buying
behavior.

____

6. Quality measures the degree to which the output of a process conforms to management's expectations and
requirements.

____

7. Service quality measures are generally based on data collected from observing front-line operations.

____

8. Reliability is the ability to perform a service dependably and accurately.

____

9. Assurance is the willingness to help customers and provide prompt recovery to service upsets.

____ 10. Empathy is the caring attitude and individualized attention provided to customers.
____ 11. Measures and indicators of product and service performance that have a strong correlation with customer
satisfaction are appropriate to monitor.
____ 12. Most of the five dimensions of service quality pertain to behavioral characteristics, which makes them easier
to measure.
____ 13. Errors in service creation and delivery are sometimes called service upsets.
____ 14. Speed is usually measured in clock time, whereas reliability of a time-based measure is usually measured in
quantifying the variances in average performances or targets.
____ 15. Queue time is a fancy term for service time variance.
____ 16. Having intensive care nurses on call in case of a dramatic increase in patient demand is an example of design
flexibility.
____ 17. Design flexibility is the ability to respond quickly to changes in the volume and type of demand.
____ 18. Productivity is more closely related to effectiveness than efficiency.
____ 19. As output decreases for a constant level of input, productivity also decreases.

____ 20. It costs 3 to 5 times more to keep an existing customer than to acquire a new customer.
____ 21. The "value of a loyal customer" links customer satisfaction and loyalty to a firm's profitability measures.
____ 22. Any measure a firm chooses to use should provide the basis for making executive-level strategic decisions.
____ 23. Health care and educational organizations were eligible for the Malcolm Baldrige National Quality Award
since its inception in 1987.
____ 24. Although the award from the Malcolm Baldrige National Quality Award Framework receives the most
attention, the primary purpose of the program is to provide a framework for performance excellence through
self-assessment to understand an organization's strengths and weaknesses, thereby setting priorities for
improvement.
____ 25. In the Baldrige Award criteria, the Business Results category focuses on how an organization selects, gathers,
analyzes, manages, and improves its data, information, and knowledge assets.
____ 26. The Leadership category of the Baldrige criteria includes how an organization addresses its public and
community responsibilities.
____ 27. Employee satisfaction might be considered as a lagging indicator of employee turnover.
____ 28. The balanced scorecard is designed to be linked to an organization's strategy.
____ 29. The balanced scorecard model uses the same categories as the Baldrige Award.
____ 30. The value chain model is probably the dominant model for operations managers.
____ 31. The service-profit chain model is based on understanding cause-and-effect linkages among performance
measures.
____ 32. The quote "Happy employees create happy customers" best characterizes the Service-Profit Chain (SPC)
model.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 33. Which one of the following statements is true with regard to the case study BankUSA: Credit Card Division?
a. Service upsets represented 17 percent of total transactions.
b. Current performance reports indicate that the credit card division is meeting 99.2 percent
of its service requirements.
c. The correlation between customer satisfaction and operating costs was negatively
correlated.
d. The ultimate (real) service level for this organization is internal performance metrics.
____ 34. Which of the following is true?
a. The theory of the Balanced Scorecard model of performance is leadership drives the
operating system that creates business results.

b. The Service-Profit Chain focuses on learning, internal business, customers, and financial
performance.
c. Volume flexibility allows the firm to change their learning behavior of employees as
conditions change.
d. In the BankUSA: Credit Card Division case study internal and external performance was
negatively correlated.
____ 35. The triple bottom line (TBL or 3BL) refers to the measurement of sustainability in all of the following areas
except
a. economic
b. social
c. technological
d. environmental
____ 36. Customer satisfaction rating increases as time-on-hold waiting decreases is an example of
a. productivity index
b. interlinking
c. value of a loyal customer
d. operational definitions
____ 37. Interlinking is the quantitative modeling of cause-and-effect relationships between
a. internal performance criteria
b. external performance criteria
c. internal and external performance criteria
d. competing organizations' performances
____ 38. Which of the following is not a key dimension of service quality?
a. conformance
b. tangibles
c. empathy
d. reliability
____ 39. Which of the following would not be a typical organizational-level financial performance measure?
a. labor and material costs
b. revenue and profit
c. return on assets
d. earnings per share
____ 40. Which of the following would be a typical operational-level quality performance measure?
a. customer ratings of goods and services
b. customer retention
c. service representative courtesy
d. product recalls
____ 41. At a basic level, quality should be measured in three areas. Which of the following is not one of those areas?
a. goods
b. services
c. environment
d. employee
____ 42. Which of the following would be an example of an innovation and learning performance measure?
a. employee satisfaction
b. earnings per share

c. design flexibility
d. product-related litigation
____ 43. Dell's ability to provide a wide range of customized computer hardware to accommodate customers' needs
best describes
a. volume flexibility
b. design flexibility
c. cycle time
d. queue time
____ 44. The number of patent applications and the number of improvement suggestions implemented relate best to
which operational performance measure category?
a. financial
b. customer and market
c. innovation and learning
d. productivity
____ 45. When Bill Gates stated that "Microsoft is always two years away from failure," he was emphasizing the
importance of
a. innovation and learning
b. productivity
c. design flexibility
d. speed
____ 46. The ability to respond quickly to changes in the amount and type of demand is called
a. learning
b. service quality
c. design flexibility
d. volume flexibility
____ 47. Productivity is the
a. quality of output/quantity of input
b. quality of input/quantity of output
c. quantity of output/quantity of input
d. quantity of input/quantity of output
____ 48. In choosing performance measures, an organization might consider all of the following criteria except
a. Is the measure actionable?
b. Is the measure based on behavioral performance?
c. Is the measure important to customers?
d. Does the measurement support the firm's mission?
____ 49. Airline revenue per passenger mile and hotel revenue per full-time employee are examples of
a. reliability
b. value of a loyal customer
c. sustainability
d. productivity
____ 50. Of the four models of organizational performance, which two focus on the "big picture" of organizational
performance rather than on operational-level framework?
a. Malcolm Baldrige National Quality Award Framework and the Value Chain model
b. Balanced Scorecard and the Service-Profit Chain
c. Malcolm Baldrige National Quality Award Framework and the Balanced Scorecard

d. Value Chain model and Service-Profit Chain

____ 51. Of the seven categories of the Malcolm Baldrige National Quality Award criteria, which is least relevant to an
operations manager?
a. Leadership
b. Workforce Focus
c. Customer Focus
d. Measurement, Analysis and Knowledge Management
____ 52. Which category of the Malcolm Baldrige National Quality Award examines how the organization fulfills its
ethical, legal, and societal responsibilities, and supports its key communities?
a. Leadership
b. Strategic Planning
c. Customer Focus
d. Results
____ 53. Of the four performance perspectives of the balanced scorecard model, which is most relevant to operations
managers?
a. financial
b. customer
c. innovation and learning
d. internal
____ 54. Employee satisfaction and other workforce-related measures fall into which perspective in the Balanced
Scorecard?
a. Financial
b. Customer
c. Innovation and Learning
d. Internal
____ 55. In regard to the value chain model, efficiency, cost and cycle time would be most related to
a. suppliers
b. inputs
c. value creation processes
d. outputs and outcomes
____ 56. Value chain measures would generally be less valuable to
a. top management
b. middle managers
c. first-line supervisors
d. employees to monitor any control
____ 57. The service-profit chain model
a. is based on a set of cause-and-effect linkages
b. is only focused on internal performance
c. was designed first for manufacturing organizations
d. is focused on equipment utilization
____ 58. Regarding the service-profit chain model, which of the following is not viewed as internal performance?
a. customer satisfaction
b. employee satisfaction
c. employee retention
d. employee productivity

____ 59. Which one of the following statements is true regarding FedEx's Service Quality Indicator (SQI)?
a. FedEx's SQI is an example of volume flexibility.
b. FedEx's SQI places the most weight (importance) on late pickups.
c. FedEx's SQI places the most weight (importance) on damaged and lost packages.
d. FedEx's SQI places the most weight (importance) on delivery on the wrong day.
Short Answer
60. Why is measurement important?
61. What are the major categories of organizational performance measures? Provide an example measure for each
category.
62. Explain the difference between goods quality and service quality, and how they are measured.
63. Describe the five key dimensions of assessing service quality.
64. Explain the difference between design flexibility and volume flexibility.
65. Define interlinking. Why is this concept significant?
66. Provide some examples of criteria that can be used to help select and delete performance measures from an
organization's information system.
67. Briefly discuss the seven categories of the Malcolm Baldrige National Quality Award.
68. Briefly discuss the four performance perspectives of the Balanced Scorecard Model.
69. Explain the concepts underlying the service-profit chain model.