Chapter 16 Building A Team and Management Succession

Essentials of Entrepreneurship and Small Business Management, 8e (Scarborough)
Chapter 16 Building a Team and Management Succession

1) ________ is the process of influencing and inspiring others to work to achieve a common goal
and then giving them the power and the freedom to achieve it.
A) Management
B) Organizing
C) Leadership
D) Coordination
Answer: C
Diff: 1
AACSB: Reflective Thinking
Learning Obj: 16-1 Explain the challenges involved in the entrepreneur's role as leader and
what it takes to be a successful leader.
2) Leadership is ________.
A) essential to a company's success
B) not an easy skill to learn
C) influencing and inspiring others to work to achieve a common goal and then giving them the
power and the freedom to achieve it
D) All of the above
Answer: D
Diff: 1
AACSB: Written and Oral Communication
3) Which of the following pairs describing leadership (first column) and management (second
column) is not accurate?
Leadership
Management
A) Comes first
Comes second
B) Deals with people
Deals with things
C) Involves doing things right
Involves doing the right things
D) Focuses on the present
Focuses on the future
Answer: C
Diff: 2
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4) Which of the following is not a behavior typically exhibited by effective leaders?

A) Define and constantly reinforce the vision they have for the company.
B) Respect and support their employees.
C) Require employees to gather necessary resources to complete their tasks; they will be more
likely to "feel ownership" than if you did it for them.
D) Create an environment in which people have the motivation, the training, and the freedom to
achieve the goals they have set.
Answer: C
Diff: 1
5) Which of the following is not one of the vital tasks small business leaders must perform?
A) Hire the right employees to the team and constantly improve their skills.
B) Create a culture for retaining employees.
C) Plan for "passing the torch" to the next generation of leadership.
D) Keep flexible and do not be concerned about preparing for the next generation of
management.
Answer: D
Diff: 1
AACSB: Analytical Thinking
6) A leadership style in which a leader takes on the role of a servant first and the role of a leader
second is referred to as a ________ leader.
A) servant
B) passive
C) managerial
D) subservient
Answer: A
Diff: 1
2
7) Questions like "What are you deeply passionate about?", "What can you be the best in the
world at?" and "What drives your economic engine?" are important to define your ________,
according to the work of Jim Collins.
A) hedgehog concept
B) core competencies
C) critical strategies
D) keys to success
Answer: A
Diff: 1
8) Both leadership and management are essential to a small company's success, but leadership
comes first.
Answer: TRUE
Diff: 1
9) Leadership deals with doing things right; management deals with doing the right things.
Answer: FALSE
Diff: 2
10) Although a small business manager must assume a wide range of ideas, tasks, and
responsibilities, none is more important than the role of leader.
Answer: TRUE
Diff: 2
11) Leadership gets a small business going; management keeps it going.
Answer: TRUE
Diff: 2
3
12) Management and leadership are essentially the same.

Answer: FALSE
Diff: 2
13) A strong leader does not share aspects of his or her company's financial health, its future
plans, or her vision for it with employees.
Answer: FALSE
Diff: 2
14) Effective leaders know they must punish workers who take risks and fail so that other
workers do not make the same mistakes.
Answer: FALSE
Diff: 1
15) Effective leaders know that what they do is more important than what they say because they
set the example for their employees.
Answer: TRUE
Diff: 1
16) Today's workforce responds best to a leadership style based on instilling fear and
intimidation.
Answer: FALSE
Diff: 1
17) Effective leaders make sure that workers have both the tangible and the intangible resources
they need to do their jobs well.
Answer: TRUE
Diff: 1
4
18) Effective leaders recognize that money is not the only reward that motivates workers.
Answer: TRUE
Diff: 1
19) Questions like "What are you deeply passionate about?", "What can you be the best in the
world at?" and "What drives your economic engine?" are important to define your hedgehog
concept, according to the work of Jim Collins.
Answer: TRUE
Diff: 2
20) Leadership is an easy skill to learn.
Answer: FALSE
Diff: 1
21) The practice known as servant leadership was coined by Robert Greenleaf and states that
leaders are servants first and leaders second, putting their employees and their employees' needs
ahead of their own.
Answer: TRUE
Diff: 1
22) Because their companies are small, entrepreneurs need not develop the leadership skills
managers in larger companies need.
Answer: FALSE
Diff: 1
23) If their companies are to grow and reach their potential, entrepreneurs must learn to be
effective leaders.
Answer: TRUE
Diff: 1
5
24) What is leadership? How does leadership differ from management?

Answer: Leadership is the process of influencing and inspiring others to work to achieve a
common goal and then giving them the power and the freedom to achieve it. Management and
leadership are not the same; yet both are essential to a small company's success. Leadership
without management is unbridled; management without leadership is uninspired. Leadership gets
a small business going; management keeps it going. Leadership deals with people; management
deals with things. Leadership deals with vision; management deals with logistics toward that
vision. Leadership deals with doing the right things; management focuses on doing things right.
Leadership comes first, then management, but both are necessary.
Diff: 3
25) List at least ten of the seventeen behaviors that effective leaders exhibit.
Answer:
Effective leaders exhibit many of the following characteristics:
1. Create a set of values and beliefs for employees and passionately pursue them.
2. Establish a culture of ethics.
3. Define and then constantly reinforce the vision they have for the company.
4. Develop a strategic plan that gives the company a competitive advantage.
5. Respect and support their employees.
6. Set the example for their employees.
7. Are authentic.
8. Create a climate of trust in the organization.
9. Build credibility with their employees.
10. Focus employees' efforts on challenging goals and keep them driving toward those goals.
11. Provide the resources employees need to achieve their goals.
12. Communicate with their employees.
13. Value the diversity of their workers.
14. Celebrate their workers' successes.
15. Are willing to take risks.
16. Encourage creativity among their workers.
17. Maintain a sense of humor.
18. Create an environment in which people have the motivation, training, and freedom to achieve
the goals they have set.
19. Create a work climate that encourages maximum performance.
20. Become a catalyst for change.
20. Develop leadership talent.
21. Keep their eyes on the horizon.
Diff: 3
6
Mini-Case 16-1: Kansas Manufacturers and Assemblers

Rose Richardson always knew that if she could land a major order for her firm, she could prove
its quality to the industry. Kansas Manufacturing and Assemblers was a job shop manufacturing
and assembling operation specializing in fast turnaround projects for manufacturers with orders
in excess of production capacity. Each job Rose's firm did was a special order.
In September, a major appliance manufacturer approached Rose and inquired about her ability
and willingness to manufacture and assemble a new appliance. This order could mean a very
substantial profit for the firm, as well as recognition throughout the industry. Rose was asked to
undertake a project that would require a 100 percent assignment of the firm's personnel for seven
months. In addition, any slight modification in design or material would require overtime. If this
job went as most, changes could be expected. On this short notice, it would be impractical for
Rose to hire additional personnel because it takes weeks, even months, to learn the necessary
skills.
Rose faces an interesting dilemma: If she doesn't take the job, it may be years before another one
of this magnitude comes along; but if she takes the job and then fails to deliver on time, or fails
to meet the quality specifications because of her overworked employees, her reputation will be
hurt for years. Rose sees this opportunity as a crossroads in the firm's history, but knows that she
must gain the full and unquestioned support of the employees if the project is to be a success.
26) If you were Rose, how would you go about gaining the commitment of your employees to a
project that will last a full seven months and will likely require each person to work overtime and
weekends and to forgo vacations for the duration of the project?
Answer: Rose must win the commitment of her employees to this project if her company is to
complete it successfully. She should consider having a meeting with her entire workforce to
explain the importance of the project and what it means to finish it on time. If the workers are
willing to commit to the project, Rose might sponsor a celebration at which employees sign
"pledge cards," dedicating themselves to completing the project on time. Of course, Rose should
consider sharing some of the financial benefits from the project with her employees. She could
link performance on the project to financial incentives. She should also establish intermediate
objectives as "checkpoints" along the way to completing the project and offer rewards (financial
or nonfinancial) to workers if they achieve them.
Diff: 3
7
Mini-Case 16-4: Plumbers Don't Want Recognition

"If I ever went out to those guys and asked them if they wanted a little more recognition, they
would laugh me out of the shop. People work for money." Norm Schultz had been a plumber
himself for 18 years before he saved enough money to open a small plumbing contractor
business. The men who worked for Norm knew what was expected of them a fair day's work
for a fair day's pay. "You don't need to tell a person that he or she is doing a good job; the person
is either doing the work or not working for me!"
Norm's son-in-law was taking a management course at a local college. When Norm asked him
what he was learning in class, he told him the management of people. Norm was very emphatic
about managing the plumbers who worked for him. "Tell an employee what you expect from the
beginning. Watch to see if they perform the job properly. Treat your people fairly and never cheat
them." Norm went on to tell his son-in-law that this was the way good managers did things.
"Recognition won't put bread on the table."
27) Is Norm Schultz correct in his attitude about workers not wanting recognition?
Answer: No, Norm is correct in saying that "Recognition won't put bread on the table," but he
fails to see that recognition can be a primary source of motivation for many employees. Some
workers strive for a "pat on the back" from the boss, and, in some cases, recognition can be just
as important as money.
Diff: 2
28) What do you think about Norm Schultz's attitudes toward employees?
Answer: While "treat people fairly and never cheat them" is good advice, Norm could go one
step further and become a more effective manager by offering praise and recognition more often.
Diff: 2
29) Which of the following is true regarding hiring mistakes?
A) Hiring mistakes are expensive.
B) Companies' informal processes may lead to unpredictable outcomes.
C) Small businesses are most likely to make hiring mistakes because they lack the human
resources experts and the disciplined hiring procedures large companies have.
D) All of the above
Answer: D
Diff: 2
Learning Obj: 16-2 Describe the importance of hiring the right employees and how to avoid
making hiring mistakes.
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30) One of the best sources for prospects for new positions may come from ________.
A) colleges and universities
B) the Internet
C) current employees
D) employment advertisements
Answer: C
Diff: 1
31) Which of the following techniques would you not recommend to a company desiring a
stronger recruiting strategy?
A) Look inside the company first a promotion-from-within policy serves as an incentive for
existing workers to upgrade their skills.
B) Encourage employee referrals reward employees for successful referrals.
C) Ensure that your recruitment efforts are known whether in traditional media, the Internet,
or on college campuses.
D) Avoid hiring retired workers they too often fail to have anything to offer.
Answer: D
Diff: 1
32) Posting job openings on the Internet has proven to be ________.
A) a relatively ineffective method of recruiting
B) a cost-effective method to attract candidates from other areas
C) an effective method to attract candidates and is relatively expensive
D) problematic for entrepreneurial businesses
Answer: B
Diff: 1
AACSB: Information Technology
33) A ________ is the process by which a company determines the duties and the nature of the
jobs to be filled and the skills and experience required of the people who are to fill them.
A) job analysis
B) job description
C) job specification
D) management audit
Answer: A
Diff: 1
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34) Luisa, the director of human resources, is discussing the duties and responsibilities of a new
position and its working conditions with Delmar, the supervisor of the position. Luisa and
Delmar are discussing a ________.
A) job description
B) management audit
C) job specification
D) job analysis
Answer: A
Diff: 2
35) Burt is applying for a position as a staff accountant. The job specification for the position
might list all of the following items except ________.
A) BBA in Accounting
B) 3 years of experience
C) prepare daily sales reports
D) knowledge of QuickBooks
Answer: C
Diff: 2
36) A job ________ identifies the duties and responsibilities of a position and its working
conditions, while a job ________ identifies the qualifications required of the job candidate in
terms of skills, education, and experience needed.
A) specification; description
B) description; specification
C) analysis; specification
D) analysis; description
Answer: A
Diff: 2
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37) The ________, published by the Department of Labor, lists more than 20,000 job titles and
descriptions and serves as a useful tool for getting a small business owner started when writing
job descriptions.
A) Title IX Handbook
B) Team Handbook
C) Job Listing Directory
D) Dictionary of Occupational Titles
Answer: D
Diff: 2
38) Which of the following types of questions should a business owner ask a candidate in a job
interview?
A) Questions calling for "yes or no" answers.
B) Questions about the candidate's religious beliefs.
C) Questions based on on-the-job scenarios that require open-ended answers.
D) Questions about the candidate's physical traits, characteristics, and family life.
Answer: C
Diff: 2
39) A ________ interview is where the interviewer gives candidates a typical job-related
situation to assess how they respond.
A) situational
B) puzzle
C) circumstantial
D) exploratory
Answer: A
Diff: 2
11
40) A ________ interview involves offbeat questions to determine how job candidates think and
reason, allowing the interviewer to assess their capacity for creativity.
A) situational
B) puzzle
C) circumstantial
D) game-based
Answer: B
Diff: 2
41) Effective interviewers spend about ________ percent of the interview talking and ________
percent listening.
A) 25; 75
B) 50; 50
C) 75; 25
D) 90; 10
Answer: A
Diff: 2
42) Which of the following is not a recommended guideline for developing questions to ask
candidates in job interviews?
A) Develop a series of core questions and ask them of every candidate.
B) Ask only questions calling for "yes or no" answers to avoid any controversy regarding the
direction the job interview took; this way, you have better control of the situation.
C) Create hypothetical situations candidates would likely encounter on the job and ask how they
would handle them.
D) Ask candidates to describe a recent success and a recent failure and how they dealt with them.
Answer: B
Diff: 2
AACSB: Ethical Understanding and Reasoning
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43) Which of the following best represents the three phases of an effective job interview?
A) Breaking the ice, asking informative questions, and providing as much information about the
company (good and bad) as possible.
B) Breaking the ice, asking informative questions, and selling the candidate on the company.
C) Breaking the ice, asking informative questions, and selling the candidate on the company
regardless of their potential fit.
D) Breaking the ice, asking questions in an interrogative manner, and selling the candidate on the
company.
Answer: B
Diff: 2
44) Successful interviewers always listen for these in an interview to see whether it matches the
candidate's words. This interviewer is referring to the candidate's ________.
A) work experience
B) job-related skills
C) nonverbal clues or body language
D) nervousness
Answer: C
Diff: 2
45) Which government agency is responsible for enforcing employment laws?
A) The Fair Labor Standards Commission
B) The National Labor Relations Board
C) The Equal Employment Opportunity Commission
D) The Justice Department
Answer: C
Diff: 2
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46) If a job candidate files charges of employment discrimination against a company, the burden
of proof in the case falls on ________.
A) the employer to prove that all pre-employment questions are job-related and
nondiscriminatory
B) the candidate to prove that some pre-employment questions and actions were discriminatory
C) the Equal Employment Opportunity Commission representing the job candidate in the lawsuit
D) None of the above
Answer: A
Diff: 2
47) Although many business owners see checking references as a formality and pay little
attention to it, the process is ________.
A) expensive and often meaningless
B) necessary and often invaluable
C) optional, based on the position's salary and relative importance
D) a questionable practice that may bias the hiring process
Answer: B
Diff: 2
48) According to a survey by CareerBuilders, almost ________ of candidates either exaggerated
or falsified information about their previous employment on their resumes.
A) one-third
B) three-fourths
C) half
D) two-thirds
Answer: C
Diff: 2
49) Every new employee a business owner hires determines the heights to which the company
can climb or the depths to which it will plunge.
Answer: TRUE
Diff: 1
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50) Business owners must recognize that what they do before they start interviewing candidates
for a position determines to a great extent how successful they will be in the hiring process.
Answer: TRUE
Diff: 1
51) Companies desiring to improve their recruitment efforts are finding that the Internet offers
tremendous reach at a relatively low cost and is very effective.
Answer: TRUE
Diff: 2
52) Information gathered during a job analysis provides the foundation for creating job
descriptions and job specifications.
Answer: TRUE
Diff: 2
53) A job analysis describes what the job is, what its duties and responsibilities are, and what
work conditions are involved.
Answer: FALSE
Diff: 1
54) A job analysis describes the process by which a firm determines the duties and nature of the
jobs to be filled and the skills and experience required of the people who are to fill them.
Answer: TRUE
Diff: 2
55) A job description sets forth a job's duties and responsibilities; a job specification translates
these duties into the qualifications needed for that job.
Answer: TRUE
Diff: 1
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56) The Dictionary of Occupational Titles, a listing of more than 20,000 job titles and
descriptions, is a useful tool for getting a small business owner started when writing job
descriptions.
Answer: TRUE
Diff: 2
57) The job specification outlines the duties and responsibilities of a job and its working
conditions, while the job description outlines the characteristics (skills, education, experience) a
person needs to fill a job.
Answer: FALSE
Diff: 2
58) Small companies are least likely to make hiring mistakes because most owners have
developed clearly defined job specifications and job descriptions.
Answer: FALSE
Diff: 2
59) To give the interviewing process more consistency, a business owner should develop a series
of core questions and ask them of every candidate.
Answer: TRUE
Diff: 2
60) The most effective job interviews are unplanned, unstructured interactions between the small
business owner and the job applicant.
Answer: FALSE
Diff: 2
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61) A situational interview gives the candidate a typical job-related situation to see how they
respond.
Answer: TRUE
Diff: 2
62) The intent of a situational interview is to make the interviewee as uncomfortable as possible
without violating legal or ethical standards.
Answer: FALSE
Diff: 2
63) In the breaking-the-ice phase of the interview process, skilled interviewers often use the job
description to explain the nature of the job and the company's culture to candidates.
Answer: TRUE
Diff: 2
64) Effective interviewers ignore candidates' nonverbal clues (i.e., body language) in interviews
because they know that most candidates are so nervous that their nonverbal communication is
meaningless.
Answer: FALSE
Diff: 2
65) Effective interviewers spend about 75 percent of the interview talking and about 25 percent
listening.
Answer: FALSE
Diff: 1
17
66) Effective interviewers skip the breaking-the-ice phase of a job interview and immediately
start asking candidates tough questions so they can see how the candidates respond under stress.
Answer: FALSE
Diff: 2
67) An effective job interview contains three phases: breaking the ice, asking questions, and
selling the candidate on the company.
Answer: TRUE
Diff: 2
68) Interviewers should avoid asking job candidates questions based on hypothetical on-the-job
scenarios and how the candidate would handle them because the Equal Employment Opportunity
Commission considers such questions to be illegal.
Answer: FALSE
Diff: 2
69) The Equal Employment Opportunity Commission (EEOC) supplies employers with a list of
questions it considers illegal in interviews.
Answer: FALSE
Diff: 2
70) In addition to contacting the references a job applicant provides, experienced employers also
call an applicant's previous employers to attempt to get a clear picture of the applicant's job
performance, character, and work habits.
Answer: TRUE
Diff: 2
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71) Small business owners should take the time to check every candidate's references.
Answer: TRUE
Diff: 1
72) Assume the role of a consultant to a small business owner who is about to conduct a job
interview for the first time. Identify the guidelines that will help him develop interview
questions. Also, explain the three phases of an effective interview.
Answer:
The guidelines for developing interview questions include:
Develop a series of core questions and ask them of every candidate.
Ask open-ended questions (including on-the-job scenarios) rather than questions calling for
yes or no answers.
Create hypothetical situations candidates would be likely to encounter on the job and ask
how they would handle them.
Probe for specific examples in the candidate's past work experience that demonstrate the
necessary traits and characteristics.
Ask candidates to describe a recent success and a recent failure and how they dealt with
them.
An effective interview consists of three phases:
1. Breaking the Ice
The first phase is used to set the interviewee and the interviewer at ease.
2. Asking Questions
In the second phase, the interviewer asks questions and listens to the candidate's responses and
body language. Effective interviewers spend about 25 percent of the time talking and listen the
remaining 75 percent.
3. Selling the Candidate on the Company
In the final phase, the employer tries to sell the candidate on her/his company. Usually in this
phase, the interviewee asks several questions about the company, the job itself, and other
relevant issues.
Diff: 2
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Mini-Case 16-3: The Pride of Vicksburg

Wallace Fry had been a lover of good food from the time he was a child. The only son of wealthy
Southern parents, he spent hours with his mother watching her prepare meals for the family and
friends. By the time Wallace was in high school, he had already won a number of awards for his
original recipes. After leaving Vicksburg, Mississippi, to attend college in the Midwest, Wallace
returned home to what must have been an unbelievable graduation present. His relatives
purchased an old paddlewheel riverboat and had begun initial preparations to have it moored
permanently at the foot of the Vicksburg landing on the Mississippi River. Wallace was presented
with a 50 percent interest in the restaurant named "The Pride of Vicksburg."
The complete renovations and restoration of the beautiful old riverboat took an additional four
months. Wallace was planning to have his new restaurant open for the spring tourist season. A
number of regional magazines had already run feature stories on the project. With the opening
one month away, Wallace decided it was time to staff the restaurant.
73) Has Wallace waited too long to begin searching for employees?
Answer: Yes, Wallace has a tremendous amount of work to do in choosing qualified employees
in one month. Selecting quality employees is especially important in the restaurant business since
personal service is an integral part of the restaurant's image and ultimate success. Clearly,
Wallace needs to develop job descriptions and specifications before he begins his search for
personnel.
Diff: 2
74) Develop a list of interview questions to help Wallace select the right person for the following
jobs:
Head chef
Wait staff
Dishwasher
Host/Hostess
Answer: The question lists students develop will be unique. However, the quality of their lists
will be higher if they first work alone for a few minutes to develop questions, and then work in
teams of two to five to brainstorm for other questions to add to their lists.
Diff: 3
20
75) What criteria should Wallace use in selecting employees?

Answer: Criteria Wallace should consider include: experience in the restaurant business,
friendliness, personality ("outgoing" or not), "people-oriented," work ethic, honesty, appearance,
attitude, and other factors.
Diff: 3
76) What would be the most effective way to recruit personnel for this type of business?
Answer: Sources of recruitment for Wallace include: Internet options, employment agencies,
cooking schools, "help wanted" ads in trade papers and newspapers, other restaurants, and
referrals.
Diff: 2
Mini-Case 16-4: Plumbers Don't Want Recognition
"If I ever went out to those guys and asked them if they wanted a little more recognition, they
would laugh me out of the shop. People work for money." Norm Schultz had been a plumber
himself for 18 years before he saved enough money to open a small plumbing contractor
business. The men who worked for Norm knew what was expected of them a fair day's work
for a fair day's pay. "You don't need to tell a person that he or she is doing a good job; the person
is either doing the work or not working for me!"
Norm's son-in-law was taking a management course at a local college. When Norm asked him
what he was learning in class, he told him the management of people. Norm was very emphatic
about managing the plumbers who worked for him. "Tell an employee what you expect from the
beginning. Watch to see if they perform the job properly. Treat your people fairly and never cheat
them." Norm went on to tell his son-in-law that this was the way good managers did things.
"Recognition won't put bread on the table."
77) Would you like working for Norm? Why or why not?
Answer: Most students probably would not like to work for Norm due to his attitude toward
employee recognition.
Diff: 1
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8) ________ is the distinctive, unwritten code of conduct that governs the behavior, attitudes,
relationships, and style of an organization.
A) Organizational structure
B) Company culture
C) Hierarchy of command
D) Formal organization
Answer: B
Diff: 1
Learning Obj: 16-3 Explain how to create a company culture that encourages employee
retention.
79) A company's culture manifests itself in ________.
A) how workers dress
B) the language workers use
C) the way workers behave
D) All of the above
Answer: D
Diff: 1
retention.
80) Company culture has a powerful impact on ________.
A) the way people work together in a business
B) how people in a company do their jobs
C) how people in a company treat their customers
D) All of the above
Answer: C
Diff: 1
retention.
81) Which of the following statements about a company's culture is false?
A) Company culture manifests itself in a variety of ways, from how workers dress and act to the
language they use.
B) As a company grows larger, its culture tends to remain constant.
C) Culture arises from an entrepreneur's consistent and relentless pursuit of a set of core values
that everyone in the company can believe in.
D) All of the above
Answer: B
Diff: 2
retention.
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82) Successful organizational culture supports exceptional performance and is compatible with
the firm's stated values and beliefs. Which of the following best illustrates this concept?
A) A "do what is needed regardless" attitude, diversity, respect for work and life balance, a sense
of purpose and a sense of fun, and participative management in a learning environment.
B) Honesty and integrity, diversity, respect for work and life balance, a sense of purpose and a
sense of fun, and dictatorial management in a learning environment.
C) Honesty and integrity, diversity, respect for work and life balance, an appreciation for career
limitations, and participative management in a learning environment.
D) Honesty and integrity, diversity, respect for work and life balance, a sense of purpose and a
sense of fun, and participative management in a learning environment.
Answer: D
Diff: 2
retention.
83) The type of job design that breaks work down into its simplest form and standardizes tasks is
known as ________.
A) job simplification
B) job enlargement
C) job rotation
D) horizontal job loading
Answer: A
Diff: 1
retention.
84) The classic auto assembly line is based on which job design principle?
A) Job enlargement
B) Job enrichment
C) Job simplification
D) Job rotation
Answer: C
Diff: 2
retention.
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85) The job ________ design strategy adds more tasks to a job to broaden its scope.
A) simplification
B) enlargement
C) enrichment
D) rotation
Answer: B
Diff: 1
retention.
86) The advantages of job rotation include ________.
A) the ability to move from one job to others
B) a greater number and variety of tasks
C) additional flexibility for the company
D) All of the above
Answer: D
Diff: 1
retention.
87) The type of job design that adds more tasks to a job to broaden its scope is known as
________.
A) job rotation
B) job enlargement
C) horizontal job loading
D) Both B and C
Answer: D
Diff: 2
retention.
88) The job ________ design strategy involves cross-training workers so they can move from
one job in the company to others, giving them a greater number and variety of tasks to perform.
A) simplification
B) enlargement
C) enrichment
D) rotation
Answer: D
Diff: 1
retention.
24
89) The job ________ design strategy involves building motivators into a job by increasing the
planning, decision-making, organizing, and controlling functions workers perform.
A) simplification
B) enlargement
C) enrichment
D) rotation
Answer: C
Diff: 1
retention.
90) In job enrichment, ________ is the degree to which a job requires a variety of different skills,
talents, and activities from the worker.
A) skill variety
B) task identity
C) task significance
D) autonomy
Answer: A
Diff: 1
retention.
91) In job enrichment, ________ is the degree to which a job gives a worker the freedom,
independence, and discretion in planning and performing tasks.
A) task identity
B) task significance
C) autonomy
D) feedback
Answer: C
Diff: 1
retention.
92) In job enrichment, ________ is the degree to which a job gives the worker direct, timely
information about the quality of her/his performance.
A) task identity
B) task significance
C) autonomy
D) feedback
Answer: D
Diff: 1
retention.
25
93) In job enrichment, ________ is the degree to which a job substantially influences the lives or
work of others (employees or final customers).
A) skill variety
B) task identity
D) autonomy
Answer: C
Diff: 1
retention.
94) Type of job design that involves building motivators into a job by increasing the planning,
decision-making, organizing, and controlling functions workers perform is ________.
A) job enrichment or vertical job loading
B) job enlargement or vertical job loading
C) job enrichment or horizontal job loading
D) job simplification or lateral job loading
Answer: C
Diff: 2
retention.
95) In job enrichment, ________ is the degree to which a job allows a worker to complete a
whole or identifiable piece of work.
A) skill variety
B) task identity
D) autonomy
Answer: B
Diff: 1
retention.
96) An arrangement under which employees work a normal number of hours with options
regarding when they start and stop work is ________.
A) hoteling
B) flextime
C) job sharing
D) flexspace
Answer: B
Diff: 1
retention.
26
97) Cora arrived at work at 7 a.m. today, and she will get off at 4 p.m. so that she can watch her
son's soccer game. Her office mate, Emma, is not a "morning person" and usually arrives at the
office at 10 a.m. and gets off at 7 p.m. Their company uses ________.
A) job sharing
B) flextime
C) flexplace
D) job enrichment
Answer: B
Diff: 1
retention.
98) Arturo, a sales representative for a small manufacturer, works out of an office in his home,
using his laptop computer, a fax machine, and a beeper to communicate with the home office,
which is located in a city 58 miles away. Arturo actually goes to the main office, on average,
once every 10 to 14 days. His company is using which work arrangement?
A) Job sharing
B) Flextime
C) Flexplace
D) Job enrichment
Answer: C
Diff: 1
retention.
99) Maria is excited about the new opportunity her company has offered her she will be able
to work from her home office with a company computer and a high-speed Internet connection
while she spends time with her newborn son. This is possible because of the implementation of
________.
A) telecommuting
B) hoteling
C) job sharing
D) job rotation
Answer: A
Diff: 1
retention.
27
100) A compensation system in which employees' pay depends on how well they perform their
jobs is known as ________.
A) a profit-sharing plan
B) open book management
C) a pay-for-performance compensation system
D) a commission compensation plan
Answer: C
Diff: 2
retention.
101) Company culture is the distinctive, unwritten code of conduct that governs the behavior,
attitudes, relationships, and style of an organization.
Answer: TRUE
Diff: 1
retention.
102) Growth requires changes in a company's management style, organizational strategy, and
methods of operations.
Answer: TRUE
Diff: 1
retention.
103) Studies comparing large companies to small ones have found that large companies' inability
to react quickly is a major barrier to their growth.
Answer: TRUE
Diff: 1
retention.
104) An assembly line is based on the principle of job simplification.
Answer: TRUE
Diff: 1
retention.
28
105) Job enlargement is based on the premise that the best way to design a job is to break it
down into its simplest form and to standardize each task.
Answer: FALSE
Diff: 1
retention.
106) The principle of job enlargement is to make a job more varied and to allow employees to
perform a more complete unit of work by broadening its scope.
Answer: TRUE
Diff: 2
retention.
107) Job enrichment increases the planning, decision-making, organizing, and controlling
functions in a job.
Answer: TRUE
Diff: 2
retention.
108) The concept of empowering employees is based on the principle of job enrichment.
Answer: TRUE
Diff: 2
retention.
109) Flextime is a work arrangement in which two or more people share the same 40-hour-aweek job.
Answer: FALSE
Diff: 1
retention.
29
110) To be effective, a small business leader must perform three vital tasks. List and briefly
explain these three tasks.
Answer:
1.
Hire the Right Employees and Constantly Improve Their Skills
Hiring mistakes are incredibly expensive, and there is no way to successfully compete without
high-quality employees. Competition among businesses for quality workers is intense, and to
assemble a quality workforce, the business owner must invest the time and money necessary to
achieve this goal at the beginning of the staffing process by developing a sound recruiting
process. Employers must create practical job descriptions and job specifications, plan and
conduct effective interviews, and carefully check references.
2.
Create a Culture for Retaining Employees
Culture is the distinctive, unwritten, informal code of conduct that governs a company's
behavior, attitudes, relationships, and style. It is the essence of "the way we do things around
here" and originates with the founder. It is critical to create a culture that supports a company's
strategy and makes it attractive for employees to continue to be a part of that culture. Employees
must experience respect, purpose, fun, diversity, integrity, participate management, and a
challenging learning environment in the organization's culture.
3.
Plan for "Passing the Torch" to the Next Generation of Leadership
The best way to avoid conflicts over control of the business is for the founder to develop a
formal management succession plan. It increases the probability of survival to the next
generation and eases the transition by reducing the tension and stress created by the "changing of
the guard." Additionally, it allows business owners to minimize the impact of taxes on their
businesses, their estates, and their successor's wealth.
Diff: 3
retention.
30
111) Explain the differences among job simplification, job enlargement, job rotation, and job
enrichment. Why should small business owners utilize these concepts?
Answer:
Job Simplification
In this type of job design, the work is broken down into its simplest form and then standardized
into tasks. Job simplification evokes monotony and impersonal, unchallenging work. It allows
small business owners and their employees to create specific job descriptions.
Job Enlargement
In this type of job design, more tasks are added to a job to broaden its scope. The idea is to make
the job more varied and to allow employees to perform a more complete unit of work.
Job Rotation
This job design involves cross-training employees so that they can move from one job in the
company to others. Job rotation, like the former, provides variety to workers and increases the
skills and understanding of workers.
Job Enrichment
This type of job design builds motivators into a job by increasing the planning, decision-making,
organizing, and controlling functions that workers perform. The idea is to make every employee
a manager, at least for her/his own particular job.
Diff: 2
retention.
Mini-Case 16-3: The Pride of Vicksburg
Wallace Fry had been a lover of good food from the time he was a child. The only son of wealthy
Southern parents, he spent hours with his mother watching her prepare meals for the family and
friends. By the time Wallace was in high school, he had already won a number of awards for his
original recipes. After leaving Vicksburg, Mississippi, to attend college in the Midwest, Wallace
returned home to what must have been an unbelievable graduation present. His relatives
purchased an old paddlewheel riverboat and had begun initial preparations to have it moored
permanently at the foot of the Vicksburg landing on the Mississippi River. Wallace was presented
with a 50 percent interest in the restaurant named "The Pride of Vicksburg."
The complete renovations and restoration of the beautiful old riverboat took an additional four
months. Wallace was planning to have his new restaurant open for the spring tourist season. A
number of regional magazines had already run feature stories on the project. With the opening
one month away, Wallace decided it was time to staff the restaurant.
112) Are job descriptions necessary in a restaurant?
Answer: Yes, job descriptions form the foundation for providing quality food and service in a
restaurant. They will help Wallace select the most qualified employees.
Diff: 2
retention.
31
113) The majority of first-generation family businesses do not survive into the second
generation.
Answer: TRUE
Diff: 2
Learning Obj: 16-4 Describe the steps in developing a management succession plan for a
growing business that allows a smooth transition of leadership to the next generation.
114) Why is developing a management succession plan so important to the founder of a family
business? Identify and briefly describe the steps of a successful plan.
Answer: The best way to avoid conflicts over control of the business is for the founder to
develop a formal management succession plan. It increases the probability of survival to the next
generation and eases the transition by reducing the tension and stress created by the "changing of
the guard." Additionally, it allows business owners to minimize the impact of taxes on their
businesses, their estates, and their successor's wealth.
Planning for succession involves the following five steps:
Step 1-Select the Successor
Never assume that your children will want to take control of the family business. The successor
does not have to be a family member. If it is a child, merit is a better standard to use than birth
order.
Step 2-Create a Survival Kit for the Successor
Regularly visit with the successor about the key factors that have led to the success of the
business; tie those key factors to performance and profitability; explain businesses strategies,
values, and philosophies; document as much process knowledge as possible.
Step 3-Groom the Successor
Be an effective communicator and listener; establish reasonable expectations for the successor's
performance; be patient and understand that the successor will make mistakes.
Step 4-Promote an Environment of Trust and Respect
Trust and respect on the part of the founder and others fuel the successor's desire to learn and
excel and will help build her/his confidence; understand that this is a gradual process; there will
be a greater likelihood that customers, creditors, suppliers, and staff members will gradually
develop confidence in the successor.
Step 5-Cope with the Financial Realities of Estate and Gift Taxes
Structure the transition so as to minimize the impact of estate, gift, and inheritance taxes on
family members and the business. Entrepreneurs who fail to consider the impact of these taxes
may force their heirs to sell a successful business just to pay the state's tax bill.
Diff: 3
32
115) List and briefly identify the five estate planning tools the owners of a family business
should consider.
Answer:
1.
Buy/Sell Agreement
A contract that co-owners often rely on to ensure the continuity of a business. It states that each
agrees to buy the others out in case of the death or disability of one, which allows the heirs to
"cash out" of the business, leaving control of the business in the hands of the remaining owners.
2.
Lifetime Gifting
The owner of a successful business may transfer money to their children (or other recipients)
from their estate throughout the parents lives; currently, the maximum allowable per person, per
year that is exempt from federal gift taxes, is $10,000.
3.
Trust
A contract between a grantor (the company founder) and a trustee (generally a bank officer or
attorney) in which the grantor gives to the trustee legal title to assets (e.g., stock in the company),
which the trustee agrees to hold for the beneficiaries (children). The beneficiaries can receive
income from the trust, or they can receive the property in the trust, or both, at some specified
time. There are several types of trusts, including a grantor-retained annuity trust (GRAT) and a
bypass trust.
4.
Estate Freeze
Minimizes estate taxes by having family members create two classes of stock for the business:
(1) preferred voting stock for the parents and (2) nonvoting common stock for the children.
5.
Family Limited Partnership
Allows business-owning parents to transfer their company to their children (thus lowering their
estate taxes) while still retaining control over it for themselves. The parents retain the general
partnership interest, and the children become the limited partners.
Diff: 3
33
Mini-Case 16-2: Passing the Baton

Carol Wingard started a small jewelry manufacturing company when she was in her late 20s, and
has worked hard to build it into a highly successful family business. Now, 40 years later, she was
"ready to sit down and enjoy life." Seven family members, including her two sons, Ralph and
Cooper, work in the business. Ralph, with 30 years of experience, and Cooper, with 22 years of
experience, are both vice presidents of the company.
Carol has always intended to pass the business on to her sons, who together own 20 percent of
the company's stock. However, she has always been too busy running the business to put together
a formal management succession plan. For the past decade, many of the employees have
whispered among themselves about who would be named president if Mrs. Wingard stepped
down and exactly what would happen to the business.
Now that she has decided to retire, Carol wants to begin developing a management succession
plan.
116) Carol calls you and announces her plans to retire within a year. What advice would you
offer her about a management succession plan?
Answer: It's probably too late for Carol to develop a management succession plan. This is
something she should have started at least 20 years ago. Since both Ralph and Cooper are
actively involved in the business, Carol must name a successor soon. She should spend the next
year coaching her successor, gradually handing over the reins of the business to him (or her, if
neither Ralph nor Cooper is qualified).
Diff: 3
117) What tools would you suggest to Carol to minimize the estate taxes involved in passing the
business on to Ralph and Cooper? Explain the advantages and disadvantages of at least three
choices and explain why you make the final recommendation that you do.
Answer: By waiting so long, there is only so much Carol can do to minimize estate taxes. One
option she should consider heavily is the estate freeze. Others include a buy/sell agreement (but
at her age, insurance policies will be expensive) or even an ESOP. She will need the help of a
capable attorney and a good accountant.
Diff: 3
AACSB: Diverse and Multicultural Work Environments
34
118) A leveraged buyout is an arrangement in which managers and/or employees borrow money
from a financial institution and pay the owner the total agreed-on price, pro-rated over a sevenyear period.
Answer: FALSE
Diff: 2
Learning Obj: 16-5 Explain the exit strategies available to entrepreneurs.
119) Discuss the three options that entrepreneurs may consider when they sell their business to
insiders.
Answer: When entrepreneurs sell the business to "insiders" they may consider one of three
options and what the advantages are for either the buyer or the seller:
1. A Sale for Cash Plus a Note
This involves financing a portion of the sales price and is popular with buyers because of its
many creative financial options.
2. Leveraged Buyout (LBO)
Managers and/or employees borrow money from a financial institution and pay the owner the
total agreed-on price at closing and then use the money generated from the company's options to
pay off the debt. The drawback of this technique is that it creates a highly leveraged business
one with debt. If properly structured, LBOs can be attractive to buyers and sellers because sellers
get their money up front and the buyers have a strong incentive to make sure the business
succeeds.
3. Employee Stock Ownership Plans (ESOPs)
This long-term exit strategy option allows employees and/or managers to purchase the business
gradually and frees up cash to finance the venture's future growth. Contributions continue until
they own the company in total. One advantage is that buyers know what they are getting.
Leveraged ESOPs offer tax advantages as the principal and the interest the ESOP borrows to buy
the business are tax deductible.
Diff: 3
Learning Obj: 16-5 Explain the exit strategies available to entrepreneurs.
35

Chapter 16 Building A Team and Management Succession

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Essentials of Entrepreneurship and Small Business Management, 8e (Scarborough)

Chapter 16 Building a Team and Management Succession

4) Which of the following is not a behavior typically exhibited by effective leaders?

12) Management and leadership are essentially the same.

24) What is leadership? How does leadership differ from management?

Mini-Case 16-1: Kansas Manufacturers and Assemblers

Mini-Case 16-4: Plumbers Don't Want Recognition

Mini-Case 16-3: The Pride of Vicksburg

75) What criteria should Wallace use in selecting employees?

Mini-Case 16-2: Passing the Baton

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