Chapter: Chapter 26: Performance Management
Multiple Choice
1. Which of the following value drivers is a short-term driver as opposed to a medium-term
driver?
a) Asset health.
b) Commercial health.
c) Capital productivity.
d) Cost structure health.
2. Which of the following are aspects of the firm that diagnostics of organizational health
typically measure?
I. Its culture and values.
II. The depth of management talent.
III. The skills and capabilities of the company.
IV. Its ability to retain employees and keep them satisfied.
a) I, II, and III only.
b) I, III, and IV only.
c) II, III, and IV only.
d) I, II, III, and IV.
3. Which of the following is a value driver associated with improving long-term growth as
opposed to return on invested capital (ROIC)?
a) Asset health.
b) Commercial health.
c) Capital productivity.
d) Cost structure health.
4. Which set of metrics is best used to describe whether the company can sustain or improve its
current revenue growth?
a) Asset health.
b) Commercial health.
c) Strategic health.
d) Core health.
5. Which of the following are properties of internal benchmarks that businesses use to gauge
their productivity and health?
I. They do not provide learning opportunities.
II. The data are likely to be more readily available.
III. They are more challenging because of their specificity.
IV. Unearthing the causes of differences in performance is much easier.
a) I, II, and III only.
b) II and IV only.
c) III and IV only.
d) I, II, III, and IV.
6. In performance management, because of potential conflicts of interest, operating managers
should not be involved in the setting of targets and in reading the measures in pursuing targets.
7. With respect to stock-based compensation for managers, which of the following is most
accurate?
a) It is never a useful means for incentivizing managers to create value.
b) It has proven to be a useful tool to incentivize managers to create value in most cases.
c) There is not enough evidence to reach conclusions concerning its effectiveness.
d) It may be useful, but when it is used, macroeconomic and industry effects should be
removed in formulating the compensation.
8. Assessing the ability to exploit new growth areas and potential new threats is the focus of
short-term value drivers as opposed to long-term value drivers.
9. In assessing a company’s long-term strategic health, it can be hard to identify specific
metrics. Thus, these situations require more qualitative milestones.
10. Managers must regularly revisit the targets they set for each value driver. As their business
environment changes, so will the limits of what they can achieve.
11. List and describe the three categories of short-term value drivers.