Essentials of Entrepreneurship & Small Business Mgmt., 7e (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
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
3) Which of the following pairs describing leadership (first column) and management (second
column) is 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
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.
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.
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
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
8) 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
9) 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.
10) 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.
11) 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.
12) 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
13) Luisa, the director of human resources, is discussing the duties and responsibilities of a new
position and its working conditions with Delmar, the manager over the position. Luisa and
Delmar are discussing a:
A) job description.
B) management audit.
C) job specification.
D) job analysis.
14) 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.
15) A ________ identifies the duties and responsibilities of a position and its working
conditions, while a ________ identifies the qualifications required of the job candidate in terms
of skills, education, and experience needed.
A) job specification; job description
B) job description; job specification
C) job analysis; job specification
D) job analysis; job description
16) 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
17) 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
18) 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
19) 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
20) Effective interviewers spend about ________ percent of the interview talking and ________
percent listening.
A) 25; 75
B) 50; 50
C) 75; 25
D) 90; 10
21) 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.
22) 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
23) 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.
24) 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
25) 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
26) 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.
27) 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
28) ________ 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
29) 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
30) 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
31) 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
32) 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
33) 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.
34) The classic auto assembly line is based on which job design principle?
A) Job enlargement
B) Job enrichment
C) Job simplification
D) Job rotation
35) The ________ design strategy adds more tasks to a job to broaden its scope.
A) job simplification
B) job enlargement
C) job enrichment
D) job rotation
36) 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
37) 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
38) The ________ 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) job simplification
B) job enlargement
C) job enrichment
D) job rotation
39) The ________ design strategy involves building motivators into a job by increasing the
planning, decision-making, organizing, and controlling functions workers perform.
A) job simplification
B) job enlargement
C) job enrichment
D) job rotation
40) 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
41) 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
42) In job enrichment, ________ is the degree to which a job gives the worker direct, timely
information about the quality of his performance.
A) task identity
B) task significance
C) autonomy
D) feedback
43) 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
C) task significance
D) autonomy
44) 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.
45) 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
C) task significance
D) autonomy
46) 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.
47) 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.
48) 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
49) 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.
50) 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.
51) Chris openly shares the company’s financial results with employees. This represents:
A) a profit-sharing plan.
B) a pay-for-performance approach.
C) the cafeteria benefit plan.
D) open book management.
52) As a motivator, money:
A) is the best motivator a business owner can use.
B) is the most effective motivator for younger, “Generation X” workers.
C) is only a short-term motivator, losing its impact over time.
D) All of the above
53) Studies regarding succession of family businesses reveal that:
A) 70 percent of first-generation businesses fail to survive into the second generation.
B) only 12 percent make it to the third generation.
C) only 3 percent make it to the fourth generation and beyond.
D) All of the above
54) More than ________ percent of all companies in the world are family owned.
A) 40
B) 60
C) 80
D) 90
55) Almost ________ percent of business founders intend to pass theirs on to their children;
however, only ________ percent have created a formal management succession plan.
A) 81; 47
B) 90; 65
C) 75; 50
D) 60; 10
56) The first step in creating a management succession plan is to:
A) create a survival kit for the successor.
B) groom the successor.
C) promote an environment of trust and respect.
D) select the successor.
57) When building your management succession “survival kit,”
A) never assume your children want to take control of the business.
B) keep your succession choice a secret to avoid conflict among other family members.
C) remember that entrepreneurial skills and desire are largely hereditary.
D) you may assume your children want to take control of the business.
58) When transferring power in a management succession, the small business owner should do
all but which of the following?
A) Tell the successor where all the critical documents are-wills, trusts, insurance policies, etc.
B) Provide the successor with a list of advisers, people who have given you good advice in the
past.
C) Be open to learn from, as well as to teach, the successor.
D) Transfer power quickly and step back, letting the successor run the business completely
without any advice or interference by the owner.
59) During the transfer of power, how should the owner deal with company problems and
mistakes the successor makes?
A) Use them as a means for teaching.
B) Step in and fix them herself, to prevent damage to the company.
C) Explain how the owner would have handled it and insist it be done that way in the future.
D) Use them as an opportunity to maintain control for as long as possible.
60) A business founder relying on a lifetime gifting strategy to minimize the taxes on the estate
she is passing on to her son can give him a maximum gift of ________ in company stock each
year, tax exempt.
A) $6,000
B) $13,000
C) $18,000
D) $24,000
61) A(n) ________ is the most basic type of trust, which allows a business owner to put up to
$1.3 million into trust, naming his spouse as the beneficiary upon his death. The spouse receives
the income from the trust throughout her life, but the principal in the trust goes to the couple’s
heirs, free of estate taxes, upon the spouse’s death.
A) grantor-retained annuity trust
B) family limited partnership
C) bypass trust
D) estate freeze
62) In a grantor-retained annuity trust (GRAT),
A) there is an attempt to minimize taxes on a family by creating two classes of stock-preferred
stock, whose value is locked in, and common stock, whose value reflects the market value of the
business.
B) a business owner can pass on up to $10,000 annually which is exempt from federal gift taxes.
C) the grantor retains the voting power and interest income from the stock in the trust for up to
ten years before the business goes to the beneficiaries.
D) the surviving owner or heir of a family business has the right to purchase the stock of the
deceased owner at a price established by a predetermined formula.
63) In a grantor-retained annuity trust (GRAT):
A) the grantor could put company stock in an irrevocable trust lasting for up to 10 years.
B) the grantor retains the voting power and interest income from the stock in the trust.
C) the company stock transfers to the beneficiaries at the end of the trust and is taxed at its
discounted present value.
D) All of the above
64) A(n) ________ attempts to minimize taxes on a family business passed from one generation
to the next by creating two classes of stock-one for the parents (preferred voting stock), whose
value is locked in, and another for the children (nonvoting common stock), whose value reflects
the market value of the business.
A) grantor-retained annuity trust
B) estate freeze
C) bypass trust
D) buy/sell agreement
65) A family limited partnership (FLP) is a strategy that allows business owning parents to
transfer their company to their children and ________ their estate taxes while retaining control
over the business.
A) lower
B) modify
C) avoid
D) defer
66) Entrepreneurs who are planning to retire often use two strategies:
A) sell to outsiders or arrange for an IPO.
B) assume the role of a silent partner or sell to nonfamily insiders.
C) sell to outsiders or sell to nonfamily insiders.
D) sell to outsiders or sell to relatives.
67) A leveraged buyout is an arrangement in which managers and/or employees borrow money
from a financial institution and pay the owners:
A) a discounted price, over time, that leverages their good credit.
B) the total agreed-on price at closing using the cash generated from the company’s operations to
pay off the debt.
C) the total agreed-on price at closing using alternative financing sources to pay off the debt.
D) the total agreed-on price at closing using the cash generated from additional stock issued by
the company.
68) An arrangement in which employees and/or managers contribute a portion of their salaries
and wages, over time, toward purchasing shares of a company’s stock from the founder until they
own the company outright, is referred to as:
A) an IPO.
B) a leveraged buyout.
C) a hostile takeover.
D) an ESOP.
69) Both leadership and management are essential to a small company’s success, but leadership
comes first.
70) Leadership deals with doing things right; management deals with doing the right things.
71) Although a small business manager must assume a wide range of ideas, tasks, and
responsibilities, none is more important than the role of leader.
72) Leadership gets a small business going; management keeps it going.
73) Management and leadership are essentially the same.
74) 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.
75) Effective leaders know they must punish workers who take risks and fail so that other
workers do not make the same mistakes.
76) Effective leaders know that what they do is more important than what they say because they
set the example for their employees.
77) Today’s workforce responds best to a leadership style based on instilling fear and
intimidation.
78) Effective leaders make sure that workers have both the tangible and the intangible resources
they need to do their jobs well.
79) Effective leaders recognize that money is not the only reward that motivates workers.
80) 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.
81) Leadership is an easy skill to learn.
82) 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.
83) Because their companies are small, entrepreneurs need not develop the leadership skills
managers in larger companies need.
84) If their companies are to grow and reach their potential, entrepreneurs must learn to be
effective leaders.