Chapter 12—Designing an Entrepreneurial Organization
TRUE/FALSE
1. Formal processes are independent and improve the functions of a department.
2. There is probably no single best organizational structure for all types of ventures in all situations.
3. An economic base is the region from which the entrepreneur expects to draw customers.
4. The United States is divided into Standard Metropolitan Statistical Areas (SMSAs), which are
geographic areas that include a major metropolitan area.
5. Risk management is a set of policies and decision-making processes that reduce or eliminate risks
associated with having employees.
6. The economic base of a region or community is simply the major source of income for the area.
7. The Family and Medical Leave Act provides for up to 12 weeks of paid leave for employees who are
dealing with family issues.
8. Today it is much easier than it used to be for a new venture to achieve total in-house control of its
value chain.
9. Founder’s stock at issuance is probably valued at the lowest level it will ever be, relative to an
investor’s stock value.
10. The number of shares authorized when a corporation is formed is purely arbitrary.
MULTIPLE CHOICE
1. ____ shape(s) the look and feel of the company and is a significant part of the company’s strategy
because it supports the achievement of the company’s mission.
a.
Formal processes
b.
Operations
c.
Location
d.
Culture
e.
Organizational design
2. ____ come(s) out of team building, creating flexibility, increasing speed, and facilitating the
management of personal issues not easily handled through policies and structure.
a.
Formal processes
b.
Formal networks
c.
Informal networks
d.
Process maps
e.
Organizational design
3. ____ is fundamentally the personality of the organization⎯the reflection of the company’s vision and
goals.
a.
Culture
b.
Process
c.
The founder
d.
Mission
e.
Organizational design
4. ____ roles are trusted people who serve as brokers between groups.
a.
Matrix
b.
Liaison
c.
Integrator
d.
Cross-unit
e.
None of these choices
5. ____ is validation of the business by external constituencies such as suppliers, customers, distributors,
and others in the value chain.
a.
Common stock
b.
Ambiguity
c.
Commitment
d.
Legitimacy
e.
None of these choices
6. Companies are typically distributed in all of the following ways except ____.
a.
geographically
b.
locally
c.
organizationally
d.
temporally
e.
by stakeholder groups
7. ____ outsource everything except their core-management function.
a.
Virtual organizations
b.
Most startups
c.
Regional organizations
d.
Manufacturing organizations
e.
None of these choices
8. Locating a site for a new business normally begins with identifying the ____ that seems best suited to
the type of business being started.
a.
area of the country
b.
state
c.
community
d.
demographic
e.
None of these choices
9. When entrepreneurs develop job descriptions, they should focus on the duties and responsibilities of a
particular job as well as the ____.
a.
legal requirements
b.
organizational chart
c.
behavioral profile
d.
process map
e.
job candidate
10. The ____ is fundamentally the personality of the organization and forms the basis for all the activities
that the company undertakes.
a.
process
b.
founder
c.
vision
d.
culture
e.
structure
11. Which of the following is not a component of the entrepreneurial organization?
a.
Formal processes
b.
People
c.
Location
d.
Culture
e.
None of these choices; all of these are components of the entrepreneurial organization.
12. A way in which virtual companies become more flexible and responsive is by forming ____, or teams
of businesses to share resources and reduce costs.
a.
virtual partners
b.
strategic alliances
c.
R&D teams
d.
temporary networks
e.
None of these choices
13. The three key factors for determining value in real estate are ____.
a.
location, location, and location
b.
economic base, financial incentives, and demographics
c.
trade area, competition, and demographics
d.
accessibility, cost of labor, and technology
e.
location, competition, and cost
14. The region from which the entrepreneur expects to draw customers is called the ____.
a.
economic base
b.
SMSA
c.
community development
d.
trade area
e.
market
15. Enterprise zones are common locations for ____.
a.
manufacturing
b.
distributing
c.
retail
d.
wholesaling
e.
restaurants
16. Which of the following is not a formal process?
a.
Planning systems
b.
Control mechanisms
c.
Compensation
d.
Team building
e.
Reward policies
17. All of the following are alternatives to conventional facilities except ____.
a.
incubators
b.
shared space
c.
leasing a building
d.
temporary tenant agreements
e.
mobile locations
18. People in ____ networks tend to gravitate toward each other in an effort to accomplish tasks in a more
efficient and effective manner than may be dictated by the organizational chart.
a.
virtual
b.
formal
c.
informal
d.
communication
e.
grapevine
19. ____ are distinct from other plans in that they are subject to the ERISA rules for employee retirement
programs.
a.
Stock options
b.
Profit-sharing plans
c.
Bonus plans
d.
Capital appreciation incentives
e.
None of these choices
20. During the interview process for new hires, it is recommended that entrepreneurs ask ____.
a.
the age of the candidate
b.
open-ended questions
c.
lifestyle questions
d.
questions about personal beliefs
e.
None of these choices
21. The Age Discrimination in Employment Act applies to all companies with ____ or more employees.
a.
20
b.
50
c.
70
d.
100
e.
300
22. The most successful new ventures adopt a team-based approach with a/an ____ structure.
a.
flatter
b.
open
c.
interactive
d.
virtual
e.
All of these choices
23. The first and best places for an entrepreneur to look for an employee include all of the following
except ____.
a.
the company’s current employees
b.
online job search sites
c.
subcontractors
d.
professional advisors
e.
referrals from people the entrepreneur trusts
24. The professional employer organization (PEO) is used for ____.
a.
employee leasing
b.
enforcing laws by the EEOC
c.
interviews
d.
drug screening
e.
risk management
25. Using a/an ____ agreement is one way to make sure that only stock that has been earned will be
distributed.
a.
employee stock ownership
b.
shareholder
c.
stock-vesting
d.
minority ownership
e.
preferred stock
26. Stock issued to the first shareholders of the corporation or assigned to key management as part of a
compensation package is ____.
a.
preferred stock
b.
founder’s stock
c.
stock-vesting
d.
dilution
e.
profit sharing
27. A basic ownership interest in the company whereby holders share in both the successes and the
failures of the business and benefit through dividends is ____.
a.
common stock
b.
founder’s stock
c.
preferred stock
d.
retained earnings
e.
None of these choices
28. When an entrepreneur specifies that rewards and bonuses be linked to profits and performance of both
the individual and the company, a/an ____ is in place.
a.
annual bonus
b.
deferred compensation plan
c.
profit sharing plan
d.
common stock plan
e.
capital appreciation plan
29. When a series of goals are set by the company with input from the employee, and the employee
receives payment as each goal is reached, this is called a ____.
a.
deferred compensation plan
b.
profit sharing plan
c.
capital appreciation plan
d.
bonus plan
e.
personal incentive plan
30. Employees have the right to participate in the profits of the company at a specified percentage, while
not being full shareholders with voting rights, if they have ____.
a.
an annual bonus
b.
a piece-rate plan
c.
capital appreciation rights
d.
a profit-sharing plan
e.
a deferred compensation plan
SHORT ANSWER
1. Define company culture. Why is it important?
2. What factors are important to consider when choosing a business site?
3. There are three specific considerations for choosing a retail site. What are they?
4. Under the law administered by the Equal Employment Opportunity Commission (EEOC), before the
point of hire you may not ask about what aspects of an applicant’s life?
5. Define virtual enterprise.
ANS:
6. Define incubators.
7. Discuss the advantages of human resource leasing.
8. Define risk management.
9. Briefly discuss the Civil Rights Act and Title VII of the Civil Rights Act.
10. Briefly discuss founder’s stock.