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CHAPTER 14
STRATEGIC ISSUES IN NOT-FOR-PROFIT ORGANIZATIONS
True/False
1.
Not-for-profit organizations account for an average of one in every 25 jobs in nations throughout
the world.
Answer: F
Not-for-profit organizations include private nonprofit corporations and public governmental units
or agencies.
Answer: T
(p.325)
2.
Examples of private nonprofit corporations include welfare departments, prisons, and state
universities.
Answer: F
(p.325)
3.
(p.325)
4.
Examples of public or collective goods include paved roads, police protection, and schools.
Answer: T
(p.325)
5.
Private nonprofit organizations qualify for special first-class mailing privileges.
Answer: F
(p.326)
6.
(p.326)
(p.326)
8.
The not-for-profit organization depends heavily on dues, assessments, or donations from its
membership, or on funding from a sponsoring agency.
Answer: T
(p.326)
9.
In profit making corporations, there is typically a simple and direct connection between the
customer or client and the organization.
Answer: T
(p.327)
10.
11.
The public university is heavily dependent on student tuition and other client-generated funds.
Answer: F
(p.327)
(p.327)
12.
The public university is more heavily dependent on outside sponsors such as a state legislature for
revenue funding.
(p.327)
Answer: T
13.
The marketplace orientation underlying portfolio analysis does translate into situations in which
customer satisfaction and revenue are directly linked.
Answer: F
A not-for-profit can be said to have institutional advantage when it performs its tasks more
effectively than other comparable organizations.
Answer: T
(p.329)
14.
287
(p.329)
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15.
A analysis is not as relevant to a not-for-profit as it is to a profit-making organization.
Answer: F
16.
One issue of strategy implementation is that decentralization can be complicated.
Answer: T
Strategic piggybacking refers to the development of a new activity for the not-for-profit
organization that would generate the funds needed to make up the difference between revenues
and expenses.
Answer: T
(p.329)
(p.331)
17.
(p.332)
18.
(p.333)
20.
The second impact of the Internet upon not-for-profit organizations was the issue of taxation.
Answer: F
(p.335)
Multiple Choice
21.
According to Peter Drucker, why do nonprofits need management even more than profit-minded
businesses?
a.
b.
c.
d.
e.
22.
23.
(p.325)
25%
35%
45%
55%
65%
(p.325)
10
20
30
40
50
24.
According to the text, not-for-profit organizations have accounted for an average of one in every
_____ jobs in nations throughout the world.
a.
b.
c.
d.
e.
(p.324)
55%
45%
35%
25%
288
(p.325)
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e.
25.
26.
28.
29.
30.
31.
(p.325)
5%
10%
15%
20%
25%
Organizations that operate on public goodwill, but are formed outside the authority of
governmental agencies or legislative bodies are placed in which category of organizations?
a.
b.
c.
d.
e.
(p.325)
less than 2%
8%
10 to 20%
approximately 25%
greater than 50%
(p.325)
profit-making firms
government organizations
nonprofit organizations
socialistic organizations
none of these
(p 325
welfare departments.
prisons.
health and human services.
private colleges.
state universities.
Strategic management has dealt primarily with what type of organization in the past?
a.
b.
c.
d.
e.
(p.325)
hospitals.
institutes.
prisons.
private colleges.
organized charities.
27.
15%
(p.325)
private for-profit
private nonprofit organizations
private quasi-public organizations
public
public for-profit
Agencies of the government on the federal, state and local level, that are constituted by law and
authorized to collect taxes and provide services are placed in which category of organizations?
289
(p.325)
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32.
a.
private for-profit
b.
private nonprofit organizations
c.
private quasi-public organizations
d.
public
e.
public for-profit
What is a "public" good?
a.
b.
c.
d.
e.
33.
c.
d.
e.
34.
36.
37.
(p.326)
(p.326)
patient
student
customer
client
case
Which feature best differentiates not-for-profit organizations from each other as well as from
profit-making corporations?
a.
b.
c.
d.
e.
(p.326)
Not-for-profit organizations typically do NOT use which term to refer to the recipient of their
service?
a.
b.
c.
d.
e.
35.
A good in which the benefits can be enjoyed by someone who didn't pay for the
good.
A good which must be purchased by the user.
An externality arising from a private good.
A public good can only be supplied by governmental bodies supported by tax dollars.
none of these.
According to the text, what is one of the reasons why the not-for-profit sector of an economy is
important?
a.
b.
(p.325)
(p.326)
privatization.
polarization.
rightsizing.
for-profitizing.
customization.
The text lists various areas of life that cannot easily be privatized and are often better managed by
not-for-profit organizations. Which of the following is NOT one of these areas?
290
(p.326)
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a.
b.
c.
d.
e.
38.
In which of the following organizations is the customer/client likely to have the greatest amount
of influence over organizational activities?
a.
b.
c.
d.
e.
39.
c.
d.
e.
41.
42.
43.
(p.327)
government grants.
their members.
donations.
benefactors.
fellowships.
A study on Minnesota nonprofits found that 35 percent of total revenues came from
a.
b.
c.
d.
e.
(p.327)
20%
30%
40%
50%
60%
(p.327)
A study of Minnesota nonprofits found that donations accounted for almost _____ of total
revenues.
a.
b.
c.
d.
e.
(p.326)
a public university
a gas station
a private college
a welfare agency
a community hospital
Which one of the following is NOT true concerning the revenue sources of not-for-profit
organizations?
a.
b.
40.
charities
government
religion
education
consulting
(p.327)
donations.
government grants.
program service fees.
members.
unions.
Which one of the following is NOT true of the relationship between the not-for-profit
organization and the person receiving the service?
291
(p.327)
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a.
b.
c.
d.
e.
44.
According to the text, which entity in a private university is likely to have a stronger influence on
the university's decision making?
a.
b.
c.
d.
e.
45.
47.
c.
d.
e.
48.
(p.327)
the sponsors
the parents of students
the administration
the students
the faculty
(p.327)
According to the text, which entity in a public university is likely to have a stronger influence on
the university's decision making?
a.
b.
c.
d.
e.
(p.327)
the sponsors
the parents of students
the administration
the students
the faculty
According to the text, a private university depends on _____ for the majority of its revenue.
a.
b.
c.
d.
e.
46.
(p.328)
It is the ability to bring a concern to the attention of the public media watchdogs.
It is the ability to coordinate the recipients of the not-for-profit organization
services/product to influence the direction of the organization.
It is learning who pays for the delivered services.
It is the process of applying influence on the sponsors.
It is encouraging government intervention to ensure that not-for-profit organizations are
meeting their stated obligations.
To the extent that a not-for-profit organization depends more on its sponsors than on its clients for
revenue,
(p.329)
a.
b.
c.
d.
the greater the responsiveness of the organization will be to the needs of the recipients.
the lesser the responsiveness of the organization will be to the needs of the recipients.
the less useful will be the standard concepts, techniques and prescriptions of
strategic management.
the more useful will be the standard concepts, techniques and prescriptions of strategic
management.
292
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e.
49.
Which of the following is NOT true of the usefulness of strategic management concepts and
techniques as applied to not-for-profit organizations?
a.
b.
c.
d.
e.
50.
52.
d.
e.
53.
54.
(p.329)
(p.330)
(p.329)
client-based advantage.
invested advantage.
institutional advantage.
public good advantage.
societal advantage.
(p.329)
competitive advantage.
institutional advantage.
manufacturing advantage.
client-based advantage.
public good advantage.
When the not-for-profit organization performs its tasks more effectively than other comparable
organizations, it is said to have a(n)
a.
b.
c.
d.
e.
(p.329)
Strategic management concepts and techniques are easily altered to fit the needs of
most not-for-profit organizations.
The marketplace orientation underlying portfolio analysis and PIMS research is not
applicable when there are only indirect links between client satisfaction and revenue.
The objectives of a not-for-profit organization are difficult to objectively measure.
Strategic management techniques are not used because sponsors, not the marketplace,
determine revenue.
Even when strategic management techniques are used in not-for-profit organizations,
there must be some modifications to fit their individualized needs.
51.
none of these.
293
(p.330)
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c.
d.
e.
55.
56.
d.
e.
d.
e.
58.
b.
c.
d.
e.
59.
b.
c.
d.
e.
(p.311)
Ambiguous operating objectives create opportunities for internal politics and goal
displacement.
Professionalism simplifies detailed planning but adds rigidity.
Goal conflicts interfere with rational planning.
External environmental factors cannot be predicted.
An integrated planning focus tends to shift from results to resources.
(p.330)
Which one of the following is NOT one of the four complications to strategy formulation?
a.
(p.329)
According to Newman and Wallender, a NFP may have a local monopoly and the clients
payments may be a small source of funds which may affect
a.
b.
c.
(p.330)
According to Newman and Wallender, the existence of multiple service objectives developed to
satisfy multiple sponsors will result in
a.
b.
c.
57.
It is much more difficult for a not-for-profit organization to establish such criteria than it
is for a profit-making organization because of the greater diversity of duties.
Differences in the concerns of various important sponsors may prevent top
management from stating the organization's mission in anything but very broad
terms.
Goals and objectives take on very little meaning in most not-for-profit organizations.
Government involvement often dictates the operations of the not-for-profit organization.
none of these.
294
(p.330)
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60.
61.
Ambiguous operating objectives create opportunities for internal politics and goal
displacement.
b.
Professionalism simplifies detailed planning but adds rigidity.
c.
Goal conflicts interfere with rational planning.
d.
External environmental factors cannot be predicted.
e.
An integrated planning focus tends to shift from results to resources.
Which of the following tends to complicate the strategy formulation process of a not-for-profit
organization?
(p.330)
a.
b.
c.
d.
e.
62.
(p.332)
A special complication arising from the constraining characteristics finds inputs rather than
outputs are heavily controlled, thus placing the emphasis on
a.
b.
c.
d.
e.
(p.331)
Which is one of the problems associated with constraining characteristics and their effect on how
behavior is motivated and performance controlled?
a.
b.
c.
d.
e.
65.
Which complication of the impact on strategy implementation is concerned with the creation of
"buffer" roles to relate to both inside and outside groups?
a.
b.
c.
d.
e.
64.
Ambiguous operating objectives create opportunities for internal politics and goal
displacement.
Linking pins for external-internal integration become important.
Rewards and penalties have little or no relation to performance.
Job enlargement and executive development may be restrained by professionalism.
Decentralization is complicated.
Which of the following tends to complicate the strategy implementation process of a not-for-profit
organization?
(p.331)
a.
b.
c.
d.
e.
63.
(p.330)
295
(p.332)
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66.
67.
68.
72.
(p.331)
(p.331)
15%
22%
29%
32%
38%
A study of Minnesota nonprofits indicated that _____ of the staff had degrees or experience in
business administration.
a.
b.
(p.331)
50%
60%
70%
80%
90%
A study of Minnesota nonprofits indicated that _____ of the program directors had degrees or
experience in business administration.
a.
b.
c.
d.
e.
(p.331)
50
60
70
80
90
71.
According to the text, attendance rate of not-for-profit board meetings is approximately _____.
a.
b.
c.
d.
e.
70.
(p.331)
According to the text, Eckerd College has over _____ members on its board of directors.
a.
b.
c.
d.
e.
69.
(p.330)
15%
20%
296
(p.331)
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c.
d.
e.
25%
30%
35%
297
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73.
When top management retains all decision-making authority so that low-level managers cannot
take any actions to which the sponsors may object, this issue refers to
a.
b.
c.
d.
e.
74.
75.
77.
78.
(p.332)
strategic piggybacking.
PPBS.
mission enhancement.
strategic funds deferral.
interorganizational linking.
(p.332)
5%
10%
15%
20%
25%
(p.332)
75%
65%
55%
45%
35%
The text indicates that for a not-for-profit organization, the costs of fund-raising should not
account for more than _____ of total income.
a.
b.
c.
d.
e.
(p.331)
complicated decentralization.
shifting of resources.
linking pins.
job enlargement and executive development.
weak client influence.
The text indicates that a not-for-profit organization should not spend more than _____ on
administrative expenses.
a.
b.
c.
d.
e.
76.
offensive centralization.
defensive centralization.
proactive centralization.
reactive centralization.
autonomous centralization.
Cited by the text, one complication that could interfere with strategy implementation as it relates
to its employees is
a.
b.
c.
d.
e.
(p.331)
conglomerate diversification
concentric diversification
vertical integration
cost leadership
focus
298
(p.332)
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79.
In terms of portfolio analysis and not-for-profit organizations, question marks receive funding
from _____.
a.
b.
c.
d.
e.
80.
84.
(p.333)
Why does the U.S. Small Business Administration take a negative position when a not-for-profit
organization uses various income-generation ventures to defray the operating costs of the
organization?
a.
b.
c.
d.
e.
(p.333)
Baptist Hospital
Mercy Hospital
Mt. Sinai Medical Center
Central Medical Center
St. Marys Hospital
According to the text, Smith-Kline Beecham pays _____ to use its name on Nicoderm chewing
gum.
a.
b.
c.
d.
e.
83.
40%
50%
60%
70%
80%
According to the text, _____ has built a $15 million office complex that rents to Nashvilles
professional football team.
a.
b.
c.
d.
e.
82.
stars
dogs
cash cows
alliances
other question marks
The text indicates that approximately _____ of colleges and universities offer auxiliary services as
sources of income.
(p.333)
a.
b.
c.
d.
e.
81.
(p.332)
(p.333)
Meeting expenses and costs becomes the foremost goal of the organization.
It views the activity as unfair competition.
It does not conform to generally accepted accounting principles (GAAP).
It does not provide a strict adherence to the goals of the organization.
The recipients of the organization's products or services do not benefit from the
income-generating ventures.
The U.S. Internal Revenue Service (IRS) advises that a not-for-profit organization that engages in
a business not "substantially related" to the organization's exempt purpose may jeopardize its
tax-exempt status, particularly if the income from the business exceeds what percentage of the
total organizational revenues?
(p.333)
a.
b.
c.
5%
20%
50%
299
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d.
e.
85.
Which one of the following is NOT one of the potential negative effects of strategic piggybacks?
a.
b.
c.
d.
e.
86.
50%
60%
70%
80%
90%
(p.334)
Something to sell.
Trustee support.
A reward system.
Entrepreneurial attitude.
Venture capital.
Which one of Edward Skloot's suggestions for a not-for-profit organization proposes that an
organization should assess its resources to see if people might be willing to pay for goods or
services which are closely related to the organization's primary activity?
a.
b.
c.
d.
e.
89.
Which of the following is NOT one of the resources Edward Skloot suggests a not-for-profit
organization have before it begins a strategic piggyback?
a.
b.
c.
d.
e.
88.
(p.333)
The U.S. National Association of College and University Business Officers predicts that over
_____ of colleges and universities in the United States will be using strategic piggybacks within a
few years.
(p.333)
a.
b.
c.
d.
e.
87.
80%
90%
(p.334)
Something to sell.
Trustee support.
Critical mass of management talent.
Entrepreneurial attitude.
Venture capital.
Which one of Edward Skloot's suggestions for a not-for-profit organization proposes that there
must be enough available people to nurture and sustain an income venture over the long haul?
(p.334)
a.
b.
c.
d.
e.
Something to sell.
Trustee support.
Critical mass of management talent.
Entrepreneurial attitude.
Venture capital.
300
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90.
Which one of Edward Skloot's suggestions for a not-for-profit organization proposes that if
trustees have strong feelings against earned-income ventures, they could actively or passively
resist commercial involvement?
a.
b.
c.
d.
e.
91.
92.
94.
95.
(p.333)
100
200
300
400
500
The New York and Presbyterian Hospitals Health Care System was a merger between
a.
b.
c.
(p.333)
strategic piggybacking.
PPBS.
mission enhancement.
strategic funds deferral.
strategic alliances.
According to the text, between 1980 and 1991, more than ____ U.S. hospitals were involved in
mergers and consolidations.
a.
b.
c.
d.
e.
(p.334)
Something to sell.
Trustee support.
Critical mass of management talent.
Entrepreneurial attitude.
Venture capital.
(p.334)
Something to sell.
Trustee support.
Critical mass of management talent.
Entrepreneurial attitude.
Venture capital.
Which one of Edward Skloot's suggestions for a not-for-profit organization proposes that because
it often takes money to make money, engaging in a joint venture with a business corporation can
provide the necessary start-up funds as well as the marketing and management support?
a.
b.
c.
d.
e.
93.
Something to sell.
Trustee support.
Critical mass of management talent.
Entrepreneurial attitude.
Venture capital.
Which one of Edward Skloot's suggestions for a not-for-profit organization proposes that
management must be able to combine an interest in innovative ideas with businesslike
practicality?
a.
b.
c.
d.
e.
(p.334)
301
(p.333)
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d.
e.
96.
According to the text, between 1980 and 1991, more than 400 U.S. hospitals were involved in
(p.333)
a.
b.
c.
d.
e.
97.
Four universities agreed to create and jointly operate a new school of international business in the
state of
a.
b.
c.
d.
e.
98.
100.
(p.335)
shadow funding.
strategic piggybacks.
taxation.
complicated decentralization.
vertical integration.
In 1998, the U.S. Congress agreed to a moratorium on the taxation of sales by purely Internetbased businesses for a period of ___ years.
a.
b.
c.
d.
e.
(p.334)
Peabody Foundation.
Teagle Foundation.
United Way.
UNCF.
Americorps.
The first impact of the Internet upon not-for-profit organizations was the issue of
a.
b.
c.
d.
e.
(p.333)
North Carolina.
New York.
Kentucky.
Ohio.
Michigan.
The Collaborative Ventures Program, which has given more than $4 million in grants to help
colleges set up money-saving collaborations, is part of an initiative run by the
a.
b.
c.
d.
e.
99.
2
3
4
5
6
302
(p.335)