Management Assignment 7
Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness
Chapter 16
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Major Questions You Should Be Able to Answer
16.1 Why is control such an important managerial function?
16.2 How do successful companies implement controls?
16.3 How can three techniques—balanced scorecard, strategy maps, and measurement management—help me establish standards and measure performance?
16.4 What are the financial tools I need to know about?
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Major Questions You Should Be Able to Answer
16.5 How do top companies improve the quality of their products or services?
16.6 What are the keys to successful control, and what are the barriers to control success?
16.7 How do managers influence productivity?
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Control: When Managers Monitor Performance
Controlling
defined as monitoring performance, comparing it with goals, and taking corrective action as needed
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What you as a manager do to get things done, with controlling shown in relation to the three other management functions.
(These are not lockstep; all four functions happen concurrently.)
4
Why Is Control Needed?
To adapt to change & uncertainty
To discover irregularities & errors
To reduce costs, increase productivity, or add value
To detect opportunities
To deal with complexity
To decentralize decision making & facilitate teamwork
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Steps in the Control Process
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Figure 16.3
Steps in the Control Process
Establish standards
performance standard is the desired performance level for a given goal
best measured when they can be made quantifiable
Measure performance
usually obtained from written reports, oral reports, and personal observations
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Steps in the Control Process
Compare performance to standards
Management by exception – control principle that says managers should be informed of a situation only if data show a significant deviation from standards
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Steps in the Control Process
Take corrective action if necessary
Make no changes
Recognize and reinforce positive performance
Take action to correct negative performance
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Question
A UPS driver fails to perform according to the standards set for the route and traffic conditions. A supervisor rides along and gives suggestions for improvement. This is the ____________ stage of the control process.
Compare performance to standards
Establish standards
Take corrective action
Measure performance
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The correct answer is “C”
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Lecture Script 6-10
Levels of Control
Strategic control
monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed
Tactical control
monitoring performance to ensure that tactical plans - those at the divisional or departmental level - are being implemented
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Levels of Control
Operational control
monitoring performance to ensure that operational plans - day-to-day goals - are being implemented and taking corrective action as needed
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Six Areas of Control
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Physical
Human resources
Informational
Financial
Structural
Cultural
Question
A drug test employed by an organization in its hiring process is an example of a(n) _______ resource control.
Physical
Human
Financial
Informational
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The correct answer is “B”
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Structural Area
Bureaucratic control
an approach to organizational control that is characterized by use of rules, regulations, and formal authority to guide performance
Decentralized control
an approach to organizational control that is characterized by informal and organic structural arrangements
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The Balanced Scoreboard
Balanced scoreboard
gives top managers a fast but comprehensive view of the organization via four indicators: (1) customer satisfaction, (2) internal processes, (3) innovation and improvement activities and, (4) financial measures
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The Balanced Scorecard: Four Perspectives
Figure 16.5
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The Balanced Scorecard: Four Perspectives
Financial
profitability, growth, shareholder values
Customer
priority is taking care of the customer
Internal business
quality, employee skills, and productivity
Innovation & learning
learning and growth of employees
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The Visual Representation of a Balanced Scorecard
Strategy map
visual representation of the four perspectives of the balanced scorecard that enables managers to communicate their goals so that everyone in the company can understand how their jobs are linked to the overall objectives of the organization
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The Strategy Map
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Figure 16.6
Why Measure-Managed Firms Succeed
Top executives agree on strategy
Communication is clear
There is better focus and alignment
The organizational culture emphasizes teamwork and allows risk taking
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Barriers to Effective Measurement
Objectives are fuzzy
Managers put too much trust in informal feedback systems
Employees resist new measurement systems
Companies focus too much on measuring activities instead of results
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Question
Jeff’s sales goal was to “improve sales”. Which barrier to measurement is this?
Objectives are fuzzy
Managers put too much trust in informal feedback systems
Employees resist new measurement systems
Companies focus too much on measuring activities
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The correct answer is “A”. See previous slide.
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Budgets: Formal Financial Projections
Budget
formal financial projection
Incremental budgeting
allocates increased or decreased funds to a department by using the last budget period as a reference point
only incremental changes in the budget request are reviewed
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Types of Budgets
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Table 16.1
Fixed versus Variable Budgets
Fixed budgets
allocates resources on the basis of a single estimate of costs
Variable budgets
allows the allocation of resources to vary in proportion with various levels of activity
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Financial Statements
Balanced sheet
summarizes an organization’s overall financial worth – assets and liabilities - at a specific point in time
Income statement
summarizes an organization’s financial results – revenues and expenses - over specified period of time
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Ratio Analysis
Liquidity ratios
indicate how easily a firm’s assets can be converted to cash
Debt management ratios
degree to which a firm can meet it’s long-term financial obligations
Return ratios
how effective management is generating a return or profit
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Audits
Audit
formal verification of an organization’s financial and operational systems
External – performed by outside experts
Internal – performed by organization’s own professional staff
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Deming Management
Quality should be aimed at the needs of the consumer
Companies should aim at improving the system, not blaming workers
Improved quality leads to increased market share, increased company prospects, & increased employment
Quality can be improved on the basis of hard data, using the PDCA cycle
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The PDCA Cycle
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Figure 16.7
Total Quality Management
Total Quality Management (TQM)
a comprehensive approach - led by top management and supported throughout the organization - dedicated to continuous quality improvement, training, and customer satisfaction
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Two Core Principles of TQM
People orientation
everyone involved in the organization should focus on delivering value to customers
Improvement orientation
everyone should work on continuously improving work processes
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People Orientation
Delivering customer value is most important
People will focus on quality if given empowerment
TQM requires training, teamwork, and cross-functional efforts
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Improvement Orientation
It’s less expensive to do it right the first time
It’s better to do small improvements all the time
Accurate standards must be followed to eliminate small variations
There must be strong commitment from top management
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Applying TQM to Services
RATER scale
enables customers to rate the quality of a service along dimensions – reliability, assurance, tangibles, empathy, and responsiveness
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The meanings of the RATER dimensions are as follows:
■ Reliability—ability to perform the desired service dependably, accurately,
and consistently.
■ Assurance—employees’ knowledge, courtesy, and ability to convey trust and
confidence.
■ Tangibles—physical facilities, equipment, appearance of personnel.
■ Empathy—provision of caring, individualized attention to customers.
■ Responsiveness—willingness to provide prompt service and help customers.
36
Some TQM Techniques
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Outsourcing
Reduced cycle time
ISO 9000 and 14000 Series
Statistical process control
Six Sigma & Lean Six Sigma
Question
In Harvey's job, he takes random samples of production runs to ascertain quality. His job involves:
Benchmarking
Statistical process control
Reduced cycle time
Feedforward control
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The correct answer is “B”.
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Lecture Script 6-38
The Keys to Successful Control Systems
They are strategic & results oriented
They are timely, accurate, & objective
They are realistic, positive, & understandable & encourage self-control
They are flexible
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Barriers to Control Success
Too much control
Too little employee participation
Overemphasis on means instead of ends
Overemphasis on paperwork
Overemphasis on one instead of multiple approaches
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Managing for Productivity
Productivity
outputs divided by inputs where: outputs are the goods and services produced, and inputs are labor, capital, materials, and energy
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Productivity is important because it determines whether a company will make a profit and affects a country’s standard of living
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Managing for Productivity and Results
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Figure 16.8
The Role of Information Technology
Enterprise resource planning (ERP)
software systems, information systems for integrating virtually all aspects of a business, helping managers stay on top of the latest developments.
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Keys to Your Managerial Success
Find your passion and follow it.
Encourage self-discovery, and be realistic.
Every situation is different, so be flexible
Fine-tune your people skills
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Keys to Your Managerial Success
Learn how to develop leadership skills
Treat people as if they matter, because they do
Draw employees and peers into your management process
Be flexible, keep your cool, and take yourself lightly
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