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Chapter 16

by: Stephanie De Angelis

Chapter 16 MGT 250

Stephanie De Angelis

GPA 3.1

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Chapter 16 notes
Managerial and Organizational Concepts
Professor Bhandari
Class Notes
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This 8 page Class Notes was uploaded by Stephanie De Angelis on Friday April 22, 2016. The Class Notes belongs to MGT 250 at Pace University - New York taught by Professor Bhandari in Winter 2016. Since its upload, it has received 18 views. For similar materials see Managerial and Organizational Concepts in Business, management at Pace University - New York.

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Date Created: 04/22/16
Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness Vocasbulary: Audits: a formal verification of an organization’s financial accounts of an organization’s  financial and operational systems  Balance Sheet: summarizes an organization’s overall financial worth – that is, assets and  liabilities – at a specific point in time Balanced Scorecard: gives top managers a fast but comprehensive view of the organization via  four indicators – customer satisfaction, internal processes, innovation and improvement  activities, and financial measures Budget: a formal financial projection Bureaucratic Control: an approach to organizational control that is characterized by use of rules,  regulations, and formal authority to guide performance Continuous Improvement: ongoing small, incremental improvements in all parts of an  organization Control Process Steps: establish standards, measure performance, compare performance to  standards, and take corrective action, if necessary Control Standard: performance standard or standard, the desired performance level for a given  goal Controlling: monitoring performance, comparing it with goals, and taking corrective action as  needed Decentralized Control: an approach to organizational control that is characterized by informal  and organic structural arrangements Deming Management: proposed ideas for making organizations more responsive, more  democratic, and less wasteful Enterprise Resource Planning: software systems, information systems for integrating virtually all aspects of a business External Audit: a formal verification of an organization’s financial accounts and statements by  outside experts Financial Statement: a summary of some aspect of an organization’s financial status Fixed Budget: allocates resources on the basis of a single estimate of costs Income Statement: summarizes an organization’s financial results – revenues, and expenses –  over a specified period of time Incremental Budgeting: allocated 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 Internal Audit: verification of an organization’s financial accounts and statements by the  organization’s own professional staff ISO 9000 Series: quality­control procedures companies must install – from purchasing to  manufacturing to inventory to shipping – that can be audited by independent quality­control  experts or registrars  ISO 14000 Series: extends the concept, identifying standards for environmental performance Lean Six Sigma: focuses on problem solving and performance improvement – speed with  excellence – of a well­defined project Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness Management by Exception: a control principle that states that managers should be informed of a  situation only if data show a significant deviation from standards Operational Control: monitoring performance to ensure that operational plans – day­to­day goals  – are being implemented and taking corrective action as needed PDCA Cycle: a plan­to­do­check­act cycle using observed data for continuous improvement of  operations RATER Scale: enables customers to rate the quality of a service along five dimensions –  reliability, assurance, tangibles, empathy, and responsiveness – each on a sale from 1 (very poor) to 10 (very good) Ratio Analysis: the practice of evaluating financial ratios Reduced Cycle Time: reduction in steps in a work process Six Sigma: a rigorous statistical analysis process that reduces defects in manufacturing and  service­related processes Special­purpose Team: meets to solve a special or onetime problem Statistical Process Control: a statistical technique that uses periodic random samples from  production runs to see if quality is being maintained within a standard range of acceptability  Strategic Control: monitoring performance to ensure that strategic plans are being implemented  and taking corrective action as needed  Strategy Map: a 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 Supply Chain: the sequence of suppliers that contribute to creating and delivering a product,  from raw materials to production to final buyers Tacti  cal Control: monitoring performance to ensure that tactical plans – those at the divisional or  departmental level – are being implemented and taking correction action as needed Total Quality Management: a comprehensive approach – led by top management and supported  throughout the organization – dedicated to continuous quality improvement, training, and  customer satisfaction Two Core Principles of TQM: people orientation – everyone involved with the organization  should focus on delivering value to customers and improvement orientation – everyone should  work on continuously improving the work processes Variable Budget: allows the allocation of resources to vary in proportion with various levels of  activity Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness EDWARDS DEMMING 16.1 Control: When Managers Monitor Performance Control is making something happen the way it was planned to happen Controlling is the fourth management function  Planning is setting goals and deciding how to achieve them  Organizing is arranging tasks, people, and other resources to accomplish the work  Leading is motivating people to work hard to achieve the organization’s goals  Controlling is concerned with seeing that the right things happen at the right time in  the right way Why is Control Needed? 1. To adapt to change & uncertainty 2. To discover irregularities & errors 3. To reduce costs, increase productivity, or add value 4. To detect opportunities 5. To deal with complexity  6. To decentralize decision making & facilitate teamwork Steps in the Control Process 1. Establish standards: what is the outcome we want? 2. Measure performance: what is the actual outcome we got? 3. Compare performance to standards: how do the desired & actual outcomes differ? 4. Take corrective action, if necessary: what changes should we make to obtain  desirable outcomes? Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness 16.2 Levels & Areas of Control Levels of Control: Strategic, Tactical, & Operational 1. Strategic control by top managers 2. Tactical control by middle managers 3. Operational control by first­line managers Six Areas of Control 1. Physical area a. Buildings, equipment, and tangible products 2. Human resources area a. Monitor employees i. Personality tests, drug testing for hiring, performance tests during  training, performance evals, etc. 3. Informational area a. Production schedules, sales forecasts, environmental impact statements,  analysis of competition 4. Financial area a. Are bills being paid on time? How much money is owed by the  customers/suppliers? 5. Structural area a. How the organization is arranged from a hierarchical or structural  standpoint i. Bureaucratic control ii. Decentralized control 6. Cultural area 16.3 The Balanced Scorecard, Strategy Maps, & Measurement Management The Balanced Scorecard: A Dashboard­like View of the Organization The Balanced Scorecard: Four “Perspectives” 1. Financial perspective: how do we look to shareholders? 2. Customer perspective: how do customers see us? 3. Internal business perspective: what must we excel at? 4. Innovation & learning perspective: can we continue to improve & create  value Strategy Map: Visual Representation of a Balanced Scorecard Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness Measurement Management: “Forget Magic” Why Measurement Firms Succeed: For Mechanisms of Success  Top executives agree on strategy  Communication is clear  There is better focus and alignments  The organizational culture emphasizes teamwork and allows risk taking Four Barriers to Effective Measurements  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 16.4 Some Financial Tools for Control Budgets: Formal Financial Projections Incremental Budgeting  Fixed versus Variable Budgets  Fixed budgets – where resources are allocated on a single estimate of costs  Variable budgets – where resources are varied in proportion with various  levels of activity Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness Financial Statements: Summarizing the Organization’s Financial Status The Balance Sheet: Picture of Organization’s Financial Worth for a Specific Point in Time The Income Statement: Picture of the Organization’s Financial Results for a  Specified Period of time Ration Analysis: Indicators of an Organization’s Financial Health Audits: External versus Internal  External audits – financial appraisals by outside financial experts Internal audits – financial appraisals by inside financial experts  16.5 Total Quality Management Deming Management: The Contributions of W. Edwards Deming to Improved Quality  Deming’s principles included 1. Quality should be aimed at the needs to the consumer 2. Companies should aim at improving the system, not blaming workers 3. Improved quality leads to increased market share, increased company  prospects & increased employment 4. Quality can be improved on the basis of hard data, using the PDCA cycle Core TQM Principles: Deliver Customer Value & Strive for Continuous Improvement  The four components to TQM are 1. Make continuous improvement a priority  2. Get every employee involved Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness 3. Listen to and learn from customers and employees 4. Use accurate standards to identify and eliminate problems  Two core principles of TQM 1. People orientation – focusing everyone on delivering customer value  Delivering customer value is most important  People will focus on quality if given empowerment  TQM requires training, teamwork, and cross­functional efforts 2. Improvement orientation – focusing everyone on continuously improving  work processes  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 Applying TQM Services Customer Satisfaction: A Matter of Perception? The RATER Scale  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 to help customers Some TQM Techniques Outsourcing: Let Outsiders Handle It Reduced Cycle Time: Increasing the Speed of Work Processes ISO 9000 & ISO 14000: Meeting Standards of Independent Auditors Statistical Process Control: Taking Periodic Random Samples Six Sigma & Lean Six Sigma: Data­Driven Ways to Eliminate Defects 16.6 Managing Control Effectively The Keys to Successful Control Systems 1. They are strategic & results oriented  2. They are timely, accurate & objective a. Be timely – meaning when needed b. Be accurate – meaning correct c. Be objective – meaning impartial 3. There are realistic, positive, & understandable & encourage self­control a. Be realistic b. Be positive c. Be understandable Chapter 16 : Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness d. Encourage self­control 4. They are flexible Barriers to Control Success 1. Too much control 2. Too little employee participation 3. Overemphasis on means instead of ends 4. Overemphasis on paperwork 5. Overemphasis on one instead of multiple approaches 16.7 Managing for Productivity What is Productivity? Productivity = outputs/inputs        OR                     = goods + services / labor + capital + materials + energy The Increasing Productivity Is Important The U.S. Productivity Track Record The Role of Information Technology


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