Management chapter 16
Planning
- setting goals and deciding how to achieve them
Quality assurance
- focusing on the performance of workers and urging them to strive for zero defects
Strategic control
- 3 levels of control - monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed - mainly performed by top managers - ceo and vp levels
Concurrent control
- 3 types of control - entails collecting performance information in real time - enables managers to determine if employee behavior and organizational processes conform to regulations and standards - corrective action can then be taken immediately when performance is not meeting expectations - technology is typically used for concurrent control - corporate online monitoring of email and internet use
Feedback control
- 3 types of control - extensively used by supervisors and managers - amounts to collecting performance information after a task or project is done - information then is used to correct or improve future performance - occurs too late - late is better than never
Financial area
- 6 areas of organizational control - are bills being paid on time? - how much money is owed by customers? - is there enough cash on hand to meet payroll? - what are the debt repayment schedules? - budgets? - financial controls are important because they can affect the other areas
Human resource area
- 6 areas of organizational control - controls used to monitor employees include personality and drug testing for hiring, performance tests during training, performance evaluations to measure productivity, employee surveys to assess job satisfaction and leadership
Structural area
- 6 areas of organizational control - how is the organization arranged from a hierarchical or structural standpoint? - bureaucratic control - decentralized control
Physical area
- 6 areas of organizational control - includes buildings, equipment, and tangible products - equipment controls monitor the use of computers, cars, HVAC equip, and other machinery
Cultural area
- 6 areas of organizational control - informal method of control - influences the work process and levels of performance through the set of norms that develop as a result of the values and beliefs that constitute an organizations culture
Informational area
- 6 areas of organizational control - production schedules, sales forecasts, environmental impact statements, analyses of competition, and public relations briefings are all controls on an organizations various information resources
To decentralize decision making and facilitate teamwork
- 6 reasons control is needed - allow top management to decentralize decision making at lower levels within the organization and to encourage employees to work together in teams
To reduce costs, increase productivity, or add value
- 6 reasons control is needed - control systems can reduce labor costs, eliminate waste, increase output, and increase product delivery cycles - can help add value to a product so that customers will be more inclined to choose them over rival products - periodic employee satisfaction surveys
To detect opportunities and increase innovation
- 6 reasons control is needed - hot selling products, competitive prices on materials, changing population trends, new overseas markets - controls help alert managers to innovative opportunities that might have otherwise gone unnoticed
To provide performance feedback
- 6 reasons control is needed - several product lines, materials purchasing policies, customer bases, worker needs that conflict with each other - controls help managers coordinate these various elements by providing feedback
to discover irregularities and errors
- 6 reasons control is needed - small problems can mushroom into big ones - cost overruns, manufacturing defects, employee turnover, bookkeeping errors, and customer dissatisfaction - may be tolerable in the short run, but can bring about the downfall of an organization in the long run
People orientation
- TQM - everyone involved with the organization should focus on delivering value to customers - value people as their most important resource - delivering customer value is most important - people will focus on quality if given empowerment- employees, suppliers, customers will concentrate on making quality improvements if given the decision making power to do so - TQM requires training, teamwork, and cross functional efforts- well trained, must work in teams, many problems are spread across functional areas
Deming management
- W. Edwards Deming - proposed ideas for making organizations more responsive, more democratic, and less wasteful includes the following principles: 1. quality should be aimed at the needs of the consumer 2. companies should aim at improving the system, not blaming workers 3. improved quality leads to increased market share, increased company prospects, and increased employment 4. quality can be improved on the basis of hard data, using the PDCA cycle
Management by exception
- a control principle that states managers should be informed of a situation only if data show a significant deviation from standards
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 - tend to lock departments into stable spending arrangements, not flexible in meeting environmental demands - a department may engage in many activities, some more important than others, it's not easy to sort out how well managers performed at the various activities
Decentralized control
- an approach to organizational control characterized by informal and organic structural arrangements - aims to get increased employee commitment, using the corporate culture, group norms, and workers taking responsibility for their performance - relatively flat organization
Bureaucratic control
- an approach to organizational control characterized by rules, regulations, and formal authority to guide performance - elicit employee compliance, using strict rules, rigid hierarchy, well defined job descriptions, administrative mechanisms such as budgets, performance appraisals, and compensation schemes - traditional military organization - works well when tasks are explicit and certain - rigid but effective means of ensuring that performance standards are being met - may not be effective if people are looking for ways to stay out of trouble by simply following the rules, or if they try to beat the system by manipulating performance results, or if they try to actively resist bureaucratic constraints
Organizing
- arranging tasks, people, and other resources to accomplish the work
Innovation and learning perspective
- balanced scorecard - "Can we continue to improve and create value?" - learning and growth of employees are the foundation for all other goals in the balanced scorecard - capable and motivated employees, who possess the resources and culture needed to get the job done, will provide higher quality products and services in a more efficient manner - commitment to invest in progressive human resource and technology - metrics include employee satisfaction/engagement, employee retention, employee productivity, training budget per employee, technology utilization, and organizational climate and culture - tracked with surveys
Customer perspective
- balanced scorecard - "How do customers see us?" - customers some of most important constituents - translates this belief into measures such as market share, customer acquisition, customer retention, customer satisfaction/loyalty, product/service quality, response time, percentage of bids one
Financial perspective
- balanced scorecard - "How do we look to shareholders?" - revenue growth and productivity growth - revenue growth goals might focus on increasing revenue from new and existing customers - productivity metrics like revenue per employee or total output divided by number of employees are common organization-level goals
Internal business perspective
- balanced scorecard - "What must we excel at?" - what the organization must excel at to effectively meet financial objectives and customer expectations 4 critical high-level internal processes that managers are encouraged to measure and manage: 1. innovation 2. customer service and satisfaction 3. operational excellence, includes safety and quality 4. good corporate citizenship - these influence productivity, efficiency, quality, safety, and other internal metrics - tend to adopt continuous improvement programs in pursuit of upgrades to their internal processes
Too much control
- barriers to control success - bureaucratic - leads to micromanagement, frustrates employees may lead them to ignore or sabotage controls
Overemphasis on 1 instead of multiple approaches
- barriers to successful controls - by having multiple control activities and information systems, an organization can have multiple performance indicators, thereby increasing accuracy and objectivity - control systems affect each other and must be integrated
Overemphasis on means instead of ends
- barriers to successful controls - control activities are not ends themselves but the means to eliminating problems - too much emphasis on accountability can lead production supervisors to push workers and equip too hard - can also lead to "beating the system"
Too little employee participation
- barriers to successful controls - involving employees in both the planning and execution of control systems can bring legitimacy to the process and heighten employee morale
Overemphasis on paperwork
- barriers to successful controls - management emphasis on getting reports done, to the exclusion of other performance activity - can lead to too much focus on quantification of results and even falsification of data
Six sigma and lean six sigma
- cannot compensate for human error or control events outside a company - let managers approach problems with the assumption that theres a data oriented, tangible way to approach problem solving
Current assets
- cash and other assets that are readily convertible to cash within one years time - inventory - accounts receivable - treasury bills - money market mutual funds
Liabilities
- claims or debts, by suppliers, lenders, and other nonowners of the organization against a companies assets
Total quality management-
- comprehensive approach, led by top management and supported throughout the organization, dedicated to continuous quality improvement, training, and customer satisfaction 1. make continuous improvement a priority 2. get every employee involved 3. listen to and learn from customers and employees 4. use accurate standards to identify and eliminate problems
ISO 9000
- consists of quality control procedures companies must install- from purchasing to manufacturing to inventory to shipping- that can be audited by independent quality control experts or registrars - reduce flaws in manufacturing and improve productivity by adopting 8 big picture quality management principles 1. customer focus 2. leadership 3. involvement of people 4. process approach 5. system approach to management 6. continual improvement 7. factual approach to decision making 8. mutually beneficial supplier relationships
Establish standards
- control process 1 - "what is the outcome we want?" - a control or performance standard is the desired performance level for a given goal - standards may be narrow or broad - best when quantifiable - one technique for establishing standards is the balanced scorecard
Measure performance
- control process 2 - "What is the actual outcome we got?" - measure performance- number of units sold, units produced, or cost per item sold - performance data usually obtained from three sources
Compare performance to standards
- control process 3 - "How do the desired and actual outcomes differ? - compare measured performance against established standards - performance that exceeds standards is an occasion for reward - the greater the difference between desired and actual performance, the greater the need for action - range of verification is often incorporated in computer systems into a principle called management by exception
Take corrective action if necessary
- control process 4 - "What changes should we make to obtain desirable outcomes?" - concerns feedback - three possibilities: 1. make no changes 2. recognize and reinforce positive performance 3. take action to correct negative performance
quality should be aimed at the needs of the consumer
- deming management - consumer is most important part of production line -efforts of individual workers should be directed toward meeting the expectations of the ultimate user
Improved quality leads to increased market share, increased company prospects, and increased employment
- deming management - lower prices and superior quality lead to greater market share, which in turn leads to improved business prospects and consequently increased employment
Quality can be improved on the basis of hard data, using the PDCA cycle
- deming management - quality could be improved by acting on the basis of hard data
Six sigma
- developed by motorola - rigorous statistical analysis process that reduces defects in manufacturing and service related products - testing thousands of variables and eliminating guess-work - improve quality and reduce waste to the point where errors nearly vanish - no more than 3.4 defects per million products or procedures - philosophy- reduce variation in business and make customer focused, data driven decisions DMAIC = define, measure, analyze, improve, control
Dashboard
- displayed in easy to read graphics - all the information on sales, orders, and the like assembled from data pulled in real time from corporate software - measure everything of significance, anything measured and watched improves
EBITDA
- earnings before interest, depreciation, taxes, and amortization - to gauge success in new market entries
ISO 14000
- extends the concept, identifying standards for environmental performance - dictates standards for documenting a companies management of pollution, efficient use of raw materials, and reduction of the firms impact on the environment
Internal audits
- financial appraisals by inside financial experts - verification of an organizations financial accounts and statements by the organizations own professional staff - verify the accuracy of the organizations records and operating activities - help uncover inefficiencies and help managers evaluate the performance of control systems
External audits
- financial appraisals by outside financial experts - formal verification of an organizations financial accounts and statements by outside experts - certified public accountants (CPA's) who work for an accounting firm that is independent of the organization being audited - verify that the organization, in preparing its financial statements and in determining its assets and liabilities, followed generally accepted accounting principles
2 types of incremental budgets
- fixed and variable
Lean six sigma
- focuses on problem solving and performance improvement- speed with excellence- of a well defined project
Budget
- formal financial projection - states an organizations planned activities for a given period of time in quantitative terms, such as dollars, hours, or number of products - prepared not only for the organization as a whole but also for the divisions and departments within it - provide a yardstick against which managers can judge how well they are controlling mandatory expenditures - quickbooks, mint, venmo - planning programming budgeting and zero base budgeting are no longer favored, incremental budgeting is dominant
Audits
- formal verifications of an organizations financial and operational systems - verify accuracy and fairness of financial statements - a tool for management decision making - more companies using data analytics to conduct audits - external and internal
Baldrige award
- given by the president of the united states to business and to education, healthcare, and nonprofits that apply and are judged to be outstanding in leadership, strategy, customers, analysis, knowledge management, workforce operations, and results
Freelancers
- hiring these can save companies as much as a third of normal payroll costs - most aren't eligible for expensive employee benefits like paid time off, medical coverage, and pensions - enjoy the freedom to work from home, make their own hours, choose their assignments, be their own boss - managing their cash flow and business expenses - setting aside money to pay their own income taxes
Control in service firms
- income tax preparers, hospital and dental practices, consultants, accountants, salons, brokers, hotels, airlines - cannot hold any inventory of their services, which are intangible, instead they provide these services only on demand - usually develop a personal, if temporary, relationship with client - service industry has grown significantly as manufacturing activity has moved overseas - training and education affect the quality of service -ongoing training/ certification -
Kaizen
- japanese philosophy of small continuous improvement that seeks to involve everyone at every level of the organization in the process of identifying opportunities and testing solutions
Balanced scorecard
- kaplan and Norton - establishes goals and performance measures according to 4 perspectives - 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 4. financial measures - complexity of managing an organization today requires that managers be able to view performance in several areas simultaneously
Strategy map
- kaplan and norton - visual representation of a companies critical objectives and the crucial relationships among them that drive organizational performance - show relationships among a company's strategic goals - provide insight into how an organization creates value to its key constituents - informs others about the knowledge, skills, and systems that employees should possess to innovate and build internal capabilities that deliver value to customers, which eventually creates higher shareholder value - starting point for any organization that wants to implement goal cascading or management by objectives
Strategic and results oriented
- keys to successful control - support strategic plans and are concentrated on significant activities that will make a real difference to the organization -develop control standards that will measure how well the plans are being achieved
Realistic, positive, understandable, encourage self control
- keys to successful controls - have to focus on working for the people who will have to live with them - if employees feel results are too difficult, they might ignore or sabotage the performance system - emphasize development and improvement, avoid punishment and reprimand - kept as simple as possible, present data in understandable terms, avoid complicated stats - encourage good communication and mutual participation
They are flexible
- keys to successful controls - must leave room for individual judgement, so they can be modified when necessary to meet new requirements
Timely, accurate, and objective
- keys to successful controls - timely- when needed, should be delivered at an appropriate or specific time, often enough to allow employees and managers to act on any deviations - accurate, correct, inaccurate figures lead to mistakes - objective, impartial, not biased or prejudiced
control
- making something happen the way it was planned to happen
Feedback
- modifying, if necessary, the control process according to the results or effects
Controlling
- monitoring performance, comparing it with goals, taking corrective action as needed - 4th management function - make sure performance meets objectives
Leading
- motivating people to work hard to achieve the organizations goals
Variable budget
- or flexible budget - resources are varied in proportion with various levels of activity - can be adjusted over time to accommodate pertinent changes in the environment - allow for the unexpected
Fixed budgets
- or static budget - allocates resources on the basis of a single estimate of costs - only one set of expenses, does not allow for adjustment over time
Balance sheet
- picture of an organizations financial worth for a specific point in time - summarizes an organizations overall financial worth, assets and liabilities, at a specific point in time
Income statement
- picture of organizations financial results for a specified period of time - summarizes an organizations financial results, revenues and expenses, over a quarter or year - net income, computed by subtracting total expenses from gross profit
PDCA cycle
- plan do check act cycle - using observed data for continuous improvement of operations
Fixed assets
- property, buildings, equipment, and the like that have a useful life that exceeds one year but that are usually harder to convert to cash
Assets
- resources that an organization controls - current assets - fixed assets
Supply chain
- sequence of suppliers that contribute to creating and delivering a product, from raw materials to production to final buyers - major cost center - paying closer attention to the sourcing, shipping, and warehousing of products - some create specialized supply chain departments that look specifically at cost and quality control in these areas and the way they contribute to the cost and quality of finished products
Micromanager
- someone who is unable to delegate tasks and decisions, insists on taking an inappropriately detailed focus on subordinates work 1. working excessive hours, weekends, holidays 2. checking everyone elses work 3. needing to be copied on and approve everything 4, requiring others to check in and always be available 5. having to hire new people all the time because of high turnover - employees more effective and achieve greater job satisfaction if they feel empowered to use their own judgement - micromanagers become bottlenecks - learn to accept some degree of uncertainty
Statistical process control
- statistical technique that uses periodic random samples from production runs to see if quality is being maintained within a standard range of acceptability
Quality control
- strategy for minimizing errors by managing each stage of production
Outsourcing
- subcontracting of services and operations to an outside vendor - reduce costs or increase productivity - outsourcing short term and project work to freelance or contract workers saves on employee related expenses - done by many state and local governments - privatization- subcontracted traditional government services such as fire protection, correctional services, and medical services
financial statement
- summary of some aspect of an organizations financial status - essential in helping managers maintain financial control over the organization - balance sheet and income statement
Operational control
- three levels of control - monitoring performance to ensure that operational plans- day to day goals- are being implemented and taking corrective action if needed - first line managers with titles such as "department head" "supervisor" - includes team leaders, reporting is done on a daily basis
Reduced cycle time
- tqm technique - reduction in steps in a work process - improve organizations performance by eliminating wasteful motions, barriers between departments, unnecessary procedural steps etc
Evidence based management
- use of real world data rather than fads and hunches in making management decisions
Feedforward control
-3 types of control - focuses on preventing future problems - collecting performance information about past performance and then planning to avoid pitfalls or roadblocks prior to staring a task or project
to adapt to change and uncertainty
-6 reasons control is needed - markets shift, consumer tastes change, competitors appear, tech is reborn, materials are invented, regulations are altered - control systems can help managers anticipate, monitor, and react to these changes
Improvement orientation
-TQM - everyone should work on continuously improving the work process - way to success is through continuous, small improvements - ongoing, small, incremental improvements in all parts of an organization - focuses on increasing operational performance - makes the following assumptions: 1. its less expensive to do it right the first time- reworking is costly, investment in training, equipment, and tools is less expensive than poor quality and poor customer relationships 2. its better to make small improvements all the time-must be an everyday matter, no improvement too small 3. accurate standards must be followed to eliminate small variations- collection of accurate data throughout every stage- standards/benchmarking to evaluate progress and eliminate small variations, which are the source of many quality defects 4. must be strong commitment from top management
Companies should aim at improving the system, not blaming workers
-deming management - u.s. managers were more concerned with blaming problems on individual workers rather than on the organizations structure, culture, technology, work rules, and management - treating employees well, listening to their views and suggestions, managers could bring about improvements in products and services
Tactical control
-three levels of control - monitoring performance to ensure that tactical plans- those at the divisional or departmental level- are being implemented and taking corrective action as needed - middle managers with titles such as "division head" "plant manager" "branch sales manager" - reporting done on a weekly or monthly basis
Seven challenges we manage for
1. competitive advantage 2. diversity 3. globalization 4. information technology 5. ethical standards 6. sustainability 7. personal happiness/goals
Performance data are usually obtained from three sources
1. employee behavior and deliverables 2. peer input or observations 3. personal observation, as when a manager takes a stroll on the factory floor to see what employees are doing
Control process steps
1. establish standards 2. measure performance 3. compare performance to standards 4. take corrective action, if necessary
4 key inhibitors to successfully implementing TQM
1. failure to provide evidence supporting previous improvement activities 2. lack of a champion who is responsible for leading the implementation 3. inability to measure or track results of the program 4. failure to develop a culture of quality or continuous learning
3 types of control
1. feedforward 2. concurrent 3. feedback - vary based on the timing of when control takes place
Two core principles of TQM
1. people orientation 2. improvement orientation
6 areas of organizational control
1. physical 2. human 3. informational 4. financial 5. structural 6. cultural
Three levels of control
1. strategic- planning by top managers 2. tactical- planning by middle managers 3. operational- planning by first line supervisory managers and team leaders
Characteristics of successful control systems
1. they are strategic an results oriented 2. they are timely, accurate and objective 3. they are realistic, positive, understandable, encourage self control 4. they are flexible
Six reasons control is needed
1. to adapt to change and uncertainty 2. to discover irregularities and errors 3. to reduce costs, increase productivity, or add value 4. to detect opportunities and increase innovation 5. to provide performance feedback 6. to decentralize decision making and facilitate teamwork
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