Chapter 19

Well-designed control systems include four key steps...

(1) establish standards, (2) measure performance, (3) compare performance to standards, (4) make corrections as necessary

Continuous Improvement

(kaizen); the implementation of a large number of small, incremental improvements in all areas of the organization on an ongoing basis

Steps in the Feedback Control Process?

-Comparing performance to standards -Measuring performance -Making corrections if and when necessary -Establishing standards

What are key performance metrics the organization will track using the balanced scorecard?

-Internal business processes -Financial performance -Potential for learning and growth -Customer service NOT a key performance metric: -Employee satisfaction

Features of hierarchal methods of control?

-Relies on task-related job descriptions -Uses detailed rules -Distrusts cultural norms as control means -Uses top-down authority

Computers and smartphone apps can be used to analyze and improve a worker's job performance in all these areas...

-collecting information regarding physical health. -measuring the money spent doing an activity. -measuring the time spent doing an activity. -tracking computer screen time. DOES NOT IMPROVE A WORKER'S JOB PERFORMANCE IN collecting information regarding strategic processes.

Daniel is an accountant who is busy studying details of the expense budget for each responsibility center for the entire organization. Using that information, which measurement demonstrates that additional explanation is necessary?

Actual expenses that exceed budgeted amounts

Jacqueline has taken a new job at a company that wants her to implement a balanced scorecard approach. Which outcome indicates that Jacqueline has successfully implemented that approach?

All employees think about and discuss the strategic plan.

What is the continuous process of measuring products, services, and practices against major competitors or industry leaders?

Benchmarking

Which country would be less likely to have an open-book management policy?

China

Stu manages the Quality Improvement program for a large health-care network. Which outcome indicates that, under Stu's direction, the organization has successfully implemented a policy of quality control?

Compliance percentages improved on most benchmarks.

Which type of performance ratio deals with the ability of a company to have sufficient assets to convert into cash to pay its liabilities?

Current ratio

What type of control system relies on the values of the organization and its traditions and shared beliefs that employees can be trusted to comply with the organization's goals?

Decentralized

What is not a consequence of the decentralized control method?

Employee turnover is relatively high

Which situation is the hoped-for outcome of open-book management?

Employees acting like business owners

Wolfgang, the CEO of a small company, has started holding quarterly meetings with all of his employees. Which action does Wolfgang take to demonstrate his decision to practice open book management?

Explaining the company's financial statements

An expense budget lists forecasted and actual revenues of the organization.

False

A struggling start-up company is betting the company's future on achieving ISO 9000 certification. Which action is required for it to be ISO 9000 certified?

Have an independent registrar audit the company's policies and procedures

Which of the following is not one of the factors that have prompted a closer focus on corporate governance in recent years?

Health-care insurance legislation

An organization's safety guidelines would fit under which key performance metric?

Internal business processes

Abraham, a manager of an electronics store is considering his career options, including moving to a new company. How would the dynamics of working in a hierarchical organization compare with that of a decentralized organization?

More specific and task-related in a hierarchical organization

A profit margin on sales is calculated using which of the following?

Net income

In a balanced scorecard, when a company computes the number of new products it has introduced into the marketplace during the past three years, this is an example of which perspective on its performance?

Potential for learning and growth

Manager Nehajanda is preparing to present data about how the actual performance of her company's departments compares to the agreed-upon performance standards. Her concern is that her data shows that either the departments failed to meet the standards or that they significantly exceeded the standards. Which action should Nehajanda propose for future quality control efforts?

Take corrective action to change performance standards

Traci's group was in charge of measuring her company's products against those of their toughest competitors. That effort directed their identification of areas for organizational improvement. However, employees felt members of Traci's group were "outsiders." Which outcome indicates that the organization changed to a system of "insiders" addressing defects early in the product cycle?

Traci's group members are distributed to work alongside others within functional areas.

As global business expands, many companies have adopted a universal benchmark for quality management practices, including ISO 9000 standards that represent an international consensus of what constitutes effective quality management as outlined by the International Organization for Standardization (ISO).

True

Budgetary control, one of the most commonly used forms of managerial control, is the process of setting targets for an organization's expenditures, monitoring results and comparing them to the budget, and making changes as needed

True

Campbell Soup uses decentralized control as its plant in Maxton, North Carolina, to encourage employees to cute costs and increase efficiency

True

Most organizations measure and control performance using quantitative financial measures

True

Organizational control is the systematic process through which managers regulate organizational activities to meet planned goals and standards of performance.

True

The TQM philosophy focuses on teamwork, increasing customer satisfaction, and lowering costs

True

The feedback control model involves using feedback to determine whether performance meets established standards

True

The feedback control model involves using feedback to determine whether performance meets established standards.

True

The philosophy of control has shifted to reflect changes in leadership methods

True

Balanced Scorecard

a comprehensive management control system that balances traditional financial measures with measures of customer service, internal business processes, and the organization's capacity for learning & growth

Six Sigma

a quality control approach that emphasizes a relentless pursuit of higher quality and lower costs

Open-Book Management

allows employees to see for themselves the financial condition of the organization & encourages them to think & act like business owners

zero-based budgeting

an approach to planning and decision making that starts at zero and requires a complete justification for every line item in a budget, instead of carrying forward a prior budget and applying a percentage change

Total Quality Management (TQM)

an organization-wide effort to infuse quality into every activity in a. company through continuous improvement

Benchmarking

another option for tracking quality; the continuous process of measuring products, services, and practices against major competitors or industry leaders

Responsibility center

any organizational department or unit under the supervision of a single person who is responsible for its activity

A budget that plans and reports investments in major assets to be depreciated over several years ic called a...

capital budget

With total quality management (TQM), employees would focus on:

continuous improvement

profitability ratio

describes the firm's profits relative to a source of profits, such as sales or assets

Cash budget

estimates receipts and expenditures of money on a daily or weekly basis to ensure that an organization has sufficient cash to meet its obligations

Open-book management allows employees to see for themselves the __________ of the company?

financial condition

liquidity ratio

indicates the organization's ability to meet it's current debt obligations

Quality Partnering

involves assigning dedicated personnel within a particular functional area of the business to identify opportunities for improvement throughout the work process

bottom-up budgeting

involves lower-level managers anticipating their department's budget needs and passing them p to top management for approval

Hierarchical Control

involves monitoring and influencing employee behavior through extensive use of rules, policies, hierarchy of authority, written documentation, reward systems, and other formal mechanisms

Revenue budget

lists forecasted and actual revenues of the organization

activity ratio

measures the organization's internal performance with respect to key activities defined by management

Corporate governance does not include...

media relations

Quality Circles

offer one technique for implementing TQM and include groups of 6 to 12 volunteer employees who meet regularly to discuss and solve problems affecting the quality of their work

The systematic process of regulating the activities of the organization in order to make them consistent with the plans and standards of the organization is called:

organizational control

Expense budget

outlines the anticipated and actual expenses for a responsibility center

A group of workers who volunteer to meet on a regular basis to try to solve problems that affect the quality of their work output is called a:

quality circle.

corporate governance

refers to the framework of systems, rules, and practices by which an organization ensures accountability, fairness, and transparency in the firm's relationships with stakeholders

balance sheet

shows the firm's financial position with respect to assets and liabilities at a specific point in time

An objective such as "our company will deliver 97% of its orders on time" is called a(n)...

standard of performance

income statement

summarizes the firm's financial performance for a given time interval

top-down budgeting

the budgeted amounts for the coming year are literally imposed on middle- and lower-level managers

Decentralized Control

the organization fosters compliance with organizational goals through the use of organizational culture, group norms, and a focus on foals rather than rules & procedures

Organizational Control

the systematic process through which managers regulate organizational activities to meet planned goals and standards of performance

Financial statements provide the basic information used for financial control of an organization

true

as global business expands, many companies have adopted a universal benchmark for quality management practices, including ISO 9000 standards, which represent an international consensus of what constitutes effective quality management as outlined by the International Organization for Standardization (ISO)

true

many organizations are moving toward increased control from the top in terms of corporate governance

true

the most common financial analysis focuses on the use of ratios - statistics that express the relationships between performance indicators such as profits and assets, sales, and inventory

true