MGT CH 16

____________________ managers are responsible for operational control.

First-level

Allocates resources on the basis of a single estimate of costs. That is, there is only one set of expenses; the budget does not allow for adjustment over time.

Fixed budget

Now recognized by more than 100 countries around the world, and a quarter of the corporations around the globe insist that suppliers have ISO 9000 certification.

ISO 9000 designation

Summarizes an organization's financial results—revenues and expenses—over a specified period of time, such as a quarter or a year.

Income statement

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.

Incremental budgeting

____________________________ feedback systems interfere with effective measurement.

Informal

A verification of an organization's financial accounts and statements by the organization's own professional staff.

Internal audit

Why is increasing productivity important?

It is important to the nation because the higher productivity is, the more available goods and services are to us, and the higher our standard of living.

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; and there must be strong commitment from top management.

In most instances, employees at Snowbird Gutter Co. take responsibility for their own work and how it is done, rather than being governed by a rigid set of rules. Snowbird is using...?

decentralized control

The reduction in steps in a work process, such as fewer authorization steps required to grant a contract to a supplier.

Reduced cycle time

What are the five dimensions of the RATER scale?

Reliability Assurance Tangibles Empathy Responsiveness

A control standard, or performance standard or simply standard, is the...?

desired performance level for a given goal

A markdown on certain grocery-store items may result in a rush of customer demand for those products, which is an example of the control systems benefit of...?

detecting opportunities

Productivity calculations _____________________ for worker hours outside of the U.S. even though foreign workers may have contributed significantly to final products.

do not account

The task of __________________________ is to verify that the organization, in preparing its financial statements, followed generally accepted accounting principles.

external auditors

A balanced scorecard gives top managers a...?

fast but comprehensive view of the organization via four indicators.

The balanced scorecard, also known as the triple bottom line, gives top managers a fast but comprehensive view of the organization via _______________ indicators.

four

When performance exceeds the standards set in the control systems, managers should...?

give rewards.

The 1960s were characterized by _________ productivity in the U.S.

high

Debt management ratio

how easily an organization can meet its long-term financial obligations.

Liquidity ratio

how easily an organization's assets can be converted into cash.

Asset management ratio

how effectively an organization is managing its assets.

The structural area refers to...?

how the organization is arranged from a hierarchical or structural standpoint such as bureaucratic and decentralized control.

Drug tests at hiring are an example of the...?

human resources area of organizational control.

One way to __________________ productivity is to encourage employee involvement in improving work processes.

improve

If a manager increases the efficiency of labor but makes no improvements to the efficiency of capital, an...?

increase in productivity will result.

The most popular form of budgeting is known as...?

incremental budgeting

The cultural area is an...?

informal method of control. It 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 organization's culture.

Based on the definition, managers can raise productivity by...?

making substitutions or increasing the efficiency of any resource.

In __________________________ companies, most top executives agree on business strategy.

measurement-managed

The human resources controls are those used to...?

monitor employees and include personality tests and drug testing for hiring, performance tests during training, performance evaluations to measure work productivity, and employee surveys to assess job satisfaction and leadership.

Tactical control is...?

monitoring performance to ensure that divisional or departmental plans are being implemented and taking corrective action as needed.

Strategic control is...?

monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed.

Financial measures like quarterly sales figures are ________________________ for gauging changes in contemporary value-creating activities

not adequate

Most economists seem to think the recent productivity growth is the result of...?

organizations' huge investment in information technology—computers, the Internet, other telecommunications advances, and computer-guided production line improvements.

Productivity equals...?

outputs divided by inputs

The two core principles of Total Quality Management (TQM) are...?

people and improvement orientations.

An equipment control that monitors the use of computers is part of the...?

physical area of organizational control.

The six areas of organizational control are...?

physical, human, informational, financial, structural, and cultural.

The four management functions are:

planning organizing leading controlling

The informational area includes...?

production schedules, sales forecasts, environmental impact statements, analyses of competition, public relations briefings that are controls on an organization's various information resources.

TQM assumes that, if given empowerment, employees will focus on...?

quality

The use of ______________________ among Japanese car manufacturers resulted in cars being produced that were perceived as being better built than American cars.

quality controls

The practice of evaluating financial ratios to determine an organization's financial health is called...?

ratio analysis

Atlantic Entertainment has restructured its order fulfillment process, reducing the number of steps involved so that employees can finish each order faster. Atlantic has engaged in...?

reduced cycle time.

Return ratios

return on investment or return on equity; how effective management is generating a return, or profits, on its assets.

TQM assumes that it's better to make...?

small improvement all the time.

In Deming's PDCA cycle, "D" stands for...?

"do", which means to implement the change or make a small scale test.

The four perspectives of the balanced scorecard include:

(1) customer satisfaction (2) internal processes (3) innovation and improvement activities (4) financial measures.

List the steps in the control process:

(1) establish standards (2) measure performance (3) compare performance to standards (4) take corrective action if necessary. If action is needed, standards may have to be revised. If it is not needed, continue work progress and recognize success.

The four control process steps are...?

(1) establish standards (2) measure performance (3) compare performance to standards (4) take corrective action, if necessary

Performance measures are usually obtained from three sources:

(1) written reports, including computerized printouts (2) oral reports, as in a salesperson's weekly recitation of accomplishments to the sales manager (3) personal observation, as when a manager takes a stroll of the factory floor to see what employees are doing.

Anticipates investments in major assets such as land, buildings, and major equipment.

Capital expenditure budget

________________________________ affect one another and in turn affect an organization's productivity

All four management functions

Summarizes an organization's overall financial worth at a specific point in time.

Balance sheet

A process by which a company compares its performance with the best practices of high-performing organizations.

Benchmarking

_____________________ control is most appropriate for an organization in which the tasks are explicit and certain.

Bureaucratic

Characterized by the use of rules, regulations, and formal authority to guide performance.

Bureaucratic control

___________________________ are helpful in the internal business perspective of the balanced scorecard.

Computer information systems

Making something happen the way it was planned to happen.

Control

What is control?

Control is making something happen the way it was planned to happen. Controlling is defined as monitoring performance, comparing it with goals, and taking corrective action as needed.

__________________________ can help managers anticipate, monitor, and react to environmental changes.

Control systems

People orientation

Delivering customer value is most important; people will focus on quality if given empowerment; and TQM requires training, teamwork, and cross-functional efforts.

What are the total quality management techniques?

Employee involvement: quality circles, self-managed teams, and special-purpose teams. Benchmarking: learning from the best performers Outsourcing: let outsiders handle it ISO 9000: meeting standards of independent auditors Reduced cycle time: increasing the speed of work processes Statistical process control: taking periodic random samples Six Sigma and Lean Six Sigma: data-driven ways to eliminate defects

Managers can also raise productivity by:

Establish base points, set goals, and measure results. Use new technology. Improve the match between employees and jobs. Encourage employee involvement and innovation. Encourage employee diversity. Redesign the work process.

A control principle that states that managers should be informed of a situation only if data show a significant deviation from standards.

Management by exception

Arranging tasks, people, and other resources to accomplish the work.

Organizing

What is productivity?

Productivity is the ratio of outputs to inputs, or (goods + services)/(labor + capital + materials + energy). It is important to companies because it determines their profitability and survival.

What are the keys to a successful control system?

Strategic and results-oriented. Timely, accurate, and objective. Realistic, positive, and understandable, and encourage self-control. Flexible.

Visual representation of the four perspectives of the balanced scorecard that enables managers to communicate their goals.

Strategy map

What is the purpose of control?

The purpose of control is to make sure that performance meets objectives.

There are six reasons why control is needed in organizations:

To adapt to change and uncertainty. To discover irregularities and errors. To reduce costs, increase productivity, or add value. To detect opportunities. To deal with complexity. To decentralize decision making and facilitate teamwork

What are the barriers to the success of control systems?

Too much control. Too little employee participation. Overemphasis on means instead of ends. Overemphasis on paperwork. Overemphasis on one instead of multiple approaches.

Allows the allocation of resources to vary in proportion with various levels of activity. That is, the budget can be adjusted over time to accommodate pertinent changes in the environment.

Variable budget

The RATER scale enables customers to rate the quality of...?

a service along five dimensions

Income statement

a summary of an organization's financial results (revenues and expenses) over a specified period of time.

Balance sheet

a summary of an organization's overall financial worth (assets and liabilities) at a specific point in time.

Financial statement

a summary of some aspect of an organization's financial status.

The balanced scorecard is related to a strategy map in that the strategy map is...?

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.

Controls allow top management to...?

decentralize decision making at lower levels within the organization and to encourage employees to work together in teams.

The innovation and learning perspective

answers the question "Can we continue to improve and create value?" by creating a culture that encourages rank-and-file employees to make suggestions and question the status quo.

The customer perspective

answers the question "How do customers see us?" by translating the mission of customer service into specific measures of concerns that really matter to customers.

The financial perspective

answers the question "How do we look to shareholders?" by using financial measures.

The internal business perspective

asks "What must we excel at?" and looks at quality, employee skills, and productivity as internal things that must be done to meet its customers expectations.

Standards are best measured when they can...?

be made quantifiable.

A formal financial projection is known as a...?

budget.

The physical area includes...?

buildings, equipment, and tangible products.

Strategy maps show the cause-and-effect links...?

by which specific improvements create desired outcomes

The purpose of _________________________ is to make sure that performance meets objectives.

controlling

Each day, factory workers at Premier Fabrication select random samples from the production runs and test them for quality, rejecting runs if too many samples fall outside a standard range of acceptability. These workers are engaged in...?

statistical process control

The three levels of control, which correspond to the three principal managerial levels, are...?

strategic, tactical, and operational.

Managers in measurement-managed companies more frequently reported...?

strong teamwork and cooperation among the management team and more willingness to take risks.

On her first visit to a new doctor's office, Caroline noted the fine furniture in the lobby and the crisp white coats that each of the staff wore. She was judging the __________________ dimension of the RATER scale.

tangibles

Lumber mills that sell sawdust and wood chips are increasing...?

the efficiency of materials inputs by expanding their uses.

The financial area looks at...?

the financial controls of the organization.

A principle of Deming management is that quality should be aimed at...?

the needs of the consumer.

Ratio analysis

the practice of evaluating financial ratios, such as: Liquidity ratio, Debt management ratio, Asset management ratio, and Returns ratio.

The acceptable deviation depends on...?

the range of variation built into the standards when they were set.

One difficulty with incremental budgets is that...?

they tend to lock departments into stable spending arrangements.