Chapter 15

Many organizational contingency factors influence the success of a TQM program. Some of these factors include:...

-Quality circles are most beneficial when employees have challenging jobs. -TQM is most successful when it enriches jobs and improves employee motivation. -When participation improves employees' problem-solving skills, productivity is likely to increase. -Quality programs have the greatest chance of success in corporate cultures that value quality and stress continuous improvement as a way of life.

A balanced scorecard contains four major perspectives...

-The financial performance perspective reflects a concern that the organization's activities contribute to improving short- and long-term financial performance. -Customer service indicators measure such things as how customers view the organization, as well as customer retention and satisfaction. -Internal business process indicators focus on production and operating statistics. -Potential for learning and growth indicators focus on how well resources and human capital are being managed for the company's future.

______________ control sets targets for an organization's expenditures, monitors results, compares them to the budget, and makes changes as needed. As a control device, __________ are reports that list planned and actual ____________________ for cash, assets, raw materials, salaries, and other resources.

Budgetary; budgets; expenditures

Budgeting is...

Budgeting is an important part of organizational planning and control.

Many business people in countries like ________, _______, and ________ ________ are not accustomed to publicly disclosing financial details.

China; Russia; South Korea

__________, including quality _________, also involves office productivity, such as improved customer service, elimination of bottlenecks, and reduction in paperwork mistakes. Lack of effective _________ can seriously damage an organization's _________ and threaten its future.

Control; control; control; health

_____________ statements provide the basic information used for financial control of an organization. Two major ones—the ___________ sheet and the __________ statement—are the starting points for financial control.

Financial; balance; income

____________ analysis allows managers to be able to evaluate financial reports that compare their organization's performance with earlier data or industry norms. The most common focuses on _______, which express the relationships between __________________ indicators such as profits and assets, sales, and inventory.

Financial; ratios; performance

_____ _________ standards are based on a set of international standards for quality management systems established by the International Standards Organization (ISO) in _________, Switzerland. Hundreds of thousands of organizations in ______ countries have been certified to demonstrate their commitment to quality.

ISO 9000; Geneva; 157

Take Corrective Action...

Managers also determine what changes are necessary; managers may encourage employees to work harder, redesign the production process, or fire employees. Managers in a participative control approach collaborate with employees to determine the corrective action necessary.

________________ management allows employees to see the financial condition of the company for themselves through charts, computer printouts, meetings, and so forth. It shows the individual employee how his or her _____ fits into the big _______________ and affects the financial future of the organization.

Open-book; job; picture

_____ _________ is a highly ambitious quality standard that specifies a goal of no more than 3.4 __________ per million parts. That means being defect-free 99.9997 percent of the time. It has become a generic term for a _________ control approach that takes nothing for granted and emphasizes higher quality and lower costs.

Six Sigma; defects; quality

One popular approach based on decentralized control philosophy is total quality management (TQM)....

TQM infuses quality into every activity in a company through continuous improvement. The TQM philosophy focuses on teamwork, increasing customer satisfaction, and lowering costs.

Compare Performance to Standards...

The third step in the control process compares actual activities to performance standards. When performance deviates from a standard, managers must interpret the deviation. They must dig beneath the surface and find the cause of the problem.

Establish Standards of Performance...

Within the organization's overall strategic plan, managers define goals for organizational departments in specific, operational terms. These include standards of performance against which to compare organizational activities. To effectively evaluate and reward employees for the achievement of standards, managers need clear standards that reflect activities that contribute to the organization's strategy.

The balanced scorecard is...

a comprehensive management control system that balances traditional financial measures with operational measures relating to a company's critical success factors.

A quality circle is...

a group of six to 12 volunteer employees who meet regularly to discuss and solve problems affecting the quality of their work. They meet during work hours to identify problems and find solutions.

Another profitability measure is return on assets (ROA) which is...

a percentage representing company earnings from assets, computed as net income divided by total assets. It is a valuable yardstick for comparing a company's ability to generate earnings with other investment opportunities.

A zero-based budgeting is...

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

A liquidity ratio indicates...

an organization's ability to meet its current debt obligations.

An expense budget includes...

anticipated and actual expenses for each responsibility center and for the total organization. It may show all expenses or focus on a particular category, such as materials or research and development expenses.

A responsibility center is...

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

The balance sheet shows the firm's financial position with respect to assets and liabilities at a specific point in time. It provides three types of information...

assets—what the company owns—includes current assets and fixed assets; liabilities—the firm's debts—includes both current debt and long-term debt; and owners' equity—the difference between assets and liabilities—is the company's net worth in stock and retained earnings.

Quality partnering involves...

assigning dedicated personnel with a particular functional area of the business. In this approach, the quality control personnel work alongside others within a functional area identifying opportunities for quality improvements throughout the work process.

Inventory turnover is...

calculated by dividing the total sales by average inventory; this tells how many times the inventory is used to meet the sales figure.

Types of budgets managers use include...

expense budgets, revenue budgets, and capital budgets.

A revenue budget lists...

forecasted and actual revenues of the organization. Revenues below the budgeted amount signal a need to investigate the problem to see whether the organization can improve revenues.

Leverage refers to...

funding activities with borrowed money. A company uses it to make its assets produce more than they could on their own.

A key to successful ___________________ of the balanced scorecard approach is a performance ________________ orientation rather than a performance ________________ orientation.

implementation; management; measurement

An activity ratio measures...

internal performance with respect to key activities defined by management.

Hierarchical control involves...

monitoring and influencing employee behavior through rules, policies, hierarchy of authority, written documentation, and reward systems. These methods define explicit rules, policies, and procedures for employee behavior. Control relies on centralized authority, the formal hierarchy, and close personal supervision

Decentralized control relies...

on shared values and goals to control employee behavior. Managers operate on the assumption that employees are trustworthy and willing to perform effectively without extensive rules and close supervision. The organization places great emphasis on the selection and socialization of employees to ensure that workers have the values needed to influence behavior which meets goals.

A capital budget lists...

planned investments in major assets such as buildings, trucks, and heavy machinery, often involving expenditures over more than a year.

A ________________ ratio states profits relative to a source of profits, such as sales or assets. The _________ _________ on sales is calculated as net income divided by total sales. The ________ _________ is the gross (before-tax) profit divided by total sales.

profitability; profit margin; gross magin

The conversion ratio is...

purchase orders divided by customer inquiries; this ration indicates effectiveness in converting inquiries into sales.

A 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. It shows the level of funds flowing through the organization and the nature of cash disbursements.

Most organizations prepare formal _________ of quantitative performance __________________ that managers review daily, weekly, or monthly. These __________________ should be related to the standards set in the first step of the control process.

reports; measurements; measurements

The current ratio (current assets divided by current liabilities) tells whether there are...

sufficient assets to convert into cash to pay off debts, if needed.

Benchmarking is...

the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders. The key to successful this lies in analysis.

The Opacity Index indicates...

the degree to which various countries are open regarding economic matters. The higher the rating, the more opaque, or hidden, is the economy.

The income statement, also called a profit-and-loss statement or "P & L," summarizes...

the firm's financial performance for a given time interval, usually one year.

Continuous improvement is...

the implementation of a large number of small, incremental improvements in all areas of the organization on an on going basis.

The bottom line indicates...

the net income—profit or loss—for the given time period.

Corporate governance refers to...

the system of governing an organization so that the interests of corporate shareholders are protected.

Organizational control is...

the systematic process through which managers regulate organizational activities to make them consistent with the expectations established in plans, targets, and standards of performance.

Many traditional companies use _____________ budgeting, meaning that the budgeted amounts for the coming year are imposed on middle- and lower-level managers. Others are beginning to adopt ______________ budgeting, in which lower-level managers anticipate their departments' resource needs and pass them up to top __________________ for approval.

top-down; bottom-up; management

Quick ratio is...

typically expressed as cash plus accounts receivable divided by current liabilities

Some corporate failures can be attributed to ___________________ because top managers did not keep personal tabs on everything in a large, global organization. Some critics argue that ____________-Oxley is creating a culture of _______________ that is stifling innovation and growth.

undercontrol; Sarbanes; overcontrol