GB 370 Chapter 13

7 deadly wastes

1. Defects 2. Overproduction 3. Transportation 4. Waiting 5. Inventory 6. Motion 7. Overprocessing

Balanced Scorecard

A framework designed to translate an organization's vision and mission statements and overall business strategy into specific, quantifiable goals and objectives and to monitor the organization's performance in terms of achieving these goals.

feedback loop in the P-O-L-C process

It might be helpful for managers to think of controls as part of a ______________

Concurrent control

Processes that entail monitoring and adjusting ongoing activities.

Kaizen

The Japanese term for continuous improvement.

Proactive managers

plan ahead for the problems business is likely to encounter and opportunities that may arise

Income statment

shows results of the organization's operations, such as revenues, expenses, and profit or loss

Cash flow statement

the detail of cash received and cash expended for each month of the year

Organizational Control

the process by which an organization influences its subunits and members to behave in ways that lead to the attainment of organizational goals and objectives

Reactive manager

waits to react to problems and then solves them by crisis management

Lean control

-A system of nonfinancial controls used to improve product and service quality and decrease waste. -Is a process for measuring and reducing inventory and streamlining production

Feedback controls

-Processes that involve the gathering of information about a completed activity, evaluating that information, and taking steps to improve the similar activities in the future. -The least proactive

The profit and loss statement

-Shows the relation of income and expenses for a specific time interval -Divided into five major categories: 1) sales or revenue 2) cost of goods sold/cost of sales 3) gross profit 4) operating expenses 5) net income

Balance sheet

-Shows what the organization is worth (assets) at a single point in time, and the extent to which those assets were financed through debt (liabilities) or owner's investment (equity) -A snapshot of the business's financial position at a certain point in time

Net income

-The bottom line -Measure of a firm's ability to operate at a profit

Financial control

-The management of a firm's costs and expenses to control them in relation to budgeted amounts. -Executed by monitoring costs and expenditure in relation to the organization's budget

Strategic control

-concerned with tracking the strategy as it is being implemented, detecting any problem areas, and making any necessary adjustments -help managers know whether a chosen strategy is working

Operational control

-is concerned with executing the strategy. They function within the framework established by the strategy. Normally these goals, objectives, and standards are established by major subsystems within the organization such as business units, projects, products, functions, and responsibility centers -contribute to successful execution of the current strategy

5 core principles of lean

1) Define value from the customer's perspective 2) Describe the value stream for each product or service 3) Create flow in each value stream 4) Produce at the pace (pull) of actual customer demand 5) Strive to continuously improve all business operations

4 areas the Balanced Scorecard approach examines

1) Financial analysis (assessments of measures such as operating costs and return-on-investment) 2) Customer analysis (customer satisfaction and retention) 3) Internal analysis (production and innovation) 4) Learning and growth analysis (employee satisfaction and retention and information system performance)

5 key benefits of organization control

1. Cost and productivity control: ensures that the firm functions effectively and efficiently 2. Quality control: contributes to cost control, customer satisfaction, and greater sales 3. Opportunity recognition: helps managers identify and isolate the source of positive surprises, such a new growth market 4. Managing uncertainty and complexity: keeps the organization focused on its strategy and helps managers anticipate and detect negative surprises and respond opportunistically to positive surprises 5. Decentralized decision making: allows the organization to be more responsive by moving decision making to those closest to customers and areas of uncertainty

4 steps in organizational control

1. Establish standards 2. Measure performance 3. Compare performance to standards 4. Take corrective action as needed

4 key costs of organizational control

1. Financial: might include paying an accountant for an audit 2. Damage to culture and reputation: might include damaged relationship with employees or a tarnished reputation with investors or government 3. Decreased responsiveness: downtime between a decision and the actions required to implement it due to compliance with controls 4. Failed implementation: poorly implemented controls exist when implementation fails or the implementation of a new control conflicts with other controls

3 basic financial reports

1. The balance sheet 2. The income/profit and loss statement 3. The cash flow statement

2 things that can go wrong when nonfinancial controls are not linked to the strategy

1. control systems tend to be tied to reward systems, and if managers and employees are being paid based on the achievement of certain nonstrategic, nonfinancial outcomes, then the firm's strategy and hence perfomance suffer 2. managers do not really understand which nonfinancial controls are the most important

Muda

A Japanese term for activity that is wasteful and doesn't add value.

Budgeting

A listing of all planned expenses and revenues.

Intangible assets

An asset that cannot be physically touched, or is not physical in nature.

Current assets

Assets that are cash or can be readily converted to cash in the short term, such as accounts receivable or inventory.

Fixed assets

Assets that are not easily converted to cash in the short term; that is, they are assets that only change over the long term. Land, buildings, equipment, vehicles, furniture, and fixtures are some examples of fixed assets.

Essential components of the Balanced Scorecard

Can be integrated into an organization's vision, mission, and strategy with its nonfinancial and financial controls

Long-term debt

Liabilities may be bank notes or loans made to purchase the business's fixed asset structure. Long-term debt/liabilities come due in a time period of more than 1 year.

Outcome controls

Processes that are generally preferable when just one or two performance measures (say, return on investment or return on assets) are good gauges of a business's health.

Feedforward control

The active monitoring of problems in a way that provides their timely prevention, rather than after-the-fact reaction.

Behavioral controls

The direct evaluation of managerial and employee decision making, not of the results of managerial decisions.

many tools and techniques associated with the lean concept were developed by Toyota in Japan beginning in the 1950s

Why is lean often associated with Toyota Motor Corporation?

Operating expenses

a measurement of all the operating expenses of the business

Nonfinancial controls

complement financial controls by monitoring intangibles like customer satisfaction and employee morale

Financial audits

ensure that financial management practices follow generally accepted procedures, policies, laws, and ethical guidelines

Financial ratio analysis

examines the relationship between specific figures on the financial statements and helps explain the significance of those figures

Current liabilities

liabilities coming due in the short term, usually the coming year.

Gross profit

notes the different between the selling price of the product or service and what the product or service cost

Cost of goods sold/cost of sales

portion of the income statement that shows the cost of products purchased for resale, or the direct labor cost for service business

Sales or revenue

portion of the income statement where the retail price of the product is expressed in terms of dollars times the number of units sold

Financial statements

provide management with information to monitor financial resources and activities

Owner's equity

refers to the amount of money the owner has invested in the firm

2 levels of control

strategic and operational

Fixed expenses

those expenses that do not vary with the level of sales

Variable expenses

those expenses that vary with the level of sales