Management Week 5: Chapter 16 & Appendix

measure performance--> what is the actual outcome we got?

to measure performance, such as by number of products sold, units produced, or cost per item sold. pg. 549

People orientation

values people as their most important resource-- both those who create a product or resource and those who receive it operates under the following assumption 1) delivering customer values is most important 2) People will focus on quality if given empowerment 3) TQM requires training, teamwork, and cross-functional efforts

variable budgets

when resources are varied in proportion with various levels of activity. allows the allocation of resources to vary in proportion with various levels of activity the budget can be adjusted over time to accommodate pertinent changes in the environment

fixed budgets

where resources are allocated on a single estimate of costs allocates resources on the basis of a single estimate of costs there is only one set of expenses; the budget does not allow for adjustment over time.

loss

your total costs exceed your total sales revenue

two types of audits

1. external 2. internal

7 areas of leadership

1. strategy 2. customers 3. analysis 4. knowledge management 5. workforce 6. operations 7. results

improvement orientation focuses on increasing operational performance and makes the following assumptions

1. Its less expensive to do right the first time --avoid costly reworking 2. Its better to make small improvement all the time 3. Accurate standards must be followed to eliminate small variations 4. there must be strong commitment from top management

four components of TQM

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

Demming Management Principles

1. Quality should be aimed at the needs of the customer 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

two types of financial statements

1. balance sheet 2. income statement

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

perfromance data is obtained from...

1. employee behavior and deliverables 2. peer input or observations 3. personal observation pg. 549

control process steps

1. establish standards 2. measure performance 3. compare performance to standards 4. take corrective action, if necessary pg. 549

benefits of Gantt chart

1. express time lines visually 2. compare proposed and actual progress 3. simplicity

three types of control

1. feedforward 2. concurrent 3. feedback they vary based on the timing of when control takes place pg. 551

lessons to make you a "keeper" in any organization

1. find your passion and follow it 2. encourage self discovery and be realistic 3. every situation is different, so be flexible 4. fine tune your soft skills--your people skills 5. learn how to develop leadership skills 6. treat people as if they matter, because they do 7. draw employees and peers into your management process. 8. keep your cool, and take yourself lightly 9. go with the flow, and stay positive

benefits of break even analysis

1. for doing future "what if" alternate scenarios of costs, prices, and sales. 2. for analyzing the profitability of past projects

limitations of break even analysis

1. it oversimplifies 2. the assumptions may be faulty

limitations of flow charts

1. no time indication 2. not good for complex projects

limitations of Gantt charts

1. not useful for large, complex projects 2. time assumptions are subjective

Two core principles of TQM

1. people orientation: everyone involved with the organization should focus on delivering value to customers 2. improvement orientation: everyone should work on continuously improving the work processes

six areas of organizational control

1. physical 2. human 3. informational 4. financial 5. structural 6. cultural

benefits of flow charts

1. planning straightforward activities 2. depicting alternate scenarios

three levels of control

1. strategic 2. tactical 3. operational

Keys to successful control systems

1. they are strategic and result oriented--> control systems support plans and are concentrated on significant activities that will make a real difference to the organization 2. they are timely, accurate, and objective A) Timely: meaning when needed. the information should not necessarily be delivered quickly, but it should be delivered at an appropriate or specific time B) Accurate: meaning correct. Accuracy is paramount if decision mistakes are to be avoided. C) Objective: meaning impartial. control systems are impartial and fair. 3. they are realistic, positive, and understandable and they encourage self-control--> control systems have to focus on working for the people who will have to live with them. A) be realistic B) be positive C) be understandable D) Encourage self-control 4. they are flexible--> must have room for individual judgement, so that they can be modified when necessary to meet new requirements

six reasons control is needed

1. to adapt to change and uncertainty control systems can help managers anticipate, monitor, and react to those changes 2. to discover irregularities and errors small problems can mushroom into big ones 3. to reduce costs, increase productivity, or add value control systems can reduce labor costs, eliminate waste, increase output, and increase product delivery cycles. 4. to detect opportunities and increase innovation controls can help alert managers to innovative opportunities that might have otherwise gone unnoticed 5. to provide performance feedback controls help managers coordinate there various elements by providing feedback 6. to decentralize decision making and facilitate teamwork Controls allow top management to decentralize decision making at lower levels within the organization and to encourage employees tow rock together in teams. pgs. 547-548

Barriers to control success

1. too much control: some organizations, particularly bureaucratic ones, try to exert too much control. This leads to micromanagement, which frustrates employees 2. too little employee participation: employee participation can enhance productivity. Involving employees in both the planning and the execution of control systems can bring legitimacy to the process and heighten employee morale. 3. Overemphasis on means instead of ends: control activities should be strategic and results oriented. too much emphasis can lead to absenteeism and machine breakdowns bc everyone is begin worked too hard. It can also lead to "beating the system"-- as managers and employees manipulate data to seem to fulfill short-run goals instead of the organization's strategic plan. 4. Overemphasis on paperwork: misdirection of effort is management emphasis on getting reports done, to the exclusion of other performance activity. Undue emphasis on reports can lead to too much focus on quantification of results and even to falsification of data. 5. Overemphasis on one instead of multiple approaches: by having multiple control activities and information systems, an organization can have multiple performance indicators, thereby increasing accuracy and objectivity.

financial perspective on the balance scorecard

How do we look to shareholders? corporate financial strategies and goals generally fall into two buckets (1) revenue growth and (2) productivity growth Revenue growth: focus on increasing revenue from both new and existing customers productivity metrics like revenue per employee or total output produced divided by number of employees are common organizational-level goals. We can also measure productivity in terms of cost.

customer perspective on the balance scorecard

How do customers see us? many companies view customers as one of their most important constituents...the scorecard translates this belief into measures such as market share, customer acquisition, customer retention, customer satisfaction/loyalty, product/service quality, response time, and percentage of bids won.

quality of care goals

Sunny brook Health Sciences Centre 1. improve the patient experience and outcomes through inter-professional, high quality cate 2. focus on the highest levels of specialized care in support of our academic health sciences centre definition 3. work with system partners and government to build an integrated delivery system in support of our communities and out academic health sciences centre definition 4. achieving excellence in clinical care associated with out strategic priorities

Deming management

W. Edwards Deming's proposed ideas for making organizations more responsive, more democratic, and less wasteful

internal business perspective on the balanced scorecard

What must we excel at? four critical high-level internal process that managers are encourages to measure and manage: 1. innovation 2. customer service and satisfaction 3. operational excellence, which includes safety and quality 4. good corporate citizenship influence productivity, efficiency, quality, safety, and a host of other internal metrics companies tend to adopt continuous improvement programs in pursuit of upgrades to their internal processes.

Kaizen

a Japanese philosophy of small continuous improvement that seeks to involve everyone at every level of the organization in the process of identifying opportunities and implementing and testing solutions

management by exception

a control principle that states that managers should be informed of a situation only if data show a significant deviation from standards pg. 550

budget

a formal financial projection states planned activities for a given period of time in quantitative terms prepared not only for the organization as a whole but also for the divisions and departments within it.

external audit

a formal verification of an organization;s financial accounts and statements by outside experts auditors are certified public accountants who work for an accounting firm that is independent of the organization being audited the task is the verify that the organization followed generally accepted accounting principle.s

PDCA Cycle

a plan-do-check-act cycle using observed data for continuous improvement of operations.

Six Sigma

a rigorous statistical analysis process that reduces defects in manufacturing and service-related processes. to reduce variation in your company's business and make customer focused, data-driven decisions preaches the use of: 1) define 2) measure 3) analyze 4) improve 5) Control

statistical process control

a statistical technique that uses periodic random samples from production runs to see if quality is being maintained within a standard range of acceptability if quality is not acceptable, production is stopped to allow corrective measures

financial statement

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

flowchart

a useful graphical tool for representing the sequence of events required to complete a project and for laying out "what if" scenarios

internal audits

a verification of an organization's financial accounts and statements by the organization's own professional staff to verify the accuracy of the organization's records and operating activities also help uncover inefficiencies and thus help managers evaluate the performance of their control systems

strategy map

a visual representation fo a company's critical objectives and the crucial relationships among them that drive organizational performance. helps employees understand how their work contributes to their employer;s overall success. provides insight into how an organization creates value to its key constituents

break-even alaysis

a way of identifying how much revenue is needed to cover the total costs of developing and selling a product

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 requests are reviewed. tend to lock departments into stable spending arrangements; they are not flexible in meeting environmental demands

feedback control

amounts to collecting performance information after a task or project is done extensively used by supervisors and managers information is used to correct or improve future performance problem: it occurs too late pg. 552

decentralized control

an approach to organizational control that is 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. found in companies with a relatively flat organization

bureaucratic control

an approach to organizational control that is characterized by use of rules, regulations, and formal authority to guide performance attempts to elicit employee compliance, using strict rules, a rigid hierarchy, well-defined job descriptions, and administrative mechanisms such as budgets, performance appraisals, and compensation schemes. works well in organizations in which the tasks are explicit and certain

current assets

cash and other assets that are readily convertible to cash within one year's time

liabilities

claims, or debts, by suppliers, lenders, and other non owners of the organization against a company's assets.

compare performance to standards --> how do the desired and actual outcomes differ?

compare measured performance against the standards established the greater the difference between desired and actual performance, the greater the need for action pg. 550

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" goal: to reduce flaws in manufacturing and improve productivity by adopting eight "big picture" Quality management principles

Total Quality Management

dedicated to continuous quality improvement, training, and customer satisfaction. a comprehensive approach- led by top management and supported throughout the organization--dedicated to continuous quality improvement, training, and customer satisfaction. two core principles are (1) people orientation and (2) improvement orientation

continuous improvement

defined as ongoing, small, incremental improvements in all parts of an organization. all products, services, functional areas, and work processes.

productivity

defined by the formula of outputs divided by inputs for a specified period of time. It matters because it determines whether the organization will make a profit or even survive. outputs: the goods and services produced input: labor and capital *Figure 16.7 is important

Gantt chart

developed by Henry L. Gantt a kind of time schedule-- a specialized bar chart that shows the relationship between the kind of work tasks planned and their scheduled completion dates

dashboard

displays easy to read graphics on critical information, such as sales, orders, costs, and shipments

concurrent control

entails collecting performance information in real time enables managers to determine if employee behavior and organizational processes conform to regulations and standards pg. 552

fixed costs

expenses that don't change regardless of your sales or output

variable costs

expenses that vary directly depending on the numbers of the product that you produce and sell

ISO 14000

extends the concept, identifying standards for environmental performance dictates standards for documenting a company's management of pollution, efficient use of raw materials, and reduction of the firms impact on the environment

freeforward control

focuses on preventing future problems collects performance information about past performance and then planning to avoid pitfalls or roadblocks prior to starting a task or project pg. 551

lean six sigma

focuses on problem solving and performance improvement--speed with excellence--of a well-defined project

improvement orientation

focusing everyone on continuously improving work processes

quality assurance

focusing on the performance of workers and urging them to strive for "zero defects"

audits

formal verifications of an organization's financial and operational systems

balanced scorecard

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 helps managers establish goals and measures for four strategic perspectives. A visual representation of the relationships among balanced scorecard perspectives is the strategy map. "measure everything of significance. Anything that is measured and watched improves."

structural area of control

how is the organization arranged from a hierarchical or structural standpoint? bureaucratic or decentralized control

physical area of control

includes buildings, equipment, and tangible products.

cultural area of control

informal method of control influences the work process and levels of performance through the set of norm that develop as a result of the values and beliefs that constitute an organization's culture.

innovation and learning perspective on the balanced scorecard

learning and growth of employees are the foundation for all other goals in the balanced scorecard the idea here is that 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. metrics in this perspective are (1) satisfaction/engagement, (2) employee retention, (3) employee productivity, (4) training budget per employee, (5) technology utilization, and (6) organizational climate and culture.

operational control by first line managers

monitoring performance to ensure that operational plans-- day to day goals-- are being implemented and taking corrective action as needed.

strategic control by top managers

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

tactical control by middle managers

monitoring performance to ensure that tactical plans--those at the divisional or departmental level--are being implemented and taking corrective action as needed.

controlling

monitoring performance, comparing it with goals, and taking corrective action as needed. making something happen the way it was planned to happen. fourth management function whose purpose is to make sure that performance meets objectives. pg. 546

informational area of control

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

fixed assets

property, buildings, equipment, and the like that have a useful life like exceeds one year but that are usually harder to convert to cash

enterprise resource planning

software systems/ information systems for integrating virtually all aspects of a business helps managers stay on top of the latest developments

establish standards --> What is the outcome we want?

standards may be narrow or broad, and they can be set for almost anything, although they are best measured when they can be made quantifiable pg. 549

income statement

summarizes an organization's financial results--revenues and expenses--over a specified period of time.

balance sheet

summarizes an organization's overall financial worth--that is, assets and liabilities--at a specific point in time.

profit (black area)

the amount by which total revenue exceeded total costs

break-even point

the amount of sales revenue at which there is no profit but also no loss to your company

human resources area of control

the controls used to monitor employees 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

control standard of performance standard

the desired performance level for a given goal pg. 549

reduced cycle

the reduction in steps in a work process the point is to improve the organization's performance by eliminating wasteful motions, barriers between departments, unnecessary procedural steps, and the like

assets

the resources that an organization controls; they consist of current assets and fixed assets.

supply chain

the sequence of suppliers that contribute to creating and delivering a product, from raw material to production to final buyers. a major cost center for most companies, and the way firms structure the distribution of their products can have enormous financial impact

quality control

the strategy for minimizing errors by managing each stage of production

outsourcing

the subcontracting of services and operations to an outside vendor done to reduce costs or increase productivity

total costs

the sum of the fixed costs and the variable costs

total sales revenue

the total dollars received from the sale pf however many units you sell

financial area of control

they can affect the preceding three areas are bills being paid on time? home much money is owed to customerS? how much money is owed to suppliers? is there enough cash on hand to meet payroll obligations? what are the debt-repayment schedules? What is the advertising budget?

take corrective action, if necessary --> what changes should we make to obtain desirable outcomes?

this step concerns feedback--modifying, if necessary, the control process according to the results or effects three possibilities of this step 1. make no changes 2. recognize and reinforce positive performance 3. take action to correct negative performance pg. 550