Managerial and Quality Control
Control is a critical issue facing every manager in every organization today
Quality control
Office productivity
Basic systems
o allocating financial resources,
o developing human resources,
o analyzing financial performance,
productivity
and
Basic mechanisms for controlling organizations
Basic structure & objectives of control process
Controlling financial performance
Changing philosophy of control
Todays total quality management
Recent trends
Control systems for a turbulent environment
evaluating
overall
Organizational Control
The systematic process through which managers regulate organizational
activities to make them consistent with expectations established in
Plans
Targets
Standards of performance
Organizational Control
Effective controlling requires information about
Performance standards
Actual performance
Actions taken to correct any deviations from the standards
Organizational Control
There are three types of control:
Feed forward, sometimes called preliminary or preventive control
Concurrent. Assesses current work activities, relies on performance
standards; Includes rules and regulations for guiding employee tasks and behaviors;
Intent to ensure that work activities produce the correct results
Feedback: Focuses on the organizations outputs; also called post-action or
output control
Organizational Control Focus Feedforward Control Anticipates Problems
Feedforward Control
It is focus is on human, material, financial resources.
Attempts to identify and prevent deviations
Sometimes called preliminary or preventive control
Concurrent Control
Monitors ongoing activities to ensure consistency with performance
standards
Assesses
Current work activities
Relies on performance standards
Includes rules and regulations
Feedback Control
Focuses on organizations outputs
Sometimes called postaction or output control
Feedback Control Model
Budgetary Control
Most commonly used method of managerial control
Process of setting targets
Used to monitor results and compare to budget
Responsibility Center
Organizational unit under the supervision of a single person who is
responsible for its activity
Budgets Managers Use
Expense = anticipated and actual expenses
Revenue = identifies forecasted and actual revenues
Cash = estimates and reports cash flows
Capital = plans and reports investments in major assets to be depreciated
Traditional Budgeting Methods
Top-down budgeting
o Middle and lower-level managers set departmental budget
targets
o Done in accordance with overall company revenues and
expenditures specified by top management
Bottom-up budgeting
o Lower-level managers budget their departments resource needs
o Pass up to top management for approval
Financial Statements
Provide basic information for financial control
Balance sheet- shows firms financial position with respect to assets
and liabilities at a specific point in time
Income statement- summarizes the firms financial performance for a
given time interval (profit-and-loss statement)
Financial Statements
Balance sheet
Assets what company owns fixed & current
Liabilities what company owes current & long-term
Owners equity
o Difference between assets and liabilities and
o Is the companys net worth in stock and retained earnings
Financial Statements
.Income statement
Shows revenues coming into the organization from all sources
Subtracts all expenses, including cost of goods sold, interest, taxes, and
depreciation
Bottom line indicates the net income (profit or loss)
Financial Analysis
Managers need to be able to evaluate financial reports that compare the
organizations performance with earlier data or industry norms
Liquidity ratios
Activity ratios
Profitability ratios
Leverage ratios
Common Financial Ratios
Control Philosophies
Bureaucratic control influencing employee behavior and assess
performance through
rules
policies
hierarchy of authority
reward systems
written documentation
Decentralized control relies on
cultural values
traditions
shared beliefs
trust
Total Quality Management - TQM
Organizationwide commitment to infusing quality into every activity through
continuous improvement
Quality circles
Benchmarking
Six Sigma
Reduced cycle time
Continuous improvement
Quality Circle Process Team
TQM Success Factors
TQM does not always work
Six sigma principles might not be appropriate for all organizational
problems
Many contingencies can influence the success of TQM program
o Quality circles = more beneficial when challenging jobs
o TQM more successful = enriches jobs + improves motivation
Trends in Quality and Financial Control
International Quality Standards ISO 9000
New Financial Control Systems
o
o
o
Economic value added - EVA
Market value added - MVA
Activity-based costing - ABC
Control Systems for Turbulent Times
Open-Book Management = sharing financial information and results
with all employees in the organization
Balanced scorecard = comprehensive management control system that
balances traditional financial measures with measures of customer
service, internal business processes, and the organizations capacity for
learning and growth
The Balanced Scorecard