CHAPTER 19 – MANAGING QUALITY PERFORMANCE
I. THE MEANING OF CONTROL
Organizational control refers to the systematic process of regulating
organizational activities to make them consis- tent with the expectations
established in plans, targets, and standards of performance.
Most organizations measure and control using quantitative financial
measures.
II. FEEDBACK CONTROL MODEL
a. FOUR STEPS OF FEEDBACK CONTROL
i. Establish standards
Standards should be defined clearly and precisely so that
employees know what they need to do and can determine
whether their activities are on target.
ii. Measure performance
These measure- ments should be related to the standards set in
the first step of the control process, and the reports should be
designed to help managers evaluate how well the organization
is meeting its standards.
iii. Compare performance to standards
When performance deviates from a standard, managers must
interpret the deviation. . Managers should take an inquiring
approach to deviations to gain a broad understanding of
factors that influence performance.
iv. Make corrections as necessary
b. THE BALANCED SCORECARD
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.
4 Major Perspectives of the Balance Scorecard:
1. Financial Performance – net income, ROI
2. Customer Service – testimonials, surveys
3. Internal Business Process – production and operating statistics
4. Potential for Learning and Growth
III. THE CHANGING PHILOSOPHY OF CONTROL
a. HIERARCHICAL VS DECENTRALIZED APPROACHES
i. Hierarchical – Hierarchical control involves monitoring and
influencing employee behavior through extensive use of rules,
policies, hierarchy of authority, written documentation, reward
systems, and other formal mechanisms.
Rules, procedures, policies
ii. Decentralized - decentralized control relies on cultural values,
traditions, shared beliefs, and trust to foster compliance with
organi- zational goals.
b. OPEN-BOOK MANAGEMENT
Open-book management allows employees to see for themselves—
through charts, computer printouts, meetings, and so forth—the financial
condition of the company.
The goal of open-book management is to get every employee thinking and
acting like a business owner. To get employees to think like owners,
management provides them with the same information owners have
IV. TOTAL QUALITY MANAGEMENT
Total quality management (TQM), an organization-wide effort to infuse
quality into every activity in a company through continuous
improvement.
a. TQM TECHNIQUES
i. Quality Circles is a group of 6 to 12 volunteer employees who
meet regularly to dis- cuss and solve problems that affect the
quality of their work.
ii. Benchmarking the continu- ous process of measuring
products, services, and practices against the toughest
competitors or those companies recog- nized as industry
leaders to identify areas for improvement.
iii. Six Sigma – 5 step methodology
1. Define
2. Measure
3. Analyze
4. Improve
5. Control
iv. Quality Partnering
v. Continuous improvement
b. TQM SUCCESS FACTORS
V. BUDGETARY CONTROL
Budgetary control, one of the most commonly used methods of
managerial control, is the process of setting targets for an organization’s
expenditures, monitoring results and comparing them to the budget, and
making changes as needed
A responsibility center is defined as any organizational department or
unit under the supervision of a single person who is responsible for its
activity.4
a. EXPENSE BUDGET
expense budget includes anticipated and actual expenses for each
responsibility cen- ter and for the total organization.
b. REVENUE BUDGET
A revenue budget lists forecasted and actual revenues of the
organization.
c. CASH BUDGET
The 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.
d. CAPITAL BUDGET
The capital budget lists planned investments in major assets such as
buildings, heavy machinery, or complex information technology systems,
often involving expenditures over more than a year.
e. ZERO-BASED BUDGET
Zero-based budgeting is an approach to planning and decision making
that requires a complete justification for every line item in a budget
instead of carrying forward a prior budget and applying a percentage
change. A zero-based budget begins with a starting point of $0, and every
dollar added to the budget is reflected by an actual, documented need.
VI. FINANCIAL CONTROL
a. FINANCIAL STATEMENTS
i. Balance sheet
ii. Income statement
b. FINANCIAL ANALYSIS: INTERPRETING THE NUMBERS
VII. TRENDS IN QUALITY AND FINANCIAL CONTROL
a. INTERNATIONAL QUALITY STANDARDS
b. CORPORATE GOVERNANCE