MANAGING QUALITY AND PERFORMANCE

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning objectives
• Define organizational control and explain why it is a key
management function.
• Explain the four steps in the control process.
• Describe the benefits of using a balanced scorecard to track the
performance and control of the organization.
• Contrast the hierarchical and decentralized methods of control.
• Explain the benefits of open-book management.
• Describe the concept of total quality management (TQM) and
major TQM techniques, including quality circles, benchmarking,
Six Sigma principles, quality partnering, and continuous
improvement.
• Discuss the use of financial statements, financial analysis, and
budgeting as management controls.
• Identify current trends in quality and financial control, including
ISO 9000 and corporate governance, and their impact on
organizations.
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 The Meaning of Control

Organizational control is the systematic

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

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 Controlling
• Managers use a variety of measures to monitor
performance:
• Controlling work processes
• Regulating employee behavior
• Systems for financial resources
• Developing human resources
• Evaluating profitability

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 Feedback Control Model

 Establish Standards of Performance:

 define goals for organizational departments
 Measure Actual Performance:
 develop quantitative measurements of performance
 Compare Performance to Standards:
 compare actual activities to performance standards.
 Feedback:
 Take Corrective Action

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 Feedback Control Model

tìm ra nguyên
nhân

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 The Balanced Scorecard
• A comprehensive management control system
• Balances traditional financial measures with
operational measures relating to a company’s critical
success factors
• Integrates various areas of the organization
• Contains four major perspectives: Financial
performance, Customer service, Internal business,
Potential for learning and growth

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 The Balanced Scorecard
chiến rất nhiều thời gian

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 Hierarchical versus Decentralized approaches

• Hierarchical controls include the monitoring of behavior

through rules, policies, reward systems, and written
documentation
• Control relies on centralized authority, the formal
hierarchy, and close personal supervision.
• Responsibility for quality control rests with quality
control inspectors and supervisors rather than with
employees.
• Hierarchical control techniques can enhance
organizational efficiency and effectiveness.

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 Hierarchical versus Decentralized approaches
phân cấp phân quyền

• Decentralized controls based on values and

assumptions; rules are only used when necessary
• relies on social values, traditions, shared beliefs, and
trust to foster compliance with organizational goals.
• Employees are trusted, and managers believe
employees are willing to perform correctly without
extensive rules or supervision.

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Hierarchical and Decentralized Methods of Control

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 Open-Book Management

 Allows employees to see for themselves –

through charts, computer printouts, meetings,
and so forth – the financial condition of the
company
 Decentralized philosophy
 Gets every employee thinking like an owner
 Sees how his/her job fits into organizational
success

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Total Quality Management (Edwards Deming)

 Infuse quality into every aspect of the business,

all day-to-day activities
 Became popular in the U.S. in the 1980s
 Focuses on:
Teamwork
Increasing customer satisfaction
Lowering costs

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Total Quality Management (Edwards Deming)

 Organizations implement TQM by encouraging

managers and employees to collaborate across
functions and departments, as well as with
customers and suppliers, to identify areas for
improvement, no matter how small.
 Each quality improvement is a step toward
perfection and meeting a goal of zero effects.

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 TQM Techniques

 Quality Circles
 Benchmarking
 Six Sigma
 Quality Partnering
 Continuous Improvement

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 TQM Techniques
• 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.
• 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 benchmarking lies in
analysis.

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 TQM Techniques
• 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.
• 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 benchmarking lies in
analysis.

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 TQM Techniques
• Six Sigma is a highly ambitious quality standard that
specifies a goal of no more than 3.4 defects per million
parts. That means being defect-free 99.9997 percent
of the time.
• The discipline is based on DMAIC (Define, Measure,
Analyze, Improve, and Control).
• Effectively implementing Six Sigma requires a major
commitment from top management because
widespread change is required.

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The Importance of Quality Improvement Programs

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 TQM Techniques
• 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.
• This integrated, partnering approach to quality
makes it possible to detect and address defects early
in the product life cycle, when they can be corrected
most easily.

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 TQM Techniques
• Continuous improvement is the implementation of a
large number of small, incremental improvements in all
areas of the organization on an on-going basis.
• All employees are expected to contribute by initiating
changes in their own job activities. There is no end to
the process. Innovations can start simply, and
employees can build on their success.

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Quality Program Success Factors

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 Budgetary Control

 Setting targets and monitoring expenditures

 Budgets list planned and actual expenditures

 Budgets are associated with a division or

department
The fundamental unit of analysis for a budget
control system is called a responsibility center.

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 Budgets Managers Use

 Expense Budget
 Revenue Budget
 Cash Budget
 Capital Budget
Top-down Budgeting
Bottom-up Budgeting
 Zero-Based Budget

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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 Budgets Managers Use
• An expense budget includes anticipated and actual
expenses for each responsibility center and for the
total organization
• A revenue budget lists forecasted and actual revenues
of the organization.
• 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.

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Budgets Managers Use
• 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 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.

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Financial Control
• Financial Statements provide basic information for financial control

Income Statement
profit-and-loss
Balance Sheet
(P&L) statement
shows firm’s
highlights firm’s
financial position
financial
performance

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27in part.
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or
 Balance Sheet

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Balance Sheet
• 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.

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 Income Statement

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 Income Statement
• 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.
The bottom line indicates the net income—profit or
loss—for the given time period.

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 Interpreting the Numbers

 Managers need to evaluate financial reports

 Comparing performance with other data
and industry standards
 Financial Analysis:
Ratios
Statistics
 Review:
Profits, assets, sales, and inventory

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 Common Financial Ratios

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 International Quality Standards

 ISO 9000 standards – International

Organization for Standardization
Organization certification
157 Countries
 Organizations demonstrate a commitment to
quality
 Many countries and companies require ISO
certification before they will do business with
an organization

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Corporate Governance
• Corporate governance refers to the system of
governing an organization so that the interests of
corporate shareholders are protected.
• Goes beyond systems and rules from the top to
safeguard shareholders
• Ensures accountability, fairness, and transparency in all
its dealings

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 Discussion
• Most companies have policies that regulate employees’
personal use of work computers during work hours.
Some even monitor employee e-mails and track the
Web sites that have been visited. Do you consider this
type of surveillance an invasion of privacy? What are
the advantages of restricting employee use of the
Internet and e-mail at work?

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.