MANAGEMENT RICHARD L. DAFT

Managing Quality and Performance Managing Quality and Performance CHAPTER 18

Learning Outcomes Define organizational control and explain why it is a key management function. Explain the benefits of using the balance scorecard to track performance and control of the organization. Explain the four steps in the control process. Discuss the use of financial statements, financial analysis, and budgeting as management controls. Contrast the hierarchical and decentralized methods of control. Identify the benefits of open-book management. Describe the concept of total quality management and major TQM techniques, such as quality circles, benchmarking, Six Sigma principles, reduced cycle time, and continuous improvement. Identify current trends in quality and financial control, including ISO certification, economic value-added and market value-added systems, activity-based costing, and corporate governance, and discuss their impact on organizations. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

What Is Your Attitude Toward Control? Managers must balance control with motivation and creativity Managers control: Work processes Employee behavior Financial resources Profitability Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Meaning of Control The systematic process of regulating organizational activities to meet expectations Established plans Targets Standards Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Choosing Standards and Measures Common forms of control include financial performance Sales Revenue Profit There is a growing need to measure intangible aspects of performance Customer Service Customer Retention Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Balanced Scorecard Comprehensive management control system that balances traditional financial measures with: Customer Service Internal Business Processes Learning and Growth Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Review the Scorecard Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Steps of Feedback Control Establish Standards of Performance Measure Actual Performance Compare Performance to Standards Take Corrective Action Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Feedback Control Model Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Controlling and Budgeting Budgets are reports that list planned and actual expenditures Budget reports highlight the variance between budgeted and actual amounts Budgets are created for all departments and divisions in an organization Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Types of Budgeting Expense Budget Revenue Budget Cash Budget Expense Budget Revenue Budget Cash Budget Capital Budget Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Financial Control Review performance and highlight potential problems Review performance and highlight potential problems Most common financial statements Balance Sheet Income Statement or Profit & Loss Statement Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Sample Financial Statements Starting point for financial control Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Financial Analysis: Interpreting the Numbers Managers need to be able to evaluate financial reports Comparisons allow managers to see improvement and focus on competition Ratios and statistics highlight relationships Ratios are stated fractions or proportions Liquidity, activity, profitability and leverage Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Common Financial Ratios Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Changing Philosophy of Control Hierarchical versus Decentralized Approaches Open Book Management Total Quality Management (TQM) Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Hierarchical and Decentralized Methods Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Open-Book Management Information sharing Teamwork Information sharing Teamwork Encourage active participation Commitment to goals Open-book management allows employees to see for themselves—through charts, computer printouts, meetings, and so forth—the financial condition of the company Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Total Quality Management Total Quality Management (TQM) is a decentralized control philosophy Infuse quality into every activity in a company through continuous improvement Toyota is a good example of the results of TQM TQM became attractive in the 1980s because of its success in Japan Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

International Opacity Index Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

TQM Techniques Quality Circles Benchmarking Six Sigma Quality Circles Benchmarking Six Sigma Reduced Cycle Time Continuous Improvement Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Importance of Quality Improvement Programs Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Quality Program Success Factors Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Trends in Quality and Financial Control International Quality Standards New Financial Control Systems Economic Value-Added (EVA) Market Value-Added (MVA) Activity-Based Costing (ABC) Corporate Governance Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.