Managing Quality and Performance for Organizational Control

1. Chapter 19 Managing Quality and Performance

2. 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

3. 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 3

4. Feedback Control Model • Establish Standards of Performance • Measure Actual Performance • Compare Performance to Standards • Take Corrective Action 4

5. 19.1 Feedback Control Model 5

6. The Balanced Scorecard Balanced perspective of company performance Integrates various areas of the organization Managers record, analyze, and discuss the metrics Serves as core management-control system 6

7. 19.2 The Balanced Scorecard

8. Hierarchical versus Decentralized approaches • Hierarchical controls include the monitoring of behavior through rules, policies, reward systems, and written documentation • Decentralized controls based on values and assumptions; rules are only used when necessary • Culture is adaptive, uniting individuals and teams

9. 19.3 Hierarchical and Decentralized Methods of Control

10. Open-Book Management • Decentralized philosophy • Gets every employee thinking like an owner • Information sharing and teamwork • Allows employees to see the financial condition of company • Sees how his/her job fits into organizational success

11. 19.4 Which Countries Have the Most Secretive Economies?

12. Total Quality Management • 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 • Collaboration • Identifying improvements • The goal of TQM is zero defects

13. TQM Techniques • Quality Circles • Benchmarking • Six Sigma • Quality Partnering • Continuous Improvement

14. 19.5 A Five-Step Benchmarking Process

15. 19.6 The Importance of Quality Improvement Programs

16. 19.7 Quality Program Success Factors

17. Budgetary Control • Setting targets and monitoring expenditures • Budgets list planned and actual expenditures • Budgets are associated with a division or department • The unit of analysis for budgeting is the responsibility center 17

18. Budgets Managers Use • Expense Budget • Revenue Budget • Cash Budget • Capital Budget • Top-down Budgeting • Bottom-up Budgeting • Zero-Based Budget 18

19. Financial Control Balance Sheet shows firm’s financial position Income Statement profit-and-loss (P&L) statement highlights firm’s financial performance 19 Financial Statements provide basic information for financial control

20. 19.8 Balance Sheet

21. 19.9 Income Statement

22. 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

23. 19.10 Common Financial Ratios

24. International Quality Standards • ISO 9000 standards – International Organization for Standardization • Organization certification • 157 Countries • Organizations demonstrate a commitment to quality • Europe leads in certifications but the United States has had the greatest number of new certifications in recent years

25. Corporate Governance Goes beyond systems and rules from the top to safeguard shareholders Ensures accountability, fairness, and transparency in all its dealings U.S. Legal Requirements: Auditing reforms – internal and external Certification of financial reports by top leaders Enhanced public financial disclosure Justification of Board structure