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Chapter 19 managerial and quality control
 

Chapter 19 managerial and quality control

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    Chapter 19 managerial and quality control Chapter 19 managerial and quality control Presentation Transcript

    • Managerial and Quality Control Chapter 19
    • Managerial and Topics Quality Control Chapter 19  Basic mechanisms for controlling organizations  Basic structure & objectives of control process  Controlling financial performance  Changing philosophy of control  Today’s total quality management  Recent trends  Control systems for a turbulent environment Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.2
    • Managerial and Quality Control  Control is a critical issue facing every manager in every organization today Quality control Office productivity Basic systems  allocating financial resources,  developing human resources,  analyzing financial performance, and evaluating overall productivity Manager’s Challenge: Gateway Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.3
    • Organizational Control  The systematic process through which managers regulate organizational activities to make them consistent with expectations established in ● Plans ● Targets ● Standards of performance Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.4
    • Organizational Control  Effective controlling requires information about ● Performance standards ● Actual performance ● Actions taken to correct any deviations from the standards Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.5
    • Organizational Control Three types of control  Feed forward Control  Sometimes called preliminary or preventive control  Concurrent Control ● 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 Control  Focuses on the organization’s outputs; also called post-action or output control Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.6
    • Organizational Control Focus Feedforward Concurrent Control Feedback Control Control Anticipates Solve Problems as Solves Problems Problems They Happen After They Occur Examples Examples Examples • Pre-employment • Adaptive culture • drug testing • Analyze sales per • Inspect raw Total quality employee materials • management • Final quality Hire only college • Employee inspection graduates self-control • Survey customers Focus is on Focus is on Focus is on Ongoing Inputs Outputs Processes Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.7
    • Feedforward Control  Focus is on – Human – Material – Financial resources  Attempts to identify and prevent deviations  Sometimes called preliminary or preventive control Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.8
    • Concurrent Control Includes self-control on behavior – personal values & attitudes  Monitorsongoing activities to ensure consistency with performance standards  Assesses – Current work activities – Relies on performance standards – Includes rules and regulations Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.9
    • Feedback Control  Focuses on organization’s outputs  Sometimes called postaction or output control Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.10
    • Feedback Control Model Adjust Standards Adjust Performance Establish 1. Establish 2. Measure 3. Compare 4. Take Strategic standards of actual performance corrective Goals performance. performance to standards. If action. . Inadequate If Adequate 4. Do nothing Feedback or provide reinforcement. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.11
    • Budgetary Control  Most commonly used method of managerial control  Process of setting targets and used to monitor results and compare to the budget, making changes as needed Experiential Exercise: Is Your Budget In Control? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.12
    • Responsibility Center  Organizational unit under the supervision of a single person who is responsible for its activity Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.13
    • Budgets Managers Use ● Expense budget = anticipated and actual expenses ● Revenue budget = identifies forecasted and actual revenues ● Cash budget = estimates and reports cash flows ● Capital budget = reports investments in major assets to be depreciated Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.14
    • Traditional Budgeting Methods  Top-down budgeting  Middle and lower-level managers set departmental budget targets  Done in accordance with overall company revenues and expenditures specified by top management  Bottom-up budgeting  Lower-level managers budget their departments’ resource needs  Pass up to top management for approval Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.15
    • Financial Statements  Provide basic information for financial control 1. Balance sheet- shows firm’s financial position with respect to assets and liabilities at a specific point in time 2. Income statement- summarizes the firms’ financial performance for a given time interval (profit-and-loss statement) Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.16
    • Financial Statements For specific point in time  Balance sheet  Assets – what company owns – fixed & current  Liabilities – what company owes –current & long- term  Owners’ equity  Difference between assets and liabilities and  Is the company’s net worth in stock and retained earnings Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.17
    • Financial Statements For given time interval – usually one year 1. 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) Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.18
    • Financial Analysis  Managers need to be able to evaluate financial reports that compare the organization’s performance with earlier data or industry norms  Liquidity ratios  Activity ratios  Profitability ratios  Leverage ratios Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.19
    • Common Financial Ratios Ratios How Determining Tells You 1. Ability to meet its current debtLiquidity Ratios Current assets/Current obligationsCurrent ratio liabilities 2. If there are sufficient assets to convert into cash to pay off debts 1. Measures internal performanceActivity Ratios Total sales/Average 2. How many times the inventoryInventory turnover inventory is used up to meet the totalConversation ratio Purchase orders/Customer sales figure inquiries 3. Company’s effectiveness in converting inquiries into salesProfitability Ratios 1. Profits relative to a source, Net income/SalesProfit margin on sales such as sales or assets Gross income/Sales Gross margin 2. What a company earned from Net income/Total AssetsReturn on assets its assets(ROA)Leverage 1. Funding activities with Total debt/Total assetsRatios borrowed money 2. A debt ratio above 1.0 to be aDebt ratio poor credit risk Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.20
    • 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 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.21
    • Total Quality Management - TQM Based on decentralized control philosophy  Organizationwide commitment to infusing quality into every activity through continuous improvement TQM Techniques Quality circles Benchmarking Six Sigma Reduced cycle time Continuous improvement Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.22
    • Quality Circle - a group of volunteer employees who meet to discuss and solve problems affecting the quality of their work Team Team Team Team Creates Quality Selects Gathers Data and Recommends Circle and Problems to Be Analyzes Solutions Collects Solved Problems Information Decision by Feedback from Mangers to Quality Circles Top Management Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.23
    • Total Quality Management – TQM  Benchmarking – continuous process of measuring products, services and practices against major competitors or industry leaders  Six Sigma – quality control approach that emphasizes a relentless pursuit of higher quality and lower costs  Cycle Time – steps taken to complete a process  Continuous Improvement – implementation of a large number of small, incremental improvements in all areas of the organization on an ongoing basis Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.24
    • 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  Quality circles = more beneficial when challenging jobs  TQM more successful = enriches jobs + improves motivation Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.25
    • Trends in Quality and Financial Control  International Quality Standards – ISO 9000 – A set of international standards for quality management, setting uniform guidelines for processes to ensure that products conform to customer requirements Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.26
    • Trends in Quality and Financial Control  New Financial Control Systems ● Economic value added (EVA) – measures performance in terms of after-tax profits minus the cost of capital investments ● Market value added (MVA) – measures the stock market’s estimate of the value of a company’s past and expected investments ● Activity-based costing (ABC) – identifies the activities needed to provide a product and allocates costs Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.27
    • 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 organization’s capacity for learning and growth Ethical Dilemma: Is Internet Monitoring the Way to Go? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.28
    • The Balanced Scorecard Financial Do actions contribute to improving financial performance? Internal Business Customers processes Mission Do internal activities How well do we & Goals and processes add serve our value for customers customers? and shareholders? Are we learning, changing, and improving? Learning and Growth Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.29
    • Rules for the Road Ahead Understand your Needs and Values Understand your Competencies Set Career Goals Maintain Networks Get a MentorCopyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.