Chapter 15Managing Qualityand Performance
New Manager’s Question 1• Controls are for bean counters.1      2         3                                  4            ...
New Manager’s Question 2• When there’s a problem, a good manager  finds who’s at fault.1      2         3                 ...
New Manager’s Question 3• Total quality management is just another  fad.1      2         3                                ...
The Meaning of Control    Organizational control is the systematic   process through which managers regulate     organizat...
The Meaning of Control • Manager’s require information about:   – Performance standards   – Actual performance   – Actions...
The Meaning of Control • Manager’s also decide:   – Standards   – Measurements   – Metrics      • Example: pro football or...
Choosing Standards and Measures• Common measures and controls:  – Sales  – Revenue  – Profit• More focus on measuring inta...
The Balanced Scorecard  Comprehensive management control   system that balances traditional financial   measures with ope...
The Balanced Scorecard  4 major perspectives:    Financial performance: concern that the     activities contribute to im...
The Balanced Scorecard  4 major perspectives (cont’d):    Business-process: focus on production &     operating statisti...
The Balanced Scorecard  Manager’s focus on various elements to:    Set targets    Evaluate performance    Guide discus...
The Balanced Scorecard  Not right for every organization  Causes managers to underestimate the   time & commitment neede...
The Balanced Scorecard Example                (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or...
Steps of Feedback Control  Establish Standards of Performance  Measuring Actual Performance  Compare Performance to Sta...
Establish Standards of Performance • Define goals for departments in specific   terms   – Includes a “standard of performa...
Measure Actual Performance• Prepare formal reports for quantitative  performance measurements• Relate measurements to stan...
Compare Performance of Standards• Compare actual activities to standards• Performance deviates from standard –  managers m...
Take Corrective Action • Determine what changes are necessary   – Encourage, redesign, fire • If participative control the...
Feedback-Control Model                (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplica...
Application to Budgeting • Budgetary control – setting targets and   monitoring expenditures • Budgets list planned and ac...
Application to Budgeting (cont’d) • The unit of analysis for budgeting is the   responsibility center   – Any department/u...
Financial Control       Financial Statements provide basic          information for financial control                     ...
Balance Sheet                (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or p...
Income Statement               (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or...
The Changing Philosophy of Control• Hierarchical controls include the monitoring  of behavior through rules, policies, rew...
Hierarchical and Decentralized Methods ofControl                   (c)2011 Cengage Learning. All Rights Reserved. May not ...
Open-Book Management Decentralized philosophy Get every employee thinking like an owner Information sharing and teamwor...
Total Quality Management (TQM)  • Infuse quality into every aspect of the    business, all day-to-day activities  • Became...
TQM Techniques       Quality Circles       Benchmarking       Six Sigma       Reduced Cycle Time       Continuous Imp...
Quality Circles •   Group of 6-12 volunteer employees •   Meet regularly •   Identify problems •   Find solutions •   Reas...
Benchmarking• Process of measuring products, services &  practices again the competitor• Introduced by Xerox in 1979• Key ...
Six Sigma • Introduced by Motorola in 1980s • Specifies a goal of no more than 3.4 defects   per million parts (quality st...
The Importance of Quality ImprovementPrograms                  (c)2011 Cengage Learning. All Rights Reserved. May not be s...
Reduced Cycle Time• Refers to the steps taken to complete a  company process  – Designing a new car/making airline reserva...
Continuous Improvement• Implementation of a large number of small  incremental improvements in all areas on an  on-going b...
Quality Program Success Factors                 (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied ...
International Quality Standards • ISO 9000 standards – International   Organization for Standardization   – Organization c...
Economic Value-Added (EVA)  • Measures performance of after-tax profits    minus the cost of capital invested in tangible ...
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BM 15 daft7e ppt_ch15 - revised

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BM 15 daft7e ppt_ch15 - revised

  1. 1. Chapter 15Managing Qualityand Performance
  2. 2. New Manager’s Question 1• Controls are for bean counters.1 2 3 4 5Strongly agree Strongly Disagree (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  3. 3. New Manager’s Question 2• When there’s a problem, a good manager finds who’s at fault.1 2 3 4 5Strongly agree Strongly Disagree (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  4. 4. New Manager’s Question 3• Total quality management is just another fad.1 2 3 4 5Strongly agree Strongly Disagree (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  5. 5. 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. (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  6. 6. The Meaning of Control • Manager’s require information about: – Performance standards – Actual performance – Actions to correct deviations from the standards • Manager’s need to decide: – What information is essential – How they will obtain it – How they can respond to it (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  7. 7. The Meaning of Control • Manager’s also decide: – Standards – Measurements – Metrics • Example: pro football or basketball team # of season tickets – reduces the dependence on box office sales (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  8. 8. Choosing Standards and Measures• Common measures and controls: – Sales – Revenue – Profit• More focus on measuring intangibles – Customer service – Increased revenue (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  9. 9. The Balanced Scorecard  Comprehensive management control system that balances traditional financial measures with operational measures relating to a company’s critical success factors (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  10. 10. The Balanced Scorecard  4 major perspectives:  Financial performance: concern that the activities contribute to improving short-and long-term financial performance  Customer service: measure things such as how customers view the organization, as well as customer retention & satisfaction (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  11. 11. The Balanced Scorecard  4 major perspectives (cont’d):  Business-process: focus on production & operating statistics  Potential for learning & growth: focus on how well resources & human capital are being managed for the company’s future (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  12. 12. The Balanced Scorecard  Manager’s focus on various elements to:  Set targets  Evaluate performance  Guide discussion about what further actions to take (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  13. 13. The Balanced Scorecard  Not right for every organization  Causes managers to underestimate the time & commitment needed  Use performance-management not performance-measurement (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  14. 14. The Balanced Scorecard Example (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  15. 15. Steps of Feedback Control  Establish Standards of Performance  Measuring Actual Performance  Compare Performance to Standards  Take Corrective Action (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  16. 16. Establish Standards of Performance • Define goals for departments in specific terms – Includes a “standard of performance” • Ex: reduce the reject rate from 15% to 3% • Carefully assess what they will measure & how they will define it • Standards defined clearly & precisely (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  17. 17. Measure Actual Performance• Prepare formal reports for quantitative performance measurements• Relate measurements to standards in step 1• Do not rely exclusively on measurements• Observe for self whether employees are participating in decision making (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  18. 18. Compare Performance of Standards• Compare actual activities to standards• Performance deviates from standard – managers must interpret the deviation – Ex: increase # of sales calls by 10%, but it’s actually 8%--why?• Dig beneath surface – find cause of problem• Involves subjective judgment, employee discussions & objective analysis (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  19. 19. Take Corrective Action • Determine what changes are necessary – Encourage, redesign, fire • If participative control then collaborate with employees • Take corrective action to change standards • Standards may need to be altered to make realistic & provide motivation (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  20. 20. Feedback-Control Model (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  21. 21. Application to Budgeting • Budgetary control – setting targets and monitoring expenditures • Budgets list planned and actual expenditures • Budgets are associated with a division or department (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  22. 22. Application to Budgeting (cont’d) • The unit of analysis for budgeting is the responsibility center – Any department/unit under the supervision of a single person who is responsible for its activity • Typical budgets include: – Expense – Revenue – Cash – Capital (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  23. 23. Financial Control Financial Statements provide basic information for financial control Income Statement Balance Sheet shows profit-and-loss statement firm’s financial position or P&L highlights firm’s financial performance *Assets *Liabilities *bottom line indicates *Owners’ equity net income (profit or loss) (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  24. 24. Balance Sheet (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  25. 25. Income Statement (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  26. 26. The Changing Philosophy of Control• 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 & teams (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  27. 27. Hierarchical and Decentralized Methods ofControl (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  28. 28. Open-Book Management Decentralized philosophy Get every employee thinking like an owner Information sharing and teamwork Allows employees to see the financial condition of company See how his/her job fits into organizational success (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  29. 29. Total Quality Management (TQM) • 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 (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  30. 30. TQM Techniques  Quality Circles  Benchmarking  Six Sigma  Reduced Cycle Time  Continuous Improvement (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  31. 31. Quality Circles • Group of 6-12 volunteer employees • Meet regularly • Identify problems • Find solutions • Reasoning: push decision making to a level at which decisions are being made by people who do the job (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  32. 32. Benchmarking• Process of measuring products, services & practices again the competitor• Introduced by Xerox in 1979• Key to successful benchmarking lies in analysis• Select competitor & emulate processes & procedures (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  33. 33. Six Sigma • Introduced by Motorola in 1980s • Specifies a goal of no more than 3.4 defects per million parts (quality standard) • Generic – emphasizes higher quality & lower costs • Based on DMAIC (define, measure, analyze, improve & control) • Requires major commitment from top mgmt (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  34. 34. The Importance of Quality ImprovementPrograms (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  35. 35. Reduced Cycle Time• Refers to the steps taken to complete a company process – Designing a new car/making airline reservation• Focus on improved responsiveness & acceleration of activities into a shorter time• Reduction in cycle time improves overall company performance as well as quality (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  36. 36. Continuous Improvement• Implementation of a large number of small incremental improvements in all areas on an on-going basis• All employees expected to contribute• Improving things a little bit at a time, all the time, has the highest probability of success (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  37. 37. Quality Program Success Factors (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  38. 38. 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 large increases (c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
  39. 39. Economic Value-Added (EVA) • Measures performance of after-tax profits minus the cost of capital invested in tangible assets • Capture all the things a company can do to add value – Efficiency – Customer satisfaction – Rewarding shareholders • Drive more cost-effective decisions (c)2011 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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