Ch 8-Slides

Chapter 8
Maintaining Control
and Improving Quality
Microsoft clip art photos reprinted with permission from Microsoft Corporation.

Copyright © Houghton Mifflin Company. All rights reserved. 8 | 2
Chapter Objectives
1. Describe three types of control, and identify the
components common to all control systems.
2. Identify five types of product quality, explain
how providing a service differs from
manufacturing a product, and list the five
service-quality dimensions.
3. Define total quality management (TQM) and
discuss the basic TQM principles. and
describe at least three of the seven TQM
process improvement tools.

Chapter Objectives (cont’d)
4. Explain how Deming’s PDCA cycle can improve
the overall management process, and identify
at least four of Deming’s famous 14 points.

Fundamentals of
Organizational Control
• Control
– Taking prompt preventative or corrective action to
ensure that the organization’s mission and
objectives are accomplished effectively and
efficiently.
• Objectives are yardsticks for measuring actual
performance.
– Purpose of the control function
• Get the job done despite environmental, organizational,
and behavioral obstacles and uncertainties.

Types of Controls
• Feedforward Control
– The active anticipation and prevention of problems,
rather than passive reaction.
• Concurrent Control
– Monitoring and adjusting ongoing activities and
processes.
• Feedback Control
– Checking a completed activity and learning from
mistakes.

Figure 8.1
Three Types of Control

Components of
Organizational Control Systems
• Organizational Control Subsystems
– Strategic plans
– Long-range plans
– Annual operating budget
– Statistical reports
– Performance appraisals
– Policies and procedures
– Cultural control

• Objectives
– Measurable reference points
(targets) for corrective action.
• Standards
– Guideposts on the way to
achieving objectives.
– Benchmarking: Identifying,
studying, and building upon the
best practices of organizational
role models.
Components of
Organizational Control Systems (cont’d)

• Evaluation-Reward Systems
– Measure and reward individual
and team contributions to
attaining organizational
objectives.
– Can shape effort-reward
expectancies that motivate
better performance.
Components of

• Identifying Control Problems
– Executive reality checks: top managers
periodically working at lower-level jobs to become
more aware of operations.
– Internal audits: independent
appraisals of organizational
operations and systems to
assess effectiveness and
efficiency.
Components of

Sarbanes-Oxley Act of 2002
• Requires CEOs and CFOs to
certify periodic corporate
financial reports.
• Prohibits personal loans or
extensions of credit to
executive officers and directors.
• Requires that guidelines be
established for audit
committees.
• Requires reimbursement by
CEOs and CFOs of bonus
and stock option profits upon
restatement of financial
statements.
• Prohibits insider trading during
pension fund blackout periods.
• Requires retention of all
documents relevant to a
government investigation.

Identifying Control Problems
• Symptoms of Inadequate Control
– An unexplained decline in revenues or profits.
– A degradation of service (customer complaints).
– Employee dissatisfaction .
– Cash shortages caused by bloated inventories or delinquent
accounts receivable.
– Idle facilities or personnel.
– Disorganized operations.
– Excess costs.
– Evidence of waste and
inefficiency.

The Quality Challenge
• Defining Quality
– “Conformance to requirements” (Crosby).
– How adequately product or service quality meets
customer expectations/needs/requirements.
• Five Types of Product Quality
– Transcendent quality
– Product-based quality
– User-based quality
– Manufacturing-based quality
– Value-based quality

Five Types of Product Quality
• Transcendent Quality
– Inherent value or innate excellence apparent to the
individual.
• Product-Based Quality
– The presence or absence of a given product attribute.
• User-Based Quality
– Quality of the product as determined by its ability to
meet the user’s expectations.

Five Types of Product Quality (cont’d)
• Manufacturing-Based
Quality
– How well the product
conforms to its design
specification or blueprint.
• Value-Based Quality
– How much value each
customer separately attributes to the product in
calculating their personal cost-benefit ratio.

Examples of Product Quality
• Transcendent quality
– Designer clothing
• Product-based quality
– HDTV-ready television
• User-based quality
– Loose-fitting jeans
• Manufacturing-based quality
– Color-fast fabrics
• Value-based quality
– Credit-card interest rates

Unique Challenges
for Service Providers
• Strategic Service Challenge
– To anticipate and exceed customer’s expectations.
– Distinctive service characteristics
1. Customers participate directly in the production process.
2. Services are consumed immediately and cannot be stored.
3. Services are provided where and when the customer desires.
4. Services tend to be labor intensive.
5. Services are intangible.

Unique Challenges
for Service Providers (cont’d)
• Defining Service Quality
– Five service quality dimensions
1. Reliability (most important)
2. Assurance
3. Tangibles
4. Empathy
5. Responsiveness

Introduction to Total Quality
Management (TQM)
• Total Quality Management (TQM)
– Creating an organizational culture committed to
the continuous improvement of skills, teamwork,
processes, product and service quality, and
customer satisfaction.
• Four Principles of TQM
1. Do it right the first time.
2. Be customer-centered.
3. Make continuous improvement a way of life.
4. Build teamwork and empowerment.

Management (TQM) (cont’d)
• Do It Right the First Time
– Designing and building quality into the product.
• Be Customer-Centered
– Satisfying the customer’s needs by anticipating,
listening, and responding.
– Internal customers: anyone in the organization who
cannot do a good job unless you do a good job.

• Make Continuous Improvement a Way of Life
– Kaizen: a Japanese word meaning continuous
improvement (quality is an endless journey).
– A gain in one area does not mean loss in another.
– Venues for continuous improvement
• Improved and more consistent product and service quality.
• Faster cycle times.
• Greater flexibility.
• Lower costs and less waste.

• Build Teamwork and Empowerment
– Teamwork
• Suggestion systems.
• QC circles and self-managed
teams.
• Team work and cross-
functional teams.
– Empowerment
• Adequate training.
• Access to information and tools.
• Involvement in key decisions.
• Fair rewards for results.

From Arthur R. Tenner and Irving J. DeToro, Total Quality Management: Three Steps to Continuous Improvement, p. 113, Figure 9.2.
Copyright © 1992 by Addison-Wesley Publishing Company, Inc. Reproduced by permission of Pearson Education, Inc. All rights reserved.
Figure 8.2
Seven Basic TQM Tools

The Seven Basic TQM
Process Improvement Tools
• Flow Chart
– A graphic display of a sequence of activities and
decisions.
• Cause-and-Effect Analysis
– The fishbone (Ishikawa) diagram helps visualize
important cause-and-effect relationships.
• Pareto Analysis (80/20 Analysis)
– A bar chart indicating which problem needs the most
attention.

The Seven Basic TQM
Process Improvement Tools (cont’d)
• Control Chart
– Visual aid to statistical process control showing
acceptable and unacceptable variations from the
norm for repetitive operations.
• Histogram
– A bar chart indicating the distribution of deviations
from a standard bell-shaped curve.

The Seven Basic TQM
Process Improvement Tools (cont’d)
• Scatter Diagram
– A diagram that plots relationships between two
variables.
• Run Chart
– A trend chart for tracking a variable over time.

Deming Management
• Deming Management
– The application of W. Edwards Deming‘s ideas to revitalize
productive systems to make them more responsive to the
customer, more democratic, and less wasteful organizations.
– Essentially the opposite of scientific management.
• Principles of Deming Management
– Quality improvement drives the entire economy.
– The customer always comes first.
– Don’t blame the person, fix the system.
– Plan-do-check-act (PDCA cycle).

Source: Adapted from W. Edwards Deming, Out of the Crisis (Cambridge, Mass.: MIT Press, 1986), p. 3.
Figure 8.3 Everyone Benefits
from Improved Quality

Source: Adapted from Deming, Out of the Crisis, p. 88.
Figure 8.4
Deming’s
PDCA Cycle

Deming Management (cont’d)
Deming’s 14 Points
• Constant purpose
• New philosophy
• Give up on quality by
inspection
• Avoid the constant search for
lowest-cost suppliers
• Seek continuous improvement
• Train everybody
• Provide real leadership
• Drive fear out of the
workplace
• Promote teamwork
• Avoid slogans and targets
• Get rid of numerical quotas
• Remove barriers that stifle
pride in workmanship
• Education and self-
improvement are key
• “The transformation is
everyone’s job”

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