Chapter 16 – Control Systems and Quality Management Techniques for Enhancing Organizational Effectiveness

formal verifications of an organization’s financial and operational systems
Balance sheet
summarizes and organization’s overall financial worth-all assets and liabilities-at a specific point in time
Balanced scorecard (Kaplan and Norton)
developed to give top managers a fast but comprehensive view of organization via four indicators (1) customer satisfaction (2) internal processes (3) innovation and improvement activities and (4) financial measures
Bureaucratic control
an approach to organizational control that is characterized by use of rules, regulations, and formal authority to guide performance
Continuous improvement
ongoing small, incremental improvements in all parts of an organization (it’s less expensive to do it right the first time and it’s better to do small improvements all the time)
Control standard
known as “performance standard” or “standard” and is used
monitoring performance, comparing it with goals, and taking corrective action as needed
Control process steps
(1) establish standards (2) measure performance (3) compare it to performance standards (4) take corrective action as needed
Decentralized control
an approach to organizational control that is characterized by informal and organic structural arrangements
Deming management
proposed ideas for making organizations more responsive, more democratic and less wasteful
Enterprise resource planning (ERP)
software systems/information systems for integrating virtually all aspects of business
External audit
an audit from an outside expert
Financial statement
summary of some aspect of an organization’s financial status
Fixed budget
allocates resources on the basis of a single estimate of costs
Income statement
summarizes an organization’s financial results-revenues and expenses-over a specific period of time
Incremental budgeting
allocates increased or decreased funds to a department by using the last budget period as a reference point; only incremental changes in the budget request are reviewed
Internal audit
an audit done by the organization’s own personal staff
ISO 9000 series
consists of quality-control procedures companies must install–from purchasing to manufacturing to inventory to shipping–that can be audited by independent quality-control experts or “registrars”
ISO 14000 series
extends the concept, identifying standards for environmental performance
lean Six Sigma
focuses on problem solving and performance improvement–speed with excellence–of a well defined project
Management by exception
is a control principle that states the managers should be informed of a situation only if the data show a significant deviation from standards
Operational control
by first line managers; monitoring performance to ensure that operational plans–day-to-day goals–are being implemented and taking corrective action as necessary
PDCA cycle
plan-do-check-act cycle using observed data for continuous improvement of operations
RATER scale
enables customers to rate the quality of a service along five dimensions (1) Reliability (2) Assurance (3) Tangibles (4) Empathy (5) Responsiveness
Ratio analysis
the practice of evaluating financial ratios
Reduced cycle time
reduction in steps in a work process
Six Sigma
a rigorous statistical analysis process that reduces defects in manufacturing and service-related processes
Special-purpose team
meets to solve a special or onetime problem
Statistical process control
a statistical technique that uses periodic random samples from production runs to see if quality is being maintained within a standard range of acceptability
Strategic control
by top managers; monitoring performance to ensure that strategic plans are being implemented and taking corrective action as necessary
Strategy map
a visual representation of the four perspectives of the balanced scorecard that enables managers to communicate their goals so that everyone in the company can understand how their jobs are linked to the overall objectives of the organization
Supply chain
sequence of suppliers that contribute to creating a
Tactical control
by middle managers; monitoring performance to ensure that tactical plans–those at the divisional and department level–are being implemented and taking corrective action as necessary
Total quality management (TQM)
a comprehensive approach–led by top management and supported throughout organization–dedicated to continuous quality improvement, training and customer satisfaction
2 core principals of TQM
(1) people orientation which is everyone involved with the organization should focus on delivering value to customers (2) improvement orientation which is everyone should work on continuously improving the work processes
Variable budget
allows the allocation of resources to vary in proportion with carious levels of activity