MGMT 415 Saudi Electronic University Control Systems and Quality Management Essay -Follow academic writing standards and APA style guidelines -Support you

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– answer all questions completely and illustrate the answers to cover all aspects of the question. PART 6
Control Systems & Quality
Techniques for Enhancing Organizational
Major Questions You Should Be Able to Answer
16.1 Control: When Managers Monitor Performance
Major Question: Why is control such an important managerial
16.2 Levels & Areas of Control
Major Question: How do successful companies implement
16.3 The Balanced Scorecard, Strategy Maps, &
Measurement Management
Major Question: How can three techniques—balanced
scorecard, strategy maps, and measurement management—
help me establish standards and measure performance?
16.4 Some Financial Tools for Control
Major Question: Financial performance is important to
most organizations. What are the financial tools I need
to know about?
16.5 Total Quality Management
Major Question: How do top companies improve the quality
of their products or services?
16.6 Managing Control Effectively
Major Question: What are the keys to successful control,
and what are the barriers to control success?
16.7 Managing for Productivity
Major Question: How do managers influence productivity?
the manager’s toolbox
Improving Productivity: Going beyond Control
Techniques to Get the Best Results
How, as a manager, can you increase work productivity—
get better results with what you have to work with?
In this chapter we discuss control techniques for
achieving better results. What are other ways for improving productivity? Following are some suggestions:1
Establish Base Points, Set Goals,
& Measure Results
To be able to tell whether your work unit is becoming
more productive, you need to establish systems of measurement. You can start by establishing the base point,
such as the number of customers served per day, quantity of products produced per hour, and the like. You can
then set goals to establish new levels that you wish to attain, and institute systems of measurement with which to
ascertain progress. Finally, you can measure the results
and modify the goals or work processes as necessary.
Use New Technology
Clearly, this is a favorite way to enhance performance. With a word processor, you can produce
more typed pages than you can with a typewriter.
With a computerized database, you can store and
manipulate information better than you can using a
box of file cards. Still, computerization is not a
cure-all; information technology also offers plenty of
opportunities for simply wasting time.
Improve Match between Employees & Jobs
You can take steps to ensure the best fit between
employees and their jobs, including improving
employee selection, paying attention to training,
redesigning jobs, and providing financial incentives
that are tied to performance.
Encourage Employee Involvement & Innovation
Companies improve performance by funding research
and development (R&D) departments. As a manager,
you can encourage your employees, who are closest
to the work process, to come up with suggestions for
improving their own operations. And, of course, you
can give workers a bigger say in doing their jobs, allow employee flextime, and reward people for learning
new skills and taking on additional responsibility.
Encourage Employee Diversity
By hiring people who are diverse in gender, age, race,
and ethnicity, you’re more likely to have a workforce
with different experiences, outlooks, values, and skills.
By melding their differences, a team can achieve
results that exceed the previous standards.
Redesign the Work Process
Some managers think performance can be enhanced
through cost cutting, but this is not always the case.
It may be that the work process can be redesigned to
eliminate inessential steps.
For Discussion Some observers think the pressure
on managers to perform will be even more intense
than before, because the world is undergoing a transformation on the scale of the industrial revolution
200 years ago as we move further into an informationbased economy.2 In what ways do you think you’ll
have to become a champion of adaptation?
What’s Ahead in This Chapter
The final management function, control, is monitoring performance, comparing it with
goals, and taking corrective action as needed. We define managing for performance and
explain its importance. We then identify six reasons controlling is needed, explain the
steps in the control process, and describe three types of control managers use. Next we
cover levels and areas of control and financial tools for control. We discuss total quality
management (TQM). We describe the four keys to successful control and five barriers to
successful control. We conclude by considering how to achieve higher productivity.
Control: When Managers Monitor Performance
Why is control such an important managerial function?
Controlling is monitoring performance, comparing it with goals, and taking corrective action. This section describes six reasons why control is needed and four steps in the control process.
Control is making something happen the way it was planned to happen. Controlling is
defined as monitoring performance, comparing it with goals, and taking corrective action
as needed. Controlling is the fourth management function, along with planning, organizing,
and leading, and its purpose is plain: to make sure that performance meets objectives.
Planning is setting goals and deciding how to achieve them.
Organizing is arranging tasks, people, and other resources to accomplish the
Leading is motivating people to work hard to achieve the organization’s
Controlling is concerned with seeing that the right things happen at the right
time in the right way.
All these functions affect one another and in turn affect an organization’s performance and productivity. (See Figure 16.1.)
Controlling for effective performance
What you as a manager do to get things done, with controlling shown in relation to the three other management functions. (These are not
lockstep; all four functions happen concurrently.)
You set goals
& decide
how to
You arrange
& other
resources to
the work.
You motivate
people to
work hard
to achieve
the organization’s goals.
You monitor
compare it
with goals,
& take
action as
Why Is Control Needed?
Lack of control mechanisms can lead to problems for both managers and companies.
For example, in 2012 the CEO of Yahoo!, Scott Thompson, is discovered to have falsified his resume by claiming to have a computer science degree—and 11 days later he
is out, bringing turmoil to an already troubled company.3 The senior banker of J.P.
Morgan Chase, Ina Drew, contracts Lyme disease and is frequently out of the office
when traders begin making more and more risky bets, culminating in a loss of at least
$3 billion and public demands for greater bank regulation.4 California-based Pacific
Gas & Electric Co. accidentally overpressurizes pipelines on its gas system more than
120 times since its 2010 San Bruno explosion that killed eight people, raising risks of
another disaster.5 Could greater control have helped avoid or reduce the consequences
of these situations? Of course.
There are six reasons why control is needed.
Control Systems & Quality Management
1. To Adapt to Change & Uncertainty
Markets shift. Consumer tastes change.
New competitors appear. Technologies are reborn. New materials are invented. Government regulations are altered. All organizations must deal with these kinds of environmental changes and uncertainties. Control systems can help managers anticipate,
monitor, and react to these changes.6
Example: As is certainly apparent by now, the issue of global warming has created a lot
of change and uncertainty for many industries. The restaurant industry in particular is feeling the pressure to become “greener,” since restaurants are the retail world’s largest energy
user, with a restaurant using five times more energy per square foot than any other type of
commercial building.7 Nearly 80% of what commercial food service spends annually for
energy use is lost in inefficient food cooking, holding, and storage. In addition, a typical
restaurant generates 100,000 pounds of garbage per location per year. Thus, restaurants are
being asked to reduce their “carbon footprints” by instituting tighter controls on energy use.8
2. To Discover Irregularities & Errors
Small problems can mushroom into big
ones. Cost overruns, manufacturing defects, employee turnover, bookkeeping errors,
and customer dissatisfaction are all matters that may be tolerable in the short run. But
in the long run, they can bring about even the downfall of an organization.
Example: You might not even miss a dollar a month looted from your credit card
account. But an Internet hacker who does this with thousands of customers can undermine the confidence of consumers using their credit cards to charge online purchases
at,, and other web retailers. Thus, a computer program
that monitors Internet charge accounts for small, unexplained deductions can be a
valuable control strategy.
3. To Reduce Costs, Increase Productivity, or Add Value
Control systems
can reduce labor costs, eliminate waste, increase output, and increase product delivery
cycles. In addition, controls can help add value to a product so that customers will be
more inclined to choose them over rival products.
Example: As we have discussed early in the book (and will again in this chapter),
the use of quality controls among Japanese car manufacturers resulted in cars being
produced that were perceived as being better built than American cars. Another example: 3M Co.’s system for creating plastic picture-hanging hooks used to be split
between four states and take 100 days; after reworking the system to get rid of “hairballs,” as the former CEO called them, now all production takes place at one hub and
takes a third as much time.9
4. To Detect Opportunities
Hot-selling products. Competitive prices on materials. Changing population trends. New overseas markets. Controls can help alert managers to opportunities that might have otherwise gone unnoticed.
Example: A markdown on certain grocery-store items may result in a rush of customer demand for those products, signaling store management that similar items might
also sell faster if they were reduced in price.
5. To Deal with Complexity Does the right hand know what the left hand is doing? When a company becomes larger or when it merges with another company, it may
find it has several product lines, materials-purchasing policies, customer bases, and
worker needs. Controls help managers coordinate these various elements.
Example: Many companies, such as fast-food chains, use “robo-scheduling” software
that analyzes sales data to predict how many workers are needed at any given time. This
control device may be good for the companies, but, points out one writer, it causes “havoc
in employees’ lives: giving only a few days’ notice of working hours, sending workers
home early when sales are slow, and shifting hours significantly from week to week.”10 In
2014, Starbucks revised how it sets baristas’ scheduling, but other chains still require lowwage workers to have “open availability,” meaning they must be able to work anytime
they are needed, or be “on call,” meaning they find out only the morning they are needed.
6. To Decentralize Decision Making & Facilitate Teamwork
Controls allow
top management to decentralize decision making at lower levels within the organization and to encourage employees to work together in teams.
Example: At General Motors, former chairman Alfred Sloan set the level of return
on investment he expected his divisions to achieve, enabling him to push decisionmaking authority down to lower levels while still maintaining authority over the
sprawling GM organization.11 Later GM used controls to facilitate the team approach
in its joint venture with Toyota at its California plant.
The six reasons are summarized below. (See Figure 16.2.)
Six reasons why
control is needed
4. …detect
1. …adapt to
change &
2. …discover
& errors
6. …deal with
helps an
3. …reduce costs,
or add value
6. …decentralize
decision making
& facilitate
Steps in the Control Process
Steps in the control process
Paying attention to the feedback
is particularly important
because of its dynamic nature.
Step 1.
Control systems may be altered to fit specific situations, but generally they follow the
same steps. The four control process steps are (1) establish standards; (2) measure
performance; (3) compare performance to standards; and (4) take corrective action, if
necessary. (See Figure 16.3.)
Step 2.
Step 3.
to standards.
Step 4.
action, if
If yes, take
If no,
progress &
Let’s consider these four steps.
1. Establish Standards: “What Is the Outcome We Want?” A control standard, or performance standard or simply standard, is the desired performance level for
a given goal. Standards may be narrow or broad, and they can be set for almost
anything, although they are best measured when they can be made quantifiable.
Control Systems & Quality Management
Nonprofit institutions might have standards for level of charitable contributions,
number of students retained, or degree of legal compliance. For-profit organizations
might have standards of financial performance, employee hiring, manufacturing defects, percentage increase in market share, percentage reduction in costs, number of
customer complaints, and return on investment. More subjective standards, such as
level of employee morale, can also be set, although they may have to be expressed more
quantifiably as reduced absenteeism and sick days and increased job applications.
One technique for establishing standards is to use the balanced scorecard, as we
explain later in this chapter.
2. Measure Performance: “What Is the Actual Outcome We Got?”
second step in the control process is to measure performance, such as by number of
products sold, units produced, or cost per item sold.
Example: Hyundai has a quality goal signified by GQ 3-3-5-5. The goal represents
the company’s desire, expressed in 2010, to finish in the top three in quality ratings
provided by J.D. Power’s dependability survey within three years, and to be among the
top five quality automakers within five years.12 (Unfortunately, in 2014, no Hyundai
cars had yet made the J.D. Power dependability list for three-year-old vehicles.13)
Performance measures are usually obtained from three sources: (1) written reports,
including computerized printouts; (2) oral reports, as in a salesperson’s weekly recitation of accomplishments to the sales manager; and (3) personal observation, as when a
manager takes a stroll on the factory floor to see what employees are doing.
As we’ve hinted, measurement techniques can vary for different industries, such
as for manufacturing industries versus service industries. We discuss this further
later in the chapter.
3. Compare Performance to Standards: “How Do the Desired & Actual
Outcomes Differ?” The third step in the control process is to compare measured
performance against the standards established. Most managers are delighted with performance that exceeds standards, which becomes an occasion for handing out bonuses,
promotions, and perhaps offices with a view. For performance that is below standards,
they need to ask: Is the deviation from performance significant? The greater the difference between desired and actual performance, the greater the need for action.
How much deviation is acceptable? That depends on the range of variation built in
to the standards in step 1. In voting for political candidates, for instance, there is supposed to be no range of variation; as the expression goes, “every vote counts” (although the 2000 U.S. presidential election was an eye-opener for many people in this
regard). In political polling, however, a range of 3%–4% error is considered an acceptable range of variation. In machining parts for the spacecraft Orion (NASA’s scheduled successor to the space shuttle), the range of variation may be a good deal less
tolerant than when machining parts for a power lawnmower.
The range of variation is often incorporated in computer systems into a principle
called management by exception. Management by exception is a control principle that
states that managers should be informed of a situation only if data show a significant
deviation from standards.
4. Take Corrective Action, If Necessary: “What Changes Should We Make
to Obtain Desirable Outcomes?” This step concerns feedback—modifying, if
necessary, the control process according to the results or effects. This might be a dynamic process that will produce different effects every time you put the system to use.
There are three possibilities here: (1) Make no changes. (2) Recognize and reinforce positive performance. (3) Take action to correct negative performance.
When performance meets or exceeds the standards set, managers should give rewards, ranging from giving a verbal “Job well done” to more substantial payoffs such
as raises, bonuses, and promotions to reinforce good behavior.
When performance falls significantly short of the standard, managers should carefully examine the reasons why and take the appropriate action. Sometimes it may turn
out the standards themselves were unrealistic, owing to changing conditions, in which
case the standards need to be altered. Sometimes it may become apparent that employees haven’t been given the resources for achieving the standards. And sometimes the
employees may need more attention from management as a way of signaling that their
efforts have been insufficient in fulfilling their part of the job bargain. ?
Steps in the Control Process: What’s Expected of UPS Drivers?
UPS, which employs 99,000 U.S. drivers, has established Integrad, an 11,500-square-foot training center 10 miles outside
Washington, D.C. There trainees practice UPS-prescribed “340
Methods” shown to save seconds and improve safety. Graduates of the training, who are generally former package sorters,
are eligible to do a job that pays an average of $74,000 annually.14 (Because about 30% of driver candidates flunk training
based on books and lectures, UPS now uses videogames, a
contraption that simulates walking on ice, and an obstacle
course around an artificial village.)
Establishing Standards. UPS establishes certain standards
for its drivers that set projections for the number of miles
driven, deliveries, and pickups. For instance, drivers are taught
to walk at a “brisk pace” of 2.5 paces per second, except under
icy or other unsafe conditions. However, because conditions
vary depending on whether routes are urban, suburban, or rural, standards vary for different routes.15
Measuring Performance. Every day, UPS managers look at a
computer printout showing the miles, deliveries, and pickups a
Small business. How important
is it for small businesses to
implement all four steps of the
control process? Do you think
that employees in small
companies—such as a garden
pots store—typically have
more or less independence
from managerial control than
those in large companies do?
driver attained during his or her shift the previous day. In general,
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