CHAPTER 16 Control Systems & Quality Management Techniques for Enhancing Organizational Effectiveness ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Major Questions You Should Be Able to Answer 16.1 Why is control such an important managerial function? 16.2 How do successful companies implement controls? 16.3 How can three techniques—a balanced scorecard, strategy maps, and measurement management—help me establish standards and measure performance? 16.4 What are the financial tools I need to know about? ©McGraw-Hill Education. Major Questions You Should Be Able to Answer 16.5 How do top companies improve the quality of their products or services? 16.6 What are the keys to successful control, and what are the barriers to control success? 16.7 How do managers influence productivity? ©McGraw-Hill Education. Control: When Managers Monitor Performance Controlling – Defined as monitoring performance, comparing it with goals, and taking corrective action as needed 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.) Jump to Appendix 1 for description ©McGraw-Hill Education. Why Is Control Needed? 1. To adapt to change and uncertainty 2. To discover irregularities and errors 3. To reduce costs, increase productivity, or add value 4. To detect opportunities 5. To deal with complexity 6. To decentralize decision making and facilitate teamwork ©McGraw-Hill Education. Steps in the Control Process (1 of 4) Figure 16.3 Jump to Appendix 2 for description ©McGraw-Hill Education. Steps in the Control Process (2 of 4) 1. Establish standards – Performance standard: the desired performance level for a given goal – Best measured when they can be made quantifiable 2. Measure performance – Usually obtained from written reports, oral reports, and personal observations ©McGraw-Hill Education. Steps in the Control Process (3 of 4) 3. Compare performance to standards – Management by exception: control principle that says managers should be informed of a situation only if data show a significant deviation from standards ©McGraw-Hill Education. Steps in the Control Process (4 of 4) 4. Take corrective action if necessary – Make no changes. – Recognize and reinforce positive performance. – Take action to correct negative performance. ©McGraw-Hill Education. Question A UPS driver fails to perform according to the standards set for the route and traffic conditions. A supervisor rides along and gives suggestions for improvement. This is the ____________ stage of the control process. A. compare performance to standards B. establish standards C. take corrective action D. measure performance ©McGraw-Hill Education. Levels of Control • Strategic control – Monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed • Tactical control – Monitoring performance to ensure that tactical plans— those at the divisional or departmental level—are being implemented ©McGraw-Hill Education. Levels of Control Operational control – Monitoring performance to ensure that operational plans —day-to-day goals—are being implemented and then taking corrective action as needed ©McGraw-Hill Education. Six Areas of Control Physical Human Resources Informational Financial Structural Cultural ©McGraw-Hill Education. Question A drug test employed by an organization in its hiring process is an example of a(n) _______ resource control. A. physical B. human C. financial D. informational ©McGraw-Hill Education. Structural Area • Bureaucratic control – An approach to organizational control that is characterized by use of rules, regulations, and formal authority to guide performance • Decentralized control – An approach to organizational control that is characterized by informal and organic structural arrangements ©McGraw-Hill Education. The Balanced Scoreboard Balanced scoreboard – Gives top managers a fast but comprehensive view of the organization via four indicators 1. Customer satisfaction 2. Internal processes 3. Innovation and improvement activities 4. Financial measures ©McGraw-Hill Education. The Balanced Scorecard: Four Perspectives (1 of 2) Figure 16.5 Jump to Appendix 3 for description ©McGraw-Hill Education. The Balanced Scorecard: Four Perspectives (2 of 2) • Financial – Profitability, growth, shareholder values • Customer – Priority is taking care of the customer • Internal business – Quality, employee skills, and productivity • Innovation and learning – Learning and growth of employees ©McGraw-Hill Education. The Visual Representation of a Balanced Scorecard Strategy map – 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 ©McGraw-Hill Education. The Strategy Map Figure 16.6 Jump to Appendix 4 for description ©McGraw-Hill Education. Question Jeff’s sales goal was to “improve sales.” Which barrier to measurement is this? A. Objectives are fuzzy. B. Managers put too much trust in informal feedback systems. C. Employees resist new measurement systems. D. Companies focus too much on measuring activities. ©McGraw-Hill Education. Budgets: Formal Financial Projections • Budget – Formal financial projection • 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 ©McGraw-Hill Education. Types of Budgets Table 16.1 TYPE OF BUDGET DESCRIPTION Cash or cashflow budget Forecasts all sources of cash income and cash expenditures for daily, weekly, or monthly period Capital expenditures budget Anticipates investments in major assets such as land, buildings, and major equipment Sales or revenue budget Projects future sales, often by month, sales area, or product Expense budget Projects expenses (costs) for given activity for given period Financial budget Projects organization’s source of cash and how it plans to spend it in the forthcoming period Operating budget Projects what an organization will create in goods or services, what financial resources are needed, and what income is expected Nonmonetary budget Deals with units other than dollars, such as hours of labor or office square footage ©McGraw-Hill Education. Fixed Versus Variable Budgets • Fixed budgets – Allocates resources on the basis of a single estimate of costs • Variable budgets – Allows the allocation of resources to vary in proportion with various levels of activity ©McGraw-Hill Education. Financial Statements • Balanced sheet – Summarizes an organization’s overall financial worth— assets and liabilities—at a specific point in time • Income statement – Summarizes an organization’s financial results—revenues and expenses—over specified period of time ©McGraw-Hill Education. Ratio Analysis • Liquidity ratios – Indicate how easily a firm’s assets can be converted to cash • Debt management ratios – Degree to which a firm can meet it’s long-term financial obligations • Return ratios – How effective management is generating a return or profit ©McGraw-Hill Education. Audits • Audit – formal verification of an organization’s financial and operational systems • External – performed by outside experts • Internal – performed by organization’s own professional staff ©McGraw-Hill Education. Deming Management 1. Quality should be aimed at the needs of the consumer. 2. Companies should aim at improving the system, not blaming workers. 3. Improved quality leads to increased market share, increased company prospects, and increased employment. 4. Quality can be improved on the basis of hard data, using the PDCA cycle. ©McGraw-Hill Education. The PDCA Cycle Figure 16.7 Jump to Appendix 5 for description ©McGraw-Hill Education. Total Quality Management Total quality management (TQM) – A comprehensive approach—led by top management and supported throughout the organization—dedicated to continuous quality improvement, training, and customer satisfaction ©McGraw-Hill Education. Two Core Principles of TQM 1. People orientation – Everyone involved in the organization should focus on delivering value to customers. 2. Improvement orientation – Everyone should work on continuously improving work processes. ©McGraw-Hill Education. People Orientation • Delivering customer value is most important. • People will focus on quality if they feel empowered. • TQM requires training, teamwork, and crossfunctional efforts. ©McGraw-Hill Education. Improvement Orientation • It’s less expensive to do it right the first time. • It’s better to do small improvements all the time. • Accurate standards must be followed to eliminate small variations. • There must be strong commitment from top management. ©McGraw-Hill Education. Applying TQM to Services RATER scale Enables customers to rate the quality of a service along five dimensions 1. Reliability 2. Assurance 3. Tangibles 4. Empathy 5. Responsiveness ©McGraw-Hill Education. Some TQM Techniques Outsourcing Reduced cycle time ISO 9000 and 14000 Series Statistical process control Six Sigma & Lean Six Sigma ©McGraw-Hill Education. Question In Harvey's job, he takes random samples of production runs to ascertain quality. His job involves A. benchmarking. B. statistical process control. C. reduced cycle time. D. feedforward control. ©McGraw-Hill Education. The Keys to Successful Control Systems 1. They are strategic and results oriented. 2. They are timely, accurate, and objective. 3. They are realistic, positive, and understandable and encourage self-control. 4. They are flexible. ©McGraw-Hill Education. Barriers to Control Success 1. Too much control 2. Too little employee participation 3. Overemphasis on means instead of ends 4. Overemphasis on paperwork 5. Overemphasis on one instead of multiple approaches ©McGraw-Hill Education. Managing for Productivity Productivity – Outputs divided by inputs where: • Outputs are the goods and services produced. • Inputs are labor, capital, materials, and energy. ©McGraw-Hill Education. Managing for Productivity and Results Figure 16.8 Jump to Appendix 6 for description ©McGraw-Hill Education. The Role of Information Technology Enterprise resource planning (ERP) – Software systems, information systems for integrating virtually all aspects of a business, helping managers stay on top of the latest developments ©McGraw-Hill Education. Keys to Your Managerial Success (1 of 2) • Find your passion and follow it. • Encourage self-discovery, and be realistic. • Every situation is different, so be flexible. • Fine-tune your people skills. ©McGraw-Hill Education. Keys to Your Managerial Success (2 of 2) • Learn how to develop leadership skills. • Treat people as if they matter, because they do. • Draw employees and peers into your management process. • Be flexible, keep your cool, and take yourself lightly. ©McGraw-Hill Education. 412 PART 5 Leading The Four Motivational Mechanisms of Goal-Setting Theory Goal setting helps motivate you by doing the following: 1. It Directs Your Attention Goal setting directs your attention toward goal- relevant tasks and away from irrelevant ones. 2. It Regulates the Effort Expended The effort you expend is generally propor- tional to the goal's difficulty. 3. It Increases Your Persistence Goal setting makes obstacles become challenges to be overcome, not reasons to fail. 4. It Fosters Use of Strategies and Action Plans The use of strategies and ac- tion plans make it more likely that you will realize success. 3J9MAX Some Practical Results of Goal-Setting Theory A goal is defined as an objec- tive that a person is trying to accomplish through his or her efforts. Goal-setting ex- perts Locke and Latham proposed the following recommendations when implementing a goal-setting program.74 To result in high motivation and performance, according to recent research, goals must have a number of characteristics, as follows. 1. Goals Should Be Specific Goals that are specific and difficult lead to higher performance than general goals like “Do your best” or “Improve performance.” This is why it is essential to set specific, challenging goals. Goals such as “Sell as many cars as you can” or “Be nicer to customers” are too vague. Instead, goals need to be specific—usually meaning quantitative, as in “Boost your revenues 25%” and “Cut absenteeism by 10%.”75 2. Certain Conditions Are Necessary for Goal Setting to Work People must have the ability and resources needed to achieve the goal, and they need to be commit- ted to the goal. ou lozol 3. Goals Should Be Linked to Action Plans An action plan outlines the activi- ties or tasks that need to be accomplished in order to obtain a goal and reminds us of what we should be working on. Both individuals (such as college students) and organizations are more likely to achieve their goals when they develop detailed action plans. 76 Example: Teams of employees at Tornier, a medical device manufacturer in Am- sterdam, meet every 45, 60, or 90 days to create action plans for completing their goals. Implementation of the plans can take between 6 and 18 months, depending on the complexity of the goal." SED only when they los 4. Performance Feedback and Participation in Deciding How to Achieve Goals Are Necessary but Not Sufficient for Goal Setting to Work Feedback and participation enhance performance only when they lead employees to set and com- mit to a specific, difficult goal. Example: Take Jim's Formal Wear, a tuxedo wholesaler in Illinois. "Once a week," says one report, "employees meet with their teams to discuss their efforts and what changes should be made the next week. Employees frequently suggest ways to improve efficiency or save money, such as reusing shipping boxes and hangers. higher performance when you use feedback and participation to stay focused and com- mitted to a specific goal. Some of the preceding recommendations are embodied in the advice we presented in Chapter 5—namely, that goals should be SMART: Specific, Measurable, Attainable, Results-oriented, and having Target dates.. 9978 Goals lead to 413 Motivating Employees CHAPTER 12 12.4 Job Design Perspectives on Motivation What's the best way to design jobs-adapt people to work or work to people? MAJOR QUESTION THE BIG PICTURE Job design, the division of an organization's work among employees, applies motivational theories to jobs to increase performance and satisfaction. The traditional approach to job design is to fit people to the jobs; the modern way is to fit the jobs to the people, using job enrichment and approaches that are based on Herzberg's landmark two-factor theory, discussed earlier in this chapter. The job characteristics model offers five job attributes for better work outcomes. 1 About half of workers reported in a recent year that their current job was stagnant." Is there anything that can be done about this? Job design is (1) the division of an organization's work among its employees and (2) the application of motivational theories to jobs to increase satisfaction and performance. There are two different approaches to job design-one traditional, one modern—that can be taken in deciding how to design jobs. The traditional way is fitting people to jobs; the modern way is fitting jobs to people. 80 1910sion COLONT UOHOW 1919 101 Fitting People to Jobs Fitting people to jobs is based on the assumption that people will gradually adapt to any work situation. Even so, jobs must still be tailored so that nearly anyone can do them. This is the approach often taken with assembly-line jobs and jobs involving rou- tine tasks. For managers the main challenge becomes “How can we make the worker most compatible with the work?”! One technique is scientific management, the process of reducing the number of tasks a worker performs. When a job is stripped down to its simplest elements, it enables a worker to focus on doing more of the same task, thus increasing employee efficiency and productivity. This may be especially useful, for instance, in design- ing jobs for mentally disadvantaged workers, such as those jobs run by Goodwill Industries. However, research shows that simplified, repetitive jobs lead to job dis- satisfaction, poor mental health, and a low sense of accomplishment and personal growth.81 Fitting Jobs to People Fitting jobs to people is based on the assumption that people are underutilized at work and that they want more variety, challenges, and responsibility. This philosophy, an outgrowth of Herzberg's theory, is one of the reasons for the popularity of work teams in the United States. The main challenge for managers is “How can we make the work most compatible with the worker so as to produce both high performance and high job satisfaction?" Two techniques for this type of job design are (1) job enlargement and (2) job enrichment. Job Enlargement: Putting More Variety into a Job The opposite of scientific management, job enlargement consists of increasing the number of tasks in a job to in- crease variety and motivation. For instance, the job of installing flat screens in television sets could be enlarged to include installation of the circuit boards as well. SMENT 414 PART 5 Leading Although proponents claim job enlargement can improve employee satisfaction, won't have a significant and lasting positive effect on job performance. After all, work- motivation, and quality of production, research suggests job enlargement by itself ing at two boring tasks instead of one doesn't add up to a challenging job. Instead, job Job Enrichment: Putting More Responsibility and Other Motivating Factors factor motivator-hygiene theory of job satisfaction.83 Specifically, job enrichment into a Job Job enrichment is the practical application of Frederick Herzberg's twent consists of building into a job such motivating factors as responsibility, achievement, recognition, stimulating work, and advancement. However, instead of the job-enlargement technique of simply giving employees ant ditional tasks of similar difficulty (known as horizontal loading), with job enrichment employees are given more responsibility (known as vertical loading). Intuit , for example, encourages employees “to spend 10% of their working time on projects and ideas of their own, even if they are not related to their assignments.” The company has found that this practice has led to the creation of several successful new products. 84 The Job Characteristics Model: Five Job Attributes for Better Work Outcomes Developed by researchers J. Richard Hackman and Greg Oldham, the job character- istics model of design is an outgrowth of job enrichment. 85 The job characteristics model consists of (a) five core job characteristics that affect (b) three critical psychological states of an employee that in turn affect (c) work outcomes-the employee's motivation, performance, and satisfaction. The model is illustrated below. (See Figure 12.9.) 30 FIGURE 12.9 The job characteristics model Source: From J. Richard Hackman and Greg R. Oldham, Work Redesign, le ©1980. Reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey. 23 Five core job characteristics - Three psychological states Work outcomes Skill variety Task identity Experienced meaningfulness of work High work motivation Task significance High work performance Autonomy Experienced responsibility for work outcomes High work satisfaction Knowledge of actual results of the work Low absenteeism & turnover Feedback Contingency factors Degree to which individuals want personal and psychological development: Knowledge & skill • Desire for personal growth Context satisfactions • 415 | CHAPTER 12 Motivating Employees The five core job characteristics are skill variety, task Five Job Characteristics identity, task significance, autonomy, and feedback, as follows. 1. Skill Variety—“How Many Different Skills Does Your Job Require?" Skill variety describes the extent to which a job requires a person to use a wide range of different skills and abilities. Example: The skill variety required by an executive chef is higher than that for a coffeehouse barista. Skill variety. Being a symphony conductor-or an airline pilot, a building contractor, a physician, or a watch maker-requires a greater number of skills than, say, driving a truck. Do highly skilled employees typically make good managers? What skills do airline pilots have that would make them effective managers in other kinds of work? © Alenavlad/Shutterstock RF 2. Task Identity—“How Many Different Tasks Are Required to Complete the Work?” Task identity describes the extent to which a job requires a worker to per- form all the tasks needed to complete the job from beginning to end. Example: The task identity for a craftsperson who goes through all the steps to build a stained-glass church window is higher than it is for an assembly-line worker who installs just the windshields on cars. NIIIIIIIIIIIII 3. Task Significance—“How Many Other People Are Affected by Your Job?” Task significance describes the extent to which a job affects the lives of other people, whether inside or outside the organization. Example: A technician who is responsible for keeping a hospital's electronic equip- ment in working order has higher task significance than a person wiping down cars in a carwash. 4. Autonomy—“How Much Discretion Does Your Job Give You?” Autonomy describes the extent to which a job allows an employee to make choices about schedul- ing different tasks and deciding how to perform them. Example: College-textbook salespeople have lots of leeway in planning which cam- puses and professors to call on. Thus, they have higher autonomy than do toll-takers on a bridge, whose actions are determined by the flow of vehicles. 5. Feedback—“How Much Do You Find Out How Well You're Doing?” Feed- back describes the extent to which workers receive clear, direct information about how well they are performing the job. Example: Professional basketball players receive immediate feedback on how many of their shots are going into the basket. Engineers working on new weapons systems may go years before learning how effective their performance has been. How the Model Works According to the job characteristics model, these five core characteristics affect a worker's motivation because they affect three critical (-) ans
Purchase answer to see full attachment