Organization Control and Quality Improvement: (Lecture Outline and Line Art Presentation)

Chapter 17
(Lecture Outline and

Line Art Presentation)
Organization Control
and Quality
Improvement
Fundamentals of
Organizational Control
• Control
• Taking preventive or corrective action to keep things
on track.
• Checking, testing, regulation, verification, or
adjustment.
• Objectives are yardsticks for measuring actual
performance.
• Purpose of the control function
• Get the job done despite environmental,
organizational, and behavioral obstacles and
uncertainties.
Copyright © Houghton Mifflin Company. All rights reserved. Lecture Outline and Line Art Presentation, 17–2
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 17.1
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
Control Systems (cont’d)
• 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.
• Evaluation-Reward Systems
• Measure and reward individual and team
contributions to attaining organizational objectives.
• Can shape effort-reward expectancies that motivate
better performance.
• Strategic Control
• Strategic planning and strategic control go hand in
hand.
• Top-level strategy sets and/or determines objectives
through the organization.
• Control measures of activities and results are
translated up the organizational pyramid.
Figure 17.2
The Performance Pyramid for Strategic Control
Source: C. J. McNair, Richard L. Lynch, and Kelvin F. Cross, "Do Financial and Nonfinancial Performance Measures
Have to Agree?" MANAGEMENT ACCOUNTING published by the Institute of Management Accountants, Montvale, NJ,
72 (November l990): 30. Copyright by Institute of Management Accountants. Reprinted by permission.
• Identifying Control Problems

• Executive reality checks: top managers periodically
working at lower-level jobs to become more aware of
operations.
• Internal auditing: independent appraisals of
organizational operations and systems to assess
effectiveness and efficiency.
• Identifying Control Problems (cont’d)
• 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.
Crisis Management
• Organizational Crisis
• A low-probability, high impact event that threatens the
viability of the organization and is characterized by
ambiguity of cause, effect, and means of resolution,
and well as by belief that decisions must be made
swiftly.
Crisis Management (cont’d)
• Crisis Management
• Anticipating and preparing for events that could
damage the organization.
• Two Biggest Mistakes Regarding Organizational
Crises
1. Ignoring early warning signs of an impending
disaster.
2. Denying the existence of a problem when disaster
actually strikes.
Figure 17.3
Key Elements a Crisis Management Program
Crisis Management (cont’d)
• Developing a Crisis Management Program

• Conduct a crisis audit seeking out trouble spots and
vulnerabilities.
• Formulate contingency plans that specify early
warning signals, actions to be taken, and
consequences of those actions.
• Create crisis management teams with specific skills to
deal with a crisis.
• Perfect the program through serious practice and
rehearsals.
The Quality Challenge
• Defining Quality
• “Conformance to requirements” (Crosby).
• A subjective response by customers to the adequacy
of product or service quality in meeting their
expectations/needs/requirements.
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 is 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.
Unique Challenges for Service
Providers
• Strategic Service Challenge
• To anticipate and exceed customer’s expectations.
• Distinctive service characteristics
• Customers participate directly in the production
process.
• Services are consumed immediately and cannot
be stored.
• Services are provided where and when the
customer desires.
• Services tend to be labor intensive.
• Services are intangible.
Unique Challenges for Service
Providers (cont’d)
• Defining Service Quality

• Five service quality dimensions
• Reliability (most important)
• Assurance
• Tangibles
• Empathy
• Responsiveness
Introduction to Total Quality
Management (TQM)
• Total Quality Management

• Creating an organizational culture committed to the
continuous improvement of skills, teamwork,
processes, product and service quality, and customer
satisfaction.
• Four Principles of TQM
• Do it right the first time.
• Be customer-centered.
• Make continuous improvement a way of life.
• 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
Figure 17.4
Seven Basic TQM Tools
Source: Tenner/DeToro, TOTAL QUALITY MANAGEMENT (figure 9.2 from page 113). © 1992 by Addison-Wesley
Publishing Company, Inc. Reprinted by permission of Pearson Education, Inc.
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 diagram helps visualize important
cause-and-effect relationships.
• Pareto Analysis (80/20 Analysis)
• A bar chart indicating which problem needs the most
attention.
Improvement Tools (cont’d)
• Control Chart
• Visual aid showing acceptable and unacceptable
variations from the norm for repetitive operations.
• Histogram
• A bar chart indicating deviations from a standard bell-
shaped curve.
• Scatter Diagram
• A diagram that plots relationships between two
variables.
Improvement Tools (cont’d)
• 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).
Figure 17.5
Everyone Benefits from Improved Quality
Figure 17.6
Deming’s PDCA
Cycle
Deming Management (cont’d)
• Deming’s 14 Points
• Constant purpose • Drive fear out of the workplace
• New philosophy • Promote teamwork
• Give up on quality by • Avoid slogans and targets
inspection • Get rid of numerical quotas
• Avoid the constant search • Remove barriers that stifle
for lowest-cost suppliers pride in workmanship
• Seek continuous • Education and self-
improvement improvement are key
• Train everybody • “The transformation is
• Provide real leadership everyone’s job”

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Chapter 17

(Lecture Outline and

• Organizational Control Subsystems

• Identifying Control Problems

• Developing a Crisis Management Program

• Defining Service Quality

• Total Quality Management

• Do It Right the First Time

• Make Continuous Improvement a Way of Life

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