organizational control

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Knowledge Objectives

1. Identify types of control and the components common to all control systems.

2. Discuss organizational control from a strategic perspective.

3. Explain how providing a service differs from manufacturing a product and list the five service-quality dimensions.

4. Define total quality management (TQM) and describe at least three of the seven TQM process improvement tools.

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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.

– Gen’l Model: Inputs Process Outputs

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What should be measured?

Always measure inputs. The decision to Always measure inputs. The decision to measure process or outputs depends upon measure process or outputs depends upon the following:the following:

• Technically feasible to monitor and Technically feasible to monitor and measure process?measure process?• Do we understand cause and effect?Do we understand cause and effect?• Cost?Cost?• Desired level of innovation?Desired level of innovation?•If impossible to measure process or If impossible to measure process or outputs, then control inputs (e.g., outputs, then control inputs (e.g., professionalization)professionalization)

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Which components to control?Which components to control?

Freedom to Freedom to innovate is innovate is desireddesired

Cause & Effect is Cause & Effect is understoodunderstood

Cause & Effect Cause & Effect is not well is not well understoodunderstood

Standardization Standardization is critical for is critical for qualityquality

Quality/Quality/safety is safety is importantimportant

Cost of Cost of measuring is measuring is lowlow

Cost of Cost of monitoring is lowmonitoring is low

Cost of input Cost of input is highis high

Outputs can be Outputs can be observed & observed & measuredmeasured

Processes can be Processes can be observed & observed & measuredmeasured

It is It is impossible to impossible to monitor monitor othersothers

Control Outputs Control Outputs WhenWhen::

Control Control Processes WhenProcesses When::

Control Control Inputs WhenInputs When::

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Which control systems to use?

• Feedforward Control– The active anticipation and prevention of problems, rather

than passive reaction. Are measurement premises still valid?

• Concurrent Control– Monitoring and adjusting ongoing activities and

processes. Process and behavioral controls.

• Feedback Control– Checking a completed activity and learning from

mistakes. Goal setting and responsibility.

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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

• Question is …what to emphasize

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Components of Organizational Control Systems (cont’d)

• Objectives– Measurable reference points (targets) for corrective

action.

– Plan what you can measure, and measure what you plan

• Standards– Guideposts on the way to achieving objectives.

– Benchmarking: identifying, studying, and building upon the best practices of comparator organizations.

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• Evaluation-Reward Systems– Measure and reward individual and team

contributions to attaining organizational objectives.

– Can shape effort-reward expectancies that motivate better performance remember the expectancy theory of motivation!).

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• Strategic Control– Strategic planning and strategic control go hand

in hand.– Top-level strategy sets and/or determines

objectives that are “cascaded” down through the organization.

– Control measures of supporting activities and results are interpreted and translated up through the organization’s decision making “pyramid”.

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• 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.

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• Identifying Control Problems (cont’d)– Symptoms of inadequate or inappropriate 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.

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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.

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Crisis Management (cont’d)

• Crisis Management– Anticipating and preparing for events that could

damage the organization.

• Two Biggest Mistakes Regarding Organizational Crises1. Ignoring early warning signs of an impending

disaster.

2. Denying the existence of a problem when disaster actually strikes.

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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.

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The Quality Challenge

• Defining Quality– “Conformance to requirements” (Crosby).– Does not address whether requirements are

appropriate

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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.

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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.

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Quality for Service Providers– 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.

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Quality for Service Providers (cont’d)

• Defining Service Quality– Five service quality dimensions

• Reliability (most important)

• Assurance

• Tangibles

• Empathy

• Responsiveness

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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 (internal/external)– Make continuous improvement a way of life.– Build teamwork and empowerment.

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Introduction to Total Quality Management (TQM) (cont’d)

• Make Continuous Improvement a Way of Life– Kaizen: a Japanese word meaning continuous

improvement (quality is an endless journey).– Potential results

• Improved and more consistent product and service quality.

• Faster cycle times.• Greater flexibility.• Lower costs and less waste.

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Introduction to Total Quality Management (TQM) (cont’d)

• 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

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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.

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The Seven Basic TQM Process 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.

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The Seven Basic TQM Process Improvement Tools (cont’d)

• Run Chart– A trend chart for tracking a variable over time.

organizational control

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