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 servicequality 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 measure
process or outputs depends upon the following:
• Technically feasible to monitor and measure
process?
• Do we understand cause and effect?
• Cost?
• Desired level of innovation?
•If impossible to measure process or outputs,
then control inputs (e.g., professionalization)
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Which components to control?
Control Inputs
When:
Control Processes
When:
Control Outputs
When:
It is impossible Processes can be
to monitor
observed &
others
measured
Outputs can be
observed &
measured
Cost of input is Cost of monitoring
high
is low
Cost of measuring
is low
Quality/safety
is important
Standardization is
critical for quality
Cause & Effect is
not well
understood
Cause & Effect is
understood
Freedom to
innovate is desired
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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
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organizations.
Components of Organizational
Control Systems (cont’d)
• 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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Components of Organizational
Control Systems (cont’d)
• 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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Components of Organizational
Control Systems (cont’d)
• 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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Components of Organizational
Control Systems (cont’d)
• 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 Crises
1. 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.
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