Topic 4 Control Systems and Quality Management

Question 1

Control:

Answer 1

Consists of monitoring performance, comparing it with goals, and taking corrective action as needed.

Question 2

Why is control needed? Helps an organization….

Answer 2

1- Adapt to change & uncertainty
2- Discover irregularities & errors
3- Reduce costs, increase productivity, or add value
4- Detect opportunities
5- Provide performance feedback
6- Decentralize decision making & facilitate teamwork

Question 3

Four steps of the Control Process

Answer 3

1- Establish standards
2- Measure performance
3- Compare performance to standards
4- Take corrective action, if necessary
-If yes, take corrective action; perhaps revise standards
-If no, continue work progress & recognize success.

Question 4

Step 1: Establish Standards-

Answer 4

• Control standard
  Standards are measured best when they can be quantified.

Question 5

Control Standard:

Answer 5

(performance standard or standard) is the desired performance level of a given goal (objective).

Question 6

Step 2: Measure Performance

Answer 6

Sources of performance data
1-Employee behavior and deliverables
2- Peer input or observations
3- Customer feedback
4- Managerial observations
5- Output from a production process

Question 7

Step 3: Compare Performance to Standards

Answer 7

Evaluating performance requires that a range of acceptable variation be built into standards
- Range depends on importance of standards
- Control Charts
- Management by Exception

Question 8

Control Charts

Answer 8

Visual statistical tool used for quality control purposes.

Question 9

Management by Exception

Answer 9

A control principle that states that managers should be informed of a situation only if data show a significant deviation from standards.

Question 10

Step 4: Take Corrective Action, if Necessary

Answer 10

• Make no changes
• Recognize and reinforce positive performance
• Take action to correct negative performance

Question 11

Types of Control:

Answer 11

• Concurrent control
• Feedback control
• Feedforward control

Question 12

Concurrent Control:

Answer 12

Entails collecting performance information in real time.
- Helps managers to determine if employees and processes conform to standards and regulations
- Corrective action can be taken immediately, if required

Question 13

Feedback Control:

Answer 13

Amounts to collecting performance information after a task or project is done.
- This information can be used to correct or improve future performance of the existing task or process

Question 14

Feedforward Control:

Answer 14

Focuses on preventing future problems.
- Collects performance information about past performance and then uses this information to help plan new future tasks or new processes

Question 15

Balanced Scorecard:

Answer 15

(BSC) is a form of control.
It provides top managers a fast but comprehensive view of the organization via four indicators:
- Financial Metrics
- Customer Metrics
- Internal Business Process Metrics
- Innovation and learning Metrics
It establishes goals and performance measures according to these four.

Question 17

BSC Key Idea

Answer 17

• Reliance on only one standard (or control) is not sufficient to achieve successful business results.
• The complexity of managing a business requires that managers be able to view several areas simultaneously.
  -Analogous to the many dials and indicators in an airline cockpit.
• It is not enough to simply measure financial performance. Operational matters, such as customer satisfaction, are equally important.

Question 18

Balanced Scorecard: Four Perspectives

Answer 18

1. Financial Perspective
2. Customer Perspective
3. Internal Business Perspective
4. Innovation & Learning Perspective

Question 19

Balance Scorecard: The Financial Perspective

Answer 19

-Measure performance of: Budgets, Financial statements (balance sheet and income statement)
-Financial Ratios

Question 20

Balance Scorecard: The Financial Perspective (Budget)

Answer 20

A formal financial projection.
- The projection, or forecast, becomes the standard against which actual performance is compared

Question 21

Balance Scorecard: The Financial Perspective (Fixed Budget)

Answer 21

(static budget)
A projection in which resources are allocated on a single estimate of costs.
- Doesn’t allow for adjustment over time.

Question 22

Balance Scorecard: The Financial Perspective (Variable Budget)

Answer 22

(Flexible budget)
Allocates resources in proportion with various levels of activity
- The budget can be adjusted over time (the standards change) to accommodate relevant changes in the environment.

Question 23

Balance Scorecard: The Financial Perspective (Financial Statement)

Answer 23

Summary of some aspect of an organization’s financial status.

Question 24

Balance Scorecard: The Financial Perspective (Balance Sheet)

Answer 24

Summarizes an organization’s overall financial worth - that is, assets and liabilities - at a specific point in time.

Question 25

Balance Scorecard: The Financial Perspective (Income Statement)

Answer 25

Summarizes an organization's financial results - revenues and expenses - over a period of time, such as a year.