Quality and Performance in Management
Summary
TLDRThis video discusses organizational control, outlining the systematic process managers use to regulate activities and meet performance standards. It explains the feedback control model's four key steps: setting standards, measuring performance, comparing results, and making corrections. It introduces the balanced scorecard for measuring performance across financial, customer, internal process, and growth perspectives. The video also covers modern approaches to quality management, like Total Quality Management (TQM), benchmarking, Six Sigma, and budgeting techniques, emphasizing continuous improvement and employee involvement in maintaining high organizational standards.
Takeaways
- 📊 Organizational control involves regulating activities to meet established plans and performance standards.
- 📈 The control process consists of four steps: establishing standards, measuring performance, comparing performance to standards, and making corrections.
- 📋 A feedback control model helps managers monitor and regulate organizational activities to meet strategic goals.
- 📉 The balanced scorecard is a management tool that integrates financial measures with customer service, internal processes, and learning/growth indicators.
- 💼 Total Quality Management (TQM) focuses on continuous improvement, customer satisfaction, and reducing costs through teamwork across departments.
- 🛠️ Six Sigma is a quality control approach aiming for 99.9997% defect-free performance using a disciplined, structured methodology.
- 👥 Quality circles empower employees to meet regularly and solve problems related to work quality, pushing decision-making to those who know the processes best.
- 🔄 Benchmarking involves comparing an organization's practices against industry leaders to identify areas for improvement and best practices.
- 💰 Budgetary control is a common managerial tool that tracks expenditures and adjusts operations based on variances between actual and budgeted amounts.
- 📉 Zero-based budgeting starts from zero dollars, requiring justification for every budget item, helping to eliminate unnecessary costs.
Q & A
What is organizational control?
-Organizational control refers to the systematic process of regulating organizational activities to ensure they are consistent with the expectations established in plans, targets, and performance standards.
What are the four key steps in the control process?
-The four key steps in the control process are: 1) establishing standards, 2) measuring performance, 3) comparing performance to standards, and 4) making corrections.
How does the feedback control model help managers?
-The feedback control model helps managers by monitoring and regulating organizational activities and using feedback to determine whether performance meets established standards, allowing managers to make necessary adjustments.
What is the balanced scorecard and what are its four perspectives?
-The balanced scorecard is a management control system that integrates financial and operational measures related to an organization's critical success factors. Its four perspectives are: financial, customer service, internal business processes, and organizational capacity for learning and growth.
What is the purpose of Total Quality Management (TQM)?
-The purpose of Total Quality Management (TQM) is to infuse quality into every activity within a company through continuous improvement, with a focus on teamwork, increasing customer satisfaction, and lowering costs.
What are quality circles and how do they function?
-Quality circles are groups of employees who meet regularly to discuss and solve problems that affect the quality of their work. They collect data, identify problems, and propose solutions, allowing decision-making at the level where employees know the work best.
What is benchmarking, and what are the steps involved in the benchmarking process?
-Benchmarking is the process of measuring products, services, and practices against industry leaders to identify areas for improvement. The five steps in the benchmarking process are: 1) plan, 2) find, 3) collect, 4) analyze, and 5) improve.
What is Six Sigma and what does its methodology aim to achieve?
-Six Sigma is a quality standard that aims for no more than 3.4 defects per million parts, representing near-perfect performance. Its five-step methodology, DMAIC (Define, Measure, Analyze, Improve, Control), provides a structured approach to solving problems and improving processes.
What is zero-based budgeting and how does it differ from traditional budgeting?
-Zero-based budgeting is an approach where every line item in the budget must be justified starting from zero dollars. Unlike traditional budgeting, which adjusts previous budgets, zero-based budgeting forces managers to evaluate the costs and benefits of each expenditure.
What are the key advantages of using bottom-up budgeting?
-Bottom-up budgeting involves lower-level managers in the budgeting process, which allows for better resource anticipation at the departmental level and increases employee involvement, empowerment, and ownership of the budgeting outcomes.
Outlines
📊 Introduction to Organizational Control and the Control Process
This paragraph introduces the concept of organizational control, which is defined as the systematic process of regulating activities to align with plans, targets, and performance standards. Control is action-based, requiring information to adjust operations. A feedback control model helps managers meet strategic goals through four steps: setting standards, measuring performance, comparing results, and making corrections. Managers must define goals clearly to ensure employees understand their tasks. Performance reports are vital, but they should focus on evaluating organizational success, not merely generating data.
💼 Total Quality Management and Its Tools
This section discusses Total Quality Management (TQM), which focuses on continuous improvement, teamwork, and customer satisfaction. Organizations implement TQM by encouraging collaboration across departments, with employees and managers working together to achieve zero defects. Various techniques, including quality circles, benchmarking, Six Sigma, and quality partnering, are used to enhance performance. Six Sigma aims for near-perfect results, using a five-step methodology (DMAIC), while quality partnering integrates quality personnel into functional teams to improve processes. The philosophy behind TQM is that small, continuous improvements lead to significant organizational advancements.
📈 Budgetary Control and Types of Budgets
This paragraph covers budgetary control, an essential method for managing organizational expenditures. Budgets set targets, track actual expenditures, and identify variances that require investigation and corrective action. Various budgets include expense, revenue, cash, and capital budgets, each serving different purposes. Expense budgets monitor costs, while revenue budgets track income. Cash budgets manage liquidity, ensuring obligations are met, and capital budgets plan major investments. Zero-based budgeting requires justifying each expense, unlike top-down budgeting, where higher management imposes targets. Increasingly, organizations adopt bottom-up budgeting for greater employee involvement.
🎵 Music Transition
This paragraph marks the end of the video segment with a music transition, setting the tone for the next part of the video or signaling a conclusion.
Mindmap
Keywords
💡Organizational Control
💡Balanced Scorecard
💡Feedback Control Model
💡Total Quality Management (TQM)
💡Benchmarking
💡Six Sigma
💡Responsibility Center
💡Zero-Based Budgeting
💡Quality Circles
💡Continuous Improvement (Kaizen)
Highlights
Organizational control is a systematic process of regulating activities to meet performance standards.
The control process includes four key steps: establishing standards, measuring performance, comparing performance to standards, and making corrections.
Effective control systems require clear performance standards, regular performance measurements, and actionable reports.
Managers must interpret deviations from standards and determine the cause, which may involve both objective analysis and subjective judgment.
The balanced scorecard integrates financial measures with operational metrics, focusing on four perspectives: financial, customer service, internal business processes, and learning and growth.
Customer service metrics in the balanced scorecard track customer retention, satisfaction, and perceptions of the organization.
Business process indicators focus on production efficiency and operational statistics, key for assessing organizational performance.
TQM (Total Quality Management) emphasizes continuous improvement through collaboration, customer satisfaction, and cost reduction.
Benchmarking is used to compare organizational practices with industry leaders to identify areas for improvement.
Six Sigma aims for near perfection with a goal of no more than 3.4 defects per million parts, using the DMAIC method (Define, Measure, Analyze, Improve, Control).
Quality partnering integrates quality control into functional areas, allowing quality personnel to be seen as insiders working alongside teams.
Kaizen, or continuous improvement, involves making small, ongoing changes to improve all areas of the organization over time.
Budgetary control helps organizations monitor expenses, comparing actual expenditures to budgets, and make adjustments where necessary.
Zero-based budgeting requires justifying every budget item from scratch, helping to eliminate unnecessary costs.
Bottom-up budgeting allows lower-level managers to anticipate resource needs, promoting employee involvement and empowerment.
Transcripts
[Music]
in this course we'll introduce the basic
mechanisms for controlling an
organization we begin by defining
organizational control and summarizing
the steps in the control process then
we'll discuss the balanced scorecard to
measure performance and examine change
in control organizational control refers
to the systematic process of regulating
organizational activities to make them
consistent with the expectations
established in plans targets and
standards of performance the essence of
control is action which adjusts
operations to predetermined standards
and its basis is information in the
hands of managers thus effectively
controlling an organization requires
information about performance standards
and actual performance as well as the
actions taken to correct any deviations
from the standards a feedback control
model can help managers meet strategic
goals by monitoring and regulating the
organization's activities and using
feedback to determine whether
performance meets established standards
managers set up control systems that
consist of four key steps first
establishing standards second measuring
performance third comparing performance
to those standards and fourth and
finally making corrections within the
organization's overall strategic plan
managers defined goals for
organizational departments in specific
operational terms that include a
standard of performance against which to
compare organizational activities
standards should be defined clearly and
precisely so that employees know what
they need to do and can determine
whether their activities are on target
most organizations prepare formal
reports for quantitative performance
measurements that managers review daily
weekly or monthly managers should take
care however that they are not
generating reports just because they
have data to do so these measurements
should be related to the standards set
in the first step of the control process
and the report should be designed to
help managers evaluate how well the
organization is meeting its standards
the third step in the control process is
comparing actual activities to
performance standards when performance
deviates from a standard
managers must interpret the deviation
managers are expected to dig beneath the
surface to find the cause of the problem
effective management control involves
subjective judgment and employee
discussions as well as objective
analysis of performance data the final
step in the control feedback model is to
determine what changes if any are
necessary a current approach to
organizational control is to take a
balanced perspective on company
performance integrating various
dimensions of control that focus on
markets and customers as well as
employees and financials the balanced
scorecard is a comprehensive management
control system that balances traditional
financial measures with operational
measures related to a company's critical
success factors a balanced scorecard
contains four major perspectives the
financial perspective customer service
internal business processes and
organizations capacity for learning and
growth within these four areas managers
identify key performance metrics the
organization will track the financial
performance perspective reflects a
concern for the organization's
activities contributing to improving
short and long term financial
performance it includes traditional
measures such as net income and return
on investment customer service
indicators measures information such as
how the customers view the organization
and customer retention and satisfaction
these data may be collected in many
forms including testimonials from
customers describing service business
process indicators focus on production
and operating statistics the final
component of the balanced scorecard
looks at the organization's potential
for learning and growth focusing on how
well resources and human capital are
being managed for the company's future
metrics may include things such as
employee retention and the introduction
of new products managers record analyze
and discuss these various metrics to
determine how well the organization is
achieving its goals the balanced
scorecard is an effective tool for
managing and improving performance but
only if it's clearly
linked to well-defined organizational
strategy and goals a manager's approach
to control is changing in many of
today's organizations in connection with
the shift to employee participation and
empowerment many organizations are
adopting decentralized rather than
hierarchical control processes total
quality management known as TQM is an
organization-wide effort to infuse
quality into every activity in a company
through continuous improvement the TQM
philosophy focuses on teamwork
increasing customer satisfaction and
lowering costs organizations implement
TQM by encouraging managers and
employees to collaborate across
functions and departments as well as
with customers and suppliers to identify
areas for improvement no matter how
small each quality improvement is a step
towards perfection and meeting a goal of
zero defects quality control becomes
part of the day-to-day business of every
employee rather than being assigned to
specialized departments the
implementation of TQM involves the use
of many techniques including quality
circles benchmarking Six Sigma
principles quality partnering and
continuous improvement a quality circle
is a group of employees who meet
regularly to discuss and solve problems
that affect the quality of their work at
a set time during the work week the
members of the quality circle meet
identify problems and try to find
solutions circle members are free to
collect data and take surveys the reason
for using quality circles is to push
decision-making to an organizational
level at which recommendations can be
made by the people who do the job and
know it better than anyone else
benchmarking is defined as the
continuous process of measuring products
services and practices against the
toughest competitors or those
organizations recognized as industry
leaders to identify areas for
improvement organizations may also use
benchmarking for generating new business
ideas assessing market demand or
identifying best practices within an
industry there's a five-step
benchmarking process which is to plan
which includes identifying the
objectives of the study and the
characteristics of a product or service
that's
influence customer satisfaction then the
second step is to find identifying the
source of information to be collected
third to collect that's gathering
information fourth to analyze which is
benchmarking data that has been
collected and recommending areas for
improvement and then finally improve
implementing recommendations and then
monitoring them through continuous
benchmarking based on the Greek letter
Sigma which statistician z' use to
measure how far something deviates from
perfection Six Sigma is a highly
ambitious quality standard that
specifies a goal of no more than three
point four defects per million parts
that essentially means being defect free
ninety-nine point nine nine nine seven
percent of the time however Six Sigma
has deviated from its precise definition
to become a generic term for quality
control approaches that takes nothing
for granted and emphasizes a disciplined
and relentless pursuit of higher quality
and lower costs Six Sigma is based on a
five step methodology referred to as de
mayic standing for define measure
analyze improve and control which
provides a structured way for
organizations to approach and solve
problems one of the drawbacks of a
traditional Quality Control Program is
that people from the Quality Control
Department are often seen as outsiders
to the business groups they serve
because they don't have a strong
knowledge of the processes they're
studying their work may be viewed with
suspicion or as an interruption to the
normal work routine a new approach
called quality partnering involves
assigning dedicated personnel within a
particular functional area of the
business in this approach the Quality
Control personnel work alongside others
within a functional area
identifying opportunities for quality
improvements throughout the work process
another advantage of this approach is
that quality partners are viewed as
insiders and peers who are readily
accepted into the workgroup you can find
extraordinary success from making a
series of mostly small improvements this
approach called continuous improvement
or Kaizen is the implementation of a
large number of small incremental
improvements in all areas of the
organization on an
going basis the basic philosophy is that
improving things a little bit at a time
all the time has the highest probability
of success innovations can start simple
and employees can build on their
successes in this unending process total
quality management is an
organization-wide effort to infuse
quality in every activity in an
organization through continuous
improvement the TQM philosophy focuses
on teamwork increasing customer
satisfaction and lowering costs
budgetary control one of the most
commonly used methods of managerial
control is the process of setting
targets for an organization's
expenditures monitoring results and
comparing them to the budget and making
changes as needed
as a control device budgets are reports
that lists planned and actual
expenditures for cash assets raw
materials salaries and other resources
in addition budget reports usually list
the variance between the budgeted and
actual amounts for each item the
fundamental unit of analysis for budget
control systems is called the
responsibility center a responsibility
center is defined as any organizational
department or unit under the supervision
of a single person who is responsible
for its activity budgets that managers
typically use include expense budgets
revenue budgets cash budgets and capital
budgets let's take a look at each an
expense budget includes anticipated in
actual expenses for each responsibility
center and for the total organization an
expense budget may show all types of
expenses or it might show a particular
category such as materials or research
and development expenses when actual
expenses exceed budgeted amounts the
different signals the need for managers
to identify possible problems and take
corrective action if needed the
difference may arise from inefficiency
or expensive may be higher because the
organization sales are growing faster
than anticipated
conversely expenses below budget may
signal exceptional efficiency or
possibly the failure to meet some other
standards such as desired levels of
sales or quality of service either way
expense budgets help identify the need
for further invest
station but do not substitute for it a
revenue budget lists forecasted in
actual revenues of the organization in
general revenues below the budgeted
amount signal and need to investigate
the problem to see whether the
organization can improve revenues
revenues above budget would require
determining whether the organization
could obtain the necessary resources to
meet the higher than expected demands
for its product or services managers
then formulate action plans to correct
the budget variance the cash budget
estimates receipts and expenditures of
money on a daily or weekly basis to
ensure that the organization has
sufficient cash on hand to meet
obligations the cash budget shows the
level of funds flowing through the
organization and the nature of cash
disbursements if the cash budget shows
the firm has more cash than necessary to
meet short-term needs the organization
can arrange to invest the excess to earn
additional income in contrast if the
cash budget shows a payroll expenditure
of $40,000 coming at the end of the week
but only $30,000 in the bank the
organization must borrow cash to meet
the payroll the capital budget lists
planned investments in major assets such
as buildings heavy machinery or complex
information technology systems often
involving expenditures over more than
one year capital expenditures not only
have a large impact on future expenses
but they also are investments designed
to enhance profits therefore a capital
budget is necessary to plan the impact
of these expenditures on cash flow and
profitability controlling involves not
only monitoring the amount of capital
expenditures but it also is about
evaluating whether the assumptions made
about the return on the investments are
holding true managers can evaluate
whether controlling investments in a
particular project is advisable as well
as whether their procedures for making
capital expenditure decisions are
adequate there are several types or
approaches to budgeting that managers
and organizations use zero based
budgeting is an approach to planning and
decision making that requires a complete
justification for every line item in a
budge
instead of carrying forward a prior
budget and apply in a percentage change
as ero based budget begins with the
starting point of zero dollars and every
dollar added to the budget is reflected
by an actual documented need by forcing
managers to evaluate and justify the
costs and benefits of each dollar zero
based budgeting can help organizations
shave excessive and unnecessary costs
from their yearly expenditures budgeting
is an important part of organization
planning and control many traditional
organizations use top-down budgeting
which means that budgeted amounts from
the cutting year are literally imposed
on middle and lower managers in top-down
budgeting managers set departmental
budget targets in accordance with
overall organizational revenues and
expenditures specified by top executives
although the top-down budget process
provides some advantages the movement
towards employee involvement empowerment
participation and learning means that
organizations are adopting bottom-up
budgeting a process in which lower-level
managers anticipate department resource
needs and pass them up to top management
for approval organizations of all kinds
are increasingly involving line managers
in the budgeting process using this form
of bottom-up budgeting budgetary control
one of the most commonly used forms of
managerial control is again the process
of setting targets for organization
expenditures monitoring the results and
comparing them to the budget and making
changes as needed
[Music]
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