Quality and Performance in Management

Summary

This 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

00:00

📊 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.

05:01

💼 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.

10:05

📈 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.

15:06

🎵 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.

Keywords

💡Organizational Control

Organizational control is the systematic process of regulating organizational activities to ensure they align with the expectations established in plans, targets, and performance standards. It involves setting up mechanisms to track and adjust operations to meet these standards, ensuring that activities are performed effectively. In the video, the concept is introduced as a fundamental part of management that helps maintain consistency and achieve organizational goals through corrective actions based on performance feedback.

💡Balanced Scorecard

The balanced scorecard is a comprehensive management control system that balances traditional financial measures with non-financial metrics related to a company's critical success factors. It encompasses four key perspectives: financial, customer service, internal business processes, and learning and growth. In the video, the balanced scorecard is presented as a modern approach to control, helping managers focus on both short-term results and long-term strategic objectives.

💡Feedback Control Model

The feedback control model is a strategic framework for monitoring and regulating an organization’s activities using feedback to determine if performance meets established standards. It consists of four key steps: establishing standards, measuring performance, comparing performance to standards, and taking corrective actions. The video emphasizes its role in helping managers adjust operations and resolve deviations to meet strategic goals.

💡Total Quality Management (TQM)

Total Quality Management is an organization-wide effort to infuse quality into every activity through continuous improvement. It emphasizes teamwork, customer satisfaction, and cost reduction. TQM involves various techniques such as quality circles, benchmarking, and Six Sigma to enhance processes and meet a goal of zero defects. In the video, TQM is shown as a shift from traditional control towards empowering employees to be actively involved in quality improvements.

💡Benchmarking

Benchmarking is the continuous process of measuring products, services, and practices against the toughest competitors or industry leaders to identify areas for improvement. It involves planning, collecting data, analyzing results, and implementing changes. The video uses benchmarking as a practical example of how organizations can assess their position in the market and generate new business ideas by learning from the best in the industry.

💡Six Sigma

Six Sigma is a quality standard aimed at achieving no more than 3.4 defects per million parts, or 99.9997% defect-free performance. It emphasizes a disciplined and structured approach to problem-solving using the DMAIC methodology: Define, Measure, Analyze, Improve, and Control. In the video, Six Sigma is described as a rigorous method for pursuing higher quality and lower costs, making it a popular choice for many organizations aiming for operational excellence.

💡Responsibility Center

A responsibility center is any organizational unit or department under the supervision of a single person who is accountable for its activities and performance. It is the fundamental unit of analysis in budgetary control systems, allowing for specific tracking and management of resources and outcomes. The video uses responsibility centers to illustrate how managers control expenditures and assess departmental efficiency.

💡Zero-Based Budgeting

Zero-based budgeting is a budgeting approach that requires a complete justification for every line item in a budget, starting from a 'zero' base, rather than carrying forward prior budgets. Every expense must be validated to ensure it is necessary and aligned with organizational goals. The video presents this as a method to eliminate unnecessary costs and improve resource allocation by making managers critically evaluate each dollar spent.

💡Quality Circles

Quality circles are small groups of employees who regularly meet to discuss and solve problems related to the quality of their work. These circles encourage decision-making at the operational level, where employees have the most knowledge of the processes. In the video, quality circles are highlighted as a TQM tool that promotes collaboration and empowers employees to contribute directly to quality improvements.

💡Continuous Improvement (Kaizen)

Continuous improvement, also known as Kaizen, refers to the ongoing effort to improve products, services, or processes incrementally over time. The philosophy is that small, consistent improvements can lead to significant long-term benefits. In the video, continuous improvement is emphasized as a key aspect of TQM, where each small improvement is a step toward perfection and enhances overall organizational performance.

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]