MGT2900

Principles of Management
Chapter 16: Control Systems &
Quality Management
Control: When Managers Monitor Performance

Controlling
– Defined as monitoring performance, comparing it with
goals, and taking corrective action as needed

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ption
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 Why Is Control Needed?

1. To adapt to change and uncertainty

2. To discover irregularities and errors
3. To reduce costs, increase productivity, or add value
4. To detect opportunities
5. To deal with complexity
6. To decentralize decision making and facilitate teamw
ork
 Steps in the Control Process (1 of 4)

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ption
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Steps in the Control Process (2 of 4)

1 . Establish standards
– Performance standard: the desired performance le
vel for a given goal
– Best measured when they can be made quantifiabl
e
Steps in the Control Process (2 of 4)

2 . Measure performance
– Usually obtained from written reports, oral reports,
and personal observations
Steps in the Control Process (3 of 4)

3 . Compare performance to standards

– Management by exception: control principle that s
ays managers should be informed of a situation on
ly if data show a significant deviation from standar
ds
 Steps in the Control Process (4 of 4)

4 . Take corrective action if necessary

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

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McGraw-Hill Education.
 Steps in the Control Process

Jump to Appendix 2 for descri

©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of
ption
McGraw-Hill Education.
 Steps in the Control Process

Jump to Appendix 2 for descri

©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of
ption
McGraw-Hill Education.
 Steps in the Control Process

Jump to Appendix 2 for descri

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ption
McGraw-Hill Education.
 Levels of Control

• Strategic control
– Monitoring performance to ensure that strategic plans are bein
g implemented and taking corrective action as needed
• Tactical control
– Monitoring performance to ensure that tactical plans those at t
he divisional or departmental level — are being implemented
• Operational control
– Monitoring performance to ensure that operational plans day-t
o-day goals — are being implemented and then taking correcti
ve action as needed
 Six Areas of Control

Human
Physical Informational
resources

Financial Structural Cultural

16-13
 Structural Area

 Bureaucratic cont  Decentralized co

rol ntrol
 an approach to orga  an approach to org
nizational control tha
anizational control
t is characterized by
that is characterize
use of rules, regulati
ons, and formal auth d by informal and
ority to guide perfor organic structural
mance arrangements

16-14
 The Balanced Scoreboard

Balanced scoreboard
Gives top managers a fast but comprehensive vi
ew of the organization via four indicators
1 . Customer satisfaction
2 . Internal processes
3 . Innovation and improvement activities
4 . Financial measures
 The Balanced Scorecard:
Four Perspectives (1 of 2)

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or further distribution permitted without the prior written consent of McGraw-Hill Education.
 The Balanced Scorecard:
Four Perspectives (2 of 2)

• Financial
– Profitability, growth, shareholder values
• Customer
– Priority is taking care of the customer
• Internal business
– Quality, employee skills, and productivity
• Innovation and learning
– Learning and growth of employees
 Deming Management
William Edwards Deming / (1900 –1993) was an American engineer, statistician, professor,
author, lecturer, and management consultant.

1. Quality should be aimed at the needs of the consum

er.
2. Companies should aim at improving the system, not
blaming workers.
3. Improved quality leads to increased market share, in
creased company prospects, and increased employm
ent.
4. Quality can be improved on the basis of hard data, u
sing the PDCA cycle.
 W. Edwards Deming

The philosophy of W. Edwards Deming has

been summarized as follows:
Dr. Deming taught that by adopting
appropriate principles of management,
organizations can increase quality and
simultaneously reduce costs (by reducing
waste, rework, staff attrition and litigation
while increasing customer loyalty)
 The PDCA Cycle
Figure 16.7

Jump to Appendix 5 for description

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 Total Quality Management

Total quality management (TQM)

A comprehensive approach — led by top mana
gement and supported throughout the organiz
ation — dedicated to continuous quality impro
vement, training, and customer satisfaction
 Two Core Principles of TQM

1 . People orientation
– Everyone involved in the organization should fo
cus on delivering value to customers.
2 . Improvement orientation
– Everyone should work on continuously improvin
g work processes.
 1. People Orientation

• Delivering customer value is most important.

• People will focus on quality if they feel empow
ered.
• TQM requires training, teamwork, and cross-fu
nctional efforts.
 2. Improvement Orientation

• It’s less expensive to do it right the first time.

• It’s better to do small improvements all the ti
me.
• Accurate standards must be followed to elimin
ate small variations.
• There must be strong commitment from top
management.
 Applying TQM to Services

RATER scale
Enables customers to rate the quality of a service al
ong five dimensions
1. Reliability
2. Assurance
3. Tangibles
4. Empathy
5. Responsiveness
The Keys to Successful Control Systems

1. They are strategic and results oriented.

2. They are timely, accurate, and objective.
3. They are realistic, positive, and understandab
le and encourage self-control.
4. They are flexible.
 Barriers to Control Success

1. Too much control

2. Too little employee participation
3. Overemphasis on means instead of ends
4. Overemphasis on paperwork
5. Overemphasis on one instead of multiple app
roaches
The Role of Information Technology

Enterprise resource planning (ERP)

Software systems, information systems for integ
rating virtually all aspects of a business, helping
managers stay on top of the latest development
s
Keys to Your Managerial Success (1 of 2
)

Find your passion and follow it.

Encourage self-discovery, and be realistic.
Every situation is different, so be flexible.
Fine-tune your people skills.
Keys to Your Managerial Success (2 of 2
)

Learn how to develop leadership skills.

Treat people as if they matter, because they
do.
Draw employees and peers into your manage
ment process.
Take yourself lightly.
Any Questions?

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