Chapter 19

Managerial and quality control

Turnitin- thanks to students who have now viewed comments on ass 1

q.xorro.com/ ebzh

Lecture overview• The meaning and importance of control• Organisational control focus• Feedback control model• Financial statements and analysis• The changing philosophy of control• Total quality management (TQM)• Trends in quality and financial control• Corporate governance• Qualities of effective control systems• Sustainable development and management

control

Cengage publications • Write out the References page reference to the

course text book Managing in New Zealand• Write down the in-text reference to the

Management challenge on page 702• Video: How the “Hear and Say” corporation

control their activities?• How do they report to Government and

benefactors?• What % of funds come from the Australian Govt?

Is this correct?• Samson, D., Catley, B., Cathro, V., & Daft, R.L.

(2012). Management in New Zealand. Sth Melbourne, Victoria: Cengage Learning.

• Hint: look on spline of book for authors surnames

• The Management Challenge, (cited in Samson et al., 2012 p. 702), discusses the life cycle of Dell Corporation.

The meaning and importance of control

• Read Dell story p. 702 Importance of Control?• Organisational control– The systematic process through which managers

regulate organisational activities to make them consistent with expectations established in plans, targets and standards of performance.

– e.g. acceptable level of defects.

(Samson, Catley, Cathro & Daft, 2012, p. 703)

Organisational control focus

• Feedforward control• Concurrent control• Feedback control• Can you explain any of these?

Organisational control focus• Feedforward control– Anticipates problems• e.g. Pre-employment drug testing• e.g. Inspect raw materials• e.g. Hire only college graduates

– Focus is on inputs

Organisational control focus• Concurrent control– Solves problems as they happen• e.g. Adaptive culture• e.g. Total quality management• e.g. employee self-control

– Focus is on ongoing processes

Organisational control focus• Feedback control– Solves problems after they occur• e.g. Analyse sales per employee• e.g. Final quality inspection• e.g. Survey customers

– Focus is on outputs

Organisational control focus

Feedback control model

• Focuses on the organisation’s outputs1 Establish standards of performance.2 Measure actual performance.3 Compare performance with standards.4 Take corrective action (if inadequate).5 Or do nothing or provide reinforcement (if

adequate).

Financial statements and analysis• Liquidity ratios• Activity ratios• Probability ratios• Leverage ratios• Budgeting• Ok who are the Finance students? • Explain these terms to class mates

Financial statements and analysis• Liquidity ratio– Indicates organisation’s ability to meet its current

debt obligations (assets/liabilities).• Activity ratio– Measures the organisation’s internal performance

with respect to key activities defined by management (total sales/average inventory), Passenger or Cargo kms, overnight visitors, average spend per international visitor, or spend per day by an international visitor

Financial statements and analysis• Profitability ratio– Profit margin on sales.– Gross margin.– Return on total assets.

• Leverage ratio– Debt ratio.

• Total debt divided by total assets (above 1.0 is considered poor credit risk).

Financial statements and analysis• Budgeting– Expense Budget• Anticipated and actual expenses.

– Revenue budget• Forecasted and actual revenues.

– Cash budget• Estimates and reports cash flows on daily or weekly

basis.– Capital budget• Plans and reports investments in major assets to be

depreciated over several years.

Financial statements and analysis• Budgeting– Top-down• Less empowerment, participation and learning.• Bureaucratic control.

– Bottom-up• Lower-level managers pass anticipated budgets up to

senior levels for approval.• Decentralised control.• Which does your organisation use?

The changing philosophy of control• The shift to employee participation and

empowerment, led many companies to adopt a decentralised rather than a hierarchical control process.

• Most organisations display some aspects of both hierarchical and decentralised control, but managers generally emphasise one or the other, depending on the organisational culture and their own beliefs about control.

The changing philosophy of control

Total quality management (TQM)

‘An organisation-wide commitment to infusing quality into every activity through continuous improvement’

(Samson, Catley, Cathro and Daft 2012: 718).

Total quality management (TQM)• TQM techniques

– Quality circles• Group of six to 12 volunteer employees meet regularly to discuss

and solve problems affecting the quality of their work.– Empowerment

• the empowerment of employees, as well as the contributions of suppliers and customers in the decision-making process.

– Benchmarking• Continuous process of measuring products, services and practices

against major competitors or industry leaders.

http://www.youtube.com/watch?v=OSA1q107IYg

So now what would you like to add to key points about TQM above?

Total quality management (TQM)

• TQM techniques– Six Sigma• Emphasises a relentless pursuit of higher quality

and lower costs.• http://www.youtube.com/watch?v=wSZOsimeB5Q

– Outsourcing• The contracting out of an organisation’s in-house

function to a preferred vendor.

Total quality management (TQM)

• TQM techniques– Reduced cycle time• Lowers the number of steps taken to complete an

organisational process.– Continuous improvement• Implementation of a large number of small incremental

improvements in all areas (ongoing).

Total quality management (TQM)

Trends in quality and financial control• International quality standards– ISO 9000• Uniform guidelines for processes to ensure products

conform to high quality requirements.

• Open-book management– Sharing financial information and results with all

employees.

Trends in quality and financial control• Economic value-added (EVA) systems:– Performance is measured as net after-tax profits

minus capital costs (tangible assets).– Each job, department or process is measured.– Difficult to compare across different firms.

Trends in quality and financial control• Market value-added (MVA)– Measures stock market’s estimate of the value of a

company’s past and projected capital investment projects.

– Listing of Mighty River Power on Stock Exchange

• The balanced scorecard– Balances traditional financial measures with measures

of customer service, internal business processes and the organisation’s capacity for learning and growth.

– Needs time and commitment.Sustainability? Three pillars ?

Sustainability: Three factors

Trends in quality and financial control

• Activity-based costing (ABC)– Identifies the various activities needed to provide

a product and determines the cost of those activities.

Corporate governance• Corporate governance– the system of governing an organisation so that

the interests of corporate owners are protected.– Corporate failures are often the result of poor

control• e.g. Lehman Bothers

– Over-control however can also have problems• Demotivation, low morale, lack of trust

– Balance is needed2014 two new Govt appointees on Unitec Council

Qualities of effective control systems1 Linked to strategy2 Understandable measures3 Acceptance by employees4 Balance objective and subjective data5 Accuracy6 Flexibility7 Timeliness8 Support of action

Sustainable development and management control

• Sustainability must be – Well planned– Well resourced and– Well controlled• e.g. BHP Billiton executes its sustainability plans,

measures progress of its projects and expenditure, and adjusts its actions where necessary if deviations occur. Management reviews and public scrutiny provide feedback control.

Next Week 11

• Chapter 10 Fundamentals of Organising• Ch 13 Diversity • Management Challenge p.470 Or• NZ Mgr Challenge Keith Palmer p.506 or• Mgmt in workplace Indigenous Maori …p.478• Do this instead of NZ Herald article • Are you writing a chapter per week on assignment

2?

Assignment one• Many students not using spellcheck (UK NZ) • Most did not check Originality Report for

possible plagiarism, lack of in-text “Quotations” and proper referencing complete with paragraph or page nos.

• Sentence fluency, word choice, • APA referencing guidelines under week 10 and

under Assessment “Referencing information Powerpoint and handouts”

Assignments• Individual part of group may have been adjusted

based on team feedback, marks in Grade book• Individual assignments please view on TURNITIN• Assignment one Group 120 marks• Assignment one Individual 40 marks • Contribution toward BSNS5390 = 35%• Assignment two and three remaining =65% • Total 100%

Results Assignment One Group and Individual

• Are you looking for your grades? Go to myunitec.unitec.ac.nz and login, then "Student Self Service", followed by "View My Grades" in the Academic Related drop down box to find your grades.

APA referencing • See refresher power-point presentation• Library web site Referencing- APA …• Te Puno Ako free handouts and seminars• Other university resources on APA