22 terms

Ch. 6 - Controlling

STUDY
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Terms in this set (...)

control process
a 3 step process that consists of:
1. measuring actual performance
2. comparing results with standards
3. taking corrective action

the control process assumes that standards of performance already exist (planning must precede application of the control process)
1. MEASURING ACTUAL PERFORMANCE
The 4 ways:
1. PERSONAL OBSERVATION (aka MBWA/management by walking around): firsthand, intimate knowledge of the actual activity; the most widely used; gives supervisors opportunities to "read between the lines"
2. STATISTICAL REPORTS: utilizes, but is not limited to, computers; includes graphs, bar charts, and numerical displays
3. ORAL REPORTS: conferences, meetings, and one-to-one conversations; advantages are they are fast, allow for feedback, permit language expression and tone of voice to convey meaning
4. WRITTEN REPORTS: advantages are they offer greater comprehensiveness and conciseness and are easier to catalog and reference; often combined with statistical reports; used to precede or follow-up with oral reports
range of variation
variation in performance that can be expected in all activities
2. COMPARING RESULTS WITH STANDARDS
determines the degree of variation between actual performance and the standard
cause-effect diagram (aka fishbone diagrams)
used to depict the causes of a certain problem and to group the causes according to common categories such as machinery, methods, personnel, finances, or management

look somewhat like a fishbone, with the problem (the effect) as the head, and the bones growing out of the spine are the possible causes of the problem
flowchart
visual representation of the sequence of events for a particular process that clarifies how things are being done so that inefficiencies can be identified and the process can be improved
scatter diagram
an illustration of the relationship between two variables that shows correlations and possible case and effect
control chart
the most sophisticated of the statistical techniques

a statistical technique used to measure variation in a system to produce an average standard with statistically determined upper and lower limits
3. TAKING CORRECTIVE ACTION
the 2 types:
1. IMMEDIATE CORRECTIVE ACTION: deals predominantly with symptoms; often described as "putting out fires"; it adjusts something right now and gets things back on track
2. BASIC CORRECTIVE ACTION: delves into the causes; gets to the source of the deviation and seeks to adjust the differences permanently; it asks how and why performance deviated

supervisors frequently don't have the time to take basic corrective action and therefore must content to perpetually "put out fires"
preventive control
a type of control that anticipates and prevents undesirable outcomes
concurrent control
a type of control that takes place while an activity is in progress; you can correct problems before they get out of hand

much of a supervisor's day-to-day activities
corrective control
a type of control that provides feedback after an activity is finished to prevent future deviation
What costs should supervisors control?

7 major cost categories:
1. DIRECT LABOR COSTS: directly applied in the creation or delivery of the product or service (ex: factory workers)
2. INDIRECT LABOR COSTS: not directly applied in the creation or delivery of the product or service (ex: accountants, HR recruiters)
3. RAW MATERIALS COSTS: materials that become part of the finished product or service (hamburger buns at Wendys)
4. SUPPORTIVE SUPPLIES COSTS: materials necessary for items but do not become part of the finished product or service (ex: cleaning supplies for a factory, photocopies of memos)
5. UTILITY COSTS: electricity, gas, water, etc.
6. MAINTENANCE COSTS: repairs and maintenance of equipment and facilities
7. WASTE COSTS: products, parts, or services that cannot be reused
Cost Reduction Program
6 steps:
1. IMPROVE METHODS
2. LEVEL THE WORK FLOW: avoid peaks + valleys; requires employees and reduces overtime
3. MINIMIZE WASTE
4. INSTALL MODERN EQUIPMENT
5. INVEST IN EMPLOYEE TRAINING: people can become obsolete just like machines if their skills become dated
6. MAKE CUTS SELECTIVELY: avoid across-the-board cuts
just-in-time (JIT) inventory system
a system in which inventory items arrive when they are needed in the production process instead of being stored in stock

• changes the technology around which inventories are managed
• the ultimate goal is to eliminate raw material inventories
kanban ("card" or "sign")
Japanese JIT systems

each container has a kanban in a side pocket; a kanban is returned to the supplier when the container is opened, initiating the shipment of a second container that arrives just as the first container is emptied
value chain management
the process of managing the entire sequence of integrated activities and information about product flows from start to finish (i.e. when the product is in the hands of the ultimate user)

• externally oriented; focuses on both incoming materials and outgoing products + services
supply chain management
internally oriented; focuses only on the efficient flow of incoming materials
quality control
•identification of mistakes that may have occurred
• monitoring quality to ensure that it meets some reestablished standard

• a comprehensive quality control program would include: preventive, concurrent, and corrective controls
characteristics of EFFECTIVE CONTROLS
TIMELINESS: should identify issues in time to prevent serious affect on performance
ECONOMY: must be economically reasonably to operate
FLEXIBILITY: should be flexible enough to adjust to adverse change or take advantage of new opportunities
UNDERSTANDABILITY: controls that can't be understand by those who have to use them are of little value
REASONABLE CRITERIA: must be reasonable and attainable; if they're too high/unreasonable you lose motivation
CRITICAL PLACEMENT: place controls on those factors critical to the unit's performance goals
EMPHASIS ON THE EXCEPTION: you can't control all activities; place controls where they call attention to exceptions
control by exception
a system that ensure that one is not overwhelmed by information on variations from standard

ex: Instruct your employees to notify you when an account is 15 days past due. If 90% of your customers pay their bills no more than 2 weeks late, you can devote your time to the 10% of exceptions
controls can create problems
5 types:
1. EMPLOYEE RESISTANCE: many employees don't like to be "checked up on"; they feel criticized or corrected and the result is they resist controls; can lead to distrust
2. MISDIRECTION OF EFFORT: sometime employees become so fixated on following the rules that they loose sight the bigger picture (ex: loss of customer empathy)
3. ETHICS + CONTROL DEVICES: while technological advancements allow supervisors to monitor employees and enhance worker productivity, worker privacy concerns can arise
4. EMPLOYEE THEFT: 85% of all organizational theft + fraud is committed by employees, not outsiders; employees steal bc the opportunities present themselves
5. SARBANES-OXLEY ACT: regulates corporate greed and unethical behavior