Expert answer:Introduction to Management We have covered a lot o
Solved by verified expert:1. We have covered a lot of ground in this course about managers and functions of management. Which principle or case study really caught your attention and made you stop and think about your management approach?A minimum of 250 words (main post) and two scholarly sources.You can use our textbook for one of the two sources. No matter how many times you cite a specific source, it only counts as one reference. must be cited in APA format and referenced in APA format.2. Chapter 16 identifies techniques for enhancing organizational effectiveness and includes the view consumers have of the organization. It is easy for a company to lose its reputation. For example, Netflix after its decision to double user rates to provide DVD rentals and online movies. How does a company restore its reputation?Use this scenario to answer the following questions:Some steel mills are destroyed by globalization, others reborn.Left for dead a decade ago, this 50-year-old facility on the shores of Lake Michigan has been rejuvenated thanks to an unusual experiment by its owner, Luxembourg-based ArcelorMittal.In 2008, Burns Harbor was “twinned” with a hypermodern mill in Gent, Belgium. Over 100 U.S. engineers and managers, who were flown across the Atlantic, were told: Do as the Belgians do.Burns Harbor now enjoys record output. Its furnaces, where steel is made out of iron ore, coal, and limestone, are run with software developed in Belgium. Robots are in. Pencils are out. Workers are learning to make the same amount of steel with nearly half the people it employed three decades ago. Productivity is nearing Belgium levels.The transition hasn’t been seamless. As a collective bargaining session looms this summer, union leaders say a tough battle is expected over wages, safety risks, and the next wave of automation. But there is also an acknowledgement that increased productivity has saved the mill from oblivion. . . .Globalization often is blamed for the travails of American manufacturing—from the relentless pressure of imports from lower-wage countries to outsourcing and overseas production by U.S.-based manufacturers. But globalization has its upsides as well. Not only does it often mean cheaper goods for American manufacturers, but it puts pressure on U.S. factories to become more efficient to keep up with global competition, making it possible for them to survive. . . .A wave of globalization in the 1980s created a true international street market, straining less profitable mills, especially in the U.S., and leading many to bankruptcy. The U.S. steel industry produced 95.6 million tons in 2011, about three-quarters of what it made 30 years ago. It employed about 95,000 people in its core mills and plants, one fifth as many as in 1981, according to the American Iron and Steel Institute.That laid the groundwork for Lakshmi Mittal, the billionaire Indian who began assembling what is now the world’s first successful international steel conglomerate of its size, and the largest by production, with 263,000 employees in 20 countries and 112 steelmaking facilities.Mr. Mittal perfected a simple business model: Buy rundown, often state-owned, mills, cut costs, lay off workers, improve productivity, turn a profit. It worked from Slovakia to South Africa, from Ukraine to Trinidad.Twinning—benchmarking two mills against each other—represents the next evolution. “The process doesn’t change: melt iron, cast, roll. But there are always incremental improvements you can make,” Mr. Mittal said in an interview.Modern benchmarking was pioneered by Xerox in the 1980s and has become a common tool for multinationals. But industrial historians say that what Mr. Mittal is actually doing is taking a page out of the productivity obsessed playbook of 19th century steel pioneer Andrew Carnegie and applying it globally. . . .In a similar fashion, ArcelorMittal twins pairs of mills—usually of similar size, age, product mix, and output—against each other. In addition to Indiana and Belgium, mills in Germany and Poland, and France and Romania, have been twinned. The weaker mill is ordered to copy the practices of the better mill, while the stronger is told to keep its edge. Managers are summoned to regular meetings and ordered to divulge and compare their performances. Although there is no explicit policy on the consequences of poor performance, ArcelorMittal has been quick to idle or shut down unprofitable mills, as it did in Liège, Belgium, last year.Many in the industry thought high wages would permanently sink the U.S. steel industry. Workers at Burns Harbor averaged about $80,000 in wages and benefits in 2011, up about 14% from 2007. . . .“Gent really is one of the best mills in the world,” says Peter Marcus, president of World Steel Dynamics, an Englewood Cliffs, N.J.-based consultancy. The measure his company favors, man-hours per ton, shows Gent at 1.25 and Burns Harbor behind at 1.32. “Those are both currently among the better numbers in the world,” he says. The average in the U.S. is 2.0.Mr. Mittal said Gent was a star. “We wanted Burns Harbor to be more like Gent.” Thus the development of the twinning program, which began in late 2007, and accelerated after the U.S. recession put a premium on productivity.That year, Larry Fabina, a hulking 56-year-old engineer from Johnstown, Pa., who had worked at the mill since 1973, traveled to Belgium, where he toured the medieval town and spent six weeks taking careful notes at the mill.When Burns Harbor engineers returned, they made the quick and easy fixes first. They changed hose nozzles and moved the nozzle on 2,500 horsepower hoses used to scrub flakes off the steel closer, thus reducing the amount of power needed to propel the water. Those two changes saved the Indiana plant $1.4 million in energy costs, the company said.Workers were directed to trim less rough steel off the sides of coil, saving the equivalent of 725 coils a year. “That’s 17,000 cars,” says Mr. Fabina, the mill’s manager for continuous improvement.Adopting the Coordi computer model took longer. Workers used to gathering information on their own and relying on experience and intuition had to attend classes on computer modeling.Last year, Burns Harbor implemented Coordi at a cost of under $1 million. Since then, the mill has increased the average number of 298-ton caldrons of molten steel it produces daily, known as “heats,” to 50 from 42. . . .“Steel working used to be 80% back and 20% brain, now it’s the other way around,” says Mr. Trinidad, the union rep, who started when the plant employed 6,700 workers in 1974. Now it has 3,700. . . .Burns Harbor achieved a record slab production of 4.8 million tons in 2011, says Bill Steers, the company spokesman, compared with 5 million at Gent. Productivity is almost at 900 tons per employee per year, while Gent has improved to around 950. “Much of this can be attributed to twinning,” says Mr. Steers.ArcelorMittal executives say they are focused on pushing even harder. At a recent meeting, Gent managers boasted they would soon reach 1,100 tons per employee. Burns Harbor managers declined to commenton whether that is feasible.3. What are the pros and cons of ArcelorMittal’s twinning program? Explain.4. To what extent do the changes at the Burn Harbor plant follow the control process shown in Figure 16.4? Discussa minimum of 1,000 words (total assignment) and three scholarly sources. You can use our textbook for one of the three sources. No matter how many times you cite a specific source, it only counts as one reference. All Answers must be cited in APA format and referenced in APA format.
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PART 6—Controlling
chapter 16
Control Systems &
Quality Management
Techniques for Enhancing Organizational
Effectiveness
S
M
Major Questions You Should BeI Able to Answer
T
H
,
16.1 Managing for Productivity
Major Question: How do managers
influence productivity?
16.2 Control: When Managers
Monitor Performance
Major Question: Why is control such
an important managerial function?
16.3 Levels & Areas of Control
Major Question: How do successful
companies implement controls?
16.4 The Balanced Scorecard,
Strategy Maps, & Measurement
Management
Major Question: How can three
techniques—balanced scorecard,
strategy maps, and measurement
management—help me establish
standards and measure performance?
J
O
S
H
U
A
6
8
9
0
B
U
16.5 Some Financial Tools for
Control
Major Question: Financial
performance is important to most
organizations. What are the financial
tools I need to know about?
16.6 Total Quality Management
Major Question: How do top
companies improve the quality of
their products or services?
16.7 Managing Control
Effectively
Major Question: What are the keys
to successful control, and what are
the barriers to control success?
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the manager’s toolbox
Encourage Employee Involvement & Innovation
Improving Productivity: Going
Beyond Control Techniques to
Get the Best Results
How, as a manager, can you increase productivity—get better
results with what you have to work with?
In this chapter we discuss control techniques for achieving
better results. What are other ways for improving productivity?
Following are some suggestions:1
Companies improve productivity by funding research and
development (R&D) departments. As a manager, you can
encourage your employees, who are closest to the work
process, to come up with suggestions for improving their
own operations. And, of course, you can give workers a
bigger say, provide flextime, and reward people for
learning new skills and taking on more responsibility.
Encourage Employee Diversity
S By hiring people who are diverse in gender, age, race, and
Establish Base Points, Set Goals, & Measure Results
To be able to tell whether your work unit is becoming more M ethnicity, you’re more likely to have a workforce with different
experience, outlooks, values, and skills. By melding their differproductive, you need to establish systems of measurement.You
I
ences, a team can achieve results that exceed the previous
can start by establishing the base point, such as the number of
standards.
customers served per day, quantity of products produced per T
hour, and the like.You can then set goals to establish new levels
that you wish to attain, and institute systems of measurement H
Redesign the Work Process
with which to ascertain progress. Finally, you can measure the ,
Some managers think productivity can be enhanced through
results and modify the goals or work processes as necessary.
Use New Technology
J
Clearly, this is a favorite way to enhance productivity. With a
computerized database, you can store and manipulate informa-O
tion better than you can using a box of file cards. Still, computerization is not a panacea; information technology also offers S
plenty of opportunities for simply wasting time.
H
Improve Match Between Employees & Jobs
U
You can take steps to ensure the best fit between employees
A
and their jobs: improve employee selection, training, job redesign, and incentives.
forecast
6
8
9
0
B
What’s
U
cost cutting, but this is not always the case. Sometimes the
work process can be redesigned to eliminate inessential
steps.
For Discussion Some observers think the pressure
on managers to perform will be even more intense than
before, because the world is undergoing a transformation
on the scale of the industrial revolution 200 years ago as
we move further into an information-based economy.2
In what ways do you think you’ll have to become a
champion of adaptation?
Ahead in This Chapter
This final chapter explores the final management function—control. Controlling is monitoring performance, comparing it with goals, and taking corrective action as needed. We
discuss managing for productivity, explaining why it’s important. We then discuss controlling, identify six reasons it’s needed, explain the steps in the control process, and
describe three types of control managers use. Next we discuss levels and areas of control. In the fifth section, we discuss financial tools for control—budgets, financial statements, ratio analysis, and audits. We then discuss total quality management (TQM),
identifying its core philosophies and showing some TQM techniques. We conclude by
describing the four keys to successful control and five barriers to successful control.
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16.1 MANAGING FOR PRODUCTIVITY
?
major
question
How do managers influence productivity?
THE BIG PICTURE
The purpose of a manager is to make decisions about the four management functions—
planning, organizing, leading, and controlling—to get people to achieve productivity and
realize results. Productivity is defined by the formula of outputs divided by inputs for a
specified period of time. Productivity is important because it determines whether the
organization will make a profit or even survive.
figure 16.1
MANAGING FOR
PRODUCTIVITY
& RESULTS
In Chapter 1, we pointed out that as a manager in the 21st century you will operate in a
S will need to deal with seven challenges—managing
complex environment in which you
for (1) competitive advantage, (2)
Mdiversity, (3) globalization, (4) information technology, (5) ethical standards, (6) sustainability, and (7) your own happiness and life goals.
Within this dynamic world, Iyou will draw on the practical and theoretical knowledge described in this book to make
T decisions about the four management functions of
planning, organizing, leading, and controlling.
H reporting to you to achieve productivity and realThe purpose is to get the people
ize results.
,
This process is diagrammed below, pulling together the main topics of this book.
(See Figure 16.1.)
Competitive
advantage
Diversity
…must
operate in
Globalization
You as a
manager…
Information
technology
a complex
environment
and…
Ethical
standards
J
O
S
H
U
A
…make
6
decisions
about
8
9
the four
0
management B
functions…
U
Planning
Organizing
Leading
… to achieve
productivity
and realize
results.
Controlling
Sustainability
Your happiness
& goals
What Is Productivity?
Productivity can be applied at any level, whether for you as an individual, for the work
unit you’re managing, or for the organization you work for. Productivity is defined by
the formula of outputs divided by inputs for a specified period of time. Outputs are all
512
PART 6
✽
Controlling
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the goods and services produced. Inputs are not only labor but also capital, materials,
and energy. That is,
productivity
outputs
inputs
or
goods services
labor capital materials energy
What does this mean to you as a manager? It means that you can increase overall
productivity by making substitutions or increasing the efficiency of any one element:
labor, capital, materials, energy. For instance, you can increase the efficiency of labor
by substituting capital in the form of equipment or machinery, as in employing a backhoe instead of laborers with shovels to dig a hole.3 Or you can increase the efficiency
of materials inputs by expanding their uses, as when lumber mills discovered they
could sell not only boards but also sawdust and wood chips for use in gardens. Or you
can increase the efficiency of energy by putting solar panels on a factory roof so the
organization won’t have to buy so much electrical power from utility companies.
S
Why Increasing Productivity Is Important
M
”Productivity growth is the elixir that makes an economy flourish,” says one business
I
because it can churn out
article.4 “Our society is wealthy,” says another, “precisely
products like automobiles, flush toilets, and Google search
algorithms
at relatively low
T
cost.”5 That is, the more goods and services that are produced and made easily availH Increasing the gross domesable to us and for export, the higher our standard of living.
tic product—the total dollar value of all the goods and,services produced in the United
States—depends on raising productivity, as well as on a growing workforce.
The U.S. Productivity Track Record During the 1960s, productivity in the United
J
States averaged a hefty 2.9% a year, then sank to a disappointing 1.5% right up until 1995.
Because the decline in productivity no longer allowed the
Oimprovement in wages and living standards that had benefited so many Americans in the 1960s, millions of people took
S
second jobs or worked longer hours to keep from falling behind. From 1995 to 2000,
H history, the productivity rate
however, during the longest economic boom in American
jumped to 2.5% annually, as the total output of goods U
and services rose faster than the
total hours needed to produce them. From the business cycle peak in the first quarter of
2001 to the end of 2007, productivity grew at an annualA
rate of 2.7%.6 Then came the recession year 2008, when it fell to 2%. Then, from the fourth quarter of 2008 to the fourth
quarter of 2009, productivity rose 5.4%—“a turnaround unprecedented in modern his6 in 2010.7 From the first quartory,” says Newsweek—and it also rose an impressive 4.1%
ter of 2011 to the first quarter of 2012, however, the rate
8 was only 0.5%, as companies
began to approach the limit of how much they could squeeze from the workforce.8
9
The Role of Information Technology Most econo0
mists seem to think the recent productivity growth is the result
B
of organizations’ huge investment in information technology—
computers, the Internet, other telecommunications advances,
U
and computer-guided production line improvements.9 From
1995 to 2001, for example, labor productivity in services grew
at a 2.6% rate (outpacing the 2.3% for goods-producing sectors), the result, economists think, of information technology.10
(Since 2001, productivity has continued to advance in the service sectors in relation to the goods-producing sectors.)11 In
particular, many companies have implemented enterprise resource planning (ERP) software systems, information systems for integrating virtually all aspects of a business,
helping managers stay on top of the latest developments.
Maintaining productivity depends on control. Let’s look
at this. ●
Control Systems & Quality Management
✽
CHAPTER 16
Competing internationally
for productivity. This oil
tanker represents the
continual competition
among companies and
among nations to achieve
productivity—“a matter
of survival” for the United
States, some leaders
believe. Is our nation doing
everything it could to be
more productive? What
about taking measures to
reduce dependence on
foreign oil?
513
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16.2 CONTROL: WHEN MANAGERS MONITOR
PERFORMANCE
?
major
question
Why is control such an important managerial function?
THE BIG PICTURE
Controlling is monitoring performance, comparing it with goals, and taking corrective
action. This section describes six reasons why control is needed and four steps in the
control process.
Control is making something happen the way it was planned to happen. Controlling is
defined as monitoring performance,
S comparing it with goals, and taking corrective action as needed. Controlling is the fourth management function, along with
M and its purpose is plain: to make sure that perforplanning, organizing, and leading,
mance meets objectives.
I
figure 16.2
■
CONTROLLING FOR
PRODUCTIVITY
■
What you as a manager
do to get things done,
with controlling shown in
relation to the three other
management functions.
(These are not lockstep;
all four functions happen
concurrently.)
■
Planning
You set goals
& decide
how to
achieve
them.
Tand deciding how to achieve them.
Planning is setting goals
H tasks, people, and other resources to accomplish
Organizing is arranging
the work.
,
Leading is motivating people to work hard to achieve the organization’s goals.
Controlling is concerned with seeing that the right things happen at the right
time in the right way. J
■
O
All these functions affect one another and in turn affect an organization’s producS
tivity. (See Figure 16.2.)
Organizing
You arrange
tasks,
people,
& other
resources to
accomplish
the work.
H
U
Leading
You motivate
A
people to
work hard
to achieve
6
the organization’s goals.
8
Controlling
You monitor
performance,
compare it
with goals,
& take
corrective
action as
needed.
For
productivity
9
0
B
Why Is Control Needed?
U
Lack of control mechanisms can lead to problems for both managers and companies. For example, the CEO of Yahoo, Scott Thompson, is discovered to have falsified
his résumé by claiming to have a computer science degree—and 11 days later he is
out, bringing turmoil to an already troubled company.12 The senior banker of J. P.
Morgan Chase, Ina Drew, contracts Lyme disease and is frequently out of the office
when traders begin taking more and more risky bets, culminating in a loss of at least
$3 billion and public demands for greater bank regulation.13 California-based Pacific
Gas & Electric Co. accidentally overpressurizes pipelines on its gas system more than
120 times since its 2010 San Bruno explosion that killed eight people, raising risks of
another disaster.14 Could greater control have helped avoid or reduce the consequences
of these situations? Of course.
There are six reasons why control is needed.
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1. To Adapt to Change & Uncertainty Markets shift. Consumer tastes change.
New competitors appear. Technologies are reborn. New materials are invented. Government regulations are altered. All organizations must deal with these kinds of environmental changes and uncertainties. Control systems can help managers anticipate,
monitor, and react to these changes.15
Example: As is certainly apparent by now, the issue of climate change or global
warming has created a lot of change and uncertainty for many industries. The restaurant industry in particular is feeling the pressure to become “greener,” since restaurants
are the retail world’s largest energy user, with a restaurant using five times more energy per square foot than any other type of commercial building, according to Pacific
Gas & Electric’s Food Service Technology Center.16 Nearly 80% that commercial food
service spends annually for energy use is lost in inefficient food cooking, holding, and
storage. In addition, a typical restaurant generates 100,000 pounds of garbage per location per year. Thus, restaurants are being asked to reduce their “carbon footprints”
by instituting tighter controls on energy use.17
S
2. To Discover Irregularities & Errors Small problems
can mushroom into big
M
ones. Cost overruns, manufacturing defects, employee turnover, bookkeeping errors,
I tolerable in the short run. But
and customer dissatisfaction are all matters that may be
in the long run, they can bring about even the downfallTof an organization.
Example: You might not even miss a dollar a month looted from your credit card
H
account. But an Internet hacker who does this with thousands
of customers can undermine the confidence of consumers using their credit cards
, to charge online purchases
at Amazon.com, Priceline.com, and other web retailers. Thus, a computer program
that monitors Internet charge accounts for small, unexplained deductions can be a
J
valuable control strategy.
O
3. To Reduce Costs, Increase Productivity, or Add Value Control systems
S and increase product delivery
can reduce labor costs, eliminate waste, increase output,
cycles. In addition, controls can help add value to a product
H so that customers will be
more inclined to choose it over rival products.
U will again in this chapter), the
Example: As we have discussed early in the book (and
use of quality controls among Japanese car manufacturers
Aresulted in cars being produced
that were perceived as being better built than American cars. Another example: 3M Co.’s
system for creating plastic picture-hanging hooks used to be split among four states and
take 100 days; after reworking the system to get rid of6“hairballs,” as the former CEO
called them, now all production takes place at one hub and takes a third as much time.18
8
4. To Detect Opportunities Hot-selling products.
9 Competitive prices on materials. Changing population trends. New overseas markets. Controls can help alert man0
agers to opportunities that might have otherwise gone unnoticed.
B may result in a rush of cusExample: A markdown on certain grocery-store items
tomer demand for those products, signaling store management that similar items might
U
also sell faster if they were reduced in price.
5. To Deal with Complexity Does the right hand know what the left hand is doing?
When a company becomes larger or when it merges with another company, it may find it
has several product lines, materials-purchasing policies, customer bases, even workers
from different cultures. Controls help managers coordinate these various elements.
Example: In recent years, Macy’s Inc. has twice had to deal with complexity. In 2006,
it pulled together several chains with different names—Marshall Field’s, Robinsons-May,
Kaufmann’s, and other local stores—into one chain with one name, Macy’s, and a muchpromoted national strategy. But after losing money in 2007, CEO Terry Lundgren began
altering course from a one-size-fits-all nationwide approach to a strategy that tailors the
merchandise in local stores to cater to local tastes.19
Control Systems & Quality Management
✽
CHAPTER 16
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6. To Decentralize Decision Making & Facilitate Teamwork Controls allow top management to decentralize decision making at lower levels within the organization and to encourage employees to work together in teams.
Example: At General Motors, former chairman Alfred Sloan set the level of return
on investment he expected his divisions to achieve, enabling him to push decisionmaking authority down to lower levels while still maintaining authority over the
sprawling GM organization.20 Later GM used controls to facilitate the team approach
in its joint venture with Toyota at its California plant.
The six reasons are summarized below. (See Figure 16.3.)
figure 16.3
SIX REASONS WHY
CONTROL IS NEEDED
2. …discover
irregularities
& errors
3. …reduce costs,
increase
productivity,
or add value
figure 16.4
STEPS IN THE CONTROL
PROCESS
4. …detect
opportunities
1. …adapt to
change &
uncertainty
S
M
I
T
H
,
5. …deal with
complexity
Control
helps an
organization…
6. …decentralize
decision making
& facilitate
teamwork
J
Steps in the ControlOProcess
Control systems may be altered S
to fit specific situations, but generally they follow the
same steps. The four control process
H steps are (1) establish standards; (2) measure
performance; (3) compare performance to standards; and (4) take correct …
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