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b. TQM is most successful when it enriches jobs and improves employee
motivation.
Discussion Question #9: Why is benchmarking an important component of TQM programs? Do
you believe a company could have a successful TQM program without using benchmarking?
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VII. TRENDS IN QUALITY AND FINANCIAL CONTROL
A. International Quality Standards
1. The increasing significance of the global economy provides one impetus for total
quality management in the United States. ISO 9000 standards are based on a set of
international standards for quality management systems established by the
International Standards Organization (ISO) in Geneva, Switzerland. Hundreds of
B. Corporate Governance
a. Corporate governance was traditionally defined as the ways in which an
organization safeguards the interests of shareholders, now the term has been
expanded to refer to the framework of systems, rules, and practices by which an
b. Some corporate failures can be attributed to undercontrol because top managers
did not keep personal tabs on everything in a large, global organization. The
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c.
Discussion Question #10: What is ISO certification? Why would a global company like GE
want ISO certification?
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Answers to End-of-Chapter Discussion Questions
1. You have been hired to manage a 20-person staff for Nightlight Travels, a travel agency in
Las Vegas. For five years, sales have been hammered by the global recession, and staff
morale has plummeted as star employees have left for positions in more secure industries.
Key customer relationships have been damaged by the sloppy and unprofessional work
habits of the remaining staff members. Your first responsibility as new manager is to create
next year’s budget for all planned expenditures. But first you must decide if you will adopt a
hierarchical approach or a decentralized approach to control. Which one would you choose,
and why?
A decentralized approach to control seems favorable for the above scenario. Decentralized
control relies on shared values and goals to control employee behavior. Managers operate on the
assumption that employees are trustworthy and willing to perform effectively without extensive
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2. You’re a manager who employs a participative control approach. You’ve concluded that
corrective action is necessary to improve customer satisfaction, but first you need to
convince your employees that the problem exists. What kind of evidence do you think
employees will find more compelling: quantitative measurements or anecdotes from your
interactions with customers? Explain your answer.
Students may suggest that some employees will be more convinced by quantitative
measurements because they consider them to be objective and factual rather than subjective and
3. Describe the advantages of using a balanced scorecard to measure and control
organizational performance. Suppose you created a balanced scorecard for Walmart. What
specific customer service measures would you include?
The balanced scorecard is a comprehensive management control system that balances traditional
financial measures with operational measures relating to a company’s critical success factors. A
balanced scorecard contains four major perspectives: financial performance, customer service,
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4. In zero-based budgeting, every account starts at $0, and every dollar added to the budget is
reflected by an actual, documented need. Identify the possible advantages of zero-based
budgeting.
In bottom-up budgeting, lower-level managers anticipate their departments’ resource needs and
5. Most companies have policies that regulate employees’ personal use of work computers
during work hours. Some even monitor employee e-mails and track the Web sites that have
been visited. Do you consider this type of surveillance an invasion of privacy? What are the
advantages of restricting employee use of the Internet and e-mail at work?
Computers used for Internet and e-mail at work belong to the employer, not the employee, which
6. Think of a class you’ve taken in the past. What standards of performance did your professor
establish? How was your actual performance measured? How was your performance
compared to the standards? Do you think the standards and methods of measurement were
fair? Were they appropriate to your assigned work? Why or why not?
Performance standards are normally set forth by the professor in determining the grading
procedure of a course. An example could be 90-100 A’s, 80–89 B’s, 70–79 C’s, etc. The actual
7. Some critics argue that Six Sigma is a collection of superficial changes that often result in
doing a superb job of building the wrong product or offering the wrong service. Do you
agree or disagree? Explain.
Based on the Greek letter sigma, which statisticians use to measure how far something deviates
from perfection, Six Sigma is a highly ambitious quality standard that specifies a goal of no more
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8. What types of analysis can managers perform to help them diagnose a company’s financial
condition? How can a review of financial statements help managers diagnose other kinds of
performance problems as well?
Managers can perform a financial analysis of an income statement and balance sheet of a
company to ascertain its strengths and weaknesses. The balance sheet shows the firm’s financial
position with respect to assets and liabilities at a specific point in time. The balance sheet
9. Why is benchmarking an important component of TQM programs? Do you believe a
company could have a successful TQM program without using benchmarking?
Benchmarking is an important component of total quality management because it is defined as
“the continuous process of measuring products, services, and practices against the toughest
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10. What is ISO certification? Why would a global company like General Electric want ISO
certification?
ISO certification refers to International Quality Standards. Many countries have endorsed a
universal framework for quality assurance called ISO 9000, a set of international standards for
Apply Your Skills: Experiential Exercise
Is Your Budget in Control?
Students will range from having the most disciplined budgeting habits, to adequate budgeting
Apply Your Skills: Small Group Breakout
Create a Group Control System
Students are asked to form groups and assume one member has been assigned to write a major
Apply Your Skills: Ethical Dilemma
The Wages of Sin?
1. Continue Westwind’s zero–tolerance policy toward shoplifting. It’s the right thing to do—
and it will pay off in the end in higher profitability because the chain’s reputation for being
tough on crime will reduce overall losses from theft.
Although this option upholds Ross’s father’s lofty moral ideals, it isn’t particularly realistic
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2. Adopt Chris Dykstra’s proposed changes and show more leniency to first-time offenders. It
is a more cost-effective approach to the problem than the current policy, plus it stays close to
your father’s original intent.
This is probably the best approach. As Chris noted, by adopting this policy Westwind can
reduce its costs of prosecuting shoplifters, which will help them keep costs lower for customers
3. Adopt Chris Dykstra’s proposed changes with an even higher limit than the proposed $20
amount (say, $50 or $100), but which is still less than the cost of prosecution. In addition,
make sure the policy isn’t publicized. That way you’ll reduce costs even more and still
benefit from your reputation for prosecuting all shoplifters.
Apply Your Skills: Case for Critical Analysis
Five Stars
1. What do you see as the major strengths and flaws in the feedback control system used in the
schools in this scenario? What changes do you recommend to overcome the flaws?
There are major strengths and flaws in the feedback control system used in the schools. The
major strengths being the fact that performance goal was set for each school district and for each
teacher. Intensive training sessions were conducted for principals and designated master teachers
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The flaws in the system can be overcome by a well-designed control system which consists of
the following four key steps:
• Establish standards of performance.
2. Is 1-5 grading system by principals and master teachers a valuable part of a feedback
control system for teachers? Why?
The 1-5 grading system by principals and master teachers does not seem to be a valuable part of
3. How might the state control the accuracy of principals who are conducting teacher
evaluations? Explain.
The state can monitor and make it a strict rule for principals to make the number of mandatory
On the Job Video Case Answers
Barcelona Restaurant Group
1. How do managers at Barcelona control the company’s financial performance?
In the video, Barcelona uses multiple methods of controlling financial performance. First,
managers hold weekly meetings during which chefs and general managers review financials. The
2. What is the “balanced scorecard” approach to measuring corporate performance, and in what
ways does Barcelona utilize this approach?
Traditionally, most businesses have measured and controlled their financial performance by
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3. List the four steps of the feedback control model and describe an instance where Barcelona
followed this process to improve its performance.
The feedback control model consists of four key steps: establish standards, measure
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