MGMT Chap. 15

Organizational control

The systematic process through which managers regulate organizational activities to meet planned goals and standards of performance.

Balanced scorecard

A comprehensive management control system that balances traditional financial measures with measures of customer service, internal business processes, and the organization’s capacity for learning and growth.

Hierarchical control (centralized)

Involves monitoring and influencing employee behavior through the use of rules, policies, hierarchy of authority, written documentation, reward systems, and other formal mechanisms.

Quality circle

A total quality management (TQM) technique that involves a group of 6–12 volunteer employees who meet regularly to discuss and solve problems affecting the quality of their work.

Decentralized control

A situation where the organization fosters compliance with organizational goals through the use of organizational culture, group norms, and a focus on goals rather than rules and procedures.

Total quality management (TQM)

Focuses on managing the total organization to deliver quality to customers.

Algorithmic control

The use of software algorithms to set targets, measure performance, provide feedback, and decide rewards for employees.

Benchmarking

The continuous process of measuring products, services, and practices against major competitors or industry leaders to identify areas for improvement.

Kaizen (continous improvement)

A Japanese term meaning “change for the better.” Implementation of a large number of small, incremental improvememts in all areas of the organization on an ongoing basis.

Six Sigma

A quality control approach that emphasizes a relentless pursuit of higher quality and lower costs; standard that specifies a goal of no more than 3.4 defects per million parts

Quality partnering

Involves assigning dedicated personnel within a particular functional area of the business to identify opportunities for quality improvements throughout the work process.

Responsibility center

Any organizational department or unit under the supervision of a single person who is responsible for its activity.

Expense budget

A budget that outlines the anticipated and actual expenses for a responsibility center.

Revenue budget

A budget that lists forecasted and actual revenues of the organization.

Zero-based budgeting (ZBB)

An approach to planning and decision making that requires a complete justification for every line item in a budget, instead of carrying forward a prior budget and applying a percentage change.

Cash budget

A budget that estimates receipts and expenditures of money on a daily or weekly basis to ensure that an organization has sufficient cash to meet its obligations.

Top-down budgeting

Means that the budgeted amounts for the coming year are literally imposed on middle- and lower-level managers.

Capital budget

A budget that plans and reports investments in major assets to be depreciated over several years.

Bottom-up budgeting

Involves lower-level managers anticipating their department’s budget needs and passing them up to top management for approval.

Liquidity ratio

Indicates the organization’s ability to meet its current debt obligations.

Income statement

Summarizes a firm’s financial performance for a given time interval.

Balance sheet

Shows the firm’s financial position with respect to assets and liabilities at a specific point in time.

Activity ratio

Measures the organization’s internal performance with respect to key activities defined by management.

Profitability ratios

Describes the firm’s profits relative to a source of profits, such as sales or assets.

Budgetary control

Process of setting targets and monitoring expenditures