NVG Final Exam Study Guide PDF

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Summary

Study Guide for the final exam, includes notes found on the modules, but more importantly it includes personal notes by the professor which the exam is heavily based on....

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1 Control in Management

Control ➢ Process of ensuring that organizational activities are going according to plan, accomplished by comparing actual performance to predetermined standards or objectives, then taking action to correct for any deviation. Control is used to: ➢ Prevent crisis ○ Catching small problems before they become big ➢ Standardize outputs ○ Control ensures good quality in the production process ➢ Appraise employee performance ○ Use objective criteria to evaluate employees ➢ Update plans ○ Compare what is happening to what was planned ➢ Protect the organization's assets ○ Helps eliminate waste, inefficiency, and pilferage Two Concerns of Control ➢ Stability ○ To ensure stability, managers must ensure the organization is operating within established boundaries of constraint. ○ These can be determined by policies, budgets, ethics, laws, etc. ➢ Objective realization ○ Requires constant monitoring to ensure that progress is being made toward established objectives ➢ Managers must be careful not to focus so much on one area that they neglect other areas Three requirements for Control ➢ Setting standards ○ Standard is the value used as a point of reference for comparing other values ■ (output per hour, inventory level, etc) ➢ Monitoring Performance ○ Gather data and detect problems ○ Checks should be performed often enough to provide the necessary information but not so often as to disrupt the work of the employees ➢ Correcting for deviations ○ taking corrective action to ensure standards are being met ○ The corrections should be aimed at the root cause of the problem

Control at all levels of Management ➢ Foolproof ○ Repetitive acts requiring very little thought, generally normal in the course of business ➢ Automatic ○ Requiring very little human interaction ■ (Thermostat regulating a building’s temperature) ➢ Operator

2 ○ Requires human response, physically checking records ➢ Supervisory ○ Layer that controls the person or persons implementing controls. ■ (Boss checking production records for the previous day) ➢ Informational controls ○ Ultimate feedback loop ○ Manager pulls together all information provided by all other controls Types of Control ➢ Behavioral or personal ○ Based on direct personal surveillance ■ The front line supervisor watching their employee ➢ Output or impersonal ○ Based on the measurements of output ■ Tracking sales performance or production ➢ Control Tolerance ○ Variation from the standard that is acceptable for the manager ■ (perfect is not a reasonable standard) 3 Factors to Consider with Control ➢ Economic Considerations ○ Controls cost money ○ In many cases the cost of the control is known but the potential savings may not be measurable ➢ Behavioral Considerations ○ Employees do not like working in an environment where they feel like every move is being monitored ➢ Flexibility and Innovation ○ Over controlling will often restrict the innovation and common sense judgement of employees ○ Employees may adhere to company policy even though it may hurt customer service

Three Types of Control ➢ Preliminary (steering) control ○ Goal is to prevent a problem from happening ■ (Purchase order) ➢ Concurrent (screening) control ○ Focuses on the process as it is occurring ○ The goal is to detect a problem as it is happening ■ (monitoring the drive thru operation at a fast food restaurant or monitoring a phone call) ➢ Post Action Control ○ Checking after an event to keep a small issue from getting out of hand. ■ (review of the profit and loss statement each month) ○ 1) It will never solve a problem ○ 2) It is the most widely used control Budget

3 ➢ Budget ○ Statement of expected results or requirements expressed in financial terms ➢ Zero Based Budgeting ○ Designed to stop basing the current years budget on the previous years budget ○ Every activity is analyzed based on the need for the current year ➢ Financial Controls ○ Information from income statements, balance sheets, etc. ■ Used for analysis purposes Direct Observation ➢ Managers daily tour of a facility ➢ Company president’s annual visit ➢ Methods study by an engineer ➢ Direct observation can be very time consuming but may be the only way to get a true picture of what is going on. ○ Manager must be careful not to base their opinion of an operation on one visit ○ Visits may be announced or unannounced

Written Reports and Audits ➢ Informational reports ○ Presents only the facts ■ (balance sheet or income statement) ➢ Analytical reports ○ Interprets the facts ■ (outside audit) ➢ Internal Audit ○ Audit conducted by company personnel on a facility ➢ External Audit ○ Audit performed by an outside accounting firm ■ Used to verify internal numbers. ○ Publicly traded companies are required to have an external audit

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Performance Appraisals

What is a Performance Appraisal? ➢ Process that involves determining and communicating to employees how they are performing their jobs and establishing a plan for improvement ➢ To be effective ○ Must be supported by documentation and must be seen as fair ➢ A good appraisal is one that several managers could administer and the results would come to the same conclusion ○ (objective vs. subjective) ➢ Incentives should be used to reward good performance Ability X Effort = Performance ➢ Ability ○ An employee’s skill set ➢ Effort ○ The amount of energy expended ➢ Performance ○ The degree of accomplishment of the tasks that make up an employee’s job Production Standards ➢ Average production or work ○ Tasks performed by all employees are approximately the same ➢ Performance of specially selected employees ○ When tasks performed by all employees are basically the same ○ It would be time consuming to use the group average

5 ➢ Time Study ○ Jobs that involve repetitive tasks ■ (assembly line) ➢ Work Sampling ○ Non-cyclical types of work in which many different tasks are performed and there is no set pattern or cycle ➢ Expert Opinion ○ Used only when none of the direct methods apply

Appraisal Methods ➢ Essay Appraisal ○ Requires a manager to describe an employee’s performance in written narrative form ○ A typical question might be ■ “Describe in your own words this employee’s performance including quantity and quality of work” ➢ Critical Incident ○ Requires the manager to keep a written record of incidents as they occur ○ Involving both satisfactory and unsatisfactory performance ➢ Graphic Rating Scale ○ Manager assesses an employee on factors such as ■ quantity of work, dependability, job knowledge, attendance, accuracy of work, etc. ■ These subjects are measured on a numerical range ➢ Checklist ○ Requires a manager to answer yes or no to a series of questions concerning the employee’s behavior ➢ Forced Choice Rating ○ Requires a manager to rank a set of statements describing how an employee carries out the duties and responsibilities of the job. ○ The statements are normally weighted but the manager does not know the weights ○ HR then determines the score of the ratings Ranking Methods ➢ Alternation Ranking ○ Manager is given a list of several employees ○ Then he selects the most valuable and the least valuable and continues this until all employees have been evaluated. ➢ Paired comparison ○ A list of employees is written on the left side of a sheet of paper ○ The first employee is compared to all other employees on a given criterion with check mark being given to the one considered the stronger performer ○ This is continued until all employees have been compared to all other employees ➢ Forced Distribution ○ Assumes the performance levels of employees is a bell curve

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Forces a manager to place a certain percentage of employees into performance levels

Potential Errors in Performance Appraisals ➢ Leniency ○ Grouping all of the ratings at the positive end of the scale ➢ Central Tendency ○ Tendency of voters to rate most employees as doing average work ➢ Recency ○ Performance evaluations are based on work performed most recently ○ Generally one or two months before the evaluation ➢ Halo Effect ○ Manager allows a single prominent characteristic of an employee to influence performance appraisals Do’s of Performance Appraisals ➢ Base appraisal on job performance only ➢ Use only rating scales relevant to the job itself ➢ Sincerely work at the appraisal interview process ➢ Be problem solving orientated Don’ts of Performance Appraisals ➢ Don’t criticize, be proactive ➢ Avoid halo effect and leniency errors ➢ Don’t dominate conversations about performance, employees must participate in the process ➢ Avoid general prescriptions to fix performance ○ present concrete and realizable objectives Performance Appraisal and the Law → 1) content of appraisal from job analysis → 2) emphasize work behavior instead of personal traits 3) ensure that the results of appraisal are communicated to the employee 4) ensure that the employees are allowed to give feedback during the appraisal 5) train managers to properly conduct evaluations 6) ensure that appraisals are written, documented, and retained 7) ensure that personnel decisions are consistent with appraisals Rewarding Appraisals ➢ Intrinsic Rewards ○ Rewards internal to the employee ○ Normally derived from involvement in work activities ■ (sense of achievement, informal recognition, status, job satisfaction, personal satisfaction) ➢ Extrinsic Rewards ○ More tangible rewards

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Controlled and distributed by the organization ■ (formal recognition, fringe benefits, incentive payments, base wages, promotion) Rewarding Performance Appraisals ➢ Compensation ○ Extrinsic rewards offered by the organization ■ Consisting of base wage or salary, any incentive or bonus, and any benefit employee receives in exchange for their work ➢ Incentives ○ Rewards offered in addition to the base wage or salary ■ Usually directly related to performance ➢ Benefits ○ Rewards employees receive because of their employment with the organization ■ (Paid vacation, health insurance, and retirement plans)

Garner Performance Appraisal Notes ➢ Managers hate to do appraisals ○ Think about the time that goes into it ➢ Most are done annually (Garner thinks you should do them bi-annually) ○ Too big of a gap to measure progress if you do it once a year ➢ AxE=P ○ Ability: Your skillset ■ You can get better at your ability, our ability to some degree is not controllable ○ Effort: Amount of energy expended ■ More important to a manager as it dictates how much work is completed ■ Recruiters are looking for work ethic ➢ Why should your boss have to appraise you for doing what you are paid to do? ○ But if they don’t, workers feel less valued and might leave ➢ Checklist is a horrible appraisal method ○ Due to it being a yes or no (Garner says don't use it) ➢ Garner worked for Roadway, district office in valdosta ➢ Dont worry about Do and donts ➢ LAW ○ Only know 1, and 2. ➢ Promotion is not necessarily a motivator to everybody ➢ Garner fired the supervisor, for dishonesty for paying someone not to work

Two Aspects of an Operating System

8 ➢ Design ○ The physical layout of the operation ➢ Control ○ The monitoring of the system on an ongoing basis ○ This is to ensure quality and manage inventory Determining Costs ➢ Direct Costs ○ There are only two direct costs to any product ■ Labor and materials ○ These are always variable costs as they change incrementally as the number of products produced increases. ➢ Overhead expenses (Variable) ○ Expenses that change in proportion to the level of production or service ■ (Training of new employees, travel) ➢ Overhead expenses (Fixed) ○ Expenses that do not change with the level of production ■ (Management salaries, marketing expenses, R&D expense, rent) Quality Control ➢ Quality ○ The degree of excellence specified in the design stage ➢ Four ways Quality is important ○ 1) Loss of business ○ 2) Liability ○ 3) Costs ○ 4) Productivity ➢ Poor quality can expose a company to high liability costs. ➢ Poor quality can also cost a company money in warranty, repair, waste, and replacement costs. Quality Allows for Continuous Improvement ➢ Quality at the source ○ Each employee is not responsible for their own work ➢ Six Sigma ○ Based on a precise set of statistical tools, answers the question what does the customer want in terms of quality then translates the answer into statistical terms ➢ Lean Manufacturing ○ Eliminating waste and non value-added activities ➢ Reengineering ○ Searching for and implementing radical changes in business processes to achieve breakthroughs in costs, speed, productivity, and service. ■ (Dragline, 28 foot trailers) Types of Quality Control ➢ Product quality control ○ Relates to the inputs or outputs of the system ○ Used when quality is evaluated with respect to a batch of existing products or services. ➢ Process control ○ Relates to the equipment and processes used during the production process ○ Used to monitor quality while the product is being produced

9 Acceptance Sampling ➢ Method of predicting the quality of a batch or large group of products form an inspection of a sample or group of samples from a batch ➢ Two reasons why this is used ○ 1) The potential for losses or costs of passing defective items are not great relative to the cost of inspection ■ (checking balloons for defects) ○ 2) Inspection of some items requires destruction of the product being tested (matches) ➢ This leaves two possibilities ○ 1) Producer risk ■ Risk producer takes in possibly rejecting a good batch ○ 2) Consumer risk ■ Risk of consumer accepting a bad product Three Types of Inventory 1. Raw material a. Buffer between production and purchasing, material waiting to be used to make the product 2. In-Process a. Buffer between rate of flow between production processes b. (this keeps your labor force working) 3. Finished goods a. Buffer between the final stage of production and shipping b. (this allows people to buy the products they need when they need them) Why Keep Inventory? ➢ Allows the company to purchase, produce, and ship in economic lot sizes rather than in small jobs ○ (Economies of scale) ➢ Allows the company to produce on a smooth continuous basis even if demand for the finished good fluctuates ➢ Prevents major problems when forecasts of demand are in error or when unforeseen slowdowns or stoppages in supply or production occur

Just In Time Inventory ➢ Philosophy for production to ensure the correct items arrive at the correct time. Tracking Inventory ➢ Barcode technology ○ When items are scanned at point of sale ○ They are then subtracted from inventory ➢ Physical inventory ○ Physically counting all of the inventory ○ This ensures effectiveness of our inventory control system Demand for Inventory ➢ Independent demand ○ Finished goods ready to be shipped out or sold

10 ■ Generally a finished product ➢ Dependent demand ○ Subassembly or component parts used to make a finished product ○ Their demand is based on the number of finished products being produced ■ (The number of tires needed for new cars being manufactured depends upon the number of cars being made) ABC Classification System ➢ Method of managing inventories based on the total value of their uses per unit ➢ This method segregates high-dollar items ○ Which tend to be monitored more than low-dollar items Safety Stock ➢ The amount of inventory maintained to accommodate unexpected changes in demand and supply and allow for variations in delivery time Order Quantity ➢ How much do you order and at what intervals? This is broken down into two categories. ○ Ordering costs ■ Usually a very insignificant cost ■ Made up of order time, shipping costs, and set up costs ○ Carrying costs ■ What it actually costs to hold inventory ■ 1) Insurance ■ 2) Storage costs ■ 3) Opportunity cost of money ■ 4) Pilferage ■ 5) Obsolescence

Garner Operations Control Notes ➢ Two aspects ○ Design & Control ➢ -How do you decide the cost of your good ○ You want to cover the costs of materials and the time it takes to make it ➢ Ford had to pay a lot of money in lawsuits for recalling vehicles that exploded ➢ Six-sigma ○ Statistical way to measure customer service, quantifying it (a lot of the big companies use this) ➢ Want to cut overhead ○ The less the better ➢ Reengineering eliminates man hours ➢ Three stages of inventory ➢ Two types of demand ○ Independent ■ Finished ready to be shipped ■ Any sub assembly part can be dependent or independent depending on the context of the purchase

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○ You want dependent demand items -Running out of inventory is not always bad ○ Halloween candy, if a store is sold out on Halloween night, they won't lose any sales after Halloween by having extreme markdowns to sell the product Opportunity cost of money: Pilferage: inventory word for stealing Big focus is on inventory...