Chapter 11: Information and Control Processes 395
lower costs.20 The discipline is based on a methodology referred to as DMAIC (Define, Measure, Analyze, Improve, and Control, pronounced de-MAY-ick), which provides a structured way for organizations to approach and solve problems.21 Companies such as General Electric, ITT Industries, Dow Chemical, ABB Ltd., and 3M have saved mil¬lions of dollars by rooting out inefficiencies and waste through Six Sigma processes.22
One finding from research into management control systems is that each of the four control systems listed in Exhibit 11.4 focuses on a different aspect of the production process. These four systems thus form an overall management control system that provides middle managers with control information about resource inputs, process efficiency, and outputs.²³ Moreover, the specific use of control sys¬tems depends on the strategic targets set by top management.
The budget is used primarily to allocate resource inputs. Managers use the bud¬get for planning the future and reducing uncertainty about the availability of human and material resources needed to perform department tasks. Computer-based statis¬tical reports are used to control outputs. These reports contain data about output volume and quality and other indicators that provide feedback to middle manage¬ment about departmental results. The reward system and quality control system are directed at the production process. Quality control systems specify standards for employee participation, teamwork, and problem solving. Reward systems pro¬vide incentives to meet goals and can help guide and correct employee behavior. Managers may also use direct supervision to keep departmental work activities within desired limits.
THE LEVEL AND FOCUS OF CONTROL SYSTEMS
Managers consider both control of the overall organization and control of depart¬ments, teams, and individuals. Some control strategies apply to the top levels of an organization, where the concern is for the entire organization or major divisions. There are five key principles top executives at winning organizations apply for effec¬tive performance management and control. Control is also an issue at the lower, operational level, where department managers and supervisors focus on the perfor¬mance of teams and individual employees.
Organization Level: The Balanced Scorecard
As discussed earlier, most companies use a combination of metrics for measuring organizational performance and effectively controlling the organization. A recent control system innovation, introduced in Chapter 3, is to integrate internal financial measurements and statistical reports with a concern for markets and customers as well as employees. The balanced scorecard (BSC) is a comprehensive management control system that balances traditional financial measures with operational measures relating to a company’s critical success factors.24 A balanced scorecard contains four major perspectives, as illustrated in Exhibit 11.6: financial performance, customer service, internal business processes, and the organization’s capacity for learning and growth.25 Within these four areas, managers identify key performance indica¬tors the organization will track. The financial perspective reflects a concern that the organization’s activities contribute to improving short- and long-term financial performance. It includes traditional measures such as net income and return on
