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Michael S. H. Shih - One of the best experts on this subject based on the ideXlab platform.
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Profit as a Signal of Product Quality and Customer Service: Performance Evaluation for Plant Managers
Social Science Research Network, 2010Co-Authors: Michael S. H. ShihAbstract:Plant Managers generally have no direct marketing responsibilities, but they have control over product quality and customer service. I hypothesize that many firms evaluate these Managers on profit since sales, a component of profit, convey information on Plant Manager’s performance on product quality and customer service. Several predictions are developed from the hypothesis and tested in this study. The chance that a Plant Manager is evaluated on cost vs. profit is predicted to decrease with the sensitivity and precision of sales as an indicator of product quality and customer service. In addition, the chance that a Plant Manager is evaluated on cost vs. profit may be associated with the extent to which the Manager is also evaluated on specific measures of product quality and customer service. Empirical results are generally consistent with these predictions.The paper contributes to the literature by reporting the results of original research on Managerial performance evaluation at an operating/junior level, as well as how Managers with only production responsibilities are evaluated and rewarded. Moreover, it examines how performance evaluation is related to certain attributes of the products the firm sells, an issue that prior research apparently has overlooked.
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Profit as a signal of product quality and customer service: performance evaluation for Plant Managers
International Journal of Accounting Auditing and Performance Evaluation, 2007Co-Authors: Michael S. H. ShihAbstract:Plant Managers generally have no direct marketing responsibilities but they have control over product quality and customer service. This paper hypothesises that many firms evaluate these Managers on profit because sales, a component of profit, convey information on a Plant Manager's performance on product quality and customer service. Several predictions are developed from the hypothesis and tested in this study. The chance that a Plant Manager is evaluated on cost vs profit is predicted to decrease with the sensitivity and precision of sales as an indicator of product quality and customer service. In addition, the chance that a Plant Manager is evaluated on cost vs profit may be associated with the extent to which the Manager is also evaluated on specific measures of product quality and customer service. Empirical results are generally consistent with these predictions.
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Responsibility Accounting and Controllability: Determinants of Performance Evaluation Systems for Plant Managers in Canada
Social Science Research Network, 1997Co-Authors: Michael S. H. ShihAbstract:The study investigates how firms design performance evaluation systems for Plant Managers. These Managers can be evaluated primarily on cost control or profit. Which approach to adopt can be framed as a choice to evaluate these Managers primarily on one variable (cost) or two (cost and sales). Results from agency theory show that the weight placed on a variable in performance evaluation depends on its precision and the information it contains not conveyed by other variables. This suggests the following hypotheses: tendency to evaluate a Plant Manager primarily on profit rather than cost (1) decreases with the importance of marketing in stimulating sales, (2) increases with the importance of product quality in stimulating sales, (3) increases with the importance of customer service in stimulating sales; and (4) decreases with the extent to which the Manager is evaluated on specific measures of product quality and customer service. Using a probit model, these hypotheses are tested with data collected from large Canadian manufacturing firms. The results are strongly supportive of the hypotheses. Contrary to conventional wisdom, more firms are found to evaluate Plant Managers primarily on profit than primarily on cost control.
Shaun Aghili - One of the best experts on this subject based on the ideXlab platform.
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Throughput Metrics Meet Six Sigma
Management Accounting Quarterly, 2011Co-Authors: Shaun AghiliAbstract:Six Sigma and the Theory of Constraints (TOC) are arguably the two most significant methodologies affecting operation management and process improvement initiatives over the past three decades. For those of you who have forgotten the concept behind it, TOC is a simple, yet brilliant management theory introduced by Eliyahu M. Goldratt in his 1984 book, The Goal. This unusual book, written in the form of a hard-to-put-down novel about a Plant Manager named Alex Rogo, depicted how TOC can be used to increase productivity and operating income in a manufacturing setting by stepping away from practices suggested by traditional cost accounting and variance reporting systems. Six Sigma approaches some of the same TOC issues, but from a different angle. The focus of Six Sigma is to address issues related to the Cost of Poor Quality (COPQ). Looking at it from a traditional quality theory point of view, Six Sigma aims at decreasing internal and external failure costs in an enterprise, thereby contributing directly to increased customer satisfaction. Having spent several years studying Six Sigma and some of its implications for management accounting and internal auditing, I began to contemplate the benefits of incorporating TOC accounting metrics within the control phase of Six Sigma. As such, the purpose of this article is to provide management accountants with a dual conceptual framework--merging elements from Goldratt's Theory of Constraints with Six Sigma's DMAIC methodology and tools--that can be used to tackle organizational system constraints. Specifically, I will aim to: * Provide you with an overview of Six Sigma, as well as the fundamentals of TOC and Throughput Accounting (TA); * Propose a Six Sigma/TOC dual framework that allows a system constraint to be broken up quickly (TOC effect) while the Six Sigma approach studies the issue in more depth to also address effects related to COPQ. In other words, while TOC can target the resource constraint (tactical objective), the Six Sigma methodology aims to increase the level of quality and remove extra nonvalue-added processes, thereby freeing up additional system resources. * Explain why the use of TA metrics within the proposed framework presented in this article can help address several shortcomings associated with other cost accounting systems, such as traditional cost accounting (CA), as well as the more relevant activity-based costing (ABC). A SIX SIGMA AND TOC PRIMER Six Sigma is a quality-driven, scientific methodology that aims at improving a current standard to a future, ideal standard of 99.9997% accuracy. This translates to about 3.4 defects per one million opportunities. Six Sigma is based on the DMAIC (Define, Measure, Analyze, Improve, Control) methodology. The main strength of Six Sigma is that it is data driven: The DMAIC process contains an arsenal of more than 400 process improvement and analysis tools--many of which have been used for more than a half century. The roots of Six Sigma can be traced back to the Plan-Do-Check-Act cycle developed by W. Edwards Deming in the 1950s to help Japanese businesses rebuild their infrastructure after World War II. Even though a detailed discussion of Six Sigma is outside the scope of this article, management accountants interested in becoming more familiar with the Six Sigma methodology are encouraged to add the following two books to their office shelves. The first, The Six Sigma Handbook by Thomas Pyzdek, is used in many Six Sigma certification courses and provides the novice and intermediate Six Sigma practitioner with a comprehensive, detailed overview of the DMAIC methodology. The other, The Lean Six Sigma Pocket Toolbook, can be used best as a Six Sigma dictionary and quick reference guide in choosing appropriate tools to tackle a certain task. I also encourage you--especially if you are an internal audit professional--to read a previous article of mine, "A Six Sigma Approach to Internal Audits," which appeared in the February 2009 issue of Strategic Finance, in order to gain an overall understanding of how the DMAIC methodology may be used to better orchestrate an operational internal audit. …
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Throughput Metrics Meet Six Sigma
Management Accounting Quarterly, 2011Co-Authors: Shaun AghiliAbstract:Six Sigma and the Theory of Constraints (TOC) are arguably the two most significant methodologies affecting operation management and process improvement initiatives over the past three decades. For those of you who have forgotten the concept behind it, TOC is a simple, yet brilliant management theory introduced by Eliyahu M. Goldratt in his 1984 book, The Goal. This unusual book, written in the form of a hard-to-put-down novel about a Plant Manager named Alex Rogo, depicted how TOC can be used to increase productivity and operating income in a manufacturing setting by stepping away from practices suggested by traditional cost accounting and variance reporting systems. Six Sigma approaches some of the same TOC issues, but from a different angle. The focus of Six Sigma is to address issues related to the Cost of Poor Quality (COPQ). Looking at it from a traditional quality theory point of view, Six Sigma aims at decreasing internal and external failure costs in an enterprise, thereby contributing directly to increased customer satisfaction. Having spent several years studying Six Sigma and some of its implications for management accounting and internal auditing, I began to contemplate the benefits of incorporating TOC accounting metrics within the control phase of Six Sigma. As such, the purpose of this article is to provide management accountants with a dual conceptual framework--merging elements from Goldratt's Theory of Constraints with Six Sigma's DMAIC methodology and tools--that can be used to tackle organizational system constraints. Specifically, I will aim to: * Provide you with an overview of Six Sigma, as well as the fundamentals of TOC and Throughput Accounting (TA); * Propose a Six Sigma/TOC dual framework that allows a system constraint to be broken up quickly (TOC effect) while the Six Sigma approach studies the issue in more depth to also address effects related to COPQ. In other words, while TOC can target the resource constraint (tactical objective), the Six Sigma methodology aims to increase the level of quality and remove extra nonvalue-added processes, thereby freeing up additional system resources. * Explain why the use of TA metrics within the proposed framework presented in this article can help address several shortcomings associated with other cost accounting systems, such as traditional cost accounting (CA), as well as the more relevant activity-based costing (ABC). A SIX SIGMA AND TOC PRIMER Six Sigma is a quality-driven, scientific methodology that aims at improving a current standard to a future, ideal standard of 99.9997% accuracy. This translates to about 3.4 defects per one million opportunities. Six Sigma is based on the DMAIC (Define, Measure, Analyze, Improve, Control) methodology. The main strength of Six Sigma is that it is data driven: The DMAIC process contains an arsenal of more than 400 process improvement and analysis tools--many of which have been used for more than a half century. The roots of Six Sigma can be traced back to the Plan-Do-Check-Act cycle developed by W. Edwards Deming in the 1950s to help Japanese businesses rebuild their infrastructure after World War II. Even though a detailed discussion of Six Sigma is outside the scope of this article, management accountants interested in becoming more familiar with the Six Sigma methodology are encouraged to add the following two books to their office shelves. The first, The Six Sigma Handbook by Thomas Pyzdek, is used in many Six Sigma certification courses and provides the novice and intermediate Six Sigma practitioner with a comprehensive, detailed overview of the DMAIC methodology. The other, The Lean Six Sigma Pocket Toolbook, can be used best as a Six Sigma dictionary and quick reference guide in choosing appropriate tools to tackle a certain task. I also encourage you--especially if you are an internal audit professional--to read a previous article of mine, "A Six Sigma Approach to Internal Audits," which appeared in the February 2009 issue of Strategic Finance, in order to gain an overall understanding of how the DMAIC methodology may be used to better orchestrate an operational internal audit. …
Amber M. Quinn - One of the best experts on this subject based on the ideXlab platform.
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A qualitative study of high‐reputation Plant Managers: Political skill and successful outcomes
Journal of Operations Management, 2009Co-Authors: Anne D. Smith, Donde Ashmos Plowman, Dennis Duchon, Amber M. QuinnAbstract:There has been little systematic study of what Plant Managers actually do on a day-to-day basis that accounts for their success in achieving organizational outcomes. In our field interviews and observations of high-rep utation Plant Managers from 11 manufacturing Plants, we found that effective political skill enabled them to influence subordinates in ways that contributed positively to organizational outcomes. Political skill is an in terpersonal style that combines social astuteness with the ability to relate well, and otherwise demonstrate situationally appropriate behavior in an engaging way that inspires confidence, trust, and genuiness [Ferris, G.R., Perrewe, P.L., Anthony, W.P., Gilmore, D.C., 2000. Political skill at work. Organizational Dynamics 28 (4), 25– 37]. We observed that effective Plant Managers possessed a configuration of dispositional traits (self-motiva tion, sense of humility, and affability), systematically employed interpersonal behaviors (creating accountability, leading by example, and developing trust), and focused on Managerial processes (stretch goals, influencing and learning from below, and empowering direct reports). By juxtaposing the political skill and power literatures, we propose a theory of Plant Manager effectiveness as a combination of political skill and the use of unobtrusive and systemic power to achieve both affective and substantive outcomes.
Tom Lenahan - One of the best experts on this subject based on the ideXlab platform.
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Executing the Turnaround
Turnaround Shutdown and Outage Management, 2005Co-Authors: Tom LenahanAbstract:This chapter discusses the experience of executing a turnaround. The event is the realization of the plan and its course is affected by how nearly that plan matches the reality of the event. A turnaround is a complex event during which unpredicted or unexpected problems may arise—no matter how good the planning and preparation. They could be caused by several reasons such as changes of intent, accidents, or industrial conflict. Shutting down is controlled by the Plant Manager and his personnel. This should be carried out in conformance with the shutdown network plan, which is a part of the overall turnaround schedule. The Plant Manager should inform the turnaround Manager so that the effect of the deviation on the existing schedule can be rapidly calculated, and the schedule amended if necessary. Largely, the turnaround Manager must rely upon other people to feed him the information needed to make decisions and take actions.
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14 – Terminating the Turnaround
Turnaround Shutdown and Outage Management, 2005Co-Authors: Tom LenahanAbstract:Publisher Summary This chapter describes the responsibility of the turnaround Manager, which is to ensure that all the activities that return the Plant to an acceptable condition, at least as good as it was before the event, are arranged. He must ensure that the handover is properly concluded and that all traces of the event are removed. Most of the work of demobilizing the site is arranged by the logistics co-coordinator, but it is still the responsibility of the turnaround Manager to ensure that it is carried out in an efficient and proper manner. Demobilization includes a thorough cleaning of the Plant area and the removal of any other item or substance temporarily installed. When the turnaround Manager is satisfied that the site has been fully demobilized and cleaned, he arranges a final site inspection with the Plant Manager, accompanied by the logistics co-coordinator and any person nominated by the Plant Manager. It is a good practice to take a small team of cleaners to clean up any area of the Plant that does not meet the Plant Manager's standards.
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6 – Planning the Turnaround
Turnaround Shutdown and Outage Management, 2005Co-Authors: Tom LenahanAbstract:Publisher Summary This chapter focuses on the planning of a turnaround. The turnaround plan may be formulated over a long period in preparation for a large amount of work, which is going to be performed in a very short space of time. It is common to plan a turnaround for nine months that must be completed, product to product, in less than three weeks. The normal turnaround features a high volume of work carried out by a large number of people working under extreme time and access constraints. It therefore requires planning of an order and detail that may not be necessary during normal production. The combining of the shutdown-start-up logic with the mechanical duration logic have a fundamental effect on the planning and execution of the turnaround. The turnaround Manager is responsible for the mechanical duration only and the Plant Manager for shutdown and start-up. The turnaround Manager also acts as a shutdown–start-up consultant and combines as a team with Plant Managers for the total event with a more senior Manager having overall responsibility.
Anne D. Smith - One of the best experts on this subject based on the ideXlab platform.
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Everyday Sensegiving: A Closer Look at Successful Plant Managers
The Journal of Applied Behavioral Science, 2010Co-Authors: Anne D. Smith, Donde Ashmos Plowman, Dennis DuchonAbstract:The authors conducted in-depth interviews and on-site visits with successful Plant Managers to understand similarities in their management approaches. Across 11 different Plants, representing nine different industries, the authors found each Plant Manager actively engaged in shaping how employees viewed the organization and its values through what the authors call “everyday sensegiving.” From themes inductively identified from the interviews and on-site visits, four central values—”Here, we value people, we value openness, we value being positive, and we value being part of a larger community”—were identified. In this article, the authors link everyday sensegiving of these mid dle Managers and extend the findings of the study to consider linkages to organizational performance and change efforts.
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A qualitative study of high‐reputation Plant Managers: Political skill and successful outcomes
Journal of Operations Management, 2009Co-Authors: Anne D. Smith, Donde Ashmos Plowman, Dennis Duchon, Amber M. QuinnAbstract:There has been little systematic study of what Plant Managers actually do on a day-to-day basis that accounts for their success in achieving organizational outcomes. In our field interviews and observations of high-rep utation Plant Managers from 11 manufacturing Plants, we found that effective political skill enabled them to influence subordinates in ways that contributed positively to organizational outcomes. Political skill is an in terpersonal style that combines social astuteness with the ability to relate well, and otherwise demonstrate situationally appropriate behavior in an engaging way that inspires confidence, trust, and genuiness [Ferris, G.R., Perrewe, P.L., Anthony, W.P., Gilmore, D.C., 2000. Political skill at work. Organizational Dynamics 28 (4), 25– 37]. We observed that effective Plant Managers possessed a configuration of dispositional traits (self-motiva tion, sense of humility, and affability), systematically employed interpersonal behaviors (creating accountability, leading by example, and developing trust), and focused on Managerial processes (stretch goals, influencing and learning from below, and empowering direct reports). By juxtaposing the political skill and power literatures, we propose a theory of Plant Manager effectiveness as a combination of political skill and the use of unobtrusive and systemic power to achieve both affective and substantive outcomes.