Internal Controls in Nonprofits
Internal Controls and the NGO Sector In previous articles, we discussed the proliferation of the NGOs or the Non Governmental Organizations in contemporary times and how not all of them are above board in their funding and internal processes. Of particular note are the fact that there is a lot of foreign money flowing into […]
Third-Party Risks in an Infrastructure Project
In the previous few articles, we have come across the various types of risk which are present in an infrastructure project. We have discussed the risk of cost overruns as well as the risks of revenue delays and everything in between. However, all the risks we discussed were directly applicable to the infrastructure company or […]
Leadership in a Collapsing World when Faced with Insurmountable Problems
Leadership When Faced with a Perfect Storm of Collapsing World It would not be an exaggeration to say that we are in the midst of a slow motion collapse of our systems and the world in general. Whether it is climate change that is threatening our way of life or excessive debt and extreme inequality […]
Changes in Financing Policy: Effect on Free Cash Flow
While valuing firms, free cash flow has to be calculated over a number of years. Hence, there is a good chance that the firm may change its financing policies during such a long period. It is for this reason that we need to consider what happens to the cash flows in the event financing policies […]
What are Black Friday Sales and What are its Economic Impact on Retailers
The retail industry has been rapidly evolving for many years. The industry has adapted to a wide range of changes varying from the introduction of online retailing to the widespread use of automation. However, there are some aspects of retailing which have not changed for a long time. Retail companies all across the world still […]
Shift in the Process: A shift in the process is defined as a pattern in which seven consecutive data points appear on only one side of the mean. Statistical studies have shown that if the number of points on one side of the mean is less than 7 then it is not a non-random pattern and could have occurred due to random causes.
A shift in the process is very important for the management to detect. This is because it signifies that the average of the process has moved to a different level. Therefore, the control chart with the mean and control specifications based on old measures is redundant and will give wrong information. It is for this reason that it is important for the organization to detect this pattern as early as possible and take corresponding measures. The most common causes of the appearance of non- random shift patterns is as follows:
Process Improvement: Shifts in process means usually happen as a result of a deliberate attempt through a process improvement initiative. The best practises to do any task are continuously evolving. Introduction of new technologies enables newer and better ways of performing the work. This pattern can be detected on the control charts and the process improvement can be institutionalised.
Introduction of New Inputs: Another common reason for shift in the process mean is the introduction of new inputs. These new inputs could be markedly better or worse than the inputs used earlier and as a result change the performance of the entire process
Change in Quality Control Measures: The shift could also be the result of a change in quality control measures. The thrust may have changed from cure to prevention and as a result the quality checks may have dramatically improved the process, shifting its mean.
As the name suggests, this may be quite straightforward. However the logic behind this pattern is interesting. The normal curve states that 95% of all data points will lie between 2 standard deviations. However, if 2 out of 3 consecutive points are lying on or above the standard deviation, we can be rest assured that the 95% criteria is not being met, at least in that point in time.
This is therefore an early sign to the management that the process may be about to go out of control. A thoughtful management will make corrective action plans that will look into the process, understand the issue and correct it as soon as possible.
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What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
