Chapter 5 - Controlling

Dr. C. M. Chang

Only to be used by instructors who adopt the text:

C. M. Chang, “Engineering Management:
Challenges in the New Millennium,” Pearson
Prentice Hall (2005) 1
Copyright © 2005 by Dr. Carl Chang
Controlling

Work done by managers to

assess and regulate work in
progress and to evaluate
results obtained, for purpose
of:
(1) Securing and maintain
maximum productivity,

(2) Reducing and preventing

unacceptable performance
2
Nature of Controlling Function
• Primarily administrative and operational in
nature
• Critical to implementation of any plan
(task, project, program) - no
implementation, no results regardless of
plan’s merits
• Important to delegation - no effective
control, no delegation
• Important to company renewal (pruning)
3
Nature of Controlling Function
• Balance between operational efficiency
and staff creativity and innovation - “Four
Levers of Control”
• Types of control - Output-based and
Process-based
• Resistance to control - falsifying data,
inventing excuses, sabotaging, playing
games, and pitching one against the other

4
Characteristics of Good Control
• Accuracy • Acceptable to
• Timeliness those who will
• Flexibility enforce decisions
• Cost-effectiveness • Control at all levels
• Understandability • Balance between
objectivity and
• Realistic subjectivity

5
 Pareto Principle

• Principle of Critical Few: 20% of factors

affecting 80% of Results - Control the
few
Sales Revenue $(MM)

10

0
5 10 15 20 25 30
Number of Customers
6
Controlling Function
Setting Standards

Measuring Performance

Evaluating Performance

Controlling Performance

7
 Setting Standards
• Standards are criteria by which work and
results are measured and evaluated at
grades:
(1)Average -- generally expected
performance level for a given job,
(2)Other grades -- outstanding, better than
average, average, below average and
unacceptable
• To distinguish performance grades and to
define expected impact of results 8
Grades of Performance

9
 Value of Setting Standards
• Provide specific guidelines for exercising
authority and making decisions (rewards
and punishments)
• Define yardstick to measure performance
(individuals, group/unit, project)
• Facilitate self evaluation, improvement and
self-control

10
 Types of Standards
• Technical Standards (product first pass
success rate, product unit cost, mean time
between failure (MTBF) for equipment,
hurtle rate, sales per employee, ROE, etc.)
• Historical Standards (own metrics in the
past - internal benchmarking)
• Planning Standards (cost leadership
target, sales revenue, profitability)

11
 Types of Standards (cont’d)
• Market Standards (market share, time to
market, EPS expected by Wall Street,
order processing cost, customer inquiry
response time - external benchmarking)
• Other Standards (OSHA, environmental
quality, EEO, ISO certification, self-
imposed performance metrics)

12
 Good Standards
• Based on approved plans
• Measurable
• Considerate of human factors
• Comparable and reasonable
• Indicative of expected work performance

13
 Question # 5.2
The company has decided for an average
annual salary raise of 8%, although the
current inflation rate runs at 10%. Each
engineering manager may decide on the
best way to distribute the salary increase to
his/her staff. If everyone gets an increase
of 8%, then there will be no differentiation
between good and poor performers. What
should you do as the engineering manager?
14
 Barriers to Setting
Good Standards
• Subjectivity -Technically strong managers
tend to set unrealistically high standards -
(1) Too high standards - demoralizing,
(2) Too low standards - not challenging
enough
• Fearful of not meeting standards
• Lack of Consideration - Human factors
and other considerations

15
 Benchmarking

Benchmarking is a method of defining

performance standards in relation to a set
of references

Internal Benchmarking External Benchmarking

How do I compare with myself How do I compare with my

over the years peers in industry
16
 Internal Benchmarking
• Compare current year performance
metrics with those in past years to indicate
performance improvement (annual
reports)
• Short-term goal setting based on internal
benchmarking may create a false sense of
corporate wellbeing - absent external
benchmarking

17
 External Benchmarking
• Compare company’s performance with
those of peers in the same industry
• (1) Financial ratios, (2) Performance
metrics - Time to market, order processing
efficiency, quality control, unit product cost,
etc., (3) Best practices - tried-and-true
methods of achieving useful results, (4)
Critical success factors - conditions for
achieving success in specific areas based
on accumulated learning,
18
 External Benchmarking
(cont’d)
• (5) Target pricing - surveying marketplace
to define going prices for competitive
products, subtracting desirable margin and
setting product cost target for product
development - “Innovation under duress”
model generally applicable to many
business/engineering activities
• (6) Balanced Scorecard – forward looking
and non-financial versus past orientation of
financial metrics only
19
 Benchmarking Metrics

Product-
Non- Related
Financial
Financial

20
 Examples of Benchmarking
Metrics (cont’d)
• Financial Ratios: ROI, ROA, ROS, Debt
to Equity Ratio, Inventory turns, Number of
units produced per employee, number of
units produced per hour, sales per
employees, profit per unit, breakeven
volume

21
 Examples of Benchmarking
Metrics (cont’d)
Non-financial Metrics:
(1) Average number of defects detected by
customers in the first month of ownership,
(2) Average number of defects detected during
manufacturing and repair ,
(3) Hours lost to production from unscheduled
maintenance,
(4) Work in progress in the plant,
(5) Number of machines per worker,
22
Examples of Benchmarking
Metrics (cont’d)
(6) Length of time to change a machine or
introduce a new operation,
(7) Number of job classification in the plant,
(8) Amount of material made obsolete by
model changes,
(9) Average units of energy per product
manufactured,
(10) Rate of absenteeism of the work force,
(11) Number of months required to introduce a
new product model, 23
 Examples of Benchmarking
Metrics (cont’d)
(12) Number of job classification in the plant,
(13) Number of engineering change requests
required during a new product development
program,
(14) Number of unit produced prior to a model
change (batch production),
(15) Time metrics (response time, lead time, up
time, on time, down time, etc.)

24
 Examples of Benchmarking
Metrics
Product-Related Metrics:
(1) Part counts,
(2) Types of material used,
(3) Material utilization in each component,
(4) Assembly process used in production,
(5) Service quality,
(6) Failure-mode effects analysis,
(7) Quality of product as experienced by customer,
(8) Long-term durability of product,
(9) Fraction of sales of repeat customers,
(10) Company responsiveness to service requests. 25
 Limitation of Benchmarking
• No forecast of the future - Only applied to
current practice, No prediction of new
competition
• Some data may not be available (using
estimates tends to reduce accuracy and
reliability of results)

26
 Question # 5.3
• A key engineer in the department handed in
his resignation notice, giving the reason for
leaving as a much higher salary offer from a
competitor. The Manager recommends to the
Director that the company should match the
competitor’s offer, even though this would
allow the engineer to earn above the
maximum for his grade. “We can always give
him smaller increases in subsequently years
to bring his salary back into line,” says the
Manager. What should the Director do?
27
 Measuring Performance
• Collect, store, analyze and record work
being done and results attained
systematically (progress reports, project
reports, technical documents,
presentations, staff meeting minutes,
personal meeting notes, etc.)
• Compare performance against
established standards
• Document results of measurement
28
 Evaluating Performance
• Appraise work in progress or completed
and provide feedback by
(1) Establishing limits of tolerance,
(2) Note variations - deviation within the
tolerance limits, and exceptions - deviation
outside the tolerance limits,
(3) Provide recognition to good performance
(give credit timely)
• Focus on deviation tends to encourage
self-appraisal/control and foster initiative 29
 Correcting Performance
• Rectify and improve work being done and
results obtained - Taking steps:
(1)Correct mistakes and focus on future
development,
(2)Take operation actions - get help from
outside consultants, add temp people,
(3)Take management action - add training,
improve procedures and policies to avoid
repeating deficiencies, transfer and
recommend dismissal 30
 Reasons for Performance
Deficiencies
• Don’t Know - Lack
definition of
performance
standards, lack of
feedback
• Can’t Do - Lack skills
and/or aptitude
• Don’t Care - Lack
the proper work
attitude 31
 Constructive Criticisms
• Negative feedback must be offered carefully
to avoid attacking people’s esteem
• Focus on results/outcome, not on person
• Avoid upsetting people by using “labels”
• Have no punitive motive and avoid causing
pain
• Show helpful and sincere attitude
• Provide no threat
32
Some Rules of Thumb

• Not good to make mistakes

in engineering fundamentals
• Okay to fail once in a while in
new risky development work,
but failure in every other
projects will hurt own
reputation
• Making the same mistakes
again and again (human
relations, aggressiveness, poor
teamwork attitude) is
33
perceived negatively
Means of Performance Control
• Personal Review - Focusing on variance -
management by exception for decision
making
• Resources - Allocation of capital, people,
staff support, technology, equipment/
facilities
• Project Approval - Initiate, modify or
terminate specific project activities

34
 Guidelines for Effective
Control
• Focus on location where actions take place
• Induce self-imposed control (Most
effective)
• Avoid extensive control, which tends to de-
motivate people and induce strong
reactions
• Manage exceptions, both bad and good
• Strive for flexible and coordinated control
(supply information with control
35
mechanism in place)
Specific Controlling Targets
(1) Managerial time
(2) Personnel
(3) Business Relationship
(4) Project
(5) Knowledge

Business
Time Personnel Project Knowledge
Relations
36
Control of Management Time

• Important tasks often

arrive at
unpredictable times
• Trivial tasks often
take up a
disproportionately
large amount of time
• Interruptions to
manager’s schedule
are common 37
 Typical Time Wasters

• Absence of clear roles and responsibilities -

overlapping responsibilities
• Poor self-discipline - No planning, lack of
personal drive to accomplish, confused
priority, procrastination
• Lack of effective delegation - trying to do all
by self
• Poor communications - unprepared
meetings, policies, politics 38
 Tips to Manage Time
• Set goals (for the day, week, month,
year)
• Prioritize tasks (classify into A, B and C
categories) according to value addition
• Plan tasks properly
• Minimize interruptions for blocks of time
to do A-tasks - planning, strategy
development)
• Make use of waiting time
• Keep reports concise and readable 39
 Time Saving Tips for Engineering Managers
1. Set Goals Write specific, measurable outcomes you want to achieve in the next
week, month, year and
five years. Consider your work, relationships, play, and well being. Go
from goals to plan to work.

2. Use a Master "to- Categorize all of your “to do” ideas according to which goal each serves.
do" List Estimate all others.

3. Get the Big Picture Plan your priorities so you work foremost on whatever gives you the
biggest payoff and potential

4. Cluster Common Do similar tasks in the same time block (e.g., a bunch of letters, a bunch
Tasks of phone calls, etc.)

5. Create Systems Keep tools, forms, checklists, and information handy and organized for
repetitive tasks.

6. Establish Place Keep everything in its pre-determined place.

Habit
40
7. Delineate Time Schedule blocks of un-interruptible time (2-4 hours) to work on
Blocks projects requiring concentration.
Assure colleagues of availability otherwise.

8. Design Your Make your setting conducive to concentration (e.g., sit with your
Environment back to traffic passing your
office, and screen calls).

9. Cut Meeting Time Use proven meeting time-savers (e.g., go to other’s offices for
meetings, do stand-up meetings,
set agenda and follow through rigorously).

10. Reduce Panic Handle what worries you the most. Ask yourself, “Will this matter
seem urgent 1o years from
now?”

11. Take the One- Periodically take a minute to ask yourself, “Am I doing this in the
Minute Test best way to meet my goals,
serve others, and take care of myself?”

Condensed and Adopted from Cottringer (2003), Casavant (2003) and Anonymous (2003B).
41
 Control of Personnel
• For high skills personnel, less control is
more desirable, excess control could
induce adverse reactions - Supervision
Curve
Productivity Low Skills

High Skills

Amount of Supervision
42
 Four Levers of Control
• Control assures operational efficiency, but
too much control inhibits creativity and
innovation - What is proper control level?
• Four levers of control:
(Source: Robert Simons, “Control in the Age of Empowerment,”
Harvard Business Review, March-April 1995)

• (1) Diagnostic System - Management

demands standardized behavior and
exercises control (in high stake situations)
43
 Four Levers of Control

• (2) Belief System - Communicate core

value, mission and vision, for
encouraging employees to add values
• (3) Boundary System - Specify what
not to do (off-limit activities)
• (4) Interactive Control System -
Senior management monitors and
interacts with low-level decision makers
to stay abreast 44
 Effective Control System
• Use Belief System and Interactive
Control System to set performance and
business conduct guidelines
• Apply performance guidelines and
Diagnostics System to improve
operational efficiency
• Implement business conduct guidelines
and Boundary System to improve
creativity
45
 Four Levers of Control

Potential Organizational Managerial

Benefits Blocks Solution

Diagnostic Systems To achieve Lack of focus of resources Build and support clear
targets

Belief Systems To contribute Uncertainty about purpose Communicates core

values and mission

Boundary Systems To do right Pressure or temptation Specify and enforce

rules of games

Interactive Control To create Lack of opportunity or fear Open organized dialogue

Systems of risk to encourage learning
46
 Question # 5.4
• Motivation in the Assembly Shop was high. However,
the Shop Manager notices that while the daily
production was above average for the Shop, it drops
down to a low during the first hour after the lunch
break. The problem was further diagnosed to be that
the operators tended to continue socializing until well
after the lunch break.The shop Manager changed the
lunch break and staggered it over a two hour period, so
that the operators could not go to lunch together. To
his surprise, the motivation began to fall and
productivity dropped dramatically.What do you think
was the problem? How do you advise the Shop
Manager to fix this problem?
47
 Question # 5.6
• The company president has noted a constant
increase of reports passing on to him, many of them
in traditional mails, others through the company’s
Intranet. Most of these reports remain unread. He
could find time to browse through some of them on
airplanes, when he traveled for business. It has
clearly become difficult for him to keep track of all
developments due to an information over-load.
However, he does not want to abandon his personal
objectives of being constantly informed, or to ask his
VP’s for summaries of major developments. What are
the alternatives open to the company president?
48
 Control of Business
Relationship
• “Who does one know and how well” is an
increasingly important competitive
advantage
• Sources of contacts - University alumni
activities, technical conferences/seminars,
industrial expositions, sports events,
church
• Use 5-second commercial (intro),
exchange expertise areas, make note, and
follow up. 49
 Control of Projects
• Understand objectives and constraints
• Use tools (computer- or Internet-based) to
plan and manage approved project
• Monitor cost, dates, critical path activities
• Control plan deviations (Risks) tightly
• Induce collaboration among team members
• Resolve problems and conflicts timely
• Communicate constantly
50
 Project Control Issues
1. Cost Control Monitor the actual versus projected percentage of cost expenditure and
take proper actions to minimize deviations.

2. Schedule Control Monitor the actual versus projected percentage of completion time and
Take the proper actions to minimize deviations.

3. Critical Path Activities These are activities without time slacks, which must be managed with
extra care to avoid schedule delay.

4. Task Deviation from Plan Delays in equipment delivery or installation, equipment damage in
transportation, construction delay due to labor action, weather, utilities,
and other causes, and changes of personnel.

5. Collaboration Securing collaboration among team members is a key success factor

for any project.

6. Conflict Resolution Resolving instantly all conflicts and problems among team members
will assure a smooth progress toward achieving the project goals.
51
Skills for Managing Projects

• Organizational and planning skills

• People management
• Problem solving
• Communications (team members, sponsors,
customers)
• Drive and energy
• Goal orientation and customer focus
• Broad multidisciplinary technical knowledge
• Manage changes
52
 Control of Knowledge

• Knowledge refers to corporate intellectual

properties comprising (1) Patents, (2)
Proprietary know-how, (3) Technical
expertise, (4) Design procedures, (5)
Empirical problem-solving heuristics, (6)
Process operational insights, and others
• Managers are responsible for developing,
preserving and applying corporate
knowledge 53
 Control of Knowledge
• Major difficulties: (1) Knowledge chunks
dispersed in various documents,
(2) Most experts not fond of sharing
knowledge - job protection
• Set/Implement knowledge reporting and
management policy (progress reports, job
rotation, design specs and procedures,
data books, meeting records, knowledge
sharing)
54
 Specific Techniques for
Knowledge Management
• Rotate experienced people - to allow
people in different locations to learn from
them
• Create a pleasant work environment to
avoid losing people with expertise
• Encourage those who are willing to use
knowledge acquisition tools to preserve
expertise (introduce performance metrics)

55
 Knowledge Management
1. Write Reports Progress reports, technical memorandums, and invention disclosures
are typical documents to be systematically prepared by all employees.

2. Design Specifications Preserve specifications on disks, tapes, films, drawings and manuals,
as design specifications represent a part of corporate know-how and
expertise.

3. Data Books Prepare systematically documents preserving laboratory and pilot

test data, experimental results and other such findings.

4. Deploy Experts Rotate experts to different locations/jobs so that their expertise

knowledge may be shared with and learned by others

5. Workplace Maintain a pleasant work environment to encourage knowledge

workers to stay

6. Preserve Knowledge Apply knowledge acquisition tools to preserve knowledge from experts,
such as expert systems, neural networks and case based reasoning
tools. 56
 Summary
• Controlling - administrative function, with
strategic implication (assure
implementation, support delegation, foster
corporate renewal)
• Set standards using external benchmarking
to avoid losing competitiveness
• Correcting poor performance may be
unpleasant
• Apply “Four Levers of Control” - Assure
operational efficiency and enhance
57
creativity
 Literature References

• Anonymous, “Best Practices: Ideas and Insights

form World’s Foremost Business Thinkers”,
Cambridge MA: Perseus Publishing (2003)
• Casavant, D. A., “Effective Time Management”
Buildings, January (2003)
• Ivancevich, J. M., and T. N. Duening, “Managing
Einstein: Leading High-Tech Workers in the
Digital Age,” New York: McGraw-Hill (2002)
• McKenna, P. and D. H. Maister, “first Among
Equals: How to manage a Group of
Professionals,” New York: Free Press (2002)
58
 Question # 5.1
• ISO Standards 9000 series were
developed a number of years ago to
improve work quality by standardizing the
engineering design, testing, production
and other procedures. How many ISO
standards are you aware of and how well
have then been accepted in the U.S.?

59
 Question # 5.5

• Bill Carter is an excellent hardware designer, but he wants to move

into management, in order to broaden his experience. His
manager is supportive and encourages Bill to go to evening
classes on management. Bill worked hard for two years, and
graduated first in his class. Soon, there was a management
opening in the procurement department. Bill applied for it, but the
position was eventually filled by an outside applicant. Bill was
turned down, because he did not have sufficient experience in the
procurement functions, which was a stated key requirement of the
job. Bill protested: “But I have better technical knowledge on
components than all the procurement engineers put together, and I
learned about procurement in my management courses. The only
way I will get experience in it is to work on the job.” Do you think
Bill should have been given the job? How would you have handled
this situation? 60
 Question # 5.7

• The Production department is undergoing an upgrade of its

automation program. It has a conflict which needs to be
controlled and managed. The line supervisor wants to
standardize on machines supplied by an American vendor,
as his people will eventually use them. The Automation
Team leader believes, on the other hand, that the Swiss-
made machines would result in greater productivity. Being
a specialist in automation, she was brought in to the
department to find ways of significantly improving
productivity. The department head is at loss of what to do,
as these two experts fight out in a staff meeting. He regrets
that he has not kept up himself with the automation
technology to enable him to arbitrate on the best way going
61
forward. What should the department head do now?
 Question # 5.8

• Unexpectedly, two junior members of the

production department come in to see
you, the Production Director, to complain
that their manager, who reports to you,
committed discrimination, practiced
favoritism in the treatment of people, and
misused company facilities for possible
personal gain. How would you handle
this complain?
62
 Question # 5.9

• At present, the company is fully loaded

with developing a new product for a major
customer. The Sales Director has
unexpectedly secured a small, but highly
profitable order which requires some low-
level development and a minor change to
the current production process. Should the
company accept the small order? If so,
how should the company satisfy the small63
order?
 Question # 5.10

• Some foreign countries, particularly

those in development stages, are
known to illegally copy product design,
technologies and others originated from
developed countries. What are the
ways for small businesses to protect
technical know-how in foreign
countries?
64
 Question # 5.11

• The Elrod Manufacturing Company was founded by John Elrod

50 years ago. Vernon Scott is the VP of Plant Engineering,
reporting into George Elrod, who took over as the company
president from his father John Elrod five years ago.
Vernon Scott and John Elrod have been good friends for many
years. The company’s products include automotive parts
(gears, axles, transmissions), metal stampings and sheet
metal sub-assembles.
Also reporting into George Elrod are six plant managers,
each with complete sales, engineering, manufacturing and
warehouse facilities and other functions. The plant
managers are responsible for the profitability of
individual plants. The total employment of the company is
12,000 people. The company has a standing policy on capital
expenditure: Expenditure below $5,000 is to be approved by
plant managers, between $5,000 and $50,000 by Vernon Scott,
and those above $50,000 by the Executive Committee.
65
 Question # 5.11 (cont’d)

• Vernon Scott favors expenditures for machinery and

equipment directly related to manufacturing, but not
for maintenance, and facility expansion and
improvement not related to manufacturing. Over the
years, plant managers have become unhappy with
Scott's refusal of expenditures for non-
manufacturing facilities. Forced to keep their
plants profitable, they could not help but bypassing
him by breaking down the projects into many small
components, each below $5,000.
Eventually, Vernon Scott found out the piecewise
purchase of a $27,000 computer by Paul Nelson, a
very capable plant manager, whose plant has become
the most profitable one in the company. Scott
demanded that George Elrod fire Nelson, citing
insubordination, cheating and dishonesty.
What would you do, if you were George Elrod?
66
 Chapter 5 -Addendum
• TQM (Total Quality Management) –(1)
Customer orientation, (2) Empowerment
related to problem solving, (3) Continuous
improvement, (4) Led by corporate vision.
• Six Sigma (Statistical Process Control –
data based)
• Example of FMEA (Failure Mode and
Effects Analysis)

67
 2003 Corporate IQS Ranking
(Problems per 100 Vehicles)

115
Toyota Motors Sales USA

117
Porsche Cars North America

124
BMW of North America

126
American Honda Motors

133 134 135

INDUSTRIAL AVERAGE

General Motors

Nissan North America

136 139
Ford

DaimlerChrysler

VW of America

141 143
Hyundai Motor America

144 146
America Suzuki Motor

Subaru of America

168
Kia Motors America

0 20 40 60 80 100 120 140 160 180

68
Source: J. D. Power and Associates 2003 Initial Quality Study (sm)
 FMEA
(Failure Mode and Effects Analysis)

• Developed by NASA in 1963

• Ford Motor Company – Major
automotive application since 1977
• Key concept – Catch all potential failure
modes early in design/production and
eliminate costly changes in later stages
of process
• FMEA is systematic and logical
69
 Types of FMEA
• Design FMEA (Product design)
• Process FMEA (Production Process)
• Service FMEA (Customer service)
• Applications FMEA (Applications of
Products/Processes)
• Others

70
 FMEA WORK SHEET

A B C D E F G H I J
Step # Process Potential Potential Severity Potential Occurrence Current Detection RPN

Description Failure Effects of Causes of Process

Modes Failures Failures Control and

Detection

K L M N O P
Recommended Responsibility Actions New New New
Actions and Taken Severity Occurrence Detection

Target

Completion

Date

71
 Basics of FMEA
• Severity (1 to 10)
• Occurrence (1 to 10)
• Detection (1 to 10)
• RPN (Risk Priority Number) = S*O*D
• Steps with higher RPN numbers are to be acted
upon
• Check the RPN reduction afterwards
• Documentation

72
 Actions to Define
• Corrective Actions (High RPNs)
• Preventive Actions (Medium RPNs)
• I - Identify
• A - Analyze
• P - Planning
• I - Implement
• E - Evaluate

73
 Use of FMEA Reports
• Customers demand FMEA reports to show
vendors’ quality control efforts
• Effectively reduce failures rates
• Communications tools
• Learning opportunities
• Most effectively produced by teams of
multi-disciplinary participants.

74
 Reference
• D. H. Stamatis (1996), “Failure Mode and
Effects Analysis,: FMEA from Theory to
Execution,” ASQC Quality Press

75