Engineering Management CHAPTER 6-12

Communication may be defined as “a process of sharing sight.

information through symbols, including words and message.”
Nonverbal Communication-is a means of conveying message
Functions of Communication through body language.

Information Function-Information is provided through The Barriers to Communication

communication.
▪ Personal Barrier
Motivation Function-Communication is oftentimes used as a ▪ Physical Barrier
means to motivate. ▪ Semantic Barrier

Control Function-Communication is used as a means of Barriers to communication may be eliminated by using

control. feedback, repeating message, using multiple channels, and
using simplified language.
Emotive Function-Communication provides a means to
decrease the internal pressure affecting the individual. Technique for Communicating Organizations

The Communication Process Communication may be classified as to the type of flow of the
message which is as follows: downward, upward or horizontal
▪ Develop an Idea
▪ Encode Management Information System-defined by Boone and Kurtz
▪ Transmit as “an organized method of providing past, present, and
▪ Receive project information on internal operations and external
▪ Decode intelligence for use in making decision.”
▪ Accept
▪ Use Management Information System is a useful means of
▪ Provide Feedback communication.
▪ Purpose of IMS
Forms of Communication ▷ To provide basis for the analysis of early warning
• Verbal and Nonverbal Communication signals that can originate both externally and internally.
• Verbal Communication- Transmitted through hearing or ▷ To automate routine clerical operations like payroll and
inventory reports.

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Engineering Management CHAPTER 6-12
▷ Assist managers in making routine decision.
▷ To provide the information necessary for management
to make strategic or non-programmed decision
Motivation refers to the “process of activating behavior
sustaining it, & directing it toward a particular goal”.
Factors Contributing to Motivation
• Willingness to do job
• Self confidence in carrying out task
• Need Satisfaction
Theories of Motivation
• Maslow’s Need Hierarchy Theory
• Herzberg’s Two Factor Theory
• Expectancy Theory
• Goal Setting Theory
Maslow’s Need Hierarchy Theory
-Abraham Maslow’s theorized that human beings have
5 basic needs which are as follows;
Physiological, Security, Social, Esteem, and Self Actualization
Herzberg’s Two Factor Theory
-Developed by Frederick Herzberg indicating that a
satisfied employee is motivated from within to work harder
and that a dissatisfied employee is not self-motivated.
-He identified two classes of factors associated with
employee satisfaction
• Satisfiers or motivation factors-responsible for job
satisfaction: Achievements, recognition, work itself and
etc.
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Dissatisfiers or hygiene factors- responsible for job
dissatisfaction: work condition, supervision and etc.
Expectancy Theory
-The theory poses the idea that motivation is
determined by expectancies and valences. Expectancy is a
belief about the likelihood that a particular behavioral act will
lead to a particular outcome. Valence is the value of an
individual places on the expected outcomes or rewards.
Goal Setting Theory
-refers to the process of “improving performance with
objectives, deadlines or quality standard.”
Goal Setting Model Consist of
• Goal Content
• Goal Commitment
• Work Behavior
• Feedback Aspect
Technique of Motivation
-Individuals or group of Individuals may be motivated
to perform through the use of various techniques.
May be classified as follows;
• Motivation through Job Design
• Motivation through rewards
• Motivation through employee participation
• Other Motivation technique for the diverse work force
Engineering Management CHAPTER 6-12
Motivation through Job Design
-A person will be highly motivated to perform if he is
assigned a job he likes. Job design maybe defined as
“specifying the task that constitutes a job for an individual or
a group.”
-In Motivating through the use of Job Design, two
approaches maybe used; fitting to people Jobs or fitting Jobs
to people.
Fitting People to Jobs. To avoid workers suffering from
chronic dissatisfaction, the following remedies maybe
adopted:
• Realistic Job previews-where management provides
honest explanations of what a Job actually entails.
• Job Rotation- where are people moved periodically
from one specialized job to another.
• Limited exposure-where a worker’s exposure to a highly
fragmented and tedious job is limited.
Fitting Jobs To People- Instead of changing the person ,
management may consider changing the job. This may be
achieved with the use of the following:
• Job Enlargement-where two or more specialized tasks
in a work flow sequence is combined into a single job.
• Job Enrichment-where efforts are made to make jobs
more interesting, challenging, and rewarding.
Motivation through rewards
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Rewards consist of material and psychological benefit
to employee for performing tasks in the work place. Properly
administered reward systems can improve job Performance
and satisfaction.
Rewards maybe classified into categories:
• Extrinsic-refer to payoffs granted to the individual by
another party Examples are money, employee’s
certificate & etc.
• Intrinsic-Internally experienced payoff which are
self-granted .Example are a sense of
accomplishment, self-esteem and self-actualization.
Motivation through employee’s participation
When employees participate in deciding various
aspects of their jobs, the personal involvement, oftentimes, is
carried up to the point where the task is completed.
The Specific Activities identified where the employees may
participate are as follows;
• Setting goals
• Making decision
• Solving problems
• Designing and implementing organizational changes
The more popular approaches to participation include the
following:
• Quality Control Circles
• Self-Managed Teams
Engineering Management CHAPTER 6-12
REQUISITE TO SUCCESFUL EMPLOYEE PARTICIPATION
PROGRAM
To succeed, an employee participation program will require the
following:
• A profit-sharing or gain sharing plan
• A long-term employment relationship with good job
security
• A concerted effort to Build and maintain group
cohesiveness
• Protection of the Individual employee’s rights
OTHER MOTIVATION TECHNIQUE
• Flexible Work Schedules
• Family support services
• Sabbaticals
Flexible Work Schedule-There is an arrangement called
flextime, which allows employees to determine their own
arrival and departure time within specified limits.
Family Support Service-Progressive companies provide day
care facilities for children of employees.
Sabbaticals- A sabbatical leave is one given to an employee
after a certain no. of years in service.
LEADING
Leading- is that the management function which “involves
influencing others to engage in the work behaviors necessary
to reach organizational goals.”
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How Leaders Influence others
Base of Powers
The power possessed by leaders may be classified according
to various bases. They are as follows:
• Legitimate Power
• Reward Power
• Coercive Power
• Referent Power
• Expert Power
Legitimate Power- A person who occupies a higher position
has a legitimate power over person’s in lower position within
the organization.
Reward Power- When a person has the ability to give rewards
to anybody who follows order or requests. Rewards may be
classified into material and psychic.
Coercive Power-When a person compels another to comply
with orders through threats or punishment.
Referent Power- When a person can get compliance from
another because the latter would want to be identified with the
former.
Expert Power- Expert provides specialized information
regarding their specific lines of expertise.
Engineering Management CHAPTER 6-12

people, both outside and inside the organization.

Conceptual Skill – This skill refer to “the ability to think in
abstract terms, to see how parts fit together as a whole.”
THE NATURE OF LEADERSHIP Behavioral Approaches to leadership Style

Leadership may be referred to as “the process of influencing • According to the ways leaders approach people to
and supporting others to work enthusiastically toward motivate them
achieving objectives.” Leadership is expected of any manager o (1)positive leadership(2)negative leadership
in charge of any unit or division. • According to the way the leaders uses power
o (1)autocratic(2)participative(3)free-rein
TRAITS OF EFFECTIVE LEADERS • According to the leader’s orientation towards task and
people
• A high level of personal drive o (1)employee oriented(2)task oriented
• The desire to lead
• Personal integrity Contingency Approaches to Leadership Style
• Self-confidence - Fiedler’s Contingency Model
• Analytical ability or judgment - Hersey and Blanchard’s Situational Leadership Model
• Knowledge of the company, industry or technology - Path-Goal Model of Leadership
• Charisma - Vroom’s Decision Making Model
• Creativity Controlling- One of the main functions of management. It
• Flexibility comes after planning, organizing and directing. It is important
LEADERSHIP SKILLS because it complements the other management functions. It is
a process consists of various steps, namely; establishing
• Technical skills performance objectives and standards, measuring actual
• Human Skills performance, comparing actual performance with objectives
• Conceptual Skills and standards, and taking necessary action based on the
results of the comparison.
Technical Skills- skills a leader must possess to enable him to
understand and make decisions about work processes, Control may be classified either as feed forward, concurrent or
activities, and technology. feedback.
Human Skills- Refer to the ability of a leader to deal with

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Engineering Management CHAPTER 6-12
Strategic control systems consist of financial ratio analysis.
Means to identify control problems: the executive check, the
comprehensive internal audit, and the general checklist of
symptoms of inadequate control.
Feed forward Control-When management anticipates
problems and prevents their occurrence, the type of control
measure undertaken. This type of control provides the
assurance that the required human and non-human resource
are in place before operations begin.
Concurrent Control-It is to be undertaken when operations are
already ongoing and activities to detect variances are made.
Feedback Control- When information is gathered about is
completed activity, and in order that evaluation and steps for
improvement are derived, feedback control is undertaken.
Feedback control validates objectives and standards.
Components of Organizational Control Systems
Organizational control systems consist of the strategic plan,
the long-range financial plan, the operating budget,
performance appraisals, statistical reports, policies and
procedures.
• Strategic Plan- provides the basic control mechanism
for the organization.
• The Long-Range Financial Plan- recommends a
direction for financial activities.
• The Operating Budget- Indicates the expenditures,
revenues, or profits planned for some future period
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regarding operations.
• Performance Appraisal- It measures employee
performance.
• Statistical Report- It pertains to those that contain data
on various developments within the firm.
• Policies -It is the framework within which the objectives
must be pursued.
• Procedure- Is a plan that describes the exact series of
actions to be taken in a given situation.
Strategic Control System
• Financial Analysis
• Financial Ratio Analysis
Financial Analysis – The success of most organizational
depends heavily on its financial performance.
Financial Ratio Analysis- is a more elaborate approach used in
controlling activities.
May be categorized in the following types;
• Liquidity
• Efficiency
• Financial Leverage
• Profitability
Liquidity Ratios- These ratios assess the ability of a company
to meets its current obligation.
Important Indicators of Liquidity- Current Ration, Acid test ratio
• Current ratio- This shows the extent to which current
Engineering Management CHAPTER 6-12

assets of the company can cover its current liabilities. company produces for every peso invested in assets.
• Acid-test ratio- This is a measure of the firm’s ability to
pay off short-term obligations with the use of current Return on equity ratio- This measures the return’s on the owner
assets and w/o relying on the sale of inventories. investment.

Efficiency Ratio- These ratios shows how effectively certain

assets or liabilities are being used in the production of goods
and services.
• Inventory turnover ratio- This ratio measures the
number of times an inventory is turned over each year.
• Fixed assets turnover- This ratio is used to measure
utilization of the company’s investment in its fixed
assets.
Financial Leverage Ratios- This is a group of ratios designed
to assess the balance of financing obtained through debt and
equity source.
• Debt total assets ratio-This ratio shows how much of
the firm’s assets are financed by debt.
• Times interest earned ratio- This ratio measures the
number of times that earnings before interest and taxes
cover or exceed the company’s interest expense.
Profitability Ratios- These ratios measure how much operating
income or net income a company is able to generate in relation
to assets, owner’s equity and sales.
Managing Production and Service Operations
Operations refer to the changing of inputs into useful outputs.
It is also an activity that needs to be managed by competent
person.
The function of operations manager is to plan, organize, and
control operation in order to achieve objectives efficiently and
effectively. The engineer manager is, often times, and assigned
to perform the tasks of the operations manager.
The transformation process may be classified generally as
manufacturing or service processes. These two are sub
classified into various types, each with built-in advantages
depending on certain conditions.
Production systems consist of various parts that complement
one another in the production task. The engineer manager
needs to be familiar with these various parts.

Profit Margin Ratio- This ratio compares the net profit to the
level of sales

Return on assets ratio- This shows how much income the

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Engineering Management CHAPTER 6-12

playing a significant role.

Types of Transformation Process Continuous Flow- The continuous flow processing is

characterized by “The rapid rate at which items move through
• Manufacturing Processes the system.”
▷Job shop
▷Batch Flow Batch Continuous Flow- This method of processing is a
▷Worker-paced line flow combination of the batch and the continuous flow.
▷Machine-paced line flow
▷Batch Continuous flow hybrid Service Processes are those that refer to the provision of
▷Continuous flow services to persons by hand or w/ machinery.
• Service Processes Service Factory- A service factory offers a limited mix of
▷Service Factory services w/c results to some economies of scale in operations.
▷Service Shop
▷Mass Service Service Shop- A service Shop Provides a diverse mix of
▷Professional Service services.

Manufacturing Processes are those that refer to the making of Mass Service- A mass service company provides services to a
products by hand or w/ machinery. large number of people simultaneously.

Job Shop- A job Shop is one whose production is “based on Professional Services- These is the companies that provide
sales orders for a variety of small lots.” specialized services to other firms or individuals.

Batch Flow-The batch flow process is where lots of generally Important parts of productive Systems
own designed products are manufacture
Productive Systems consist of six important activities as
Worker-paced Assembly LINE- An assembly line refers to a follows:
production layout arranged in a sequence to accommodate
processing of large volumes of standardized products or ▷Product Design
services. ▷Production Planning and scheduling
▷Purchasing and materials management
Machine-Paced Assembly Line - This type of production ▷Inventory control
process produce mostly standard products with machines ▷Work Flow Layout

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Engineering Management CHAPTER 6-12
▷Quality Control
Product Design refers to the “the process of creating a set of
product specifications appropriate to the demands of the
situation.”
Production Planning may be defined as “forecasting the future
sales of a given product, translating this forecast into the
demand it generates for various production facilities, and
arranging for the procurement of these facilities.”
Scheduling is the “phrase of production control involved in
developing timetables that specify how long each operation in
the production process takes.”
Material Management refers to “the approach that seeks
efficiency of operation through integration of all material
acquisition, movement, and storage activities in the firm.”
Inventory Control is the process of establishing and
maintaining appropriate levels of reserve stocks of goods.
Work Flow Layout-Process of determining the physical
arrangement of the production system.
Quality Control-refers to the measurement of products or
services against standards set by the company.
Managing the Marketing Function
To survive, companies must continuously generate income. To
be able to do so, they must be able to sell enough quantity of
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their products or services. Engineering Firms are no exception.
The proper management of the marketing function helps the
engineer manager convince customer to patronize the firm.
Specifically, the engineer manager must know how to use
effectively the four P’s of marketing which are the product, the
price, the place, and the promotion.
An activity called strategic marketing is designed to make sure
that marketing objectives of the firm are achieved. Strategic
marketing calls for selecting a target market and developing an
appropriate marketing mix.
The marketing mix consists of the appropriate levels of
product quality, price, promotion, and place.
Marketing is a group of activities designed to facilitate and
expedite the selling of goods and services.
The Marketing Concept states that engineer must try to satisfy
the needs of his clients by means of a set of coordinated
activities.
The term “product” includes the tangible item and its capacity
to satisfy a specific need.
Price refers to “the money or other considerations exchanged
for the purchase or use of the product, idea, or service.”
Place-It is very important for companies to locate in places
where they can be easily reached by their customers.
The Promotion- Communicating information b/w seller and
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potential buyer to influence attitudes and behavior.
Advertising defines as “a paid message that appears in the
mass media for the purpose of informing or persuading people
about a particular products, services, beliefs, or action.”
Publicity- The promotional tool that publishes news or info
about a product, service, or idea on behalf of a sponsor but it is
not paid for by the sponsor.
Personal Selling- A more aggressive means of promoting the
sales of a product or service.
Sales Promotion-Any paid attempt to communicate with the
customers other than advertising, publicity, and personal
selling, may be considered sales promotion.
Strategic Marketing for Engineers
▷Selecting a Target Market
▷Developing a Marketing Mix
Factors Used in selecting a target market
▷The size of market
▷The Number of competitors serving the market
Managing the Finance Function
Financing the engineer firm is very important management
activity. There is a need to assure everyone concerned that
funds are available when they are needed.
The first are of concern is the determination of fund
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requirements. If the amount needed is already known, the next
step is to determine the appropriate source of financing.
The various fund sources have their own individual strength
and limitations. It is wise to found out through analysis which
will benefit the engineer firm most.
When the internal sources of funds are not enough tofinance
the operation, external sources like those granting loans and
credits may be tapped.
In determination of the best source of financing, the following
factors must be considered: flexibility, risk, income, control,
timing, and other.
To achieve its goals, the engineering firm must be financially
healthy. There are certain indicators of financial health. They
are broadly classified into the following categories: liquidity,
efficiency, financial leverage and profitability.
An important aspect of managing the finance function is risk
management. When assets and human resources are
protected and conserved, the engineering firm is well on its
way to achieve its objectives.
The various ways of handling risk are: risk avoidance, risk
retention, hazard reduction, loss reduction, and risk shifting.
Finance Function is an important management responsibility
that deals with the “procurement and administration of funds
with the view of achieving the objectives business.”
Engineering Management CHAPTER 6-12

▷Collection of Accounts Receivable s

▷Loans and Credits
▷Sales of Assets
▷Ownership Contribution
▷Advances from Customer

The Determination of Fund Requirements

Any organization, including the engineering firm, will need

funds for the following specific requirements. The Best Source of Financing

▷To finance daily operation ▷Flexibility

▷To finance the firm’s credit services ▷Risk
▷To finance the purchase of inventory ▷Income
▷To finance the purchase of major assets ▷Control
▷Timing
Financing Daily Operation ▷Other Factors like collateral values, floatation cost,
speed, and exposure
The day to day operations of the engineering firm will require
funds to take care of expenses as they come. Money must be The Firms Financial Health
made available for the payment of the following.
In general, the objectives of engineering firms are as follows:
▷Wages
▷Rent ▷To make profits for the owner
▷Taxes ▷To satisfy creditors with the repayment of loans plus
▷Power and light interest
▷Marketing expenses ▷To maintain the viability of the firm so that the
▷Administrative Expenses customers will be assured of a continuous supply of
products or services.
The Source of Funds

▷Cash Sales

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Risk maybe classified as either pure or speculative. Pure risk is

one w/c “there is only a chance of loss.”

Speculative Risk is one w/c there is a chance of either loss or

gain.

Risk Management-Is “an organized strategy for protecting and

conserving assets and people.”

The purpose of risk management is “to choose intelligently

from among all the available methods of dealing with risk in
Indicators of Financial Health order to secure the economic survival of the firm.”

▪ Balance sheet-also called statement of financial Methods of Dealing with Risk

position
▪ Income statement-also called statement of operation ▪ The risk may be avoided
▪ Statement of changes in financial position ▪ The risk may be retained
▪ The hazard may be reduced
Risk- refers to the uncertainty concerning loss or injury. The ▪ The losses may be reduced
engineering firm is faced w/a long list of exposure to risk ▪ The risk may be shifted
which are as follows:

▪ Fire
▪ Theft
▪ Floods
▪ Accident
▪ Nonpayment of bills by customers
▪ Disability and death
▪ Damage claim from other parties

Type of Risk

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