ABE 137

Engineering Management

Module 1-A: Operations and Production Management

Operation Manager - is responsible for the management of productive systems, that is, systems that
either create goods and services, or both.
Example:
1. Luxury cruise ship
▪ Captain – head of the ship
▪ Crew – underline people
▪ Service: sea travel/transporation/sea freight activities:
▪ Running the ship (navigation, maintenance, general repair)
▪ Managing food services
▪ Providing medical services
▪ Supervision and training of crew
▪ Overseeing activities of passengers
▪ Housekeeping
2. Managing a factory
▪ General manager – head/CEO(firm)
▪ Underline manager/supervisors (operations, personnel, marketing, ads, etc) Workers
▪ Output: goods activities:
▪ What are the raw materials
▪ How much to produce]
▪ When to order
▪ How much to make/produce
▪ Work assignments
3. A university (MSU)

3 FUNCTIONS WITHIN A BUSINESS ORGANIZATION

1. Operations – the function that consists of all activities that are directly related to
producing goods or providing services
Goods-oriented – production, manufacturing, and assembly operations (farming,
mining, construction, manufacturing, power generation)
Service-oriented – health care, storage/transportation, food handling, retailing,
exchange, entertainment, communication, etc.

TRANSFORMATION
INPUTS OUTPUTS
(Conversion medium)
Human Process: teaching education
Physical Equipment: computers, etc. .
Intellect Facilities: school, university
Reservoir (dam) Power plant electricity
Water energy

2. Finance – comprises activities related to securing monetary resources at favorable prices and
allocating those resources throughout the organization
a. Budgeting – preparation of plan and financial requirements
b. Economic analysis of investment proposal – evaluation of alternative investment
c. Provision of funds – loans, investments, etc.
 3. Marketing – concerns with selling the organization’s products and services
- also measure the needs and preferences of consumers, valuable sources of
information relating to ideas of the products or services improvement, ideas for new
products and services
a. Primary marketing
b. Advertising and promotion
c. Developing and maintaining a market
d. Sales forecasting

TRANSFORMATION
INPUTS OUTPUTS
(Conversion)
Feedbacks Feedbacks Control Feedbacks

Promotions:
1. Deals – short-term price reduction, commonly used to increase awareness among potential
customers or to retaliate against a competitor’s action
Example: “Buy one, take one”, “Buy one, 50% discount on 2 nd purchase”
2. Premiums – a promotional tool often used with consumers which consists of merchandise
offered free at a significant savings over retail
Example: Attachment or bonding of items like shampoo, bath soap, face towel.
3. Contest – winning a prize, tv shows and games
4. Sweepstakes – raffle draw
Example: Anniversary raffle, Christmas raffle, etc)
5. Samples – offering the product free, for taste or test
Example: food products, e.g.coffee, biscuits, etc
6. Point-of- purchase displays – near cashiers or end of aisle Example: gums, toothbrush, razor,
candies, condom, etc.

Advertising: tv, radio, magazine, newspaper, direct mail, billboard, internet, social media and other
online platforms (Lazada, Shopee, etc)

FUNCTIONS INVOLVING OPERATIONS:

1. Accounting – responsible for preparing the financial statements, including income statement
and balance sheet; also data on labor, materials and overloads
2. Purchasing – charged with procurement of materials, supplies, and equipments
3. Personnel – concerned with recruitment and training of personnel, labor, labor relations,
contract negotiations, wage and salary administration, manpower projections, and
ensuring the health and safety of employees
4. Public relations – responsible for building and maintaining a positive public image of the
organization (i.e. CSR – Corporate Social Responsibility)
5. Industrial Engineering – scheduling, performance standard, work methods, quality control and
materials handling (usually in manufacturing plants of medium and large company)
6. Maintenance – responsible for general maintenance and repair of equipment, maintenance of
building and grounds, heating and air-conditioning, removing toxic waste, parking, security. (i.e.
GS – General Services Office)

Because of its diversity and being the core of the organization:

• Half of all employed people in a country is in the operation/production area
• Operation function controls a major portion of the assets in most organization
THE OPERATION MANAGEMENT FUNCTION
The functions of a Manager:

1. Responsible for the creation of raw materials and its conversion to outputs (of goods and
services)
2. Source of new ideas for improvements related to the production aspect of the organization.
Product and service design can be the lifeblood of a competitive organization.
3. To guide the system through decision-making
• Qualitative vs. Quantitative
• Management process (planning, staffing, etc.)
• System design or system operation

Design approach:
SYSTEM DESIGN – involves decisions that relate to system capacity, the
geographic location of facilities, arrangement of departments, placement of
equipments of physical structures, product and service planning, acquisition of
equipment. * Usually require long-term commitment

SYSTEM OPERATION – involves management of personnel, inventory planning and control,

scheduling, project management, and quality assurance

*System Design essentially determines many of the parameters of a System Operation,

e.g. costs, space, capacities, and quality.

LEVELS OF OPERATION MANAGEMENT DECISIONS:

Operation management decisions are hierarchical in nature (top level to bottom level). Plans and
decisions are usually sequential and those at the lower level are constrained to a certain extent by
higher level plans decisions.

a. Strategic Decision – broad in scope and involves choice of products and services, new facilities,
and locations and general policies of the organization.
• CEO, Board of Directors/Trustees, toprank officials
• Formulate the visions, missions, and strategies
• Long-term implication for the organization
b. Tactical Decisions – narrower in scope and often involves in allocating financial resources,
equipment selection and use, planning work force levels, output rates and inventory levels.
c. Operation Decision – involves activities such as scheduling of equipments and personnel,
adjusting production rates, and handling equipment breakdowns, absenteeism, shortages,
inventory, replenishment, and quality control.
Made within the framework established by tactical and strategic decisions.

MANAGEMENT PROCESSES
(Scope of Responsibility of an Operation Manager)

1. Planning – involves determining a future course of an action

(capacity, location, products and services, layout, projects, scheduling)
2. Organizing – refers to the administrative structure of the organization and requires decisions
regarding who, what, where, when and how. (degree of centralization, make or buy,
subcontracting)

3. Staffing – involves selection and training of the personnel who will operate the system
(overtimes, hiring/ laying off
4. Directing – refers to the issuance of commands or orders, making suggestions, motivations of
works for efficiency and productivity.
5. Controlling – involves measuring the results of operations, deciding if they are acceptable,
instituting, correcting actions needed. (inventory control, quality control)
3 WAYS TO DESCRIBE PRODUCTION SYSTEMS:

1. Degree of Standardization – production systems produce output that ranges from highly
standardized to highly customized

Standardized Output – there is a high degree of uniformity and/or standard is

fixed but many varies as for product
Goods: radios, TV, typewriter, computers, newspapers, canned foods,
automobiles, pens, papers, etc.
Services: car washes, televised newscasts, airline service, a specific lectures, etc.

Customized outputs – the product or service is designed for specific case or individual
Goods: eyeglass, custom-fitted clothing, window glass, etc.
Services: tailoring, taxi rides, surgery, medical service

System with standard output can generally take advantage of standardized methods, materials,
and mechanizations, attributing to higher volume and lower unit costs. With customized
production system, each job is varied, so workers must be skilled, work slower, and the
work is usually less mechanized.

2. Type of Operation
a. Project – set of activities directed towards a unique goal
Relatively large scale
Example: Construction of hospital, computerization of production line
b. Unit or Batch Production – typically performed by a job shop
- it maintains the ability to render certain types of production but generally is
not responsible for specific product
c. Mass Production – both works and output tend to be highly standardized
- usually automated or use special equipment
Example: household goods, school supplies, automobile, appliances, etc
d. Continuous processing – employed when homogenous product or service is produced or
rendered.
Example: processing of chemicals, photographic film, oil products, heating, airconditioning,
continuous cleaning, monitoring system

3. Manufacturing or service operations

Manufactured operation – production of tangible output; product-oriented Service

Operation – implies act, therefore, act-oriented

they differs in terms of how it is done The

difference involves the following:
1. Nature and Consumption of output
▪ Manufacturing is tangible while service is intangible
▪ Service involves much higher degree of customer contact that manufacturing
does.

▪ Performance of service typically occurs at point of consumption

▪ Manufacturing allows a separation of production and consumptions, so that it
occurs in an isolated environment, away from them consumer
2. Uniformity of output
▪ Service operations are subject to more variability of inputs than typical
manufacturing operations are.
▪ Also, job requirements for manufacturing are generally more uniform that for
service.
3. Labor content of jobs
 Services require a higher labor content, while manufacturing, if mechanized, are
usually smooth and efficient
4. Uniformity of output
Service output is also more variable, while manufacturing, if mechanized, are
usually smooth and efficient
5. Measurement of productivity
▪ Is easy in manufacturing and much more measurable than in service operation
▪ Service operation requires very careful analysis for measurement of its efficiency
and productivity
Most real system, or in reality, there is a blend of manufacturing and service
operations)

Manufacturing firm – production, maintenance and repair of equipments

Hospitals – medical and surgical supplies and health services Theaters – film
showing/ entertainment, snacks and foods

4. Implication for production system (with the type of operation)

a. Degree of certainty : repetitive – jobshops/batch – projects
b. Routine of activities : repetitive – jobshops/batch – projects

CONTEMPORARY ISSUES AND DEVELOPMENT IN OPERATION MANAGEMENT

(Factors influencing managerial decisions)

1. Productivity
2. Government regulation
3. The international scope of operations
4. Foreign competition
5. Cost and quality
6. Technology
7. The increasing importance of service operations
8. Managerial attention to employee viewpoints
9. Competitiveness
10. Operations strategy

1. PRODUCTIVITY – the key issue in all organization, and consequently a key measure of the
effectiveness of management.
▪ Serves as scorecards of the effective use of resources
▪ Measures the relationship between inputs (land, labor, capital, materials, etc.) and the
outputs (goods and services)
▪ One of the primary responsibilities of an operation manager to achieve productive use of
resource
▪ A key factor in competitiveness
▪ Output

a. Labor productivity – output relative to the labor hours worked

Example: Bd. Ft. of lumber cut/hr/person
b. Machine productivity
Example: Area painted/hr, area painted/day, length of road concreted/week
c. Multifactor productivity – reflects a combination of some or all of the resources used to obtain
a certain output.
Example: Quantity of production @ standard price
Labor cost + material cost + overhead
 Factors that affect productivity:
a. methods
b. capital
c. quality
d. technology
e. management

Example: Preparation of a thesis

Objective: to have a good grade and gain [easy] approval from the panel
▪ decide whether experimental or machine design
▪ qualitative or quantitative approach (method)
▪ machine should be significant, operational and manuscripts and papers should be
presentable (capital and quality)
▪ be prepared and be resourceful (research and management) change your style
(technology)

How to improve productivity?

Key steps that a company can take toward improved productivity:
a. Develop productivity measures for all operations; measurement is the first step in managing
and controlling an operation.
b. Look at the system as a whole in deciding which opportunity to concentrate. Provide
alternatives. It’s overall productivity that is important.
c. Develop methods for achieving productivity improvements, such as soliciting ideas from
workers, studying how other firms have increased productivity, and reexamining the way
work is done.
d. Establish reasonable goals for improvement.
e. Make it clear that management supports and encourage productivity improvement.
Consider giving incentive to reward workers for contributions.
f. Measure improvements and publicize them.

2. GOVERNMENT REGULATION
▪ On pollution control (standards on waste disposal, emission controls)
▪ Product safety (building, food and beverages, appliances, etc.)
▪ Consumers’ awareness
▪ Workers’ safety and hiring practices (DOLE, OWA, etc)

3. INTERNATIONAL SCOPE OF OPERATION

▪ Increases opportunities develop foreign markets, created additional sources for raw
materials and labor inputs, and force organizations to reassess their strategies
▪ Brought an increase of multinational companies (obtain raw materials from one
country, fabricate and process it in another country)

4. FOREIGN COMPETITION
Imported rice from neighboring Southeast Asian nations (especially Thailand and
Vietnam) is cheaper than locally-produced rice

5. QUALITY AND COST EFFECTIVENESS

Rice Production (Thailand vs. Phil. Vs. Vietnam)

6. TECHNOLOGICAL CHANGES
▪ Computerization
▪ Use/application of robotics
▪ Internet of things (online process and operations)

7. EMPLOYEE INPUT
▪ Consultation: form of suggestions, quality circles and other core groups
▪ Giving importance to employees’ viewpoint as part of the company’s decision
8. COMPETITIVENESS
Business organizations compete with one another in a variety of ways. Among these
are price, quality, product or service differentiation, flexibility, and delivery time.
a. Price – is the amount a customer must pay for the product or service
- generally relates to other factors of production
Organizations may settle for lower profit margins (however, most organizations
focus on lowering production costs.
b. Quality – refers to the materials and workmanship, as well as design
- generally relates to the buyers’ perceptions on how it served its purpose
c. Product Differentiation – refers to special features that cause a product or
service to be perceived by the buyers as more suitable than a competitor’s
product or service
- may include design, cost, quality, ease of use, convenient location, warranty
d. Flexibility – refers to the ability to respond to changes
- changes might relate to increase or decrease in volume demanded, changes in
product mix, or design change
e. Delivery units – refers to the length of time between placing an order and
receiving the product or service ordered

Although managers generally recognize some or all these factors, they do not always use them
for competitive advantage. Because of:
1. They are unsure of the mix of factors that matters most to buyers. So that they must be
carefully assessing buyer wants and needs.
2. They are unable to achieve desired levels of these factors. It must understand its markets
and be able to achieve suitable levels of quality, cost, delivery, time, differentiation, and
flexibility. Also be aware of what its competitors are doing in these areas, and perhaps
make some predictions about future behavior of competitors in order to have the necessary
time to respond.

9. STRATEGY – are plans for accomplishing goals

Long-term and should provide focus for achieving the mission of the organization.
Often, the success of an organization depends on how all the strategies match the
organization’s mission

Mission – describes the purpose of the organization, the reason for its existence, what business
is it in.
Example: Increase market share at the rate of 50% a year for the next five years

a. Corporate Strategy – also called company strategy

▪ The over-all strategy of an organization
▪ It provides the basis of the individual strategies of functional units (marketing, finance,
operations)

External factors that should be taken into account:

(These could have an impact on the organization)
1. Economic conditions – general condition of the economy, inflations and deflations, interest
rates, tax laws, tariffs
2. Political conditions – favorability of attributes towards business, political stability, wars
(peace and order)
3. Legal environment – government regulations, trade restrictions, wage laws, labor laws,
patents, etc.
4. Technology – refers to the product innovations, current and future process technology,
design technology
5. Competition – number and strength of competitors, basis of competition
6. Market – available consumer
 Internal factors:
1. Human resources – skills and abilities of managers, personnel, staff and workers 2.
Facilities and equipments - capacity, locations, age, cost to maintain, replacement,
significance to operations
3. Financial resource – cash flow, funding (capital)
4. Customers – loyalty, existing relationships, understanding of their wants and needs
5. Products and services – existing and potential
6. Technology – existing, ability to integrate to new technology, probable impact of technology
on current and future operations
7. Suppliers – dependability, quality, flexibility
- relationship with supplier

Decision areas for corporate strategy:

• Product and service selection
• Location of facilities
• Capacity
• Process selection
• Lay-out
• Human resource policies
• Bases of competition
• Technology
• Organization type

b. Operations Strategy – strategic decisions in operations generally relate to cost,

quality/reliability, flexibility, and availability

Lead time – the time needed to respond, say, or to change or with customer demand

PARETO PHENOMENON – “Things are not all equal; some things (a few) will be very important
in achieving an objective or solving a problem, and other things (many) will not”

References:
1. Operations Management.by: Stevenson,W.J. Seventh Edition. McGraw-Hill
2. Operations Research by: Hamdy Taha
ABE 137 Engineering Management

Module 1-B: FARM MANAGEMENT

Management – the process of optimizing human, material and financial contributions for the
achievement of organizational goals.
- The art of getting things done through other people. Managers achieve their goals by arranging
for others to perform whatever tasks may be necessary-not by performing the tasks themselves.
- Management is defined as the process of setting and achieving goals through the execution of
the management functions that utilize human, financial, and material resources.
- Process of planning, organizing, leading and controlling the efforts of organizational members
and the use of all available organizational resources in order to achieve the stated organizational
goals.
- Practice of consciously and continually shaping organizations.
- The effective and efficient use of scarce resources to achieve organizational goals.

Managers – people who are responsible for helping the organizational goal.

Characteristics of a Manager:
1. Assumes Responsibility
A manager is in charge of specific tasks and must see to it that they are done successfully.
The manager is usually evaluated on how well he/she arranged for these tasks to be
accomplished.
2. Must balance competing goals.
Each manager must strike a balance between goals and needs.
3. Conceptual Thinker
Every manager must be an analytical thinker; that is he/she must be able to think a specific,
concrete problem through and come up with a feasible solution for it.
4. Works with and through people (associates, supervisor and peers).
The manager works with anyone at any level in the organization who can help him/her achieve
unit or organizational goals.
5. Mediator
Disputes within a unit or organization can affect morale and productivity and may even cause
some competent employees to leave the organization. Settling disputes require skill and tact,
and a manager who is careless in handling such a problem may find that he or she has only
made it worse.
6. Politician
A manager, like a politician must use the arts of persuasion and compromise in order to
promote organizational goals.
7. Diplomat
The manager is the representative of his/her work unit at organizational meetings and dealing
with clients, customers, contractors, government officials and personnel of other organizations.
8. Makes difficult decisions.
No organization runs smoothly all the time. Managers are the people who are expected to come
up with solutions to difficult problems and to follow through on their decision even when doing
so, may be unpopular with some persons.

Managerial Roles:
Liaison – interpersonal role; act as go-between.
Monitor – informational role; check what is going on outside the relationship. Negotiator –
decisional role; discussing and debating on certain issues
FARM MANAGEMENT

- Study of the ways and means of organizing land, labor, and capital and the application of
technical knowledge and skill in order that the farm may be made to yield the maximum net
returns.
- It refers to the utilization of sound business principles and technical knowledge in the planning
and organization of a farm and the application of skill in its operation for the purpose of attaining
the largest continuous profit of the farmer as an individual.
- It is the art of applying business and scientific principles to the organization and management of
farm business enterprise for the purpose of securing the greatest continuous profit.

Functions of Farm Management:

1. Management of Labor
Selecting methods and practices and training labor to be used in performing various operations.
2. Making more or less short time minor adjustments in the proportion of the factors of production
and other parts of the farming program
This function refers to the making of adjustments from day to day or from week to week-
adjustments, which should not be postponed or adjustments of relatively minor importance.
Weather conditions and unexpected price or cost changes are the causes that commonly give
rise to such problems.
3. Controlling and directing the various resources
This could be related to #2, the problem of controlling and directing will be less complicated.
This is also related to solution of methods and practices, the problem of how operations are to
be performed.
4. Management of Capital and Management of Land (e.g. Buying and Selling)
5. Keeping records and accounts (e.g. Farm records and farm accounts)
6. Smooth operations
Seeing that the entire productive process proceeds smoothly from day to day throughout the
year.
Example: Use of implements, machinery, and labor must be planned so that each operation
maybe performed at the proper time and without unnecessary delays.
7. Noting tentative adjustments in the factors of production which seem desirable because of price
or market changes, savings of materials, utilization of waste or by-products, or introduction of
new methods and practices.

Management of Labor

Sources of Labor:
1. Family Labor – farm labor mainly supplied by the family circle.
2. Hired Labor – farm labor supplied from outside of the family.

Rules for Labor Management:

1. Plan a labor calendar, which will keep down the peak labor requirements
-an hour’s labor is worth much more in the rush seasons during harvest time, than of other times
of the year. “pakyawan”
2. Don’t do slack-season work during rush seasons
- put off manure hauling, fencing, cutting weeds in fence rows, etc. until times when there is less
to do.
3. Plan rainy-day work in advance
4. Exchange labor with neighbors
5. Cut chore labor to a minimum
6. Simplify and combine jobs whenever you can

7. To save labor on livestock, self-feed everything that you can

8. Use extra care in directing inexperienced labor
9. Select laborers carefully. Choosing the right people to the right job/work.
10. Clearly assign tasks, train and supervise labor with job analysis.
 11. Develop initiative, good-will, cooperation and respect.
12. Plan day to day utilization of labor, make day to day adjustments.
13. Provide social life.
14. Keeping a high grade labor on the farm such as giving out bonuses and profit sharing.

Classification of Farm Jobs:

1. Fieldwork: Fieldwork on crops should come first and must be done in clear weather with
moderately dry soil. Plowing, preparing the seedbed and planting crops must be done at just
the right time to be most effective.
2. Outside work that can be delayed: These includes tasks as hauling manure, building fences,
plowing, husking corn, outside repairs to buildings, equipment etc.
3. Work for rainy days: In order that no time will be wasted by downpour, indoor work such as
repairing machinery, sharpening mower sickles, and oiling machinery and harness should be
kept in mind.

Fundamental Factors Responsible for Farmers’ Success:

1. Selection of the right farm for the type and system of farming to fit the farm including the decision
on whether to buy or rent the farm.
2. Proper sizes of farm business will efficiently utilize the available labor, power, machinery
equipment and capital.
3. The relative importance of diversified enterprises will promote full use of the farm resources and
business stability, including adjustments necessary to meet prospective changes in the market.
4. The supply of adequate capital and utilization of credit.
5. A study of the best layout of the farm into fields or farmstead.
6. Proper provisions of buildings, equipment, irrigation and other farm requirements.
7. The importance given to conservation.
8. Importance of keeping adequate records to insure a reliable source of information for planning.
9. Proper attention to the marketing of produce and the purchase of farm supplies.
10. Day to day decisions that has to be made in the farm.

Classes of Risks in Agriculture

1. Those resulting from natural factors such as extreme weather conditions, fire, flood,
earthquakes, and pests and diseases.
2. Those arising from human factors such as carelessness, incompetence, dishonesty, theft, and
political disturbance.
3. Those arising from unpredictability of the market conditions.

Methods of Reducing Risks:

1. Insurance
2. Diversification
3. Future Contract – selling the product at current on agreed price delivering them in some future
time.
4. Flexibility – ease with which the organization of production can be changed.
5. Liquidity – the maintenance of balance of money or assets than can be readily converted into
cash.

Farm Planning and Budgeting

Use of Farm Plans

1. Serve as a yardstick for performance and accomplishment.
2. Serve as a guide or reminder on the schedule of activities.
3. Provide a basis for evaluation and improvement.
4. Serve as central facilitating aid

Operational Steps in Planning

1. Taking stacks of resources
 2. Review and analysis of alternatives
3. Deciding on alternatives and fitting them into one plan
4. Summarizing the resources requirement and output expectation

Elements in Complete Planning and Budgeting

1. Personnel Organization
2. Calendar of Operation
3. Schedule of Labor Requirements
4. Schedule of Supplies Required
5. Schedule of Expected Production and Income
6. Summary budget and test of success

Farm Records

Uses of Farm Records

1. Provide data for farm planning and budgeting
2. Aid to credit, insurance, taxes, and in preparing reports
3. Give data for group action on local or national programs
4. Provide information useful in property valuation

Steps in Taking Farm Inventory

1. List down all farm property
2. Put value on each item
3. List all farm debts and receivables
4. Summarize the information for farm analysis purpose

Methods of Valuation of Inventory

1. Original Cost – actual purchase cost
2. Normal market value – estimated average selling price over a number of years.
3. Present market value
4. Original cost less depreciation

Financial Analysis
current assets
a. Liquidity/Solvency Ratio: Current Ratio = current liabilities
ideal C.R. 2:1

current assets−invetories
b. Quick/Acid-Test Ratio: = current liabilities
Ideal Quick Ratio = >1:1

c. Net Working Capital = Current Asset – Current Liabilities

(amount of funds available for payment anytime)
ABE 139
Engineering Management

Module 1-C: Organization and Management

Organization - is a collection of people working together to achieve a common purpose. It is a unique

social phenomenon that enables its members to perform tasks far beyond the reach of individual
accomplishment.
Ex: corporations, small business, nonprofit orgs, government agencies, schools, hospitals,
etc.

Organizations affect most aspects of our lives: our communities, families & households, group
of friends, etc. We live in a world of managed organizations – large public orgs, small business, private
companies, clubs and people organizations, etc. Some organizations work efficiently, others are not.
Organizations also perform other functions, as well as economic ones. But, whatever its function, how
well an organization performs depends on those who work within it. Most of the time, it is the quality of
management which makes a difference between an organization that succeeds and ones that fail.

The broad purpose of any organization is to provide goods and services of value to customers
and clients. A clear sense of purpose is tied to “quality products and service”, “customer satisfaction”,
and “social responsibility” can be an important source or organizational strength and performance
advantage.

Some functions of organizations:

Functions Description Examples

1. Create wealth or Providing goods and Public and private
human well-being services or commercial orgs
2. Articulating and Support moral and other Charities, POs,
implementing ideas intangible needs NGOs
3. Gaining power to Provide political and Government, trade
protect interests economic resources and unions
opportunities
4. Give people work, Source of career/jobs, or Business orgs
status & social structure in life
contact

Organizational Performance: Environment and Productivity

Definition of Management:

Management is both a general human activity and a distinct occupation.

As human activity, people manage an infinite range of activity as well as economic ones
– getting things done with the aid of other people. The activity takes place in a great variety of
human circumstances – domestic, social, economic, political, as well as in formally established
organizations.

As a specialist occupation, management emerges when external agents, such as people

or capital, gain some control of a work process. They decide what to make, how to make it and
where to sell it. They also try to take control of the time, behavior and skills of workers.

Functional Specialization of Managers:

a. Functional Managers – those responsible for a single common activity within the
organization, such as personnel, research, marketing or production.
b. General Managers – typically head a complete unit of the organization, such as a decision
or a subsidiary, within which there will be several functions. The General Manager is
responsible for all the overall performance of the unit, and therefore, relies on the manager
in-charge of particular functions.
c. Line Managers – those in-charge of a function that is directly involved in making or supplying
products or services to the customers. Their performance has a significant impact on the
overall performance and image of the organization, as they and their staff are in direct
contact with the customers, or clients.
Example: In-charge of retail store, nurse stations, specific work department, manufacturing
area
d. Staff Manager – in charge of support functions such as finance, personnel, purchasing or
legal affairs. Their functions do not earn income directly for the organization and their staff
is not in direct contact to the customers and clients.
 e. Project Managers – are responsible for a temporary team that has been created to plan and
implement a change – a new product or system, for example. More common in engineering,
marketing, and research companies.

*In a management hierarchy, a manager may perform direct operation (functional, line, project
managers), manage staff on direct operation (staff/personnel managers), manage managers
(general managers, COO), or manage the business entirety (CEO, Board of trustees/directors)

Content, Scope and Functions of Management:

Management is the task of planning, organizing, leading and controlling the use of resources in order
to achieve some performance objectives, ex. produce goods and/or services.
1. Environment

Organizations depend on the external environment for the resources to sustain them. These
include finance, people, ideas, materials or information; as well as intangible resources such
as goodwill, licenses, permissions and authorizations to undertake certain activities.

2. Planning

This deals with the overall directions of the work to be done. It includes developing potential
resources, objectives, strategies, and targets for better performance. As more people and
interest become involved and the cost of resources increases, setting objectives, targets and
plans becomes more essential. Managers, therefore, invest time and effort in developing a
sense of direction for the organization, and express it in a set of objectives.

3. Organizing

This is an activity of moving abstract plans closer to realization, by deciding how to allocate
time and effort. It includes defining the primary business processes required to meet the
objectives, and deciding on the technologies and facilities needed.

4. Leading

This is the activity of generating effort and commitment towards meeting objectives. It
includes influencing and motivating other people to work in support of the plans. The more
complex an organization becomes, and subdivided into vertical and horizontal
specializations, the more task of securing commitment and action from all members of the
organization. Managers cannot assume that people under them will act as they would like
them to; as generally, people exercise choice over what they do at work.

5. Controlling

It is the process of monitoring events and measuring work performance, comparing results
to objectives and plan. This may lead to some corrective actions or change of plan in the
future implementation.
Organization Context of Management

There is a link between and among the managers, their organization and the external environment.

a. Objectives – sometimes called purpose or goals. It represent future desired state of the
organization, or part of it
b. Business processes – the activities that people and technologies perform on materials and
information to meet the objectives.
Ex: designing products, making the product, receiving orders, delivering, receiving
payment, etc.
c. Technology – the type and location of facilities, machinery, and information systems that
people use to transform inputs into useful outputs.
d. Finance – the financial resources available for the organization
e. Structure – the way tasks are divided and coordinated
f. People – their knowledge, skills, attitudes, and goals
g. Culture – norms, beliefs and underlying values that characterizes the unit
h. Power – the amount and distribution of identifiable sources of power and influence

*Gender in Organization
Many tasks are predominantly male or female occupations.
Ex: Women are much more likely than men to work as elementary & high school teacher,
nurses and librarians. They often do routine work and shop work, but rarely do what could
be defined as skilled manual work.

Gender segregation is both horizontal and vertical. Horizontal segregation occurs where men
and women are associated with different types of jobs. Even when male and female have the
same job title and formal role in the organization, they are likely to undertake different tasks and
responsibilities. This segregation may have been narrowed down de to automation and use of
more technology at work.

Vertical segregation occurs when men are preferred in higher ranks in the organization and
women in the lower. If women are confined to lower occupational positions and to less
responsible work, they will have fewer opportunities for professional growth and promotion.

Common Issues in the Management Process:

a. Talent

People and their talent – what they know, what they learn and what they do with it – are the
ultimate foundations of organizational performance.
Intellectual Capital – is the collective brainpower or shared knowledge of a workforce that
can be used to create value.
- it is a personal asset for individuals
- it is the package of intellect, skills and capabilities that differentiates people as
valuable to potential explorers
- it is the strategic asset for organizations
Intellectual Capital = Competency × Commitment

b. Technology

Tech IQ – a person’s ability to use technology and to stay informed on the latest
technological developments
- Is required in basic operations of the organizations and new ways of working as
more people spend at least part of their work time ‘telecommuting’ or in ‘mobile
offices’

c. Globalization

Globalization – is the worldwide interdependence of resources flows, product market, and

business competition.

*Countries and people are not just interconnected through the news, travels and lifestyles;
they are also interconnected in labor markets and employment patterns, and in financial and
business dealings.

In our global world, government leaders now worry about the competitiveness of nations,
just as corporate leaders worry about business competitiveness.

One controversial effect of globalization is job migration – the shifting of jobs from one
country to another.

d. Ethics

Ethics – the set of moral standards of what is “good” or “bad” in one’s behavior. *The socially
responsible and sustainable organizations are usually those that are exemplars of ethical
behavior and integrity.

e. Diversity

Workforce diversity – describes differences among workers in gender, race, age, ethnicity,
religion, sexual orientation, and able-bodiedness.
Prejudice – is the display of negative, irrational attitude towards members of diverse
populations
- it is the stage that set for diversity bias
Ex: working mothers may not be the best employees
Discrimination – an active prejudice when minority members are unfairly treted and
denied full benefits of organizational membership
Ex: Not promoting working mothers for fear that her parenting responsibilities
may make it hard for her to do the job well

Glass Ceiling Effect – a subtle form of discrimination that sets an invisible barrier or
“ceiling” that prevents women and minorities from rising above a certain level in the
organization
 f. Careers
Finding the career entry point is difficult. It is helpful to pursue internships as pathways to
first-job placements.

Essential Managerial Skills and Developing Managerial Potential

Skills – is the ability to translate knowledge into action that results in desired performance

1. Technical Skills – is the ability to use a special proficiency or expertise to perform particular
tasks
Ex: Accountants, engineers, nurses, doctors, teachers, marketing personnel, financial
planners, systems analyst, etc.

*Knowing how to write a business plan and use statistics to analyze business data,
preparing visual aids for presentation, etc are also technical skills

2. Human and Interpersonal Skills – also called ‘soft skills’, is the ability to work well in
cooperation with other people
- the foundation of emotional intelligence

Ex: ability to communicate, collaborate, network and engage with others in a spirit of trust,
enthusiasm, and positive impact

Emotional Intelligence – the ability to manage ourselves and our relationships effectively

3. Conceptual and Analytical Skills – also called ‘Critical Thinking’, it is the ability to think
creatively and analytically to diagnose and solve complex problems
- It involves the capacity to break problems into smaller parts, see the
relations between the parts and recognize the implications of any
problem
References:
1. Management: An Introduction by: David Boddy, 2 nd Ed.
2. Introduction to Management : John R. Schermerhorn, 12th Ed.
ABE 139
Engineering Management

Module 1-D: Theories and Models of Management

A model represents a more complex reality. Focusing on the essential elements and their relationship
helps us understand that complexity and how change may affect it. People develop models and
theories in response to circumstances – to the most pressing issues facing managers. However, most
management problems require several perspectives, so no single model offers a complete solution.

Management Perspectives:

Unitary
Someone who takes a unitary perspective tends to emphasize the common purpose of the
organization, and to believe that members share and accept this purpose. They expect members
to subordinate individual interests to the good of the whole. They see disagreement or dissent as a
sign of disloyalty or failure, and expect all parts to work together for the common good. They stress
the importance of loyalty to the leader.
Ex: a. Sporting teams’ “Let’s play to win”
b. Ship’s “We’re all in the same boat”

Pluralist
People who take this perspective see the organization as a coalition of interest groups. Each group
has its own objectives that will sometimes coincide and at other times conflict with those of other
groups. They see that members have personal goals and competing loyalties – to colleagues, their
profession, business unit, family or local community – as well as to the organization as a whole.
Pluralists expect that people will reflect these loyalties in debate within the organization about both
ends and means. Within reason, they see disagreement as a sign of strength, not a weakness.
Ex: Government & nations – in which different and equally legitimate views are resolved through
political systems and processes

Critical
Those who take the critical point of view believe organizations reflect deeper divisions and
inequalities in a society. They believe that organizations are not just vehicles for the efficient
delivery of services but are also tools for achieving personal or group interests. Some stakeholders
are more powerful than others, so that apparently democratic debate will always favor those in more
powerful positions.
Those with a critical perspective stress that underlying differences of power in organizations and
society; and believe that ‘rational’ methods attempt to disguise underlying sectional interests.

History and Theories of Management Thought:

A. Classical Management Approach
B. Behavioral Management Approach
C. Modern Management Approach

A. CLASSICAL MANAGEMENT APPROACH

Scientific Management
It emphasizes careful selection and training of workers and supervisory support.

In 1911, Frederick W. Taylor, considered as the Father of Scientific Management, published

his book The Principles of Scientific Management. According to him, “The principal object of
management should be to secure maximum prosperity for the employer, coupled with the
maximum prosperity to the employee”. He noticed that many workers did their jobs their own
ways and without clear and consistent approach. He believed this caused inefficiency and low
performance. He also believed that this problem could be corrected if workers were taught and
then helped by supervisors to always do their job in the right ways.

Taylor’s goal was to improve the productivity of people at work. He used the concept of “Time
Study” to analyze the motions and tasks required.

Motion Study – is the science of reducing a task to its basic physical motions

Insights of Scientific Management:

a. Make results-based compensation a performance incentive.
b. Carefully design jobs with efficient work methods.
c. Carefully select workers with the abilities to do these jobs.
d. Train workers to perform jobs to the best of their abilities
e. Train supervisors to support worker so they cn perform to the best of their abilities.

Administrative Principles

In 1916, French Henri Fayol published Administration Industrielle et Generale. It identifies the
5 rules or duties of Management: foresight, organization, command, coordination and control –
which became the foundation for the four functions of today’s management (planning,
organizing, leading and controlling)

a. Foresight – to complete a plan of action for the future

b. Organization – to provide and mobilize resources to implement the plan
c. Command – to lead, select, and evaluate workers to get the best work towards the plan
d. Coordination – to fit diverse efforts together and to ensure information shared and
problems solved
e. Control – to make sure things happen according to plan and to take necessary corrective
action.
Fayol believed that management can be taught and he introduce a number of ‘principles’ to
guide the managers in action. They include:
a. Scalar chain principle – there should be clear and unbroken line of communication
from the top to the bottom in the organization
b. Unity of command principle – each person should receive orders from only one boss
c. Unity of direction principle – one person should be in charge of all activities that have
the same performance objective.

3. Bureaucratic Organization
 Max Weber was a late 19th-century German intellectual whose insights had a major impact on
the field of management and the sociology of organizations. His ideas developed after noticing
organizations of his day often performed poorly. Among other things, he saw people holding
positions of authority not because of their capabilities, but because of their “privileged” social
status.

At the heart of Weber’s thinking was an ideal, intentionally rational, and very efficient form of
organization called bureaucracy. It was founded on the principle of logic, order, and legitimate
authority.

Bureaucracy – is a rational and efficient form of organization founded on logic,

order and legitimate authority.

Characteristics of a bureaucracy:
a. Clear division of labor – jobs are well done and workers become highly-skilled at performing
them
b. Clear hierarchy of authority – authority and responsibility are well-defined for each position
and each position reports to a higher-level
c. Formal rules and procedures – written guidelines direct behaviors and decisions in jobs and
written files are kept for historical record
d. Impersonality – rules and procedures are impartially and uniformly applied, with no one
receiving preferential treatment
e. Careers based on merit – workers are selected and promoted on ability, competency, and
performance, and managers are career employees of the organization

B. BEHAVIORAL MANAGEMENT APPROACHES

1. Organizations as communities

The work of Mary Parker Follett was part of an important transition from classical thinking into
behavioral management. In the book Mary Parker Follett-Prophet of Management: A
Celebration of Writings from the 1920s, Follett taught respect for the experience and knowledge
of worker, warned against the dangers of too much hierarchy, and called for visionary
leadership. Follett is considered as “one of the most important women America has produced in
the fields of civic and sociology”.

In her writing, Follett describe organizations as “communities” in which managers and workers
should labor in harmony without one party dominating the other, and with the freedom to talk
over and truly reconcile conflicts and differences.
 Follett’s emphasis on groups and her commitment to human cooperation are still highly relevant
themes today. From her teachings, it is believed that making every employee an owner in a
business would create feelings of collective responsibility – thus, the labels: employee
ownership, profit sharing and gain-sharing. And in today’s management, these are the labels
managerial ethics and corporate social responsibility.

Corporate social responsibility (CSR) – is the obligation of an organization to serve the

interest of society in addition to its own interests.
- It is in line with the concept of Sustainability which refers to high quality of
life for present and future generations.

2. Hawthorne studies

The shift towards behavioral thinking in management was given an important boost in 1924
when Western Electric Company commissioned a research group to study individual productivity
at the Hawthorne Works of the firm’s Chicago plant.

The Hawthorne studies applied a scientific management perspective to understand how

economic incentives and physical conditions of the workplace affected the output of the workers.
But after failing to find a link between improved lighting productivity, the researchers concluded
that unforeseen “psychological factors” somehow interfered with the experiments.

Harvard’s Elton Mayo conducted a study of worker’s fatigue and output. He designed a scientific
test that would be free from psychological effects, as earlier concluded by the previous studies.
Mayo and his colleague concluded that the new “social setting” created for workers in the test
room made them want to do a good job. Moreover, a study conducted on another group resulted
to their conclusion that groups can have strong negative, as well as positive, influence on
individual productivity.

The Hawthorne Studies pointed out the attention of managers and researchers toward social
and human factors as keys to productivity. They brought visibility to the notions that people’s
feelings, attitudes, and relationships with co-workers affected their work, and that groups were
important influences on individuals.

Hawthorne Effect – the tendency of people singled out for special attention to perform as
expected, as created by the situation

3. Theory of human needs

 Work psychologist Abraham Maslow in the area of human needs has also a major impact on
the behavioral approach to management. He describes need as a psychological deficiency that
a person wants to satisfy.

2 Underlying Principle:
a. Deficit Principle – a satisfied need is not a motivator of behavior. People act to
satisfy ‘deprived’ needs to be satisified.
b. Progression Principle – a need is activated only when the next-lower level need is
satisfied.

*Consistent with human relations thinking, Maslow’s Theory implies that managers who
understand and help people satisfy their important needs at work will achieve productivity.

4. Theory X and Theory Y

Douglas MacGregor was heavily influenced by both the Hawthorne studies and Maslow’s
theory. His book, The Human Side of Enterprise, advances the thesis that managers should
give more attention to the social and self-actualizing needs of people at work. He called upon
managers to shift their view of human nature away from the set of assumptions he called Theory
X and towards ones he called Theory Y.

According to MacGregor, managers holding Theory X assumptions approach their jobs

believing that those who work for them generally dislike work, lack ambition, are irresponsible,
are resistant to change, and prefer to be led rather than to lead. He considers such thinking as
inappropriate. He argues instead for Theory Y assumptions in which the managers believes
people are willing to work, capable of self-control, willing to accept responsibility, imaginative
and creative, and capable of self-direction.

5. Theory of adult personality

The ideas of Maslow and MacGregor inspired the well-regarded scholar and consultant Chris
Argyris. In his book Personality and Organization, he contrasts the management practices
found in the traditional and hierarchical organizations with the needs and capabilities of mature
adults.
 Argyris believes common problems of employee absenteeism, turnover, apathy, alienation, and
low morale may be signs of mismatch. And, he argues that managers who treat people positively
and as responsible adults will achieve the highest productivity.

C. MODERN MANAGEMENT FOUNDATIONS

The concepts, models and ideas in the scientific and behavioral approach in m

1. Quantitative analysis and tools

Analytics – is the systematic analysis of large databases to solve problems and make informed
decisions.

Typical quantitative approach in managerial problem solving:

Quantitative Approaches
a. Mathematical forecasting – makes future projections for reserve size
and depletion rates that are useful in planning process
b.Inventory Analysis – minimize left-over stocks and also avoid going out
of stock
c. Queuing theory – allocates service personnel and workstations based
Problem on alternatives workload demands and reduce customer waiting time
d.Linear programming – optimum allocation of production and
machineries
e. Network models – break large tasks into smaller components and
diagram then in step-by-step sequences that will help better analyze,
plan and control timetables for completion of activities

2. Organizations as systems

System - is a collection of interrelated parts working together for a purpose

Subsytem – is a smaller component of a larger system
Open System – interacts with its environment and transforms resources inputs into outputs
 3. Contingency thinking

Contingency thinking – tries to match management practices with situational demands

*There’s no “one best way” to manage in all circumstances. Rather, the
contingency perspective tries to help managers understand situational differences and
respond to them in a way that fit their unique characteristics.

4. Quality management

The work of W. Edwards Deming is a cornerstone of the quality movement in management.

Deming’s approach to quality emphasizes use of statistical methods, commitment to training in
the fundamentals of quality assurance, and constant innovation.

Total Quality Management – is an organization-wide commitment to continuous

improvement, product quality and customer needs

Continuous Improvement – involves always searching for new ways to improve work quality and
performance

5. Knowledge management and organizational learning

Knowledge management – is the process of using intellectual capital for competitive advantage.
It describes the process through which organizations use information technology
to develop, organize, and share knowledge to achieve performance success.
 The knowledge management officer is responsible for energizing learning process
and making sure that an organization’s intellectual assets are well-managed.
These assets include patents, intellectual property rights, trade secret and special
processes and methods.

6. Evidence-based management

Evidence-based management – involves making decisions based on hard facts about what
really works.

References:
1. Management: An Introduction by: David Boddy, 2nd Ed.
2. Introduction to Management : John R. Schermerhorn, 12th Ed.

-ER Lapong-

ABE 139
Engineering Management
Module 2: Management Functions - PLANNING

PLANNING - is the process of setting objectives and determining how best to accomplish them
(deciding exactly what you want to accomplish & how best to go about it) *It sets the stage
for the others by providing sense of direction

Plan – is a statement of intended means for accomplishing objectives.

Objectives and Goals – are specific results that one wishes to achieve.
Stretch Goals – are performance targets that we have to work extra hard and
stretch to reach.

Importance of Planning:
When planning is done well, it creates a solid platform for the other management functions. It
helps with organizing (allocating and arranging resources to accomplish tasks), leading
(guiding the efforts of human resources to ensure high levels of task accomplishment), and
controlling (monitoring task accomplishments and taking necessary corrective actions)

The Planning Process:

1. Define your objectives

Identify desired outcomes or results in very specific ways. Know where y0u want to go; be specific
enough that you will know you have arrived when you get there, or know how far off the mark you
are at various points along the way
2. Determine where you stand vis-à-vis objectives
Evaluate current accomplishments relative to the desired results. Know ehere you stand in reaching
the objectives; know what strengths work in your favor and what weaknesses may hold you back.
3. Develop premises regarding future conditions
Anticipate future events. Generate alternative „scenarios‟ for what may happen; identify for each
scenario things that may help or hinder progress towards your objective.
4. Analyze alternatives and make a plan
List and evaluate possible actions. Choose the alternative most likely to accomplish your objectives;
describe what must be done to follow the best course of action
5. Implement the plan and evaluate results
Take action and carefully measure your progress towards objectives. Follow by doing what the plan
requires; evaluate results, take corrective actions, and revise plans as needed.

Planning should focus attention on objectives and goals that identify the specific results or
desired outcomes that one intends to achieve. But the objectives and goals have to be good ones and
they should push you to achieve substantial, not trivial things.

It is also important not to forget the action side of planning. The process should always create
a real and concrete plan, a statement of action steps to be taken in order to accomplish objectives and
goals. These steps must be clear and compelling, so that the all-important follow through takes place.
 Plans alone don’t deliver results; implemented plans do. The best planning includes the
active participation of those people who work efforts will eventually determine whether or not plans get
put into actions successfully.

It‟s also important to remember that planning is not something managers do only on occasion. It is
an ongoing process, done continuously while dealing with busy and demanding work setting.

Benefits of Planning:

The pressure of planning comes from many sources. And planning for such conditions has a
number of benefits for both the organization and individuals.

Externally, organizations are subjected to changing norms and ethical standards/ expectations,
government regulations, uncertainties of global economy, changing technologies, and the cost of
investments in labor, capital and other supporting resources.

Internally, pressure factors include the goal of operating efficiently, new structures, new
technologies, alternative work arrangements, greater workplace diversity, and concerns for work-life
balance.

1. Planning improves focus and flexibility

 An organization with focus knows what it does
best, knows the need of its customers,
and knows how to serve them well.
 An individual with focus knows where he
/she wants to go in a career or situation,
and in life overall.
 An organization with flexibility is willing and
able to change and adapt to shifting
circumstances without losing focus, and it
operates with an orientation towards the
future rather than the past
 An individual with flexibility adjusts
career plans to fit new and developing
opportunities.

2. Planning improves action orientation

 Planning focuses our attention on priorities
that helps avoid the complacency trap.

Complacency trap – being carried along by the flow of events

 It is the way for people and organizations to stay ahead of the competition and become better
at what they are doing,
 Planning keeps the future visible as a performance target and reminds us that the best
decisions are often those made before events force problems upon us.

3. Planning improves coordination and control

 The individuals, groups, and subsystems in an organization are ach doing many different
things at the same time. But their efforts must also be combined into meaningful contributions
to the organizations as a whole.
 When planning is done well, it facilitates control. The link between planning and controlling
begins when objectives and standards are set. They make it easier to measure results and
take action to improve things as necessary.
 Without planning, control lacks objectives and standards for measuring how things are going
and identify what could be done to make them go better. Without control, planning lacks the
necessary follow-up to ensure that things work out as planned. With both, it‟s a lot easier to
spot when things aren‟t going well and make the necessary adjustments.
Types of Plans Used by Managers:

1. Long-range and Short-Range Plans

Long-range plan – three or more years into the future

Short-range plan – one year or less

➢ In this modern times, there is a lot less permanency to long-term plans and that they re subject
to frequent revisions
➢ Top management is responsible for setting longer-term plans and directions for the
organization; and they set the context for lower management to work on useful shortterm plans
➢ Everyone should understand the organization‟s long-term plans and objectives. Without the
sense of long-term direction, people can end up working hard and still not achieve significant
results.

2. Strategic and Tactical Plans

Strategic plans – identifies long-term directions

Tactical plans – helps to implement all or parts of a strategic plan

Vision – a statement that expresses what it hopes to be in the future, and clarifies the purpose of
the organization
Mission – a statement that gives action to the Vision statement and quantify or qualify the purpose
of the organization

➢ Strategic Plans focused on the organization as a whole or a major component of it. They are
longer-term plans that set broad action directions and create a frame of reference for allocating
resources for maximum performance impact.
➢ Strategic Plans ideally set the goals and objectives needed to accomplish the organization‟s
vision.
➢ Tactical plans specify how the organization‟s resources can be of use to put strategies in
action.
 ➢ Tactical Plans, in business organizations, often take form of functional plans that indicate how
different components of the enterprise will contribute to the overall strategy.

Types of Function Plans:

a. Production plan – work methods and methodologies
b. Financial Plan – money and capital investments
c. Facilities Plan – facilities and work layouts
d. Logistics Plan – suppliers and acquiring resource inputs
e. Marketing Plan – selling and distribution of goods and services
f. Human Resource Plan – building a talented workforce

3. Operational Plans
❖ It identifies short-term activities to implement strategic plans
❖ It includes both standing plans (e.g. policies and procedure) that are used over and over
again, and sing-use plans (e.g. budgets) that apply to one specific task or time period.

a. Policies and Procedures

Policy – is a standing plan that communicate broad guidelines for decisions and action,
usually for specific circumstances
*Organizations operate with many policies and they set expectations for many aspects
of employee behavior. Typical human resource policy cover things like employee hiring,
termination, performance appraisals, pay increases, promotions, and discipline.

Procedure – a rule describing actions that are to be taken in various specific situations
*Procedure, usually in the form of Standard Operating Procedure (SOP) support the
policy statement by establishing in-place guidelines and specifics

b. Budget
This is a single-use plan that commits resource for specific time periods to activities,
projects, or programs.

 Managers usually spend a fair amount of time bargaining with higher levels to get
adequate budget to support the needs of their work units or teams. They are also
expected to achieve work objectives while keeping within the allocated budget.
 For business enterprise, to be “Over-budget” is generally bad; to be “Underbudget” is
generally good.

a. Financial Budget – project cash flows and expenditure

b. Operating Budget – plot anticipated sales or revenues, against period of operation
c. Non-monetary Budget – allocate resources like labor, equipment, and space
d. Fixed Budget – allocates a stated amount of resources for a specific purpose
e. Flexible Budget – allows resources to vary in proportion with various levels
of activity, such as having extra money to hire temporary workers
when workloads exceed a certain level

Zero-based Budget – allocates resources as if each budget were brand new

- it deals with this roll-over budget
- in ZBB, there is no guarantee that any past funding will be renewed. All
proposals, old and new, must compete for available funds at the start of each
new budget cycle

Planning Tools and Techniques:

Planning delivers the most benefits when its foundations are strong.

1. Forecasting – the process of predicting, what will happen in the future

a. Qualitative Forecasting – uses expert opinion to predict the future
 b. Quantitative Forecasting – uses mathematical models and statistical analyses of historical
data and surveys to predict future events. *Although useful, all forecast should be treated
cautiously. They are planning aids, not substitute. They rely on human judgment, and they can
be wrong.

2. Contingency Planning – identifies alternative courses of action to take when things go wrong or
when circumstances change.
- Back-up plans/ or plans

3. Scenario Planning – is a long-term version of contingency planning

- It identifies alternative future scenarios and makes plans to deal with each
*Best use to tackle issues as climate change, sustainable development, fossil-fuel alternatives,
human rights, and biodiversity.
*Most typically, it involves the “Best case” and “Worst case” scenarios.

4. Benchmarking – the use of external and internal comparisons to better evaluate one‟s current
performance and identify possible ways to improve for the future. *The purpose of benchmarking
is to find out what other people and organization are doing very well, and then plan how to
incorporate these ideas into one‟s own operations. It is basically a way of learning from the
success of others.
*One benchmarking technique is to search for the Best Practices – things people and organizations
do that help them achieve superior performance.

5. Staff Planning – used to bring focus and expertise to a wide variety of planning tasks.
- usually between staff planners and line managers

Implementation Plans to Achieve Results:

1. Goal setting

Great goals ten to have the following characteristic:

a. Specific – clearly targeted key results and outcomes to be accomplished
b. Timely – linked to specific timetables and „due dates‟
c. Measurable – described so results can be measured without ambiguity
d. Challenging – include a stretch factor that moves toward real gains
e. Attainable - although challenging, realistic and possible to achieve

2. Goal Alignment

It is one thing to set goals and make them part of plan. It is quite another to make sure that
goals and plans are well integrated across the many people, work units and levels of an
organization, as a whole. Goals set everywhere in the organization should ideally help
advance its overall mission or purpose. Yet, people sometimes work very hard to accomplish
 things that simply don‟t make much of a difference in organizational performance. This is why
goal alignment is an important part of managerial planning.

Hierarchy of goals/objectives helps with goal alignment. When such hierarchy is well-defined,
the accomplishment of lower-level goals is the means to the accomplishment of higher-level
goals.

3. Participation and Involvement

Planning is a process, not an event. „Participation‟ and „Involvement‟ are two of its core
components.

Participatory Planning – includes in all planning steps the people who will be affected by plans
and those will implement them.

*One of the things that research is most clear about is that when people participate in
setting goals, they gain motivation to work hard to accomplish it. Whether the planning
is for a team, a large division, or the entire organization, involving people goes a long
way toward gaining their commitments to work hard and support the implementation of
plans.

*There are many benefits when and if this participatory planning approach is followed in
practice. Participation can increase the creativity and information available for planning.
It can also increase the understanding and acceptance of plans, as well as commitment
to their success. And even though participatory planning takes time, it can improve
performance results by improving both the quality of any plans made and the
effectiveness of their implementation.

The SWOT Analysis

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a
company's competitive position and to develop strategic planning. SWOT analysis assesses internal
and external factors, as well as current and future potential.

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and
weaknesses of an organization, its initiatives, or an industry. The organization needs to keep the
analysis accurate by avoiding pre-conceived beliefs or gray areas and instead focusing on real-life
contexts. Companies should use it as a guide and not necessarily as a prescription.

• SWOT analysis is a strategic planning technique that provides assessment tools.

• Identifying core strengths, weaknesses, opportunities, and threats lead to fact-based analysis,
fresh perspectives and new ideas.
• SWOT analysis works best when diverse groups or voices within an organization are free to
provide realistic data points rather than prescribed messaging.
 References:
1. Introduction to Management : John R. Schermerhorn, 12th Ed.
2. Management: An Introduction by: David Boddy, 2nd Ed.

-ER Lapong-

ABE 139 Engineering Management

Module 3: Management Function - ORGANIZING

ORGANIZING - is the process of arranging people and other resources to work together to
accomplish a goal
- Its purpose as one of the basic management functions is to create a division
of labor and then coordinate results to achieve a common purpose

Organizational Structure – a way in which various parts of an

organization are arranged
- is a system of tasks, workflows, reporting relationships, and communication
linkages

*An organizational structure helps to

implement an organization’s
strategy an goals/objectives

a. Formal structures – shows how the organization is intended to function. - It is

represented by an Organization Chart

Organizational Chart – diagram that represents the relationships and arrangement

of work positions.
- Typically, it identifies positions and job titles, as well as line of
authority and communication between them -
Basic Components of Formal Structure
i. Division of work – positions and titles show work responsibilities ii.
Supervisory relationships – lines shows who report to whom iii.
Communication channels – lines show formal communication flow iv. Major
subunits – positions reporting to a common manager v. Levels of
management – vertical layers of management

✓ Even though organization charts are supposed to be helpful, the reality is that
they sometimes don‟t make sense. They may be out of date or they may be just
plain confusing.
 A formal organization

b. Informal Structures – is a set of informal relationships among an organization‟s

members
- It is a „shadow‟ organization made up of unofficial, but often critical,
working relationships between
organization‟s members

✓ If informal structure could be drawn, it would show who talks and interacts with
whom, regardless of their titles and relationship.
✓ The line of the informal structure would cut across levels and move from side to
side. They would show people meeting for coffee, exercise and leisure groups,
and friendship cliques.

An informal ‘organization’ (bounded positions)

Social Network Analysis – a tool that identifies the informal structures and their
embedded social relationship. Such analysis would ask people to identify others
whom they turn for help most often, with whom they communicate regularly, and who
give them energy and motivation.

Major Types of Organizational Structures:

A. Traditional Organizational Structures (Vertical OS)
B. Horizontal Organizational Structures

A. Traditional Organizational Structures

1. Functional Structures – structure where people with similar skills and performing similar
tasks are grouped together into formal work units. Members of functional structure share
technical expertise, interests and responsibilities.

Advantages:
✓ Economies of scale with efficient use of resources
✓ Task assignments consistent with expertise and training
 ✓ High-quality technical solving
✓ In-depth training and skill development within functions
✓ Clear career paths within functions

Disadvantages:
 Difficulty in pinpointing responsibilities for common things like cost, product or service
quality, etc.
 Since focus is on specific departments or functional units, the “big picture” issues can
easily get neglected.
 May result to functional chimneys or functional silos problem – a lack of
communication, coordination, and problem solving across functions.

2. Divisional Structures – structures that groups together people working on the same
product, in the same area, with similar customers, or on the same processes.

a. Product Structures – group together jobs and activities focused on a single product or
service
b. Geographical Structure – also called Area structures, groups together people and jobs
performed in the same location
c. Customer Structures – groups together people and jobs that serve the same customers
or clients
d. Process Structures – groups together jobs and activities that are part of the ame process.

Advantages:
✓ More flexibility in responding to environmental changes
✓ Improved coordination across functional departments
✓ Clear points of responsibility for product or service delivery
✓ Expertise focused on specific customers, products and regions
✓ Greater ease in changing size by adding or deleting divisions

Disadvantages:
 They can reduce economies of scale and increase costs through duplication of resources
and efforts across divisions.
 Can create unhealthy rivalries as divisions compete for resources and top management
attention
 Emphasize division need ov.er the goals of the organization as a whole.

3. Matrix Structures - also called matrix organization, combines the functional and divisional
structures
- It is an attempt to gain the advantages and minimize the disadvantages
of each
 - Its main benefit rest with the teams whose members work closely
together to share expertise and information

Advantages:
✓ Better communication and cooperation across functions
✓ Improved decision making and problem solving takes place at the team level where
the best information is available
✓ Increased flexibility in adding, removing, or changing operations to meet changing
demands
✓ Better customer service; there is always a program, product or project manager
informed and available to answer questions
✓ Better strategic management; top managers are freed from lower-level problem
solving to focus time on more strategic issues

Disadvantages:
 Two-boss system is susceptible to power struggles if functional supervisors and
team leaders compete with one another to exercise authority
 Two-boss system can frustrate if it creates task confusion and conflicting work
priorities.

B. Horizontal Structures – aims in better cross-functional integration in an organization

1. Team Structures – uses permanent and temporary cross-functional teams to improve

lateral relations

*Cross-functional team – brings together members from different functional depts.

*Project teams – are conveyed for a particular task or project and disband once it is
completed

Advantages:
 ✓ Putting people into teams and giving them goals to work on together breaks down
barriers and mobilizes talents.
✓ Shared knowledge and expertise on specific problems can improve performance by
increasing the speed and quality of decisions in many situations.
✓ May boost morale and members experience greater sense of task involvement and
identification; hence, increases enthusiasm for the job

Disadvantages:
 Conflicting loyalties for persons with both teams and functional assignments
 May also affect time management and group process (many meetings may prove to be
unproductive )

In Team Structures, the quality of outcomes depends a lot on how well tasks,
relationships, and overall team dynamics are managed. The challenges can be
mastered with the right team talents and leadership.

2. Network Structures – uses information technologies to link with networks of outside

suppliers and service contractors
- Instead of doing everything for itself with full-time employees, the network
organization employs a minimum staff and contracts out as much as
possible – done usually through strategic alliance

Strategic Alliance – is a cooperation agreement with another organization to jointly

pursue activities of mutual interests

Advantages:
Network structures are lean and streamlined. They help organizations stay cost-
effective by reducing overhead costs and increasing operating efficiency.

Disadvantages:
 The more complex the organization, the more complicated it is to control and
coordinate the network contracts and alliances.
 The organization may lose control over activities contracted out.
 If one part of the network breaks down or fails to deliver, the entire system will suffer

3. Boundaryless Structures – eliminates internal boundaries among subsystems and external

boundaries with the external environment

*Virtual Organization – uses IT and the Internet to engage

a shifting network of strategic alliances
- Takes the concept of Boundaryless Structures to the extreme
Ex: Social media communities – Facebook, LinkedIn, Twitter, etc. Online
selling platforms – Shopee, Lazada, Shop Suki, etc
Organizational Designs - it is the process of creating (choosing and implementing) structures that
accomplish mission and objectives

a. Contingency in Organizational Design

Bureaucracy is a vertical structure, and its distinguishing features include a clear-cut division
of labor, strict hierarchy of authority, formal rules and procedures, and promotion based on
competency.

*Bureaucracy emphasizes formal authority, order, fairness and efficiency.

b. Mechanistic and Organic Design

Mechanistic Design – it‟s centralized, with rules and procedures, a clear-cut division of
labor, narrow spans of control, and formal coordination.
- highly bureaucratic, and is described as “tight” structures of the
traditional pyramid form
-
Organic Design – is decentralized, with fewer rules and procedures, open divisions of labor,
wide spans of control and more coordination
- it create Adaptive organizations (operates with minimum bureaucratic
features and encourages worker empowerment and teamwork

c. Trends in Organization Designs

The complexity, uncertainty and change inherent in today‟s environment are prompting
more and more organizations to shift toward horizontal and organic structures.

i. Fewer levels of management

Chain of command – the line of authority that vertically link each position with higher level
of management
Span of control – the number of persons directly reporting to a manager
Tall structure – have narrow spans of control and many hierarchical levels Flat
structure – have wide spans of control and few hierarchical levels

ii. More delegation and empowerment

Delegation – is the process of distributing and entrusting work to other persons

Empowerment – allows other make decisions & exercise discretion in their work

iii. Decentralization with centralization

Centralization – is the concentration of authority for most decisions at the top level of the
organization
Decentralization – is the dispersion of authority to make decisions throughout all levels of
the organization

iv. Reduce use of staff

Staff positions – provide technical expertise for other parts of the organization
 References:
1. Introduction to Management : John R. Schermerhorn, 12th Ed.
2. Management: An Introduction by: David Boddy, 2 nd Ed.

-ER Lapong-

ABE 139 Engineering Management

Module 4: Management Function - LEADING

“You manage things, you lead people”

- Grace Hopper, management expert and first female admiral in the US Navy

“The present moment is the domain of mangers; the future is the domain of leaders”
- Barry Posner, Leadership scholar and consultant

LEADING - is the process of inspiring others to work hard and to accomplish important tasks

A. Leadership and Power

Leadership success begins with the ways a manager uses power to influence the behavior of other
people. Accordingly, it is a concern that too many people, managers included, are uncomfortable with
the concept of power that they don’t realized how indispensable it is to leadership.

Power – is the ability to get someone else to do something you want done, or to make things
happen the way you want. And, the “positive” face of power is the foundation of effective
leadership. This means using power not with the desire to influence others for the sake of
personal satisfaction. It means using power to influence others for the good of the group or
organization as a whole.
Anyone in a managerial position theoretically has power, but how well it is used vary from one
person to another. Leaders gain power both from the positions they hold and their
personal qualities.

A. Bases of Position Power

1. Reward power – ability to influence through rewards

➢ It is the capacity to offer something of value – a positive outcome – as a means
of influencing another person’s behavior.
➢ This involves use of incentives such as pay raises, bonuses, promotions, special
assignments, and verbal or written compliments.
➢ However, this approach can work well only as long as people want the reward
and the manager or leadermakes it continuously available. But take the value of
the reward or the reward itself away, and the power is quickly lost.

2. Coercion power – is the ability to influence through punishment.

➢ It is the capacity to punish or withhold positive outcomes as a way to influence
the behavior of other people.
➢ A manager or leader may attempt to coerce someone by threatening him or her
with verbal reprimands, pay penalties, and even termination.
➢ You’ll most likely resent both the threat and the person making it. You might act
as requested or at least go through the motions. But you’re unlikely to continue
doing so once the threat no longer exist.

3. Legitimate power – is the ability to influence through authority.

➢ It is the right by virtue of one’s organizational position or status to exercise
control over persons in subordinate positions.
➢ Ex: When the instructor assigns course homework; most often, you do what is
required. But if the Instructor tells you to attend an event or program not related
to the subject, the legitimacy of the order is lost and your compliance is much
less likely.

B. Bases Personal Power

Position power is not sufficient for

any manager. It’s very often the amount
of personal power you can mobilize
through expertise and reference
that make the difference between
success and failure in a leadership
situation.

1. Expert power – is the ability to influence through special skills, knowledge, and
information.
➢ It is the capacity to influence other people because of expertise.
➢ When the manager uses expert power, the implied message is: “You should do
what I want because of what I know”.
 ➢ Expertise can be gained from experience and accomplishments, as well as
access to useful information.
➢ It is maintained by protecting one’s credibility by not overstepping boundaries
and pretending to expertise that isn’t there.
➢ Some people are granted at least temporary expertise due to credentials, such
as doctors, lawyers and engineers – they can quickly lose it through mistakes
and bad behavior.
➢ Most of us acquire expertise at work one step at a time.
➢ Gaining expertise, in fact, maybe one of the biggest early career challenges.
2. Referent power – is the ability to influence through identification
➢ It is the capacity to influence the behavior of other people because they admire
you and want to identify positively with you.
➢ Reference is power derived from charisma or interpersonal attractiveness.
➢ When a manager uses referent power, the implied message is: “You should do
what I want in order to maintain a positive, self-defined relationship with me”
➢ It is helpful to defined referent power as something that can be developed and
maintained trough good interpersonal relationships, ones that encourage the
admiration and respect of others.
➢ Simply put, it’s a lot easier to get people do what you want when they like you
than when they dislike you.

B. Leadership and Vision

“Great leaders get extraordinary things done in organizations by inspiring and motivating others
toward a common purpose”. In other words, they use their power exceptionally well; and that use
of power is associated with Vision – a future that one hopes to create or achieve in order to improve
upon the present state of affairs.
But simply having the vision of a desirable future is not enough. Truly exceptional leaders area
really good at turning their visions into accomplishments.

Visionary Leadership – describes a leader who brings to the situation a clear and compelling
sense of the future, as well as an understanding of the actions needed to get there successfully.
This means having the clear vision, communicating the vision, and getting people motivated and
inspired to pursue the vision in their daily work.

Visionary Leadership gives meaning to people’s work; it makes what they does seem worthy and
valuable.

“The job of a good leader is to articulate a vision that others are inspired to follow.”
– Lorraine Monroe, noted educational leader.
 “Effective leadership means having a lot of people working toward a common goal”. If you can
achieve that with no one caring who gets the credit, you’re going to accomplish a lot.

C. Leadership as Service

“Institutions function better when the idea, the dream, is to the fore, and the person, the leader, is
seen as servant to the dream.
- Robert Greenleaf, Greenleaf Center for Servant Leadership

“Real leaders are servants of the people they lead. A really great boss is not afraid to hire smart
people. You want people who are smart about things you are not smart about” - Lorraine
Monroe, Monroe Leadership Institute

When thinking about leadership, power and vision, it is important to remember personal integrity.
“Service” is central to integrity; and leaders who have integrity act as “servant of the
organization”.

Servant Leadership is based on serving others and helping them fully use their talents so that
organizations benefit society. In Servant Leadership, the more important is not the leader, but the
followers. A servant leader is “other-centered” and not “self-centered”.

When a leader shifts the focus away from himself and shift towards others, empowerment takes
place.

Empowerment is the process of allowing others to exercise power and achieve influence within
the organization. It enables others to gain and use decision-making power.

Servant leaders realize that power in an organization is not a “zero-sum” quantity. They reject the
idea that in order for one to gain power, someone else needs to give it up. They empower others
by providing them with the information, responsibility, authority, and trust to make decisions and
act independently.

Leadership Traits and Behaviors

For centuries, people have recognized that some person perform very well as leaders, and other
do not. Why? Historically, the issue has been studied from the perspective of the trair, behavioral,
and contingency approaches.

1. Leadership Traits

What personal traits and characteristics are associated with leadership success?

The “Great Person Theory” found out that physical characteristics of a person such as height,
weight, and physique make no difference in determining leadership success. An extensive study
found that followers rather consistently admire leaders who were honest, competent, forward-
looking, inspiring, and credible.

Some personal traits of many successful leaders are:

a. Drive – successful leader have high energy, display initiative and are tenacious
b. Self-confidence – successful leaders trust themselves and confident in their abilities
c. Creativity – successful leaders are creative and original in their thinking
d. Cognitive ability – successful leaders have their intelligence to integrate and interpret
information
e. Job-relevant knowledge – successful leaders know their industry and its technical
foundations
f. Motivation – successful leaders enjoy influencing others to achieve shared goals
g. Flexibility – successful leaders are trustworthy; they are honest, predictable and
dependable
 2. Leadership Behavior

How is leadership success affected by the way leaders behave when engaging with followers?

Two dimension of leadership behavior:

a. Concern for the task to be accomplished

A leader high in concern for task plans and defines the work to be done, assign task
responsibilities, sets clear work standards, urges task completion and monitors performance
results.

b. Concern for the people doing the work

A leader high in concern for people acts with warmth and supportiveness toward followers,
maintain good social relations with them, respects their feelings, is sensitive to their needs,
and shows trust in them.

Researchers eventually moved toward the position that effective leaders were high in
concern for both people and tasks.

In the Robert Blake and

Jane Mounton’s Leadership
Grid, the preferred combination
of “high-high”
leadership is called the “Team
Manager”. The leaders share the
decisions with team members,
empowers them, encourage
participation, and supports
teamwork.

Leadership style – the recurring pattern of behaviors exhibited by leaders. When people
talk about their leaders with whom they work, even today, their vocabulary often describes
classic styles of leadership from the behavioral theories.

Classic Leadership Styles:

1. Autocratic style – “authority-obedience manager”
emphasizes task over people, retains authority and information and acts in
unilateral, command-and-control fashion
2. Human relations style – “Country club manager”
does just the opposite of authority style, and emphasizes people over tasks
3. Laissez-faire style – “Impoverished manager”
shows little concern for the task, lets the group make decision, and acts with
a “do the best you can and don’t bother me” attitude
4. Democratic style – “Team manager”
Is committed to both task and people. This leaders tries to get things done
while sharing information, encourages participation in decision-making,
and otherwise helps others develop thir skills and capabilities.

Contingency Approaches to Leadership

1. Fiedler’s Contingency Model (Fred Fiedler)

Which leadership style best work in the different types of situations that leaders face?

Fiedler proposed that leadership depends on a match or fit between a person’s leadership style
and situational demands. He believed that leadership style is part of one’s personality and is
 difficult to change. Thus, he didn’t place much hope in trying to train leaders to behave in
different ways. He, instead suggested that leadership success comes from putting our existing
styles to work in situations for which they are the best fit. This requires both self-awareness of
one’s leadership style and a good understanding of the situational strengths and weaknesses
of that style.

2. Hersey-Blanchard Situational Leadership Model

How should leaders adjust their leadership styles according to the task readiness of
followers?

In contrast of Fiedler’s notion that leadership style is hard to change, the HerseyBlanchard
situational leadership model suggests that successful leaders do adjust their styles. But they do
so wisely and based on the task readiness, or task maturity – of the followers.

Four leadership styles to choose from:

a. Delegating – allowing the group to

take responsibility for the task
decisions: a lowtask, low- relationship
style
b. Participating – emphasized
shared ideas and participative
decisions on task directions: a
low-task, high relationship style
c. Selling – explaining task directions in
a supportive and persuasive
way: a hightask, high- relationship
style
d. Telling – giving specific task
direction and closely supervising
work: a high-task, low-relationship style

3. Path-Goal Leadership Theory (Robert House)

How can leaders use alternative leadership styles to add value in different types of situations?

This theory seeks the right fit between leadership style and situation. Unlike Fiedler, House
believes that a leader can use all of the following leadership styles and actually shift back and
forth among them:

a. Directive leadership – letting followers know what is expected: giving directions on what
to do and how, scheduling work to be done, maintaining definite standards of
performance, clarifying the leader’s role in the group.

b. Supportive leadership – doing things

to make work more pleasant, treating team
members as equals, being friendly and
approachable, showing concern
for the well-being of
subordinates.
c. Achievement-oriented leadership –
setting challenging goals, expecting the
highest levels of performance, emphasizing
continuous improvement in
performance, displaying
confidence in meeting high
standards
 d. Participative leadership – involving team members in decision-making, consulting with
them and asking for suggestions, using the suggestions when making decisions

4. Leader-Member Exchange Theory (LMX Theory)

How do in-group and out-group dynamics influence leader-follower relationship?

One noticeable things is the tendency of leaders to develop “special relationship with some of
the team members, sometimes to the point where not everyone is treated in the same way”

LMX Theory recognizes that not everyone is treated in the same way by the leader. People fall
into “in-groups” and “out-groups”.; and the group you are in make a big difference in your
experience with the leader. “In-group” experiences and enjoy special treatment and trusted high-
exchange relationships with the leaders and often get special rewards, assignments, privileges,
and access to information. For someone in the “Outgroup”, it is frustrating to receives less
rewards, less information and little to no special attention.

(By Abraham Maslow and Clayton Alderfer)

5. Leader-Participation Model (Vroom-Jago Model)

How should leaders make decisions in different types of problem situations?

This model links leadership success with the use of alternative decision-making methods. It
suggests that leaders are most effective when they make decisions in ways that best fit the
problem.
Categories of leader’s decision-making alternatives:

a. Authority decision – is made by leader and communicate to the group

➢ Works best when leaders have the expertise needed to solve the problem
and are confident and acting alone.
➢ Also works best when followers are submissive and likely to accept and
implement the leader’s decision, and when there is little or no time
available for group decision.
b. Consultative decision – is made by the leader after gathering information and advice
from others
➢ Works best when leaders lack the expertise and information needed to
solve the problem.
➢ Also works best when he problem is unclear, follower acceptance is
uncertain but necessary in the implementation.
c. Group decision – is made by the group with the leader’s support as a contributing
Member
➢ Works best under situations like in Consultative decisions.
Personal Leadership Development

1. Charismatic and Transformational Leadership

Charismatic Leaders – inspires followers in extraordinary ways

➢ Charisma, together with other several personalities qualities, i.e.
honesty, credibility and competence, should be developed with foresight
and practice.
➢ Charismatic qualities like enthusiasm and inspiration is linked with transformational
leadership – which most leaders lack

Ex: Martin Luther King Jr. – a Christian minister and Civil Rights leader. He delivered his
“I Have A Dream” speech in August 1963, which became the mantra of Civil Rights
movements (ultimately the US Congress passed the Civil Rights Act in 1964). King
received the Nobel Peace Prize in 1965.

2. Emotional Intelligence and Leadership

Emotional Intelligence – is the ability to understand and manage emotions in yourself and
others and use this understanding to handle social relationship effectively.
3. Gender and Leadership

Gender similarities hypothesis – holds that male and female have similar psychological
properties
➢ Men and women can be equally effective leader
➢ Men and women are sometimes perceived as using
somewhat different styles, and perhaps arriving at leadership success from different
angles According to research:
 Men are usually expected to be a “Take-charge” leader who are task-oriented, directive,
and assertive while trying to get things done. Women are usually “Takecare” leaders who
behave in supportive and nurturing ways.
 Women leaders are viewed as more participative than male leaders, and rated as strong
in motivating others, emotional intelligence, persuading, fostering communication, listening
to others, mentoring, and supporting high-quality work.
 Women are attributed to “Interactive leadership” in which leaders are strong in
communication and act democratic and participate with followers.
 Men are, accordingly, better in “visioning”, maybe because women are perceived as less
directive, as leaders.
4. Moral Leadership

This is the leadership with ethical standards that clearly meet the test if being “good”
and “correct”

Anyone in a leadership position will ideally practice high ethical standards of

behavior, try to build and maintain an ethical organizational culture, and both help
and require others to behave ethically in their work. Unfortunately, facts don’t
support this aspiration.

Moral leadership begins with personal integrity. Leading with integrity means acting
in an honest, credible and consistent manner in putting one’s values into action.
When a leader has integrity, he earns the trust of his followers.

5. Drucker’s “Old-Fashioned” Leadership (Peter Drucker)

It is a pragmatic view of
leadership.

Drucker believes that the basic

building block for success as a
leader is defining and establishing a
sense of mission. A good leader
sets the goals, priorities, and
standards; and keeps it clear and
visible. He also stressed the
importance of earning and
keeping the trust of others – the
key of which is the leader’s
personal integrity.

References:
1. Introduction to Management : John R. Schermerhorn, 12th Ed.
2. Management: An Introduction by: David Boddy, 2 nd Ed.

-ER Lapong-
Page
 Page

ABE 139 Engineering Management

Module 5: Management Function - CONTROLLING

CONTROLLING - is the process of measuring performance and making sure things

turn out as intended.

Role of controlling in the management process

When the subject of control is brought up, discussion often take on negative
connotation. There are so many controls around us that are seen as impediment
our freedom (e.g. speed limits, school work, laws, etc.).

From business perspective, however, control needs to be viewed in light of

what it can do to make our operations more efficient, effective and successful.
Organizations need to control their product offerings to match the market. They
also need to exercise control in a order to ensure that they are moving in a
direction that is in line with the goals of the organization.
Ex: Nissan, a global leader in vehicle manufacturing, imposed restrictions and
high degree of control over its production. When designing a new car, the
company should be keenly aware of the needs and desires of the consumers
in different countries and not just focus on technology and innovation.

Managerial control is all about how to make sure things go right for the organization,
even as they deal with a lot of complexities. The control process is one of the
ways managers help the organization best use its resources and systems to
achieve productivity.

Controlling sees to it that the right things happen, in the right things happen in
the right way, and at the right time. It helps ensure that the performance is
consistent with the plans, and that accomplishments throughout an organization
are coordinated in a means-end manner. It also help ensure that people comply
with the organizational policies and procedures.

One of the great benefits of effective control is organizational learning. One

control program is after-action review - a systematic assessment of lessons
learned and results accomplished in a completed project. It answers the
questions: What was the intent? What actually happened? What did we learn?
I. Types of Controls

A. Open-systems Control – one of the best ways and perspectives to understand

control

1. Feedforward Controls – also called preliminary control and preventive in nature

➢ ensures that directions are clear, that proper directions are

established, and that the right resources are available to
accomplish the objectives take place before the work activity
begins
➢ managers using them take a forward-thinking and proactive
approach to control
Ex: Food chains (MacDonald, Jollibee, etc) take preliminary control of
food ingredients to ensure food quality. They requires their suppliers
to deliver ingredients (buns, chicken, drink concentrate, etc) in exact
specifications, covering from size, texture, uniformity of color and
freshness

2. Concurrent Controls – also called steering control

➢ focuses on what happens during the work process

➢ they make sure things are being done according to plan and
maybe done through direct supervision (face-to-face)
➢ the goal is to solve problems as they occur and answers the
questions: “What can we do to improve right now”

Ex: Car manufacturing and assembly line, customized goods

3. Feedback Controls – also called post-action control

➢ focus on the quality of end results rather than on inputs and

activities
➢ takes place after an action is completed
 ➢ are largely reactive, the goals are to solve problems after they
occur and prevent future one
➢ have weak points from a customer service perspective
➢ feedback about mistakes already made may not help to
correct it but it can help improve things in the future

Ex: Restaurants, service products, budget overruns

B. Internal and External Control

➢ Management approach that allow and expect people to control

their own behavior- Internal Control
➢ It can structure situations to make sure things happen as
planned External Control, i.e. bureaucratic or administrative
control, clan or normative control, market or regulatory control

1. Self-control

We do internal control in our daily lives. We do so with regard to managing

our daily schedule, our eating and drinking habit, our money, our relationship,
etc. and managers can take advantage of this human capacity for self-control
by unlocking, allowing, and supporting it.

This means helping people to be good at self-management, giving

them freedom, and encouraging them to exercise self-discipline in
performing their jobs. Any workplace that emphasizes participation,
empowerment and involvement will rely heavily on self-control.

Managers can gain a lot by assuming people are ready and willing to
exercise self-control in their work. But an internal control strategy requires
a high degree of trust. When people are willing to work on their own and
exercise self-control, managers must have the confidence to give them the
freedom to do so.

Self-control is most likely when the process of setting objectives and

standards is participative. The potential for self-control also increases when
capable people have clear sense of organizational mission and have the
resources necessary to do their jobs well. It is also further enhanced by
inclusive organizational cultures in which everyone treats each other with
respect and consideration.

It’s also important to think about self-control as a personal capacity, even a

life skill. How good are you at taking control of your time and maintaining a
healthy work-life balance? Do you ever wonder who’s in control – you or your
smart phone? It used to be that some people took work home in briefcase, did
a bit, closed the case up, and took it back to office the next day. Now, work is
always there, on the computer, in our emails, and text messages. It’s habit-
forming and some of us handle this better than the others.
 2. Bureaucratic Control – influences behavior through authority, policies,
procedures, job descriptions, budgets, and day-to-day supervision – to make
sure that people act in harmony with organization’s interests
➢ the goal is to make sure members behave towards one another
respectfully and with no suggestion pressures and improprieties.
➢ may also come from laws and regulations in the organization’s
external environment

3. Clan Control – influences behavior through norms and expectations set by

the organizational culture
➢ also called normative control
➢ it harnesses the power of group cohesiveness and collective
identity
➢ it happens as persons who share values and identity strongly
with one another behave in consistent ways

4. Market Control – is essentially the influence of market competition on the

behavior of organizations and their members
Business firms show the influences of market control in the way
that they adjust products, pricing, promotions, and other
practices in response to customer feedback and what
competitors are doing

Ex: a growing emphasis on organic products and environment-friendly practices

II. The Control Process

The four steps in the control process

Step 1. Establish Objectives and Standards

The control process begins with planning, when performance objectives and
standards for measuring them is set. It can’t start without them. Performance
objectives identify key results that one wants to accomplish. The focus in planning
should be on describing “critical” or “essential” results that will make a substantial
performance difference. Once these key results are identified, standards can be set
to measure their accomplishment.

Output Standards
It measures actual outcomes or work results. Businesses may use output
standards such as earning per share, sales growth, and market share. Others
include quantity and quality production, costs incurred, service or delivery time and
error rates.

Input Standards
It measures work efforts that go into a performance task.
These are common in situations where outputs are difficult or expensive to
measure Examples:
a. A college professor might include in his standards the existence of an
orderly course syllabus, meeting all class sessions, and returning exams
and assignments in timely manner
b. at work: conformance to rules, efficiency in the use of resources, and work
attendance

Step 2. Measure Actual Performance

It is the point where output standards and input standards are used to
carefully document results.
Performance measurements in the control process must be accurate enough
to spot significant differences between what is really taking place and what
was originally planned. Without measurement, effective control is not
possible.

*”What gets measured happens”

*”If it is not documented, it did not happen.”

Step 3. Compare Results with Objectives and Standards

This control process is to compare objectives with results, as represented by

the control equation;

Need for Action = Desired Performance - Actual Performance

Desired Performance may be determined by:

A. Engineering comparisons
Ex: United Parcel Service (UPS) carefully measures the routes and
routines of its drivers to establish the times expected for each delivery.
When a delivery manifest is scanned as completed, the driver’s time is
registered in a performance log that is closely monitored by supervisors.

B. Historical comparisons
Ex: Past experiences becomes the baseline for evaluating current
performance
 C. Relative Comparisons
Ex: benchmark performance achieved by other people, work units, or orgs

Step 4. Take Corrective Action

It is the final step on the control process taken to correct problems or make
improvements.

Management by exception - is the practice of giving attention to situations that

show the greatest need for action. It saves time, energy, and other
resources by focusing attention on high-priority areas.

Two Types of Exceptions:

1. Problem Situations
➢ where actual performance is less than desired
➢ it must be understood so that corrective action can restore
performance to the
desired level.

2. Opportunity Situations
➢ where actual performance turns out higher/better than what was
desired
➢ it must be understood with the goal of continuing or increasing the
high level of accomplishment in the future.

III. Control Tools and Techniques

A. Project Management and Control

Project - complex one-time events with unique components and an objective

that must be met within a set time.

Project management - is the responsibility for overall planning, supervision,

and
control or projects. A project manager’s job is to ensure that a project is
well planned and then completed according to plan - on time, within
budget, and consistent with the objectives.

Project Management Techniques:

1. Gantt Chart
 graphical display of the scheduling of tasks that go into completing a
project.
 developed by Henry Gantt, an industrial engineer
 a tool that becomes a mainstay of project management
  this visual overview of what needs to be done on a project allows for
easy progress to be made at different time intervals
 it also helps with the event or activity sequencing to make sure that
things get accomplished in time for later work to build upon them

2. CPM/PERT
(Critical Path Method / Program Evaluation and Review Technique)
 a more advanced use of the Gantt Chart
 uses a network chart: the activities and sub-activities are the “nodes”
and the arrows between nodes show the “order” things must be done
 the full diagram shows all the interrelationships that must be
coordinated for the entire project to be successfully completed

The use of CPM/PERT

technique helps project
managers track activities to
make sure they happen in the
right sequence and on time.
The pathway from the start to
the conclusion that
involves the longest
completion time is called the
critical path. It represents the
quickest time in which the entire
project can be finished, assuming everything goes according to
schedule and plans.

B. Inventory Control

The goal of inventory control is to make sure that any inventory is only big
enough to meet immediate needs.

1. Economic order quantity

form of inventory control that automatically orders a fixed number of
items every time an inventory level falls to a predetermined point.
The order sizes are mathematically calculated to minimize
inventory costs (Ex: local supermarket)
 2. Just-in-time scheduling

This system reduces costs and improves workflow by scheduling materials to

arrive at a workstation or facility just in time for use. JIT nearly eliminates the
carrying costs of inventories, hence, it is an important business productivity
tool.

C. Breakeven Analysis

It is used in management to perform what-if calculations under different

projected cost and revenue conditions.

Breakeven Point = Fixed Cost / (Price - Variable Cost)

Ex: Given a supposed target price per unit of the product, fixed costs
(production costs), and variable cost (marketing), what is the volume of
production/sales to breakeven?

D. Financial Control

The foundation for analysis using financial control rests with the firm’s balance
sheet and income statement.

Balance Sheet - shows assets and liabilities at a point in time

* shown in Assets = Liabilities format
 Income Statement - shows profits or losses at a point in time
* displayed in Sales - Expenses = Net Income format

Managers should be able to use information from balance sheets and income
statements to understand a firm’s financial performance. Financial controls of
this nature often involve measures of liquidity, leverage, asset management,
and profitability

❖ Liquidity
Liquidity - ability to generate cash and pay bills
- measures ability to meet short-term obligations
*Current Ratio = Current Assets / Current Liabilities
*Quick Ratio or Acid Test = Current Assets - Inventories/Current
Liabilities

❖ Leverage
Leverage - ability to earn more in returns than the cost of debt
- measures use of debt
*Debt Ratio = Total Debts/Total Assets

❖ Asset Management
Asset Management - ability to use resources efficiently & operate at min.
cost
- measures asset and inventory efficiency
*Asset Turnover = Sales/Total Assets
*Inventory Turnover = Sales/Average Inventory
Higher is better: You want more sales relative to assets and inventory

❖ Profitability
Profitability - ability to earn revenues greater than the cost
- measures ability to earn revenues greater than costs
*Net margin = Net income / sales
*Return on Assets (ROA) = Net income / Total assets
*Return on Equity (ROE) = Net income / Owner’s Equity
Higher is better: You want high net income relative to sales, assets & equity.
 Financial ratios are very common in executive dashboards that organize
business intelligence information for decision-making. The ratios lend
themselves nicely to visual displays that provide neat historical comparisons
within the firm and for industry benchmarking. They can also be used to set
financial targets or goals to be shared with employees and tracked to indicate
performance success or failure.

E. Balance Scorecards

Balanced Scorecards are tallies of organizational performance in financial,

customer service, internal process, and innovation and learning areas.
It gives top managers a fast, but comprehensive view of the business.

Questions used to develop specific scorecard goals and measures:

1. Financial Performance
Questions:
i. How well do our actions directly contribute to improved financial
performance?
ii. To improved financially, how should we appear to our stakeholders?
Sample goals: survive, succeed, prosper
Sample measures: cash flow, sales growth and operating income, increased
market share, return of equity

2. Customer Satisfaction
Questions:
i. How well do we serve our customers and clients?
ii. To achieve our vision, how should we appear to our customers?
Sample goals: new products, responsive supply
Sample measures: percentage sales from new products, percentage on-
time deliveries

3. Internal Process Improvement

Questions:
i. How well do our activities and processes directly increase the value we
provide our customers and clients?
ii. To satisfy our customers and shareholders, at what internal business
processes should we excel?
Sample goals: manufacturing excellence, design productivity, introduction of
new product
Sample measures: cycle times, engineering efficiency, new product time

4. Innovation and Learning

Questions:
i. How well are we learning, changing and improving things over time?
ii. To achieve our vision, how will we sustain our ability to change and
improve?
Sample goals: technology leadership, time to market
Sample measures: time to develop new technologies, new product
introduction time versus competition
References:
1. Introduction to Management : John R. Schermerhorn, 12th Ed.
2. Management: An Introduction by: David Boddy, 2nd Ed.

-ER Lapong- Page

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PRODUCTION MANAGEMENT

• OPTIMIZATION
o Optimization problem
▪ Maximizing or minimizing some function relative to some set, often representing
a range of choices available in a certain situation. The function allows
comparison of the different choices for determining which might be “best”
o Common applications
▪ Minimal cost, maximal profit, minimal error, optimal design, optimal management,
variation principles

o Goals of the subject

▪ The understanding of modeling issues …
• What to look for in setting up an optimization problem?
• What features are advantageous or disadvantageous?
• What devices/tricks of formulation are available?
• How can problems usefully be categorized?

▪ Analysis of solutions…
• What is meant by a “solution”?
• When do solutions exist, and when are they unique?
• How can solutions be recognized and characterized?
• What happens to solutions under perturbations?

▪ Numerical methods…
• How can solutions be determined by iterative schemes of computation?
• What modes of local simplification of a problem are
convenient/appropriate?
• How can different solution techniques be compared and evaluated?

o Distinguishing features of optimization as a mathematical discipline:

▪ Descriptive → prescriptive
▪ Equations → inequalities
▪ Linear/nonlinear → convex/nonconvex
▪ Differential calculus → subdifferential calculus

• OPTIMIZATION PROBLEMS

Many important applied problems involve finding the best way to accomplish some task. Often
this involves finding the maximum or minimum value of some function: the minimum time to
make a certain journey, the minimum cost for doing a task, the maximum power that can be
generated by a device, and so on. Many of these problems can be solved by finding the
appropriate function and then using techniques of calculus to find the maximum or the
minimum value required.

Generally, such a problem will have the following mathematical form: Find the largest (or
smallest) value of 𝑓(𝑧) when 𝑎 ≤ 𝑧 ≤ 𝑏. Sometimes a or b are infinite, but frequently the real
world imposes some constraint on the values that z may have.

Such a problem differs in two ways from the relative maximum and minimum problems we
encountered when graphing functions: We are interested only in the function between a and b,
and we want to know the largest or smallest value that 𝑓(𝑧) takes on, not merely values that
are the largest or smallest in a small interval. That is, we seek not a relative maximum or
minimum but a global (or absolute) maximum or minimum.
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 GUIDELINES FOR SOLVING OPTIMIZATION PROBLEMS:
1. Identify what is to be maximized or minimized and what the constraints are.
2. Draw a diagram (if appropriate) and label it.
3. Decide what the variables are and in what units their values are measured in. for
example, A for area in square meters, r for radius in inches, C for cost in Euros. In other
words, if the problem does not introduce these variables, you need to do so.
4. Write a formula for the function that is to be maximized or minimized.
5. Use the given constraint to express the formula from Step 4 in terms of a single
variable, namely something like 𝑓(𝑧) or 𝐴(𝑧), 𝐶(𝑧)… Whatever name is appropriate.
Then identify the domain of this function, which is typically [a,b] or (a,b).
6. Find the critical points of 𝑓. Compare all critical values and endpoints (or perhaps
*ambot d mabasa* or curve sketching if the interval is open) to determine the absolute
extrema of 𝑓.
7. Provide your solution meaningfully, which includes unit(s).

• FORECASTING
o What is Forecasting?
▪ Determining future event s based on historical facts and data
▪ Process of predicting a future event based on historical data
▪ Educated guessing
▪ Underlying basis of all business decisions
• Production
• Inventory
• Personnel
• Facilities

o Some thoughts on forecasts

▪ Forecasts tend to be wrong!
▪ Forecasts can be biased! (marketing, sales, etc.)
▪ Forecasts tend to be better for near future

o So, why forecast?

▪ Better to have “educated guess” about future than to not forecast at all!
o Realities of Forecasting
▪ Forecasts are seldom perfect
▪ Most forecasting methods assume that there is some underlying stability in the
system
▪ Both product family and aggregated product forecasts are more accurate than
individual product forecasts

o Importance of forecasting in OM
▪ Departments throughout the organization depend on forecasts to formulate and
execute their plans.
• Finance needs forecasts to project cash flows and capital requirements.
• Human resources need forecasts to anticipate hiring needs.
• Production needs forecasts to plan production levels, workforce, material
requirements, inventories, etc.
• What departments in your university needs to forecast?
▪ Demand is not the only variable of interest to forecasts.
• Manufacturers also forecast worker absenteeism, machine availability,
material costs, transportation and production lead times, etc.
• Besides demand, service providers are also interested in forecasts of
population, of other demographic variables, of weather, etc.

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o Types of forecasts by time horizon

o How to Forecast?
▪ Qualitative Methods
• Based on educated opinion and judgement (subjective)

▪ Quantitative Methods
• Based on data (objective)

o Forecasting Approaches
▪ Qualitative
• Used when situation is vague and little data exist
• New products
• New technology
• Involves intuition, experience
• E.g. forecasting sales on internet

▪ Quantitative
• Used when situation is “stable” and historical data exist
• Existing products
• Current technology
• Involves mathematical techniques
• E.g. forecasting sales of color televisions

▪ Qualitative Methods
• Executive Judgment
• Sales Force Composite
• Market Research/Survey
• Delphi Method
▪ Quantitative Methods
• Time series & regression
• Time series → popular forecasting approach in operations management
• Assumption:
o “patterns” that occurred in the past will continue to occur in the future
• Patterns
o Random variation
o Trend
o Seasonality
o Composite
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• LINEAR PROGRAMMING
o Linear Programming Method of Project Selection
▪ Linear programming method is a type of constrained optimization method of project
selection. In this method, you look towards reducing the project cost by efficiently
reducing the duration of the project. You look for running an activity in its normal
time or the crash time. The crash time of the activity enables you to reduce the
activity time or the project as a whole.

o What is a Linear Program?

▪ A linear program is a mathematical model that indicates the goal and requirements
of an allocation
▪ Linear Programming (LP) is a mathematical procedure for determining optimal
allocation of scarce resources.

o Properties of LP Models
▪ Seek to minimize or maximize
▪ Include “constraints” or limitations
▪ There must be alternatives available
▪ All equations are linear

o Linear Programming Problems

▪ The maximization or minimization of some quantity is the objective in all linear
programming problems
▪ All LP problems have constraints that limit the degree to which the objective can
be pursued.
▪ A feasible solution satisfies all the problem’s constraints.
▪ An optimal solution is a feasible solution that results in the largest possible
objective function value when maximizing (or smallest when minimizing).
▪ A graphical solution method can be used to solve a linear program with two
variables.
▪ If both the objective function and the constraints are linear, the problem is referred
to as a linear programming problem.
▪ Linear functions are functions in which each variable appears in a separate term
raised to the first power and is multiplied by a constant (which could be).
▪ Linear constraints are linear functions that are restricted to be “less than or equal
to”, “equal to”, or “greater than or equal to” a constant.

• PERT/CPM
o CPM/PERT or Network Analysis as the technique is sometimes called, developed along
two parallel streams, one industrial and the other military

o CPM (Critical Path Method) was the discovery of M.R.Walker of E.I.Du Pont de Nemours
& Co. and J.E.Kelly of Remington Rand, circa 1957. The computation was designed for
the UNIVAC-I computer. The first test was made in 1958, when CPM was applied to the
construction of a new chemical plant. In March 1959, the method was applied to
maintenance shut-down at the Du Pont works in Louisville, Kentucky. Unproductive time
was reduced from 125 to 93 hours.

o PERT (Project Evaluation and Review Technique) was devised in 1958 for the
POLARIS missile program by the Program Evaluation Branch of the Special Projects
office of the U.S.Navy, helped by the Lockheed Missile Systems division and the
Consultant firm of Booz-Allen & Hamilton. The calculations were so arranged so that they
could be carried out on the IBM Naval Ordinance Research Computer (NORC) at
Dahlgren, Virginia.

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 o The methods are essentially network-oriented techniques using the same principle. PERT
and CPM are basically time-oriented methods in the sense that they both lead to
determination of a time schedule for the project. The significant difference between two
approaches is that the time estimates for the different activities in CPM were assumed to
be deterministic while in PERT these are described probabilistically. These techniques
are referred as project scheduling techniques.

o In CPM activities are shown as a network of precedence relationships using activity-

on node network construction
▪ Single estimate of activity time
▪ Deterministic activity times
▪ USED IN: Production management - for the jobs of repetitive in nature where the
activity time estimates can be predicted with considerable certainty due to the
existence of past experience.

o In PERT activities are shown as a network of precedence relationships using activity-

on arrow network construction
▪ Multiple time estimates
▪ Probabilistic activity times
▪ USED IN: Project management - for non-repetitive jobs (research and
development work), where the time and cost estimates tend to be quite uncertain.
This technique uses probabilistic time estimates.

o Benefits of PERT/CPM
▪ Useful at many stages of project management
▪ Mathematically simple
▪ Give critical path and slack time
▪ Provide project documentation
▪ Useful in monitoring costs

o Limitations of PERT/CPM
▪ Clearly defined, independent and stable activities
▪ Specified precedence relationships
▪ Over emphasis on critical paths

o Applications of CPM/PERT
These methods have been applied to a wide variety of problems in industries and have
found acceptance even in government organizations. These include:
▪ Construction of a dam or a canal system in a region
▪ Construction of a building or highway
▪ Maintenance or overhaul of airplanes or oil refinery
▪ Space flight
▪ Cost control of a project using PERT/COST
▪ Designing a prototype of a machine
▪ Development of supersonic planes

• QUEUING THEORY
o Mathematical analysis of queues and waiting times in stochastic systems
▪ Used extensively to analyze production and service processes exhibiting random
variability in market demand (arrival times) and service times.

o Queues arise when the short-term demand for service exceeds the capacity
▪ Most often caused by random variation in service times and the times between
customer arrivals
▪ If long term demand for service > capacity the queue will explode
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o Capacity problems are very common in industry and one of the main drivers of process
redesign
▪ Need to balance the cost of increased capacity against the gains of increased
productivity and service
o Queuing and waiting time analysis are particularly important in-service systems
▪ Large costs of waiting and of lost sales due waiting

o Commercial Queuing Systems

▪ Commercial organizations serving external customers
▪ Ex. Dentist, bank, ATM, gas stations, plumber, garage
o Transportation service system
▪ Vehicles are customers or servers
▪ Ex. Vehicles waiting at toll stations and traffic lights, trucks or ships waiting to be
loaded, taxi cabs, fire engines, elevators, buses
o Business-internal service system
▪ Customers receiving service are internal to the organization providing the service
▪ Ex. Inspection stations, conveyor belts, computer support
o Social service systems
▪ Ex. Judicial process, the ER at a hospital, waiting lists for organ transplants or
student dorm rooms

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o Components of a Basic Queuing Process

▪ The calling population

• The population from which customers/jobs originate
• The size can be finite or infinite (the latter is most common)
• Can be homogeneous (only one type of customers/jobs)
▪ The arrival process
• Determines how, when and where customer/jobs arrive to the system
• Important characteristics is the customers’/jobs’ inter-arrival times
• To correctly specify the arrival process requires data collection of interarrival
times and statistical analysis
▪ The queue configuration
• Specifies the number queues
o Single or multiple lines to a number of service stations
• Their location
• Their effect on customer behavior
o Balking and reneging
• Their maximum size (# of jobs the queue can hold)
o Distinction between infinite and finite capacity

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o The service mechanism
▪ Can involve one or several service facilities with one or several parallel service
channels (servers)
▪ Specification is required
▪ The service provided by a server is characterized by its service time
• Specification is required and typically involves data gathering and statistical
analysis
• Most analytical queuing models are based on the assumption of
exponentially distributed service times, with some generalizations.

o The queue discipline

▪ Specifies the order by which jobs in the queue are being served
▪ Most commonly used principles is FIFO
▪ Other rules are, for example, LIFO, SPT, EDD
▪ Can entail prioritization based on customer type

o MITIGATING EFFECTS OF LONG QUEUES

▪ Concealing the queue from arriving customers
• Ex. Restaurants divert people to the bar or use pagers, amusement parks
required people to buy tickets outside the park, broadcast news on TV at
various stations along the queue, casinos snake night club queues through
slot machine areas.

▪ Use the customer as a resource

• Ex. Patient filling out medical history form while waiting for physician

▪ Making the customer’s wait comfortable and distracting their attention

• Ex. Complementary drinks at restaurants, computer games, internet
stations, food courts, shops, etc. at airports

▪ Explain reason for the wait

▪ Provide pessimistic estimates of the remaining wait time

• Wait seems shorter if a time estimate is given

▪ Be fair and open about queuing disciplines used

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