ENGINEERING MANAGEMENT

Functions of management

AIMS AND OBJECTIVES

This lesson is intended to introduce to the students about the different functions of
management. After studying this lesson you will be able to:

1. Briefly describe the term-management

2. Discuss various managerial function
3. Explain different steps to be followed by a manager while performing
controlling operation
4. Differentiate between coordination and communication
5. Explore the nature of planning in an organization
6. Describe - objectives, policies and decision making concept
7. Understand the need of globalization for an International firm

INTRODUCTION

Management is an activity consisting of a distinct process which is primarily

concerned with the important task of goal achievement. No business enterprise can
achieve its objectives until and unless all the members of the enterprise make an
integrated and planned effort under the directions of a central coordinating agency.
This central coordinating agency is technically known as 'management' and the
methodology of getting things done is known as 'management process'.

The process of management involves the determination of objectives and putting

them into action. According to McFarland, "Management is the process by which
managers create, direct, maintain and operate purposive organizations through
systematic, coordinated and cooperative human effort".

According to G. R. Terry -"Management is a distinct process consisting of planning,

organizing, actuating and controlling, performed to determine and accomplish stated
objectives by the use of human beings and other resources". Under management as
a process, management is considered as a continuing activity made up of basic
management functions. The process is on going and continuing. It assumes a cyclical
character.

1. Planning: Denotes the determination of short-to-long-range plans to achieve

the objectives of organization.
 2. Organizing: Indicates the development of sound organization structure
according to predetermined plans.
3. Direction: Means stimulating and motivation of personnel of the organization
according to predetermined plans.
4. Controlling: Offers assurance that directs action i.e., plan- in-action, is taking
place as per plan.

We have an ongoing cycle of planning - action - control – re-planning. Control

function closes the system loop by providing adequate and accurate feedback of
significant deviations from planned performance in time. Feedback can affect the
inputs or any of the managerial functions or the process so that deviations can be
removed and goals can be accomplished.

MANAGERIAL FUNCTIONS

A manager is called upon to perform the following managerial functions:

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Motivating
6. Controlling
7. Co-coordinating and
8. Communicating.

Planning: When management is reviewed as a process, planning is the first function

performed by a manager. The work of a manager begins with the setting of objectives
of the organization and goals in each area of the business. This is done through
planning. A plan is a predetermined course of action to accomplish the set objectives.
It is today's projection for tomorrow's activity. Planning includes objectives,
strategies, policies, procedures, programmes e.t.c. As it involves making choices,
decision-making is the heart of planning.

Organizing: Organizing includes putting life into the plan by bringing together
personnel, capital, machinery, materials etc., to execute the plans. While, planning
decides what management wants to do, organizing provides an effective machine for
achieving the plans.

Staffing: Staffing involves filling the positions needed in the organization structure
by appointing competent and qualified persons for the job. This needs manpower
planning, scientific selection and training of personnel, suitable methods of
remuneration and performance appraisal.
Directing: Direction involves managing managers, managing workers and the work
through the means of motivation, proper leadership, effective communication as well
as co-ordination. A manager must develop the ability to command and direct others.

Motivating: Motivation is a managerial function to inspire and encourage people to

take required action. Motivation is the key to successful management of any
enterprise. Motivation can set into motion a person to carry out certain activity.

Controlling: Control is the process of measuring actual results with some standard
of performance, finding the reason for deviations of actual from desired result and
taking corrective action when necessary. Thus, controlling enables the realization of
plans. A manager must adopt the following steps in controlling:

1. Identify potential problems.

2. Select mode of control.
3. Evaluate performance in terms of planning.
4. Spot significant deviations.
5. Ascertain causes of deviations.
6. Take remedial measures.

Co-ordination: Co-ordination is concerned with harmonious and unified action

directed toward a common objective. It ensures that all groups and persons work
efficiently, economically and in harmony. Co-ordination requires effective channels
of communication. Person-to-person communication is most effective for
coordination.

Communication: It means transfer of information and under-standing from person

to person. Communication also leads to sharing of information, ideas and
knowledge. It enables group to think together and act together.

PLANNING

Planning means looking ahead. It is deciding in advance what is to be done. Planning

includes forecasting. According to Henry Fayol - "purveyance, which is an essential
element of planning, covers not merely looking into the future but making provisions
for it. A plan is then a projected course of action". All planning involves anticipation
of the future course of events and therefore bears an element of uncertainty in respect
of its success. Planning is concerned with the determination of the objectives to be
achieved and course of action to be followed to achieve them. Before any operative
action takes place it is necessary to decide what, where, when and who shall do the
things.

Decision-making is also an important element of planning. Planning determines both

long-term and short-term objectives and also of the individual departments as well
as the entire organization. According to Fayol - "The plan of action is, at one and the
same time, the result envisaged, the line of action to be followed, the stages to go
through, and the methods to use. It is a kind of future picture wherein proximate
events are outlined with some distinctness...." Planning is a mental process requiring
the use of intellectual faculties' imagination, foresight, sound judgment etc.

Planning is deciding in advance what is to be done. It involves the selection of

objectives, policies, procedures and programmes from among alternatives. A plan is
a predetermined course of action to achieve a specified goal. It is a statement of
objectives to be achieved by certain means in the future. In short, it is a blueprint for
action.

According to Louis A Allen, "Management planning involves the development of

forecasts, objectives, policies, programmes, procedures, schedules and budgets".
According to Theo Haimann, "Planning is deciding in advance what is to be done.
When a manager plans, he projects a course of action, for the future, attempting to
achieve a consistent, coordinated structure of operations aimed at the desired
results". According to Koontz O'Donnel - "Planning is an intellectual process, the
conscious determination of courses of action, the basing of decisions on purpose,
acts and considered estimates".

Nature of Planning:

1. Planning is goal-oriented: Every plan must contribute in some positive way

towards the accomplishment of group objectives. Planning has no meaning
without being related to goals.

2. Primacy of Planning: Planning is the first of the managerial functions. It

precedes all other management functions.

3. Pervasiveness of Planning: Planning is found at all levels of management. Top

management looks after strategic planning. Middle management is in charge of
administrative planning. Lower management has to concentrate on operational
planning.

4. Efficiency, Economy and Accuracy: Efficiency of plan is measured by its

contribution to the objectives as economically as possible. Planning also
focuses on accurate forecasts.

5. Co-ordination: Planning co-ordinates the what, who, how, where and why of
planning. Without co-ordination of all activities, we cannot have united efforts.

6. Limiting Factors: A planner must recognize the limiting factors (money,

manpower etc.) and formulate plans in the light of these critical factors.
 7. Flexibility: The process of planning should be adaptable to changing
environmental conditions.

8. Planning is an intellectual process: The quality of planning will vary according

to the quality of the mind of the manager.

Importance of Planning:

As a managerial function planning is important due to the following reasons:

1. To manage by objectives: All the activities of an organization are designed to

achieve certain specified objectives. However, planning makes the objectives
more concrete by focusing attention on them.

2. To offset uncertainty and change: Future is always full of uncertainties and

changes. Planning foresees the future and makes the necessary provisions for
it.

3. To secure economy in operation: Planning involves, the selection of most

profitable course of action that would lead to the best result at the minimum
costs.

4. To help in co-ordination: Co-ordination is, indeed, the essence of management,

the planning is the base of it. Without planning it is not possible to co-ordinate
the different activities of an organization.

5. To make control effective: The controlling function of management relates to

the comparison of the planned performance with the actual performance. In the
absence of plans, a management will have no standards for controlling other's
performance.

6. To increase organizational effectiveness: Mere efficiency in the organization is

not important; it should also lead to productivity and effectiveness. Planning
enables the manager to measure the organizational effectiveness in the context
of the stated objectives and take further actions in this direction.

Advantages of Planning

1. All efforts are directed towards desired objectives or results. Unproductive

work and waste of resources can be minimized.
2. Planning enables a company to remain competitive with other rivals in the
industry.
3. Through careful planning, crisis can be anticipated and mistakes or delays
avoided.
 4. Planning can point out the need for future change and the enterprise can manage
the change effectively.
5. Planning enables the systematic and thorough investigation of alternative
methods or alternative solutions to a problem. Thus we can select the best
alternative to solve any business problem.
6. Planning maximizes the utilization of available resources and ensures optimum
productivity and profits. Planning provides the ground work for laying down
control standards.
7. Planning enables management to relate the whole enterprise to its complex
environment profitably.

Disadvantages of Planning

1. Environmental factors are uncontrollable and unpredictable to a large extent.

Therefore, planning cannot give perfect insurance against uncertainty.
2. Planning is many times very costly.
3. Tendency towards inflexibility to change is another limitation of planning.
4. Planning delays action.
5. Planning encourages a false sense of security against risk or uncertainty.

PLANNING PROCESS

The planning process involves the following steps:

1. Analysis of External Environment: The external environment covers

uncontrollable and unpredictable factors such as technology, market, socio-
economic climate, political conditions etc., within which our plans will have to
operate.
2. Analysis of Internal Environment: The internal environment covers relatively
controllable factors such as personnel resources, finance, facilities etc., at the
disposal of the firm. Such an analysis will give an exact idea about the strengths
and weakness of the enterprise.
3. Determination of Mission: The "mission" should describe the fundamental
reason for the existence of an organization. It will give firm direction and make
out activities meaningful and interesting.
4. Determination of Objectives: The organizational objectives must be spelled out
in key areas of operations and should be divided according to various
departments and sections. The objectives must be clearly specified and
measurable as far as possible. Every member of the organization should be
familiar with its objectives.
5. Forecasting: Forecasting is a systematic attempt to probe into the future by
inference from known facts relating to the past and the present. Intelligent
forecasting is essential for planning. The management should have no stone
unturned in reducing the element of guesswork in preparing forecasts by
collecting relevant data using the scientific techniques of analysis and
inference.
6. Determining Alternative course of Action: It is a common experience of all
thinkers that an action can be performed in several ways, but there is a
particular way which is the most suitable for the organization. The management
should try to find out these alternatives and examine them carefully in the light
of planning premises.
7. Evaluating Alternative Courses: Having sought out alternative courses and
examined their strong and weak points, the next step is to evaluate them by
weighing the various factors.
8. Selecting the Best: The next step - selecting the course of action is the point at
which the plan is adopted. It is the real point of decision-making.
9. Establishing the sequence of activities: After the best programme is decided
upon, the next task is to work out its details and formulate the steps in full
sequences.
10. Formulation of Action Programmes: There are three important constituents of
an action plan: (A) The time-limit of performance. (B) The allocation of tasks
to individual employees. (C) The time-table or schedule of work so that the
functional objectives are achieved within the predetermined period.
11. Reviewing the planning process: Through feedback mechanism, an attempt is
made to secure that which was originally planned. To do this we have to
compare the actual performance with the plan and then we have to take
necessary corrective action to ensure that actual performance is as per the plan.

Features of Objectives

1. The objectives must be predetermined.

2. A clearly defined objective provides the clear direction for managerial effort.
3. Objectives must be realistic.
4. Objectives must be measurable.
5. Objectives must have social sanction.
6. All objectives are interconnected and mutually supportive
7. Objectives may be short-range, medium-range and long-range.
8. Objectives may be constructed into a hierarchy.
Advantages of Objectives

1. Clear definition of objectives encourages unified planning.

2. Objectives provide motivation to people in the organization.
3. When the work is goal-oriented, unproductive tasks can be avoided.
4. Objectives provide standards which aid in the control of human efforts in an
organization.
5. Objectives serve to identify the organization and to link it to the groups upon
which its existence depends.
6. Objectives act as a sound basis for developing administrative controls.
7. Objectives contribute to the management process: they influence the purpose
of the organization, policies, personnel, leadership as well as managerial
control.

Process of Setting Objectives

Objectives are the keystone of management planning. It is the most important task
of management. Objectives are required to be set in every area which directly and
vitally effects the survival and prosperity of the business. In the setting of objectives,
the following points should be borne in mind:

1. Objectives are required to be set by management in every area which directly

and vitally affects the survival and prosperity of the business.
2. The objectives to be set in various areas have to be identified.
3. While setting the objectives, the past performance must be reviewed, since past
performance indicates what the organization will be able to accomplish in
future.
4. The objectives should be set in realistic terms i.e., the objectives to be set
should be reasonable and capable of attainment.
5. Objectives must be consistent with one and other.
6. Objectives must be set in clear-cut terms.
7. For the successful accomplishment of the objectives, there should be effective
communication.

STRATEGIES

The term 'Strategy' has been adapted from war and is being increasingly used in
business to reflect broad overall objectives and policies of an enterprise. Literally
speaking, the term 'Strategy' stands for the war-art of the military general,
compelling the enemy to fight as per out chosen terms and conditions. A strategy is
a special kind of plan formulated in order to meet the challenge of the policies of
competitors. This type of plan uses the competitors' plan as the background. It may
also be shaped by the general forces operating in an industry and the economy.

Edmund P Learned has defined strategies as "the pattern of objectives, purposes or

goals and major policies and plans for achieving these goals, stated in such a way as
to define what business the company is in or is to be and the kind of company it is
or is to be". Haynes and Massier have defined strategy as “the planning for
unpredictable contingencies about which fragmentary information is available”.

According to David I Cleland and William R King, "Strategy is the complex plans
for bringing the organization from a given posture to a desired position in a further
period of time". In the words of Haimann, "Strategy is a policy that has been
formulated by the top management for the purpose of interpreting and shaping the
meaning of other policies". According to C. T. Hardwick and B. F. Landuyt, "The
word strategy is used to signify the general concept and salient aspect of
gamesmanship as an administrative course designed to bring success".

According to Koontz and O' Donnell. "Strategies must often denote a general
programme of action and deployment of emphasis and resources to attain
comprehensive objectives". Strategies are plans made in the light of the plans of the
competitors because a modern business institution operates in a competitive
environment. They are a useful framework for guiding enterprise thinking and
action. A perfect strategy can be built only on perfect knowledge of the plans of
others in the industry. This may be done by the management of a firm putting itself
in the place of a rival firm and trying to estimate their plans.

Characteristics of Strategy
1. It is the right combination of different factors.
2. It relates the business organization to the environment.
3. It is an action to meet a particular challenge, to solve particular problems or to
attain desired objectives.
4. Strategy is a means to an end and not an end in itself.
5. It is formulated at the top management level.
6. It involves assumption of certain calculated risks.

STRATEGY FORMULATION

There are three phases in strategy formation:

1) Determination of objectives.
2) Ascertaining the specific areas of strengths and weakness in the total
environment.
3) Preparing the action plan to achieve the objectives in the light of environmental
forces.

Business Strategy

Seymour Tiles offers six criteria for evaluating an appropriate strategy.

1) Internal consistency: The strategy of an organization must be consistent with its

other strategies, goals, policies and plans.
2) Consistency with the environment: The strategy must be consistent with the
external environment. The strategy selected should enhance the confidence and
capability of the enterprise to manage and adapt with or give command over the
environmental forces.
3) Realistic Assessment: Strategy needs a realistic assessment of the resources of
the enterprise—men, money and materials—both existing resources as also the
resources, the enterprise can command.
4) Acceptable degree of risk: Any major strategy carries with it certain elements of
risk and uncertainty. The amount of risk inherent in a strategy should be within
the bearable capacity of the enterprise.
5) Appropriate time: Time is the essence of any strategy. A good strategy not only
provides the objectives to be achieved but also indicates when those objectives
could be achieved.
6) Workability: Strategy must be feasible and should produce the desired results.

POLICIES

A policy is a standing plan. Policies are directives providing continuous framework

for executive actions on recurrent managerial problems. A policy assists decision-
making but deviations may be needed, as exceptions and under some extraordinary
circumstances. Policy-making is an important part of the process of planning.
Policies may be described as plans which are meant to serve as broad guides to
decision making in a firm. Policies exist at various levels of the enterprise—
Corporate level, divisional level and departmental level. Policies are valuable
because they allow lower levels of management to handle problems without going
to top management for a decision each time.

Essentials of Policy Formulation

The essentials of policy formation may be listed as below:

 1. A policy should be definite, positive and clear. It should be understood by
everyone in the organization.
2. A policy should be translatable into the practices.
3. A policy should be flexible and at the same time have a high degree of
permanency.
4. A policy should be formulated to cover all reasonable anticipatable conditions.
5. A policy should be founded upon facts and sound judgment.
6. A policy should conform to economic principles, statutes and regulations.
7. A policy should be a general statement of the established rule.

Importance of Policies

Policies are useful for the following reasons:

1. They provide guides to thinking and action and provide support to the
subordinates.
2. They delimit the area within which a decision is to be made.
3. They save time and effort by pre-deciding problems and
4. They permit delegation of authority to mangers at the lower levels.

DECISION MAKING

The word decision has been derived from the Latin word "decidere" which means
"cutting off". Thus, decision involves cutting off of alternatives between those that
are desirable and those that are not desirable. Decision is a kind of choice of a
desirable alternative. A few definitions of decision making are given below:

In the words of Ray A Killian, "A decision in its simplest form is a selection of
alternatives". Dr. T. G Glover defines decision "as a choice of calculated alternatives
based on judgment". In the words of George R. Terry, "Decision-making is the
selection based on some criteria from two or more possible alternatives".

Felix M. Lopez says that "A decision represents a judgment; a final resolution of a
Functions of Management conflict of needs, means or goals; and a commitment to
action made in face of uncertainty, complexity and even irrationally".

According to Rustom S. Davar, "Decision-making may be defined as the selection

based on some criteria of one behaviour alternative from two or more possible
alternatives. To decide means to cut off or in practical content to come to a
conclusion".
Fremont A. Shull Andrew L Delbecq and Larry L Cummings define decision making
as "a conscious human process involving both individual and social phenomenon
based upon factual and value premises which concludes with a choice of one
behavioural activity from among one or more alternatives with the intention of
moving toward some desired state of affairs".

From the above definitions, we can conclude that, Decision Making involves the
process of establishing goals, tasks and searching for alternatives for a decision
problem.

Characteristics of Decision Making:

Decision making implies that there are various alternatives and the most desirable
alternative is chosen to solve the problem or to arrive at expected results.

1) The decision-maker has freedom to choose an alternative.

2) Decision-making may not be completely rational but may be judgmental and

emotional.

3) Decision-making is goal-oriented.

4) Decision-making is a mental or intellectual process because the final decision is

made by the decision-maker.

5) A decision may be expressed in words or may be implied from behaviour.

6) Choosing from among the alternative courses of operation implies uncertainty

about the final result of each possible course of operation.

7) Decision making is rational. It is taken only after a thorough analysis and

reasoning and weighing the consequences of the various alternatives.

Types of Decisions

1. Programmed and Non-Programmed Decisions: Herbert Simon has grouped

organizational decisions into two categories based on the procedure followed.
They are:

2. Programmed decisions: Programmed decisions are routine and repetitive and

are made within the framework of organizational policies and rules. These
policies and rules are established well in advance to solve recurring problems
in the organization. Programmed decisions have short-run impact. They are,
generally, taken at the lower level of management.
 3. Non-Programmed Decisions: Non-programmed decisions are decisions taken
to meet non-repetitive problems. Non-programmed decisions are relevant for
solving unique/ unusual problems in which various alternatives cannot be
decided in advance. A common feature of non-programmed decisions is that
they are novel and non-recurring and therefore, readymade solutions are not
available. Since these decisions are of high importance and have long-term
consequences, they are made by top level management.

4. Strategic and Tactical Decisions: Organizational decisions may also be

classified as strategic or tactical.

Strategic Decisions: Basic decisions or strategic decisions are decisions which are
of crucial importance. Strategic decisions a major choice of actions concerning
allocation of resources and contribution to the achievement of organizational
objectives. Decisions like plant location, product diversification, entering into new
markets, selection of channels of distribution, capital expenditure e.t.c. are examples
of basic or strategic decisions.

Tactical Decisions: Routine decisions or tactical decisions are decisions which are
routine and repetitive. They are derived out of strategic decisions. The various
features of a tactical decision are as follows:

1) Tactical decision relates to day-to-day operation of the organization and has to

be taken very frequently.

2) Tactical decision is mostly a programmed one. Therefore, the decision can be

made within the context of these variables.

3) The outcome of tactical decision is of short-term nature and affects a narrow

part of the organization.

4) The authority for making tactical decisions can be delegated to lower level
managers because: first, the impact of tactical decision is narrow and of short-
term nature and Second, by delegating authority for such decisions to lower-
level managers, higher level managers are free to devote more time on strategic
decisions.

Decision Making Process

1. Specific Objective: The need for decision making arises in order to achieve
certain specific objectives. The starting point in any analysis of decision
making involves the determination of whether a decision needs to be made.

2. Problem Identification: A problem is a felt need, a question which needs a

solution. In the words of Joseph L Massie "A good decision is dependent upon
 the recognition of the right problem". The objective of problem identification
is that if the problem is precisely and specifically identifies, it will provide a
clue in finding a possible solution. A problem can be identified clearly, if
managers go through diagnosis and analysis of the problem:

Diagnosis: Diagnosis is the process of identifying a problem from its signs and
symptoms. A symptom is a condition or set of conditions that indicates the existence
of a problem. Diagnosing the real problem implies knowing the gap between what
is and what ought to be, identifying the reasons for the gap and understanding the
problem in relation to higher objectives of the organization.

Analysis: Diagnosis gives rise to analysis. Analysis of a problem requires: (i) Who
would make decision? (ii) What information would be needed? (iii) From where the
information is available? Analysis helps managers to gain an insight into the
problem.

3. Search for Alternatives: A problem can be solved in several ways; however, all
the ways cannot be equally satisfying. Therefore, the decision maker must try
to find out the various alternatives available in order to get the most satisfactory
result Functions of Management of a decision. A decision maker can use
several sources for identifying alternatives: (i) His own past experiences (ii)
Practices followed by others and (iii) Using creative techniques.

4. Evaluation of Alternatives: After the various alternatives are identified, the next
step is to evaluate them and select the one that will meet the choice criteria.
The decision maker must check proposed alternatives against limits, and if an
alternative does not meet them, he can discard it. Having narrowed down the
alternatives which require serious consideration, the decision maker will go for
evaluating how each alternative may contribute towards the objective supposed
to be achieved by implementing the decision.

5. Choice of Alternative: The evaluation of various alternatives presents a clear

picture as to how each one of them contribute to the objectives under question.
A comparison is made among the likely outcomes of various alternatives and
the best one is chosen.

6. Action: Once the alternative is selected, it is put into action. The actual process
of decision making ends with the choice of an alternative through which the
objectives can be achieved.

7. Results: When the decision is put into action, it brings certain results. These
results must correspond with objectives, the starting point of decision process,
if good decision has been made and implemented properly. Thus, results
provide indication whether decision making and its implementation is proper.
Characteristics of Effective Decisions

An effective decision is one which should contain three aspects. These aspects are
given below:

1. Action Orientation: Decisions are action-oriented and are directed towards

relevant and controllable aspects of the environment. Decisions should
ultimately find their utility in implementation.

2. Goal Direction: Decision making should be goal-directed to enable the

organization to meet its objectives.

3. Effective in Implementation: Decision making should take into account all

the possible factors not only in terms of external context but also in internal
context so that a decision can be implemented properly.

GLOBAL PLANNING

Globalization reflects a business orientation based on the belief that the world is
becoming more homogeneous and that distinctions between national markets are not
only fading, but, for some products will eventually disappear. As a result, companies
need to globalize their international strategy by formulating it across markets to take
advantage of underlying market, cost, environmental and competitive factors.

Why Plan Globally?

International firms have found it necessary to institute formal global strategic

planning to provide a means for top management to identify opportunities and threats
from all over the world, formulate strategies to handle them and stipulate how to
finance the strategies implementation. Global strategic plans not only provide for
constancy of action among the firm's managers worldwide but also require the
participants to consider the ramifications of their actions on the other geographical
and functional areas of the firm.

Global Strategic Planning Process

Global strategic planning is the primary function of managers. The process of

strategic planning provides a formal structure in which managers:

1. Analyze the company's external environments

2. Analyze the company's internal environments
3. Define the company's business and mission
4. Set corporate objectives
5. Quantify goals
 6. Formulate strategies and
7. Make tactical plans.

The steps mentioned above may not be in a sequential form. In practice, there is
considerable flexibility in the order in which firms take up these items.

Nature of Planning Process

Planning shapes strategy and defines the means to achieve goals. It is the matching
of markets with products and other corporate resources so that the long term
competitive advantage of the firm gets strengthened. In other words, the process of
planning seeks to answer question regarding what the firm expects to achieve and
what method the firm is going to use to this end. It decomposes problems and issues,
applies rational tools on the basis of available information, and finalizes action to
achieve the goal. In small firm, planning may be ad hoc. But in large firms, especially
in multinational corporations that operate in varying environments, the process of
planning is more systematic and comprehensive.