CHAPTER 4
ORGANIZING TECHNICAL ACTIVITIES
INTRODUCTION
The engineer manager needs to acquire various skills in
management, including those for organizing technical activities. In
this highly competitive environment, the unskilled manager will not
be able to bring his unit, or his company, as the case may be, to
success.
REASONS FOR ORGANIZING
Organizing is undertaken to facilitate the implementation of plans. In
effective organizing, steps are undertaken to breakdown the total
job into more manageable man size jobs. Doing these will make it
possible to assign particular tasks to particular 3 persons. In turn,
these will help facilitate the assignment of authority, responsibility,
and accountability for certain functions and tasks.
ORGANIZING DEFINED
Organizing is a management function which refers to "the
structuring of resources and activities to accomplish objectives in an
efficient and effective manner. The arrangement or relationship of
positions within an organization is called the structure. The result of
the organizing process is the structure.
THE PURPOSE OF THE STRUCTURE
The structure serves some very useful purposes. They are the
following:
1. It defines the relationships between tasks and authority for
individuals and departments.
2. It defines formal reporting relationships, the number of levels in
the hierarchy of the organization, and the span of control.
3. It defines the groupings of individuals into departments and
departments into organization.
4. It defines the system to effect coordination of effort in both
vertical (authority) and horizontal (tasks) directions.
When structuring an organization, the engineer manager must be
concerned with the following:
1. Division of labor - determining the scope of work and how it is
combined in a job.
2. Delegation of authority -the process of assigning various degrees
of decision making authority to subordinates.
3. Departmentation - the grouping of related jobs, activities, or
processes into major organizational subunits.
4. Span of control - the number of people who report directly to a
given manager.
5. Coordination - the linking of activities in the organization that
serves to achieve a common goal or objective.
THE FORMAL ORGANIZATION
After a plan is adapted; management will proceed to form an. The
formal organization is "the structure that details lines of
responsibilities, authority, and position”.
The formal structure is described by management through:
1. Organization chart - diagram of the organization’s official positions
and formal lines of authority
2. Organizational manual - written descriptions of authority
relationships, and describes job procedures.
3. Policy manuals - personnel activities and company policies
INFORMAL GROUPS
- Group with friendship as a principal reason for belonging
- It is not a part of the formal organization, and it does not have a
formal performance purpose.
- Useful in the accomplishment of major tasks
The informal organization, useful as it is, is “vulnerable to
expediency, manipulation, and opportunism,” according to
Valentine.
TYPES OF ORGANIZATIONAL STRUCTURES
1. FUNCTIONAL ORGANIZATION
- A form of departmentalization in which everyone engaged in one
functional activity, such as engineering or marketing, is grouped into
one unit
2. PRODUCT OR MARKEY ORGANIZATON
- Refers to the organization of a company by divisions that brings
together all those involved with a certain type of product or
customer.
3. MATRIX ORGANIZATION
- An organizational structure in which each employee reports to
both a functional or division manager and to a project or group
manager.
Functional Organization
Functional organization structures are very effective smaller firm,
especially single-business firms where key activities revolve around
well-defined skills and areas of specialization.
Functional organizations have certain advantages. They are the
following:
1. The grouping of employees who perform a common task permit
economies of scale and efficient resource use.
2. Since the chain of command converges at the top of the
organization, decisionmaking is centralized, providing a unified
direction from the top.
3. Communication and coordination among employees within each
department are excellent.
4. The structure promotes high-quality technical problem-solving.
5. The organization is provided with in depth skill specialization and
development.
6. Employees are provided with career progress within functional
departments.
The disadvantages of the functional organization are the following:
1. Communication and coordination between the departments are
often poor.
2. Decisions involving more than one department pile up a€ the top
management level and are often delayed.
3. Work specialization and division of labour, which are stressed in a
functional organization, produce routine, non-motivating employee
tasks.
4. It is difficult to identify which section or group is responsible for
certain problems.
5. There is limited view of organizational goals by employee.
6. There is limited general management training for employees.
Product or Market Organization
The product or market organization, with its feature of operating by
divisions, is “appropriate for a large corporation with many product
lines in several related industries."
The advantages of a product or market organization ore as follows:
1. The organization is flexible and responsive to change.
2. The organization provides a high concern for customer's needs.
3. The organization provides excellent coordination across functional
departments.
4. There is easy pinpointing of responsibility for product problems.
5. There is emphasis on overall product and division goals.
6. The opportunity for the development of general management
skills is provided.
The disadvantages of the product or market organization are as
follows:
1. There is a high possibility of duplication of resources across
divisions.
2. There is less technical depth and specialization in divisions.
3. There is poor coordination across divisions.
4. There is less top management control.
5. There is competition for corporate resources.
Matrix Organization
A matrix organization, according to Thompson and Strickland, "is a
structure with two (or more) channels of command, two lines of
budget authority, and two sources of performance and reward”.
Higgins declared that "the matrix structure was designed to keep
employees in a central pool and to allocate them to various projects
in the firm according to the length of time they were needed.
The matrix organization is afforded with the following advantages:
1. There is more efficient use of resources than the divisional
structure.
2. There is flexibility and adaptability to changing environment.
3. The development of both general and functional management
skills are present.
4. There is interdisciplinary cooperation, and any expertise is
available to all divisions.
5. There are enlarged tasks for employees which motivate them
better.
The matrix organization has some disadvantages, however. They are
the following:
1. There is frustration and confusion from dual chain. of command.
2. There is high conflict between divisional and functional interests.
3. There are many meetings and more discussion than action.
4. There is a need for human relations training for key employees
and managers.
5. There is a tendency for power dominance by one side of the
matrix.7
TYPES OF AUTHORITY
1. Line Authority - a manager's right to tell subordinates what to do
and then see that they do it.
2. Staff Authority - a staff specialist's right to give advice to a
superior.
3. Functional authority - a specialist's right to oversee lower level
personnel
Examples:
 Strategic Planning
 Labour relations
 Research
 Accounting
 Personnel
Staff officers may be classified into the following:
1. Personal staff - those individuals assigned to a specific manager to
provide needed staff services.
2. Specialized staff - those individuals providing needed staff
services for the whole organization.
3. Functional authority - a specialist's right to oversee lower-level
personnel involved in that specialty, regardless of where the
personnel are in the organization.
PURPOSE OF COMMITTEES
A committee is a formal group of people formed for a specific
purpose.
They serve as a mechanism for bringing together diverse
perspectives and expertise to address the multifaceted challenges
that arise in the field of engineering.
They may be classified as follows:
1. Ad Hoc Committee - a committee created for a short-term
purpose and have a limited life. Once that task is completed, the ad
hoc committees cease to exist.
2. Standing committee – it is a relatively permanent committee that
deals with issues on an ongoing basis.
SUMMARY
The proper management of engineering activities, whether at the
unit, department, or firm level, requires effective organizing. The
organizing function is undertaken to facilitate the implementation of
plans. Organizing refers to the structuring of resources and activities
to accomplish objectives. The structure serves as a way to reach the
organization's goals.
CHAPTER 5: CONTROLLING
What is Controlling?
Controlling refers to the "process of ascertaining whether
organizational objectives have been achieved; if not, why not; and
determining what activities should then be taken to achieve
objectives better in the future.
Importance of Controlling
- When controlling is properly implemented, it will help the
organization achieve its goal in the most efficient and effective
manner possible.
- Proper control measures minimize the ill effects of such negative
occurrences.
STEPS IN THE CONTROL PROCESS
The control process consists of four steps, namely:
1. establishing performance objectives and standards
2. measuring actual performance
3. comparing actual performance to objectives and standards, and
4. taking necessary action based on the results of the comparisons.3
Establishing Performance Objectives and Standards
- In controlling, what has to be achieved must first be determined.
- Once objectives and standards are established, the measurement
of performance will be facilitated. Standards differ among various
organizations.
- After the performance objectives and standards are established,
the methods for measuring performance must be designed. Every
standard established must be provided with its own method for
measurement
Measuring Actual Performance
- There is a need to measure actual performance so that when
shortcomings occur, adjustments could be made.
Comparing Actual Performance to Objectives and Standards
-Once actual performance has been determined, this will be
compared with what the organization seeks to achieve. Actual
production output, for instance, will be compared with the target
output.
Taking Necessary Action
The purpose of comparing actual performance with the desired
result is to provide management with the opportunity to take
corrective action when necessary.
TYPES OF CONTROL
Control consists of three distinct types, namely:
1. feedforward control
2. concurrent control, and
3. feedback control
Feedforward Control - When management anticipates problems
and prevents their occurrence, the type of control measure
undertaken is called feed-forward control.
Concurrent Control - When operations are already ongoing and
activities to detect variances are made, concurrent control is said to
be undertaken. When such deviations occur, adjustments are made
to ensure compliance with requirements.
Feedback Control - When information is gathered about a
completed activity, and in order that evaluation and steps for
improvement are derived, feedback control is undertaken.
- Corrective actions aimed at improving future activities are features
of feedback control.
- Feedback control validates objectives and standards.
ORGANIZATIONAL CONTROL SYSTEMS
Organizational control systems consists of the following:
1. strategic plan
2. the long-range financial plan
3. the operating budget
4. performance appraisals
5. statistical reports
6. policies and procedures
Strategic Plans
A strategic plan provides the basic control mechanism for the
organization. When there are indications that activities do not
facilitate the accomplishment of strategic goals, these activities are
either set aside, modified or expanded. These corrective measures
are made possible with the adoption of strategic plans.
The Long-Range Financial Plan
Most firms will be satisfied with one year. Engineering firms,
however, will require longer term financial plans. This is because of
the long lead times needed for capital projects
The Operating Budget
An operating budget indicates the expenditures, revenues, or profits
planned for some future period regarding operations.
Performance Appraisals
Performance appraisal measures employee performance. As such, it
provides employees with a guide on how to do their jobs better in
the future. Performance appraisals also function as effective checks
on new policies and programs.
Statistical Reports
Statistical reports pertain to those that contain data on various
developments within the firm. Among the information which may be
found in a statistical report pertains to the following:
1. labor efficiency rates
2. quality control rejects
3. accounts receivable
4. accounts payable
5. sales reports
6. accident reports
7. power consumption report
Policies and Procedures
Policies refer to "the framework within which the objectives must be
pursued. A procedure is "a plan that describes the exact series of
actions to be taken in a given situation."
An example of policy is as follows:
"Whenever two or more activities compete for the company's
attention, the client takes priority."
An example of a procedure is as follows: "Procedure in the purchase
of equipment:
1. the concerned manager forwards a request for purchase to the
purchasing officer;
2. the purchasing officer forwards the request to top management
for approval;
3. when approved, the purchasing officer makes a canvass of the
requested item; if
disapproved, the purchasing officer returns the form to the
requesting manager;
4. the purchasing negotiates with the lowest complying bidder."
STRATEGIC CONTROL SYSTEMS
To be able to assure the accomplishment of the strategic objectives
of the company, strategic control systems become necessary. These
systems consist of the following:
1. financial analysis
2. financial ratio analysis
Financial Analysis
The success of most organizations depends heavily on its financial
performance. A review of the financial statements will reveal
important details about the company's performance.
Financial Ratio Analysis
Financial ratio analysis is a more elaborate approach used in
controlling activities.
Under this method, one account appearing in the financial
statement is paired with another to constitute a ratio.
Financial ratios may be categorized into the following types:
1. liquidity
2. efficiency
3. financial leverage
4. profitability
LIQUIDITY RATIOS - These ratios assess the ability of a company to
meet its current obligations. The following ratios are important
indicators of liquidity:
1. Current ratio - This shows the extent to which current assets of
the company can cover its current liabilities. The formula for
computing current ratio is as follows:
Current ratio = current assets/current liabilities
2. Acid-test ratio - This is a measure of the firm's ability to pay off
short-term obligations with the use of current assets and without
relying on the sale of inventories. The formula is as follows:
Acid-test ratio = current assets inventories/current liabilities
EFFICIENCY RATIOS - These ratios show how effectively certain
assets or liabilities are being used in the production of goods and
services. Among the more common efficiency ratios are:
1. Inventory turnover ratio - This ratio measures the number of
times an inventory is turned over (or sold) each year. This is
computed as follows:
Inventory turnover ratio = cost of goods sold/inventory
2. Fixed asset turnover - This ratio is used to measure the utilization
of the company's investment in its fixed assets, such as its plant and
equipment. The formula used is as follows:
Fixed asset turnover = net sales/net fixed assets
FINANCIAL LEVERAGE RATIOS - This is a group of ratios designed to
assess the balance of financing obtained through debt and equity
sources. Some of the more important leverage ratios are as follows:
1. Debt to total assets ratio - This ratio shows how much of the
firm's assets are financed by debt. It may be computed by using the
following formula :
Debt to total assets ratio = total debt/total assets
2. Times interest earned ratio - This ratio measures the number of
times that earnings before interest and taxes cover or exceed the
company's interest expense. It may be computed by using the
following formula:
Times interest earned ratio = (profit before tax + interest expense
earned ratio interest expense) divided by interest expense
PROFITABILITY RATIOS - These ratios measure how much operating
income or net income a company is able to generate in relation to its
assets, owner's equity, and sales. Among the more notable
profitability ratios are as follows:
1. Profit margin ratio - This ratio compares the net profit to the level
of sales. The formula used is as follows:
Profit margin ratio = net profit/net sales
2. Return on assets ratio - This ratio shows how much income the
company produces for every peso invested in assets. The formula
used is as follows:
Return on assets ratio = net income/assets
3. Return on equity ratio - This ratio measures the returns on the
owner's investment. It may be arrived at by using the following
formula:
Return on equity ratio = net income/equity
IDENTIFYING CONTROL PROBLEMS
Recognizing the need for control is one thing, actually implementing
it is another.
When operations become complex, the engineer manager must
consider useful steps in controlling. Kreitner mentions three
approaches:
1. executive reality check
2. comprehensive internal audit
3. general checklist of symptoms of inadequate control
EXECUTIVE REALITY CHECK
Employees at the frontline often complain that management
imposes certain requirements that are not realistic. In a certain state
college, for instance, requests for the purchase of classroom
materials and supplies take last priority. This is irregular because
requests of such kind must be of the highest priority considering that
the organization is an educational institution. Ironically, because
certain officers of the non-academic staff have direct access to the
president, their purchase requests almost always get top priority.
Later on, when the president made an inspirational speech on
quality teaching, many members of the faculty just shrugged their
shoulders and listened passively.
One school, Central Luzon State University, provides a good example
on how the executive reality check may be exercised. It requires its
executives to handle at least one subject load each. What the
executives will experience in the classroom will make him more
responsive in the preparation of plans and control.
The engineer manager of a construction firm could, once in a while,
perform the work of one of his laborers. In doing so, he will be able
to see things that he never sees inside the confines of his air-
conditioned office. Because the said action exposes the engineer
manager to certain realities, the term "executive reality check" is
very appropriate.
COMPREHENSIVE INTERNAL AUDIT
An internal audit is one undertaken to determine the efficiency and
effectiveness of the activities of an organization. Among the many
aspects of operations within the organization, a small activity that is
not done right may continue to be unnoticed until it snowballs into a
full-blown problem.
An example is the resignation of an employee after serving the
company for 15 years. After one week, another employee with ten
years of service also resigned. Both were from the same
department. If after another week, a third employee is resigning, a
full investigation is in order. Even if the source of the problem is
identified, it may already have caused considerable losses to the
organization. A comprehensive internal audit aims to detect
dysfunctions in the organization before they bring bigger troubles to
management.
SYMPTOMS OF INADEQUATE CONTROL
If a comprehensive internal audit cannot be availed of for some
reason, the use of a checklist for symptoms of inadequate control
may be used.
Kreitner has listed some of the common symptoms as follows:
1. An unexplained decline in revenues and profits.
2. A degradation of service (customer complaints).
3. Employee dissatisfaction (complaints, grievances, turnover).
4. Cash shortages caused by bloated inventories or delinquent
accounts receivable.
5. Idle facilities or personnel.
6. Disorganized operations (work flow bottlenecks, excessive
paperwork).
7. Excessive costs.
8. Evidence of waste and inefficiency (scraр, rework).
It must be noted that behind every symptom is a problem waiting to
be solved.
Unless this problem is clearly identified, no effective solution may be
derived. Nevertheless, problems are easily recognized if adequate
control measures are in place.