CHAPTER ONE

BASICS OF MANAGEMENT AND INDUSTRIAL

ORGANIZATIONS

Topics to be covered
Definition
Introduction to management
Functions of management
 Planning
 Organizing
 Directing
 Controlling

Managerial roles and skills

Organization
Basics of Productivity
MEQUANINT B.----------------------FOR 5TH YEAR MECHANICAL ENGINEERING
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 INTRODUCTION TO MANAGEMENT
Management is the attainment of organizational goals in an
effective and efficient manner through planning, organizing,
staffing, directing and controlling organizational resources.
The creation of conditions that allow the effective use of
resources (human, financial, material, equipment, technical
and etc.) to achieve a specified goal.
Organizational resources (5M): Men(human beings), Money,
Machines, Materials and Methods.
Louis E Boone & David L Kurtz- “The use of people and other
resources to accomplish objectives”.
William F. Glueck,“Management is effective utilization of
human and material resources to achieve the enterprise’s
objectives ”.
Frederick Taylor defines Management as “the art of knowing
what you want to do in the best and cheapest way”.
MEQUANINT B.----------------------FOR 5TH YEAR MECHANICAL ENGINEERING 2
MANAGEMENT CONCERNS
Efficiency
Efficiency is getting the most output
from the least amount of inputs in order
to minimize resource costs.
“Doing things right”
The level of output that is achieved
with a given level of inputs.
 Effectiveness
Effectiveness is completing activities
so that organizational goals are
attained.
“Doing the right things”

MEQUANINT B.----------------------FOR 5TH YEAR MECHANICAL ENGINEERING

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HIGH PERFORMING ORGANIZATIONS ARE
EFFICIENT AND EFFECTIVE

TEREFE J----------------------FOR 5TH YEAR MECHANICAL ENGINEERING 4

CHARACTERISTICS OF
MANAGEMENT
Management is Concerned
with Group Efforts/Activity.
Management is Dynamic.
Management is Goal
Oriented Activity.
Management is an Art of
Getting Things Done.
Management is a System of
Authority.
 Management is relationship
building within and outside
the organization.
 Management is an
environment oriented
activity.
 Management has its own
tools and techniques.
 Management is leadership
responsibility, not just an
activity.
 Management is concern
with performance results
and accomplishment.
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FOUR REASONS OF STUDYING MANAGEMENT

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FUNCTIONS OF
MANAGEMENT
Planning
Organizing
Staffing
Directing
Controlling

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 PLANNING
Planning is determining the objectives and
formulating the methods to achieve them.
A job well planned is half done.
During planning one needs to ask oneself the
following:
What am I trying to accomplish i.e. what is my
objective?
What resources do I have and do I need to accomplish
the same?
What are the methods and means to achieve the
objectives?
Is this the optimal path? Searching for Alternatives?

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 STEPS IN PLANNING
1. Determining the goals or objectives for the entire
organization.
2. Making assumptions on various elements of the
environment.
3. Decide the planning period.
4. Examine alternative courses of actions.
5. Evaluating the alternatives.
6. Real point of decision making.
7. Make derivative plans/approval.

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ORGANIZING
Determine what is to be done/ Division of Work.
Assign Tasks: Departmentalization.
Link Departments: Hierarchy Development
Decide how much Authority to Designate/ Authority,
Responsibility and Delegation.
Decide the Levels at which Decisions are to be made /
Centralization vs. Decentralization
Decide how to Achieve Coordination.

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TECHNIQUES OF
ACHIEVING COORDINATION
Coordination by Rules or Procedures.
Coordination by Targets or Goals.
Coordination through the Hierarchy/step by step.
Coordination through Departmentalization./units
Using a Staff Assistant for Coordination.
Using a Liaison for Coordination.
Using a Committee for Coordination.
Using Independent Integrators for Coordination.
Coordination through Mutual Adjustment.

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STAFFING
Selecting and training individuals for specific job
functions, and charging them with the associated
responsibilities.
Determining the number of employed personnel in an
organization or program, Also called workforce.
Working for employee self improvement through education, experience
sharing , etc: Example
Higher Education (in and outside country)
Health sector (in and outside country)
Agricultural sector (in and outside country)

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DIRECTING/LEADING
Provides positive and dynamic leadership.
Provides proper motivation of personnel.
Ability to command people.
Attracting people to the organization.
Marshaling and allocation of resources
Creating good working conditions

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CONTROLLING
Controlling is a three-step process of measuring
progress toward an objective, evaluating what remains
to be done, and taking the necessary corrective action to
achieve or exceed the objectives.
Measuring: determining through formal and informal
reports the degree to which progress toward objectives is
being made.
Evaluating: determining cause of and possible ways to act
on significant deviations from planned performance.
Correcting: taking control action to correct an unfavorable
trend or to take advantage of an unusually favorable trend.

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METHODS OF
CONTROLLING
Feed Forward Control - Control that attempts to
identify and prevent deviations before they occur is
called feed forward control, sometimes called
preliminary or preventive control.
Concurrent Control - Control that monitors ongoing
employee activities during their progress, to ensure
they are consistent with quality standards, is called
concurrent control.
Feedback Control - In this case, the control takes
place after the action. Sometimes called post-action
or output control.

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STEPS IN CONTROLLING
Establish Standards of Performance.
Measure Actual Performance.
Compare Performance to Standards.
Take Corrective Action.

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TYPES OF MANAGER’S
First-line Managers: often called supervisors stand at
the base of the managerial hierarchy.
Middle Managers: heads of various departments and
organize human and other resources to achieve
organizational goals.
Top Managers: set organizational goals, strategies to
implement them and make decisions.

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MANAGERIAL SKILLS
A manager is someone skilled in knowing how to
analyze and improve the ability of an organization to
survive and grow in a complex and changing world.
This means that managers have a set of tools that
enable them to grasp the complexity of the
organization's environment.
Technical skills
Human skills
Conceptual skills

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TECHNICAL SKILLS
Technical skill involves understanding and
demonstrating proficiency in a particular workplace
activity.
A persons’ knowledge and ability to make effective
use of any process or technique constitutes his
technical skills.
For eg: Engineer, accountant, data entry operator,
lawyer, doctor etc.

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HUMAN SKILLS
An individuals’ ability to cooperate with other
members of the organization and work effectively in
teams.
Communication.
For eg: Interpersonal relationships, solving people’s
problem and acceptance of other employees.

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CONCEPTUAL SKILLS
Ability of an individual to
analyze complex situations
and to rationally process
and interpret available
information.
For eg: Idea generation
and analytical process of
information.

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MANAGERIAL SKILLS

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 MANAGER’S ROLES
Someone who coordinates and oversees the work of other
people so that organizational goals can be accomplished.
Interpersonal role
Informational role
Decisional role
Interpersonal Role
Figurehead- ethical guidelines and the principles of behavior
employees are to follow in their dealings with customers and
suppliers.
Leader- give direct commands and orders to subordinates
and make decisions.
Liaison-coordinate between different departments and
establish alliances between different organizations.

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Informational Role
Monitor- evaluate the performance of employees in different
functions.
Disseminator-communicate to employees the organization’s
vision and purpose.
Spokesperson- give a speech to inform the local community
about the organization’s future intentions.

Decisional Role
Entrepreneur- commit organization resources to develop
innovative goods and services.
Disturbance handler- to take corrective action to deal with
unexpected problems facing the organization from the external
as well as internal environment.
Resource allocator- allocate existing resources among
different functions and departments.
Negotiator- work with suppliers, distributors and labor
unions.
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MANAGER’S ROLES

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ORGANIZATION
An organization is a collection of people working together in a
coordinated and structured fashion to achieve one or more goals.
In other words the process of organization implies the
arrangement of human & nonhuman resources to make a
meaningful whole that accomplishes organizational objectives.
Characteristics: (1) each has a distinct purpose; (2) each is
composed of people; and (3) each develops some deliberate
structure so members can do their work.

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ORGANIZATION

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 ORGANIZATIONAL STRUCTURE

Formal relationship between

people in various positions in
the organization.
They show who supervises
whom & how various jobs &
departments are linked together
to make and achieve
coordinated system.
Main channels of
communication:
Downward
Upward
Horizontal
Diagonal

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BASICS OF PRODUCTIVITY
Productivity is a common measure of how well resources
are being used or a measure of the efficient use of
resources usually expressed as the ratio of output to
input.
 Productivity, the relative efficiency of economic activity—that
is, the amount of products or services produced compared to
the amount of goods and labor used to produce.
 Labor Productivity Outputs
Productivity =
 Quantity (or value) of output / labor hrs
Inputs
 Quantity (or value) of output / shift
 Machine Productivity
 Quantity (or value) of output / machine hrs
 Energy Productivity
 Quantity (or value of output) / kwh
 Capital Productivity
 Quantity (or value) of output / value of input
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 Measures of Productivity
Partial Output Output Output Output
measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

If we produce only one product, the numerator can be either the total
units of product or total $ value of the product.

If we produce several products, the numerator is the total

$ value of all products.
Usually, the numerator is the total $ value of all outputs.
The denominator is total $ value of all inputs.

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 MEASURES OF PRODUCTIVITY
Example 1 Which productivity
measures can be
7040 Units Produced calculated?

Sold for $1.10/unit What is the

multifactor
Cost of labor : $1,000 productivity?

Cost of materials: $520 MFP = Output

Labor + Materials + Overhead
Cost of overhead: $2000
MFP = (7040 units)*($1.10)
$1000 + $520 + $2000

= 2.20

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 MEASURES OF PRODUCTIVITY
Example 2
 5,500 Units Produced
 Sold for $35/unit
 500 labor hours are used
 Cost of labor: $25/hr
 Cost of raw material: $5,000
 Cost of overhead: 2 x labor cost
What is the labor productivity?
What is the multifactor
productivity?
 5,500 units/500 hours = 11
units/hour
Or we can arrive at a unitless
figure:
 (5,500 units*$35/unit)/(500
hours * $25/hr) =15.4
MFP = (5,500 units)*($35)
(500hrs.)*$25/hr. + ($5000) +
2*(500hrs.)*$25/hr.
MFP = 4.52
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 MEASURES OF
PRODUCTIVITY
Example 3
 Assume that you have just determined that your service
employees have used a total of 2400 hours of labor this week to
process 560 insurance forms. Last week the same crew used
only 2000 hours of labor to process 480 forms.
 Which productivity measure should be used?
 Answer: Could be classified as a Partial Measure (labor
productivity).
 Is productivity increasing or decreasing?
 Answer: Last week’s productivity = 480/2000 = 0.24, and
this week’s productivity is = 560/2400 = 0.23. So,
productivity has decreased slightly.

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FACTORS AFFECTING
PRODUCTIVITY
Standardization  Methods
Technology  Design of the workspace
Searching for lost or  Incentive plans that
misplaced items reward productivity
Scrap rates  Capacity utilization
 Location
Labor turnover,
 Layout
layoffs, new workers  Inventory
Safety  Scheduling
Bottlenecks  Equipment breakdowns
 Part and material shortages
 Inadequate investment in
training & education of the
employees

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KEY STEPS FOR IMPROVING
PRODUCTIVITY
Develop productivity measures for all operations
Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Get management support (make it clear that management supports
and encourages productivity improvements.)
Measure and publicize improvements
Invest on labor force by training and education

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 EXERCISE 1-ASSIGNMENT 1
1. A company that makes shopping carts for supermarkets recently purchased new
equipment, which reduced the labor content needed to produce the carts.
Information concerning the old system (before adding the new equipment) and the
new system (after adding the new machines) includes:
Old System New System
Output/hr 80 84
Workers 5 4
Wage $/hr 10 10
Machine $/hr 40 50
a) Compute labor productivity for both the Old System and the New System.
b) Compute total factor productivity for both the Old System and the New System.
c) Suppose production with old equipment was 30 units of cart A at a price of
$100 per cart, and 50 units of cart B at a price of $120. Also suppose that
production with new equipment is 50 units of cart A, at a price of $100 per
cart, and 30 units of cart B at a price of $120. Compare total-factor
productivity for the old and the new systems.

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 EXERCISE 2 1-ASSIGNMENT 1
2. A company has introduced a process improvement that reduces the
processing time for each unit and increases output by 25% with less material
but one additional worker.
Under the old process, five workers could produce 60 units per hour. Labor
costs are $12/hour, and material input was $16/unit.
For the new process, material input is now $10/unit and overhead is charged at
1.6 times direct labor cost. Finished units sell for $31 each.
a) Compute single factor productivity of labor in the old system. (Compute it in
four possible ways.)
b) Compute all factor productivity for both old and new systems.
Factor Old System New System Output 60
60(1.25) = 75
# of workers 5 6
Worker cost $12/hrs $12/hrs
Material $16/unit $10/unit
Overhead 1.6(labor cost) 1.6(labor cost)
Price 31 31
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 EXERCISE 3 1-ASSIGNMENT 1
3. A milk factory seeks advice from an external consulting company concerning its business and
production processes. The final consulting report describes several steps to increase productivity
including implementation of cutting-edge processing techniques through more powerful filtering
systems.

Existing System Proposed System

Workers 12 9
Milk Output/hour 1,000 gallons 1,400 gallons
Wage Rate/hour $12 $12
Filtration Cost/hour $120 $170

a) Calculate the labor productivity for the existing as well as the proposed system.
b) Find the Total-Factor Productivity for both systems.
c) Assume that current processing includes 700 gallons of Grade-A milk sold at $2.40/gallon and
300 gallons of Grade-B milk at $1.90/gallon. Furthermore, assume that under the proposed
system, processing will include 600 gallons of Grade-A milk at $2.40/gallon and 400 gallons of
Grade-B milk at $1.90/gallon. Compare all-factor productivity for both the existing and the new
system.
d) Is the proposed system acceptable? Why?

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