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 Department of Mechanical Engineering 1 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”. Department of 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”
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Characteristics of Management Management is Concerned Management is relationship with Group Efforts/Activity. building within and outside Management is Dynamic. the organization. Management is Goal Management is an Oriented Activity. environment oriented activity. Management is an Art of Management has its own Getting Things Done. tools and techniques. Management is a System of Management is leadership Authority. responsibility, not just an activity. Management is concern with performance results and accomplishment.
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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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. Department of Mechanical Engineering 22 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 Quantity (or value) of output / labor hrs Productivity = 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 Department of Mechanical Engineering 27 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?
Measures of Productivity Example 2 5,500 units/500 hours = 11 5,500 Units Produced units/hour Sold for $35/unit Or we can arrive at a unitless 500 labor hours are used figure: Cost of labor: $25/hr (5,500 units*$35/unit)/(500 Cost of raw material: $5,000 hours * $25/hr) =15.4 Cost of overhead: 2 x labor cost MFP = (5,500 units)*($35) What is the labor productivity? (500hrs.)*$25/hr. + ($5000) + What is the multifactor 2*(500hrs.)*$25/hr. productivity? 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 reward productivity misplaced items Capacity utilization Scrap rates 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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Exercise1 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 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 Department of Mechanical Engineering 35 Exercise 3 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?