Production and

Project Management

By Ebise G. ( MSc.)
 Chapter One

Basics of Management and

Organizations

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 Synopsis
 Introduction to management
 Functions of management
 Types of managers
 Managerial roles and skills
 Organization
 Characteristics of organization
 Types of organizational structures
 Basics of Productivity
 Productivity measurement and growth

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 Introduction to Management

 Management is the act of getting people together to accomplish

desired goals and objectives using available resources efficiently
and effectively. 

 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.

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 Definition of management according to different scholars
 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”.
 According to Harold Koontz, "Management is the art of getting things
done through others and with formally organized groups.“
 According to George R. Terry, ''Management is a distinct process
consisting of planning, organizing, actuating and controlling; utilizing in
each both science and art, and followed in order to accomplish pre-
determined objectives."

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  Effectiveness
 Adequate to accomplish a purpose, producing the intended or
expected result. 
 Effectiveness is completing activities so that organizational goals
are attained.
 Doing the right things
 Efficiency
 Performing or functioning in the best possible manner with the least
waste of time and effort.
 Efficiency is doing something with the least possible expenditure of
resources (such as time, energy, etc.)
 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.

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 Characteristics of Management
 Management is Concerned with  Management is relationship
Group Efforts/Activity. building within and outside the
 Management is Dynamic. organization.
 Management is Goal Oriented  Management is an environment
Activity. oriented activity.
 Management has its own tools
 Management is an Art of Getting
and techniques.
Things Done.
 Management is leadership
responsibility.

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Four Reasons of Studying Management

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 Managers and Types of Managers
 A manager is a person who exercises managerial functions
primarily.
 Manager is a person responsible for supervising and motivating
employees and for directing the progress of an organization.
 They should have the power to hire, fire, discipline, do
performance appraisals, and monitor and the power to approve
overtime, and authorize vacations.
 Each manager having their own individual and notable
leadership manner and they are different in each organization.

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Types of managers
 Top level managers (administrative level): are responsible
for controlling and overseeing the entire organization.
 They apply control and coordination of all the activities of the
firm as they organize the several departments of the
enterprise which would include their budget, techniques, and
agendas.
 Functions of Top level managers
 They develop goals, strategic plans and make decisions on the
direction of the business.
 Lay down the policies and objective of the organization.
 Strategizing the plans of the enterprise and aligning competent
managers to the departments or middle level to carry them out.
 Keeping the communication between the enterprise and the outside
world.
 Play a significant role in the mobilization of outside resources.

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 Middle-level Managers is also referred to as the
subordinates of the top-level management and are
responsible for the organization and direction of the low-level
management.
 Functions of Middle level managers
 Executing organizational plans in conformance with the
company’s policies and the objectives of the top
management
 Designing and implementing effective group and
intergroup work and information systems
 Defining and monitoring group-level performance
indicators
 Diagnosing and resolving problems within and among
work groups
 Designing and implementing reward systems supporting
cooperative behavior.
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 Low level managers ( First level managers)
 They also referred to as the supervisory or the operative
level of managers
 They oversee and direct the operative employees.
 They spend most of their time addressing the functions
of the firm, as instructed by the managers above them
 Functions of Low-level managers
 Assigning employees tasks
 Guiding and supervising employees on day-to-day activities
 Ensuring the quality and quantity of production
 Making recommendations and suggestions
 Up-channeling employee problems.

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 Functions of Managers
 Managers work to increase the efficiency and effectiveness of
their employees, processes, projects, and organizations as a whole
by using the different functions.

Functions of Managers
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 Planning
 Organizing
 Staffing
 Directing
 Controlling

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 Planning
 Planning means defining performance goals for the organization and
determining what actions and resources are needed to achieve the
goals.
 Planning is determining the objectives and formulating the methods to
achieve them.
 Through planning, management defines what the future of the
organization should be and how to get there.
 A job well planned is half done.
 Strategic plans : are long-term and affect the entire organization.
 A strategic plan bridges the gap between what an organization is
and what it will become. 
 Tactical plans: is the shorter-term planning of an objective that will
take a year or less to achieve. It is usually carried out by an
organization’s middle management.

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 During planning one needs to ask oneself the
following:
What I am 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?

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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.

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 Main steps in planning
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Organizing
 Organizing is the function of management that involves
developing an organizational structure and allocating human
resources to ensure the accomplishment of objectives.
 Organizing also involves the design of individual jobs within the
organization.
 Decisions must be made about the duties and responsibilities of
individual jobs, as well as the manner in which the duties should
be carried out.
 Organizing at the level of the organization involves deciding how
best to departmentalize, or cluster, jobs into departments to
coordinate effort effectively.

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 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.

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 Staffing
 Staffing involves the determination of manpower requirements of
the enterprise and providing it with adequate competent people at
all its levels.
 Staffing is the function by which managers build an organization
through the recruitment, selection, development, of individuals as
capable employees.
 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.

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 Directing/Leading
 Directing function of management refers to the process of
instructing, guiding, counseling, motivating and leading people in
the organization to achieve its objectives.
 It is the interpersonal aspect of management, which deals directly
with influencing, guiding, supervising, and motivating the
subordinates for the accomplishment of the pre determined
objectives.
 A function that includes motivating employees, directing others,
selecting the most effective communication channels, and
resolving conflicts.
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There are three elements of directing that helps managers to
influence people to contribute willingly for the achievement of
organizational goal.
 Motivation
 Leadership and
 Communication
Importance of Directing
 Provides positive and dynamic leadership.
 Provides proper motivation of personnel.
 Ability to command people.
 Attracting people to the organization.
 Allocation of resources
 Creating good working conditions

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 Controlling
 The process of measuring performance and taking action to ensure
desired results.
 Has a positive and necessary role in the management process.
 Ensures that the right things happen, in the right way, at the right
time.
 It 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 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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Types of control methods

 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 actual performance to standards.
 Take corrective action.

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Different types of managers with their respective functions

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 Managerial Skills
 Management skills can be defined as certain attributes or abilities
that an executive should possess in order to fulfill specific tasks
in an organization.
 They include the capacity to perform executive duties in
an organization while avoiding crisis situations and promptly
solving problems when they occur.
 Management skills can be developed through learning and
practical experience as a manager.
 The skills help the manager to relate with their fellow co-workers
and know how to deal well with their subordinates, which allows
for the easy flow of activities in the organization.
 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.

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 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 skills involve skills that give the managers the
ability and the knowledge to use a variety of techniques to
achieve their objectives.
 These skills include operating machines and software,
production tools, and pieces of equipment but also the skills
needed to boost sales, design different types of products and
services, and market the services and the products.
 It is the knowledge related to specified fields such as
computers, engineering, accounting, manufacturing, etc.
 These skills are more important at lower level of management
since these managers deal directly with people doing technical
activities and they need to instruct, direct and supervise them.
 Technical skills are most important for team leaders and
lower-level managers because they supervise the workers who
produce products or serve customers.
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 Human Skills / Interpersonal Skill
 Management jobs are all about people, and being able to build
successful relationships is integral.
 To lead a team you'll need to earn the respect of your colleagues. 
 The human or the interpersonal skills are the skills that present
the managers’ ability to interact, work or relate effectively with
people.
 These skills enable the managers to make use of human potential
in the company and motivate the employees for better results.
 An individuals’ ability to cooperate with other members of the
organization and work effectively in teams.
 For e.g. Interpersonal relationships, solving people’s problem
and acceptance of other employees.

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 Conceptual Skills
 These involve the skills managers
present in terms of the knowledge and
ability for abstract thinking and
formulating ideas.
 The manager is able to see an entire
concept, analyze and diagnose a
problem, and find creative solutions.
 This helps the manager to effectively
predict hurdles their department or
the business as a whole may face.
 Ability of an individual to analyze
complex situations and to rationally
process and interpret available
information.
 For e.g. Idea generation and analytical
process of information.
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 Manager’s Roles
 Manager is responsible to integrates all the activities which are
performed in an organization and play a variety of roles in
organization to manage the work.
 Interpersonal role
 Informational role
 Decisional role

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Interpersonal roles
 A manager’s interpersonal roles are based on various interactions
with other people.
 Depending on the situation, a manager may need to act as a
figurehead, a company leader, or a liaison
 Interpersonal roles are roles that involve people (subordinates and
persons outside the organization) and other duties that are ceremonial
and symbolic.
Figurehead
 They performs symbolic legal or social duties.
 All social, inspiration, legal and ceremonial obligations
 The manager will perform some duties that are casual and informal
ones like, receiving and greeting visitors, visiting dignitaries,
attending to social functions of an employee, entertaining customers
by offering parties and lunches, etc…

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Leader
The leader builds relationships with employees and communicates with,
motivates, and coaches them.
Duties are at the heart of the manager-subordinate relationship and include
structuring and motivating subordinates, overseeing their progress, promoting
and encouraging their development, and balancing effectiveness.
As a leader, managers motivate, direct and encourages his/her subordinates
Liaison 
They maintains a network of contacts outside the work unit to obtain
information and collects information for the wellbeing of the organization
Communication or cooperation which facilitates a close working relationship
between people or organizations.
Acts as a go-between among individuals inside and outside the organization
Representing the retail sales division of the company at a regional sales
meeting
The manager works as a liaison officer between top management and
subordinate staff.
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Informational Role
 These informational roles are all about receiving and transmitting
information so that managers can serve as the nerve centers of
their organization.
Monitor
 The monitor seeks internal and external information about issues
that can affect the organization.
 Duties include assessing internal operations, a department’s
success and the problems and opportunities which may arise.
 Finding out about legal restrictions on new product technology.

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Disseminator
 The disseminator transmits information internally that is
obtained from either internal or external sources.
 Whatever information is gathered by the manager, is then passed
on to the subordinates or the seniors.
 Provides information where it is needed in the organization.
Spokesperson
 Transmits information to people outside the organization
 Representing the company at a shareholders’ meeting
 Give a speech to inform the local community about the
organization’s future intentions

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Decisional Role
 Decisional roles revolved around making choices.
 Managers’ interpersonal role leads to decisional roles.
 Information and resources that are collected and gathered by the
interpersonal make a manager able to play the decisional roles or
responsibilities that he/she is obligated to.
Entrepreneur
 Searches out new opportunities and initiates change
 Implementing a new production process using new technology
 Acts as an initiator, designer, and encourage change and innovation.
 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.
 Handles unexpected events and crises

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Resource allocator
 The resource allocator distributes resources of all types, including
time, funding, equipment, and human resources.
 Designates the use of financial, human, and other organizational
resources.
 Approving the funds necessary to purchase equipments and hire
personnel.
Negotiator
 Represents the company at negotiating processes.
 Participating in salary negotiations with union representatives.
 The negotiator represents the organization in major negotiations
affecting the manager’s areas of responsibility is a specific task
which is integral for the spokesman, figurehead, and resource
allocator roles.
 Work with suppliers, distributors and labor unions.
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 Organization
 An organized group of people with a particular purpose, such as a business or
government department.
 An organization is a collection of people working together in a coordinated
and structured fashion to achieve one or more goals.
 Organization is the form of every human association for the attainment of
common purpose
 In other words the process of organization implies the arrangement of human
& nonhuman resources to make a meaningful whole that accomplishes
organizational objectives.
 Each organization has a distinct purpose; is composed of people; and each
develops some deliberate structure so members can do their work.

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Organization

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 A system is an interrelated set of elements functioning as a
whole.
 An organization as a system is composed of four elements:
 Inputs: material or human resources
 Transformation processes: technological and managerial
processes
 Outputs: products or services
 Feedback: reactions from the environment

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Characteristics of successful organizations
 Effective Sharing of Goals
 A healthy organization shares its business goals with
employees at every level of the organization.
 Management shares goals with employees and gets them
on board with the mission and vision of the organization.
 Employees and managers understand what is required to
reach these shared goals and make every effort to achieve
them.
 Great Teamwork
 Healthy companies know how to develop teams that
collaborate to achieve common goals.
 Employees and managers readily offer their assistance to
each other to meet corporate objectives.
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 High Employee Morale
 Healthy organizations possess high employee morale.
 Employees value their positions in the organizations and desire to work
there for a long time.
 Productivity is high and organizational events are enjoyable and successful
 Offers Training Opportunities
 Organizations provide on-the-job training and opportunities for employees
to enhance their work-related skills.
 Organizations bring in other individuals to provide necessary departmental
and corporate-wide training and offer opportunities to pursue certification
and continual education.
 Strong Leadership
 Good leadership is one of the main characteristics of a healthy organization.
 Employees have good relationships with management that are based on
trust.
 Managers know how to get employees to function together.
 When correction is needed, employees readily accept the constructive
criticism offered by leaders.
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 Handles Poor Performance
 They confront poor performance instead of ignoring it.
 Organizations take corrective actions to improve performance.
 Upper-level management values the input of employees who make
suggestions on how to improve productivity and achieve high
performance rates.
 Adapts to Opportunities and Changes
 Healthy organizations know how to recognize and seize good
opportunities.
 Healthy organizations always look for opportunities to grow.
 They also know how to adapt to technological or operational
changes.
 They try to stay ahead or inline with changes in the industry and
business environment.

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 Clearly Defined Structure
 Companies possess a sense of order and organizational
structure.
 The structure and order of the organization does not limit
innovation and growth.
 Well-Known Company Policies
 Organizations create and implement company policies that
are readily available to their employees.
 Healthy organizations follow the policies and regulations
of local, state and federal governments.
 When employees or managers break policies, the issue is
dealt with immediately and in a professional manner.

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Organizational Structure
 An organizational structure is a system that outlines how certain
activities are directed in order to achieve the goals of an
organization.
 The organizational structure also determines how information
flows between levels within the company.
 Having an organizational structure in place allows companies to
remain efficient and focused.
 A successful organizational structure defines each employee's
job and how it fits within the overall system.
 It lays out who does what so the company can meet its
objectives.
 This structuring provides a company with a visual representation
of how it is shaped and how it can best move forward in
achieving its goals.
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Types of organizational structures
Line Organizational Structure
 Line organizational structure is one of the simplest types of organizational
structures.
 Its authority flows from top to bottom
 The chain of command and each department head has control over their
departments

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Functional Organization
 The Functional Organization groups workers based on their area of
specialization and the functional manager leads the team and manages all the
operations or businesses.
 The department heads manage communication between the top management
and his subordinates and positions departments vertically.
 It groups employees based on functional skills for a higher degree of
performance and suitable for manufacturing or engineering companies.

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Divisional Structure
 Organizational chart has its own division which corresponds to either products.
 Each division contains the necessary resources and functions needed to support
the product line.
 The main advantage of the divisional structure is the independent operational
flow, that failure of one company does not threaten the existence of the others.

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 Productivity
 Productivity refers to the physical relationship between the
quantity produced (output) and the quantity of resources used in
the course of production (input).
 Productivity is the ratio between output of wealth and input of
resources used in production processes.
 It is an economic measure of output per unit of input.
 Output means the quantity of products produced and the inputs
are the various resources used in the production.
 The resources used may be land, building, equipment,
machinery, materials, labor etc.

Outputs
Productivity =
Inputs
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Measures of Productivity
 There are three types of productivity measures:
 Partial: Exactly one input is considered in measuring productivity
 Multifactor: More than one input but not all inputs are included when
measuring productivity.
 Total: All the inputs are included when measuring productivity
 Partial productivity measures can be classified as:
 Labor Productivity
Quantity (or value) of output / labor hrs


 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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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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•Productivity
  Growth
 Productivity growth simply refers to an improvement or increase
in the efficiency of work or production.
 Productivity growth refers to an increase in the value of outputs
produced for a given level of inputs, over a given period of time.
 Generally, productivity growth is depicted by an increase in total
output or production.

 Where, PG is productivity growth, CP is current productivity and

PP is previous productivity

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•Examples
 
1. A wrapping paper company produced 2000 rolls of paper in
one day. Standard price is 1ETB/roll. Labor cost was 160 ETB
material cost was 50 ETB and overhead was 320ETB.
 Determine the labor productivity
 Determine the all-factor productivity.
Solution:

= = 12.5
AFP = = 3.77

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• A  team of workers make 400 units of a product, which is valued by its
2.
standard cost of €10 each. The accounting department reports that for this
job the actual costs are €400 for labor, € 1,000 for materials, and €300 for
overhead.
a. Calculate the MFP in terms of labor and material cost
b. Calculate all factor productivity
Solution:
a) Multifactor Productivity =

b) All-factor Productivity =
= = 2.35

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3.
 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 all-factor 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

AFP = (5,500 units)*($35)/

(500hrs.)*$25/hr. + ($5000) + 2*(500hrs.)*$25/hr.

AFP = 4.52

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4. 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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5. Lake Charles Seafood makes 500 wooden packing boxes for fresh seafood

per day, working in two 10-hour shifts. Due to increased demand, plant

managers have decided to operate three 8-hour shifts instead. The plant is

now able to produce 650 boxes per day.

a) Calculate the company’s productivity before the change in work rules and

after the change.

b) What is the percentage increase in productivity?

c) If production is increased to 700 boxes per day with the three 8-hour

shifts, what is the new productivity?

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5. 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, material input was $16 and overhead is
19$.
For the new process, material input is now $10, overhead is charged
at 19 $ and labor costs are $14/hour. Finished units sell for $31
each.
a) Compute single factor productivity of labor in the old system.
b) Compute all factor productivity for both old and new systems.
c) Compute the productivity growth.
Factor Old System New System Output 60
60(1.25) = 75
# of workers 5 6
Worker cost $12/hr $14/hr
Material $16 $10
Overhead 19 19
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Price 31 31 63
Factors Affecting Productivity
Controllable or internal factors
Plant & Equipment: play prominent role in
enhancing productivity. The increased availability of
plant through proper maintenance & decreased idle
time increases productivity. Further increases by
proper utilization, modernization, investment, etc.
Materials and technology: efforts to reduce
material & energy consumption. So, attention should
be given to selection & quality of right material,
control of scrap & wastage, effective stock control,
optimum energy utilization & energy savings.

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 Human Factors: Depends upon human competence & skills.
Ability to work effectively depends upon training, education,
experience, aptitude, etc.
 Work Methods: Improving the way in which work is done.
Work study & industrial engineering techniques & training
improves the work methods which in return enhances
productivity.
 Management Style: Influences the organizational design,
communication in organization, policy & procedure. A flexible
& dynamic management style is a better approach to achieve
higher productivity.

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Un-controllable Or External Factors
 Natural Resources: physical, geographical and
climate conditions exert considerable influence on
productivity.
 Government Policy & Infrastructure: Government
policies & programs are significant to productivity,
transport & communication power, taxes & interest rates
have a maximum influence on the productivity.

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Ways of Improving Productivity
Employee Based
 Worker participation, promotions, skill enhancement, working
condition improvement, communication, punishment,
recognition, training, education, supervision quality.
Material Based
 Material planning and control, purchasing, logistics, material
storage and retrieval, source selection and procurement of
quality material, waste elimination.
Process based
 Methods engineering and work simplification, job design
evaluation, job safety, human factors engineering.
Task based
 Management style, work culture, communication in the
organization, motivation, promotion group activity.
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 THANK YOU!!!

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