Functions of Engineering

Management
Engineering Management
BNR 42603
Mohd Hakimi Bin Zohari

Outlines

Planning and Strategy formulation

Organizing
Leading and motivating
Controlling of Resource and
Finance Management

Planning

Explain the importance of planning

Identify missions
Explain the roles of goals and
objectives
Identify strategies

Introduction

Enterprises/company need plans,

direction and control to success
and all these will function only with
effective organization.
These elements, planning,
organizing and controlling are
called managerial functions.

Planning

Provides method for identifying

objectives
Design sequence of programs and
activities to achieve objectives

Effective Planning

Plan to plan

People implementing plan should

be involved in preparing plan

Planning?

What must be done?

Who will do it?
How will it be done?
When must it be done?
How much will it cost?
What do we need to do it?

Cont

What is the Problem/Purpose?

Establish Goal/Objectives
What Client Need Is Being Satisfied
by the Project?
Identify Success Criteria

The Foundation for

Planning

Mission
Purpose or Goal
Objectives
Strategies

All Customer Driven

Strategic Planning
Vision/Mission

SWOT Analysis

Gap Analysis

Goals

Objectives

Strategies

Mission

Goal 1

Objective 1

Goal 2

Objective 2

Strategy 1

Strategy 2

Goal 3

Strategic Planning

Suggests ways (strategies) to

identify and to move toward
desired future states
Consists of the process of
developing and implementing
plans to reach goals and objectives

Cont

Not a business plan

Not an operational plan

Vision Microsoft (1980s)

"A personal computer on every

desk, and every computer running
Microsoft software."

Mission, Vision &

Objectives

A companys mission is a statement of

the basic purpose or reason for its existence

its values (role to stakeholders - customers,
employees, society, etc.).

The vision goes beyond the mission statement

clarifies the long-term direction of the company

(where the company is going)
reflects managements aspirations for the company

Planning
Mission Statement

First step in planning process

What do we want to do

Planning
Goal Statement

Why?

What do we do?

For whom do we do it?

Examples of Mission &

Vision

Southwest Airlines:

Mission: To provide high quality service at a lower

price in the airline industry.
Vision: Opening air travel to a wider group of
leisure travelers while infusing the organization
with a sense of fun.

Apple Computer:

Mission: To bring the best personal computing

products and support to consumers around the
world.
Vision: One person, one computer.

Vision Example

Eastman Chemical Company

To Be the World's Preferred
Chemical Company

Mission Pals

To deliver excellence in food

service while providing a menu
focused on exceptional quality.

SWOT Analysis
Internal

External

Strengths

Opportunities

Weaknesses

Threats

Planning Goal Statement

Gives purpose and direction

Used as continual point of
reference for questions regarding
scope or purpose

Planning Objectives

More detailed goal statement

Clarifies goal
How do we go about it?
To (action verb)
Consistent with organization

Planning Develop
Objectives
Specific
Measurable
Attainable
Realistic
Time-limited

Objectives Characteristics

Outcome - what is to be
accomplished
Time Frame - expected completion
date
Measure - metrics for success
Action - how the objective will be
met

Goals and Objectives

Objectives for Organizational

Survival

Market Share
Innovation
Productivity
Physical and Financial Resources
Manager Performance and Development
Worker Performance and Attitude
Profitability
Social Responsibility

Management by
Objectives

Commonly Referred to as MBO

Corollary MBWA
(Management by Walking Around)

Organizing

Legal Forms of Organization:

Proprietorship, Partnership, Corporation, and
Cooperative
Organizing Process
Comparison of subdivision logics
(Departmentalization)
Span of Control, nature of line, staff and
service relationships
Effect of technology on organization structure

Legal Forms of
Organization

Sole Proprietorship

Owned and operated by one person

Simple to organize and shut down
Has few legal restrictions
Owner is free to make all decisions
Profit is taxed only once (in USA)
Unlimited responsibility for debts
Difficult to raise capital for growth of business
Duration of business is limited to the life of
proprietor

Legal Forms of
Organization

Partnership

Association of two or more partners

Has relatively few legal restrictions
Permits the pooling the managerial skills and judgements
Divided decision making and authority might cause problems
Partners have unlimited liability for debts
In a limited partnership, there must be at least one general partner
Limited partners are limited only to the extent of their investment

Most common form of business organization

Legal Forms of
Organization

Corporations

Legal entities owned by shareholders

Shareholder has no liability beyond loss of the value of stock
Have perpetual life as long as submitting necessary reports
Raising money for growth is easy
Easiness in transfer of ownership and change management
More difficult and expensive to organize
Subject to many rules and regulations
More taxing is applied
Most large organizations are corporations

Legal Forms of
Organization

Cooperatives

Special type of organization owned by

users or customers
Earnings are usually distributed tax
free
Board members managing
cooperative are elected by all
members

Organizing

To work efficiently in a team,

members need to know the parts
to play (roles) and how these roles
relate to one another.
Designing and maintaining these
systems of roles is called
organizing.

Organizing involves:

Identification and Classification of

Required Activities
Grouping of Activities to Obtain
Objectives
Assignment of a manager to each
group with the authority
Provision for Coordination
horizontally and vertically

Cont

Assignment of a manager to each group with the authori

Provision for Coordination horizontally and vertically

Top Level
Middle-Level
First-Line Managerial Level

Organizing by Key
Activities

Effective organizing must first

consider basic mission and longrange objectives established for
the organization and the strategy.
Therefore, key activities have to be
considered first

Ask three questions to

identify key activities

In what area is excellence required

to obtain the companys objectives
In what areas would lack of
performance endanger the results?
What are the values that are truly
important to us in this company?

After establishing key

activities,
two additional works are suggested:

Decision Analysis

What decisions are needed to obtain effectiveness in key

activities?
(Futurity, effectiveness on the functions, frequency and results
are addressed)

Relations Analysis

With whom the person in charge of an activity will have to

work?
Find the crucial relations for success and effectiveness. These
relations should be easy, accessible, and central to unit.

Patterns of Departmentalization

YOU

Jane

Jack

Jill

Patterns of Departmentalization
Functional Departmentalization
President

Finance
Manager

Production
Manager

Sales
Manager

Designer

Dr.B.G.Ctiner

Patterns of Departmentalization
President

Finance

Production

Marketing

CD Cabinet Div

Acctg Prodn.

Mktg

R&D

Disk Box Div.

Pers.

Acctg Prodn.

Mktg

Product Departmentalization

Pers.

Patterns of Departmentalization
President

Finance

Production

Marketing

Western Division

Acctg Prodn.

Mktg

R&D

Eastern Division

Pers.

Acctg Prodn.

Mktg

Pers.

Geographic Departmentalization

Patterns of Departmentalization
President

Finance

Production

CD Cabinets Disk Boxes

Parts

Assembly Finishing

Marketing

R&D

Western Sales Eastern Sales

Industry Sales

Consumer Sales

Mixed Departmentalization

Span of Control
Defines number of Subordinate Managers
CEO

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Control of Span for 4

(needs 20 managers)

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Span of Control
Defines number of Subordinate Managers
CEO

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Control of Span for 8

(needs 8 managers)

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Span of Control

CEO
M
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M M M M M M M M

M M M M

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Narrow
Span

CEO

Wider
Span

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Multiple Levels can increase communication and decision time

Narrow spans of control (tall organizations) are expensive
(we have more managers)

Wide spans leave managers with inadequete times to supervise

activities.

Factors Determining Effective Spans

Number of relationships that exists between mana

and subordinates individually and in various comb
and among the subordinates themselves.
Number of relationships with n subordinates

2(n-1)+n-1

250000
Relationships

300000

For n=1, 1 relationship

n=2, 6 relationships
n=3, 18 relationships

200000
150000
100000
50000
0
1

9 10 11 12 13 14 15

Number of Subordinates

Supervision

Following conditions affect a manager

to effectively supervise people

Subordinate Training
Nature of jobs Supervised
Rate of Change of Activities and
Personnel
Clarity of instruction and delegation
Staff Assistance

Current Trends in Spans

To increase the spans of control (decreases number
organizational levels)

Results of Wider Spans

1. Significant reduction of administrative costs

2. More effective and efficient organization commun

3. Faster Decisions and closer interaction between

organizational levels
4. Requirement for more personnel training for all le
5. Better leadership at all levels

Outlines

Planning and Strategy formulation

Organizing
Leading and motivating
Controlling of Resource and
Finance Management

Classification of
Companies

Unit: production according to the

Customer orders (job-shop)
Mass Production
Process

Impact of Information Revolution

Reduction of number of workers, more skilled worker

requires monitoring abilities rather than physical on
Skills Required
1. Visualization (ability to manipulate mental patterns)
2. Conceptual Thinking (or abstract reasoning)
3. Understanding of processes such as machine fundame
and machine/material interactions

4. Statistical understanding (trends, and meaning of da

5. Oral and Visual Communication
6. Attentiveness
7. Individual Responsibility

Impact of Information Revolution

RESULT
Little future in industry for the uneducated employee

If your actions inspire others to dream

more, learn more, do more and
become more, you are a leader.

Managers

Leaders

Administer

Innovate

Ask how and when

Ask what and why

Focus on systems

Focus on people

Do things right

Do the right things

Maintain

Develop

Short term perspective

Longer term perspective

Imitate

Originate

Are a copy

Are original

Leadership
Nature of Leadership
It is the ability to get people to do what they
dont want to do and like it

Leadership Traits

Physical Qualities
Personal Attributes
Character Attributes
Intellectual Qualities

 Physical Qualities: Health, Vitality, Endurance

Personal Attributes: Personal Magnetism, Cooperativeness,
enthusiasm, ability to inspire, persuasiveness, forcefulness,
and tact
Character Attributes: Integrity, Humanism, Self-discipline,
Stability and Hard working
Intellectual Qualities: Mental capacity, ability to teach others,
scientific approach to problems

Leadership Continuum
Autocratic
Diplomatic
Consultative
Participative

Motivation

Motivation
Dale Carnegie states that there is
only one way to get anybody to do
anything. And that is by making
the other person want to do it.

Motivation: An inner state that energizes, activates, or moves

and that directs or channels behavior toward goals.
Company Goals

Motivation is the feeling that directs

the person toward goals

We can define motivation in terms of three measures

1. Direction

Direction
(When several alternatives are available)

We can define motivation in terms of three measures

2. Strength of behavior when choice

is made

Strength

Bigger heart shows larger motivation

Direction

We can define motivation in terms of three measures

3. Persistence of Behavior

Strength
Persistence shows the consistency and continuousness

There is only one way if you want the people to make something for you

Making them want to do it.

In other words, motivate them.

Motivation Theories

McGregor

Maslow

Herzberg

McGregor
Theory X and Theory Y

Theory X authoritarian
management style

Theory Y participative
management style

Maslows Hierarchy

Physiological
Safety
Love
Esteem
Self-actualization

Maslow, cont.
Higher Level

Self-Actualization
Realizing ones full potential;
Creativity, self-development
Esteem
Self respect, prestige, recognition
Affiliation
Acceptance by others, being part
of a group

Maslow, cont.
Lower Level

Security/Safety
Job security, predictable work
environment
Physiological
Food, shelter, air, water

Motivation and Leading Technical People

CONTENT THEORIES:
Maslows Hierarchy of Needs
In this theory, there are
5 needs and each need
rests on the prior
satisfaction of another.

Self-actualization Needs
Esteem Needs

Minimum Level

Affectionate Needs
Safety and Security Needs
Physiological Needs

Motivation and Leading Technical People

CONTENT THEORIES:
Maslows Hierarchy of Needs
Self-actualization Needs
Esteem Needs
Affectionate Needs

Safety and Security Needs

Physiological Needs

Herzbergs Two-Factor Theory

Motivator factors that are intrinsic

to the job

Hygiene factors that are intrinsic to

the job

Motivation and Leading Technical People

CONTENT THEORIES:
Herzbergs two-factor theory:
Factor 1 is called hygiene factors. Factor 2 is called motivation factors.
Motivation
Factors
(motivators)

2
Hygiene
Factors

Self-actualization Needs
Esteem Needs
Affectionate Needs
Safety and Security Needs
Physiological Needs

Hygiene Factors

Salary
Working Conditions
Company Policies
Relationship with Boss
Relationship with Peers

Motivator Factors

Recognition
Work Itself
Responsibility
Advancement
Achievement

Motivation and Leading Technical People

McClellands trio of needs:
Mixture of three needs

Need for
achievement

Need for
power

Need for
affiliation

Differences Among
Technical Professionals

Scientists versus engineers

Scientists versus Engineers

Higher value on independence in science people
True scientist is assumed to have doctorate but typical engineer
begins with B.S. Degree and later MS.c degree
Scientists put a high value on professional autonomy and publication
of results
Scientists look for reputation outside the company
Scientist tries to add his new findings to literature whereas new
findings of engineer are usually proprietary information to company

Special Characteristics of technical professionals are as follows:

High Need for Achievement
Desiring Autonomy (Independence)
Tending to identify first with their profession (then company)
Seeking to maintain their expertise

Behavior modification
Positive reinforcement
Negative reinforcement, or
avoidance
Punishment
Extinction

Behavior Modification (Reinforcement Theory): Motivation

(behavior)
followed by an event (reinforcement) which affects the
repetition of behavior.

Reinforcement
Positive Reinforcement: Increases the repetition of desired behavior by
providing a reward (promotion, recognition etc)
Negative Reinforcement: Increases the repetition of desired behavior by
letting the employee escape from undesired consequences
Punishment: Decreases the repetition of undesired behavior by
imposing penalties
Extinction: Decreases the repetition of undesired behavior by
simply ignoring and using positive reinforcement

Behavior Modification (Reinforcement Theory): Motivation

(behavior)
followed by an event (reinforcement) which affects the
repetition of behavior.

Reinforcement
Positive
Reinforcement

+
Extinction

Punishment
Reinforcement
Negative
Reinforcement
Assoc.Prof.Dr.B.G.etiner

NATURE OF LEADERSHIP
Leadership is formal or non-formal.

They have the authority

(power of reward and
punishment)

They are true leaders

LEADING TECHNICAL PEOPLE

Dimensions of Technical Leadership
Successful technical leaders should master five strategic dimensions
1. Coach for peak performance: listen, ask, facilitate, integrate,
provide administrative support
2. Run Organizational Interference: Obtain resources, support
professionals and minimize the bureaucracy
3. Orchestrate Professional Development
4. Expand Individual Productivity through Teamwork
5. Facilitate Self-management

Describe some of the important elements for

establishing financial controls
a. Financial Ratios used in Ratio Analysis
b. Financial and Operating Budgets
c. Nature of Budgeting Process
Explain balance sheets, income statements,
ratios.

Explain different non-financial control systems

Characteristics of Effective Control Systems

Definition of Controlling
Compelling Events to Conform to Plans

Steps of Controlling

Closed-Loop versus Open-Loop Control

Closed-Loop: Automatic Control which monitors and manages a proc

by means of a self-regulating system
Open-Loop: Requires an external monitoring system
In Engineering Management, last step in control usually requires
Human judgment
Example; Machining process fails to maintain
a specific tolerance
The machining problem (fixing)
Operator is not skilled enough (training)

Tolerance cannot be achieved for that mat

Closed Loop

Automatic or cybernetic
Monitors or manages process by
internal, self-regulating system
Essential feature is strong feedback
system
Example: Thermostat system

Open Loop

Requires external monitoring or agent

to activate control
Example: Cruise control on an
automobile

Characteristics of Effective Control Systems

Effective: Measure what needs to measured and controlled
Efficient: Economical and worth their cost
Timely: Enough time for corrective action
Flexible: should be adjustable to changing conditions
Understandable: should be easy to understand

Tailored: Deliver the information according to each level of manag

Lead to corrective action: should incorporate means of corrective

Financial Controls
Provide basic information for the control of cash and credit which
essential for company survival.
There are 3 major types of financial statements:
1.

Balance Sheet: Companys financial position at a partic

instant in time, assets and liabilities
2. Income statement: Financial performance of the firm ov
a period of time.

3. Cash Flow: Statement showing where funds come from a

what it is used for

Balance Sheet

Quickly get handle on financial

strength of company
Includes assets, liabilities, and
stockholders equity

Assets Anything business owns that

has monetary value

Liabilities Claims of creditors

against the assets of the business

Income Statement

Also called Profit and Loss Statement

Most used business report
Snapshot of money as it flows
through business over specific
period of time
Basic formula:revenues - expenses = income
(profit/loss)

Ratio Analysis

Ratios of two financial numbers

taken from financial statements
and compared to industry
averages
Four Types

Liquidity: Measures ability to meet

short term obligations

Leverage: Measures the level of debt

in a firms financial structure
Activity: Measures how effectively a
firm uses its resources
Profitability: Measures profit
producing performance of firm

Liquidity Ratio

Current ratio is formula referred to

Current assets/current liabilities

Numbers from Balance sheet

Acid test ratio

Profitability Ratio

Net income/Net sales

From Profit and Loss Statement

Balance Sheet (EXAMPLE: Company X, December 2002)

What company
Owns

What company
Owes

Financial Ratios
Liquidity Ratios
Current Ratio
Current Assets
Current Liabilities
1400000
450000

= 3.11

Measure the ability

to meet short-term
obligations.

As minimum 2.0 is used

but it varies. A current
ratio of 10 shows
assets are not using
efficiently.

Financial Ratios
Liquidity Ratios
Acid Test Ratio
Current Assets-Inventory
Current Liabilities
1400000-700000
= 1.56
450000

For quickly converting

to cash we calculate
this ratio.

It is difficult to conver
inventories to cash,
Therefore, inventory i
extracted.
Over 1.0 is OK.

Financial Ratios
Leverage Ratios
Debt-to-assets ratio
Total Debt
Total Assets
1450000
4400000

= 0,33

Relative importance o
stockholders and
outside creditors as a
source of enterprises
capital.

Rate is dependent on
the industry.

Financial Ratios
Activity Ratios
Inventory Turnover
Cost of Goods Sold
Inventory
2000000
700000

= 2,86

Financial Ratios
Activity Ratios
Accounts Receivable
Turnover
Net Sales
Accounts Receivable
4000000
400000

= 10

Financial Ratios
Activity Ratios
Asset Turnover
Net Sales
Total Assets
4000000
4400000

= 0,91

Financial Ratios
Profitability Ratios
Profit Margin
Net Income
Net Sales
1050000
4000000

= 26,3%

Financial Ratios
Profitability Ratios
Return on Total Assets
Net Income
Total Assets
1050000
4400000

= 23,8%

Budgets
Plans for the future allocation and use of resources
over a fixed period of time.

Financial Budgets
Planning of cash for the coming period and how the
company intends to use it.

Three Types of Financial Budgets

1.Cash Budgets: Estimate future revenues and
expenditure and their timing during budgeting period
2.Capital Expenditure Budgets: Describes future
investments in plant and equipment
3.Balance Sheet Budget: Uses the first two
estimates to predict what balance sheet look like at the
end of budgeting period

Budgeting Process
Budgets can be prepared by a central group and imposed
on everyone by top management (top-down approach).
This does not take the advantage of information from
lower management.
Alternatively, budgets can be prepared in responsibility
centers.
They tend to be inflated and doesnt consider upper
management goals and objectives.

Controlling

Audits of Financial Data :

Audits are investigations of an organizations activities
to verify their correctness and identify any need for
improvement.
External Audits: required at least once a year for publicly
held organization by independent companies
Internal Auditing Staff: They spend their times in
auditing several units of organization

Controlling
Non-financial Controls
Human Resource Control: Seen in Human Aspects of
organizing
Management Audit: By answering some questions
about management such as planning, organizing and
staffing, directing, control, resource planning and control
Social Control: Building an organizational culture and
controlling.

Non-financial Controls

Effectiveness of research activities

Systems for release of drawing
release
Inventory control
Quality control

Individual Assignment

A study on Total Quality Management

and Safety Management
implementation in industry.
ISO 9001
Any quality standard
Not more than 5 pages
Due date 23 March 2016