Chapter 1 Introduction to Engineering Management

A. THE FUNCTIONS OF ENGINEER

Since prehistoric times, mankind has benefited from the various tools, equipment, and projects
developed by engineers. Among these are the following:

1. The stone bladed axe which was a very useful tool and the irrigation system used to promote
crop growing – 6,000 to 3,000 B.C.;

2. The pyramids of Egypt – 3,000 to 600 B.C.;

3. Road building by the Romans – 600 B.C. to A.D. 400;

4. The production of paper and gunpowder by the Chinese – 100 A.D. to 1,600 A.D.;

5. The production of steam engine and the spinning and weaving machinery -1601 A.D. to 1799
A.D.; and

6. The manufacture of cars and household appliances – modern times.

A listing of all useful tools, equipment, and projects developed and produced by engineers will be
sufficient to produce volume of books. These contributions indicate that engineers have become an
indispensable segment of the world’s professions. This expectation will continue for a long time.

Even as engineers are currently producing solutions to many of the difficulties faced by mankind,
much is still expected of them. Their outputs, new or improvements of old ones, are very much needed in
the following specific problem concerns;

1. The production of more food for fast growing world population;

2. The elimination of air and water pollution;
3. Solid waste disposal and materials recycling;
4. The reduction of noise in various forms;
5. Supplying the increasing demand for energy;
6. Supplying the increasing demand for mobility;
7. Preventing and solving crimes; and
8. Meeting the increasing demand for communication facilities.

Specifically, the functions of engineering encompass the following areas:

1. Research — where the engineer is engaged in the process of learning about nature and
codifying this knowledge into usable theories.
2. Design and development — where the engineer undertakes the activity of turning a product
concept to a finished physical item. Design for manufacturability and value engineering teams
(a feature of some companies) are charged with improvement of designs and specifications at
the research, development, design, and production stages of production development.
3. Testing — where the engineer works in a unit where new products or parts are tested for
workability.
4. Manufacturing — where the engineer is directly in charge of production personnel or assumes
responsibility for the product.
5. Construction — this is where the construction engineer (a civil engineer) is either directly in
charge of the construction personnel or may have responsibility for the quality of the
construction process.
6. Sales — where the engineer assists the company's customers to meet their needs, especially
those that require technical expertise.
7. Consulting — where the engineer works as consultant of any individual or organization
requiring his services.
 8. Government — where the engineer may find employment in the government performing any
of the various tasks in regulating, monitoring, and controlling the activities of various
institutions, public or private.
9. Teaching — where the engineer gets employment in a school and is assigned as a teacher of
engineering courses. Some of them later become deans, vice presidents, and presidents.
10. Management — where the engineer is assigned to manage groups of people performing
specific tasks

B. THE ENGINEER IN VARIOUS TYPES OF ORGANIZATION

From the viewpoint of the engineer, organizations may be classified according to the degree of
engineering jobs performed:

1. Level One — those with minimal engineering jobs like retailing firms.
2. Level Two — those with a moderate degree of engineering jobs like transportation companies.
3. Level Three — those with a high degree of engineering jobs like construction firms.

Figure 1.1 Types of Organization and the Management Skills Required of Engineers

general

Management
skills required

specialized
level level level
1 2 3
The Firm’s Quantity of Engineering Jobs

Management Skills Required at Various Levels

Among the types of organizations, the engineer will have a slim chance of becoming the general
manager or president of level one, unless of course, he owns the firm. The engineer manager may be
assigned to head a small engineering unit of the firm, but there will not be too many firms which will have
this unit.
In level two firms, the engineer may be assigned to head the engineering division. The need for
management skills will now be felt by the engineer manager.
Level three firms provide the biggest opportunity for an engineer to become the president or general
manager. In this case, the engineer manager cannot function effectively without adequate management skil
C. WHAT IS ENGINEERING MANAGEMENT?

Engineering management refers to the activity combining technical knowledge with the ability to
organize and coordinate worker power, materials, machinery, and money.'
When the engineer is assigned to supervise the work of even a few people, he is already engaged in
the first phase of engineering management. His main responsibility is to lead his group into producing a
certain output consistent with the required specifications.
The top position an engineer manager may hope to occupy is the general managership or presidency
of any firm, large or small. As he scales the management ladder, he finds that the higher he goes up, the
less technical activities he performs, and the more management tasks he accepts. In this case, it is but
proper that the management functions taught in pure management courses be well understood by the
engineer manager
D. MANAGEMENT DEFINED

Since the engineer manager is presumed to be technically competent in his specialization, one may
now proceed to describe more thoroughly the remaining portion of his job, which is management.
Management may be defined as the "creative problem solving-process of planning, organizing,
leading, and controlling an organization's resources to achieve its mission and objectives."

E. THE PROCESS OF MANAGEMENT

Management is a process consisting of planning, organizing, directing (or leading), and controlling.
Explained in a simple manner, management must seek to find out the objectives of the organization, think
of ways on how to achieve them, decide on the ways to be adapted and the material resources to be used,
deter-mine the human requirements of the total job, assign specific tasks to specific persons, motivate
them, and provide means to make sure that the activities are in the right direction. The specific activities in
the management process are discussed more thoroughly in the succeeding chapters.

F. REQUIREMENTS FOR THE ENGINEER MANAGER'S JOB

Depending on the type of products or services a firm produces, the engineer manager must have the
following qualifications:

1. a bachelor's degree in engineering from a reputable school; In some cases, a master’s

degree in engineering or business management is required;
2. a few years experience in a pure engineering job;
3. training in supervision;
4. special training in engineering management.

These qualifications will be of great help to the engineer manager in the performance of the various
management functions.

G. HOW ONE MAY BECOME A SUCCESSFUL ENGINEER MANAGER

Successful engineer managers do not happen as a matter of chance, although luck is a contributory
factor. It is very important for the engineer manager to know the various factors leading to successful
management.

Kreitner indicates at least three general preconditions for achieving lasting success as a manager.
They are as follows:

1. ability
2. motivation to manage, and
3. opportunity.

Ability

Managerial ability refers to the capacity of an engineer manager to achieve organizational

objectives effectively and efficiently.

Effectiveness, according to Higgins, refers to a description of "whether objectives are

accomplished", while efficiency is a description of the relative amount of resources used in obtaining
effectiveness."'

To illustrate:

If a civil engineer was asked by his superiors to finish a 100-kilometer road cementing
project within eight months, he is said to be effective if he finished the job within the required
 period. On the other hand, his efficiency is measured by the inputs (labor and materials) he poured
into the project in relation to the actual output (the 100 kilometer road). If the same output is made
with less inputs, the more efficient the civil engineer becomes
Motivation to Manage

Many people have the desire to work and finish specific tasks assigned by superiors, but not many
are motivated to manage other people so that they may con-tribute to the realization of the organization's
objectives.

A management researcher, John B. Miner, developed a psychometric instrument to measure

objectively an individual's motivation to manage. The test is anchored to the following dimensions:

1. Favorable attitude toward those in positions of authority, such as superiors.

2. Desire to engage in games or sports competition with peers.
3. Desire to engage in occupational or work-related competition with peers.
4. Desire to assert oneself and take charge.
5. Desire to exercise power and authority over others. 6
6. Desire to behave in a distinctive way, which includes standing out from the crowd.
7. Sense of responsibility in carrying out the routine duties associated with managerial work.
High scores in the foregoing dimensions are associated with high motivation to manage.

Opportunity

Successful managers become possible only if those having the ability and motivation are given the
opportunity to manage. The opportunity for successful

1. Obtaining a suitable managerial job, and

2. Finding a supportive climate once on the job.

Newspaper advertisements abound with needs for engineer managers. It is a little difficult to
determine if the firms requiring their services provide a supportive climate for effective and efficient
management. A supportive climate is characterized by the recognition of managerial talent through
financial and nonfinancial rewards.

SUMMARY
Engineers are known for their great contributions to the development of the world's civilization. There
are many areas where their presence is necessary like research, design and development, testing, manufacturing,
construction, sales, consulting, government, teaching, and management. Engineers may be found contributing
their share in the various levels of organization. Engineering activities need to be managed and engineers are
sometimes placed in positions where they have to learn management skills. Management is concerned with
planning, organizing, leading, and controlling an organization's resources to achieve its mission and objectives.

There are certain qualifications required of the engineer manager.

One may become a successful engineer manager if the preconditions of ability, motivation to manage,
and opportunity to manage are met.
Chapter 2 Decision Making
A. DECISION-MAKING AS A MANAGEMENT RESPONSIBILITY

Decisions must be made at various levels in the workplace. They are also made at the various stages
in the management process. If certain resources must be used, someone must make a decision authorizing
certain persons to appropriate such resources.

Decision-making is a responsibility of the engineer manager. It is understandable for managers to

make wrong decisions at times. The wise manager will correct them as soon as they are identified. The
bigger issue is the manager who cannot or do not want to make decisions. Delaney concludes that this type
of managers are dangerous and "should be removed from their position as soon as possible."

Management must strive to choose a decision option as correctly as possible. Since they have that
power, they are responsible for whatever outcome their decisions bring. The higher the management level
is, the bigger and the more complicated decision-making becomes.

An example may be provided as follows:

The production manager of a certain company has received a written request from a section
head regarding the purchase of an air-conditioning unit. Almost simultaneously, another request
from another section was forwarded to him requiring the purchase of a forklift.

The production manager was informed by his superior that he can only buy one of the two
requested items due to budgetary constraints. The production manager must now make a decision.
His choice, however, must be based on sound arguments for he will be held responsible, later on, if
he had made the wrong choice.

B. WHAT IS DECISION-MAKING?

Decision-making may he defined as the process of identifying and choosing alternative courses of
action in a manner appropriate to the demands of the situation."'

The definition indicates that the engineer manager must adapt a certain procedure designed to
determine the best option available to solve certain problems.

Decisions are made at various management levels (i.e., top, middle, and lower levels) and at various
management functions (i.e., planning, organizing, directing, and controlling). Decision-making, according
to Nickels and others, “is the heart of all the management functions”

C. THE DECISION-MAKING PROCESS

Rational decision-making, according to David H. Holt,' is a process involving the following steps:

1. diagnose- problem

2. analyze environment

3. articulate problem or opportunity

4. develop viable alternatives

5. evaluate alternatives

6. make a choice
 7. implement decision 8. evaluate and adapt decision results

Diagnose Problem

If a manager wants to make an intelligent decision, his first move must be to identify the problem. If
the manager fails in this aspect, it is almost impossible to succeed in the subsequent steps. An expert once
said "identification of the problem is tantamount to having the problem half-solved."

What is a Problem? A problem exists when there is a difference between an actual situation and a
desired situation!' For instance, the management of a construction company entered into a contract with
another party for the construction of a 25-storey building on a certain site. The actual situation of the firm
is that it has not yet constructed the building. The desired situation is the finished 25-storey building. In
this case, the actual situation is different from the desired situation. The company, there-fore, has a
problem and that is, the construction of the 25-storey building.

Analyze the Environment

The environment where the organization is situated plays a very significant role in the success or
failure of such an organization. It is, therefore, very important that an analysis of the environment be
undertaken.

The objective of environmental analysis is the identification of constraints, which may be spelled
out as either internal or external limitations. Example of internal limitations are as follows:

1. Limited funds available for the purchase of equipment.

2. Limited training on the part of employees.
3. III-designed facilities.

Examples of external limitations are as follows:

1. Patents are controlled by other organizations.

2. A very limited market for the company's products and services exists.
3. Strict enforcement of local zoning regulations.

When decisions are to be made, the internal and external limitations must be considered. It may be
costly, later on, to alter a decision because of a constraint that has not been previously identified.

An illustration of failure to analyze the environment is as follows:

The president of a new chemical manufacturing company made a decision to locate his
factory in a place adjacent to a thickly populated area. Construction of the building was made with
precision and was finished in a short period. When the clearance for the commencement of
operation was sought from local authorities, this could not be given. It turned out that the residents
opposed the operation of the firm and made sure that no clearance is given.

The president decided to relocate the factory but not after much time and money has been
lost. This is a clear example of the cost associated with management disregarding the environment
when decisions are made. In this case, the president did not consider what the residents could do.

Components of the Enuimnment. The environment consists of two major concerns:

1. internal and
2. external.

The internal environment refers to organizational activities within a firm that surrounds decision-
making' Shown in Figure 2.1 are the important aspects of the internal environment.

The external environment refers to variables that are outside the organization and not typically
within the short-run control of top management? Figure 2.2 shows the forces comprising the external
environment of the firm.
Develop Viable Alternatives

Oftentimes, problems may be solved by any of the solutions offered. The best among the alternative
solutions must be considered by management. This is made possible by using a procedure with the
following steps:

1. Prepare a list of alternative solutions.

2. Determine the viability of each solutions. Revise the list by striking out those which are
not viable.

To illustrate:

An engineering firm has a problem of increasing its output by 30%. This is the result
of a new agreement between the firm and one of its clients.
 The list of solutions prepared by the engineering manager shows the following alternative
courses of action:

1. improve the capacity of the firm by hiring more workers and building additional facilities;
2. secure the services of subcontractors;
3. buy the needed additional output from another firm;
4. stop serving some of the company's customers; and
5. delay servicing some clients.

The list was revised and only the first three were deemed to be viable. The last two were deleted
because of adverse effects in the long-run profitability of the firm.

Evaluate Alternatives

After determining the viability of the alternatives and a revised list has been made, an evaluation of
the remaining alternatives is necessary. This is important because the next step involves making a choice.
Proper evaluation makes choosing the right solution less difficult.

How the alternatives will be evaluated will depend on the nature of the problem, the objectives of
the firm, and the nature of alternatives presented. Souder sug-gests that 'each alternative must be analyzed
and evaluated in terms of its value, cost, and risk characteristics."'

The value of the alternatives refers to benefits that can be expected. An example may be described
as follows: a net profit of P10 million per year if the alternative is chosen.

The cost of the alternative refers to out-of-pocket costs (like P100 million for construction of
facilities), opportunity costs (like the opportunity to earn interest of P2 million per year if money is
invested elsewhere), and follow-on costs (like P3 million per year for maintenance of facilities
constructed).

The risk characteristics refer to the likelihood of achieving the goals of the alternatives. It the
probability of a net profit of P10 million is only 10 percent, then the decision-maker may opt to consider an
alternative with a P5 million profit but with an 80 percent probability of success.

Another example of an evaluation of alternatives is shown below:

An engineer manager is faced with a problem of choosing between three applicants to fill up
a lone vacancy for a junior engineer. He will have to set up certain criteria for evaluating the
applicants. If the evaluation is not done by a professional human resources officer, then the engineer
manager will be forced to use a predetermined criteria.

Make a Choice

After the alternatives have been evaluated, the decision-maker must now be ready to make a choice.
This is the point where he must be convinced that all the previous steps were correctly undertaken.

Choice-making refers to the process of selecting among alternatives representing potential solutions
to a problem. At this point, Webber advises that particular effort should be made to identify all significant
consequences of each choice."'

To make the selection process easier, the alternatives can be ranked from best to worst on the basis
of some factors like benefit, cost, or risk.

Implement Decision
 After a decision has been made, implementation follows. This is necessary, or decision-making will
be an exercise in futility.

Implementation refers to carrying out the decision so that the objectives sought will be achieved. To
make implementation effective, a plan must be devised.

At this stage, the resources must be made available so that the decision may be properly
implemented. Those who will be involved in implementation, according to Aldag and Stearns, must
understand and accept the solution.

Evaluate and Adapt Decision Results

In implementing the decision, the results expected may or may not happen. It is, therefore,
important for the manager to use control and feedback mechanisms to ensure results and to provide
information for future decisions.

Feedback refers to the process which requires checking at each stage of the process to assure that
the alternatives generated, the criteria used in evaluation, and the solution selected for implementation are
in keeping with the goals and objectives originally specified.

Control refers to actions made to ensure that activities performed match the desired activities or
goals, that have been set.

In this last stage of the decision-making process, the engineer manager will find out whether or not
the desired result is achieved. If the desired result is achieved, one may assume that the decision made was
good. If it was not achieved, Ferrell and Hirt suggest that further analysis is necessary'` Figure 2.3 presents
an elaboration of this last step.

D. APPROACHES IN SOLVING PROBLEMS

In decision-making, the engineer manager is faced with problems which may either be simple or
complex. lb provide him with some guide, he must be familiar with the following approaches:

1. qualitative evaluation, and

2. quantitative evaluation.

Qualitative Evaluation.

This term refers to evaluation of alternatives using intuition and subjective judgment. Stevenson states that
managers tend to use the qualitative approach when:

1. The problem is fairly simple.

2. The problem is familiar.

3. The costs involved are not great.

4. Immediate decisions are needed.

An example of an evaluation using the qualitative approach is as follows:

A factoz4 operates on three shifts with the following schedule:

First shift — 6:00 A.M. to 2:00 P.M.

Second shift— 2:00 P.M. to 10:00 P.M.

Third shift — 10:00 P.M. to 6:00 A.M.

Each shift consists of 200 workers manning 200 machines. On September 16, 1996, the
operations went smoothly until the factory manager, an industrial engineer, was notified at 1:00
 PM. that five of the workers assigned to the second shift could not report for work because of
injuries sustained in a traffic accident while they were on their way to the factory.

Because of time constraints, the manager made an instant decision on who among the first
shift workers would work overtime to man the five machines.

Quantitative Evaluation.

This term refers to the evaluation of alternatives using any technique in a group classified as
rational and analytical.

E. QUANTITATIVE MODELS FOR DECISION MAKING

The types of quantitative techniques which may be useful in decision-making are as follows:

1. inventory models
2. queuing theory
3. network models
4. forecasting
5. regression analysis
6. simulation
7. linear programming
8. sampling theory
9. statistical decision theory

Inventory Models

Inventory models consist of several types all designed to help the engineer manager make decisions
regarding inventory. They are as follows:

1. Economic order quantity model — this one is used to calculate the number of items that
should be ordered at one time to minimize the total yearly cost of placing orders and carrying
the items in inventory

2. Production order quantity model — this is an economic order quantiy technique applied to
production orders.

3. Back order inventory model — this is an inventory model used for planned shortages.

4. Quantity discount model — an inventory model used to minimize the total cost when quantity
discounts are offered by suppliers.

Queuing Theory

The queuing theory is one that describes how to determine the number of service units that will
minimize both customer waiting time and cost of service.

The queuing theory is applicable to companies where waiting lines are a common situation.
Examples are cars waiting for service at a car service center, ships and barges waiting at the harbor for
loading and unloading by dock-workers, programs to be run in a computer system that processes jobs, etc.

Network Models
 These are models where large complex tasks are broken into smaller segments that can be managed
independently.

The two most prominent network models are:

1. The Program Evaluation Review Technique (PERT) — a technique which enables engineer
managers to schedule, monitor, and control large and complex projects by employing three
time estimates for each activity

2. The Critical Path Method (CPM) — this is a net-work technique using only one time factor
per activity that enables engineer managers to schedule, monitor, and control large and
complex projects.

Forecasting

There are instances when engineer managers make decisions that will have implications in the
future. A manufacturing firm, for example, must put up a capacity which is sufficient to produce the
demand requirements of customers within the next 12 months. As such, man-power and facilities must be
procured before the start of operations. To make decisions on capacity more effective, the engineer
manager must be provided with data on demand requirements for the next 12 months. This type of
information may be derived through forecasting.

Forecasting may be defined as "the collection of past and current information to make predictions
about the future."'

Regression Analysis

The regression model is a forecasting method that examines the association between two or more
variables. It uses data from previous periods to predict future events.'• Regression analysis maybe simple
or multiple depending on the number of independent variables present. When one independent variable is
involved, it is called simple regression: when two or more independent variables are involved, it is called
multiple regression.'"

Simulation

Simulation is a model constructed to represent reality, on which conclusions about real-life

problems can be used!' It is a highly sophisticated tool by means of which the decision maker develops a
mathematical model of the system under consideration.

Simulation does not guarantee an optimum solution, but it can evaluate the alternatives fed into the
process by the decision-maker.

Linear Programming

Linear programming is a quantitative technique that is used to produce an optimum solution within the
bounds imposed by constraints upon the decision. Linear programming is very useful as a decision-making
tool when supply and demand limitations at plants, warehouse, or market areas are constraints upon the
system.

Sampling Theory

Sampling theory is a quantitative technique where samples of populations are statistically

determined to be used for a number of processes, such as quality control and marketing research.
When data gathering is expensive, sampling provides an alternative. Sampling, in effect, saves time
and money.

Statistical Decision-Theory
 Decision theory refers to the "rational way to conceptualize, analyze, and solve problems in
situations involving limited, or partial information about the decision environment."

A more elaborate explanation of decision theory is the decision making process presented at the
beginning of this chapter. What has not been included in the discussion on the evaluation of alternatives,
but is very important, is subjecting the alternatives to Bayesian analysis.

The purpose of Bayesian analysis is to revise and update the initial assessments of the event
probabilities generated by the alternative solutions. This is achieved by the use of additional information.

When the decision-maker is able to assign probabilities to the various events, the use of
probabilistic decision rule, called the Bayes criterion, becomes possible. The Bayes criterion selects the
decision alternative having the maximum expected payoff, or the minimum expected loss if he is working
with a loss table."

SUMMARY

Decision-making is a very important function of the engineer manager. His organization will rise or fall
depending on the outcomes of his decisions. It is, therefore, necessary for the engineer manager to develop some
skills in decision-making.

The process of identifying and choosing alternative courses of action in a manner appropriate to the
demands of the situation is called decision-making. It is done at various management levels and functions.

The decision-making process consists of various steps, namely: diagnose problem, analyze
environment, articulate problem or opportunity, develop viable alter-natives, evaluate alternatives, make a
choice, implement decision, and evaluate and adapt decision results.

There are two approaches in solving problems, namely: qualitative evaluation and quantitative
evaluation. Qualitative evaluation is used for solving fairly simple problems, while quantitative evaluation is
applied to complex ones.
Chapter 3 Planning Technical Activities

A. THE NATURE OF PLANNING

There are many instances when managers are overwhelmed by various activities which at times be-
cloud his judgment. This must be expected since any-body who is confronted by several situations
happening simultaneously will loose sight of the more important concerns. To minimize mistakes in
decision-making, planning is undertaken.

A plan, which is the output of planning, provides a methodical way of achieving desired results. In
the implementation of activities, the plan serves as a useful guide. Without the plan, some minor tasks may
be afforded major attention which may, later on, hinder the accomplishment of objectives.

An example of the difficulty of not having a plan is illustrated below.

The management of an engineering firm was able to identify the need to hire additional three
employees. The manager proceeded to invite applicants, screen them, and finally hired three of them.

When the hiring expense report was analyzed, it involved more than double the amount spent by
other firms in hiring the same number of people. When an inquiry was made, it was found out that the
manager committed some errors of judgment. For instance, he used an expensive advertising layout in a
newspaper when a simple message will do.

Also, it was found out that the absence of a hiring plan contributed to the high cost of hiring.

B. PLANNING DEFINED

Various experts define planning in various ways, all of which are designed to suit specific purposes.

Planning, according to Nickels and others, refers to the management function that involves
anticipating future trends and determining the best strategies and tactics to achieve organizational
objectives."' This definition is useful because it relates the future to what could be decided now.

Aldag and Stearns, on the other hand, define planning as "the selection and sequential ordering of
tasks required to achieve an organizational goal."' This definition centers on the activity required to
accomplish the goals.

The definition of Cole and Hamilton provides a better guide on how to effectively perform this vital
activity. Planning, according to them is 'deciding what will be done, who will do it, where, when and how
it will be done, and the standards to which it will be done?"

For our purpose, it will suffice to define planning as selecting the best course of action so that the
desired result may be achieved. It must be stressed that the desired result takes first priority and the course
of action chosen is the means to realize the goal.

C. PLANNING AT VARIOUS MANAGEMENT LEVELS

Since engineer managers could be occupying positions in any of the various management levels, it
will be useful for them to know some aspects of planning undertaken at the different management levels.

Planning activities undertaken at various levels are as follows:

1. Top management level — strategic planning

2. Middle management level — intermediate planning

3. Lower management level — operational planning.

 4.

Strategic Planning

The term strategic planning refers to the process of determining the major goals of the organization
and the policies and strategies for obtaining and using resources to achieve those goals. The top
management of any firm is involved in this type of planning.

In strategic planning, the whole company is considered, specifically its objectives and current
resources. The output of strategic planning is the strategic plan which spells out "the decision about long-
rang.. goals and the cower of action to achieve those goals.”

Intermediate Planning

Intermediate planning refers to "the process of determining the contributions that subunits can make
with allocated resources.” This type of planning is undertaken by middle management.

Under intermediate planning, the pals of a subunit are determined and a plan is prepared to provide
a guide to the realization of the goals. The intermediate plan is designed to support the strategic plan.
 Operational Planning

The term operational planning refers to the pro-cess of determining how specific tasks can best be
accomplished on time with available resources." Thin typo of planning is a responsibility of tower
management. It must be performed in support of the strategic plan and the intermediate plan.

D. THE PLANNING PROCESS

The process of planning consists of various steps depending on the management level that performs
the planning task. Generally, however, planning involves the following:

1. setting organizational, divisional, or unit goals

2. developing strategies or tactics to reach those goals

3. determining resources needed and

4. setting standards.

Setting Organizational, Divisional, or Unit goals

The first task of the engineer manager is to provide a sense of direction to his firm (if he is the chief
executive), to his division (if he heads a division), or to his unit (if he is a supervisor). The setting of goals
provide an answer to the said concern. If everybody in the firm (or division or unit, as the case may be) is
aware of the goals, there is a big chance that everybody will contribute his share in the realization of such
goals.
 Goals may be defined as the "precise statement of results sought, quantified in time and magnitude,
where possible.'" Examples of goals are provided in Figure 3.3.

Developing Strategies or Tactics to Reach Goals

After determining the goals, the next task is to devise some mess to realize them. The ways to
realize the goals are called strategies and these will be the concern of top management. The middle and
lower management will adapt their own tactics to implement their plans.

A strategy may be defined as course of action aimed at ensuring that the organization will achieve
its objectives."

An example of a strategy is as follows:

The decision of a construction firm's management to diversify its business by engaging also
in the trading of construction materials and supplies.

When the above mentioned strategy is implemented, it may help the construction firm realize
substantial savings in the material and supply requirements used in their construction activities. The firm
will also have greater control in the timing of deliveries of materials and supplies.

A tactic is a short-term action taken by management to adjust to negative internal or external

influences. They are formulated and implemented in support of the firm's strategies. The decision about
short-term goals and the courses of action are indicated in the tactical plan.

An example of a tactic is the hiring of contractual workers to augment the company's current
workforce.

Determining Resources Needed

When particular sets of strategies or tactics have been devised, the engineer manager will, then,
determine the human and nonhuman resources required by such strategies or tactics. Even if the resource
requirements are currently available, they must he specified.
 The quality and quantity of resources needed must be correctly determined. Too much resources in
terms of either quality or quantity will be wasteful. Too little will mean loss of opportunities for
maximizing income.

To satisfy strategic requirements, a general statement of needed resources will suffice. The specific
requirements will be determined by the different units of the company.

To illustrate:

Suppose the management of a construction firm has decided, in addition to its current
undertakings, to engage in the trading of construction materials and supplies.

A general statement of required resources will be as follows: A new business unit will be organized
to deal with the buying and selling of construction materials and supplies. The amount of P50 million shall
be set aside to finance the activity. Qualified persons shall be recruited for the purpose.

Setting Standards

The standards for measuring performance may be set at the planning stage. When actual
performance does not match with the planned performance, corrections may be made or reinforcements
given."

A standard may be defined as "a quantitative or qualitative measuring device designed to help
monitor the performances of people, capital goods, or processes.”

An example of a standard is the minimum number of units that must be produced by a worker per
day in a given work situation.

E. TYPES OF PLANS

Plans are of different types. They may be classified in terms of functional areas, time horizon, and
frequency of use.

Functional Area

Plans may be prepared according to the needs of the different functional areas. Among the types of
functional area plans are the following:

1. Marketing plan— this is the written document or blueprint for implementing and controlling an
organization's marketing activities related to a particular marketing strategy."

2. Production plan — this is a written document that states the quantity of output a company must
produce in broad terms and by product family.

3. Financial plan — it is a document that summarizes the current financial situation of the firm,
analyzes financial needs, and recommends a direction for financial activities.

4. Human resource management plan — it is a document that indicates the human resource needs
of a company detailed in terms of quantity and quality and based on the requirements of the
company's strategic plan.

Plans with Time Horizon

Plans with time horizon consist of the following:

1. Short-range plans — these are plans intended to cover a period of less than one year. First-line
supervisors are mostly concerned with these plans.

2. Long-range plans — these are plans covering a time span of more than one year. These are
mostly undertaken by middle and top management.

Plans According to Frequency of Use

 According to frequency of use, plans may be classified as:

1. standing plans and

2. single-use plans.

Standing Plans. These are plans that are used again and again, and they focus on managerial
situations that recur repeatedly.

Standing plans may be further classified as follows:

1. Policies — they are broad guidelines to aid managers at every level in making decisions about
recurring situations or function.

2. Procedures — they are plans that describe the exact series of actions to be taken in a given
situation.'"

3. Rules — they are statements that either require or forbid a certain action.

Single-Use Plans. These plans are specifically deve-loped to implement courses of action that are
relatively unique and are unlikely to be repeated.

Single-use plans may be further classified as follows:

1. budgets

2. programs, and

3. projects.

A budget, according to Weston and Brigham, is "a plan which sets forth the projected expenditure
for a certain activity and explains where the required funds will come from.”

A program is a single-use plan designed to coordinate a large set of activities!'

A project is a single-use plan that is usually more limited in scope than a program and is sometimes
pre-pared to support a program."

F. PARTS OF THE VARIOUS FUNCTIONAL AREA PLANS

The engineer manager may be familiar with engineering plans, knowing the details from beginning
to end. However, the ever present possibility of moving from one management level to the next and from
one functional area to another presses the engineer manager to be familiar as well with other functional
area plans.

The Contents of the Marketing Plan

The structure and content of marketing plans vary depending on the nature of the organizations
adapting them. William Cohen maintains that the following must be included in the marketing plan:

1. The Executive Summary — which presents an overall view of the marketing project and its
potential.

2. Table of Contents

3. Situational Analysis and Target Market

4. Marketing Objectives and Goals

 5. Marketing Strategies

6. Marketing Tactics

7. Schedules and Budgets

8. Financial Data and Control

The Contents of the Production Plan

The production plan must contain the following:

1. the amount of capacity the company must have

2. how many employees are required

3. how much material must be purchased

The Contents of the Financial Plan

The components of the financial plan are as follows.

1. An analysis of the firm's current financial condition as indicated by an analysis of the most
recent statements
 2. A sales forecast

3. The enpitn1 budget

4. The cash budget

5. A set of pro forma (or projected) financial statements 6. The external financing plan

Contents of the .Human Resources Plan

The human resources plan must contain the following:

1. personnel requirements of the company

2. plans for recruitment and selection

3. training plan

4. retirement plan

G. PARTS OF THE STRATEGIC PLAN

The strategic plan must contain the following:

1. Company or corporate mission

2. Objectives or goals

3. Strategies

Company of corporate mission refers to the “strategic statement that identifies why an organization
exists, its philosophy of management, and its purpose as distinguished from other similar organizations in
terms of products, services, and markets.”

H. MAKING PLANNING EFFECTIVE

Planning is done so that some desired results may he achieved. At times, however, failure in
planning occurs.

Planning may be made successful if the following are observed:

1. recognize the planning barriers

2. use of aids to planning

The planning barriers, according to Plunkett and Attner, are as follows:

1. manager's inability to plan

2. improper planning process

3. lack of commitment to the planning process

4. improper information
 5. focusing on the present at the expense of the future

6. too much reliance on the planning department

7. concentrating on only the controllable variables

Among the aids to planning that may be used are:

1. Gather as much information as possible

2. Develop multiple sources of information

3. Involve others in the planning process

SUMMARY

Technical activities, like other activities, require effective planning. i.e., if objectives and goals are to
be realized.

A plan is a methodological way of achieving results.

Planning is undertaken at various management levels.

Various steps are required in the planning process depending on the management level.

Plans may be classified in terms of functional areas, time horizon, and frequency of use.

Plans consist of various parts that the engineer manager must be familiar with.

Plans can be made effective by recognizing the planning barriers and making use of aids to planning.

Chapter 4 Organizing Technical Activities

A. THE NATURE OF PLANNING

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 persons. In turn, these will help facilitate the assignment of
authority, responsibility, and accountability for certain functions and tasks.

B. ORGANIZING DEFINED

Organizing is n 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.

C. 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 l abor — determining the scope of work and how it is combined in a job.

2. Delegation of authority — the process of assign-ing various degrees of decision-making author-

ity 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.

D. THE FORMAL ORGANIZATION

Alter a plan is adapted, management will proceed to form an organization to cony out the activities
indicated in the plan.

The formal organization is “the structure that details lines of responsibilities, authority, and
position.” What is depicted in the organization chart is the formal organization. It is "the planned structure”
and it "represents the deliberate attempt to establish patterned relationships among components that will
meet the objectives effectively.”

The formal structure is described by management through:

1. organization chart

2. organizational manual and

3. policy manuals.

The organization chart is a diagram of the organization's official positions and formal lines of
authority.

The organizational manual provides written descriptions of authority relationships, details the
functions of major organizational units, and describes job procedures.

The policy manual describes personnel activities and company policies.

E. INFORMAL GROUPS

Formal require the formation of formal groups which will be assigned to perform specific tasks
aimed at achieving organizational objectives. The formal group is a part of the organization structure.

There are instances when members of an organization spontaneously form a group with friendship
as a principal reason for belonging. This group is called an informal group. It is not a part of the formal
organization and it does not have a formal performance purpose.

Informal groups are oftentimes very useful in the accomplishment of major tasks, especially if these
tasks conform with the expectations of the members of the informal group.
 The informal organization, useful as it is, is "vulnerable to expediency, manipulation, and
opportunism,' according to Valentine.' Its low visibility, Valentine added, makes it 'difficult for
management to detect these perversions, and considerable harm can be done to the company.

The engineer manager is, therefore, warned that he must be on the lookout for the possible
difficulties that the informal groups may do to the organization. It will be to his beat interest if he could
make the informal groups work for the organization.

F. TYPES OF ORGANIZATIONAL STRUCTURES

Before the commencement of activities, the decision-makers in an organization will have to decide
on what structure to adapt. Depending on the size and type of operations, a certain structural type may best
fit the requirements.

Organizations may be classified into three types. They are the following:

1. Functional organization — this is 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 market organization — this 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.

The different types of organizations, with their own distinct advantages and disadvantages, are
briefly presented below

Functional Organization

Functional organization structures are very effective in smaller firms, 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, decision-making 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 of the top management level and are
often delayed.

3. Work specialization and division of labor, 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 employees.

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 are 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

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.

G. TYPES OF AUTHORITY

The delegation of authority is a requisite for effect-ive organizing. It consists of three types. They
are as follows:"

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 involved in that
specialty, regardless of where the personnel are in the organization.

Line departments perform tasks that reflect the organization's primary goal and mission. In a
construction firm, the department that negotiates and secures con-tracts for the firm is a line department.
The construction division is also a line function.

Staff departments include all those that provide specialized skills in support of line departments.
Examples of staff departments include those which perform strategic planning, labor relations, research,
accounting, and 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.
 Functional authority is one given to a person or a work group to make decisions related to their
expertise even if these decisions concern other departments. This authority is given to most budget officers
of organizations, as well as other officers.

H. THE PURPOSE OF COMMITTEES

When certain formal groups are deemed inappropriate to meet expectations, committees are often-
times harnessed to achieve organizational goals. Many organizations, large or small, make use of
committees.

A committee is a formal group of persons formed for a specific purpose. For instance, the product
planning committee, as described by Millevo, is "often staffed by top executives from marketing,
production, research, engineering, and finance, who work part-time to evaluate and approve product
ideas."

Committees are very useful most especially to engineering and manufacturing firms. When a certain
concern, like product development, is under consideration, a committee is usually formed to provide the
necessary line-up of expertise needed to achieve certain objectives.
 Committees may be classified as follows:

1. Ad hoc committee — one created for a short-term purpose and have a limited life. An example
is the committee created to manage the anniversary festivities of a certain firm.

2. Standing committee — it is a relatively permanent committee that deals with issues on an

ongoing basis. An example is the grievance committee set up to handle initially complaints from
employees of the organization.

Committees may not work properly, however, if they are not correctly managed. Delaney suggests
that it might be useful to set up some procedures to make the committee a more effective tool to
accomplish our goals."

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.

The formal organization is the structure that will carry out the plan. It is described through the organization
chart, the organization manual, and the policy manual.

Informal groups oftentimes find their way to exist side by side with formal organizations. These groups
may make it easy or make it hard for the organization to achieve its objectives.

Organizations may be classified into: (11 functional, (2) product or market, or (3) matrix.

Authority delegated to the members of the organization may be classified into: (I) line authority, (2) staff
authority, and (3) functional authority. Committees are used as a supplement to the existing formal organization.

Committees are formed to perform specific tasks. Committees are classified into: (1) ad hoc, and 12)
standing.