Module 1: Introduction to Engineering Management and Evolution of Management Theories

What is Engineering Management?

Engineering Management is an art and science of planning, organizing, staffing, directing, and controlling work activities to attain and achieve common goals and objectives.

It principally deals with the efficient and effective use of the five human resources, namely: manpower, money, machines, and time, as the proper, efficient, and effective utilization of these resources with minimal cost and a short period of time.

If the cost is more and the time is long in doing the work activities, it is not Engineering Management but rather Mismanagement.

Five Basic Management Functions:

  1. Planning - deciding in advance what to do and how the work will be done.
  2. Organizing - the grouping of work activities necessary to attain goals and objectives.
  3. Staffing – providing personnel with appropriate qualifications and eligibility in an organization.
  4. Directing – commanding and telling people what to do and how it should be done.
  5. Controlling – comparing work accomplishments with planned targets and making corrective action if the accomplishments differ from the plans.

Four M’s of Management

  1. Manpower
  2. Money
  3. Materials
  4. Machines

Basic Elements of Project Management:

  1. Project development and screening
  2. Project development and design.
  3. Project appraisal, negotiation, and approval.
  4. Project implementation
  5. Project evaluation and screening.

Some Well-Known Personalities in Engineering Management:

  1. Frederick Taylor - "Father of Scientific Management."
  2. Henri Fayol - "Father of Modern Management."
  3. Henry Gantt – Emphasized the importance of time and cost in planning and monitoring work activities.
  4. Mary Parker Follet - Emphasized the importance and value of human relations.

Fayol’s 14 Principles of Management:

  1. Division of work - Divide work into specialized tasks and functions, each assigned to a specific individual.
  2. Authority - Authority must be accompanied by responsibility.
  3. Discipline - Sanctions are necessary to minimize or prevent the recurrence of behavior that violates agreed-upon expectations.
  4. Unity of command - "For any action whatsoever, an employee should receive orders from one superior only."
  5. Unity of direction - There should be "one head and one plan for a group of activities having the same objective".
  6. Subordination - The interest of one employee or group of employees should not prevail over that of the organization.
  7. Remuneration - "Should be fair and, as far as possible, afford satisfaction both to personnel and firm (employer and employee)."
  8. Centralization - The amount of centralization or decentralization necessary to a firm is a function both of the size of the firm and the ability of the managers. Organizational effectiveness is increased by determining the optimal level of centralization.
  9. Scalar chain - Hierarchy level of authority; communication is kept open within the chain of command.
  10. Order - There must be an order in both material and personnel. For material, "things must be in their place suitably arranged so as to facilitate all activities". "Perfect order requires that the place be suitable for the employee and the employer for the place…the right men in the right place."
  11. Equity - To encourage employee loyalty and performance. Employers must treat employees fairly, combining kindness and justice but not excluding forcefulness or sternness.
  12. Stability of tenure of personnel - It requires time for the employee to develop skills necessary to perform his or her work well. Therefore, successful companies are those with low turnover (high stability of tenure) of personnel.
  13. Initiative - "At all levels of the organizational ladder zeal and energy on the part of employers are augmented by initiative (the thinking out and implementation of plans). We should encourage employees to act solely."
  14. Esprit de corps - "Union is strength. Harmony, union among the personnel is great strength in that concern. Teamwork and cooperation among people are essentials in the organization."

Specific Functional Areas of Engineering:

  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 into a finished physical item.
  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 a consultant for 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 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.

Evolution of Management Theories

The Classical or Traditional School

This is built on principles presented by Mooney, Reiley, Gullick, Fayol, Emerson, and Taylor. Classical theorists believed and prescribed certain principles that would aid in setting up and managing organizations.

See Fayol’s Fourteen Principles

Scientific Management by Frederick Taylor (1895-1915)

Frederick Taylor – the “father of time study” (He relied on the stopwatch since he focused on the amount of time required to complete a particular job). He wrote a book entitled “Principles of Scientific Management”.

In his writings, Taylor presented a balanced view of scientific Management. He believed that a “mental revolution” would have to take place before management and workers could see that their positions were compatible.

He pointed out that as productivity rose, the salaries of both the managers and employees would also rise. At the same time, he emphasized that managers must avoid such practices as rate cutting because they lead to employee hostility toward management.

Taylor’s Four Principles of Scientific Management:

  1. Develop a science for each element of a man’s work, to replace the old rule-of-thumb method.
  2. Scientifically select and then train the worker. (In the past, the worker had chosen his own work and trained himself as best as he could).
  3. Heartily cooperate with the men to ensure that all the work done is in accordance with the principles of the science developed for the work.
  4. Divide the work and the responsibility equally between the management and the workers.

In essence, Taylor’s scientific management stresses the need for developing the best way of performing each job; training and preparing the workers to perform that job; and establishing harmonious cooperation between the management and the workers so that the job is performed in the desired way.

The Gilbreths and Motion Study

Frank and Lilian Gilbreth (1912) emphasized the ideal motions required to perform a job in an optimal fashion. They developed the concept of therblig (Gilbreth spelled backward, except for the transposition of H and T ease of pronunciation); a therblig is an elemental hand or arm motion.

Human Relations School

The human relations theory emphasizes exactly what the classical theory ignored; the human element.

The beginnings of this school can be traced back to the study of Elton Mayo (1924-32) and his associates from Harvard University of the famous Hawthorne studies at the Hawthorne plant of the Western Electric company in the United States.

Initially, the researchers were interested in investigating the relations between the illumination factor and productivity.

The human relations theory draws its backing mainly from the field of social Psychology and from other related fields. Drawing a theoretical framework from these fields, concepts on leadership and motivation, change, conflict, and communication are studied and researched in the context of the industrial revolution.

Theorists like Agyris, Barnard, Simon, Likert, McGregor, and others have made available contributions to this school of thought.

The human relations contend that an employee must be treated as a human being and not as a mere factor of production.

Management Science or Quantitative School of Thought

The management science approach stresses the use of quantitative techniques and methods in decision making. This approach advocates a logical sequence of problem formulation, gathering information and data, constructing mathematical models, exploring tentative solutions, testing the suggested solutions, and executing them.

Quantitative tools commonly used are: waiting line theory or queuing, linear programming, program evaluation review techniques (PERT), critical path method (CPM), Monte Carlo method, decision theory, simulation theory, probability theory, and so on.

The use of quantitative techniques in the decision-making process is known as Operations Research (OR).

Modern Management

This theory is not a single view or theory expressed or formulated by a particular theorist. It has taken different directions and is still in the process of evolving. The contributors to Modern management theory come from the behavioral sciences, operations research, management science, and contingency or situational theory.

Harold Kontz contends that the development of modern management theory has led to a destructive jungle warfare and the management theory looks like a jungle.

Modern Management can be classified into three different levels:

  1. Top management
  2. Middle management
  3. Supervisory management (Operational or First level)

Top Management level

Middle Management Level

Supervisory Management level

Advanced Management Program in the Philippines

AMIEP (Association of Management and Industrial Engineers in the Philippines, 1953) - organized under the leadership of Dr. Lilian Gilbreth).

AMP (Advanced Management Program) in the Far East – convened in August 1950, participated by administrators and heads of various sectors, Filipino executives negotiated with the Dean of Harvard School for approval of the proposed program, the “Baguio Program” (June 25, 1956, Pines Hotel) – was known as the Asian Institute for Advanced Management.

MBA (Master in Business Administration) program – offered by different Universities in the Philippines.

AIM (Asian Institute of Management) – established to develop managerial skills of the Filipino entrepreneur as well as Asian brothers.

PUP Graduate School (Manila) offers the following post-graduate courses:

Masters Degree

Open University System

Module 2: Organizing

Organizing Technical Activities

The engineer manager needs to acquire various skills in management, including those for organizing technical activities. Nowadays, skills in organizing contribute largely to the accomplishment of the objectives of many organizations, whether they are private businesses or otherwise. The opportunities offered by skillful organizing are too important for the engineer manager to ignore.

Distinction between "organization," "management," and "system"

The distinction between organization, management, and system is important and must be fully appreciated. We organize to manage, and we manage largely through the system. We manage successfully when we apply not only the principles fundamental to correct organization and system but also when we take into account all the principles and methods of industrial management. Management is the whole of which organization, system, industrial psychology, and other elements and methods are parts.

"A person may be a good systematizer, and yet not be a good organizer, and even a poor manager."

Organizing Definition

Organizing is defined as the grouping of work activities necessary to attain planned targets and objectives, the assignment of grouping to a manager with adequate authority, the proper coordination in the organizational structure. Organizing is a management function that 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.

The Purpose of Structure

The structure serves some very useful purposes:

  1. It defines the chain of authority for individuals and departments.
  2. It defines formal reporting relationships, the number of levels in the hierarchy of the organization, and span of control.
  3. It defines the groupings of individuals into departments and departments into organizations.
  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 labor - determining the scope of work and how it is combined in a job.
  2. Delegation of authority - the process of assigning various degrees of decision-making authority 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.

THE FORMAL ORGANIZATION

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 a planned structure, and it represents the deliberate attempt to establish patterned relationships among components that will meet the objectives effectively.

The structure is described by management through:

  1. Organization chart
  2. Organizational manual
  3. Policy manuals

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

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

The policy manual describes personnel activities and company policies.

INFORMAL ORGANIZATION

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

- Informal groups are often very useful in the accomplishment of major tasks especially if these tasks conform with the expectations of the informal group.

- The informal organization, useful as it is, is "vulnerable to expediency, manipulations and opportunism (Raymund F. Valentine." Dangers of the informal organization", "World Executive Digest, March 1982).

- It refers to the behavioral, informal, and undefined relationships and working climate within the organization.

- The authority and power of executives and employees are determined not by their title but by relationships, years of experience in the firm, of affinity through kinships, regional or ethnic origins, religion, schooling, or other human relationships.

- Groupings may be small or nebulous, members shifting from group to group and according to shared interest or goals.

- The communication links are loosely held.

- There is much flexibility and sometimes creativity in informal organization.

- The engineer manager is therefore warned that he must be on the lookout for the possible difficulties that the informal group may cause to the organization. It could be in his best interests if he could make the informal groups work for the organization.

Reasons or Factors for Joining or Forming an Informal Group

  1. Friendship
  2. Common interest - like concern for the environment or love for classical music
  3. Proximity - which gives people the chance to share ideas, opinions, and feelings.
  4. Need Satisfaction - derived from unions, cultural societies, fraternities, etc.
  5. Collective power - derived from unions, fraternities, etc.
  6. Group Goals - which attract individuals like consumer society, sports club, etc.

Informal Structure - Unofficial but important working relationships between members.

Importance of Organizing Process

The organizing process will make it possible to attain the purpose of the organization (as defined previously in the planning function).

Benefits of Organizing

  1. A clarified environment
  2. A coordinated environment
  3. A formal decision-making structure

The Organizing Process

  1. Consider plans and objectives.
  2. Determine the work activities necessary to accomplish objectives.
  3. Classify and group activities.
  4. Assign work and functional definition.
  5. Design a hierarchy of relationships.

The principle functional definition - establishing departments, the nature, purpose, tasks, and performance of the department must first be determined as a basis for authority.

Approaches to Organizing

  1. Functional
  2. Geographic
  3. Product Line Approach
  4. Customer Approach
  5. Matrix Approach

I. Functional Approach

This is a form of departmentation in which everyone engaged in one functional activity, such as engineering, or marketing, is grouped into one unit.

Functional Approach:

Advantages:

  1. Avoid overlapping in the execution of basic business activities.
  2. Simplifies training.
  3. Provides occupational specialization.

Disadvantages:

  1. Communication difficulties.
  2. Lack of cooperation between functional areas.
  3. Does not develop generalists in the management areas.
  4. Potential internal rivalry among functional areas.

II. Geographic Approach

Grouping activities of one department or for one enterprise under geographic heads or territories.

Advantages:

  1. Works best under different laws, currencies, languages, and traditions exist.
  2. Serves mass markets efficiently.
  3. Takes advantage of large production, transportation savings, and tax advantages.
  4. Proximity to raw materials.
  5. Training ground to develop management-decision making is easier.
  6. Better coordination of activities.

III. Product Line Approach

Refers to the organization of a company by divisions that bring together all those involved with a certain product type or customer.

Advantages:

  1. Allows research specialists to concentrate on specific and related projects and problems.
  2. Allows the sales force to sell complementary products to a consistent group of buyers or purchasing agents.
  3. Healthy competition between product managers, sales managers, etc. (though should not be extreme).

Disadvantage:

  1. It is costly and requires duplication of function.

IV. Customer Approach

Focuses on groups of customers who are distinct in their demands, preferences, and needs.

Advantages:

  1. Satisfies the needs and wants of customers.

Disadvantages:

  1. Difficulty in coordinating customer-based departments.
  2. Oversimplification specializes in solving the needs of the customers.

V. Matrix Approach

Blending the functional organization structure with a project team structure. A structure in which each employee reports to both a functional or division manager and to a project or group manager.

Advantages:

  1. Provides coordinated effort, minimizing conflict between functional areas.

Disadvantages:

  1. Places a premium on interpersonal skills. Specializes to serve more than one master (loyalty conflict).

Major Organizational Concepts

I. Authority

II. Delegation

III. Centralization and Decentralization

I. Authority

Authority is the right to commit resources or the legal right to give orders. It is vested in a manager because of the position he/she occupies in the organization and is defined in each manager's job description.

Relationship of Authority to Power

Sources of Power

  1. Legitimate or position power.
  2. Power to reward or to punish.
  3. Referent or charismatic power.
  4. Expert power.

Types of Authority

  1. Line Authority: Defines the relationship between superior and subordinates. It is a direct supervisory relationship flowing downward in an organization directly from superior to subordinate.
  2. Staff Authority: Advisory in nature. Managers provide advice or technical assistance, normally flowing upward. Staff assists the line departments by providing technical expertise or support services.
  3. Functional Authority: Delegated to an individual over specific activities undertaken by personnel in other departments.

II. Delegation

Delegation is the passing of formal authority to another person. Superiors delegate authority down to subordinates to facilitate work. Delegation creates a sequence of events: assignment of tasks, delegation of authority, acceptance of responsibility, and creation of accountability.

Responsibility: The obligation to carry out assigned duties to the best of one's ability.

Accountability: Having to answer someone for your actions.

III. Centralization and Decentralization

Centralization: Selective concentration of authority.

Decentralization: Dispersal of authority within the organization's structure.

Module 3: Forms of Business Organization

1. Sole Proprietorship

Sole owner of a business which has no partners and no shareholders.

Advantages:

  1. Less regulations by government in operating decision
  2. Less conflict and disagreements in manner of management; hence flexibility in decision making.
  3. Easier to increase or decrease capital; Financial operations are not complicated.
  4. Best suited for small businesses
  5. The tax rate is lower as compared to partnership and corporation.

Disadvantages:

  1. Unlimited liability of the owner
  2. Limited capital
  3. Limited management expertise especially if there are no other professional managers.

2. Partnership

An association of two or more people who bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves.

Article 1771:

A partnership may be constituted in any form except where immovable or real rights are contributed thereto, in which case a public instrument shall be necessary.

Article 1772:

Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument which must be recorded in the Office of the Securities and Exchange Commission (SEC).

Advantages:

  1. Easy to form
  2. Flexible operation
  3. More efficient than sole proprietorship.
  4. Partners are expected to have great interest in the operations of the partnership because of their unlimited liability aside from their shares of profit.

Disadvantages:

  1. Unlimited liability
  2. Limited life - can easily be dissolved.
  3. Limited ability to raise capital
  4. Net income is subject to tax whether distributed or not.

Classification of partnerships:

Classification of partnership

3. Corporation

Components of a Corporation:

For non-stock corporations, the body is called the Board of Trustees.

A board of trustees is a group of individuals either appointed or elected to manage and govern the assets of an endowment, charitable foundation, trust, or nonprofit organization.

A director must have at least a share of capital stock registered in his name at the time of election (or required cut-off date) and during his term. Majority must be residents of the Philippines

Classification of corporation:

4. Cooperatives

An association of persons who have voluntarily joined together to achieve a common end through the formation of a democratically controlled organization, making equitable contributions to the capital required and accepting a fair-share of risks and benefits of the undertaking in which the members actively participate.

Republic Act 6438: -known as the Cooperative Code, Article 2 "To foster the creation and growth of the cooperatives in a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice

Forms of Cooperatives:

  1. Credit Cooperatives: Promote saving and thrift among members and accumulate funds to be lent to members in the form of loans.

    Example: CARD bank, TSPI, etc.

  2. Producers Cooperatives: Undertake the cooperative or joint production of agricultural or industrial products.

    Example: Samahang Nayon

  3. Consumer Cooperatives: Produce goods for resale to members.

    Example: PUP consumer's cooperative

  4. Service Cooperatives: Provide services which members avail themselves of.

    Example: BATELEC, BATELCO Electric Coops.

  5. Marketing Cooperatives: Centralize purchasing of inputs needed by producer members as well as the selling of the produce of the members.

    Examples: Federation of the agricultural producers' cooperatives which were organized to handle distribution and marketing of the produce of the Cooperatives.