Chapter One

Basics Of Management
Topics to be covered
 Introduction to management
 Functions of management
• Planning
• Organizing
• Directing
• Controlling
 Managerial roles and skills
 Basics of Productivity
1
 What is industrial
management?
 Industrial referring to industry. Application of complex and sophisticated

methods to the production of goods and services.

 The complex and sophisticated methods refer to the use of machines which

improve the quantity and quality of production.

 Management means :
 Planning

 Organizing

 Coordinating

 Controlling, motivating and directing various activities in an

2
Continue…..

 Management is a process used to accomplish organizational goals.

 According to F.W. Taylor, “Management is an art of knowing what
to do, when to do and see that it is done in the best and cheapest
way
 Industrial Management: The branch of engineering, that deals with
the creation and management of systems that integrates people,
materials and energy in productive ways.

3
 Introduction to Management
General Definition of Management

An organisation’s
Set of activities (including planning Directed
resources (human,
and decision making at financial,physical
and informational
, organising, leading )
and control)
With the aim
of

Achieving organisational goals in an

efficient and effective manner.

4
 Cont.…

 The creation of conditions that allow the effective use

of resources (human, financial, material, equipment,
technical and etc.) to achieve a specified goal.
 Organizational resources (5M): Men (human beings),
Money, Machines, Materials and Methods.

5
 Major Premises
 Technology and business savvy (know-how) represents a very
powerful combination of great demand in society.
 Market environment is rapidly evolving (changing marketplace
complexities, web-based technologies, globalization).
 Leaders with understanding of technology and management
perspectives are needed.
 Engineers with proper management and leadership training have
great opportunities to add value.

6
 Management Challenges

 Market place changes rapidly (Web-based technologies,

customer demand) affecting how progressive companies will be
organized.
 Engineering managers to lead by supervising complex teams,
innovating with vision for the future, designing global products,
and organizing supply chains.

7
 Management Challenges

Implement projects/programs;
Develop new product features to enhance company
competitiveness;
Define, control and reduce costs to improve profitability;
Identify best practices to improve engineering operations
and surpass them;
Create supply chain networks to derive speed, quality and
cost benefits. 8
 Management challenge
 Do things right to keep company operating smoothly.

 Control costs and eliminate wastes to attain profitability in the

short-run.
 Create vision for the future related to technologies;

 Define what should be done for technology-based success in the

future.
 Utilize resources to best achieve company’s objectives.

 In balancing population growth and resources

9
 Management concerns
 Efficiency: is getting the most output from the least amount of
inputs in order to minimize resource costs.
• “Doing things right”
 Effectiveness: is completing activities so that organizational
goals are attained.
• “Doing the right things”
e.g. we killed a sneak by bomb, is it efficient/effective?

10
 Functions of Management
 According to Henry Fayola, To manage is to forecast and plan, to
organize, to command, & to control.
 The most widely accepted functions of management are: planning,
Organizing, Staffing, Directing and Controlling

11
 Planning
 Planning is deciding in advance - what to do, when to do & how to
do.
 Plan is a future course of actions and It bridges the gap from where
we are & where we want to be.
 It is an exercise in problem solving & decision making.
 Thus, planning is a systematic thinking about ways & means for
accomplishment of pre-determined goals.

12
 Planning

 During planning one needs to ask oneself the

following:

 What am I trying to accomplish i.e. what is

my objective?
 What resources do I have?
 What are the methods and means to
achieve the objectives?
 Is this the optimal path or method? 13
 Steps in Planning

1. Determining the goals for the entire organization.

2. Making assumptions on various elements of the
environment.
3. Decide the planning period.
4. Examine alternative courses of actions.
5. Evaluating the alternatives.
6. Make derivative plans.

14
 Organizing
 Organizing is the process of dividing work into convenient tasks or
duties,
 Grouping of such duties in the form of positions

 Grouping of various positions into departments and sections

 Assigning duties to individual positions, and delegating authority to each positions

so that the work is carried out as planned.

Organizing as a process involves:

 Determining, grouping and structuring the activities
 Creating rules for effective performance at work.
 Allocation necessary authority and responsibility.
 Delegation of authority and creation of responsibility. 15
 Staffing
 Selecting and training individuals for specific job functions, and
charging them with the associated responsibilities.
 Determining the number of employed personnel in an organization or
program, Also called workforce.
 The main purpose of staffing is to put right man on right job. Staffing
involves:
– Manpower Planning(choose the person and giving the right place).
– Recruitment, Selection & Placement.
– Training & Development.
16
 Directing/Leading

 It is part of managerial function which actuates the organizational

methods to work efficiently for achievement of organizational
purposes .
 Direction deals directly with influencing, guiding, supervising,
motivating sub-ordinate for the achievement of organizational
goals. Direction has following elements

 Supervision And Motivation

 Communication.
17
 Controlling
 Controlling is a three-step process of measuring progress toward
an objective, evaluating what remains to be done, and taking the
necessary corrective action to achieve or exceed the objectives.
 Measuring: determining through formal and informal reports the
degree to which progress toward objectives is being made.
 Evaluating: determining cause of and possible ways to act on
significant deviations from planned performance.
 Correcting: taking control action to correct an unfavorable trend or
to take advantage of an unusually favorable trend.
18
 Steps in Controlling

1. Establish Standards of Performance.

2. Measure Actual Performance.
3. Compare Performance to Standards.
4. Take Corrective Action.

19
Levels of Manager’s

20
 Levels of Manager’s

 First-line Managers: often called supervisors stand at the base of the

managerial hierarchy.
 Middle Managers: heads of various departments and organize human
and other resources to achieve organizational goals.
 Top Managers: set organizational goals, strategies to implement them
and make decisions.

21
 Managerial Skills

 A manager is someone skilled in knowing how to analyze and improve

the ability of an organization to survive and grow in a complex and
changing world.
 Management knowledge and skills (operational, strategic,
financial/accounting, interpersonal skills/communications, etc.)
 Decision making skills/ tools (what-if analysis, risk analysis, problem
solving, root cause analysis, decision tree, optimization, etc.)
 Technical skills
 Human skills
22

 Technical Skills
 A skill that is required for the accomplishment of a specific task.
 Technical skill involves understanding and demonstrating
proficiency in a particular workplace activity.
 A persons’ knowledge and ability to make effective use of any
process or technique constitutes his technical skills.
 For e.g. Engineer, accountant, data entry operator, lawyer, doctor
etc.

23
 Human Skills

 An individuals’ ability to cooperate with other members of the

organization and work effectively in teams.
 Communication.
 For e.g. Interpersonal relationships, solving people’s problem and
acceptance of other employees.

24
 Conceptual Skills
 Ability of an individual to analyze complex situations and to
rationally process and interpret available information.
 The ability to think creatively about, analyze and understand
complicated and abstract ideas.
 For e.g.: Idea generation and analytical process of information.

25
 Management Skills and Functions
• Differences among management levels in skill
needed and the functions performed:

Planning

Controlling Organizing

26
Leading
 Quiz 1
• Write the skills of managers and relate these
skills with the level of managers in respective
to the management functions?
• Define management in your own words and
write what management concerns about?

27
 Productivity

 Productivity is a common measure of how well resources are

being used or a measure of the efficient use of resources usually
expressed as the ratio of output to input
Outputs
Productivity =
Inputs
 Productivity simply defined as the ratio between output and input.
 According to Peter Drucker, “Productivity means a balance
between all factors of production that will give the maximum
output with smallest efforts”
28
 Cont.…
• Productivity of a production system is analogous to the
efficiency of a machine.
• Therefore, Productivity is an efficiency of the production
system.
• Just as it is desired to increase the efficiency of a machine it is
also to raised the productivity within the available resources.
• Hence, to increase productivity we want to make this ratio of
output to input as large as possible which can be practical. This
can be achieved by:
 Either producing more output with the same inputs
 Or using fewer inputs for the same outputs
• Productivity is a common measure of how well a country,
industry or business units is doing using its resources or factor
of production. 29
 Productivity

Then, Productivity is the relationship between the outputs generated

from a system and the inputs that are used to create those outputs.
30
 Basics of Productivity

 Labor Productivity
 Quantity (or value) of output / labor hrs

 Quantity (or value) of output / shift

 Machine Productivity
 Quantity (or value) of output / machine hrs

 Energy Productivity
 Quantity (or value of output) / kwh

 Capital Productivity
 Quantity (or value) of output / value of input
31
There are three major types of productivity
measures:

Partial productivity
• Partial productivity is the ratio of output to one class of input
among many factors of production.
• For example, labour productivity measures the productivity of
labour. Similarly, material, machine, land and capital
productivities can be defined. Thus

32
Measures of Productivity
1. Partial = Output ; Output ; Output ; Output
measures Labor Machine Capital Energy

2. Multifactor = Output Output

measures Labor + Machine Labor + Capital + Energy

3. Total = Goods or Services Produced

measure All inputs used to produce them
N.B:
 If we produce only one product, the numerator can be either the total units of
product or total $ value of the product.
 If we produce several products, the numerator is the total $ value of all
products.
 Usually, the numerator is the total $ value of all outputs. The denominator
33 is total
 Measures of Productivity

Example 1

Find the multi-factor productivity for a company

which has the following information.

Output =7040 Units, Cost of labor= $1,000,Cost of

materials= $520, Cost of overhead= $2000 and Sold
for $1.10/unit. 3
 Measures of Productivity

Example 1

Find the multi-factor productivity for a company which has the

following information.
Output =7040 Units, Cost of labor= $1,000,Cost of materials=
$520, Cost of overhead= $2000 and Sold for $1.10/unit.

= 2.20
3
 Measures of Productivity

Example 2
 5,500 Units Produced
 Sold for $35/unit
 500 labor hours are used
 Cost of labor: $25/hr
 Cost of raw material: $5,000
 Cost of overhead: 2 x labor cost
a. What is the labor productivity?
b. What is the multifactor productivity?

36
 Measures of Productivity

Example 2
 5,500 Units Produced  The LP = 5,500 units/500 hours = 11
 Sold for $35/unit units/hour
 500 labor hours are used Or we can arrive at a unitless figure:
 Cost of labor: $25/hr
 (5,500 units*$35/unit)/(500 hours *
 Cost of raw material: $5,000
 Cost of overhead: 2 x labor cost $25/hr) =15.4
a. What is the labor productivity?
b. What is the multifactor productivity?

=4.52

37
 Measures of Productivity
Example 3
Assume that you have just determined that your service employees have used a total
of 2400 hours of labor this week to process 560 insurance forms. Last week the
same crew used only 2000 hours of labor to process 480 forms.
a. Which productivity measure should be used?
b. Is productivity increasing or decreasing?

38
 Measures of Productivity
Example 3
Assume that you have just determined that your service employees have used a total
of 2400 hours of labor this week to process 560 insurance forms. Last week the
same crew used only 2000 hours of labor to process 480 forms.
a. Which productivity measure should be used?
 Answer: Could be classified as a Partial Measure (labor productivity).

b. Is productivity increasing or decreasing?

 Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s
productivity is = 560/2400 = 0.23. So, productivity has decreased slightly.

39
 Factors affecting productivity

 Methods
 Environmental influence
 Design of the workspace
 Labor turnover, layoffs, new
 Incentive plans that reward
workers
productivity
 Scrap rates  Capacity utilization
 Bottlenecks  Inadequate investment in
 Layout training & education of the

 Scheduling employees
 Searching for lost or
 Part and material shortages
misplaced items
 Equipment breakdowns
 Technology 40
 Key Steps for Improving Productivity
 Develop productivity measures for all operations
 Determine critical (bottleneck) operations
 Develop methods for productivity improvements
 Establish reasonable goals
 Get management support (make it clear that management supports
and encourages productivity improvements.)
 Measure and publicize improvements

41
 Exercise 1
1. A company that makes shopping carts for supermarkets recently purchased new
equipment, which reduced the labor content needed to produce the carts. Information
concerning the old system (before adding the new equipment) and the new system (after
adding the new machines) includes:
Old System New System
Output/hrs 80 84
Workers 5 4
Wage $/hrs 10 10
Machine $/hrs 40 50
a) Compute labor productivity for both the Old System and the New System.
b) Compute all factor productivity(multi factor) for both the Old System and the New
System.
c) Suppose production with old equipment was 30 units of cart A at a price of $100 per
cart, and 50 units of cart B at a price of $120. Also suppose that production with
new equipment is 50 units of cart A, at a price of $100 per cart, and 30 units of cart
B at a price of $120. Compare total-factor productivity for the old 42 and the new
systems.
 Exercise 2
2. A company has introduced a process improvement that reduces the processing
time for each unit and increases output by 25% with less material but one additional
worker.
Under the old process, five workers could produce 60 units per hour. Labor costs are
$12/hour, and material input was $16/unit.
For the new process, material input is now $10/unit and overhead is charged at 1.6
times direct labor cost. Finished units sell for $31 each.
a) Compute single factor productivity of labor in the old system. (Compute it in four
possible ways. [units per worker, $ per worker, unit per dollar,Unitless])
b) Compute all factor productivity for both old and new systems.
Factor Old System New System
Output 60 60(1.25) = 75
# of workers 5 6
Worker cost $12/hr $12/hr
Material $16/unit $10/unit
Overhead 1.6(labor cost) 1.6(labor cost) 43
 Exercise 3
3.A milk factory seeks advice from an external consulting company concerning its business
and production processes. The final consulting report describes several steps to increase
productivity including implementation of cutting-edge processing techniques through more
powerful filtering systems.
Existing System Proposed System
Workers 12 9
Milk Output/hour 1,000 gallons 1,400 gallons
Wage Rate/hour $12 $12
Filtration Cost/hour $120 $170

a) Calculate the labor productivity for the existing as well as the proposed system.
b) Find the Total-Factor Productivity for both systems.
c) Assume that current processing includes 700 gallons of Grade-A milk sold at
$2.40/gallon and 300 gallons of Grade-B milk at $1.90/gallon. Furthermore, assume
that under the proposed system, processing will include 600 gallons of Grade-A milk at
$2.40/gallon and 400 gallons of Grade-B milk at $1.90/gallon. Compare all-factor
productivity for both the existing and the new system. 44
d) Is the proposed system acceptable? Why?
 Quiz 1
1.A milk factory seeks advice from an external consulting company concerning its
business and production processes. The final consulting report describes several steps
to increase productivity including implementation of cutting-edge processing
techniques through more powerful filtering systems.

a) Calculate the labor productivity for the existing as well as the proposed
system.
b) Find the Total-Factor Productivity for both systems.

45
 n e
e r O
a p t
Ch
Of
d
En