IE ch1
IE ch1
IE ch1
Basics Of Management
Topics to be covered
Introduction to management
Functions of management
Planning
Organizing
Directing
Controlling
Managerial roles and skills
Basics of Productivity
Principle of management
Organizational structure 1
Introduction to Management
What is Management?
A set of activities (including planning and
decision making, organising, leading and control)
directed at an organisation’s resources (human,
financial, physical and informational) with the aim
of achieving organisational goals in an efficient
and effective manner.
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
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beings), Money, Machines, Materials and Methods.
Major Premises
Technology and business savvy (know-how) represents
a very powerful combination of great demand in society.
Inside Outside
Present Future
Local Global
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Challenges - Inside
Implement projects/programs;
Manage people, technologies, and resources to add
value;
Develop new product features to enhance company
competitiveness;
Define, control and reduce costs to improve
profitability;
Initiate technology projects to sustain company
position.
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Challenges - Outside
Keep abreast (in touch) of emerging
technologies and apply them to strengthen
company’s core competencies;
Apply web-based tools to enhance operations
and foster customer relations;
Identify best practices to improve engineering
operations and surpass them;
Create supply chain networks to derive speed,
quality and cost benefits.
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Challenges - Present
Do things right to keep company operating smoothly;
Use Balanced Scorecard to monitor non-financial and
financial performance;
Control costs and eliminate wastes to attain profitability in
the short-run.
Challenges - Future
Seek transformation opportunities to create company
profitability in the long-run;
Introduce new generation products timely;
Create vision for the future related to technologies;
Define what should be done for technology-based success in
the future. 8
Challenges - Local
Utilize resources to best achieve company’s objectives;
Take ethical and lawful actions while taking into account
local conditions;
Maintain and nurture local professional networks;
Challenges - Global
Apply location-based resources to realize global
economies of scale and scope for achieving cost and
technology advantages;
Develop global professional networks;
Acquire a global mindset;
Exercise leadership roles in international settings.
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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”
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Functions of Management
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Planning
Planning is determining the objectives and formulating
the methods to achieve them.
Forecasting, setting objectives, action planning,
administering policies, establishing procedure.
A job well planned is half done.
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?
Steps in Planning
1. Determining the goals or objectives for
the entire organization.. 12
Steps in Planning
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.
Organizing
Selecting organizational structure, delegating,
establishing working relationship.
Division of Work.
Assign Tasks: Departmentalization.
Link Departments: Hierarchy Development
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Organizing
Decide how much Authority to Designate/ Authority,
Responsibility and Delegation.
Decide the Levels at which Decisions are to be made.
Decide how to Achieve Coordination.
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.
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Directing/Leading
A function that includes motivating employees,
directing others, selecting the most effective
communication channel, and resolving conflict.
Ability to command people.
Attracting people to the organization.
Marshaling and allocation of resources
Creating good working conditions
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.
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Controlling
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.
Steps in Controlling
1. Establish Standards of Performance.
2. Measure Actual Performance.
3. Compare Performance to Standards.
4. Take Corrective Action.
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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.
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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
Conceptual skills
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Technical Skills
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.
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. 19
Conceptual Skills
Ability of an individual to analyze complex
situations and to rationally process and interpret
available information.
For eg: Idea generation and analytical process of
information.
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Basics of 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.
Productivity, the relative efficiency of economic
activity—that is, the amount of products or services
produced compared to the amount of goods and
labor used to produce.
Outputs
Productivity =
Inputs
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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
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Measures of Productivity
= 2.20
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Measures of Productivity
Example 2
5,500 Units Produced 5,500 units/500 hours
Sold for $35/unit = 11 units/hour
500 labor hours are used Or we can arrive at a
Cost of labor: $25/hr unitless figure:
Cost of raw material: $5,000 (5,500
Cost of overhead: 2 x labor units*$35/unit)/(500
cost hours * $25/hr) =15.4
What is the labor productivity?
What is the multifactor
productivity?
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MFP = 4.52
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.
Which productivity measure should be used?
Answer: Could be classified as a Partial
Measure (labor productivity).
Is productivity increasing or decreasing?
Answer: Last week’s productivity = 480/2000
= 0.24, and this week’s productivity is =
560/2400 = 0.23. So, productivity has
decreased slightly. 26
Factors affecting productivity
Standardization Methods
Technology Design of the workspace
Searching for lost Incentive plans that reward
or misplaced items productivity
Scrap rates Capacity utilization
Layout
Labor turnover,
Scheduling
layoffs,
Equipment breakdowns
new workers
Part and material shortages
Bottlenecks
Inadequate investment in
training & education of the
employees
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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
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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/hr 81 90
Workers 5 4
Wage $/hr 10 10
Machine $/hr 40 50
a) Compute labor productivity for both the Old System and the New System.
b) Compute total factor productivity 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 and the new systems. 29
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.)
B, Compute all factor productivity for both old and new systems.
Factor Old System New System
Output 80 80(1.25) = 100
# of workers 5 6
Worker cost $12/hr $12/hr
Material $16/unit $10/unit
Overhead 1.6(labor cost) 1.6(labor cost)
Price 31 31
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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
G.Dessler, 2003
Depicting the Organization
• Organization Chart
– A chart that shows the structure of the
organization including the title of each manager’s
position and, by means of connecting lines, who
is accountable to whom and who has authority for
each area.
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Organization Design and Structure
• Organization design
– A process in which managers develop or change their
organization’s structure
• Work specialization
– A component of organization structure that involves
having each discrete step of a job done by a different
individual rather than having one individual do the
whole job
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Structure Variables
• Principles • Departmentalization
– Chain of command – Functional
– Span of control – Divisional
– Authority • Product
– Power • Customer
– Responsibility • Geographic
• Process
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Organizational Structure: Principle
Chain of command; The management principle that no
person should report to more than one boss
Span of control; The number of subordinates a manager
can direct efficiently and effectively
Authority;
The rights inherent in a managerial position to give orders and
expect them to be obeyed
Responsibility; An obligation to perform assigned
activities
Power; An individual’s capacity to influence decisions
Types of Power
Power based on one’s position in the
Legitimate formal hierarchy
Coercive Power based on fear
Power based on the ability to distribute
Reward something that others value
Power based on one’s expertise,
Expert special skill, or knowledge
Power based on identification with a
Referent person who has resources or traits
Departmentalization(Creating Departments)
• Departmentalization
– The process through which an organization’s activities
are grouped together and assigned to managers; the
organization wide division of work.
Functional; The grouping of activities by functions performed
Product; The grouping of activities by product produced
Customer; The grouping of activities by common customers
Geographic; The grouping of activities by territory
Process; The grouping of activities by work or customer flow
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Organization Chart
ASSYMENT 1
prepare the organization chart of
adigrat university
and submit at the coming week at
this time
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