CHAPTER I

MANAGERS AND DEVELOPMENT

THE FUNCTIONS OF THE ENGINEER
Since prehistoric times, mankind has benefited from the contribution of Engineers.
Cars and Household Appliances

These contributions indicate that engineers have become an indispensable segment of the
world’s professions.
Engineers are supposedly one of the professional, who will produce solutions to the
difficulties faced by mankind. Innovation is the word t
hat Engineer must have on their mind, especially at some specific concerns our world is
facing;
1. The production of move food for a 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.
8. Meeting the increasing demand for communication facilities
Specifically, the functions of engineering encompass the following areas.
1. Research – the engineer is engaged in the process of learning about nature and codifying
this knowledge into usable theories.
2. Design and Development – the engineer undertakes the activity of turning a product
concept to a finish physical system
3. Testing – the engineer works in a unit where new products or parts are tested for work
ability
4. Manufacturing – engineer is directly in charge of production personnel or assumes
responsibility for the product
5. Construction - construction engineer is directly in charge in charge of construction
personnel or have responsibility for the quality of process
6. Sales – the engineer assist company’s customer to meet their needs
7. Consulting – the engineering works as consultant of any individual or organization
requiring his services
8. Government – engineer may find an 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 – the engineer gets employment in a school as a teacher of engineering courses.
10. Management – the engineer is assigned to manage groups of people performing specific
tasks.
THE ENGINEERING IN VARIOUS TYPES OF ORGANIZATION
Organizations may be classified according to the degree of engineering jobs performed:
1. Level one – minimal engineering jobs
2. Level two – moderate degree of engineering jobs
3. Level three – high degree of engineering jobs
Types of Organization and the Management Skills Required of Engineers

The Firm’s Quantity of Engineering Jobs

MANAGEMENT SKILLS REQUIRED AT VARIOUS LEVELS

Level One - they're the backbone of the organization, has the ability to work well in a
wide range of people, spend most of their time in the office firm, responsible for project
planning, creating time lines, organizing regular meetings, working with contractors and clients
and etc.
Level Two – the engineer may be assigned to head the engineering division. credibility
and field expertise is indeed a need here. it's totally different from office work where you gain
your baseline of comfort. this is the zone of labor intensive with a combination of time
management.
Level Three - it's all about running the show while producing effective results. This is the
biggest opportunity for an engineer to become the president or general manager. This is where
you oftentimes encounter tight spot and different level of difficulty and an as engineer manager
you must know how to address this kind of hardship.
WHAT IS ENGINEERING MANAGEMENT?
Engineering Management is a specialized form of management that is required to
successfully lead engineering or technical personnel and projects. The term can be used to
describe either functional management or project management.
Engineering management refers to the activity combining "technical knowledge with the
ability to organize and coordinate worker power, materials, machinery, and money."
As the engineer 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.
MANAGEMENT DEFINED
The other portion of engineer manager is management. Management defined as the
“creative problem solving-process of planning, organizing, leading, controlling of an
organization to attain its goal”.

THE PROCESS OF MANAGEMENT

There are 4 process of management, these are planning, leading, controlling, and
organizing. These 4 process helps an organization to seek more information and strategies to
attain mission and objectives, what are materials be needed, to inspire them, to know your
strengths and weaknesses, to assign specific task to specific person, and to make sure that all of
the strategies be implemented.

REQUIREMENTS FOR THE ENGINEER MANAGER’S JOB

There are some qualifications that an engineer manager must have.
1. A bachelor’s degree in engineering from a reputable school; in some case, a master’s
degree in engineering or business management is required;
2. A few years of experience in pure engineering job;
3. Training in supervision;
4. Special training in engineering management.
These qualifications are needed in the performance of the various management functions.

HOW ONE MAY BECOME A SUCCESSFUL

ENGINEERING MANAGER
An engineering manager directs, plans, and coordinates activities, as well as spends time
supervising employees in architectural and engineering companies. They are responsible for
developing the overall concepts of new products and/or solving problems that may prevent its
completion. Engineering managers set schedules, create administrative procedures, and propose
budgets for projects and programs.
 There are 3 major factors to be a successful engineer manager.
1st factor that lead to be a successful engineer manager is the ABILITY. Ability is the
quality of being able to perform, first you need to be confident with your ability of leading your
group. If you have ability in leading the group, the more efficient your work will.
The 2nd factor that leads you to be a successful engineer manager is MOTIVATION TO
MANAGE. Motivation to manage is one factor of being a good engineer manager because if you
are motivated to manage then everything will fall into its right places and everything will go as
planned. Good engineer manager also has a sense of responsibility that you will influence other
lead your subordinates to be motivated also to do work more effectively. You must also have;
1. Favorable attitude towards those in position such as superiors
2. Desire friendly completions with peers
3. Desire to assert oneself and take charge
4. Desire to exercise power and authority towards others
5. Learn to behave in a distinctive way when standing out in the crowd and
6. Learn how to accept responsibilities.
The 3rd factor that leads you to become a successful engineer manager is
OPPORTUNITY. If you really want to be a successful engineer manager, you must be
competent for every opportunity that will open. The opportunity for a successful management
has two requirements;
1. Obtaining a suitable managerial job
2. Finding a supportive climate once on the job.
 CHAPTER II
TASK OF AN ENGINEER: DECISION MAKING
THE ENGINEERING MANAGER

The Engineering manager is responsible for the effective management of the engineering and
maintenance department. The Engineer manager is presumed to the technicality competent in
his/her specialization, one may now proceed to describe more thoroughly the remaining portion
of his/her job, which is management.
They are also responsible for hiring staff, supervising employees, setting budgets and goal for
project, reading research and development projects, and checking the accuracy of the work
produced under their supervision. They are responsible for overall management of the
implementation by contract for the assigned projects, coordinates with different functional
groups and inter-agencies with regards Right-of-Way, Survey, Geological and other
requirements requiring action plan.
Engineering manager also manage the implementation of project and ensures that the
construction schemes, methodologies and strategies of the project are based on the approved
contract and drawings and they also approve/endorse the contractor's proposal for time
extension, suspension, variations, standby claims, etc. as evaluated by the project-in-charge.

KINDS OF ENGINEERING MANAGER

1. ENGINEERING PROJECT MANAGER - the Project Manager is responsible to ensure that

they conform to regulatory, statutory, sponsor and stakeholder requirements.
2. SENIOR LEAD ANALYST - is primarily responsible for the development, presentation and
support of agricultural commodity supply forecasts.
3. CONSTRUCTION MANAGEMENT ENGINEER - involves the application of technical and
scientific knowledge to infrastructure construction projects.
4. INDUSTRIAL MANAGEMENT ENGINEER - This is engineering stream is related to
understanding, development and implementation of systems involving human being and other
resources.
5. DESIGN TEAM LEADER - is responsible for generating and leading cutting-edge designs
from concept to execution.
6. TECHNICAL MANAGER - should be able to perform all necessary tasks related to company
systems including troubleshooting any technical issues.
7. CONSTRUCTION MANAGER - is a professional service that uses specialized, project
management techniques to oversee the planning, design, and construction of a project, from its
beginning to its end.
8. PROJECT MANNAGER - have the responsibility of the planning, procurement and execution
of a project, in any undertaking that has a defined scope, defined start and a defined finish;
regardless of industry.
9. CITY ENGINEER - They design roads, bridges and other infrastructure projects and ensure
they adhere to budgetary and environmental requirements.
10. DIRECTOR OF PUBLIC WORKS - supervises the activities of various departments within
the public works sector.

WHAT IS DECISION-MAKING?
- Decision-making is the process of identifying and choosing alternative courses of action in a
manner appropriate to the demands of the situation. Decisions are made at various management
levels and at various management functions.
Managers of all kinds and types, including the engineer manager are primarily tasted to
provide leadership in the quest for the attainment of the organization objectives. The decision
maker must be learn the intricacies of decision making. Good decision, will provide the right
environment for continuous growth and success and decision skills will be very crucial to the
success.

Decision-Making as a Management Responsibility

- 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.

THE DECISION MAKING PROCESS

1. Diagnose Problem - The manager should seek first for the problem for them to make
intelligent decisions. If he fails to do so, it is impossible for him to succeed. "Identification of the
problem is tantamount to having the problem half-solved."

Problem - occurs when there is a difference between the actual situation and a desired
situation. For example, the construction of a house is expected to be finished in a
particular date. The desired situation is the house that is to be finished at that specific
time. Problem occurs when it missed the desired date.

2. Analyze Environment - It is one of the most important factors to be considered. It is because

environment influences the success of the organization.
The objective of environmental analysis is the identification of constraints, which may be
spelled out as either internal or external limitations.
Examples of Internal Limitations
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
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.

Components of the Environment

- The environment consists of two major concerns;
 1. Internal Environment - organizational activities within a firm that surrounds decision
making.
2. External Environment - variables that are outside the organization and is not within the
control of the top management.

3. Articulate Problem or Opportunity - Before a strategy can be explored, a clear articulation of

the problem has to happen.

4. Develop Viable Alternatives – The best among alternative solutions must be considered by
management.
Procedures for Alternative Solutions
1. Prepare a list of alternative solutions
2. Determine the viability of each solutions
3. Revise the list by striking out these which are not viable.

5. Evaluate Alternatives – Proper evaluation makes choosing the right solution less difficult.
How the alternative will be evaluated will depend on the nature of the problem, the objectives of
the firm, and the nature of alternatives presented.

6. Make a Choice – This is the point where he must convinced that all the previous steps were
correctly undertaken.

7. Implement Decision – Implementation refers to carrying out the decision so that the objectives
sought will be achieved. To make implementation effective, a plan must be delivered.

8. Evaluate and Adapt Decision Making Results – It is important for the manager to use control
and feedback mechanism 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, criteria use in evaluation, and the solution selected
for the 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.

APPROACHES IN PROBLEM SOLVING

Qualitative Evaluation - refers to evaluation of alternatives using institutions and subjective
judgement.

Stevenson states that managers tend to use qualitative approach when:

1. The problem is farily simple
2. The problem is familiar
3. The costs involved are not great
4. Immediate decisions are needed.

Quantitative Evaluation - refers to the evaluation of the alternatives using any technique in a
group classified as rational and analytical.
QUANTITATIVE MODELS FOR DECISION MAKING

1. Inventory Models - it is designed to help the engineer manager to make decisions regarding
inventory.
Economic order quantity model - minimizes the total holding costs and ordering costs.
Production order quantity model - Answers how much to produce and when to order.
Back order inventory model – this is an order for a good or service that cannot be filled at the
current time due to a lack of available supply.
Quantity discount model - an incentive offered to a buyer that results in a decreased cost per unit
of goods or materials when purchased in greater numbers.
2. Queuing Theory - determine the number of service units that will minimize both customer
waiting time and cost of service.
3. Network models - are large complex tasks are broken into smaller segments.
• The Program Evaluation Review Technique (PERT) - designed to analyze and
represent the tasks involved in completing a given project.
• The Critical Path Method (CPM) - it is an algorithm for scheduling a set of project
activities.
4. Forecasting – is the process for making predictions of the future based on past and present data
and most commonly by analysis of trends.
5. Regression Analysis - a forecasting method that examines the association between two or
more variables may be simple or multiple depending on the number of independent variables
present. It is simple regression if one independent variable is involved if it is two or more it is
called multiple regressions.
6. Simulation - a model to represent reality, on which conclusions about real-life problems can
be used. The decision maker develops a mathematical model of the system under consideration.
It can evaluate alternatives fed into process by decision maker.
7. Linear Programming - a quantitative technique used to produce an optimum solution within
bounds imposed by constraints upon the decision. It is very useful as a tool because supply and
demand limitations at plants, market etc. are constraints upon the system.
8. Sampling Theory - samples if populations are statistically determined to be used for a number
of processes, like quality control and marketing research.
9. Statistical Decision Theory - a rational way to conceptualize, analyze and solve problems in
situations involving limited, or partial information about the decision environment.
- Bayesian analysis is to revise and update the initial assessments of the event
probabilities generated by the alternative solutions.
- Bayes criterion selects the decision alternative having the maximum expected payoff, or
the minimum expected loss.
 CHAPTER III
PLANNING
THE NATURE OF PLANNING
PLAN - provides a methodical way of achieving desired results - it is also serves as a useful
guide.
PLANNING DEFINED:
PLANNING
According to Nickels and others, it refers to "the management functions that involves
anticipating future trends and determining the best strategies and tactics to achieve organizational
objectives."
According to Aldag and Stearns, it is "the selection and sequential ordering of tasks
required to achieve organizational goal."
According to Cole and Hamilton, it 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.

THE PLANNING AND THE MANAGEMENT PROCESS

1.) Setting Organizational, Divisional, Or Unit Goals - the first task of the engineer managet is
to provide a sense of direction.
- the setting goals provide an answer to the said concern.
2.) Developing Strategies Or Tactics To Reach Goals - the ways to realize the goals are called
strategies and this will be the concern of top management.
Strategy - "a course of action aimed at ensuring that the organization will achieve its objectives.
Tactic - id a short-term actio taken by management to adjust to negative internal or external
influences.
3.) Determining Resources Needed- to satisfy strategic requirement, a general statement of
needed resources will suffice.
4.) Setting Standards - standards for measuring performance may be set at the planning stage.
Standard- "a quantitative or qualitative measuring device designed to help monitor the
performances of people, capital goods, or processes.
PLANNING AT 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.
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.
 Intermediate Planning - refers to the process of determining the contributions that
subunits can make with allocated resources.
Operational Planning - refers to the process of determining how specific tasks can best
be accomplished on time with available resources"

TYPES OF PLANS:
FUNCTIONAL AREA PLANS:
1.) Marketing Plan - a written document or blueprint for an organization's marketing activities.
2.) Production Plan - quantity of output that a company must produce in vroad terms and by
product family.
3.) Financial Plan - summarizes the current financial situation of the firm, analyzes financial
needs, direction for financial activities.
4.) Human Resources Management Plan - indicates the human resource needs of a company
detailed in terms of quantity and quality.

PLANS WITH THE TIME HORIZON:

1.) Short-Range Plans - plans intended to cover a period of less than one year.
2.) Long-Range Plans - plans covering a time span of more than one year.

PLANS ACCORDING TO FREQUENCY OF USE

1.) Standing Plans - used again and again, focus on managerial situations.
a.) Policies - broad guidelines about recurring situations or function.
b.) Procedures - describe to exact series of actions to be taken in a given situation.
c.) Rules - statements that either require or forbid a certain action.

SINGLE-USE PLANS are relatively unique and are unlikely to be repeated.

The said plan may be classified as:
1.) Budgets - A budget, according to Weston and Brigham, "a plan that shows the projected
expenditure and the required funds will come from."
2.) Programs - A program is a single-use plan to coordinate a large set of activities.
3.) Projects - A project is a single-use plan that has more limited in scope and sometimes
prepared to support a program.

TOOLS FOR PLANNING

1. Affinity Diagram -is a tool that gathers large amounts of language data (ideas, opinions,
issues) and organizes them into groupings based on their natural relationships.
2. Tree Diagram -is a diagram used in strategic decision making, valuation or probability
calculations.
3. Interrelationship Diagram -is an analysis tool that allows a team to identify the cause-and-
effect relationships among critical issues.
4. Matrix Diagram (MD) -is a tool that allows a team to identify the presence and strengths of
relationships between two or more lists of items.
5. Prioritization Matrix -is a 2×2 matrix designed to help you discern which tasks/projects are
“Critical and Urgent,” so you can focus on what matters most.
6. Process Decision Program Chart (PDPC) -is a technique designed to help prepare
contingency plans.
7. Activity Network Diagram -is a quality management tool used to depict the activities of a
project that are either in parallel or in series.
 CHAPTER IV
ORGANIZING

Engineer Manager- needs to acquire various skills in management, including those for
organizing and technical activities
Second World War- is when the value if a superior organizational set- up has been proven
dramatically
REASONS FOR ORGANIZING
Organizing- is undertaken to facilitate the implementation of plans.
 Steps are undertaken to breakdown the total job into more manageable man-sized jobs.
 These will make it possible to assign particular tasks to particular persons
 These will help facilitate the assignment of authority, responsibility, and accountability
for certain functions and tasks.
ORGANIZING DEFINED
Organizing- is a management function which refers to the “structuring of resources and
activities to accomplish objectives in an efficient process is the structure.”
Structure- is the arrangement or relationship of positions within an organization.
PURPOSE OF STRUCTURE
1.) It defines the relationships between tasks and authority for individuals and departments.
2.) It defines formal reporting relationships, the number of level in 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.
THE FORMAL ORGANIZATION -"the structure that details lines and responsibilities,
authority, and position. The formal structure described by management through; organization
chart, organization manual and policy manuals.
The organization chart is a diagram of the organization's official position.
The organization manual is a written descriptions and authority relationships, functions or
major organization units and jobs procedures.
The policy manual describes company policies.
 HIERARCHIES IN AN ORGANIZATION

Hierarchy is a way to structure an organization using different levels of authority and a vertical
link, or chain of command, between superior and subordinate levels of the organization. Higher
levels control lower levels of the hierarchy. You can think of an organizational hierarchy as a
pyramid. The highest level of authority is at the top of the pyramid, and orders flow from this top
level down to the next level where it continues to move on down until it reaches the level where
the order is supposed to be carried out.

TYPES OF ORGANIZATIONAL STRUCTURES

Organizations may be classified into three types.
1.) Functional Organization - this is a form of departmentalization in which everyone in a
functional activity, such as engineering or marketing, is grouped into one unit.
2.) Product or Market Organization - refers to the division of the organization in a company
that brings together all those involved with a certain type of product or a customer.
3.) Matrix Organization - an organizational structure in which each employee reports to both
functional or division manager to a project or group manager.
 CHAPTER V
STAFFINNG

Decide and setup the organization structure to serve the interest of a certain firm and fill
up position with most qualified person available. Engineering organization must be very
sensitive on choosing the most suited person for job vacancies to lessen the probability of having
staffing errors that may affect the organization

WHAT IS STAFFING?
- Putting the right person in various positions with his area of concern.
- Is undertaken to match people with jobs vacancies.
- Defined as “ the management function that determines human needs, recruits , selects,
trains, and develops human resources for job created by an organization.”

THE STAFFING PROCEDURES

1. Human resource Planning
2. Recruitment
3. Selection
4. Induction & orientation
5. Performance appraisal
6. Employment Decisions (monetary rewards, transfer, promotions and demotions) and
7. Separation

HUMAN RESOURCE PLANNING

- A systematic deployment of human resources in various levels. The engineering manager
will have to involve himself with human resource planning.

Human resource planning involves three activities

1. Forecasting – assessment of future human resources needs.

2. Programming–translating the human resources needs to personal objectives and goals
3. Evaluation and control – monitoring and an evaluation of human resource to success.

Methods of forecasting
 Time series Methods- use historical data to develop forecast in future.
 Explanatory or Casual models- attempts to identify variables to predict future condition
(ex. Regression, econometric, leading indicators).
 Monitoring methods- provide early warning signals of significant changes established
patterns and relationship and assess the likely impact and plan responses if required.
 RECRUITMENT
- Attracting qualified persons to apply for vacant positions that are suited to job and serve
the organization.

Source of applicants
- when management wants to fill up vacancies , the following may be tapped:

1. Current Employees
2. Newspaper Advertising
3. Schools
4. Referrals from employees
5. Recruitment firms
6. Competitors

SELECTION
- Act of choosing available individuals most likely to succeed the job.
- To evaluate each candidate and pick the most suited in position.
- Selection procedures may be simple or complex depending on the cost of wrong
decision(MUST CHOOSE THE QUALIFIED )

Ways of Determining the Qualifications of a Job Candidate

Companies use any or all of the following in determining the qualification of a candidate:
1. Applications Blanks – provide all the information of an applicant.
2. References- provide some vital information on the character of the applicant.
3. Interviews- asking series of relevant question to the job candidate.
4. Testing- evaluation of the future behaviour or performance of an individual.

TYPE OF TEST

1. Psychological test – standard measure of a person current knowledge.

a) Aptitude test- measures person’s capacity or potential to learn.
b) Performance test- measure person’s current knowledge of a subject.
c) Personality test – measure personality traits, sociability, an conformity.
d) Interest test- measure person’s interest in various field of work.
2. Physical examination – type of test given to assess the physical health of an applicant.
 INDUCTION AND ORIENTATION
- Are interrelated processes that refer to an instigation program design to help new
employees to adjust to an organization
Induction
- Technique by which a new employee is rehabilitated into surrounding and introduced to
practices policies and purpose of organization.

Orientation
- Process of acquainting new employees with the organization.
-
TRAINING AND DEVELOPMENT
- If the newly-hired(or newly-promoted) employee is assessed to be lacking necessary
skills required by the job, training becomes necessity.

Two general types of training programs

1. Training programs for non-managers, and
2. Training programs for managers.

TRAINING PROGRAM FOR NONMANAGERS

Type of training is directed to non-managers for specific increase in skill and knowledge
to perform a particular job.
1. On-the-job training – where the trainer is placed in an actual work
2. Vestibule School – where the trainee is placed into a situation also exactly the same as the
work place.
3. Apprentice program- where the combination of on-the-job training and experiences.
4. Special courses- are those taken which provide emphasis on education rather than
training.

TRAINING PROGRAM FOR MANAGERS

The training needs of managers may be classified into four areas: decision-making skills,
interpersonal skills, job knowledge, and organizational knowledge.

 DECISION-MAKING SKILLS
a) In-basket – where the trainee is provide with set of notes , telephones calls, letters, and
reports, all pertaining to a certain company situation.
b) Management games- where a trainee are faced with situation and required to make series
of decision about that situation.
 c) Case studies- actual situation in organization and enable one to examine successful and
unsuccessful operations.
 INTERPERSONAL SKILLS
a) Role –playing- is a method by which the trainees are assign roles to play in a given case
incident.
b) Behaviour modelling – this method attempts to influence the trainee by showing model
persons behaving effectively in a problem situation.
c) Sensitivity training- a method wherein awareness, sensitivity and others are developed.
d) Transactional analysis- a training method intended to help individuals to improve their
interpersonal communication skills.
 JOB KNOWLEDGE
a) On-the-job experience- provides valuable opportunities for a trainee to learn various
skills
b) Coaching – requires a senior manager to assist a low –level manager and teach needed
skill, directions, advice, and helpful criticism.
c) Understudy- a manager works as assistant to a high-level manager.
 ORGANIZATIONAL KNOWLEDGE
a) Position rotation – the manager is given an assignment in a variety of departments
b) Multiple Management- the method premised on the idea that junior executive must be
provided with means to prepare them for higher management position.

PERFORMANCE APPRAISAL
Is the measurement of employee performance. The purpose for which performance appraisal
is made are as follows:

1. To influence, in a positive manner, employee performance and development

2. To determine merit and pay increases
3. To plan for future goals
4. To determine training and development needs: and
5. To assess the promotional potential of employees

Ways of Appraising Performance

1. Rate scale method – trait or characteristics to be rated is represented by a line or scale.

2. Essay Method- evaluator composes statements that best describe the person evaluated.
3. Management by objective methods- specific goals are set collaboratively for the
organization as a whole, for various submits of members.
4. Assessment center method- one is evaluated by persons other than immediate superior.
5. Checklist Method- evaluator checks statement on a list that must fulfilled.
6. Work standards Methods- standards are set for realistic worker output and later on for
evaluation.
 7. Ranking method- where evaluator arranges employees in rank.
8. Critical-incident method- where the evaluator recalls and writes down specific (but
critical) incidents that indicates the employee’s performance.

EMPLOYMENT DECISIONS
After evaluating the performance of employees (managerial or otherwise), the
management will know be ready to make employment decisions

These consist of the ff.

1. Monetary rewards – these are given to employees whose performance is beyond the
standard requirements.
2. Promotion –this refers to a movement of a person to a higher position and responsibility.
It is given though competence and ambition.
3. Transfer- this is the movement of a person to a different job at the same or similar level
of responsibility in organization.
4. Demotion- this is a movement from one position to another which has less pay or
responsibility to it.

SEPARATION
- Is either a voluntary or involuntary termination of an employee. When madevoluntary,
the organization’s management must find out the real reason.
- Involuntary separation(or termination ) is the last option of the management exercise
when an employee’s performance is poor or when he/she committed and act of violating
the company rules and regulation.
 CHAPTER VI
COMMUNICATING AND MOTIVATING
COMMUNICATING

The achievement of the objectives of the engineering organization will depend on the
performance of the human and non-human elements attached to it. The task of management is to
“program” these elements correctly so that each will respond accordingly to their assigned tasks.
Standard programming methods have already been adapted by technologists for most machines
and equipment.

What Communication Is
 Morris Philip Wolf and Shirley Kuiper define communication as “a process of sharing
information through symbols, including words and message.”
 Communication may happen between superior and subordinate, between a manager and a
client or customer, between employee and a government representative, etc.

Function of Communication
 Communication may be used to serve any of the following functions:
1. Information function - Information Provided through communication may be used for
decision-making at various work levels in the organization. A construction worker, for
instance, may be given instructions on the proper use of certain equipment. This will later
provide him with a guide in deciding which equipment to use in particular circumstances.
2. Motivation function – communication is also oftentimes used as a means to motivate
employees to commit themselves to the organization’s objectives.
3. Control function – when properly communicated, reports, policies, and plans define
roles, clarify duties, authorities and responsibilities. Effective control is, then, facilitated.
4. Emotive function – when feelings are repressed in organization, employees are
affected by anxiety, which, in turn, affects performance. Whatever types of emotions are
involved, whether satisfaction, dissatisfaction, happiness, or bitterness, communication
provides a means to decrease the internal pressure affecting the individual.

The Communication Process

The communication process consists of eight steps which are as follows: develop an idea,
encode, transmit, receive, decode, accept, use, and provide feedback.
 Develop an Idea
The most important step in effective communication is developing an idea. It is
important that the idea to be conveyed must be useful or of some value. An example of a
useful idea is how to prevent accidents in wrokplaces.
 Encode
The next step is to encode the idea into words, illustrations, figures, or other symbols
suitable for transmission. The method of transmission should be determined in advance
so that the idea may be encoded to conform with the specific requirements of the
identified method.
 Transmit
 After encoding, the message is now ready for transmission through the use of an
appropriate communication channel. Among the various channels used include the
spoken word, body movements, the written word, television, telephone, radio, an artist’s
paint, electronic mail, etc.
 Receive
The next step is the communication process is the actual receiving of the message
by the intended receiver. The requirement is for the receiver to be ready to receive at the
precise moment the message relayed by the sender.
 Decode
The next step, decoding, means translating message from the sender into a form
that will have meaning to the recipient. If the receiver knows the language and
terminology used in the message, successful decoding may be avhieved.
 Accept
The next step is for the receiver to accept or reject the message. Sometimes,
acceptance (or rejection) is a partial.
 Use
The next step is for the receiver to use the information. If the message provides
information of importance to a relevant activity, then the receiver could store it and
retrieve it when required.
 Provide Feedback
The last step in the communication process is for the receiver to provide feedback
to the sender. Depending on the perception of the receiver, however, this important step
may not be made.

Forms of Communication
Communication consists of two major forms:
1. Verbal and
2. Nonverbal.

Verbal communications are those transmitted through hearing or sight. These modes of
transmission categorizes verbal communication into two classes: oral and written.

Nonverbal communication is a means of conveying message through body language, as well as

the use of time, space, touch clothing, appearance, and aesthetic elements. Body language
consists of gesture, bodily movement, posture, facial expression, and mannerisms of all kinds.

The Barriers to Communication

Various factors may impede the efficient flow of communication. Any, or all, these
factors may, at any point, derail the process.

The barriers to communication may be classified generally as:

1. Personal Barriers
Personal barriers are hindrances to effective communication arising from a
communicator’s characteristics as a person, such as emotions, values, poor listening
habits, sex, age, race, socioeconomic status, religion, education, etc.
2. Physical Barriers
 Physical Barriers refer to interferences to effective communication occurring in
the environment where the communication is undertaken. The very loud sound produced
by a passing jet temporarily drowns out the voice of guest delivering a speech.

3. Sematic Barriers
Semantics is the study of meaning as expressed in symbols. Words, pictures, or
actions are symbols that suggest certain meanings. When the wrong meaning has been
chosen by receiver, misunderstanding occurs. Such error constitutes a barrier to
communication.

Overcoming Barriers to Communication

When communication barriers threaten effective performance, certain measures must be
instituted to eliminate them. To eliminate problems due to noise, selective perception, and
distraction, the following are recommended:
1. Used feedback to facilitate understanding and increase the potential for appropriate
action.
2. Repeat messages in order to provide assurance that they are properly received.
3. Use multiple channels so that the accuracy of the information may be enhanced.
4. Use simplified language that is easily understandable and which eliminates the
possibility of people getting mixed-up with meanings.

Techniques For Communicating In Organizations

Communication may be classified as to the types of flow of the message which are as
follows: downward, upward, or horizontal. Each of the types of message flow has its own
purposes and techniques.

Downward Communication
Downward Communication refers to message flows from higher levels of authority to
lower levels. Among the purposes of downward communication are:
1. to give instructions
2. to provide information about policies and procedures
3. to give feedback about performances
4. to indoctrinate or motivate.

Among the techniques used in downward communication are as follows: Letters, meetings,
telephones, manual, handbooks, and newsletters.
Letters are appropriate when directives are complex and precise actions are required.
Manuals are useful sources of information regarding company policy, procedures, and
organization.
Handbooks provide more specific information about the duties and priveleges of the
individual worker.
Newsletters provide a mixture of personal, social, and work-related information.

Upward Communication
 There is a need for management to provide employees with all the necessary material and
non-material support it can give. The first requirement, however, is for management to know the
specific needs of the employees. This is the primary reason for upward communication.
Upward communication refers to messages from persons in the lower-level positions to person in
higher position.
Among the techniques used in upward communication are: formal grievance procedures,
employee attitude and opinion surveys, suggestion systems, open door policy, informal gripe
sessions, task force, and exit interviews.
Formal Grievance Procedures- Grievances are part of a normally operating
organization.
Employee Attitude and Opinion Surveys – finding out what the employee think about
the company is very Important.
Suggestion Systems – Suggestion from employees are important sources of cost- saving
and production enhancing ideas.
Open-Door Policy – An open door policy, even on limited basis, provides the
management with an opportunity to act on difficulties before they become full-blown
problems.
Information Gripe Sessions – Informal gripe sessions can be used positively if
management knows how to handle them.
Task Forces – When a specific problem or issue arises, a task force may be created and
assigned to deal with the problem or issue.
Exit Interviews – When employees leave an organization for any reason, it is to the
advantage of management to know the real reason.

Horizontal Communication
Horizontal Communication refers to messages sent to individuals or groups from another
of the same organizational level or position.
The purposes of horizontal communication are:
1. To coordinate activities between departments
2. To persuade othersat the same level of organization
3.To pass on information about activities or feelings

Management Information System

It was mentioned at the beginning of this chapter that communication may be used to
serve the information function. This means that a way must be devised to allow effective
decision making. In this regard, companies of various sizes have organized systems to gather
information that will be useful to management.

The Purposes of MIS

1. To provide a basis for the analysis of early warning signals that can originate
both externally and.
2. To automate routine clerical operations like payroll and inventory reports.
3. To assist managers in making routine decisions like scheduling orders to
machines, and reordering supplies.
4. To provide the information necessary for management to make strategic or
non-programmed decisions
Motivating
Productivity has always been serious concern of the management firms, if it improves, it
means great chances for the company to grow and be more stable. One reason why the Philippine
economy cannot move steadily forward is our record of low productivity for so many years.
What Is Motivation?
Motivating refers to the act of “giving employees reasons or incentives… to work to
achieve organizational objectives.” Motivation, on the other hand, refers to the “process of
activating behaviour, sustaining it, and directing it toward a particular goal.”

Factors Contributing To Motivation

There are certain factors influencing a person’s desire to do his job well.
1. Willingness to do a job. People who like what they are doing are highly motivated to
produce the expected output.
2. Self-confidence in carrying out a task. When employees feel that they have the
required skill and training to perform a task, the more motivated they become.
3. Needs satisfaction. People will do their jobs well if they feel that by doing so, their
needs will be satisfied.

Theories Of Motivation
There are various theories of motivation, but only the four most influential ones will be
discussed.
1. Maslow’s needs hierarchy theory
2. Herzberg’s two-factor theory
3. Expectancy theory
4. Goal setting theory

Maslow’s Needs Hierarchy Theory

Abraham Maslow, a psychologist , theorized that human beings have five basic needs
which are as follows:
Physiological Needs. Those that are concerned with biological needs like food, drink, rest and
sex fall under category of physiological needs.
Security Needs. After satisfying the physiological needs, people will seek to satisfy their safety
needs.
Social Needs. After satisfying his physiological and security needs, the employee will now strive
to secure love, affection, and the need to be accepted by peers.
Esteem Needs. The fourth level of needs is called esteem needs and they refer to the need for a
positive self-image and self-respect and the need to be respect by others.
Self-Actualization Needs. The fifth and the top most level needs in hierarchy are called self-
actualization needs and involve realizing our full potential as human beings and becoming all
that we are able to be.
The Relevance of Maslow’s Theory to Engineering Management. Even if Maslow’s
Theory has been largely questioned, one basic premise cannot be discarded.

Herzberg’s Two-Factor Theory

 The two-factor theory is one developed by Frederick Herzberg indicating that a satisfied
employee is motivated from within to work harder and that a dissatisfied employee is not self-
motivated.
Expectancy Theory
Expectancy Theory is a motivation model based on the assumption that an individual will
work depending on his perception of the probability of his expectation to happen.

1. A combination of forces within the individual and the environment determines

behaviour.
2. People make decisions about their own behaviour and that of organizations.
3. People have different type of needs, goals, and desires.
4. People make choices among alternative behaviours based on the extent to which they
think a certain behaviour will lead to a desired outcome.
Goal Setting Theory
Goal setting refers to the process of “improving performances with objectives, deadlines
or quality standard.”
The goal setting model drawn by Edwin A. Locke and his associates consist of the
following components:

1. Goal Content. To be sufficient in content, goals must be challenging, attainable, specific

and measurable, time limited, and relevant.
2. Goal Commitment. When individuals or groups are committed to the gaols they are
supposed to achieve, there is a chance that they will be able to achieve them.
3. Work Behaviour. Goals influence behaviour in terms of direction, effort, persistence, ad
planning.
4. Feedback Aspects.Feedback provide the individuals with a way of knowing how far they
have gone in achieving objectives.

Techniques Of Motivation
Individual or groups of individuals may be motivated to perform through the use of
various techniques.
1. Motivation Through Job Design
A person will be highly motivated to perform if he is assigned a job be likes.
2. Motivation Through Rewards
Rewards consist of material and psychological benefits to employee for performing task
in the work-place.
3. Motivation Through Employee Participation
When employees participate in deciding various aspects of their jobs, the personal
involvement, oftentimes, is carried up to the point where the task is completed.
4. Other Motivation Techniques for the diverse work force
The advent of theories on individual differences and the biological clock of human beings
put pressure on the engineer manager to adapt other motivation techniques whenever
applicable.
 CHAPTER VII
LEADING, CONTROLLING AND THE MANAGEMENT
PROCESS
LEADING
 The management function which "involves influencing others to engage in the work
behaviors necessary to reach organization goals".
 Leading refers to the function, leadership refers to the process.

How Leaders Influence Others?

 Engineer managers are expected to maintain effective work forces, so they are required to
perform leadership roles. Leaders are said to be able to influence others because of the
power they possess.

Power
 Refers to the ability of leader to exert force on another.

Bases of Power
1. Legitimate Power- a person who occupies a higher position over persons in
lower position within organization.
Example: Supervisor, CEO

2. Reward Power- a person who has the ability to give rewards to anybody who
follows orders or requests.
Reward power may be classified into two:
a. Material Rewards- refer to money or other tangible benefits like cars,
house and lot, etc.
b. Physic Rewards- consist of recognition, praises etc.

3. Coercive Power- a person who compels another to comply with others through
threats or punishments (demotion, dismissal, with holding promotion, etc).

4. Referent Power- a person who can get compliance from another because the
latter would want to identified with the former.

5. Expert Power- provide specialized information regarding their specific lines of

expertise. Possessed great skill in technology.

Nature of Leadership

Leadership
 The process of influencing and supporting others to work enthusiastically towards
achieving objectives.

Traits of Effective Leaders

1. High level of Personal Drive
 Person who is willing to accept responsibility, possess, vigor, initiative,
persistence, and health.
 Even failures occur, a leader always find ways to resolve the problem and reach
the goal.

2. Desire to Lead
 A person who always has a reservoir of extra efforts which can be used whenever
needed.
 A full-hearted leader

3. Personal Integrity
 A person who is well-regarded by others as one.
 A person who does not have personal integrity will have a hard time convincing
his subordinates about the necessity of completing various tasks.

Integrity- “honesty, honor, incorruptibility, rectitude, righteousness, uprightness, and

similar virtues.”(V.K Saraf)

4. Self-confidence
 The activities of leaders require moves that will produce the needed outputs. The
steps of conceptualizing, organizing, and implementing will be completed if
sustained efforts are made. For the moves to be continuous and precise, self-
confidence is necessary.

“Almost inevitably consummate salesman who radiate enormous contagious self-

confidence.”—McKinsey

“A chieftain cannot win if he loses his nerve. He should be self-confident and self-reliant
and even if he does not win, he will know he has done his best.” —Wess Roberts

5. Analytical Ability
 A leader must have sufficient skill to determine the root cause of the problem.
 This ability can be used by the leader to tide him over many challenging aspects
of leadership.

6. Knowledge of the Company, Industry, or Technology

 A leader must be well-informed about his company, the industry where the
company belongs, and the technology utilized by the industry

7. Charisma
 A person who has sufficient personal magnetism that leads people to follow his
directives.
 A trait that is greatly responsible for whatever accomplishments they achieved.
  Charismatic persons in the history are Napoleon Bonaparte, Julius Caesar, Adolf
Hitler, George Washington and Elvis Presley.

8. Creativity
 Ronnie Milero “the ability to combine existing data, experience and preconditions
from various sources in such a way that the results will be subjectively regarded
as new, valuable, and innovative and as a direct solution to an identified problem
solution.”
 Problems are complex and challenging but creativity can overcome this.

9. Flexibility
 May differ in method used but same result. Leaders with this traits can find
another way to solve any problem.
Leadership skills:
1. Technical skills
 A skill needed to understand and make decisions about work process, activities, and
technology
 Having this skills will give more confidence in performing his functions.

2. Human skills
 The ability of a leader to deal with people, both inside and outside the organization.
 A leader must know how to get along, motivate, and inspire people.

3. Conceptual skills
 The ability to think in abstract term, to see how parts fit together to form the whole.
 A leader must give a clear and well-expressed presentation of what must be done.
Behavioral Approaches to Leadership Styles
There are several approaches used in classifying leadership styles. They are as follows:
1. According to the ways leaders approach people to motivate them
2. According to the way leaders uses power
3. According to the leader’s orientation towards task and people
Ways Leaders Approach People
1. Positive Leadership - a leader gives reward either economic or non-economic.
2. Negative Leadership – when punishment is emphasized Luke reprimand, suspension or
dismissal.
Ways Leaders Uses Power
1. Autocratic Leaders
 They make decisions without consulting subordinates
 His motivations comes from threats, punishments and intimidation.
  Disadvantage is he receives little information and ideas from his people as inputs into
his decision-making.
2. Participative Leaders
 When a leader openly invites his people about anything for the sake of the company.
 Advantage for generating good ideas and increased support.
 Disadvantage is it is time consuming and may frustrate people who prefer quick
decision reached
3. Free-Rein Leaders
 Let employees or subordinates relative freedom to do whatever it takes to accomplish
these objectives.
 Also called laissez-faire leaders.
 If it works, there is full managerial delegation resulting to optimum utilization of time
and resources.
 It’s weakness is there is very little managerial control and high degree of risk
Leaders Orientation towards Tasks and People
Leaders may be classified according to how they view tasks and people.
1. Employee Orientation – when a leader sees an employee as human beings of “intrinsic
importance and with individual and personal need” to satisfy.
2. Task Orientation – when a leader places stress on production and the technical aspects
of the job and the employees are views as to make the work done.
Fiedler’s Contingency Model
Leadership is effective when the leader style is appropriate in the situation. The leader
should have good relationship with his subordinates, and a power to teach and instruct them.
The leader should inherent in his position. If the leader is not fit in the situation, change the
leader, select who is fit for the situation.
Hersey and Blanchard Situational Leadership Model
The most important factor selecting leader style is the development of maturity. The job
skill, knowledge and psychological maturity are the component of maturity. Leadership style
appropriate for various maturity level; Directing is for the person who lack of competence but
are enthusiastic and committed. Coaching is for the person who has competence but lack of
commitment. Supporting is for the person who has competence but lack of confidence and
motivation. Delegating is for a person who has bot competence and commitment.
Path-Goal Model Leadership
The leadership can be made effectively because leader can be influence subordinate
perception of their work goal and path to goal attainment. Effective leader can enhance
subordinate motivation by classifying the perception of subordinate goals, link meaningful
reward with goal attainment and explain how goals and desire reward can be enhance. The
leadership style which maybe use by path-goal.
1. Directive Leadership is the leader that focuses on main goals of the assignment
 2. Supportive leadership is the leader that treats his subordinate equal and supporting them
to improve their well being
3. Participative Leadership is that the leader are looking and paying attention on
suggestion of his subordinate.
4. Achievement-oriented Leadership where the leader emphasize challenge and seek to
maintain a high degree of confidence that subordinate will meet difficult challenge in a
responsible manner.
Vroom’s Decision-Making Model
Proper Leadership style for various situations focuses on the appropriate delegation of
decision making. Five distinct decision-making styles are identified in Vroom Model. Two of
them are autocratic, two other are consultative and one is group directed.

CONTROLLING
The long-term existence of many companies, most often, is placed in jeopardy when some
aspects of their activities go out of control.
Some example are the destruction of lives and property, normal business operations are
hampered causing discontinuities in employment and the provision of products and services.
These could not happened if only adequate control were instituted.
What is controlling?
Controlling is refers to the process of ascertaining whether organizational objectives have been
achieved; if not, why not; and determining what activities should then be taken to achieve
objectives better in the future.
Importance of Controlling
When controlling is properly implemented, it will help the organization achieve its goal in the
most efficient and effective manner possible.
Steps in the Control Process
1. Establishing performance objectives and standards
2. Measuring actual performance
3. Comparing actual performance to objectives and standards, and
4. Taking necessary action based on the result of the comparisons.

Establishing Performances Objectives and Standards

1. Sales Targets - which are expressed in quantity or monetary terms;
2. Production Targets - which are expressed in quantity or quality;
3. Worker Attendance - which are expressed in terms of rate of absences;
4. Safety Record - which is expressed in number of accidents for given periods;
5. Supplies Used - which are expressed in quantity or monetary terms for given periods.
Measuring Actual Performance

This must be done in a consistent to facilitate proper data acquisition to make sinformed
decisions concerning performance and make adjustments as necessary to their protocols.

Comparing Actual Performance to Objectives and Standards

Measured results are compared to the standards they previously established. Therefore,
they can determine if performance is up to their expectations - or not.

Taking Necessary Action

A company must use the information gathered from the control process. Not taking
action based on revealed information which means they wasted their time and resources
instituting the control process. They must then measure these corrective actions some time
down the road to see if they are performing up to corporate

TYPES OF CONTROL

Organizations constantly need to ensure that they're meeting the goals they've set for
themselves. That's where the three types of organizational controls come in.

1. Feedforward Control
Detects the disturbance directly and takes an appropriate control action in order to
eliminate its effect on the process output. This is a focus on inputs, or things the
organization can put into the planning to be sure objectives can be met.
2. Concurrent Controls
These controls rely on performance standards, rules, and regulations for guiding
employee tasks and behaviors. Their purpose is to ensure that work activities produce the
desired results. This is a focus on ongoing processes, or things the organization can change
in real-time to be sure the objectives can be met.
3. Feedback Controls
It involves reviewing information to determine whether performance meets established
standards. This is a focus on outputs, or things the organization can get out of the planning
to be sure the objectives can be met.

COMPONENTS OF ORGANIZATIONAL CONTROL SYSTEM

1. Strategic Plans
Organizational leaders determine their vision for the future as well as identify their
goals and objectives for the organization.
2. Long-range Financial Plan
 An investment plan or strategy with a term of usually longer than one year.
3. Operating Budget
It shows the company's projected revenue and associated expenses for an upcoming
period and is often presented in an income statement format.
4. Performance Appraisal
The process by which a manager or consultant examines and evaluates an employee's
work behavior and uses the results to provide feedback to the employee to show where
improvements are needed and why.
5. Statistical Reports
An organized synthesis of data that span a whole array of forms going from tables of
numbers to a text summarizing the findings.
6. Policies and Procedures
Are designed to influence and determine all major decisions and actions, and all
activities take place within the boundaries set by them.

STRATEGIC CONTROL SYSTEM

Is concerned with tracking the strategy as it is being implemented, detecting any
problems areas or potential problem areas, and making any necessary adjustments.
1. Financial Analysis
The process of evaluating businesses, projects, budgets and other finance-related entities
to determine their performance and suitability.
2. Financial Ratio Analysis
Financial ratios compare the results in different line items of the financial
statements. The analysis of these ratios is designed to draw conclusions regarding the
financial performance, liquidity, leverage, and asset usage of a business.

I. Liquidity
Liquidity Ratios
 Assess the company’s ability to meet its current obligations.
Important ratios that indicates liquidity are:
1. Current Ratio- shows how the current assets of the company can cover
its current assets.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
Formula: 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
 2. Acid-test Ratio- measures firm’s ability to pay off short term obligations
with the use of current assets and without relying on the sale of
inventories.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠−𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
Formula: 𝑎𝑐𝑖𝑑 𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

II. Efficiency
Efficiency Ratios
 Shows the effectiveness of the certain assets or liabilities are being used in the
production of goods and services.
Common efficiency ratios are:
1. Inventory turnover ratio- measures the number of times an inventory is
turned over or sold each year.
Formula:
𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 = 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

2. Fixed asset turnover- measure utilization of the company’s investment in

its fixed assets, such as its plant and equipment.
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Formula: 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑛𝑒𝑡 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
III. Financial Leverage
Financial Leverage Ratios
 Assess the balance of financing obtained through debt and equity sources.
Some important leverage ratios are:
1. Debt to total assets ratio- shows how much of the firm’s assets are
financed by debt.
𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
Formula: 𝑑𝑒𝑏𝑡 𝑡𝑜 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑟𝑎𝑡𝑖𝑜 = 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

2. Times interest earned ratio- measures the number of times that earnings
before interest and taxes cover or exceed the company’s interest expense.
Formula:
𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
𝑡𝑖𝑚𝑒𝑠 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑎𝑟𝑛𝑒𝑑 𝑟𝑎𝑡𝑖𝑜 =
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
IV. Profitability
Profitability Ratios
 Measure how much operating income or net income a company is able to generate
in relation to its assets, owner’s equity and sales.
 Notable profitability ratios are:
1. Profit margin ratio- compares the net profit to the level of sales.
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
Formula: 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜 = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

2. Return on assets ratio- shows how much income the company produces
for every peso invested in assets.
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Formula: 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑎𝑠𝑠𝑒𝑡𝑠 𝑟𝑎𝑡𝑖𝑜 = 𝑎𝑠𝑠𝑒𝑡𝑠

3. Return on equity ratio- measures the returns on the owner’s investment.

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Formula: 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =
𝑒𝑞𝑢𝑖𝑡𝑦

IDENTIFYING CONTROL PROBLEMS

Kreitner useful tips in controlling:
1. Executive reality check
2. Comprehensive internal audit
3. General checklist of symptoms of inadequate control
Executive Reality Check
Executive (noun)
 A directing or controlling office of an organization. (Merriam Webster)

Reality Check (noun)

 Something which shows you that the real situations is different from what
you believed or hoped. (Merriam Webster)
So in short Executive Reality Check is the process or action done by the
executives to increase their awareness about the problems and concerns, so that they will
know how to control and manage the problems.

Comprehensive Internal Audit

Internal Audit determines the efficiency and effectivity of the activities of an
organization, it can identify weak spots and problems in the organizational control
system.
Internal Auditing is an evaluation of the various operations and systems control
that are within an organization to know whether proper policies and procedures are being
followed, if the resources are used efficiently, missions are successfully accomplished
and the organization objectives are being achieved.
 Symptoms of Inadequate Control
If there are no available internal auditors, use of checklist for symptoms of
inadequate control may be used.
List of common symptoms are:
1. An unexplained decline in revenue and profits.
2. A degradation of service (ex. customer complaints).
3. Employee dissatisfaction (ex. complaints, grievances, turnover).
4. Cash shortages caused by bloated inventories or delinquent accounts receivable.
5. Idle facilities or personnel.
6. Disorganized operations (ex. work flow bottlenecks, excessive paperwork)
7. Excessive costs.
8. Evidence of waste and inefficiency (ex. scrap, rework)
It must be noted that behind every symptoms is a problem waiting to be solved.

MANAGING PRODUCTION AND SERVICE OPERATION

Operation- refers to any process that accepts inputs and uses resources to change those inputs in
useful ways.

The Production Process

INPUT TRANSFORMATION PROCESS OUTPUTS

Land Equipment Products


Labor Procedures Services
Capital
Entrepreneurship
Technology

Examples of final goods and services are as follows:

1. Industrial chemicals like methylene chlorides, borax powder, phosphoric acid, etc., which
are produced by chemical manufacturing firms.
2. Services like those for the construction of ports, high-rise buildings, roads, bridges, etc.,
which are produced by construction firms.
3. Electrical products like transformers, circuit breakers, switch gears, power capacitors,
etc., which are produced by electrical manufacturing firms.
4. Electronic products like oscilloscope, microwave tests systems, transistors, cable testers,
etc., which are produced by electronics manufacturing firms.
 5. Mechanical devices like forklifts, trucks, loaders, etc., which are produced by
manufacturing firms.
6. Engineering consultancy services like those for construction management and
supervision, project management services, etc., which are produced by engineering
consultancy firms.

OPERATION MANAGEMENT

 Operation is an activity that needs to be managed by competent persons.

 “the process of planning, organizing, and controlling operation to reach objectives
efficiently and effectively” - Aldag and Stearns
 Operation Management must be performed in coordination with the other functions like
those for marketing and finance.
 Organization Chart of a Manufacturing Firm

TOP MANAGEMENT

PRODUCTION/OPERATION FINANCE/ACCOUNTING MARKETING

Facilities Disbursements/credits Sales production
Construction Accounts receivable Advertising
Maintenance Accounts payable/ Sales
Production and inventory control General ledger Market
Scheduling Funds management
Material control Money Market
Quality assurance and control International exchange
Procurement Capital requirements
Manufacturing Stock ISSUE
Tooling Bond issue and recall
Fabrication
Assembly
Engineering/design
Product development and
design
Detailed product
specifications
Industrial engineering
Efficient use of machines,
space
and personnel
Process Engineering
Development and installation
of production tools, equipment and
processes
Organization Chart of a Construction Firm

PRESIDENT

Vice President Vice President for Vice President

for Finance & for
Operation Administration Marketing

Manager,
Accounting Sales
General
Construction

Manager,
Construction Cashier Advertising
Equipment

Manager,
Human
Steel
Resources
Construction
OPERATIONS AND THE ENGINEER MANAGER
 The engineer manager is expected to produce some output at whatever management level
he is.
 The engineer in charge of operations in a construction firm is responsible for the actual
construction of whatever bridge or road his company has agreed to put up. He is required
to do it using the least-expensive and the easiest methods.
 The engineer as operations manager must find ways to contribute to the production of
quality goods or services and the reduction of costs in his department.
 The typical operations manager is one with several years of experience in the operations
division and possesses an academic background in engineering.

TYPES OF TRANSFORMATION PROCESS

1. Manufacturing processes
a. job shop
b. batch flow
c. worker-paced line flow
d. machine-paced line flow
e. batch/continuous flow hybrid
f. continuous flow

2. Service processes
a. service processes
b. service shop
c. mass service
d. professional service

MANUFACTURING PROCESSES
 Manufacturing processes are those that refer to the making of products by hand or with
machinery.

Job Shop
 Based on sales order for a variety of small lots.
 Produce custom products, in general.
 The type of layout used to Job shops is the process layout where similar machines are
grouped together.
 The typical size of operation is generally small.
 Job shops are labor in intensive and machine is frequently idle.
 Inspection
Preparation
and  Lathe Work  Milling  Grinding  and
Shipping
Grouping of
Materials

Batch Flow
The batch flow process is where lots of generally own designed products are manufactured.

It is further characterized by the following:

1. There is flexibility to produce either low or high volumes.
2. Not all producers are performed on all products.
3. The type of equipment used are mostly for general purpose.
4. The process layout is used.
5. The operation is labor intensive. Although there is less machine idleness.
6. The size of operation is generally medium size.

Worker Paced Assembly Line

It refers to a production lay out where they are arrange in sequence to accommodate
processing large products or services. The quantity and quality of the output is depends to a great
extent to the skill of the labor utilized.

It is characterized by the following:

1. Products are mostly standardized.
2. Clean process pattern.
3. Specialized equipment is used.
4. The sized of operation is variable.
5. The process is worker paced.
6. Type of lay out used is line flow.
7. Labor is still a big cost item.
8.
Machine Paced Assembly Line
A production process produces mostly standard products with machines playing significant
role.

1. Process is clear and rigid pattern.

2. Specialized type of equipment is used.
3. The line flow lay out is used.
4. Capital equipment is bigger cost item.
5. Operation is large.
6. The process is machine paced.
Continuous Flow
A process where characterized by rapid rate at which item move through the system. It is
very appropriate for producing highly standardized products.

1. The economy of scale in production, resulting to low per unit cost of production.
2. The process is clear and very rigid.
3. Specialized equipment is used.
4. The line flow lay flow used.
5. Operations are highly capital intensive.
6. The sized of operation is very large.
7. Processing is fast.

Service Process
Service process are those that refer to the provision of services to person by hand or
machinery.

Service Factory
A service factory offers a limited mix of services which results to some economies of
scale in operations. This also affords the company to compete in terms of price and speed of
producing the service.

McDonalds and Shakely’s are example of service factor. The service factory is the rigid
pattern of line flow processing.

Service Shop
A service shop provides a diverse mix of services. The layout use dare those for job
shops or fixed position and adaptable of service factories.

Among the services provided by these shops are car engine tune up, wheel balancing,
wheel alignment, change oil, etc.

Mass Service
A mass service company provides services to a large number of people simultaneously. A
unique processing method. Therefore, necessary to satisfy this requirement. To be able to serve
many people, mass service companies offer limited mix of services.

Professional Services
These are companies that provide specialized services to other firms or individuals.
Examples of such firms are as follows.

1. Engineering or management consulting services

2. Design services
3. Advertising agencies
4. Accounting Services
5. Legal Services
6. Data Processing Services
 7. Health Services

The nature of these categorized organizations creates management more challenging that
unlike any other types of organizations, these professional services firms sell knowledge and
expertise. It focuses more on their skills in their learned profession on how they should develop a
strategic process to attract and keep the best out of their career.

IMPORTANT PARTS OF PRODUCTIVE SYSTEMS

Productive systems consists of six important activities as follows:

1. Product Design
Companies wanting to maintain or improve its market share keeps a product design
team composed of engineers, manufacturing, and marketing specialists. Because a good
product design ensures quality, appearance, performance, ease of use, and reliability.
2. Production Planning and Scheduling
Efficiency and effectiveness of this two as a very important initial stage, assures the
optimization of utilizing human and nonhuman resources.
3. Purchasing and Materials Management
The management of purchasing and materials must be undertaken with a high degree
of efficiency and effectiveness through integration of all material acquisition, movement, and
storage activities especially in firms engaged in high volume production.
4. Inventory Control
It is the process of establishing and maintaining appropriate levels of reserve stocks
of goods.
Risks can be encounter if there is too much or too little of reserve stocks of goods.
Taking control for both of this cases is necessary to prevent loss of income opportunities due
to mishandling of resources.
There are ways of achieving proper inventory control. They are as follows:
1. Determining reorder point and reorder quantity.
2. Determining economic order quantity.
3. The use of just-in-time (JIT) method of inventory control.
4. The use of the material requirement planning (MRP) method of planning and
controlling inventories.
5. Work-Flow Layout
Is the process of determining the physical arrangement of the production system.
6. Quality Control
Refers to the measurement of products or services against standards set by the
company. It is essential to maintain or improve the quality of products or services as it carries
the company's reliability.