Engineering

Management
 Engineering Management

Controlling
 Engineering Management

Why Control is Needed

GAP
Personal Organizational
Goals
Goals
CONTROL
SYSTEM

The purpose of control system is to align the

personal goals of the employees to the
organizational goals by closing the gap. Without
which, personal goal always dominates and
organizational goals will hardly be realized.
 Engineering Management

Improving
Making employee Ensures
efficient use motivation order and
of resources discipline

Judging of Importance Facilitates

accuracy of of coordination
standards Controlling in action
Helps in Helps in
achieving improving the
organizational Helps in performance
goals minimizing
the errors
 Engineering Management

Characteristics
a continuous process an end process
a management process compares actual
performance with
embedded in each level
planned performance
of organizational
hierarchy point out the error in the
execution process
forward looking
helps in minimizing cost
closely linked with
helps in achieving
planning
standard
a tool for saves the time
achieving
organizational
activities
 Engineering Management

Steps in Controlling
Establish the Performance
Objectives & Standards

Measure Actual
Performance

do
nothing
Does Actual
Performance
Match the Yes
Standards
No

Taking
Corrective
Action
 Engineering Management

1. Establishing the Performance

Objectives & Standards
Develop standards
Inform parties about the standards
Confirm understanding
Seek acceptance
 Engineering Management

Types of Standards
Managerial Standards
Includes policies, rules and reports
stating the who, what and why of
business
Examples:
1. Passing percentage of board passer
2. Frequency of preventive maintenance
3. Company rules and regulation
4. Office dress code
 Engineering Management

Types of Standards
Technical Standards
specify the what and how of the
business, applied to production methods
and processes, to materials, machinery
and equipment, safety equipment, parts
and supplies.
Examples:
1. Voltage and current ratings
2. Grade of chemicals
3. Light intensity for classrooms
 Engineering Management

2. Measuring Actual Performance

Implement and monitor
Evaluate
To ensure that when shortcomings occur,
adjustments could be made
 Engineering Management

3. Comparing Actual Performance

to Objectives & Standards
A comparison between the actual
performance and the organization’s
standards
 Engineering Management

4. Taking Corrective Action

The result of the comparison between actual
performance to objectives and standards
provides an opportunity to take corrective
action if necessary
 Engineering Management

Types of Control & Their Relationship to

Operations
Pre – Operations Feedforward Control
Phase

Actual
Operations Preventive Control
Phase

Post – Operation Feedback Control

Phase
 Engineering Management
Types and Examples of Control

Preventive Feed Forward

Feedback
Diagnostic Therapeutic
- determines - determines - used for
Aspect of -prevents
deviation but deviation but with future decision,
Control/ deviation
without correction instant correction correction, etc
Definition
•Code of Conduct •Unusual OT •Coaching •Performance
Personnel and •Labor laws •Infraction Appraisal
•Behavioral
Administrative •Professional such as •201 File
correction
Ethics tardiness •Technical exam
•Technical •Warning devices •Safety valve •Historical
Equipment standards and alarms • Engine performance
and •SOP •Instrument governor •Product
Processes •Locks or codes readouts •Auto shut off review
• Budget variance •Budget •Actual expense
•Budget vs. budget
report
Finance •Financial control
•Audit report
Policies •Audit report
 Engineering Management

Components of Organizational Control

Systems
Long Range Operating Budget
Strategic Plan Financial Plan -indicates the
-basic control --recommends a expenditures, revenues
mechanism for the direction for financial or profits planned for
organization activities. some future period
regarding operations
Performance Statistical
Policies & Procedures
Appraisals Reports
-measures employee -Policies refer to the
-pertain to those
performance. framework within which
that contain data
-provides employees the objectives must be
on various
with a guide on how pursued. Procedure is a
to do their jobs better developments on
plan that describes the
in the future. the firms
exact series of actions
-effective checks on
new policies and
to be taken in a given
programs situation.
 Engineering Management

Strategic Control Systems

 Engineering Management

Categories of Financial Ratio

Analysis
A. Liquidity Ratios

1. Current Ratio-shows the extent in which current assets

of the company can cover its current liabilities

Current ratio=current assets/current liabilities

2. Acid-test ratio-measure of the firm’s ability to pay off

short-term obligations with the use of current assets and
without relying on the sales of inventories

Acid-test ratio=current assets-inventories/current

liabilities
 Engineering Management

Categories of Financial Ratio

Analysis
B. Efficiency Ratios

1. Inventory Turnover Ratio-measures the number of

times an inventory is turned over each year.

Inventory turnover ratio=cost of goods sold/inventory

2. Fixed asset turnover-measure utilization of the

company’s investment in its fixed assets, such as its plant
and equipment

Fixed asset turnover=net sales/net fixed assets

 Engineering Management

Categories of Financial Ratio

Analysis
C. Financial Leverage Ratios

1. Debt to Total Assets Ratio-shows how much of the

firm’s assets are financed by debt.

Debt to total assets ratio=total debt/total assets

2. Times interest earned ratio-measures the number of

times that earnings before interest and taxes cover the
company’s interest expence

𝒑𝒓𝒐𝒇𝒊𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒕𝒂𝒙+𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒙𝒑𝒆𝒏𝒔𝒆

Times interest earned ratio=
𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒙𝒑𝒆𝒏𝒔𝒆
 Engineering Management

Categories of Financial Ratio

Analysis
D. Profitability Ratios

1. Profit Margin Ratio-compares the net profit to the level of sales.

Profit margin ratio=net profit/net sales

2. Return on assets ratio-shows how much income the company

produces for every peso invested in assets

Return on assets ratio=net income/assets

3. Return on Equity Ratio-measures the returns on the owner’s

investment.

Return on equity ratio=net income/equity

 Engineering Management

Identifying Control Problems

Executive Reality Check
Comprehensive Internal Audit
General Checklist of Symptoms of
Inadequate Control
 Engineering Management

Symptoms of Inadequate Control

unexplained decline in revenues & profits
degradation of service (customer complaints)
employee dissatisfaction (grievance, turnover,
complaints)
cash shortage caused by bloated inventories or delinquent
accounts receivable
idle facilities or personnel
disorganized operations (workflow
bottlenecks, excessive paperwork)
excessive costs
 Seatwork
Deadline 30/Apr/19 04:30 pm

1. Why is controlling a very important management function?

2. What is controlling? Is it applicable to the day-to-day
activities of the engineer manager?
3. Why is the establishment of performance objectives and
standards an important step in the control process?
4. Compare and contrast the three distinct types of control.
5. How do strategic plans provide a basis for control?
6. What are policies? In what ways do they facilitate control?
7. When the engineer manager reviews the financial
statements of the company under his supervision, what
benefits does he derive?
8. What are financial ratios? How may they be categorized?
9. What is measured in the debt to total assets ratio? How may
it be computed?
10.Do you consider “idle facilities or personnel” as a symptom
of inadequate control? Why or why not?