DIRE DAWA UNIVERSITY

SCHOOL OF ELECTRICAL & COMPUTER ENGINEERING

Industrial Management & Engineering

Economy (IEng 5382)

Lidiya Asfaw

BSc. in Industrial Engineering

 Outline of Presentation
Chapter 1: Management Concepts in
Industrial Organization
 Introduction to management;
 Functions of management;
 Organizational Structure;
 Basics of Productivity;
Efficiency and Effectiveness
 Introduction
 Management has been viewed by scholars
as:
 a process ,
 a displine,
 a human activity and a career
 Management is essential not only for
business concerns but also for banks,
schools, colleges, hospitals, hotels,
religious bodies etc.
 Management - Definition
 Peter F. Drucker defines, “management is
an organ; organs can be described and
defined only through their functions”.

 Terry, “management is not a people; it is

an activity like walking, reading,
swimming or running”.

 Henry Fayol, defined as “to manage is to

forecast and plan, to organize, to
compound, to coordinate, and to
control”.
 Management- Definition
 Management is the process of getting
things done , effectively and efficiently
through and with other people.

 “Management is a process of designing and

maintaining an environment in which
individuals work together in groups to
effectively and efficiently accomplish
selected aims”.

 Management is an art of getting work done

through others/people. (Koontz)
 Management - Definition
Management is the process of coordinating

all resources through the five major

functions of Planning, Organizing,
Staffing, directing/leading and Controlling
to achieving organazional goals.
Management is a set of activities directed at

an organization's resources with the aim of

achieving organizational goals in an
efficient and effective manner.
 Take a Minute!!!
•What is this little lad doing?
•Do you know where he is going?
•Can you see where he is going?
•Can you really see what the
consequences are going to be?
•Have you got the big picture in
mind?
•With anything that one does in
life you start with the end in
mind. You decide what you want
to achieve and then you decide
 CONT’D
CONT’D
manage the creative tension between current reality and
Future reality

Greatness
NOW Reality Vision FUTURE

Courage
 CONT’D
CONT’D
So That You and Your
Followers Can Reach your
Vision

Put Stepping Stones in

Place

Chart the Path

 WHY
WHY MANAGEMENT?
MANAGEMENT?
 The Industrial Revolution brought about the emergence of large-

scale business and its need for professional managers

 Management became more important as the developments and

complexities of technology and human relationships get more

challenging to those who perform managerial functions
 WHAT
WHAT MANAGEMENTS
MANAGEMENTS STRIVES
STRIVES FOR?
FOR?

'Management strives involving a group of people work

together in the most effective and efficient manner to

achieve stated goals in the best and most economical
way'.
 Management - Characteristics
Management is a distinct activity having the following salient
features:
1.Economic Resource:
 Like land, labor, machine and capital, management is also one
of the factors of production.
2.Goal Oriented:
 Management is a purposeful activity that coordinate the efforts
of workers to achieve the goals of the organization.
3.Distinct Process: consists of such functions as planning,
organizing, staffing, directing/leading and controlling.
4.Universal Application: it is universal in character meaning that,
its principles and techniques are equally applicable in the fields
of business, education, military, government and hospital.
5.Multidisciplinary subject:
 Functions of Management
For attainment of objectives, every organization has a
group of person for managing its affairs.
It is concerned with productivity, effectiveness and
efficiency by performing various managerial functions.
There is enough disagreement among management
writers on the classification of managerial functions.
Henry Fayol, the father of principles of management
described various functions of management as :
1. Forecasting and planning
2. Organizing
3. Staffing
4. Controlling and
5. Coordinating.
Planning
Planning is the process of establishing goals and
suitable course of action for achieving those goals.
It is deciding the present about the future
objectives and actions for achievement.
Planning involves setting the ‘right’ goals and then
choosing the ‘right’ means for attaining those goals
 Planning is necessary to ensure proper utilization of
resources (men, materials, machine, time, and money) to
achieve the objectives.
Planning is performed by the managers at all levels.
Focuses with ‘what’, ‘how’ and ‘when’ of
performance.
 Steps in Planning
Following steps are taken by the manager for the
purpose of planning.
 Recognition of the need for planning (Importance)
o Changes in technology, government policy, overall economic activity, in
the nature of competition and in social norms and attitudes.
 Establishing objectives
 Building the premises or principles for planning
(developing strategies to be followed)
 Identifying alternative course of action
 Selecting a best course of action
“Failing to plan means planning to fail”
“Well plan is half done”
 Organizing
Organising is providing everything essential for proper
functioning and combining the human power with other
resources to give desired output.
Organising involves the following:
1. Identification and classification of required activities
2. Grouping of activities in to jobs necessary to attain
objectives
3. Assignment of these jobs and activities to a
departments and individuals
4. Delegation of responsibility and authority for
performance and
5. Provision for vertical and horizontal coordination of
activities.
Guidelines for Good Organization
A good organizing should have the following:
i. Allotment of work
ii. Grant of necessary authority
iii. Distribution of work in different departments
iv. Coordination among different department
v. Able to avoid wastage of labour, money and
materials

Types of Organization:
1. Line or scalar organization
2. Functional organization
3. Line and staff organization
 Staffing
After objectives are set, policies formulated etc, the

next logical step is in the management process is to

recruit suitable personnel for manning the jobs.
Staffing, now-a-days, also termed as human resources

management is defined as filling and keeping filled

positions in the organization structure.
Staffing function involves recruiting, selecting,
placing, promoting, appraising, carrier planning,
training etc.
 Controlling
Controlling function of management can be defined as :

1. Controlling is a continuous process of measuring actual

results in relation to those planned
2. Controlling is a process which sets standards, measures job
performance, and takes corrective action, if required
3. Controlling, find out the deviation and take corrective
actions.
Generally, it is the process of ensuring that the divisional,

departmental, sectional and individual performances are

consistent with the predetermined objectives and goals.
 Coordinating
It is the function of establishing such relationship among various

parts of the organization that they all together pull in the

direction of organizational objectives.
It involves the following sub-functions:

 Clearly definition of authority – responsibility relationships

 Unity of Direction

 Unity of Command

 Effective Communication

 Effective Leadership
 Fayol’s Principles of Management
A body of principles of management has been
developed by Henry Fayol; the father of
modern management.
He has proposed that there are 6 primary
functions of management and 14 principles
of management, Forecasting & Planning,
Organizing, Staffing, Coordinating,
Controlling.
He held that there is a single administrative
science, whose principles can be used in
all management situation no matter whatHenri Fayol (1841-1925)
kind of organization was being managed.
 Henri Fayol - 14 Principles
1. Division of Labor:
 Work of all kinds must be divided &
subdivided and allotted to various
persons according to their expertise in a
particular area.
2. Authority & Responsibility are related:
 Authority refers to the right of superiors
to get exactness from their sub-
ordinates. Responsibility means
obligation for the performance of the job
assigned. Note that responsibility arises
wherever authority is exercised.
3. Unity of Command:
 A sub-ordinate should receive orders and
be accountable to one and only one boss
at a time. He should not receive
instructions from more than one person.
 Henri Fayol - 14 Principles
4. Unity of Direction:
People engaged in the same kind of
business or same kind of activities
must have the same objectives in a
single plan. Without unity of
direction, unity of action cannot
be achieved.
5. Equity:
Equity means combination of
fairness, kindness & justice. The
employees should be treated with
kindness & equity if devotion is
expected of them.
6. Order:
This principle is concerned with
proper & systematic arrangement
 Henri Fayol - 14 Principles
7. Discipline:
Discipline means sincerity, obedience,
respect of authority & observance of
rules and regulations of the enterprise.
Subordinate should respect their
superiors and obey their order.
8. Initiative:
Initiative means eagerness to initiate
actions without being asked to do so.
Management should provide opportunity
to its employees to suggest ideas,
experiences & new method of work.
9. Remuneration:
Remuneration to be paid to the workers
should be fair, reasonable,
satisfactory & rewarding of the efforts.
 Henri Fayol - 14 Principles
10. Stability of Tenure:
• Employees should not be moved frequently
from one job position to another i.e. the
period of service in a job should be fixed.
11. Scalar Chain of Command:
• Scalar chain is the chain of superiors
ranging from the ultimate authority to the
lowest. Communications should follow this
chain. However, if following the chain
creates delays, cross-communications can
be allowed if agreed to by all parties and
superiors are kept informed.
12. Sub-ordination of Individual Interest to
common goal:
• An organization is much bigger than the
individual it constitutes. Therefore interest
 Henri Fayol - 14 Principles
13. Espirit De’ Corps:
• It refers to team spirit i.e. harmony in
the work groups and mutual
understanding among the members.
• Espirit De’ Corps inspires workers to
work harder.
14. Centralization:
• Centralization refers to the degree to
which subordinates are involved in
decision making.
• Whether decision making is
centralized (to management) or
decentralized (to subordinates) is a
question of proper proportion.
Levels of Management
1. Top Level:
Levels of Management
Top management sets the mission and goals, develops policies,
evaluates the overall performance of various departments,
responsible for the business as a whole and is concerned mainly with
long-term planning.
2. Middle Level:
Middle level management develops departmental goals, executes
the policies, plans and strategies determined by top
management, develops medium- term plans and supervises and
coordinate lower-level managers’ activities.
3. Lower (Supervisory, frontline) Level:
Lower level management takes charge of day-to-day operations,
is involved in preparing detailed short-range plans, is
responsible for smaller segments of the business, executes plans of
middle management, guides staff in their own subsections and keep
close control over their activities.
Areas of Management

• Finance
• Production
• Operations
• Human Resources
• Marketing
• Administration
 Areas of Management
Financial Management –
Focus on obtaining money necessary
for the successful operations and using
funds to further organizational goals

Production & Operations

Management–
Develop & administer activities to
transform resources into goods,
services, and ideas for the
marketplace.
 Areas of Management
Human Resources Management
–
Handle staffing function and deal
with employees in a formalized
manner

Marketing Management –
Responsible for planning, pricing,
and promoting products and
making them available to
customers
 Organizational Structure

Organizational structure refers to the way in which a

group is formed, its lines of communication, and its

means for channeling authority and making

decisions.

It clarifies the formal relationships of individuals in the

various positions within the organization.

Why do we need an Organizational Structure

 All Organizations have a management structure that

determines the relationships between functions and

positions and subdivides and delegates roles,

responsibilities and authority to carry out defined

tasks.
Organizational Structure: Purpose
Divides work to be done in specific jobs & department.

Assigns tasks and responsibilities associated with individual

jobs.
Coordinates diverse organizational tasks.

Establishes relationship between individuals, groups and

departments.
Establishes formal lines of authority.

Allocates organizational resources.

Clusters jobs into units.

Types of Organizational Structure
 Centralized Organizational Structure
Large, complex organizations often require a

taller hierarchy.
In its simplest form, a tall structure results in

one long chain of command similar to the

military.
As an organization grows, the number of
management levels increases and the
structure grows taller.
In a tall structure, managers form many ranks

and each has a small area of control.

 Centralized Organizational
Structure
ADVANTAGES: DISADVANTAGES:
1. The quality of performance will improve due to close 1.Tall Organization creates many levels of management.
supervision. 2.There are many delays and distortion in communication.

2. Discipline will improve. 3.Decisions and actions are delayed.

4.It is very costly because there are many managers. The
3. Superior - Subordinate relations will improve.
managers are paid high salaries.
4. Control and Supervision will become easy and
5. It is difficult to coordinate the activities of different levels.
convenient.
6.There is strict supervision. So the subordinates do not
5. The manager gets more time to plan and organize the have any freedom.
future activities. 7.Tall Organization is not suitable for routine and
6. The efforts of subordinates can be easily coordinated. standardized jobs.

7. Tall Organisation encourages development of staff. 8. Here, managers may became more dominating.

8. There is mutual trust between superior and subordinates

 Decentralized Organizational
Structure.
Flat structures have fewer management
levels, with each level controlling a
broad area or group.

Flat organizations focus on empowering

employees rather than adhering to the
chain of command.

By encouraging autonomy and self-

direction, flat structures attempt to tap into
employees’ creative talents and to
solve problems by collaboration.
 Decentralized Organizational Structure
ADVANTAGES DISADVANTAGES
1.Flat Organization is less costly because it has 1.There are chances of loose control because there are many
only few managers. subordinates under one manager.
2.It creates fewer levels of management. 2.The discipline in the organization may be bad due to loose
3.Quick decisions and actions can be taken control.
because it has only a few levels of management. 3.The relations between the superiors and subordinates may
4. Fast and clear communication is possible among be bad. Close and informal relations may not be possible.
these few levels of management. 4.There may be problems of team work because there are
5.Subordinates are free from close and strict many subordinates under one manager.
supervision and control. 5.Flat organization structure may create problems of
6.It is more suitable for routine and standardized coordination between various subordinates.
activities. 6.Efficient and experienced superiors are required to manage
7.Superiors may not be too dominating because of a large number of subordinates.
large numbers of subordinates. 7.It may not be suitable for complex activities.
8.The quality of performance may be bad
 Productivity - Introduction
Productivity is the quantitative relation between what we

produce and what we use as a resources to produce them.

Productivity = Output/Input
Productivity refers to the efficiency of the production
systems.
Definition of Productivity:

 Productivity is the measures of how well the resources are

brought together in an organization and utilized for
accomplishing a set of objectives.
 Production and Productivity
Production system is an organized process of
conversion of raw materials into useful
finished products as shown in figure below.
Transformati
Input Output
on process

Men
Machine
Materials Goods and
Money services
Management
Energy
Production System
 Production and Productivity
The concept of production and productivity are
totally different:
Production refers to absolute output.

Productivity is a relative term where in the output

is always expressed in terms of inputs.

If the production is increased for the same input,

then there is an increase in productivity.

 Measurement of Productivity
Productivity can be measured, the amount of
output per unit of input.
In a factory, it might be measured based on the

number of hours it takes to produce a good.

While in service industry, might be measured

based on the income generated by an

employee divided by his/her salary.
 Productivity Measures
Productivity
Measures

Partial Total
Total Factor
Productivity Productivity
Productivity
Measures Measures
(TFP)
(PPM)
Advantages (TPM)
Advantages
i.Easy to understand and Advantages
•Easy and more accurate
calculate •Data are obtained
representation total
ii.A tool to pinpoint easily
picture of company
improvement •Value added approach
•Easily related to total
Limitations : Limitations :
cost
i. Misleading if used •No consideration of
Limitations :
alone materials and energy.
•Difficulties to obtaining
ii. No consideration of
the data
 Partial Productivity
The resources of productivity when measured

separately are called partial productivity.

“Apple to Apple” comparison.
 Total Productivity
The method of calculating productivity considering all
the resources is called total productivity.
It is systematic and qualitative approach to compete
in quality, price and time.
Total productivity provides systematic framework and
structure to an organization and increase profitability.
 Factors Influencing
Productivity

Controllable or Internal Non-controllable or

factors External factors
Product Structural
Plant and adjustment
equipment Natural
Technology resources
Materials Government
Human factors policy
Work methods
 Productivity Improvement
Techniques
Material
Technology Based
Based

Productivity
Product Employee
Based
Improvement Based
Techniques

Task Based
 Productivity Improvement
Techniques
Technology Based –
i) Computer Aided Design (CAD), Computer Aided
Manufacturing(CAM), and Computer Integrated Manufacturing
Systems(CIMS)

Employee Based –
i) Financial and non-financial incentives at individual and group
level.
ii) Employee promotion.
iii) Job design, job enlargement, job enrichment and job rotation.
iv) Workers participation in decision making.
v) Quality circles(QC), small Group Activities(SGA)
vi) Personal development
 Techniques
Material Based –
i) Material planning and control.
ii) Purchasing, logistics.
iii) Material storage and retrieval.
iv) Source selection and procurement of quality material.
v) Waste elimination.
vi) Material recycling and reuse.

Process Based –
i. Methods engineering and work simplification.
ii. Job design, job evaluation, job safety.
iii. Human factors engineering.
 Productivity Improvement
Techniques
Product Based –
i. Value analysis and value engineering.
ii. Product diversification.
iii. Standardization and simplification.
iv. Reliability engineering.
v. Product mix and promotion.
Management Based –
i. Management style.
ii. Communication in the organization
iii. Work culture
iv. Motivation
v. Promoting group activity.
 Contd..
Efficiency means whatever you produce or perform; it
should be done in a perfect way. (Doing things
right)

Although, Effectiveness has a broader approach,

which means the extent to which the actual results
have been achieved to fulfill the desired outcome
i.e. doing accurate things. (Doing the right things)

Consider a 10th standard student example…

END OF THE CHAPTER!