InIndustrial Management
&
Engineering Economy
Dr.Srikanth.K
College Of Engineering & Technology
Department of Mechanical Engineering
Mizan – Tepi University
Out line of presentation
Chapter-I
Basic Management Concepts and Industrial Organization:
 Introduction to management;
 Functions of management;
 Organizational structure;
 Basics of productivity.
Management- Definition
1
Management is the process of achieving
goals and objectives effectively and efficiently
through and with the people.
2
"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- Definition
3
Management is the process of achieving
organizational goals and objectives
effectively and
efficiently
by
using
management functions i.e. Planning –
Organizing – Staffing – Controlling
4
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.
Elements of definition
Process - represents ongoing functions
or primary activities engaged in by
managers
Efficiency - getting the most output
from the least amount of inputs. “doing
things right” • concerned with means •
Achieving the objectives in time.
Effectiveness - completing activities so
that organizational goals are attained •
“doing the right things” • concerned
with ends • Achieving the objectives on
time.
Efficiency and Effectiveness in Management
Management: Science or Art?
Management Science:
Science is a collection of systematic knowledge, collection of truths and
inferences (Logical thinking) after continuous study and experiments. It has
fundamental principles discovered.
Management Art :
Art uses the known rules and principles and uses the skill, expertise,
wisdom, experience to achieve the desired result.
Management Science & Art :
Management is both art and science. Management has got two faces like a
coin; on one side it is art and on the other it is science. Management has
got scientific principles which constitute the elements of Science and Skills
and talent which are attributes of Art.
Fayol’s Principles of Management
Henri Fayol (1841-1925)

He has proposed that there are 6 primary
functions
of
1.Forecasting,2.Planning,
management
3.Organizing,
4.Commanding, 5.Coordinating, 6.controlling
and 14 principles of management, There are 14
Principles of Management described by Henri
Fayol.
Important of management
(Fayol’s 6 Functions of Management)
Process designed to achieve an organization’s objectives
by using its resources effectively & efficiently in a
changing environment
Make decisions – utilization of resources – achieve
objectives:
• Forecasting
• Planning
• Organizing
• Staffing
• Directing
• Controlling
New Product Development
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.
 Henry Fayol, the father of principles of management described various
functions of management as :
1.
2.
3.
4.
5.
Forecasting and planning
Organizing
Staffing
Controlling and
Coordinating.
Planning
Planning is the process of establishing goals and suitable courese of
action for achieving those goals.
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.
Steps in Planning
Following steps are taken by the planning manager for the purpous of
planning.
1. Recognition of the need for planning
2. Establishing objectives
3. Building the premises for planning
4. Identifying alternative course of action
5. Selecting a best course of action
Advantages of Planning
1. Planning gives direction
2. Planning helps of at least changes and uncertainty
3. Planning helps in economic operation
4. Planning focuses attention of important activities
5. Planning helps in controlling
6. Planning helps in growth
Types of Planning
Plan
Standing
or
Repeated use planes
Single –use plane
Kinds of Enterprise
plane
Time plans
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 or required activities
2.
Grouping of activities necessary to attain objectives
3.
Assignment of each group to a manager
Guidelines for Good organisation
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 Organisation
1.
Line or scalar organisation 2. Functional organisation 3. Line and staff
organisation
Staffing
Staffing, now-a-days, also termed as human resources management is
defined as filling and keeping filled positions in the organisation
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.
Techniques of management control
1. Budget and budgetary control
2. Cost control and cost accounting
3. Inventory control
4. Quality control
5. Production control
6. Network techniques
Coordinating
Objectives of coordination:
Following objectives are sough through coordination's:
i) Reconciliation of goals
ii) Economy and efficiency
iii) Good personal relations
iv) Helps in keeping high moral of employees
Techniques of effective coordination
1. Clearly defined goals 2. Clear lines of authority and responsibility
3. cooperation
4. Effective leadership and supervision
The following are the key of functions of management
Selection of injection machine
Functions of management
(Fayol’s 6 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.
Henry Fayol, the father of principles of management
described various functions of management as :
1.Forecasting: The first function is to analyze the present and
past information to predict the future and plan accordingly.
2.Planning: The top management plans a suitable course of
action, based on the business forecast.
Cont...
3.Organizing: The management next needs to systematically arrange the resources, i.e.,
raw material, capital and human resource as per the planning.
4.Staffing: Staffing, now-a-days, also termed as human resources management is defined
as filling and keeping filled positions in the organisation structure.
Staffing function involves recruiting selecting, placing, promoting, appraising, carrier
planning, training etc.
5.Coordinating: In this function, the management should ensure proper synchronization
among all the departments. For this purpose, weekly meetings can be held with the
managers of all the departments.
6.Controlling: The managers need to evaluate the performance of the personnel by
establishing the standards, comparing the actual performance with the desired one and
implement the corrective measures accordingly.
14 Principles of Henri Fayol in management
1. Division of Labor
2. Authority & Responsibility
3. Unity of Command
4. Unity of Direction
5. Equity
6. Order
7. Discipline
8. Initiative
9. Remuneration
10. Stability of Tenure
11. Scalar Chain
12. Sub-ordination of Individual Interest to common goal
13. Espirit De’ Corps
14. Centralization
14 Principles of Henri Fayol in management
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
Authority refers to the right of superiors to get exactness
(Accuracy) from their sub-ordinates. Responsibility means
obligation (Duty) 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
14 Principles of Henri Fayol
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 of things and people. Arrangement of
things is called material order and placement of
people is called social order.
14 Principles of Henri Fayol
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 orders.
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. It should accord satisfaction to both
employer and the employees
14 Principles of Henri Fayol
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
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 of the undertaking should prevail
(Hold) in all circumstances. The interests of any one employee
or group of employees should not take precedence (Priority)
over the interests of the organization as a whole.
14 Principles of Henri Fayol
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.
The task is to find the optimum degree of
centralization for each situation.
Levels of management
1. Top Level:
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
Levels of management
Why Study Management?
Universality of Management
– The reality that management is needed
• in all types and sizes of organizations
• at all organizational levels
• in all organizational areas
• in all organizations, regardless of location
Universal Need for Management
Important of management
A scientific management is most essential as it fulfills
the following necessities:
It maintains discipline by keeping proper control
It distributes the work and machine among the
workers to get maximum output
It keeps co-ordinations among the staff
It improves efficiencies
It suggests new idea and improvements
It develops means of marketing and publicity
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
Manager
A
manager
is
someone
whose
primary
responsibility is to carry out the management
process within an organization to achieve the
organizational goals.
 Changing nature of organizations and work has
blurred the clear lines of distinction between
managers and non-managerial employees
Managerial skills
Managerial Primary skills
Conceptual skills (Top Management):
 This refers to the ability to think and conceptualize
abstract situations. These abilities are required for
making complex decisions.
In short it is:
 The mental capacity to develop plans, strategies and
vision Changing nature of organizations and work has
blurred the clear lines of distinction between managers
and non-managerial employees
Managerial Primary skills
Human or interpersonal skills (Middle Management):
This includes the ability to understand other people
and interact effectively with them. The human skills
are also important in creation of an environment in
which people feel secure and free to express their
opinions.
In short it is:
The ability to work with other people in teams
Managerial Primary skills
Technical skills (Low Management):
• These skills include the knowledge, abilities of and
proficiency
in
activities
involving
methods,
processes and procedures in the relevant fields as
accounting, engineering, manufacturing etc.
Or in short:
• The ability to use the knowledge or techniques of a
particular discipline to attain ends
Managerial Secondary skills
Design skills:
• These skills enable a manager to handle and solve
any kind of unforeseen or actual problems, that
may crop up in the organization. Such problems
could arise due to internal factors or external
factors and/or both.
In short it is:
• The problem solving skill
Managerial Secondary skills
Communication skills:
• The abilities of exchanging ideas and
information effectively. To understand others
and let others understand comprehensively.
Leadership skills
• The abilities to influence other people to
achieve the common goal.
Managerial Secondary skills
Leadership Skills
The abilities or strengths
shown
by
people
in
management roles that aid in
guiding and encouraging a
group of people and their
team toward achieving a
common goal or set of goals.
Roles of manager
Roles of manager
A: Inter-personal Role
Figurehead:
Represents the company on social occasions. Attending the flag hosting
ceremony, receiving visitors or taking visitors for dinner etc.
Leader:
In the role of a leader, the manager motivates, encourages, and builds
enthusiasm among the employees. Training subordinates to work under
pressure, forms part of the responsibilities of a manager.
Liaison:
Consists of relating to others outside the group or organization. Serves
as a link between people, groups or organization. The negotiation of prices
with the suppliers regarding raw materials is an example for the role of
liaison.
Roles of manager
B: Decisional Role:
1. Entrepreneur:
Act as an initiator and designer and encourage changes and innovation,
identify new ideas, delegate idea and responsibility to others.
2. Disturbance handler:
Take corrective action during disputes or crises; resolves conflicts among
subordinates; adapt to environmental crisis.
3. Resource allocator:
Decides distribution of resources among various individuals and groups in the
organization.
Roles of manager
Informational role:
1. Monitor:
Emerges as nerve center of internal and external information about
Information.
2. Disseminator:
Transmits information received from other employees to members
of the organization.
3. Spokesperson:
Transmits information to the people who are external to the organization,
i.e., government, media etc. For instance, a manager addresses a press
conference announcing a new product launch or other major deal
Organizational structure
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
management
have
structure
a
that
determines the relationships b/w
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 & dept.
 Assigns tasks and responsibilities associated with individual jobs.
 Coordinates diverse organizational tasks.
 Establishes relationship b/w individuals, groups and departments.
 Establishes formal lines of authority.
 Allocates organizational resources.
Clusters jobs into units.
IMPORTANCE OF ORGANIZATIONAL STRUCTURE
 It enables members to know what their responsibilities
 It frees the manager and the individual workers to concentrate on their
respective roles and responsibilities
 It coordinates all organization activities so there is minimal duplication of
effort or conflict.
 Avoids overlapping of function because it pinpoints responsibilities.
 Shows to whom and for whom they are responsible
ORGANIZATIONAL RELATIONSHIP
ORGANIZATIONAL RELATIONSHIP
FORMAL STRUCTURE
INFORMAL STRUCTURE
FORMAL STRUCTURE

Formal structure, through departmentalization and work division,
provides a framework for defining managerial authority, responsibility and
accountability.
FORMAL STRUCTURE
INFORMAL RELATIONS

Informal structure is generally
social, with blurred or shifting lines of
authority and accountability.

It also has its own channels of
communication, which may distribute
information more broadly and rapidly
than
the
system.
formal
communication
Informal Structure
Types of Organizational Structure
Organizational Structure
Tall
Flat
Or
or
Centralized Organizational
Decentralized Organizational
Structure.
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:
1.
DISADVANTAGES:
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.
Superior - Subordinate relations will improve.
3. Decisions and actions are delayed.
4. It is very costly because there are many managers. The
4.
Control and Supervision will become easy and
convenient.
5.
5.
The manager gets more time to plan and organize the
future activities.
The efforts of subordinates can be easily coordinated.
7.
Tall Organisation encourages development of staff.
There
is
subordinates
mutual
It is difficult to coordinate the activities of different
levels.
6. There is strict supervision. So the subordinates do not
6.
8.
managers are paid high salaries.
trust
between
superior
have any freedom.
7. Tall Organization is not suitable for routine and
standardized jobs.
and
8.
Here, managers may became more dominating.
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
only few managers.
many 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
because
it
has
only
a
few
levels
of
management.
4.
Fast and clear communication is possible
among these few levels of management.
5. Subordinates are free from close and strict
supervision and control.
6. It is more suitable for routine and standardized
activities.
7. Superiors may not be too dominating because
of large numbers of subordinates.
control.
3. The relations between the superiors and subordinates may
be bad. Close and informal relations may not be possible.
4. There may be problems of team work because there are
many subordinates under one manager.
5. Flat organization structure may create problems of
coordination between various subordinates.
6. Efficient and experienced superiors are required to
manage a large number of subordinates.
7. It may not be suitable for complex activities.
8. The quality of performance may be bad
5.Introduction To Productivity
Productivity has now become an everyday watchword. It is crucial to the
welfarae of the industrial firm as well as for the economic progress of the
country. High productivity refers to doing the work in a shortest possible time
with least expenµiture on inputs without sacrificing quality and with
minimum wastage of resources.
CONCEPT
Productivity is the quantitative relation between what we produce and what
we use as a resource to produce them, i.e. arithmetic ratio of amount produced
(output) to the amount of resources (input). Productivity can be expressed as:
Productivity = Out Put/Input.
DEFINITIONOF PRODUCTIVITY
Productivity is a function of providing more and more of everything
to more and more people with less and less consumption of
resources.
PRODUCTION AND PRODUCTIVITY
Production is defined as a
process or procedure to
transform a set of input into
output having the desired
utility and quality. Production
is a value addition process.
Production
system is an
organised
process
of
conversion of raw materials
into useful finished products
represented as in Fig.
Production system
Cont...
The concept of production and productivity are totally different
production refers to absolute output whereas productivity is a
relative term where in the output is always expressed in terms of
inputs. Increase in production may or may not be an indicator of
increase in productivity. If the production is increased for the same
output, then there is an increase in productivity.
Productivity can be Increased
1. When production is increased without increase in inputs.
2. The same production with decrease in inputs.
3. The rate of increase in output is more compared to rate of increase
in input.
Productivity Benefits
Increase in income/profitability.
Lowering running cost/operational costs.
 Maximising the use of all of the company’s resources such as land,
equipments/machineries, factory, workers, and etc.
 Gaining a greater share of the market.
 More cash flows mean more opportunity for the company to expand and
grow.
1. A company produces 160 kg of plastic moulded parts of acceptable quality by consuming
200 kg of raw materials for a particular period. For the next period, the output is doubled
(320 kg) by consuming 420 kg of raw material and for the third period, the output is
increased to 400 kg by consuming 400 kg of raw material.
During the first year, production is 160 kg.
Comments: From the above illustration, it is clear that, for second period, though production
has doubled, productivity has decreased from 80% to 76%, for third, period production is
increased by 150% and correspondingly productivity increased from 80% to 100%.
Thus, Increase in production may or may not increase Productivity.
RODUCTIVITY IMPROVEMENT TECHNIQUES
The basic productivity improvement techniques are represented in the Fig.
Productivity improvement techniques
1.Technology Based
1.Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and Computer Integrated
Manufacturing System (CIMS).
2. Robotics
3. Laser technology
4. Modern maintenance techniques
5. Energy technology
6. Flexible manufacturing system (FMS)
2.Employee Based
1. Financial and non-financial incentives at individual and group level
2. Employee promotion.
3. Job design, job enlargement, job enrichment and job rotation
4. Worker participation in decision-making
5. Quality circles (QC), Small Group Activities (SGA)
6. Personal Development
3.Material Based
1. Material planning and control
2. Purchasing logistics
3. Material storage and retrieval
4. Source selection and procurement of quality material
5. Waste elimination
6. Material recycling and reuse
4.Process Based
1. Methods engineering and work simplification
2. Job design, job evaluation, job safety
3. Human factors engineering
5.Product Based
1. Value analysis and value engineering
2. Product diversification
3. Standardisation and simplification
4. Reliability engineering
5. Product mix and promotion
6.Management Based
1. Management style
2. Communication in the organisation
3. Work culture
4. Motivation
5. Promoting group activity