Certification Study Group
Operations Management
Operations Management (OM)

Refers to the development and
administration of the activities involved
in transforming resources into goods
and services.
Key OM Terms

Manufacturing


The activities and processes used in
making tangible products; also called
production
Operations

The activities and processes used in
making both tangible and intangible
products
The Transformation Process

The process through which inputs are
converted into outputs.


Inputs are resources such as labor, money,
materials, and energy.
Outputs are goods, services, and ideas that
result from the conversion of inputs
Transformation Process
Inputs
land
labor
capital
raw
materials
time
information
energy
Customer
Transformation
or Conversion
procedures
equipment
facilities
technology
knowledge
Outputs
goods
services
ideas
Conversion Process
Control
standards
This process creates utility.
(Feedback)
Operations Management in
Service Businesses

Service providers use human and
mechanical processes to provide
products that are intangible
Service Businesses: Labor
Requirements


Service providers are generally more
labor intensive.
A manufacturer is likely to be more
capital intensive.
Planning and Designing
Operations Systems

Operations planning

Before a company can make a product, it
must decide what it will produce for what
group of customers, what processes it will
use to make the products, and what
facilities it needs for production.
Steps in Planning and Designing
Operations Systems
1.
Planning the product
2.
Designing the operations process
a. Standardization
b. Modular design
c. Customization
3.
4.
Planning capacity
Planning facilities
a. Facility location
Steps in Planning and Designing
Operations Systems
4.
Planning facilities
b.
Facility layout
1. Fixed position layout
2. Process layout
3. Product layout
c.
Technology
1. Cad
2. Cam
3. Flexible manufacturing
4. CIM
Choosing The Best Location
Factors
Transportation
Human Resources
Physical Factors
Technology and the
Production Process





Robots
Computer aided design
Computer aided manufacturing
Flexible manufacturing system
Computer integrated manufacturing
Logistics
Purchasing Management
Inventory Control Management
Routing and Scheduling
Distribution Management
©The McGraw-Hill Companies, 2000
The Objectives of Purchasing
1.
2.
3.
4.
5.
Buying the right items
Obtaining desired quality
Buying the right quantity
Paying the lowest price
Obtaining inventory at the right time
Logistics and Purchasing


Make, buy, or lease decision – this is
the decision of choosing whether to
manufacture a needed product in
house, purchase it from a supplier, or to
lease it
If the decision is made to purchase a
component it is important to maintain
more than one source of supply
Types of Inventory
raw
materials
work in
process
finished
goods
transformation process
©The McGraw-Hill Companies, 2000
Inventory Control






Inventory control
Perpetual inventory
Vendor managed inventory
Material-requirements planning (MRP)
Economic order quantity (EOQ) model
JIT
Managing Inventory

Just-in-time (JIT) inventory
management – eliminates waste by
using smaller quantities of materials
that arrive “just in time” for use in the
transformation process
Routing and Scheduling


Routing is the sequence of operations
through which the product must pass.
Scheduling is the process of assigning
work to be done to departments or
even specific machines or persons.
Routing and Scheduling – PERT


Program Evaluation and Review Technique
(PERT) – a popular scheduling technique is
that evaluates the sequence of activities
required to complete a project to find the
most efficient, or critical, path.
The path that requires the longest time from
start to completion is called the critical path
because it determines the minimum amount
of time in which the process can be
completed.
A Hypothetical PERT Diagram
for a McDonald’s Big Mac
9-13
Start
Remove buns,
2 beef patties,
cheese,
sauce,
1
lettuce,
onions,
pickle
(20)
Grill beef
patties
(120)
2
4
3
Apply
sauce
to bun
(10)
Critical path
6
5
Place
cooked
patties
on bun
(5)
Activity
Top
with
cheese
and
vegetables
(15)
7
Place
Big Mac in
package
(5)
5
Event
8
Place
package
in heated
bin
(5)
E
n
d
Serve to
customer
(5)
(185) Time to complete
event (seconds)
©The McGraw-Hill Companies, 2000
Importance of Quality


Quality control - involves measuring
goods and services against established
quality standards
Starts with senior management, but
everyone must be involved
TQM

Total quality management (TQM) is the
organizational philosophy that quality
control should be incorporated
throughout the transformation process
Handling Quality Issues

Statistical process control – management
collects and analyzes information about the
production process to pinpoint quality
problems.
Establishing Standards

A company must determine what
standard of quality it desires and then
assess whether its products meet that
standard
Strategic Importance of the
Production Function



The productions and operations manager is
responsible for coordinating the creation of a
good and service which creates profits for the
company
Profits are needed to survive
Effective management can lower the cost of
production, boost quality, and allow the firm
to respond to customer demands
Certification Study Group
Organizational Leadership
The Nature of Leadership

The Meaning of Leadership

Process: what leaders actually do.




Use noncoercive influence to shape the
group’s or organization’s goals.
Motivate others’ behavior toward goals.
Help to define organizational culture.
Property: who leaders are.

The set of characteristics
attributed to individuals
perceived to be leaders.
The Nature of Leadership

The Meaning of
Leadership

Leaders


People who can
influence the
behaviors of others
without having to rely
on force.
People who are
accepted
as leaders by others.
Leadership Versus Management



Leadership and management are related, but
different.
For example, the management side of
executing plans focuses on monitoring
results, comparing them with goals, and
correcting deviations.
In contrast, the leadership side of the same
activity focuses on energizing people to
overcome bureaucratic hurdles to help reach
goals.
Distinctions Between
Management and Leadership
Leadership
Activity
Management
Establishing direction and
vision for the organization
Creating an agenda
Planning and budgeting,
allocating resources
Aligning people through
communications and actions
that provide direction
Developing a human network
for achieving the agenda
Organizing and staffing,
structuring and monitoring
implementation
Motivating and inspiring by
satisfying needs
Executing plans
Controlling and problem
solving
Produces useful change and
new approaches to challenges
Outcomes
Produces predictability and
order and attains results
Source: Adapted from A Force for Change: How Leadership Differs from
Management by John P. Kotter. Copyright © 1990 by John P. Kotter, Inc.
Reprinted with permission of The Free Press, a division of Simon & Schuster Inc.
Types of Power in
Organizations
Power is the ability to
affect the behavior of
others.
Source: Van Fleet, David D., and Tim Peterson, Contemporary Management, Third Edition. Copyright © 1994 by Houghton Mifflin Company. Used with permission.
Forms of Power
 Legitimate power is granted through the




organizational hierarchy.
Reward power is to give or withhold rewards.
Coercive power is the capability to force
compliance by means of psychological,
emotional, or physical threat.
Referent power is based on identification,
imitation, loyalty, or charisma.
Expert power is derived from information or
expertise.
Leadership Schools
 Trait Model
 Behavioral Models
 Michigan Studies (Likert)
 Ohio State Studies
 Leadership Grid
 Situational (Contingency) Models
 Leadership Continuum (Tannenbaum & Schmidt)
 Least Preferred Coworker Theory (Fiedler)
 Path Goal Model (Evans & House)
 Vroom-Yetton-Jago Model
Trait Approach
Assumed that a basic set of personal traits
that differentiated leaders from nonleaders
could be used to identify leaders and predict
who would become leaders.
 The list had as many exceptions as items and
soon became too long to be useful.
 The trait approach was unsuccessful in
establishing empirical relationships between
traits and persons regarded as leaders.
 Despite weaknesses, leaders today are often
chosen on various traits.

Traits
 intelligence
 self confident
 supervisory ability
 risk taker
 initiative
 motivated
 drive
 hard working
 individuality
 self assurance
Leadership Behaviors

Michigan Studies (Rensis Likert)

Identified two forms of leader
behavior


Job-centered behavior —
managers who pay close attention
to subordinates’ work, explain work
procedures, and are keenly
interested in performance.
Employee-centered behavior —
managers who focus on the
development of cohesive work
groups and employee satisfaction.
Michigan Studies
A Behavioral Approach to Leadership

The two forms of leader behaviors were
considered to be at opposite ends of
the same continuum.
Employee-centered behavior
Job-centered behavior
Ohio State Studies
A Behavioral Approach to Leadership


Did not interpret leader behavior as being onedimensional as did the Michigan State studies.
Identified two basic leadership styles that can
be exhibited simultaneously:

Initiating-structure


Individual clearly defines leader-subordinate role, formalizes
communications, and sets the working agenda
Consideration

Shows concern for subordinates and attempts to establish
friendly and supportive climate.
Ohio State Studies

Initial assumption was that the most effective
leaders who exhibit high levels of both
behaviors. Subsequent research indicated that:
Employees of supervisors ranked high on initiating
structure were high performers, yet they expressed
low levels of satisfaction and higher absenteeism.
 Employees of supervisors ranked high on consideration
had low- performance ratings, yet they had high levels
of satisfaction and less absenteeism.
 Other situational variables make consistent leader
behavior predictions difficult. There is no universal or
“one best way” model of leadership.

Leadership
Grid®
High
9
1,9
Team Management
Work accomplishment is
from committed people;
interdependence through
a “common stake” in
organization purpose
leads to relationships
of trust and respect.
Country Club Management
8
Source: From Leadership Dilemmas—
Grid Solutions by Robert R. Blake and
Anne Adams McCanse. (Formerly the
Managerial Grid by Robert R. Blake and
Jane S. Mouton.) Houston: Gulf Publishing
Company, p. 29. Copyright © 1991 by
Scientific Methods, Inc. Reproduced by
permission of the owners.
Concern for people
7
The Leadership Grid® is
a method of evaluating
leadership styles. The
Grid® is used to train
managers so that they
are simultaneously more
concerned for people
and for production (9,9
style on the Grid®).
6
9,9
Thoughtful attention to the
needs of people for satisfying
relationships leads to a
comfortable, friendly
organization atmosphere
and work tempo.
5
Middle of the Road
Management
4
Adequate organization performance is
possible through balancing the necessity
to get out work with maintaining morale
of people at a satisfactory level.
5,5
Authority-Compliance
3
2
Impoverished Management
1
Exertion of minimum effort
to get required work done
is appropriate to sustain
organization membership.
1,1
Efficiency in operations
results from arranging
conditions of work in
such a way that
human elements
9,1
interfere to a
minimum degree.
0
Low
Low
1
2
3
4
5
6
Concern for production
7
8
9
High
Situational Approaches to
Leadership

Situational Models of Leader Behavior

Assume that:


Appropriate leader behavior
varies from one situation to
another.
Key situational factors that
are interacting to determine
appropriate leader behavior
can be identified.
Situational Approaches to
Leadership
 Situational Variables:




Personality of leader
Task to be accomplished
Expectations, needs, and attitudes of
followers
Environment where leadership takes
place
Employee Characteristics
L
E
A
D
E
R
S
H
I
P
S
T
Y
L
E
Experience
Ability
Personality
Group cohesiveness
Productivity
&
Employee
Satisfaction
Goal Clarity
Task Structure
Job Characteristics
Political Behavior in
Organizations

Political Behavior


The activities carried out for the specific purpose
of acquiring, developing, and using power and
other resources to obtain one’s preferred
outcomes.
Common Political Behaviors


Inducement—offering to give something to someone
else in return for that person’s support.
Persuasion—persuading others to support a goal on
grounds that are objective and logical as well as
subjective and personal.
Political Behavior in
Organizations

Political Behavior

Common Political Behaviors



Creation of an obligation—providing support
for another person’s position that obliges that
person to return the favor at a future date.
Coercion—using force to get one’s way.
Impression management—making a direct
and intentional effort to enhance one’s image in
the eyes of others.
Political Behavior in
Organizations

Managing Political Behavior



Be aware that even if actions are not politically
motivated, others may assume that they are.
Reduce the likelihood of subordinates engaging in
political behavior by providing them with
autonomy, responsibility, challenge, and feedback.
Avoid using power to avoid charges of political
motivation.
Political Behavior in
Organizations

Managing Political Behavior


Get disagreements and conflicts out in the open
so that subordinates have less opportunity to
engage in political behavior.
Avoid covert behaviors that give the impression of
political intent even if none exists.
A Model
of
Ethical
Political
Behavior
Source: Gerald F. Cavanaugh, Denis J.
Moberg, and Manuel Velasquez, “The
Ethics of Organizational Politics,”
Academy of Management Review, July
1981, p. 368. Used with permission.