Select 4 questions based upon reading material (attached). Questions should not represent basic fact-based questions or definations presented in the reading but should represent higher order questions that allow deeper thought about Enginnering Management. ( NOTE: ONLY HAVE TO MAKE QUESTIONS WHICH WILL REQUIRE DEEP THINKING)
Leading Technical People
Leadership is the third of the four management functions. President Harry S. Truman defined lead- ership as “the ability to get men to do what they don’t want to do and like it.” Whether one agrees with this statement or not, it is certain that leadership is more than just directing others. Leadership is truly an art form that can be taught and learned. Just as in any other art form, there are multiple styles of leadership.
The first section on the nature of leadership examines the difference in managers and leaders. Next, the traditional trait theory and its application to the engineering manager is considered. Sev- eral related approaches emphasize two dimensions, one concerned with tasks and the other with people. These approaches include The Leadership Grid®, the Michigan and Ohio State studies, ser- vant leadership, and life-cycle theory.
Motivation is a key component of the leadership model. McGregor’s two contrasting viewpoints (Theories X and Y) on the nature of the individual who is to be motivated are considered. Then two approaches to understanding motivation are presented: content theories and process theories. The con- tent theories include Maslow’s hierarchy of needs, Herzberg’s two-factor theory, and McClelland’s acquired need theory. Process theories assume that behavior is determined by expected outcomes and include Adam’s equity theory, Vroom’s expectancy theory, and Skinner’s behavior modification.
Management Functions
Planning
Decision Making
Organizing
Leading
Controlling
LEADERSHIP
Leadership and Management. The words “leadership” and “management” are often used interchangeably, yet they describe two different concepts. Maccoby1 defines leadership as a relationship between the leader and the led and management as a function. The leader uses passion and emotion, while the manager uses a more formal, rational method. Managers are quite often experienced in their field and have worked their way up within the company; and a leader may be a new arrival to a company, with fresh ideas. Often companies do not distinguish between the two positions and as a result may place a manager into a leadership role.
Although there are many examples of good managers and leaders, Drucker presents the idea that there is no one right way to manage. Different groups in the work population must be managed differently at different times. Thus, management and leadership styles are constantly changing.2 Some of the leader and manager characteristics that Warren Bennis has listed are described in the following chart:3
Nature of Leadership
Leadership is the process of getting the cooperation of others in accomplishing a desired goal. Sir William Slim, commander of the British Army that defeated the Japanese in Burma in World-
Managers Leaders
Administer Innovate
Ask how and when Ask what and why
Focus on systems Focus on people
Do things right Do the right things
Maintain Develop
Short-term perspective Longer term perspective
Imitate Originate
Are a copy Are original
War II, defined leadership as that “mixture of persuasion, compulsion, and example that makes men do what you want them to do.” In a more subtle vein, Barney Frank said, “The great leader is the one who can show people that their self-interest is different from that which they perceived.”
People become leaders by appointment or through emergence. Formal, or “titular,” leaders are appointed branch manager or committee chair or team captain and have the advantage of formal authority (including the power to reward and punish), but this only gives them the opportunity to prove themselves effective at leadership. Although good leaders prefer to influence others through persuasion where possible, this author agrees with Robert Shannon that “it is much easier to be per- suaded by a person with power than by one without power.”4
Emergent, or informal, leaders evolve from their expertise or referent power as it is expressed in the process of group activity. Even as children we find certain individuals emerging as the ones whose suggestions for the games to play or the mischief to get into are followed, and throughout life we find that certain people “take the lead” and are accepted as informal leaders. When the emergent leader is then appointed or elected as formal leader, he or she has a double opportunity to be effec- tive. Recognizing this, many organizations conduct “assessment centers” to evaluate potential lead- ers, and these include group situations where no leader is appointed in order to see who emerges to lead the resolution of a jointly assigned problem.
Leadership Traits. Early researchers into the nature of leadership tried to identify the personal characteristics, or traits, that made for effective leaders. For example, Peterson and Plowman list the following 18 attributes as being desirable in a leader:
• Physical qualities of health, vitality, and endurance
• Personal attributes of personal magnetism, cooperativeness, enthusiasm, ability to inspire,
persuasiveness, forcefulness, and tact
• Character attributes of integrity, humanism, self-discipline, stability, and industry
• Intellectual qualities of mental capacity, ability to teach others, and a scientific approach to
problems
Harris had this list of 18 qualities and attributes evaluated by a group of 176 engineers, mostly electrical, mechanical, and aerospace engineers working for high-technology firms in the Dallas, TX, area. There were two phases to this research. In the first phase 130 engineers, divided into three different ranges of engineering experience, were asked to rate each of the 18 characteristics individ- ually as they perceived their necessity for effective leadership in the engineering environment.
The attribute considered most necessary by less experienced engineers was ability to inspire, whereas engineers with intermediate (6–15 years) experience most valued enthusiasm in a leader. The attribute in a leader that apparently becomes more highly valued with experience is integrity, rated in eighth place by young engineers, fourth place by those with intermediate experience, and first place by engineers with more than 15 years of experience. The attribute considered least necessary was health, followed (in seventeenth place) by forcefulness, then by humanism (empathy) and vitality.
In the second phase of the research, Harris asked an additional 46 engineers who repeated the evaluation above to rate their current engineering managers on the same scale. He then calculated the difference between the mean ranking of the perceived necessity for each quality or attribute with the mean rating of current engineering managers. He found that engineering managers most exceeded the perceived need in the following categories (identified by the t-score of the difference of means):
• 6.95 Health
• 4.12 Endurance
• 3.79 Scientific approach to problems
• 3.69 Vitality
• 3.67 Forcefulness
On the other hand, these engineering managers were least successful in meeting expectations in the following categories:
• -9.16 Ability to inspire
• -5.36Tact
• -4.82 Persuasiveness
• -4.17 Stability
• -2.88 Enthusiasm
Harris summarizes his research: “The results quite clearly show that engineers want and expect excellent leaders. The results also show that they are not getting what they want.” When Harris repeated this research with European engineers he got similar results, except that he found engi- neers in Europe were even less satisfied with their managers than were engineers in Texas.
Connolly7 discusses studies showing that neither appointed nor informal leaders need be much above the average intelligence of the group. He shows that the development and acceptance of emergent leaders are facilitated by social skills, by technical skills in the specific tasks facing the group, and by being at the hub of a communication net.
Controlling
PREVIEW
The fourth basic management function is controlling. Controlling is a process of measuring perfor- mance and taking action to ensure the desired results. Controlling is a critical function because it ensures that all the management functions of planning, organizing, and leading, as well as mechan- ical processes of an organization, perform as planned. This chapter begins by introducing the steps in the classical control process, three types of control, and the characteristics of effective control systems. Most of the chapter deals with financial controls since they are one of the items on a roadmap for economic success. Human resource controls such as management audits, human resource accounting, and social controls are discussed briefly. Finally, other nonfinancial controls that will be discussed in later chapters are mentioned.
THE PROCESS OF CONTROL
Steps in the Control Process
Perhaps the simplest definition of controlling, attributed to B. E. Goetz, is “compelling events to con- form to plans.” Another author1 states that “control techniques and actions are intended to insure, as far as possible, that the organization does what management wants it to do.” Control is a process that pervades not only management, but technology and our everyday lives. Effective control must begin in planning; planning and control are inseparable.
The steps in the control process are simple.
• The first step, establishing standards of performance, is an essential part of effective plan- ning. Standards should be measurable, verifiable, and tangible to the extent possible. Examples are:
• standard rate of production established by work measurement;
• budgeted cost of computer usage;
• targeted value for product reliability; or
• desired room temperature.
• The second step (and the start of the actual control process) is measurement of the actual level of performance achieved.
• The third step is comparison of the two, measurement of the variance (deviation between them), and communicating this deviation promptly to the entity responsible for control of this performance, so that they might identify what changed to cause the deviation to occur and identify potential corrective actions.
• The final step is taking corrective action as required to “compel events to conform to plans.” Mechanical Process Control
Closed-loop control, also known as automatic or cybernetic control, monitors and manages a process by means of a self-regulating system. The essential feature of cybernetic control is a strong feedback system. The common home thermostat provides a simple example of an automatic control process. A desired (standard) temperature is set by adjusting a lever or wheel on the thermostat. A mechanism such as a bimetallic strip or bellows converts the actual temperature surrounding the thermostat into physical movement. When the variance between desired and actual temperature exceeds some design maximum, sensor movement creates an electrical contact that communicates a signal to the correcting entity, in this case the control of a furnace or air conditioner, and the vari- ance is automatically corrected. A more complex application is the automatic control of a nuclear reactor, designed to shut down the reactor under conditions of power surges that could become cat- astrophic long before a human operator could react.
Open-loop, or noncybernetic, control requires an external monitoring system and/or an exter- nal agent to complete the control loop. Frequently, the automatic part of the control system provides a warning of a variance from planned values, but then human judgment is required to identify the reason for the variance and to determine corrective action. Even systems that are automated (cyber- netic) in the short run are ultimately open loop, because they permit an external agent to adjust the standard (or set point). Cruise control on an automobile, for example, operates automatically, but it may be turned off or set to a different speed by manual control.
In engineering management the last step in the control process, corrective action, usually requires human judgment. Consider the action required when a machining process fails to maintain a specified tolerance of ;0.01 centimeter about some specified (planned) dimension. The problem (and its resolution) might include any of the following:
• The machine used is too worn to maintain such a tolerance (and should be fixed or replaced).
• The operator is not skilled enough to achieve the desired result (and needs training).
• The tolerance specified is more than can be reasonably achieved in the material being
machined. (The designer should be asked to relax the specification or choose a more tolerant design or material.)
The choice among these solutions and others requires thought and decision making; the control system has done its job when it brings the problem and information surrounding it to the appropri- ate decision maker.
Three Perspectives on the Timing of Control
Feedback Control. Engineers are usually comfortable with the idea of feedback systems, in which the output of a system can be measured and the variance between measured and desired output used to adjust the system. Thus the rotational speed of a machine can be measured by the effect of centrifugal force on rotating balls (the traditional “governor”), and the difference between this physical movement and the desired (standard) value can be used to adjust the speed. The previ- ous thermostat example is also a feedback system. Such feedback control (also called post-action or output control) is quite effective for continuing processes or for repetitive actions. For example, the lessons learned in building past McDonald’s restaurants have certainly been used to make the next thousand restaurants more efficient. But for many applications, managers cannot afford to wait until an activity or product is complete before examining it, because the cost, risk, and schedule conse- quences of late discovery of failure are unacceptable.
Screening or Concurrent Control. Controls may also be applied concurrently with the effort being controlled. A new engineer may be given an unfamiliar assignment one step at a time, with review by the supervisor after each step. A production schedule may include several in-process inspection points so that further investment in defective parts can be avoided. A baseball coach will observe the effectiveness of a pitcher literally one pitch at a time, prepared at any point to start warming up a replacement in the bullpen. However, concurrent control can be expensive and stifling of initiative and can lead to inactivity while awaiting the next inspection.
Feedforward (or Preliminary or Steering) Control. The essence of feedforward control is a system that can predict the impact of current actions or events on future outcomes, so that current decisions can be adjusted to assure that future goals will be met. Engineers and managers have many applications where controls must be applied in the early phases of a project or program. A nuclear power reactor may take 10 years to produce, and the construction project manager needs management tools that will predict, as the project progresses, whether it is likely to be completed on time and within budget. As the project continues, control over the early tasks in this system gives us “feedforward” control over the total project duration. The earned value methods of Chapter 15 pro- vide the same sort of feedforward control of costs. In Chapter 14 we discuss management tools, such as work breakdown structures and network systems (PERT or CPM), that enable us to identify the longest “critical path” of tasks that must be completed in sequence to complete the project.
Examples of feedforward control in manufacturing include careful screening of sequences for machine operations, inspection of raw materials, and preventive maintenance of machines, all in an attempt to reduce (control) later production problems. The prudent taxpayer does not wait until April 15 to discover his or her tax liability for the previous year; he or she tries to estimate it before the year ends in order to manage cash contributions, sales of stock, and other actions before Decem- ber 31 to reduce or defer tax. Similarly, the comptroller of a corporation will try to forecast the next period’s revenue and sales so that cash will be ready when needed (and effectively invested when not). These also are examples of feedforward control.
Characteristics of Effective Control Systems
An effective control system should satisfy most of the following criteria:
• Effective. Control systems should measure what needs to be measured and controlled.
• Efficient. Control systems should be economical and worth their cost.
• Timely. Control systems should provide the manager with information in time to take correc- tive action. A tax accounting system is expected to show costs to the nearest dollar, but it does not need to do so for the year ending December 31 until the following April 15. A control sys- tem for monthly expenses, however, might be satisfied with ; five percent accuracy, but demand information within a week after the end of the month measured.
• Flexible. Control systems should be tools, not straitjackets, and should be adjustable to changing conditions.
• Understandable. Control systems should be easy to understand and use, and they should pro- vide information in the format desired by the users.
• Tailored. Where possible, control systems should deliver to each level of manager the infor- mation needed for decisions, at the level of detail appropriate for that level.
• Highlight deviations. Good control systems will “flag” parameters that deviate from planned values by more than a specified percentage or amount for special management attention.
• Lead to corrective action. Control systems should either incorporate automatic corrective action or communicate effectively to an agent that will provide effective action; this is why the control system exists.
Delegation and Control
The concept of delegating authority was introduced. Such delegation requires effective control systems to assure that delegated power is not used unwisely. Drucker offers as a topical example “Irangate,” in which arms were supplied to Iran despite clearly stated government policy to the contrary. He asserts that (among other things) the Reagan administration missed this basic prin- ciple of control and accountability.
First—in one of the most common but also most unforgivable management mistakes—it con- fused delegation of authority with abdication of responsibility. A chief executive officer must del- egate. Otherwise, he’ll end up like Gulliver in Lilliput, ineffectual and ensnared in details, as were Lyndon Johnson and Jimmy Carter. But delegation requires greater accountability and tighter control. Delegation requires clear assignments of a specific task, clear definition of the expected results, and a deadline. Above all it requires that the subordinate to whom a task is delegated keep the boss fully informed. It is the subordinate’s job to alert the boss immediately to any possible “surprise”—rather than to try to “protect” the boss against surprises, as Mr. Reagan’s subordi- nates apparently did. If they keep surprises away from the boss, they invariably will end up mak- ing him look incompetent or not in control or a liar—or all three.2
FINANCIAL CONTROLS
Engineers need to know about financial controls because their continued employment may be dependent upon how they support and contribute to their company’s “bottom line.” Many business owners do not realize that financial statements have a value that goes far beyond their use to prepare tax returns or loan applications. Financial controls include financial statements (especially the bal- ance sheet and income statement), financial ratios used in ratio analysis, financial and operating budgets and the nature of the budgeting process, and financial audits. Financial statements provide the basic information for the control of cash and credit, which are essential to the survival of a company.
Budgets
Budgets are perhaps the most common and universally used control techniques. This would be the first step in the financial control process. Budgets are plans for the future allocation and use of resources (usually, but not always financial ones) over a fixed period of time. The budgeting process forces managers to think through future operations in quantitative terms and obtain approval of the planned scope of operations, and it provides a standard of comparison for judging actual perfor- mance in the control process.
Financial budgets describe where the firm intends to get its cash for the coming period and how it intends to use it. There are three common types. Cash budgets estimate future revenues and expenditures and their timing during the budgeting period, telling the manager when cash must be borrowed and when excess cash will be available for temporary investment. Capital expenditure budgets describe future investments in plant and equipment. Because expenditures for fixed assets require their use for an extended period to recover the investment, capital expenditures usually are scrutinized more carefully by upper management than are operating expenditures. Finally, a balance sheet budget uses the previous two estimates to predict what the balance sheet will look like at the end of the budgeting period.
For closer control, organizations are divided into responsibility centers. Expense or cost centers are those (such as manufacturing units or staff offices) where the manager’s primary financial con- cern is control of costs. In a revenue center, such as sales or marketing, the manager has revenue tar- gets to meet. Where an organization can be divided into business units containing both production and sales of a distinct product, so that profit centers are created, the manager has more freedom to manipulate costs in order to increase profit.
Where one unit of a company has as its primary customer another unit of the same company, the “transfer price” credited to one profit center and debited to the other must be established with care, especially where no accurate market price for the product exists. Not only does this price establish which unit makes the most apparent profit but (where the units are in different states or countries) it also determines the amounts and beneficiaries of tax receipts on these profits.
Operating budgets can be created for each of these responsibility centers. These also are of three (corresponding) types: the expense budget, the revenue budget, and the profit budget, which is a combination of the other two for-profit centers.
Budgeting Process. Budgets can be prepared by a central staff group and imposed on everyone by top management (the “top-down approach”), but this approach is usually unwise. It does not take advantage of information from lower management levels that would improve the budget process, and it does not foster commitment from lower managers to conform to the budget. Alternatively, budgets could be prepared at the responsibility center level and then just added up, but such budgets tend to be inflated and often do not consider adequately upper management’s goals and objectives for the coming period.
Many organizations employ a combination of these two approaches. Top management first pro- vides guidelines for the budgeting process, including estimates of future sales and production levels and changes in priorities to meet new objectives. After middle management has provided more detail, the various responsibility centers prepare proposed revenue and expense budgets. These are merged, “massaged” (modified), and negotiated at each middle management level, approved at the top, and then passed back down as operating guidelines for the coming period.
Budgets are frequently proposed and approved as percentage increases or decreases in current levels, which makes it difficult to change priorities in resource use quickly to meet new priorities. The technique of zero-base budgeting was developed to overcome this problem. Each responsibil- ity center develops a budget package with a core of resource expenditure that is absolutely neces- sary to meet next year’s objectives, and one or more supplemental additions required to do the job more effectively or to carry out “nice-to-have” functions. Packages and supplements are then ranked on a cost–benefit basis at each management level, and top management allocates resources to meet organizational goals, which may require expansion of some units and shrinking or elimination of others.
Budgets should be tools, and management should be flexible in adapting them as conditions change, however, in the government budgets are generally not flexible as they are authorized by Congress at a high level and the organizations must live with them. Many budgets are valid only for the level of production and sales on which they were based; thus, when the level of output can vary substantially, a variable budget is needed. In such a budget, costs for labor, materials, and certain overhead and sales costs are set up as functions of output, while others are kept fixed. For a given month, for example, budget expenditures might be authorized at the level corresponding to 60 percent of capacity.
Cost Accounting
The financial budgets just discussed are plans for the future in quantitative (dollar) terms. Before effective decisions for the future (plans) can be made, the costs of alternative decisions must be understood. Historical accounting systems that determine the profitability of past operations are needed to determine income tax liability and produce quarterly and annual reports for stockholders, but they are often not adequate for determining if particular products, whether produced in the past or proposed for the future, have been or will be profitable. To find that out, costs must be divided among (allocated to) specific products, and this is the arena of cost accounting.
Historically, direct labor formed the major part of manufacturing costs, and distribution of overhead costs in proportion to direct labor hours or direct labor dollars was often an acceptable estimate. With modern automation, direct labor costs are often reduced to less than 10 percent of total costs, and allocation of overhead costs by activity-based costing, as illustrated in our simple example of setup costs, becomes essential for making good decisions.
Financial Statements
The second step in the control process is to measure actual performance and this is what financial statements do. The balance sheet shows the firm’s financial position at a particular instant in time—a financial “snapshot,” as it were. This snapshot is usually the financial status at the end of a calendar year or a financial year
For example, assume that a plant produces 4000 units of product A and 1000 units of product B, and that each unit (whether A or B) requires one hour of direct labor at $10 per hour. Total labor cost is therefore $10 (4000 + 1000), or $50,000. Now if supervisory effort costing $5000 is required to coordinate this production, it might be reasonably assumed that each hour of direct labor requires a proportional amount of supervision, resulting in an overhead or burden charge of $1 per direct labor hour, and a total cost for labor and supervision of $11 per unit (whether A or B).
Now, assume that costs of setting up the production line for products A and B total $8000. If we allocate this overhead cost in proportion to direct labor, it will amount to $8000/5000, or $1.60, and we will now have a unit cost of $12.60 for both product A and B. However, this setup cost may represent one $4000 setup activity for each of products A and B, so that a fairer representation of setup cost would be $4000/4000, or $1.00 per unit of A, and $4000/1000, or $4.00 per unit of B. Now we find that the unit costs for direct labor, supervision, and setup total $12 for product A and $15 for p
