06-08-2019

Industrial Engineering
and Management

Organizations

Organization
• A systematic arrangement of people brought together to
accomplish some specific purpose; applies to all
organizations—for-profit as well as not-for-profit
organizations.
• Where managers work (manage)

Common characteristics
• Goals
• Structure
• People

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Common Characteristics of Organizations

People Differences

Operatives

People who work directly on a job or task and have no

responsibility for overseeing the work of others

Managers

Individuals in an organization who direct the activities of

others

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Organizational Levels

Identifying Managers

First-line managers
Supervisors responsible for directing the day-to-day activities of
operative employees

Middle managers
Individuals at levels of management between the first-line manager
and top management

Top managers
Individuals who are responsible for making decisions about the
direction of the organization and establishing policies that affect all
organizational members

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Management Defined

Management
The process of getting things done, effectively and
efficiently, through and with other people

Efficiency
Means doing the thing correctly; refers to the
relationship between inputs and outputs; seeks to
minimize resource costs

Effectiveness
Means doing the right things; goal attainment

Efficiency and Effectiveness

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Management Process Activities

Management process:
planning, organizing,
leading, and controlling

Management Process

Planning
Includes defining goals, establishing strategy, and developing plans
to coordinate activities

Organizing
Includes determining what tasks
to be done, who is to do them,
how the tasks are to be
grouped, who reports to
whom, and where
decisions are to be made

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Management Process

Leading
Includes motivating employees, directing the activities of
others, selecting the most effective communication
channel, and resolving conflicts

Controlling
The process of monitoring performance,
comparing it with goals, and
correcting any significant
deviations

The Pre-modern Era

Ancient massive construction projects

Egyptian pyramids
Great Wall of China
Taj Mahal

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Adam Smith’s Contribution To The Field Of Management

Wrote the Wealth of Nations (1776)

 Advocated the economic advantages that
organizations and society would reap from the
division of labor:
• Increased productivity by increasing each
worker’s skill and dexterity.
• Time saved that is commonly lost in changing
tasks.
• The creation of labor-saving inventions and
machinery.

The Industrial Revolution’s Influence On Management Practices

Industrial revolution
 Machine power began to substitute for human power
• Lead to mass production of economical goods

 Improved and less costly transportation systems became

available
• Created larger markets for goods.

 Larger organizations developed to serve larger markets

• Created the need for formalized management
practices.

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Classical Contributions

Classical approach
 The term used to describe the hypotheses of the
scientific management theorists and the general
administrative theorists.
 Scientific management theorists
• Fredrick W. Taylor, Frank and Lillian Gilbreth, and
Henry Gantt
 General administrative theorists
• Henri Fayol and Max Weber

Scientific Management

Frederick W. Taylor
 The Principles of Scientific Management (1911)
• Advocated the use of the scientific method to define
the “one best way” for a job to be done

 Believed that increased efficiency could be achieved by

selecting the right people for the job and training them
to do it precisely in the one best way.

 To motivate workers, he favored incentive wage plans.

Separated managerial work from operative work.

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Scientific Management

Frank and Lillian Gilbreth

 Bricklaying efficiency improvements
 Time and motion studies (therbligs)

Henry Gantt
 Incentive compensation systems
 Gantt chart for scheduling work operations

Human Relations Movement

 Based on a belief in the importance of employee

satisfaction—a satisfied worker was believed to be a
productive worker.

 Advocates were concerned with making management

practices more humane.
• Dale Carnegie
• Abraham Maslow
• Douglas McGregor

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The Quantitative Approach

Operations research (management science)

 Evolved out of the development of mathematical and
statistical solutions to military problems during World
War II.

 Involves the use of statistics, optimization models,

information models, and computer simulations to
improve management decision making for planning and
control.

The Process Approach

 Management theory jungle (Harold Koontz)

• The diversity of approaches to the study of
management—functions, quantitative emphasis, human
relations approaches—each offer something to
management theory, but many are only managerial
tools.

 Planning, leading, and controlling activities are circular and

continuous functions of management.

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The Systems Approach

Defines a system as a set of interrelated and interdependent parts

arranged in a manner that produces a unified whole

 Closed system : a system that is not influenced by and does not

interact with its environment

 Open system: a system that dynamically interacts with its

environment

 Stakeholders: any group that is affected by organizational

decisions and policies

Planning Defined

 Defining the organization’s objectives or goals

 Establishing an overall strategy for achieving those goals

 Developing a comprehensive hierarchy of plans to

integrate and coordinate activities

Planning is concerned with ends (what is to be done) as well as

with means (how it is to be done).

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Reasons for Planning

Criticisms Of Formal Planning

 Planning may create rigidity.

 Plans can’t be developed for a dynamic
environment.
 Formal plans can’t replace intuition and creativity.
 Planning focuses managers’ attention on today’s
competition, not on tomorrow’s survival.
 Formal planning reinforces success, which may lead
to failure.

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Types of Plans

BREADTH TIME SPECIFICITY FREQUENCY

OF USE FRAME OF USE
Strategic Long term Directional Single use
Tactical/
Operational Short term Specific Standing

Planning: Focus and Time

Strategic plans
 Plans that are organization-wide, establish overall objectives, and position an
organization in terms of its environment

Tactical plans
 Plans that specify the details of how an organization’s overall objectives are
to be achieved

Short-term plans
 Plans that cover less than one year

Long-term plans
 Plans that extend beyond five years

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Planning: Focus and Time

Strategic plans
 Plans that are organization-wide, establish overall objectives, and position an
organization in terms of its environment

Tactical plans
 Plans that specify the details of how an organization’s overall objectives are
to be achieved

Short-term plans
 Plans that cover less than one year

Long-term plans
 Plans that extend beyond five years

Strategic Planning

Strategic plans
• Apply broadly to the entire organization
• Establish the organization’s overall objectives
• Seek to position the organization in terms of its environment
• Provide direction to drive an organization’s efforts to achieve its goals.
• Serve as the basis for the tactical plans.
• Cover extended periods of time
• Are less specific in their details

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Tactical Planning

Tactical plans (operational plans)

• Apply to specific parts of the organization.
• Are derived from strategic objectives
• Specify the details of how the overall objectives are to be achieved.
• Cover shorter periods of time
• Must be updated continuously to meet current challenges

Tactical Planning

Specific plans
• Plans that have clearly defined objectives and leave no room for
misinterpretation
“What, when, where, how much, and by whom” (process-focus)
Directional plans
• Flexible plans that set out general guidelines
“Go from here to there” (outcome-focus)

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Single-Use and Standing Plans

Single-use plans
• A plan that is used to meet the needs of a particular or unique situation
• Single-day sales advertisement
Standing plan
• A plan that is ongoing and provides guidance for repeatedly performed
actions in an organization
• Customer satisfaction policy

Management by Objectives

Management by Objectives (MBO)

• A system in which specific performance objectives are jointly determined
by subordinates and their supervisors, progress toward objectives is
periodically reviewed, and rewards are allocated on the basis of that
progress.
• Links individual and unit performance objectives at all levels with overall
organizational objectives
• Focuses operational efforts on organizationally important results.
• Motivates rather than controls

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Cascading of Objectives

Elements of MBO

• Goal specificity
• Participative decision making
• Explicit time period for performance
• Performance feedback

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SWOT: Identifying Organizational Opportunities

SWOT analysis
Analysis of an organization’s strengths,
weaknesses, opportunities, and threats in
order to identify a strategic niche that the
organization can exploit

SWOT Analysis

Strengths (strategic)
• Internal resources that are available or things that an organization does
well
• Core competency: a unique skill or resource that represents a competitive
edge
Weaknesses
• Resources that an organization lacks or activities that it does not do well
Opportunities (strategic)
• Positive external environmental factors
Threats
• Negative external environmental factors

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BCG Matrix

Grand Strategies

Growth strategy
A strategy in which an organization attempts to increase the level of its
operations;
Retrenchment strategy
A strategy characteristic of a company that is reducing its size, usually in an
environment of decline
Stability strategy
A strategy that is characterized by an absence of significant change
Combination strategy
The simultaneous pursuit by an organization of two or more of growth,
stability, and retrenchment strategies

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Growth Strategies

Merger
Occurs when two companies, usually of similar size, combine
their resources to form a new company

Acquisition
Occurs when a larger company buys a smaller one and
incorporates the acquired company’s operations into its own

Competitive Strategies

Strategies that position an organization in such a way that it will

have a distinct advantage over its competition
Cost-leadership strategy
Becoming the lowest-cost producer in an industry
Differentiation strategy
Attempting to be unique in an industry within a broad market
Focus strategy
Attempting to establish an advantage (cost/differentiation) in
a narrow market segment

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Competitive Strategies

Strategies that position an organization in such a way that it will

have a distinct advantage over its competition
Cost-leadership strategy
Becoming the lowest-cost producer in an industry
Differentiation strategy
Attempting to be unique in an industry within a broad market
Focus strategy
Attempting to establish an advantage (cost/differentiation) in
a narrow market segment

Organization Design and Structure

Organization design
A process in which managers develop or change their
organization’s structure

Work specialization
A component of organization structure that involves having
each discrete step of a job done by a different individual
rather than having one individual do the whole job

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Economies and Diseconomies of Work Specialization

Types of Departmentalization

• Functional
• Product
• Customer
• Geographic
• Process

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Organizational Structure: Control

Chain of command
The management principle that no person should report to
more than one boss

Span of control
The number of subordinates a manager can direct efficiently
and effectively

Organizational Structure: Control

Authority
The rights inherent in a managerial position to give orders
and expect them to be obeyed

Power
An individual’s capacity to influence decisions

Responsibility
An obligation to perform assigned activities

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Types of Organizational Authority

Line authority
The position authority (given and defined by the
organization) that entitles a manager to direct the work of
operative employees

Staff authority
Positions that have some authority (e.g., organization policy
enforcement) but that are created to support, assist, and
advise the holders of line authority

Line Versus Staff Authority

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Chain of Command

Centralization and Decentralization

Centralization
A function of how much decision-making authority is
pushed down to lower levels in an organization; the more
centralized an organization, the higher the level at which
decisions are made

Decentralization
The pushing down of decision-making authority to the
lowest levels of an organization

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Mechanistic versus Organic Organizations

• Rigid hierarchical • Collaboration (both vertical

relationships and horizontal)
• Fixed duties • Adaptable duties
• Many rules • Few rules
• Formalized communication • Informal communication
channels • Decentralized decision
• Centralized decision authority
authority • Flatter structures
• Taller structures

Technology and Structure

Unit production
• Production in terms of units or small batches

Mass production
• Production in terms of large batch manufacturing

Process production
• Production in terms of continuous processing

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Organization Design Applications

Simple structure
An organization that is low in specialization and
formalization but high in centralization

Functional structure
An organization in which similar and related occupational
specialties are grouped together

Divisional structure
An organization made up of self-contained units

Other Organizational Structures

Matrix structure
An organization in which specialists from functional
departments are assigned to work on one or more projects
led by a project manager
Team-based structure
An organization that consists entirely of work groups or
teams
Boundaryless organization
An organization that is not defined or limited by boundaries
or categories imposed by traditional structures

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Sample Matrix Structure

Organizational Behavior (OB) Defined

The study of the actions of people at work

The focus of OB
Individual behaviors
• Personality, perception, learning, and motivation
Group behaviors
• Norms, roles, team-and conflict
The goals of OB
• To explain
• To predict behavior

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The Organization as an Iceberg Metaphor

Behaviors of Interest to OB

Employee productivity
• The efficiency and effectiveness of employees
Absenteeism
• The election by employees to attend work
Turnover
• The exit of an employee from an organization
Organizational citizenship
• Employee behaviors that promote the welfare of the
organization

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Understanding Employees

Attitudes
Valuative statements concerning objects, people, or events
Cognitive component
The beliefs, opinions, knowledge, and information held by a
person
Affective component
The emotional, or feeling, segment of an attitude
Behavioral component
An intention to behave in a certain way toward someone or
something

Job-related Attitudes

Job satisfaction
An employee’s general attitude toward his or her job.
Job involvement
The degree to which an employee identifies with his or her
job, actively participates in it, and considers his or her job
performance important for self-worth.
Organizational commitment
An employee’s orientation toward the organization in terms
of his or her loyalty to, identification with, and involvement
in the organization.

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Cognitive Dissonance Theory

Cognitive dissonance
 Any incompatibility between two or more attitudes or
between behavior and attitudes
 Inconsistency is uncomfortable and individuals will seek a
stable state with a minimum of dissonance.
The desire to reduce dissonance is determined by:
• The importance of the elements creating the dissonance
• The degree of influence the individual believes he or she
has over the elements
• The rewards that may be involved.

Personality and Behavior

Personality is the combination of the psychological traits

that characterize that person.
Myers-Briggs Type Indicator (MBTI)
• A method of identifying personality types uses four
dimensions of personality to identify 16 different
personality types
Big Five model
• Five-factor model of personality that includes
extroversion, agreeableness, conscientiousness,
emotional stability, and openness to experience

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Myers-Briggs Type Indicator (MBTI)

Extroversion versus introversion (EI)

An individual’s orientation toward the inner world of ideas
(I) or the external world of the environment (E).

Sensing versus intuitive (SN)

An individual’s reliance on information gathered from the
external world (S) or from the world of ideas (N).

Myers-Briggs Type Indicator (MBTI)

Thinking versus feeling (TF)

• One’s preference for evaluating information in an
analytical manner (T) or on the basis of values and beliefs
(F).

Judging versus perceiving (JP).

• Reflects an attitude toward the external world that is
either task completion oriented (J) or information
seeking (P).

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The Big Five Model of Personality

Extroversion A personality dimension that describes the degree to which someone

is sociable, talkative, and assertive.

Agreeableness A personality dimension that describes the degree to which someone

is good-natured, cooperative, and trusting.

Conscientiousness A personality dimension that describes the degree to which someone

is responsible, dependable, persistent, and achievement oriented.

Emotional stability A personality dimension that describes the degree to which someone
is calm, enthusiastic, and secure (positive) or tense, nervous,
depressed, and insecure (negative).

Openness to experience A personality dimension that describes the degree to which

someone is imaginative, artistically sensitive, and intellectual.

Foundations Of Group Behavior

Group

Two or more interacting and interdependent individuals who come together

to achieve particular objectives
Role
A set of expected behavior patterns attributed to someone in a given position
in a social unit
Norms
Acceptable standards (e.g., effort and performance, dress, and loyalty) shared
and enforced by the members of a group

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Group Effects

Social loafing

• The tendency of an individual in a group to decrease his or her effort

because responsibility and individual achievement cannot be measured
Group cohesiveness

• The degree to which members of a group are attracted to each other and
share goals
• Size, work environment, length of time in existence, and group-
organization goal congruency affect the degree of group cohesiveness.

Stages of Team Development

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Work Groups And Work Teams

Work group

• A group that interacts primarily to share information and to make

decisions that will help each member perform within his or her
area of responsibility

Work team

• A group that engages in collective work that requires joint effort

and generates a positive synergy.

Types of Work Teams

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Shaping Team Behavior

Proper selection

• Hire employees who have both the technical skills and the interpersonal
skills required to fulfill team roles.
Employee training

• Provide training that involves employees in learning the behaviors

required to become team players.
Rewarding the appropriate team behaviors

• Create a reward system that encourages cooperative efforts rather than

competitive ones.

Motivation And Individual Needs

Motivation

• The willingness to exert high levels of effort to reach organizational goals,

conditioned by the effort’s ability to satisfy some individual need
Need
• An internal state that makes certain outcomes appear attractive

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Motivation Theories

• Hierarchy of needs theory (Maslow)

• Theory X (McGregor)
The assumption that employees dislike work, are lazy, seek to avoid
responsibility, and must be coerced to perform

• Theory Y
The assumption that employees are creative, seek responsibility,
and can exercise self-direction

Early Theories Of Motivation (cont’d)

• Motivation-Hygiene theory (Herzberg)

 intrinsic factors are related to job satisfaction and extrinsic
factors are related to job dissatisfaction
 Hygiene factors
 Factors, such as working conditions and salary, that, when
adequate, may eliminate job dissatisfaction but do not
necessarily increase job satisfaction
 Motivators
 Factors, such as recognition and growth, that increase job
satisfaction

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Herzberg’s Motivation-Hygiene Theory

Contrasting Views of Satisfaction-Dissatisfaction

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Contemporary Theories Of Motivation

• Three-needs theory (McClelland)

 The needs for achievement, power, and affiliation are major
motives in work
 Need for achievement (nAch):
 Need for power (nPow):
 Need for affiliation (nAff):

Contemporary Theories Of Motivation

• Equity theory (Adams)

 Employees perceive what they get from a job situation

(outcomes) in relation to what they put into it (inputs) and then
compare their input-outcome ratio with the input-outcome
ratios of relevant others.

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Contemporary Theories Of Motivation

• Referent
 In equity theory, the other persons, the systems, or the personal
experiences against which individuals compare themselves to
assess equity.
 The choice of a particular set of referents is related to the
information available about referents as well as to the perceived
relevance.

Equity Theory Relationships

EMPLOYEE’S ASSESSMENT

Inequity (underrewarded)

Equity

Inequity (overrewarded)

*Person A is the employee, and Person B is a relevant other or referent.

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Expectancy theory (Vroom)

• A comprehensive theory of motivation that an individual tends to

act in a certain way, in the expectation that the act will be
followed by given outcome, and according to the attractiveness
of that outcome to the individual.
 The extent to which individuals are motivated to perform to
get a reward of value to them is based on their belief that
their performance will result in the reward they want.

Expectancy Relationships (Linkages)

• Effort–performance
 The perceived probability that exerting a given amount of
effort will lead to performance
• Performance–reward
 The belief that performing at a particular level will lead to the
attainment of a desired outcome
• Attractiveness
 The importance placed on the potential outcome or reward
that can be achieved on the job.

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Simplified Expectancy Theory

Performance
appraisal system

Training and Hum an resources

development m anagement

Integrating Theories of Motivation

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The Communication Process

Communication process
The transferring and understanding of meaning

Written Versus Verbal Communications

Written Verbal
• Tangible • Less secure
• Verifiable • Known receipt
• More permanent
• Quicker response
• More precise
• More care is taken
• Consumes less
with the written time
word • Quicker feedback

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The Grapevine

 “The grapevine motto: Good information passes among

people fairly rapidly—bad information, even faster!”

Communication Barriers

Filtering
• The deliberate manipulation of information to make it
appear more favorable to the receiver
Selective perception
• Selective hearing communications based on one’s needs,
motivations, experience, or other personal
characteristics
Information overload
• The result of information exceeding processing capacity

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Communication Barriers

Jargon
• Technical language that is not understood by
outsiders
Gender
• Men and women communicate differently.
National culture
• Communication differences that arise from the
different languages and national cultures

Managing Conflict

Conflict defined
• Perceived differences resulting in interference or
opposition
Functional conflict
• Conflict that supports an organization’s goals
Dysfunctional conflict
• Conflict that prevents an organization from achieving
its goals

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Three Views of Conflict

Traditional view
• Assumed that conflict was bad and would always have a negative
impact on an organization.
Human relations view
• Argued that conflict was a natural and inevitable occurrence in
all organizations; rationalized the existence of conflict and
advocated its acceptance.
Interactionist view
• Encourages mangers to maintain ongoing minimum level of
conflict sufficient to keep organizational units viable, self-critical,
and creative.

Conflict and Organizational Performance

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Sources of Conflict

Communication differences
• Arising from semantic difficulties, misunderstandings, and noise
in the communication channels.
Structural differences
• Horizontal and vertical differentiation creates problems of
integration leading to disagreements over goals, decision
alternatives, performance criteria, and resource allocations in
organizations.
Personal differences
• Individual idiosyncrasies and personal value systems create
conflicts.

What Is Control?

Control
• The process of monitoring activities to ensure that they are
being accomplished as planned and of correcting any
significant deviations
• An effective control system ensures that activities are
completed in ways that lead to the attainment of the
organization’s goals.

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Characteristics of Three Approaches to Control Systems

Market
• Uses external market mechanisms, such as price competition and
relative market share, to establish standards used in system to gain
competitive advantage.
Bureaucratic
• Emphasizes organizational authority of administrative and
hierarchical mechanisms to ensure appropriate employee behaviors
and to meet performance standards.
Clan
• Regulates employee behavior by the shared values, norms,
traditions, rituals, beliefs, and other aspects of the organization’s
culture.

Steps in the Control Process

• Measuring actual performance

 Personal observation, statistical reports, oral reports, and written
reports
 Management by walking around (MBWA)
 A phrase used to describe when a manager is out in the work
area interacting with employees

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Steps in the Control Process

• Comparing actual performance against a standard

 Comparison to objective measures: budgets, standards, goals
 Range of variation
 The acceptable parameters of variance between actual
performance and the standard

Steps in the Control Process

• Taking managerial action to correct deviations or inadequate standards

 Immediate corrective action
 Correcting a problem at once to get performance back on track
 Basic corrective action
 Determining how and why performance has deviated and then
correcting the source of deviation
 Revising the standard
 Adjusting the performance standard to reflect current and
predicted future performance capabilities

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Types Of Control

• Feedforward control
 Control that prevents anticipated problems
• Concurrent control
 Control that takes place while an activity is in progress
• Feedback control
 Control that takes place after an action
 Provides evidence of planning effectiveness
 Provides motivational information to employees

Types Of Control

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