Courseware: Cebu Institute of Technology University

Cebu Institute of Technology
University
N. Bacalso Avenue, Cebu City, Philippines
COLLEGE OF ENGINEERING AND ARCHITECTURE
Department of Industrial Engineering
COURSEWARE
ES034 | ENGINEERING MANAGEMENT
WEEK 1: August 23 to 27, 2021
Adapted by:
Engr. Antoniette M. Almaden
Engr. Aries M. Rivero
VERSION 01: JMHMontegrande

Welcome to the exciting world of management!
A rapidly accelerating trend in recent years has seen management become a significant part of
everyone’s job duties, from front-line employees serving customers to the executives who are at
the top of the organization hierarchy. The increasing competitive pressures on companies to
make decisions rapidly and to delegate more responsibilities to employees closest to
customers, along with wide accessibility of massive amounts of information provided by the
Internet, have given rise to a need for everyone to develop management skills—individuals and
teams as well as managers. At a minimum, employees now have responsibilities for managing
information in addition to managing their relationships with customers, both internal and external
to the organization and with organizational peers, subordinates, and managers. How well
employees can manage these relationships and the information for which they are responsible
will have a critical impact on their success or failure.
For this week, we will discover the world of management, including organization and its
components. This will also provide you an overview of the four functions of management:
planning, organizing, leading, and controlling. These functions are what the work of
management is about.
You can use this study guide in the completion of this module.
Introduction to Engineering Management - Managerial Skills and

August 23, 2021
Competences
August 25, 2021 Ethics and Social Responsibility – Corporate Governance
August 27, 2021 Finalize Output
If you have any questions, feel free to reach out to me!

I hope you will enjoy and learn so much for this week!

MANAGEMENT
PART ONE
Introduction
Management Process and Functions
Management Ethics & Social Responsibility
INTENDED LEARNING OUTCOMES

✓ Define what are organizations like and recite who are manager and their functions
✓ Discuss the management process and find how are managerial skills and competencies
learned
✓ Discuss ethical behavior and examine how ethical dilemmas complicate the workplace
✓ Enumerate how can ethical standards be maintained
✓ Illustrate social responsibility and governance

INTRODUCTION TO ENGINEERING MANAGEMENT
Watch this video before starting the module and answer the discussion questions:
“Engineering Manager job description” by ExpediaGroup
INTRODUCTORY
https://www.youtube.com/watch?v=bJ09zx7nTSo
VIDEO
DISCUSSION QUESTIONS
1. What are the roles of Engineering Managers, according to Muthu? Give at least 3.
2. What do Engineering Managers actually do according to Muthu and Janaki. Give at least 3.
INTRODUCTION
Engineering is a profession in which a knowledge of the mathematical and natural science gained by study,
experience, and practice is applied with judgement to develop ways to utilize, economically, the materials
and forces of nature for the benefit of mankind (1979, US. Engineering societies).
Management is the process of working with and through others to achieve organizational objectives in a
changing environment. Central to this process is the effective and efficient use of limited resources.1
Engineer vs. Manager
ENGINEER MANAGER
• Build, test, and oversee the production of • Develop plans and schedules for reaching
structures, machines, and devices technical goals, such as new product
development.
• Technology centered • People-centered
• Depends solely on his technical skills • Depends on the skills of his team of people
• Concentrates on the task at hand • Looks at a task from the point of view of the
value it adds and the interest of
stakeholders.
Functions of the Engineer
1. Research – where the engineer is engaged in the process of learning about nature and codifying
this knowledge into usable theories.
2. Design and development — where the engineer undertakes the activity of turning a product concept
into a finished physical item. Design for manufacturability and value engineering teams (a feature
of some companies) are charged with the improvement of designs and specifications at the
research, development, design, and production stages of product development.
3. Testing — where the engineer works in a unit where new products or parts are tested for workability.
4. Manufacturing — where the engineer is directly in charge of production personnel or assumes
responsibility for the product.
5. Construction — this is where the construction engineer (a civil engineer) is either directly in charge
of the construction personnel or may have responsibility for the quality of the construction

6. Sales — where the engineer assists the company's customers to meet their needs, especially those
that require technical expertise.
7. Consulting — where the engineer works as consultant of any individual or organization requiring
his services.
8. Government — where the engineer may find employment in the government performing any of the
various tasks in regulating, monitoring, and controlling the activities of various institutions, public or
private.
9. Teaching — where the engineer gets employment in a school and is assigned as a teacher of
engineering courses. Some of them later become deans, vice presidents, and presidents.
10. Management — where the engineer is assigned to manage groups of people performing specific
tasks.
The Engineering in Various Types of Organization
From the viewpoint of the engineer, organizations may be

classified according to the degree of engineering jobs
performed:
1. Level One — those with minimal engineering jobs
like retailing firms. The engineer will have a slim
chance of becoming the general manager or
president unless he owns the firm. The engineer
manager may be assigned to head a small
engineering unit of the firm.
2. Level Two — those with a moderate degree of
engineering jobs like transportation companies.
The engineer may be assigned to head the
engineering division. The need for management Figure 1.1 Types of Organization and the Management
Skills Required of Engineers
skills will now be felt by the engineer manager.
3. Level Three — those with a high degree of
engineering jobs like construction firms. This level provides the most significant opportunity for an
engineer to become the president or general manager – adequate management skills are needed.
What is Engineering Management?
Engineering management refers to the activity combining "technical knowledge with the ability to organize
and coordinate worker power, materials, machinery, and money."' When the engineer is assigned to
supervise the work of even a few people, he is already engaged in the first phase of engineering
management. His main responsibility is to lead his group into producing a certain output consistent with the
required specifications. The top position an engineer manager may hope to occupy is the general
presidency of any firm, large or small. As he scales the management ladder, he finds that the higher he
goes up, the fewer technical activities he performs, and the more management tasks he accepts. In this
case, it is proper that the management functions taught in pure management courses be well understood
by the engineer manager.
ACTION LEARNING EXERCISE 1.1: The Engineer that I want to be.
Select one function of an engineer that you want to venture on in the future and why? What specific
level? What do you think are your responsibilities?

ORGANIZATIONS
Before knowing more about management and all its aspect, it is important to start with understanding what
organizations are and how they create value to understand how essential is management to the
organization.
What is an Organization?
An organization is a collection of people working together to achieve a common purpose. It is a unique

social phenomenon that enables its members to perform tasks far beyond the reach of individual
accomplishment. This description applies to organizations of all sizes and types that make up the life of any
community, from large corporations to small businesses and nonprofit organizations such as schools,
government agencies, and community hospitals.
All organizations are open systems that interact with their environments. They do so in a continual process
of obtaining resource inputs—people, information, resources, and capital—and transforming them into
outputs in the form of finished goods and services for customers. Organizations create value when they
use resources well to produce good products and take care of their customers. When operations add value
to the original cost of resource inputs, then (1) a business organization can earn a profit—that is, sell a
product for more than the costs of making it—or (2) a nonprofit organization can add wealth to society—
that is, provide a public service like fire protection that is worth more than its cost.
In an article entitled “Putting People First for Organizational Success,” Jeffrey Pfeffer and John F. Veiga
argue forcefully that organizations perform better when they treat their members better.39 Managers in
these high-performing organizations don’t treat people as costs to be controlled; they treat them as valuable
strategic assets to be carefully nurtured and developed. So, who are today’s managers, and just what do
they do?
Who are the managers?
You find them in all organizations and with a wide variety of job titles—team leader, department head,
supervisor, project manager, president, administrator, and more. We call them managers, people in
organizations who directly support, supervise, and help activate the work efforts and performance
accomplishments of others.
Levels of Managers
1. Top Managers guide the performance of the

organization as a whole or of one of its major parts.
They also set objectives and strategy, scan the
environment, plan and make decisions and lead the
organization consistent with its purpose and
mission. Examples are the CEO, President and
Vice President of an organization.
2. Middle Managers are in charge of relatively large
departments or divisions consisting of several
smaller work units. Examples are clinic directors in
hospitals; deans in universities; and plant
managers, and regional sales managers in
businesses. Middle managers work with top
managers, coordinate with peers, and support
lower levels to develop and pursue action plans that Figure 1.2 Levels of Managers
implement organizational strategies to accomplish
key objectives.

3. First-line Managers report to middle managers and supervise nonmanagerial workers. Typical job
titles for these first-line managers include department head, team leader, and supervisor.
ACTION LEARNING EXERCISE 1.2: The organization I want to join

What company do you want to work in the future? What is the nature of the company/product/services?
Who is the current top manager?
Management Defined
As mentioned previously, management is the process of working with and through others to achieve
organizational objectives in a changing environment. Central to this process is the effective and efficient
use of limited resources.1
Five components of this definition require closer examination: (1) working with and through others, (2)
achieving organizational objectives, (3) balancing effectiveness and efficiency, (4) making the most of
limited resources, and (5) coping with a changing environment.
The Management Process and Managerial Functions
The ultimate “bottom line” in every manager’s job

is to help an organization achieve high
performance by best utilizing its human and
material resources. Th is is accomplished through
the four functions of management in what is called
the management process—planning,
organizing, leading, and controlling.
PLANNING. Commonly referred to as the primary

management function, planning is the formulation
of future courses of action. Plans and the
objectives on which they are based give purpose
and direction to the organization, its subunits, and
contributing individuals. Figure 1.3 Four Functions of Management
ORGANIZING. Structural considerations such as the chain of command, division of labor, and assignment
of responsibility are part of the organizing function. Careful organizing helps ensure the efficient use of
human resources.
LEADING. Managers become inspiring leaders by serving as role models and adapting their management
style to the demands of the situation. The idea of visionary leadership is popular today.
CONTROLLING. When managers compare desired results with actual results and take the necessary
corrective action, they are keeping things on track through the control function. Deviations from past
plans should be considered when formulating new plans.
Managerial Skills and Competences

A skill is the ability to translate knowledge into action that results in desired performance. Harvard scholar
Robert L. Katz described the essential, or baseline, skills of managers in three categories: technical,
human, and conceptual.

Figure 1.4 Katz’s essential managerial skills—technical, human, and conceptual.
• Technical Skills is the ability to use a special proficiency or expertise to perform particular tasks.
Accountants, engineers, market researchers, financial planners, and systems analysts, for
example, possess technical skills within their areas of expertise. Figure 1.4 shows that technical
skills are very important at job entry and early career levels.
• Human and Interpersonal Skills is the ability to work well in cooperation with other people.
Recruiters today put a lot of weight on a job candidate’s “soft” skills—things like ability to
communicate, collaborate, and network, and to engage others with a spirit of trust, enthusiasm,
and positive impact. As pointed out in Figure 1.4, the interpersonal nature of managerial work
makes human skills consistently important across all levels of managerial responsibility.
• Conceptual and Analytical Skills ability to think critically and analytically. It involves the capacity
to break problems into smaller parts, see the relations between the parts, and recognize the
implications of any one problem for others. Figure 1.4 shows that conceptual skills gain in
importance as one moves from lower to higher levels of management.
ACTION LEARNING EXERCISE 1.3: Managerial Skills

You have just been hired as the new head of an audit team for a national accounting fi rm. With four years of
experience, you feel technically well prepared for the assignment. However, this is your first formal appointment as
a “manager.” Things are complicated at the moment. The team has 12 members of diverse demographic and cultural
backgrounds, as well as work experience. There is an intense workload and lots of performance pressure. How will
this situation challenge you to develop and use essential managerial skills and related competencies to successfully
manage the team to high levels of auditing performance? Among the various managerial skills and competencies,
which do you consider the most difficult to develop, and why?
ETHICS AND SOCIAL RESPONSIBILTY

Ethics is defined as the moral code of principles that sets standards of good or bad, or right or wrong, in
one’s conduct. A person’s moral code is influenced by a variety of sources including family, friends, local
culture, religion, educational institutions, and individual experiences. Ethics guide and help people make
moral choices among alternative courses of action. And in practice, ethical behavior is that which is
accepted as “good” and “right” as opposed to “bad” or “wrong” in the context of the governing moral code.
Ethics in the Workplace

A college student gets a job offer and accepts it, only to get a better offer two weeks later. Is it right for her
to reject the first job to accept the second? A student knows that his roommate submitted a term paper
purchased on the Internet. Is it right for him not to tell the instructor? One student confides to another that
a faculty member promised her a high final grade in return for sexual favors. Is it right for him to inform the
instructor’s department head?

The real test of ethics occurs when individuals encounter a situation that challenges their personal values
and standards. Often ambiguous and unexpected, these ethical challenges are inevitable. Everyone has to
be prepared to deal with them, even students.
Ethical Dilemmas
An ethical dilemma is a situation that requires a choice regarding a possible course of action that, although
offering the potential for personal or organizational benefit, or both, may be considered unethical. It is often
a situation in which action must be taken but for which there is no clear consensus on what is “right” and
“wrong.” Here are some common examples of situations that present managers with ethical dilemmas.
✓ Discrimination—Your boss suggests that it would be a mistake to hire a qualified job candidate because
she wears a headscarf for religious purposes. The boss believes your traditional customers might be
uncomfortable with her appearance.
✓ Sexual harassment—A female subordinate asks you to discipline a coworker that she claims is making
her feel uncomfortable with inappropriate sexual remarks. The coworker, your friend, says that he was
just kidding around and asks you not to take any action that would harm his career.
✓ Conflicts of interest—You are working in another country and are offered an expensive gift in return for
making a decision favorable to the gift giver. You know that such exchanges are common practice in
this culture and that several of your colleagues have accepted similar gifts in the past.
✓ Product safety—Your company is struggling financially and can make one of its major products more
cheaply by purchasing lower-quality materials, although doing so would slightly increase the risk of
consumer injury.
✓ Use of organizational resources—You bring an office laptop computer home so that you can work after
hours. Your wife likes this computer better than hers, and asks if she can use it for her online business
during the weekends.
ACTION LEARNING EXERCISE 1.4: Ethical Dilemmas

What ethical dilemmas have you encountered in any organization that you joined (within or outside
school)? Why do you consider that as an ethical dilemma?
Maintaining High Ethical Standards

Moral Management
Management scholar Archie Carroll makes a distinction between immoral, amoral, and moral managers.
• The immoral manager chooses to

behave unethically. He or she does
something purely for personal gain and
knowingly disregards the ethics of the
action or situation.
• The amoral manager also disregards
the ethics of an act or a decision, but
does so unintentionally or unknowingly.
This manager simply fails to consider
the ethical consequences of his or her actions, and typically uses the law as a guideline for behavior.
• The moral manager considers ethical behavior as a personal goal. He or she makes decisions and
acts in full consideration of ethical issues.

Although it may seem surprising, Carroll suggests that most managers act amorally. Though well
intentioned, they remain mostly uninformed or undisciplined in considering the ethical aspects of our
behavior. The moral manager, by contrast, is an ethics leader who always serves as a positive role model.
Ethics Training
Ethics training is one way to try to instill ethical behavior in an organization. It takes the form of structured
programs to help participants understand the ethical aspects of decision making and better integrate high
ethical standards into their daily behaviors. Ethics training seeks to help people understand the ethical
aspects of decision making and to incorporate high ethical standards into their daily behavior.
Codes of Ethical Conduct

They are formal statements of an organization’s values and ethical principles that set expectations for
behavior. Ethics codes typically address organizational citizenship, illegal or improper acts, and
relationships with coworkers and customers.
Whistleblower Protection
Picture this: (1) Dave, a student, reports to that their teacher is not attending the class on time; and (2)
Anna, a teacher, complained to the Department of Labor and Employment (DOLE) that they are underpaid.
These two people come from different organization settings and are linked to different issues. But, they
share two important things in common. First, each was a whistleblower who exposed misdeeds in their
organizations in order to preserve ethical standards and protect against further wasteful, harmful, or illegal
acts. Second, each was punished for such action – the teacher failed Dave in their class and Ann was fired
from her job, respectively.
Research by the Ethics Resource Center has found that some 44% of workers in the United States fail to
blow the whistle to report wrongdoings they observe at work. The top reasons are “(1) the belief that no
corrective action would be taken and (2) the fear that reports would not be kept confidential.”
ACTION LEARNING EXERCISE 1.5: What would you do?

You have just seen one of your classmates snap a cell phone photo of an essay question on the exam
everyone is taking. The instructor missed it and you’re not sure if anyone else saw it. You know that
the instructor is giving an exam to another section of the course next class period. Do you let this pass
and pretend it isn’t all that important? Or, do you take some action? What type of moral management
do you think your action belong (immoral, amoral or moral)?
SOCIAL RESPONSIBILITY AND GOVERNANCE

Corporate Social Responsibility
Corporate Social Responsibility (CSR) describes the obligation of an organization to act in ways that
serve both its own interests and the interests of society at large. Consider these brief examples.
✓ Trish Karter co-founded the Dancing Deer Bakery in Boston with a winning recipe for social
responsibility. She hires people who lack skills, trains them, and provides them with a financial stake in
the company. She also donates 35% of company proceeds to fund action programs to end family
homelessness.
✓ Deborah Sardone owns a housekeeping service in Texas. Noticing that clients with cancer really
struggled with chores, she started Cleaning for a Reason. The nonprofit organization networks with
cleaning firms around the country to provide free home cleaning to cancer patients.

Corporate social responsibility comes to life in day-to-day management through stewardship, the notion
that managers at all levels should act in ways that respect and protect the interests of society. A good
steward, for example, supports and displays sustainable practices; a poor steward could care less.
Corporate Governance
Corporate governance refers to the active oversight of management decisions and company actions by
boards of directors. Businesses are required by law to have boards of directors that are elected by
stockholders to represent their interests. The governance exercised by these boards most typically involves
hiring, firing, and compensating the CEO and top management; assessing strategy, and verifying financial
records. The expectation is that board members will hold management accountable for ethical and socially
responsible leadership.
When corporate failures and controversies occur, weak governance often gets blamed. And when it does,
you will sometimes see the government stepping in to try to correct things for the future. Even as one talks
about corporate governance and top management accountability, it is important to remember that all
managers must accept personal responsibility for doing the “right” things. It is not enough to fulfill one’s
performance accountabilities; it must be fulfilled in an ethical and socially responsible manner which is
referred as the ethics self-governance.
ACTION LEARNING EXERCISE 1.6: CSR in Philippines

Give a concrete example of a company/organization in Cebu that supports or displays sustainable
practices; thus, actively pursues corporate social responsibility. Include a short description of the
company and how at least 3 reasons why it exemplifies corporate social responsibility.
Week 1 Output : INTRODUCTION

Instruction
1. This is done individually.
2. Those parts with highlighted red boxes require answers. Create a separate file for your answers.
You can use word/pdf or ppt, else written if no resources available. If your answers are hardcopy
or written, take a clear photo or better use camscanner app.
3. Use this filename: Filename: 2122-1-MGT-SECTIONC1-WEEK1-FAMILYNAME,FIRSTNAME
4. Submit on or before 11:59PM of Sunday, August 28, 2021 thru uploading your outputs in our
Moodle Classroom

University
COURSEWARE
Week 2
Adapted by:
Prepared by: ENGR. JOYCE MARIE MONTEGRANDE

Welcome to Week 2!
Last week, we identified the difference of an engineer and manager with their functions in
different types of organization. We also defined what organizations are and the management
processes and functions that evolves on it. For those handling the organizations – managers,
we identified the necessary skills and competences needed to get the desired performance of
the organization. Coupled with the ethics in workplace for a harmonious working environment.
And lastly, corporate social responsibility where managers act in ways that respect and protect
the interests of society and corporate governance where boards of directors oversight the
managerial decisions and actions.
For Week 2, we will delve into the environment of organizations (including the global
environment) - Organizational Culture & Environment, Global Dimension of Management, and
Small Business Management & Entrepreneurship.
Sharing to you an ideal study guide that will guide you through the week.
August 31, 2021 Organizational Culture: Dimensions and Importance
September 1, 2021 Factors To Consider In Managing A Global Environment
September 2, 2021 Workplace Diversity
September 3, 2021 Entrepreneurship and Small Business Management
September 4, 2021 Finalize output
Again, if you have any questions, feel free to reach out to me!
I hope you will enjoy and learn so much for this week!

ENVIRONMENT
PART TWO
Organizational Culture & Environment

Global Dimension of Management
Small Business Management & Entrepreneurship

✔ Discuss the characteristics and importance of organizational culture.
✔ Describe the constraints and challenges facing managers in today’s external
environment.
✔ Explain how is diversity managed in a multicultural organization
✔ Distinguish multinational corporations and discuss their extensive operations
✔ Define culture and discuss how it relates to global diversity

ORGANIZATIONAL CULTURE & EXTERNAL ENVIRONMENT
Watch this video before starting the module and answer the discussion questions:
INTRODUCTORY Our People, Our Culture of Equality
VIDEO https://youtu.be/iUY8Lv96Scw
DISCUSSION QUESTIONS 2.1

1. Give at least 3 insights on how the people feel about the culture of equality.
2. Give at least 3 effects to the organization when equality becomes the priority.
Organizational Culture: Dimensions and Importance
Organizational culture is a system of shared values, assumptions, beliefs, and norms that unite the
members of an organization. Organizational culture reflects employees’ views about “the way things are
done around here.” Culture gives meaning to actions and procedures within an organization and may be
considered to be the personality of the organization. The culture specific to each firm affects how employees
feel and act as well as the type of employee hired and retained by the company.
There are three aspects of an organization’s culture, as shown in Figure 2.1. The most obvious is the visible
culture that an observer can hear, feel, or see. Aspects of visible culture include how people dress, how
fast people walk and talk, whether there is an open floor plan
without office doors or managers have private offices, and the
extent to which status and power symbols are conspicuous.
Assigned parking spots based on rank, differing cafeteria or
eating arrangements based on organizational level, and the
degree to which furnishings are plush and conservative
versus simple and modern indicate the nature of power and
status differentials.
The signs of a visible culture make it possible to study

dominant cultural characteristics, such as whether the
organization is competitive or easygoing, formal or informal,
hierarchical or egalitarian, liberal or conservative. For
instance, firms with controlling cultures often record and
Figure 2.1 Three dimensions of Organizational Culture review their employees’ communications, including telephone
calls, e-mail, and Internet connections.
At a deeper level, espoused values are not readily observed but instead are the ways managers and
employees explain and justify actions and decisions. For example, managers may justify layoffs primarily
on the basis of a need to cut costs or to expedite decision making and improve response time by
streamlining organizational levels. Other managers may say they tolerate mistakes because employees
need to be encouraged to take risks or because it is better to treat workers with respect and provide them
with second chances when necessary. Espoused values are those values that are expressed on behalf of
an organization or that are expressed as explanations for policies or actions.

People may not always give the real reason behind their actions. Employees are quick to spot hypocrisy.
Managers who are not honest about why actions were taken may create an organizational culture full of
cynicism, dishonesty, lack of credibility and poor ethics, all of which eventually translate into poor firm
performance.
Espoused values may vary substantially across organizations and this variability in expressed values can
reflect real and important differences in these organizations. For organizations that have merged or been
acquired it has been found that organizational performance after the merger is better for firms that had
more closely matched espoused values to begin with. This effect on postmerger financial performance
illustrates the importance of espoused values.
Espoused values are generally consciously and explicitly communicated. At the center of organizational
culture are core values that are widely shared, operate unconsciously, and are considered nonnegotiable.
In some organizations, a basic assumption may be that stability and commitment of the workforce are
critical for success. Consequently, employees are well treated and receive liberal fringe benefits. At the
other extreme, a basic assumption may be that employees are commodities and an expense that should
be minimized in the business process, rather than an investment. Thus employees are tightly controlled,
exceptions to established policy are kept to a minimum, there are detailed rules and procedures about what
employees can and cannot do, and managers believe it is their duty to prevent deviations from the norms.
Employees may be watching one another to ensure that no one breaks the rules, and people are trained to
check with their superiors before making most decisions.
The basic underlying cultural assumptions create the lenses through which people perceive and interpret
events. Someone sitting motionless may be seen as loafing in some firms, while at others, the employee
would be perceived as pondering an important problem. When employees are absent from work, the
organization’s culture may lead managers to conclude they are shirking, and if an employee requests
permission to perform some tasks at home, the request will probably be denied because the supervisor
expects the employee will “goof off” rather than work.
Why is having a strong culture important? For one thing, in organizations with strong cultures, employees
are more loyal than are employees in organizations with weak cultures. Research also suggests that strong
cultures are associated with high organizational performance. And it’s easy to understand why. After all,
if values are clear and widely accepted, employees know what they’re supposed to do and what’s
expected of them, so they can act quickly to take care of problems. However, the drawback is that a strong
culture also might prevent employees from trying new approaches especially when conditions are
changing rapidly.
Coolest Office Ever? (Google Office Tour) - Hype Hunt: EP18

https://youtu.be/HBe6XUFvtRY
APPLICATION
VIDEO Working at Google as a Cloud Software Engineer
https://youtu.be/dd4AvcIMe-I

ACTION LEARNING EXERCISE 2.1
1. From the video Coolest Office Ever? (Google Office Tour) - Hype Hunt: EP18, give at least 3 visible
cultures of Google.
2. Check Google’s Core Values in the link below
https://www.google.com/about/philosophy.html
Comparing the Working at Google video and the Google’s Core Values, how did Google concretely apply
their Core Values to the actual working environment? Give at least 3.
Example:
Core Value: There’s always more information out there.
Application to Work Environment: There is already an answer to a lot of questions and are answered
by all of the resources and the other teams at Google.
The External and Internal Environment
The decade from 2000 to 2009 was a challenging one for organizations. For instance, some well-known
stand-alone businesses at the beginning of the decade were acquired by other companies during this time,
including Compaq (now a part of Hewlett-Packard), Gillette (now a part of Procter & Gamble) and Merrill
Lynch (now a part of Bank of America); others disappeared altogether, including Lehman Brothers, Circuit
City, and Steve & Barry’s (all now bankrupt). Anyone who doubts the impact the external environment has
on managing just needs to look at what’s happened during the last decade.
● Economic component - interest rates, inflation,

changes in disposable income, stock market
fluctuations, and business cycle stages.
● Demographic component - trends in population
characteristics such as age, race, gender, education
level, geographic location, income, and family
composition.
● Political/legal component - federal, state, and local
laws, as well as global laws and laws of other
countries. It also includes a country’s political
conditions and stability.
● Sociocultural component - societal and cultural
factors such as values, attitudes, trends, traditions,
lifestyles, beliefs, tastes, and patterns of behavior.
● Technological component - scientific or industrial
Exhibit 2.2 Components of External innovations.
Organization ● Global component - issues associated with
globalization and a world economy.

The term external environment refers to factors and forces outside the organization that affect its
performance. As shown in Exhibit 2.2, it includes several different components.
● Internal environment is a component of the business

environment, which is composed of various elements
present inside the organization, that can affect or can be
affected with, the choices, activities and decisions of the
organization.
● Capital/Financial Resources - funds (often include cash,
credit, and lines of credit) necessary to grow and sustain
a business
● Physical Resources - tangible assets of the organization
that play an important role in ascertaining the
competitive capability of the company like equipment
and manufacturing plant
● Human Resources - most valuable asset of the
organization; firm’s real assets are its human resources
consisting of board of directors, top management, middle
management, supervisors and employees.
Exhibit 2.3 Components of Internal ● Technological Resources - imply the technical know-how
Organization
of the organization.
Reimagining Business in the Post-COVID-19 "Next Normal" | Leadership |

APPLICATION
Business In :60 | GZERO Media
VIDEO
https://youtu.be/jzvctKzEoFc
1. Identify at least 2 external factors and 2 internal factors that the companies need to reimagine given
the changes than the pandemic created. Include a brief explanation/description of the factor.

MANAGEMENT AND GLOBALIZATION
This is the age of the global economy in which resource supplies, product markets, and business
competition are worldwide rather than local or national in scope. It is also a time heavily influenced by the
forces of globalization, defined as the growing interdependence among the components in the global
economy.
There is no better way to illustrate the global economy than with the clothes we wear. Where did you buy
your favorite t-shirt? Where was it made? Where will it end up? In a fascinating book called The Travels of
a T-Shirt in the Global Economy, economist Pietra Rivoli tracks the origins and disposition of a t-shirt that
she bought while on vacation in Florida.
As shown here, Rivoli’s t-shirt lived a complicated and very global life. That life began with cotton grown in
Texas. It moved to China where the cotton was processed and white t-shirts were manufactured. The t-
shirts were then sold to a firm in the United States that silk-screened and sold them to retail shops for resale
to American customers. These customers eventually donated the used t-shirts to a charity that sold them
to a recycler. The recycler sold them to a vendor in Africa who distributed them to local markets to be sold
yet again to local customers.
It’s quite a story, this t-shirt that travels the commercial highways and byways of the world. Thus;
globalization can be described as “one of the most powerful and pervasive influences on nations,
businesses, workplaces, communities, and lives.”
Global Management
The term used to describe management in businesses and organizations with interests in more than one
country is global management. Procter & Gamble, for example, pursues a global strategy with customers
in over 180 countries. Toyota has 14 plants in North America and employs over 35,000 locals. The success
of firms like these depends on being able to attract and hire truly global managers who have strong global
perspectives, are culturally aware, and always stay informed about international developments.

Why Companies Go Global
John Chambers, chairman and CEO of Cisco Systems Inc., once said: “I will put my jobs anywhere in the
world where the right infrastructure is, with the right educated workforce, with the right supportive
government.” Cisco, Honda, Haier, and other firms like them are classic international businesses that
conduct for-profit transactions of goods and services across national boundaries. Nike is another; its
swoosh is one of the world’s most recognized brands.
DID YOU KNOW???
Its competitor, New Balance, takes a different

Nike does no domestic manufacturing. All of its
approach. Even though making extensive use of global
products come from sources abroad, including 100+
suppliers and licensing its products internationally,
factories in China alone.
New Balance still produces at factories in the United
States.
The two firms follow somewhat different strategies, but each is actively pursuing these common reasons
for doing international business.
Profits—Gain profits through expanded operations.

Customers—Enter new markets to gain new customers.
Suppliers—Get access to materials, products, and services.
Labor—Get access to lower-cost talented workers.
Capital—Tap a larger pool of financial resources.
Risk—Spread assets among multiple countries.
Today you can add another reason to this list, economic development—where a global firm does business
in foreign countries with direct intent to help the local economy. Coffee giants Green Mountain Coffee
Roasters, Peet’s Coffee & Tea, and Starbucks, for example, are helping Rwandan farmers improve
production and marketing methods. They send advisers to teach coffee growers how to meet high
standards so that their products can be sold worldwide. It’s a win–win: The global coffee firm gets a quality
product at a good price, the local coffee growers gain skills and market opportunities, and the domestic
economy improves.

Managing Global Environment
The success of a foreign venture depends on who is in charge. If a manager does not perform up to par in
a domestic unit, others can fill in. This is not the case in an overseas operation. The importance of choosing
the right managers was underlined by CEOs of U.S. companies with revenues in the $300 million to $1
billion range who identified the choice of management for overseas units as one of their most crucial
business decisions. There are three basic approaches to managing an international subsidiary: the
ethnocentric, polycentric, and geocentric approaches.
● The ethnocentric approach involves filling top management

and other key positions with people from the home country.
Ethnocentric staffing means to hire management that is of
same nationality of parent company. These managers are
known as expatriates.
The ethnocentric approach places natives of the home

country of a business in key positions at home and abroad.
In this example, the U.S. parent company places natives
from the United States in key positions in both the United
States and Mexico.
• In the polycentric approach, international subsidiaries are

managed and staffed by personnel from the host country,
or local nationals. The purpose of adopting this approach
is to reduce the cost of foreign operations gradually. Even
those organizations which initially adopt the ethnocentric
approach may eventually switch over to the polycentric
approach. The primary purpose of handing over the
management to the local people is to ensure that the
company understands the local market conditions, political
scenario, cultural and legal requirements better.
In this example, the Australian parent company uses natives of India to manage operations at the Indian
subsidiary. Natives of Australia manage the home office.
• Nationality is deliberately downplayed in the geocentric

approach as the firm actively searches on a worldwide or
regional basis for the best people to fill key positions.
Many of these individuals are likely to be third-country
nationals—citizens of countries other than the host nation or
the firm’s home country.
In this example, the UK parent company uses natives of

many countries at company headquarters and at the U.S.
subsidiary.

If you were an owner of an international and rapidly growing high-tech firm making sophisticated
computer chips for medical equipment, (a) what do you think is the best approach to manage it and why?
(b) Do you think an international firm should have local managers in all important posts? Why or why
not?

WORKPLACE DIVERSITY
What Is Workplace Diversity?
“The collective strength of experiences, skills, talents, perspectives, and cultures that each agent and
employee brings to the workplace”
- State Farm, the number one provider of auto insurance in the United States
“Diversity refer to variety, differences, multiformity (instead of uniformity), or dissimilarities (instead of

similarities.”
- Dictionary
“Diversity is often used to refer to differences based on ethnicity, gender, age, religion, disability, national
origin and sexual orientation,” but it also encompasses an “infinite range of unique characteristics and
experiences, including communication styles, physical characteristics such as height and weight, and
speed of learning and comprehension.”
- The Society for Human Resource Management
One important thing to note about these diversity definitions is that they focus on all the ways in which
people can differ. And that’s significant because diversity is no longer viewed as simply specific categories
like race, gender, age, or disability but has broadened to a more inclusive recognition of the spectrum of
differences.
On the other hand, workforce diversity is the ways in which people in an organization are different from
and similar to one another. The demographic characteristics that we tend to think of when we think of
diversity—age, race, gender, ethnicity, etc.—are just the tip of the iceberg. These demographic differences
reflect surface-level diversity, which are easily perceived differences that may trigger certain stereotypes,
but that do not necessarily reflect the ways people think or feel. Such surface-level differences in
characteristics can affect the way people perceive others, especially when it comes to assumptions or
stereotyping. However, as people get to know one another, these surface-level differences become less
important and deep-level diversity—differences in values, personality, and work preferences—becomes
more important. These deep-level differences can affect the way people view organizational work rewards,
communicate, react to leaders, negotiate, and generally behave at work.

Why Is Managing Workforce Diversity So Important?
1. Expand your talent pool
● Better use of employee talent - employees will have

different skill sets, backgrounds, and experiences.
● Increased quality of team problem-solving efforts
● Ability to attract and retain employees of diverse
backgrounds since they can collaborate together and learn
from each other which will make them more well-rounded
employees
2. Promote Innovation
● Enhanced problem-solving ability

● Work teams with diverse backgrounds often bring different
and unique perspectives to discussions, which can result in
more creative ideas and solutions. However, recent
research has indicated that such benefits might be hard to
come by in teams performing more interdependent tasks
over a long period of time. Such situations also present
more opportunities for conflicts and resentments to build.
But, as the researchers pointed out, that simply means that
those teams may need stronger team training and coaching
to facilitate group decision making and conflict resolution.
3. Grow Your Business and Improve Your Business Reputation
● Businesses with a diverse employee base are known to

have an equally diverse customer base.
● Attract different types of customers which will help grow
your business
● Increased understanding of the marketplace, which
improves ability to better market to diverse consumers
● Potential to improve sales growth and increase market
share
● Employees positive stories about their work will
propagate a positive reputation for your business.

Types of Workplace Diversity
Age
The aging population is a major critical shift taking place in the workforce. With many of the nearly 85 million
baby boomers still employed and active in the workforce, managers must ensure that those employees are
not discriminated against because of age. One issue
with older workers is the perception that people have
of those workers. Perceptions such as they’re sick
more often and they can’t work as hard or as fast as
younger employees—perceptions that are inaccurate.
Employers have mixed feelings about older workers.
On the positive side, they believe that older workers
bring a number of good qualities to the job including
experience, judgment, a strong work ethic, and a
commitment to doing quality work. However, they also
view older workers as not being flexible or adaptable
and being more resistant to new technology. The
challenge for managers is overcoming those
misperceptions of older workers and the widespread
belief that work performance and work quality decline
with age. Managers need to ensure that these
Exhibit 2.5 Types of Diversity Found in Workplaces workers, regardless of age, also are treated fairly and
as valuable assets. Effectively managing an
organization’s diverse age groups can lead to their working well with each other, learning from each other,
and taking advantage of the different perspectives and experiences that each has to offer. It can be a win-
win situation for all.
Gender
Women (49.8%) and men (50.2 %) now each make up almost half of the workforce. Yet, gender diversity
issues are still quite prevalent in organizations. So what do we know about differences between men and
women in the workplace?
First of all, few, if any, important differences

between men and women affect job performance.
No consistent male-female differences exist in
problem-solving ability, analytical skills,
competitive drive, motivation, sociability, or
learning ability. Psychological research has found
minor differences: Women tend to be more
agreeable and willing to conform to authority while
men are more aggressive and more likely to have
expectations of success.
Another area where we also see differences between genders is in preference for work schedules,
especially when the employee has preschool-age children. To accommodate their family responsibilities,
working mothers are more likely to prefer part-time work, flexible work schedules, and telecommuting. They
also prefer jobs that encourage work–life balance.

One question of much interest as it relates to gender is whether men and women are equally competent as
managers. Research evidence indicates that a “good” manager is still perceived as predominantly
masculine. But the reality is that women tend to use a broader, more effective range of leadership styles to
motivate and engage people. They usually blend traditional masculine styles—being directive, authoritative,
and leading by example—with more feminine ones that include being nurturing, inclusive, and collaborative.
Men tend to rely primarily on masculine styles. Another study showed that women
managers were significantly more likely than their male counterparts to coach and develop others and to
create more committed, collaborative, inclusive, and ultimately, more effective, teams.
Not that either women or men are the superior employees, but a better appreciation for why it’s important
for organizations to explore the strengths that both women and men bring to an organization and the barriers
they face in contributing fully to organizational efforts.
Race and Ethnicity
Race and ethnicity are important

types of diversity in
organizations. Race is defined
as the biological heritage
(including physical
characteristics such as one’s
skin color and associated traits)
that people use to identify
themselves. Most people identify
themselves as part of a racial
group. Such racial classifications
are an integral part of a country’s
cultural, social, and legal
environments. Ethnicity is
related to race, but it refers to
social traits—such as one’s cultural background or allegiance—that are shared by a human population.
Most of the research on race and ethnicity as they relate to the workplace has looked at hiring decisions,
performance evaluations, pay, and workplace discrimination. However, much of that research has focused
on the differences in attitudes and outcomes. Let’s look at a few key findings. One finding is that individuals
in workplaces tend to favor colleagues of their own race in performance evaluations, promotion decisions,
and pay raises. Although such effects are small, they are consistent. Next, research shows substantial
racial differences in attitudes toward affirmative action. For instance, in employment interviews, African
Americans receive lower ratings. In the job setting, they receive lower job performance ratings, are paid
less, and are promoted less frequently. However, no statistically significant differences between the two
races are observed in absenteeism rates, applied social skills at work, or accident rates. As you can see,
race and ethnicity issues are a key focus for managers in effectively managing workforce diversity.

Disability/Abilities
One issue facing managers and organizations is that

the definition of disability is quite broad. The U.S. Equal
Employment Opportunity Commission classifies a
person as disabled if he or she has any physical or
mental impairment that substantially limits one or more
major life activities. For instance, deafness, chronic
back pain, AIDS, missing limbs, seizure disorder,
schizophrenia, diabetes, and alcoholism would all
qualify. The following describes some of the fears
organizations have in hiring persons with disability as
well as the reality; that is, what it’s really like.
FEAR REALITY
Hiring people with disabilities leads to higher Absentee rates for sick time are virtually equal between employees
employment costs and lower profit margins with and without disabilities; workers’ disabilities are not a factor in
formulas calculating insurance costs for workers’ compensation
Workers with disabilities lack job skills and Commonplace technologies such as the Internet and voice-
experience necessary to perform as well as recognition software have eliminated many of the obstacles for
their abled counterparts workers with disabilities; many individuals with disabilities have
great problem-solving skills from finding creative ways to perform
tasks that others may take for granted
Uncertainty over how to take potential A person with a disability for whom workplace accommodations
disciplinary action with a worker with have been provided has the same obligations and rights as far as
disabilities job performance
High costs associated with accommodating Most workers with disabilities require no accommodation but for
disabled employees those who do, more than half of the workplace modifications cost
$500 or less
In effectively managing a workforce with disabled employees, managers need to create and maintain an
environment in which employees feel comfortable disclosing their need for accommodation. Those
accommodations, by law, need to enable individuals with disabilities to perform their jobs but they also need
to be perceived as equitable by those not disabled. That’s the balancing act that managers face.
Religion
Hani Khan, a college sophomore, worked for three months as a

stock clerk at a Hollister clothing store in San Francisco. One
day, she was told by her supervisors to remove the head scarf
that she wears in observance of Islam (known as a hijab)
because it violated the company’s “look policy” (which instructs
employees on clothing, hair styles, makeup, and accessories
they may wear to work). She refused on religious grounds and
was fired one week later. Religious beliefs also can prohibit or
encourage work behaviors. Many conservative Jews believe
they should not work on Saturdays. Some Christians do not want
to work on Sundays. Religious individuals may believe they have

an obligation to express their beliefs in the workplace making it uncomfortable for those who may not share
those beliefs. Some pharmacists have refused to give out RU-486 (the “morning after” abortion pill) on the
basis of their beliefs. As you can see, religion and religious beliefs can generate misperceptions and
negative feelings. In accommodating religious diversity, managers need to recognize and be aware of
different religions and their beliefs, paying special attention to when certain religious holidays fall. Try to
accommodate, when at all possible, employees who have special needs or requests, but do so in a way
that other employees don’t view it as “special treatment.”
GLBT: Sexual Orientation and Gender Identity
The acronym GLBT—which refers to gay, lesbian,

bisexual, and transgender people—is being used
more frequently and relates to the diversity of
sexual orientation and gender identity. Sexual
orientation has been called the “last acceptable
bias.” Despite the progress in making workplaces
more accommodating of gays and lesbians, much
more needs to be done. One study found more
than 40 percent of gay and lesbian employees
indicated that they had been unfairly treated,
denied a promotion, or pushed to quit their job
because of their sexual orientation.
An increasing number of large companies are implementing policies and practices to protect the rights of
GLBT employees in the workplace. For instance, Ernst & Young, S. C. Johnson & Sons, Inc., and Kodak,
among others, all provide training to managers on ways to prevent sexual orientation discrimination. A
diversity manager at IBM says, “We believe that having strong transgender and gender identification
policies is a natural extension of IBM’s corporate culture.” Managers need to look at how best to meet the
needs of their GLBT employees. They need to respond to employees’ concerns while also creating a safe
and productive work environment for all.
Other Types of Diversity
As said earlier, diversity refers to any dissimilarities or differences that might be present in a workplace.
Other types of workplace diversity that managers might confront and have to deal with include
socioeconomic background (social class and income-related factors), team members from different
functional areas or organizational units, physical attractiveness, obesity/thinness, job seniority, or
intellectual abilities. Each of these types of diversity also can affect how employees are treated in the
workplace. Again, managers need to ensure that all employees—no matter the similarities or
dissimilarities—are treated fairly and given the opportunity and support to do their jobs to the best of their
abilities.

WORKPLACE DIVERSITY INITIATIVES
What should organizations do to promote diversity?
The Legal Aspect of Workplace Diversity
Federal laws have contributed to some of the social change over the last 50-plus years and have evolved
to the level of diversity that currently exists. Failure to do so can be costly and damaging to an
organization’s bottom line and reputation. It’s important that managers know what they can and cannot
do legally and ensure that all employees understand as well. However, effectively managing workplace
diversity needs to be more than understanding and complying with federal laws.
Top Management Commitment to Diversity
Today’s increasingly competitive marketplace underscores the reality that creating a diverse workplace has
never been more important. It’s equally important to make diversity and inclusion an integral part of the
organization’s culture. “A sustainable diversity and inclusion strategy must play a central role in decision
making at the highest leadership level and filter down to every level of the company.”
How do organizational leaders do that?
1. Make sure that diversity and inclusion are part of the organization’s purpose, goals, and
strategies. Even during economically challenging times, an organization needs a strong
commitment to diversity and inclusion programs.
2. Diversity needs to be integrated into every aspect of the business—from the workforce,
customers, and suppliers to products, services, and the communities served.
3. Policies and procedures must be in place to ensure that grievances and concerns are
addressed immediately.
4. Finally, the organizational culture needs to be one where diversity and inclusion are valued,
even to the point where, like Marriott International, individual performance is measured and
rewarded on diversity accomplishments.
Mentoring
Mentoring is a process whereby an experienced

organizational member (a mentor) provides advice and
guidance to a less-experienced member (a protégé).
Mentors usually provide two unique forms of
mentoring functions—career development and social
support. A good mentoring program would be aimed at all
diverse employees with high potential to move up the
organization’s career ladder. A good mentor (1) provides
instruction, (2) offers advice, (3) gives constructive
criticism, (4) helps build appropriate skills, (5) shares
technical expertise, (6) develops a high-quality, close, and
supportive relationship with protégé, (7) keeps lines of
communication open and (8) knows when to “let go” and
let the protégé prove what he/she can do. If an organization is serious about its commitment to diversity, it
needs to have a mentoring program in place.

Diversity Skills Training
“The only thing in human DNA is to discriminate. It’s a part of

normal human tribal behavior.” Our human nature is to not
accept or approach anything that’s different from us. But it
doesn’t make discrimination of any type or form acceptable.
So the challenge for organizations is to find ways for
employees to be effective in dealing with others who aren’t like
them. That’s where diversity skills training, specialized training
to educate employees about the importance of diversity
and teach them skills for working in a diverse workplace,
comes in. The Sodexho’s chief diversity officer said, “As an
organization, we have worked to implement the right policies, but more importantly, empower all our
employees to understand issues of diversity and work to ensure change happens at every level of our
company.”
Employee Resource Groups
Kellogg Company, the cereal company, is a pioneer in workplace

diversity. More than 100 years ago, the company’s founder, W.
K. Kellogg, employed women in the workplace and reached
across cultural boundaries. That commitment to diversity
continues today. The company’s CEO says, “There’s no doubt
that our success comes from the many different backgrounds,
experiences, ideas, and viewpoints that our people contribute to
our business.” Kellogg’s has been very supportive of its various employee resource groups, made up of
employees connected by some common dimension of diversity. Such groups typically are formed by
the employees themselves, not the organizations. However, it’s important for organizations to recognize
and support these groups. The diverse groups have the opportunity to see that their existence is
acknowledged and that they have the support of people within and outside the group. Individuals in a
minority often feel that they’re invisible and not important in the overall organizational scheme of things.
Employee resource groups provide an opportunity for those individuals to have a voice. Through these
employees’ resource groups, those in a minority find that they’re not alone. And that can be a powerful
means of embracing and including all employees, regardless of their differences.
INTERNET RESEARCH 2.1

Go to DiversityInc.com [https://www.diversityinc.com/the-2019-top-50-diversityinc/] and find the latest list
of Top 50 Companies for Diversity. Select a company from this list. Describe and evaluate the following:
a. What types of workplace diversity are present?

b. What is the company doing or what are their initiatives to promote workplace diversity?

ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT
Nature of Entrepreneurship
The term entrepreneurship describes strategic thinking and risk-taking behavior that results in the creation
of new opportunities.
Who are Entrepreneurs?
A classic entrepreneur is a risk-taking individual who takes action to pursue
opportunities others fail to recognize, or even view as problems or threats.
Some people become serial entrepreneurs that start and run new ventures
over and over again, moving from one interest and opportunity to the next.
We find such entrepreneurs both in business and nonprofit settings.
A common pattern among successful entrepreneurs is first-mover
advantage. They move quickly to spot, exploit, and deliver a product or
service to a new market or an unrecognized niche in an existing one.
Characteristics of Entrepreneurs
Attitudes and Personal Interests
● Internal locus of control: Entrepreneurs believe that they are in control of their own destiny; they
are self-directing and like autonomy.
● High energy level: Entrepreneurs are persistent, hardworking, and willing to exert extraordinary eff
orts to succeed.
● High need for achievement: Entrepreneurs are motivated to accomplish challenging goals; they
thrive on performance feedback.
● Tolerance for ambiguity: Entrepreneurs are risk takers; they tolerate situations with high degrees
of uncertainty.
● Self-confidence: Entrepreneurs feel competent, believe in themselves, and are willing to make
decisions.
● Passion and action orientation: Entrepreneurs try to act ahead of problems; they want to get things
done and not waste valuable time.
● Self-reliance and desire for independence: Entrepreneurs want independence; they are self-reliant;
they want to be their own bosses, not work for others.
● Flexibility: Entrepreneurs are willing to admit problems and errors, and are willing to change a
course of action when plans aren’t working.
Background, Experiences, and Interests
● Childhood experiences and family environment – some entrepreneurs are with parents who were
entrepreneurial and self-employed. And entrepreneurs are often raised in families that encourage
responsibility, initiative, and independence
● Career or work history - entrepreneurs who try one venture often go on to others. Prior work
experience in the business area or industry being entered is helpful.
● Deeply embedded life interest - entrepreneurs as having strong interests in starting things. They
enjoy creative production—things like project initiation, working with the unknown, and finding
unconventional solutions. Entrepreneurs also have strong interests in running things. They enjoy
enterprise control—being in charge, being held accountable, and making decisions while moving
others toward a goal.

Social Entrepreneurship
Speaking of entrepreneurship, don’t forget it can play an important role in tackling social issues: housing
and job training for the homeless; bringing technology to poor families; improving literacy among
disadvantaged youth; reducing poverty and improving nutrition in communities. These examples and others
like them are all targets for social entrepreneurship, a form of ethical entrepreneurship that seeks novel
ways to solve pressing social problems. Social entrepreneurs take risks and create social enterprises
whose missions are to help make lives better for underserved populations.
Entrepreneurship and Small Business
The U.S. Small Business Administration (SBA) defines a small business as one that has 500 or fewer
employees, is independently owned and operated, and does not dominate its industry. The most common
small business areas are restaurants, skilled professions such as craftspeople and doctors, general
services such as hairdressers and repair shops, and independent retailers. The vast majority of small
businesses employ fewer than 20 persons and over half are home based.
Why and How to Get Started

There are many reasons why people start
their own small businesses. They range
from necessity, as discussed earlier as a
stimulus to entrepreneurship, to wanting to
be your own boss, control your future, and
fulfill a dream. Once a decision is made to
go the small business route, the most
common ways to get involved are to start
one, buy an existing one, or buy and run a
franchise—where a business owner sells
to another the right to operate the same
business in another location. A franchise
such as Subway, Quiznos, or Domino’s
Pizza runs under the original owner’s
business name and guidance. In return, the
franchise parent receives a share of income
or a flat fee from the franchisee.
Any business—large or small, franchise or startup, needs a solid underlying business model. Think of this
as a plan for making a profit by generating revenues that are greater than the costs of doing business.
Serial entrepreneur Steven Blank calls business startups temporary organizations that are trying “to
discover a profitable, scalable business model.” In other words, a startup is just that—a “start”; it’s a new
venture that the entrepreneur is hoping will take shape and prove successful as things move forward.

Writing a business plan
When people start new businesses or launch new units within existing ones, they can benefit from a good
business plan. This plan describes the details needed to obtain startup financing and operate a new
business and direction for a new business and the financing needed to operate it. Here is a sample business
plan outline.
● Executive summary—overview of the business purpose and the business model for making money.
● Industry analysis—nature of the industry, including economic trends, important legal or regulatory
issues, and potential risks.
● Company description—mission, owners, and legal form.
● Products and services description—major goods or services, with competitive uniqueness.
● Market description—size of market, competitor strengths and weaknesses, five-year sales goals.
● Marketing strategy—product characteristics, distribution, promotion, pricing, and market research.
● Operations description—manufacturing or service methods, supplies and suppliers, and control
procedures.
● Staffing description—management and staffing skills needed and available, compensation, and
human resource systems.
● Financial projection—cash fl ow projections for one to five years, breakeven points, and phased
investment capital.
● Capital needs—amount of funds needed to run the business, amount available, and amount
requested from new sources.
● Milestones—a timetable of dates showing when key stages of the new venture will be completed.
Why Small Businesses Fail

Small businesses have a high failure rate—one high enough to
be intimidating. The SBA reports that as many as 60 to 80% of
new businesses fail in their first five years of operation. The
following are the eight reasons why many small businesses fail.
• Insufficient financing—not having enough money available
to maintain operations while still building the business and
gaining access to customers and markets.
• Lack of experience—not having sufficient know how to run
a business in the chosen market or geographical area.
• Lack of expertise—not having expertise in the essentials of
business operations, including finance, purchasing, selling, and production.
• Lack of strategy and strategic leadership—not taking the time to craft a vision and mission, nor to
formulate and properly implement a strategy.
• Poor financial control—not keeping track of the numbers, and failure to control business finances and
use existing monies to best advantage.
• Growing too fast—not taking the time to consolidate a position, fine-tune the organization, and
systematically meet the challenges of growth.
• Lack of commitment—not devoting enough time to the requirements of running a competitive
business.
• Ethical failure—falling prey to the temptations of fraud, deception, and embezzlement.
ACTION LEARNING EXERCISE – Becoming a Social Entrepreneur

Make a list of social problems that exist in your local community/barangay. Choose one and identify how
you might deal with it through social entrepreneurship. In no less than 10 sentences, how will you be
able to earn a living wage from this venture while still doing good?
END OF WEEK 2

University
COURSEWARE 3 & 4
Week 3 (September 6 to 18, 2021)
Adapted by:

INFORMATION AND
DECISION MAKING
PART THREE
Information, Technology and Management

Information and Managerial Decisions
The Decision Making Process
Issues in Managerial Decision Making
Qualitative and Quantitative Models for Decision Making

✔ Conclude the role of information in the management process
✔ Generalize how managers use information to make decisions
✔ Enumerate and discuss the steps in the decision-making process
✔ Use techniques / tools in decision making
✔ Distinguish the current issues in managerial decision making

INFORMATION, TECHNOLOGY, AND MANAGEMENT
The challenges begin with the fact that our society is now highly information-driven, digital, networked, and
continuously evolving. Career and personal success increasingly requires three “must-have” competencies:
technological competency—the ability to understand new technologies and to use them to their best
advantage; information competency—the ability to locate, gather, organize, and display information; and
analytical competency—the ability to evaluate and analyze information to make actual decisions and
solve real problems.
What Is Useful Information?
This sign should be on every manager’s desk—Warning: Data ≠

Information! Data are raw facts and observations. Information is data
made useful and meaningful for decision making. We all have lots of
access to data, but we don’t always turn it into useful information that
meets the test of these five criteria:
1. Timely—The information is available when needed; it meets

deadlines for decision making and action.
2. High quality—The information is accurate, and it is reliable; it can
be used with confidence.
3. Complete—The information is complete and sufficient for the task at hand; it is as current and up to
date as possible.
4. Relevant—The information is appropriate for the task at hand; it is free from extraneous or irrelevant
materials.
5. Understandable—The information is clear and easily understood by the user; it is free from
unnecessary detail.
Even when the information is good, we don’t always make the right decisions based upon it. The term
analytics, sometimes called business analytics or management analytics, describes the systematic
evaluation and analysis of information to make decisions. Think of it as putting data to work for informed
decision making. Analytics is critically important to all aspects of the management process—planning,
organizing, leading, and controlling.
Information System and Business Intelligence
People perform best when they have available to them the right information at the right time and in the right
place. This is the function served by management information systems that use the latest technologies
to collect, organize, and distribute data. Silicon Valley pioneer and Cisco Systems CEO John Chambers
once pointed out that he always has the information he needs to be in control—be it information on earnings,
expenses, profitability, gross margins, and more. “Because I have my data in that format,” he said, “every
one of my employees can make decisions that might have had to come all the way to the president. . ..
Quicker decision making at lower levels will translate into higher profit margins. . .. Companies that don’t
do that will be noncompetitive.” Given the great power of technology today, information systems are
indispensable executive tools.

Business intelligence is the process of tapping or mining information systems to extract data that is most
useful for decision makers. It sorts and reports data in organized ways that help decision makers detect,
digest, and deal with patterns posing important implications. One of the trends in business intelligence is
use of executive dashboards that visually display and update key performance metrics as graphs, charts,
and scorecards on a real-time basis.
Information Needs in Organization
Information serves the variety of needs described in the

Figure. At the organization’s boundaries, information in
the external environment is accessed. Managers use this
intelligence information to deal with customers,
competitors, and other stakeholders such as government
agencies, creditors, suppliers, and stockholders.
Organizations also send vast amounts of public
information to stakeholders and the external environment.
This often takes the form of advertising, public relations
messages, and financial reports that serve a variety of Figure 3.1 Internal and external information needs in
organizations
purposes, etc. And within organizations, people need vast
amounts of internal information to make decisions and solve problems in their daily work. They need
information from their immediate work setting and from other parts of the organization.
INFORMATION AND MANAGERIAL DECISIONS
Information is the anchor point for all three—information helps a leader sense the need for a decision, frame
an approach to the decision, and communicate about the decision with others.
Managers as Information Processors - Managers are information processors who are continually gathering,
giving, and receiving information. This information processing is now as much electronic as it is face to
face. Managers use technology at work the way we use it in our personal lives—always on, always
connected.
ACTION LEARNING EXERCISE FOR DECISION MAKERS 3.1: You are the Mayor
Base on the trend of the positive cases of the novel coronavirus, COVID 19, in Cebu, what would you
implement to lessen the number of the positive cases as the Cebu City Mayor and why? Give at least 3.
How can electronic communications such as the Internet and news be used to improve the decision-
making process?
Managers as Problem Solvers – In all company situations, the manager’s skill in problem solving - the
process of identifying a discrepancy between an actual and a desired state of affairs, and then taking action
to resolve – is very essential. Success in problem solving comes from using information to make good
decisions—choices among alternative possible courses of action.

THE DECISION MAKING PROCESS
The decision-making process can be understood in the context of the following short case.
The Ajax Case. On December 31, the Ajax Company decided to close down its Murphysboro plant. Market
conditions were forcing layoffs, and the company could not find a buyer for the plant. Some of the 172
employees had been with the company as long as 18 years; others as little as 6 months. All were to be
terminated. Under company policy, they would be given severance pay equal to one week’s pay per year
of service.
This case reflects how competition, changing times, and the forces of globalization can take their toll on
organizations, the people who work for them, and the communities in which they operate. Think about how
you would feel as one of the affected employees. Think about how you would feel as the mayor of this small
town. Think about how you would feel as a corporate executive having to make the difficult business
decisions.
STEP 1. Identify and Define the Problem
The first step in decision making is to find and define the problem. Information gathering and deliberation
are critical in this stage. The way a problem is defined can have a major impact on how it is resolved, and
it is important to clarify exactly what a decision should accomplish. The more specific the goals, the easier
it is to evaluate results after the decision is actually implemented.

Back to the Ajax Case. Closing the Ajax plant will put a substantial number of people from the small
community of Murphysboro out of work. The unemployment will have a negative impact on individuals, their
families, and the town as a whole. The loss of the Ajax tax base will further hurt the community. The local
financial implications of the plant closure will be great. The problem for Ajax management is how to minimize
the adverse impact of the plant closing on the employees, their families, and the community.
STEP 2. Generate and Evaluate Alternative Courses of Action
Once a problem is defined, it is time to assemble the facts and information that will solve it. This is where
we clarify exactly what is known and what needs to be known. Extensive information gathering should
identify alternative courses of action, as well as their anticipated consequences. Key stakeholders in the
problem should be identified, and the effects of possible courses of action on each of them should be
considered. A cost-benefit analysis is a useful approach for evaluating alternatives. It compares what an
alternative will cost in relation to the expected benefits. The benefits of an alternative should be greater
than its costs, and it should also be ethically sound.
Back to the Ajax Case. The Ajax plant is going to be closed. Given that, the possible alternative
approaches that can be considered are (1) close the plant on schedule and be done with it; (2) delay the
plant closing until all efforts have been made to sell it to another firm; (3) offer to sell the plant to the
employees and/or local interests; (4) close the plant and offer transfers to other Ajax plant locations; or (5)
close the plant, offer transfers, and help the employees find new jobs in and around Murphysboro.
STEP 3. Choose a Preferred Course of Action
This is the point where an actual decision is made to select a preferred course of action.
Back to the Ajax Case. Ajax executives decided to close the plant, offer transfers to company plants in
another state, and offer to help displaced employees find new jobs in and around Murphysboro.
STEP 4. Implement the Decision
Once a decision is made, actions must be taken to fully implement it. Nothing new can or will happen unless
action is taken to actually solve the problem. Managers not only need the determination and creativity to
arrive at a decision, they also need the ability and willingness to implement it.
Back to the Ajax Case. Ajax ran ads in the local and regional newspapers. The ad called attention to an
“Ajax skill bank” composed of “qualified, dedicated, and well-motivated employees with a variety of skills
and experiences.” Interested employers were urged to contact Ajax for further information.
STEP 5—Evaluate Results
The decision-making process is not complete until results are evaluated. If the desired outcomes are not
achieved or if undesired side effects occur, corrective action should be taken. Evaluation is a form of
managerial control. It involves gathering data to measure performance results and compare them against
goals. If results are less than what was desired, it is time to reassess and return to earlier steps. In this way,
problem solving becomes a dynamic and ongoing activity within the management process. Evaluation is
always easier when clear goals, measurable targets, and timetables were established to begin with.

Back to the Ajax Case. How effective were Ajax’s decisions? We don’t know for sure. But after the
advertisement ran for some 15 days, the plant’s relations manager said: “I’ve been very pleased with the
results.” That’s all we know and more information would certainly be needed for a good evaluation of how
well management handled this situation. Wouldn’t you like to know how many of the displaced employees
got new jobs locally and how the local economy held up? You can look back on the case as it was described
and judge for yourself. Perhaps you would have approached the situation and the five steps in decision
making somewhat differently.
ACTION LEARNING EXERCISE FOR DECISION MAKERS 3.2
Base on your possible solutions to lessen the case of COVID-19 in Cebu (Activity 3.1: You are the
Mayor), applying the decision-making process and define your actions on each of the steps in decision
making.
ISSUES IN MANAGERIAL DECISION MAKING
Decision Errors and Traps
Framing Error
Which one of these products would you pick: ‘80% fat-free’ frozen
yogurt or ‘20% fat’ frozen yogurt; ‘90% lean’ ground beef or ‘10%’ fat
ground beef? Most people would be more likely to choose the first
option in both cases, even though the two choices are identical.
Managers sometimes suffer from framing error that occurs when a

problem is evaluated and resolved in the context in which it is
perceived—either positively or negatively. Another example is when
data show a product that has a 40% market share. A negative frame
views the product as deficient because it is missing 60% of the market.
The likely discussion would focus on: “What are we doing wrong?”
Alternatively, the frame could be a positive one, looking at the 40% share as a good accomplishment. In
this case the discussion is more likely to proceed with “How do we do things better?” Sometimes people
use framing as a tactic for presenting information in a way that gets other people to think inside the desired
frame. In politics, this is often referred to as “spinning” the data.
Availability Bias
The availability bias occurs when people assess a current event

or situation by using information that is “readily available” from
memory. An example is deciding not to invest in a new product
based on your recollection of a recent product failure. The potential
bias is that the readily available information is fallible and irrelevant.
For example, the product that recently failed may have been a good
idea that was released to market at the wrong time of year.

Representativeness Bias
The representativeness bias occurs when people assess

the likelihood of something happening based on its similarity
to a stereotyped set of occurrences. An example is deciding
to hire someone for a job vacancy simply because he or she
graduated from the same school attended by your last and
most successful new hire. The potential bias is that the
representative stereotype masks factors important and
relevant to the decision. For instance, the abilities and career
expectations of the job candidate may not fit the job
requirements; the school attended may be beside the point.
Anchoring and Adjustment Bias
The anchoring and adjustment bias occurs

when decisions are influenced by inappropriate
allegiance to a previously existing value or starting
point. For example, someone is trying to ask on the
average price of a German cars - more or less than
$100,000. Thinking about luxury cars and your
previous experience with these types of cars lets
you think that you should be paying around
$75,000 and said that it’s too high. You were then
asked if it’s higher or lower than $20,000 and you
said that it’s too low – still thinking about luxury cars. Your estimate on the average price of German cars
will be much lower if that person will ask first about small cars and mentioning low number then luxury cars
and mentioning high number.
From that price point, you can now make adjustments as needed based on the brand, model, and additional
features. The higher your starting point, the more likely you are to settle on a higher final purchase price.
The lower your starting point, the more likely you are to settle on a lower purchase price.
Confirmation Error
One of our tendencies after making a decision is

to try and find ways to justify it. In the case of
unethical acts, for example, we try to “rationalize”
them after the fact. This is called confirmation
error. It means that we notice, accept, and even
seek out only information that confirms or is
consistent with a decision we have just made.
Contrary information that shows what we are
doing is incorrect is downplayed or denied.

Escalating Commitment
Another decision-making trap is escalating commitment. This

occurs as a decision to increase effort and perhaps apply more
resources to pursue a course of action that is not working. Managers
prone to escalation let the momentum of the situation and personal
ego overwhelm them. They are unwilling to admit they were wrong
and unable to “call it quits,” even when facts indicate that this is the
best thing to do. This is a common decision error, perhaps one that
you are personally familiar with. It is sometimes called the sunk-cost
fallacy.
ACTION LEARNING EXERCISE 3.3 – Oh! I didn’t know it’s a bias!
State any personal experience on each of the decision traps and bias.
APPROACHES IN SOLVING PROBLEMS
In decision-making, the engineer manager is faced with problems which may either be simple or complex.
To provide him with some guide, he must be familiar with the following approaches:
1. Qualitative Approach; and

2. Quantitative Approach.
Qualitative Approach. This term refers to evaluation of alternatives using intuition and subjective
judgment. Stevenson states that managers tend to use the qualitative approach when (1) the problem is
fairly simple, (2) the problem is familiar, (3) the costs involved are not great / low cost and (4) immediate
decisions are needed. An example of an evaluation using the qualitative approach is as follows:
A factory operates on three shifts with the following schedule: (1) First shift — 6:00 A.M. to 2:00 P.M. (2)
Second shift — 2:00 P.M. to 10:00 P.M and (3) Third shift — 10:00 P.M. to 6:00 A.M. Each shift consists of
200 workers manning 200 machines. On September 16, 1996, the operations went smoothly until the
factory manager, an engineer, was notified at 1:00 P.M. that five of the workers assigned to the second
shift could not report for work because of injuries sustained in a traffic accident while they were on their
way to the factory. Because of time constraints, the manager made an instant decision on who among the
first shift workers would work overtime to man the five machines.
Quantitative Approach. It concentrates on the quantitative facts or data associated with the problem and
develop mathematical expression that describes the objectives, constraints, and other relationships that
exist in the problem. Used when: (1) The problem is complex, and the manager cannot develop a good
solution without the aid of quantitative analysis, (2) The problem is very important (e.g. great deal of money
is involved), (3) The problem is new and the manager has no previous experience from which to draw, (4)
The problem involves many variables, (5) There are data which describe the decision environment, (6)
There are data which describe the value or utility of the different possible alternatives, (7) The goals of the

decision maker or her organization can be described in quantitative term and (8) Workable models are
available for these situations
QUANTITATIVE MODELS FOR DECISION MAKING
1. Inventory Models – consist of several types all designed to help the engineering manager make
decision regarding inventory. They are as follows:
a. Economic order quantity model - calculate the number of items that should be ordered at one
time to minimize yearly cost of placing orders and carrying items in inventory
b. Production Order Quantity Model – economic order quantity technique applied to production
orders
c. Back Order Inventory Model – used for planned shortages
d. Quantity Discount Inventory Model – minimize the total cost when quantity discounts are
offered by suppliers
2. Queuing Theory – describes how to determine the number of service units that will minimize both
customer waiting time and cost of service. This is applicable to companies where waiting lines are
a common situation. Examples are cars waiting for service at the car wash center, ships and barges
waiting at the harbor for loading and unloading by dockworkers, etc.
3. Network Models – models where the large tasks are broken into smaller segments that can be
managed independently. Two most prominent network models are:
a. Program Evaluation Review Technique (PERT)– enables managers to schedule, monitor and
control large and complex projects with three time estimates for each activity
b. Critical Path Method (CPM) – network technique using only one-time factor per activity
4. Forecasting - the collection of past and current information to make predictions about the future
5. Regression Analysis - a forecasting method that examines the association between two or more
variables. It uses data from previous periods to predict future events.
a. Simple Regression – one independent variable is involved
b. Multiple Regression – two or more independent variables are involved
6. Simulation - a model constructed to represent reality on which conclusions about real-life problems
can be used
7. Linear Programming - quantitative technique that is used to produce an optimum solution within
the bounds by constraints upon the decision
8. Sampling Theory - quantitative technique where samples of populations are statistically determined
to be used for a number of processes such as quality control and marketing research.
9. Statistical Decision Theory / Decision Analysis - rational way to conceptualize, analyze and solve
problems in situations involving limited or partial information about the decision environment.
Decision environment has three (3) classifications:

a. Decision Making Under Conditions of Certainty - only one state of nature exists. There is
complete certainty about the future.
b. Decision Making Under Conditions of Uncertainty - More than one state of nature exists, but
the decision maker has no knowledge about the various states
c. Decision Making Under Conditions of Risk - More than one state of nature exists, but now the
decision maker has information which will support the assignment of probability values to each
of the states

INVENTORY MODELS (specifically Economic Order Quantity)
In inventory management, economic order quantity is the order quantity that minimizes the total holding
costs and ordering costs. It is one of the oldest classical production scheduling models.
Inventory Cost
● Holding costs - the costs of holding or “carrying” inventory over time; e.g. obsolescence, insurance,
extra staffing, interest, pilferage, damage, warehousing, etc.
● Ordering costs - the costs of placing an order and receiving goods; eg. Supplies, forms, order
processing, clerical support, etc.
● Setup costs - cost to prepare a machine or process for manufacturing an order; e.g. clean-up costs,
re-tooling costs, adjustment costs, etc.
Economic Order Quantity (EOQ)
Basic Assumptions
● Demand is known, constant, and independent
● Lead time is known and constant
● Receipt of inventory is instantaneous and complete
● Quantity discounts are not possible
● Only variable costs are setup and holding
● Stock outs can be completely avoided
EOQ Model Equations
Q = Number of pieces/units per order

Q* = Optimal number of pieces per order (EOQ)
D = Annual demand in units for the inventory item
S = Setup or ordering cost for each order
H = Holding or carrying cost per unit per year
Optimal Order Quantity, Q* Expected Number of Orders, N Expected Time Between Order, T
2𝐷𝑆 𝐷 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑑𝑎𝑦𝑠 / 𝑦𝑒𝑎𝑟
𝑄∗ = √ 𝑁= 𝑇=
𝐻 𝑄∗ 𝑁
Setup Cost Holding Cost
𝐷 𝑄
𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡 = (𝑆) 𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = (𝐻)
𝑄 2
Example 1: Forever 25, a famous clothing manufacturer company, wanted to determine the number of
units of needles that they should order to minimize the yearly cost of placing orders. They also want to know
how many times do they need to order in a year, the optimal time between order/replenishment and the
total annual cost for ordering the needles in a year. Following data was provided by the procurement
department.
D = 1,000 units Q*= 200 units

S = $10 per order H = $.50 per unit per year
Solutions:
2𝐷𝑆 2(1,000)(10)
𝑄∗ = √ = √ = 200 𝑢𝑛𝑖𝑡𝑠
𝐻 (0.50)
𝐷 1,000
𝑁= = = 5 𝑜𝑟𝑑𝑒𝑟𝑠 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
𝑄∗ 200
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑑𝑎𝑦𝑠 / 𝑦𝑒𝑎𝑟 250

𝑇= = = 50 𝑑𝑎𝑦𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑜𝑟𝑑𝑒𝑟𝑠
𝑁 5
𝑇𝑜𝑡𝑎𝑙 𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡 + 𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡
𝐷 𝑄 1000 200
𝑇𝑜𝑡𝑎𝑙 𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑜𝑠𝑡 = (𝑆) + (𝐻) = (10) + (0.50) = $100 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
𝑄 2 200 2
PROBLEM SOLVING 3.1 - Economic Order Quantity
The Alladin’s Carpet Discount Store in Paknaan, Mandaue stocks carpet in its warehouse and sells it
through an adjoining showroom. The store keeps several brands and styles of carpet in stock; however,
its biggest seller is Super Fly carpet. The store wants to determine the optimal order size and total
inventory cost for this brand of carpet given an estimated annual demand of 10,000 yards of carpet, an
annual carrying cost of 37.50 per yard, and an ordering cost of 7500. The store would also like to know
the number of orders that will be made annually and the time between orders (i.e., the order cycle) given
that the store is open every day except Sunday, Thanksgiving Day, and Christmas Day (which is not on
a Sunday) (311 days/yr). Determine the following:
A. Determine the optimal order quantity.

B. Determine the number of orders per year.
C. Determine the time between orders.
D. Determine the annual set-up cost.
E. Determine the annual holding cost.
F. What is the total inventory cost of the Q* system?

STATISTICAL DECISION THEORY / DECISION ANALYSIS
A rational way to conceptualize, analyze and solve problems in situations involving limited or partial
information about the decision environment. Three classifications of decision environment are the following:
(1) Decision Making Under Conditions of Certainty, (2) Decision Making Under Conditions of Uncertainty
and (3) Decision Making Under Conditions of Risk.
Definition of terms:
● Decision Alternative – the workable options that must be considered in the decision
● States of Nature – the probable future events that can occur, not under the control of the decision
maker
● Payoff Table – a table which shows the payoffs (profit or loss) which would result from each possible
combination of decision alternative and state of nature
DECISION MAKING UNDER CONDITIONS OF UNCERTAINTY
There are four types of criteria that we will look at (1) Maximax Criterion (Optimist), (2) Maximin Criterion
(Pessimist), (3) Minimax Regret Criterion (Opportunist) and (4) Criterion of Realism (Realist).
Example: Consider the following problem of ABC Company. The company has to choose whether they will
have to expand, build or subcontract a building for company expansion. Come up with a decision using the
different criteria under conditions of uncertainty. The table shows the profit or loss – for example, if they
choose to expand but the demand (states of nature) of their product is low then they will make a loss of
Php250,000. (Amount in Php)
States of Decision Alternatives

Nature Expand Build Subcontract
High 500,000 700,000 300,000
Moderate 250,000 300,000 150,000
Low -250,000 - 400,000 - 10,000
Failure - 450,000 - 800,000 - 100,000
1. Maximax Criterion (Optimist)

The maximax rule involves selecting the alternative that maximizes the maximum payoff
available. In the optimistic criterion, select the decision alternative which would maximize his
maximum payoff. Select the maximum payoff possible for each decision alternative then choose
the alternative that provides the maximum payoff within the group

High 500,000 700,000 300,000
Moderate 250,000 300,000 150,000
Low - 250,000 - 400,000 - 10,000
Failure - 450,000 - 800,000 - 100,000
Maximum
500,000 700,000 300,000
Payoff

The optimistic decision-maker locates the maximum payoff for each decision alternatives. The
maximum of these payoffs is identified and the corresponding alternative is selected. The optimal
decision alternative in the example, based on this criterion, is to Build with a maximum payoff of
Php700,000.
2. Maximin Criterion (Pessimist)

In the pessimistic criterion, it is to maximize his minimum possible payoff or to choose the best of
the worst. Select the minimum payoff possible for each decision alternative then choose the
alternative that provides the maximum payoff within the group.

High 500,000 700,000 300,000
Moderate 250,000 300,000 150,000
Low - 250,000 - 400,000 - 10,000
Failure - 450,000 - 800,000 - 100,000
Minimum
- 450,000 - 800,000 - 100,000
Payoff
The pessimistic decision-maker locates the minimum payoff for each decision alternatives. The
maximum of these minimum payoffs is identified and the corresponding alternative is selected.
Since –Php100,000 is maximum out of the minimum payoffs, the optimal decision alternative is to
Subcontract.
3. Minimax Regret Criterion (Opportunist)

Assume that a states of nature actually happened, solve for the regret or the difference of the
largest payoff for that state and the payoff of each decision alternative. Choose the minimum of
these regret values. It is useful for a risk-neutral decision maker. Essentially, this is the technique
for a 'sore loser' who does not wish to make the wrong decision. 'Regret' in this context is defined
as the opportunity loss through having made the wrong decision.
Using the same example, if the demand is high, they will make a maximum profit of 700,000 if they
build. If they had decided to expand, they will only make a profit of 500,000. The difference or regret
between the 500,000 profit and the maximum of 700,000 achievable profit for that state of nature
(high) is 200,000. This means that they had an opportunity loss of 200,000 for choosing to expand
than to build. The regrets can be tabulated as follows:

High 500,000 - 700,000 700,000 - 700,000 300,000 - 700,000
200,000 P0 400,000
Moderate 250,000 - 300,000 300,000 - 300,000 150,000 - 300,000
50,000 0 150,000
Low - 250,000 -(- 10,000) -400,000 -(- 10,000) - 10,000-(- 10,000)
240,000 390,000 0
Failure - 450,000 -(- 100,000) -800,000 -(-100,000) - 100,000 -(- 100,000)
350,000 700,000 0
Maximum
350,000 700,000 400,000
Regret

The regret criterion is based upon the minimax principle, i.e., the decision-maker tries to minimize
the maximum regret. Thus, the decision-maker selects the maximum regret for each of the decision
alternatives and out of these the alternatives which corresponds to the minimum regret is regarded
as optimal. Since Php350,000 is the minimum regret, the optimal alternative is to Expand.
4. Criterion of Realism
It is considering both optimism and pessimism. Alpha is used as an index of optimism. Determine
the maximum and the minimum payoff for each decision alternative and use the formula. Then a
weighted average/measure of realism of the maximum and minimum payoffs of an action, with α
and 1 - α as respective weights, is computed. The decision alternative with highest average is
regarded as optimal.
𝑀𝑒𝑎𝑠𝑢𝑟𝑒 𝑜𝑓 𝑅𝑒𝑎𝑙𝑖𝑠𝑚 = (𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑃𝑎𝑦𝑜𝑓𝑓) 𝛼 + (𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑃𝑎𝑦𝑜𝑓𝑓)(1 − 𝛼)
Using the same example, come up with a decision using criterion of realism with an index of
optimism at α = 60%.
Decision Alternatives
States of Nature
Expand Build Subcontract
High 500,000 700,000 300,000
Moderate 250,000 300,000 150,000
Low - 250,000 - 400,000 - 10,000
Failure - 450,000 - 800,000 - 100,000
Maximum Payoff 500,000 700,000 300,000
Minimum Payoff - 450,000 - 800,000 - 100,000
500,000*0.6 + -450,000*0.4 500,000*0.6 + -450,000*0.4 500,000*0.6 + -450,000*0.4
Measure of Realism 120,000 100,000 140,000
Since the average for Subcontract is the maximum, it is the optimal alternative.
PROBLEM SOLVING 3.2 - Decision making under conditions of Uncertainty

1. Miguel and Enzo run a salad shop called "Himsug ug Baskug Salads Co". They need to make the
salads a day before so they have to decide how many salads to make in advance each day before
they know the actual demand. Their choice is between 45, 55 and 65 salads. The following table
shows their profit or loss/ payoff table. Amount in Php.
States of Nature Decision Alternatives (Daily Supply)

(Daily Demand) 45 Salads 55 Salads 65 Salads
45 Salads 2000 1000 -1000
55 Salads 2000 2500 -500
65 Salads 2000 2500 2600
Determine the optical decision alternative for the four types of criteria. For Criterion of Realism,
consider an index of optimism at α=65%.
END OF WEEK 3

QUEUING THEORY
- Queuing theory is the mathematics of waiting lines.

- It is extremely useful in predicting and evaluating system performance.
- Queuing theory has been used for operations research, manufacturing and systems analysis.
Traditional queuing theory problems refer to customers visiting a store, analogous to requests
arriving at a device. Commonly used in telecommunications, traffic control, health services (e.g.
control of hospital bed assignments)
Queuing System
Key elements of the queuing system are the (1) customer which refers to anything that arrives at a facility
and requires service, e.g., people, machines, trucks, emails. And (2) server refers to any resource that
provides the requested service, eg. repairpersons, retrieval machines, runways at airport.
The queuing system has four major

components: Input which is the Arrival
Process, Queue or Waiting Line, Service
Process or the Server and the Output/Exit. The
input or the arrival process is when the
customers arrive. The customers will then
have to wait their turn for service in the queue
or waiting line, are serviced and leave after the
service. Example in a hospital (system), the
patients (customer) are arriving and being
entertained by the nurses (servers).
Queue Structure
Queue Structure is the crucial element of a queuing system, as it shows the queue discipline, which means
the order in which the customers are picked from the queue for the service. It depends on the arrival of
customers and the nature of service being offered. The customers can be chosen from the queue in one of
the following ways:
1. First-come-first-served. When the services are rendered to the customers in order of their arrival,
the queue discipline is the first-come-first-served type. Simply, serving the customer first, who
comes first to the service facility. Example: At the movie ticket counter, a person who came first will
get the tickets first.
2. Last-come-first served. It simply means, the person who comes last will be served first.
Sometimes the customers are serviced in the order reverse of the order in which they enter the
service facility. Example: A pile of files, the file that comes in the last will be read first.
3. Service-in-random-order (SIRO). Under this type of queue structure, the customer is chosen for
service randomly and hence all the customers are equally likely to be selected. Therefore, the time
of arrival of the customer has no consequence on the selection of the customer.
4. Priority Service. Under this rule, customers are grouped in priority classes on the basis of some
attributes such as service time or urgency or according to some identifiable characteristic, and
FCFS rule is used within each class to provide service. Treatment of VIPs in preference to other
patients in a hospital is an example of priority service.

Service System
Parallel channels means, a number of channels providing identical service facilities so that several
customers may be served simultaneously. Series channel means a customer go through successive
ordered channels before service is completed. A queuing system is called a one-server model, i.e., when
the system has only one server, and a multi-server model i.e., when the system has a number of parallel
channels, each with one server.
a. Arrangement of service facilities in series
1. Single Queue Single Server
2. Single Queue, Multiple Server
b. Arrangement of Service facilities in Parallel
Customer Characteristics/Attitude
1. Balking: “I’m not going to wait in that line”. Customer decides not to join the queue by seeing the
number of customers already in service system.
2. Reneging: “I’m outta here”. Customer after joining the queue, waits for some time and leaves the
service system due to delay in service.
3. Jockeying: “Hey, that line looks like it’s moving faster”. Customer moves from one queue to
another thinking that he will get served faster by doing so.
Single Channel Model
 = Mean number of arrivals per time period

µ = Mean number of units served per time period

Average number of units (customers) in the Average time a unit spends waiting in the
system (waiting and being served), Ls queue, Wq
𝐿𝑠 = 𝑊𝑞 =
µ− µ (µ− )
Average time a unit spends in the system

Utilization factor for the system, ρ
(waiting time plus service time), Ws
1 𝜌=
𝑊𝑠 = µ
µ−
Average number of units waiting in the queue, Probability of 0 units in the system (that is, the
Lq service unit is idle), ρ0
2
𝐿𝑞 = 𝜌0 = 1 −
µ (µ− ) µ
Example: You are an owner of a single server carwash. The customers arrive at a mean rate of 2 cars per
hour with a service rate/mean number of units served per time period of 3 cars serviced per hour. Compute
for the six parameters of single channel model and conclude whether there is a need to add a carwash boy.
 = 2 cars arriving/hour µ = 3 cars serviced/hour
Average number of units (customers) in the system Average time a unit spends waiting in the queue, Wq
(waiting and being served), Ls 2
𝑊𝑞 = = = 40 𝑚𝑖𝑛𝑢𝑡𝑒 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑤𝑎𝑖𝑡𝑖𝑛𝑔 𝑡𝑖𝑚𝑒
2 µ (µ− ) 3 (3 − 2)
𝐿𝑠 = = = 2 𝑐𝑎𝑟𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑠𝑦𝑠𝑡𝑒𝑚 𝑜𝑛 𝑎𝑣𝑒𝑟𝑎𝑔𝑒
µ− 3− 2
Average time a unit spends in the system (waiting time Utilization factor for the system, ρ
plus service time), Ws 2
𝜌= = = 66.6% 𝑜𝑓 𝑡𝑖𝑚𝑒 𝑐𝑎𝑟𝑤𝑎𝑠ℎ 𝑏𝑜𝑦 𝑖𝑠 𝑏𝑢𝑠𝑦
1 1 µ 3
𝑊𝑠 = = = 1 ℎ𝑜𝑢𝑟 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑤𝑎𝑖𝑡𝑖𝑛𝑔 𝑡𝑖𝑚𝑒 𝑖𝑛 𝑡ℎ𝑒 𝑠𝑦𝑠𝑡𝑒𝑚
µ− 3− 2
Average number of units waiting in the queue, Lq Probability of 0 units in the system (that is, the service unit
2
22 is idle), ρ0
𝐿𝑞 = = = 1.33 𝑐𝑎𝑟𝑠 𝑤𝑎𝑖𝑡𝑖𝑛𝑔 𝑖𝑛 𝑙𝑖𝑛𝑒 2
µ (µ− ) 3 (3 − 2) 𝜌0 = 1−
µ
= 1−
3
= 0.33 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 0 𝑢𝑛𝑖𝑡𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑠𝑦𝑠𝑡𝑒𝑚
Conclusion: Base on the computed parameters, there is a need to add a server/carwash boy. The system
has a low probability of having zero units and with an average of 2 cars waiting and being served. The
customers also have to wait for 40 minutes for a 20-minute service.
PROBLEM SOLVING 4.1 - Queuing Theory

You are an owner of a single server Burger Junction. The customers arrive at a mean rate of 5 customers
per minute with a service rate/mean number of units served per time period of 7 customers serviced per
minute. Compute for the six parameters of single channel model and conclude whether there is a need
to add a server.

PARETO ANALYSIS
Pareto analysis is a formal technique useful where many

possible courses of action are competing for attention. This
technique is also called the vital few (20%) and the trivial many
(80%). It is statistical technique in decision making for selection
of limited tasks which have significant overall impact. This
technique helps to identify the top 20% of causes that needs to
be addressed to resolve the 80% of the problems.
The value of the Pareto Principle for a project manager is that it

reminds them to focus on the 20% of things that matter. Of the
things you do during your project, only 20% are really important.
Those 20% produce 80% of your results. Identify and focus on those things first, but don't totally ignore the
remaining 80% of causes.
History of Pareto Analysis

● The Pareto effect is named after Vilfredo Pareto, an economist and sociologist who lived from 1848
to 1923.
● He observed in 1906 that 20% of the Italian population owned 80% of Italy’s wealth.
Pareto Chart
● A Pareto Chart is a series of bars whose height reflect the frequency or impact of problems
● The bars are arranged in descending order of height from left to right
● Bars on left are relatively more important (vital few) than that the bars on the right (trivial many)
Example: The business was investigating the delay associated with processing credit card applications, the
data could be grouped into the ff categories: no signature, residential address not valid, non-legible
handwriting, already a customer and other.
Step 1: Identify and List Problems (Record the raw data)

Category Frequency
No address 9

Non-legible writing 22
Current Customer 15
No signature 40
Other 8
Write out a list of all of the causes to the problem that needs to resolve. Where possible, gather feedback
from clients and team members. This could take the form of customer surveys, formal complaints, or
helpdesk logs, for example. Score the listed problem; it will depend on the sort of problem that needs to be
resolved.
Step 2: Order the data in descending order

Category Frequency
No signature 40
Non-legible writing 22
Current Customer 15
No address 9
Other 8
Step 3: Determine the percentage that each category represent
Category Frequency Percentage

No signature 40 43%
Non-legible writing 22 23%
Current Customer 15 16%
No address 9 10%
Other 8 8%
To compute for the percentage, divide each frequency to the total frequency of all the causes and multiply
by 100. From the example, divide the frequency of the ‘No signature’ cause by the total of all frequency
which is 94 and multiply by 100; this will yield 43%. Percentages of the causes are shown in the table.
Step 4: Solve for the cumulative percentage
Category Frequency Percentage Cumulative

Percentage
No signature 40 43% 43%
Non-legible writing 22 23% 66%
Current Customer 15 16% 82%
No address 9 10% 92%
Other 8 8% 100%
To solve for the cumulative percentages, add the percentage of one category to the percentage of the
preceding category. This calculation is important in statistics because it shows how the percentages add
together over a time period.

Step 5: Prepare and Analyze the diagram
Make a bar graph with respect to the frequency of

the causes. The cumulative line is plotted at the
midpoint of each bar at a height equal to the
cumulative percentage. Draw a line at 80% on the
y-axis running parallel to the x-axis. Then drop the
line at the point of intersection with the curve on the
x-axis. This point on the x-axis separates the
important causes on the left (vital few) from the
less important causes on the right (trivial many).
Therefore, 80% of the delays in processing the

credit card application is a result from the 20%
causes – no signature & non-illegible writing.
PROBLEM SOLVING 4.2 – Pareto Analysis

1. How is your quarantine period so far – productive or unproductive?
2. Identify at least 10 activities/events in your quarantine period that you often do and identify the
frequency (how often) you do it per month.
3. Conduct a Pareto Analysis to identify the 80% of the reasons that make your quarantine period
productive/unproductive.
END OF WEEK 4

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VERSION 01: JMHMontegrande

Introduction to Engineering Management - Managerial Skills and

August 27, 2021 Finalize Output

If you have any questions, feel free to reach out to me!

VERSION 01: JMHMontegrande

INTENDED LEARNING OUTCOMES

VERSION 01: JMHMontegrande

Engineer vs. Manager

VERSION 01: JMHMontegrande

The Engineering in Various Types of Organization

From the viewpoint of the engineer, organizations may be

What is Engineering Management?

ACTION LEARNING EXERCISE 1.1: The Engineer that I want to be.

VERSION 01: JMHMontegrande

An organization is a collection of people working together to achieve a common purpose. It is a unique

Who are the managers?

1. Top Managers guide the performance of the

VERSION 01: JMHMontegrande

ACTION LEARNING EXERCISE 1.2: The organization I want to join

The Management Process and Managerial Functions

The ultimate “bottom line” in every manager’s job

PLANNING. Commonly referred to as the primary

Managerial Skills and Competences

VERSION 01: JMHMontegrande

ACTION LEARNING EXERCISE 1.3: Managerial Skills

ETHICS AND SOCIAL RESPONSIBILTY

Ethics in the Workplace

VERSION 01: JMHMontegrande

ACTION LEARNING EXERCISE 1.4: Ethical Dilemmas

Maintaining High Ethical Standards

• The immoral manager chooses to

VERSION 01: JMHMontegrande

Codes of Ethical Conduct

ACTION LEARNING EXERCISE 1.5: What would you do?

SOCIAL RESPONSIBILITY AND GOVERNANCE

VERSION 01: JMHMontegrande

ACTION LEARNING EXERCISE 1.6: CSR in Philippines

Week 1 Output : INTRODUCTION

VERSION 01: JMHMontegrande

Prepared by: ENGR. JOYCE MARIE MONTEGRANDE

VERSION 01: JMHMontegrande

August 31, 2021 Organizational Culture: Dimensions and Importance

September 1, 2021 Factors To Consider In Managing A Global Environment

September 2, 2021 Workplace Diversity

September 3, 2021 Entrepreneurship and Small Business Management

September 4, 2021 Finalize output

VERSION 01: JMHMontegrande

Organizational Culture & Environment

INTENDED LEARNING OUTCOMES

VERSION 01: JMHMontegrande

DISCUSSION QUESTIONS 2.1

Organizational Culture: Dimensions and Importance

The signs of a visible culture make it possible to study

VERSION 01: JMHMontegrande

Coolest Office Ever? (Google Office Tour) - Hype Hunt: EP18

VERSION 01: JMHMontegrande