INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (Meng5182)

2. FUNCTIONS OF MANAGEMENT

2.1 INTRODUCTION
Industries are confronting a number of challenges originating from different angles. To have a
victory over these challenges, the managers should carry out their activities, which consist of
a number of functions, in a systematic way.
The challenges of the managements arise from:

Inside
Present
Local

Outside
Future
Global

Inside challenges are those managers face with in their industry/company:

Implement projects/programs;
Manage people, technologies, and resources to add value;
Develop new product features to enhance company competitiveness;
Define, control and reduce costs to improve profitability;
Initiate technology projects to sustain company position.

Outside challenges may include:

Keep abreast of emerging technologies and apply them to strengthen companys core
competencies;
Apply web-based tools to enhance operations and foster customer relations;
Identify best practices to improve engineering operations and surpass them;
Create supply chain networks to derive speed, quality and cost benefits.
Present challenges that managers should worry about:
Do things right to keep company operating smoothly;
Monitor non-financial and financial performance;
Control costs and eliminate wastes to attain profitability in the short-run.
Future challenges:

Seek e-transformation opportunities to create company profitability in the long-run;

Introduce new generation products timely;
Create vision for the future related to technologies;
Define what should be done for technology-based success in the future.

Local challenges:

Utilize resources to best achieve companys objectives;

Take ethical and lawful actions while taking into account local conditions;
Maintain and nurture local professional networks;
Share lessons gained with people at other company sites.

Global challenges:
2. Functions of Management

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (Meng5182)

Apply location-based resources to realize global economies of scale and scope for
achieving cost and technology advantages;
Develop global professional networks;
Acquire a global mindset;
Exercise leadership roles in international settings.

2.2 PLANNING
Planning is the most basic of all the management functions. Planning is thinking before
doing. Planning is the work done to predetermine a course of action, in order to provide focus
and direction for enhancing the efficiency and effectiveness of the company. Planning is
made necessary by rapid change of
a. Technology ( web-based tools, broadband communications options, mobile access),
b. Environment (globalization, competition, marketplace), and
c. Organization (mergers & acquisitions, networks, outsourcing and alliances).
Planning defines who, how, where, when and using which resources to do the what work.
Planning can be divided in to two as:
1. Strategic planning, and
2. Operational planning.
Strategic planning is to define future activities which are worth doing by the unit/company
to assure that the company applies its recourses (skilled manpower, time, money, physical
resources, equipment, facilities, and business relationships) effectively to achieve its shortterm and long-term goals.
The following questions should be addressed while strategic planning
What are the companys vision, mission and value system?
What specific goals (profitability, market share, sales, technology leadership position,
global penetration) to accomplish by when, with what investment and which
technology?
Which new/improved product streams to offer by when (considering product life
cycle)?
What core technologies (design, production, distribution, service) to maintain,
develop, acquire and/or apply?
Which business networks/partnerships to create (suppliers, co-marketing, production,
logistics, service)?
With which performance metrics to monitor corporate progress?

2. Functions of Management

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (Meng5182)

MISSION AND VISION

Mission
Why do we exist?
Whom are we serving?
What do we do to serve them?
Examples
Dells mission is to be the most
successful computer company in the
world at delivering the best customer
experience in markets we serve. In
doing so, Dell will meet consumer
expectations of highest quality; leading
technology;
competitive
pricing;
individual and company accountability;
best-in-class service and support;
flexible
customization
capability;
superior corporate citizenship; financial
stability.

Sample Corporate Values

Innovation
Honesty

Quality

Social responsibility

Continuous improvement

Stability

Collaboration

Accountability

Trust and openness

Quality of work Life

Empowerment

Initiative

Diversity and equal opportunity

Respects for others

Open communications

2. Functions of Management

Vision - Company Aspiration

Market capital
Business standing
Ranking in industrial sector
Market Share
Others.
Example
General Motors vision is to be the
world leader in transportation products
and related services.
PepsiCos responsibility is to continually
improve all aspects of the world in
which we operate environment, social,
economic creating a better tomorrow
than today.
Dells vision is to create a company
culture where environmental excellence
is second nature.

Tools for Strategic Planning

External benchmarking

Technology forecasting

Product life cycle analysis

Market research
SWOT analysis

Sensitivity analysis (what-if, scenarios, Monte Carlo)

Operational planning is to define tasks/events to be accomplished with the least amount of

resources within the shortest time, to assure that the company applies its resources efficiently to
achieve its short-term and long-term goals.
Like strategic planning, operational planning has questions that have to be addressed:

What is the most efficient way of accomplishing a project/task with known objectives
(doing things right) ?
How to link up with the best suppliers in the marketplace for parts needed?

What are the operational guidelines for performing specific work?

Tools for Operational Planning

Project management including action planning

Design, test and analysis procedures

Operational guidelines

Objectives of planning
The important objectives of planning are:
1.
2.
3.
4.
5.
6.

Planning helps in effective forecasting

Planning provides certainty in the activities
Planning provides performance standards
Planning gives a specific direction to the organization
Helps the organization to tune with the environment
It provides economy in the management

7. It is very much helpful in preparing the budgets

8. The need for plan arises from constant change
9. Planning is directed towards efficiency
Steps in planning
The details of planning may differ depending up on the specific requirements of a particular
business. However, in all types of business planning process involves certain necessary steps
summarized as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Determination of objectives
Forecasting to assist planning
Decide the planning period
Collection, classification and processing of information
Deciding alternative courses of action
Evaluation of alternatives
Selection of best plan
Subsidiary plans to aid master plan
Controlling plans

Advantages of planning
1. Maximum utilization of resources
2. Minimization of unproductive work
3. Reduces uncertainty
4. Basis for managerial action
5. Basis for control
6. Avoids bottlenecks in production
7. Encourages innovation and creativity
8. Improves motivation
9. Facilitates effective delegation of authority
10. Gives competitive edges to the enterprise
Limitations of planning
Though planning facilitates various planning functions and brings orderliness, stability and
continuity of operation, it suffers from certain limitations:
1.
2.
3.
4.
5.

Limitations of forecast
Costly affair
Influence of external factors
Resistance to change
Rigidity and inflexibility

Elements/components of planning or types of planning

i.
ii.

Goals-any achievement of an end point (quantitative)

Objectives-ends towards which activities of a company are directed (derived from
goals)
iii.
Policies-verbal, written or implied overall guide setting up boundaries that supply
the general limits and directions in which managerial actions will take place. Not to
employ any person over 60 years of age.
iv.
Rules-specific action to be taken or not taken in a given situation. No smoking.
v.
Procedures-How a particular activity is carried out. Steps that must be followed
after the receipt of an order till dispatch of products to customers.
vi.
Programs-precise plan which lays down the operations to be carried out to
accomplish a given work.
vii.
Schedules-time sequence of the work to be done.
viii. Budget-an appraisal of expected expenses against anticipated income for a future
period.
2.3 FORECASTING
Forecasting is an important and essential part of effective planning. It refers to a systematic
analysis of past and present circumstances. It is essentially a technique of anticipation. It
provides key information and pertinent facts relating to the future. The success of a business
greatly depends on the efficient forecasting and preparing for future events.
Definitions of forecasting
Some of the important definitions of forecasting are as follows:
i. Forecasting is defined as the estimation of future activities (type, quantity and quality of
future work). This estimates the basis to plan the future requirements for men, machines,
materials, time, money, etc.
ii. Forecasting is a systematic attempt to probe the future by inference from known facts. The
purpose is to provide management with information on which it can base planning
decisions.
iii.Forecasts are predictions or estimates of change, if any in characteristic economic
phenomena which may affect ones business plans.
iv. Business forecasting refers to the statistical analysis of the past and current movements in
the given time series so as to obtain clues about the future pattern of the movements.
Forecasting may be done in connection with sales, production or any other type of business
activities. Forecasting begins with the sales forecast and is followed by production forecast and
forecast for probable costs, finance, purchases, profit or loss etc.
While making the forecast invention of new materials, fashion changes, policies of competitors,
unseasonable weather, threat of war and the general economic situation expected in the country
and foreign markets should be taken in to consideration.
Importance of business forecasting

1. Importance in planning
2. Accuracy in managerial decision
3. Facilitates control-it discloses the areas where control is lacking
4. Formulating future policies
5. Develops coordination-a common effort of many persons
6. Helps in preparing budgets
7. It contributes to business success-better utilization of resources
2.4 ORGANIZING
Organizing involves determining activities needed to fulfill the objectives, grouping these
activities into manageable units or departments and assigning such groups of activities to
managers. Organizing provides a framework of management or a mechanism for positive,
integrated and cooperative action by many people, in a joint effort to implement plan. Planning
decides what management wants to do, while organizing provides an effective machine for
achieving the plan or objectives.
Thus organizing involves identification and grouping the activities to be performed and dividing
them among the individuals and creating authority and responsibility, relationship among them.
Organization, in fact, is a backbone of management, which establishes relationship between
people, work and resources. It coordinates these factors in such a way that maximum output is
obtained effectively and efficiently with minimum total cost.
Steps in organizing
The process of organizing involves the following steps:
1.
2.
3.
4.
2.5

Determination of activities
Division of activities
Fitting individuals in to jobs
Developing relationships in terms of authorities and responsibilities
STAFFING

Staffing is filling the positions needed in the organization structure by appointing competent and
qualified persons for the jobs. Staffing involves:
i.
ii.
iii.
iv.
v.
vi.

Recruitment,
Selection
Placement
Training
Personal development
Developing system for remuneration

Staffing is important since people differ in their intelligence, knowledge, skills, experience,
physical condition, age and attitudes. Therefore, management must understand in addition to the
technical and operational competence, the sociological and psychological structure of the work

force. This will enable them to select right man for the right job and train and motivate them to
increase the organizational effectiveness and productivity.
2.6 DIRECTING
Directing consists of motivating, guiding and supervising the subordinates in their activities.
Only giving orders is not directing. This is an important managerial function because the
managerial decisions are put in to action through effective directing. Actual activity starts only
when manager issues directions to his subordinates so as to what is to be done and how it should
be done. The person who directs must have dynamic leadership skill.
Steps in directing:
i. Issue of orders and instructions
ii. Guidance and training
iii.Supervision-(work as per plan, subordinates as directed)
Directions given should be definite, clear cut, understandable, communicable and practicable. A
manager can plan and organize, but no tangible results can be obtained until he implements the
proposed course of action. This needs directing or actuating which literally means moving in to
action.
2.7 MOTIVATING
Motivating means inspiring people to intensify their desire and willingness to perform their
duties effectively and cooperate for the achievement of common objectives of the
business.
It is the mental preparation of an individual to do a specific job.
Motivation is the act of stimulating someone or oneself to get a desired course of action, to
push the right button to get desired action.
The concept of motivation is mainly psychological. It relates to those forces operating
within the individual employee or subordinate which imputes him to act or not active in
certain ways.
Fundamentals of motivation
1. A person wants to exist and survive and for this he needs basic necessities of life.
2. The desire to achieve a goal, for satisfaction or bliss. Basically people are motivated to put
in sincere efforts if they are assured of fulfilling their needs, such as psychological needs,
social needs, security needs, ego (needs for self respect) etc.
Classifications of motivation
i. Internal motivation-interests, emotional attachments, burning desires, fighting spirit for
some noble cause, ...
ii.External motivation-attractive salary, bonus, praise, incentive, punishment, fear of loss of
job,

Importance of motivation
i. Arise desire to work.
ii.Appropriate use of factors of production.
iii. Reduction in labor turnover.
iv. Increase in production and productivity.
v. Basis of cooperation-good employer-employee relationship.
Thus without motivation the workers will not discharge their duties efficiently. Effective
motivation is secrete of improved quantity and quality.
2.8 CONTROLLING
Controlling can be defined as:
Setting standards, measuring actual performance, and taking corrective action. It is more
than mere evaluation, appraisal or correction.
Verifying whether everything occurs in conformity with the plan adopted, the instructions
issued and the principles established.
Necessity of controlling
To ensure that every activity is carried out according to the plan and directions.
Control enables the manager to keep a check and coordinating the activities of his
subordinates so as to meet the objectives of the company, economically and effectively.
Essential steps in controlling procedure
1. Setting standards. (output, quality, cost, production targets, time standards, )
2. Checking and reporting of performance.
3. Taking corrective action.
Types of control
1. Physical control. (quality and quantity)
2. Financial control. (cost per unit of production, cost of material, labor, indirect expenses)
3. Budgetary control. Physical and financial standards for future are determined and results
are compared against the pre-determined standards.
2.9 COORDINATING
Coordination is an ongoing process whereby a manager develops an integrated, orderly and
synchronized pattern of group effort among his subordinates and tries to attain unity of
effort in the pursuit of a common purpose.
Coordination deals with the task of blending efforts in order to ensure successful
attainment of an objective. It is accomplished by means of planning, organizing, actuating
and controlling.

Need for coordination by management arises because of:

Numerous persons at work.

Subdivisions and complexity of work.
Delegation of responsibility and authority.
Chances of difference between executives and specialists.
Human nature and their problems.
Growth in size of organization.

Tools of coordination

Clear cut objectives.

Clear cut authority and responsibility of every subordinate.
Effective communication.
Good human relationship.

Types of coordination

Internal coordination- (departments, branches, sections, )

External coordination- (customers, suppliers, society, government, )
Vertical coordination- (top to bottom or bottom to top)
Horizontal coordination-(managements at the same level-purchase, sales, accountant,
finance, )
2.10COMMUNICATING
Communication is a process by which instructions, ideas, thoughts or information are
transmitted, received and understood, by the persons working in an organization.
Process of effective communication
For every communication, at least two persons are required i.e. a sender and a receiver. The
various steps involved are shown below.

Methods of communication
1. Verbal or written
2. Formal or informal
3. Downward, upward or horizontal communication
Purposes of formal communication

Essentials of communication
For effective communication the following are important points:
1. It must be clear in purpose and intention.

2. It has to be participatory.
3. It must be simple and the language used has to be understandable and specific.
4. It has to attach importance to action rather than words.
5. There should be cordial employer-employee relations.
Communication is the flow of accurate information which people want, need and are entitled to
have for successful completion of the job. It is an established fact that one of the foundation
stones upon which organization rests is a system of communication. Coordination is largely
achieved through communications. The importance of effective communication in
management is described below.
1. Smooth and unrestricted running of the enterprise.
2. Quick decision and implementation.
3. Proper planning and coordination.
4. Maximum productivity with minimum cost.
5. Morale building and democratic management.
2.11DECISION MAKING
Decision-making, along with leadership and communication is one of the top three attributes a
successful manager needs. It is a direct result of thinking and you need to be able to think until it
hurts. Decision-making is directed to reaching a goal/objective. It is about the how, what, why,
when (and where) of a course of action and of how to overcome obstacles and to solve problems.
Decision-making is what turns thought into action: it implies change and requires a decision to
be made against a background of uncertainty and risk.
Decision-making skills
You need to be able to choose the action or course of action that is the best for you/your
organization to meet its objective(s). An effective decision is one that produces the goods, i.e.
gives the desired end result.
It is important to be able to project ahead, to take the expected and unexpected into account, to
have contingency plans in case events intrude in such a way as will turn a good decision into a
bad one.
There are usually several different decisions that can be taken and pressure to decide. Decide you
must, even if trial and error are then used to assess the decision, amend it or overturn it.
Fear of failure must not serve to make you risk-averse; rather it should push you harder to think
until it hurts.
The effective decision has these six elements:
1. Defining the objective
2. Gathering sufficient information
3. Identifying the feasible options

4. Evaluating those options

5. Making the decision (choosing an option)
6. Testing its implementation: by feel, by measurement and by assessment.
An effective decision-maker is always an effective thinker. The three essential skills are those of:
1. analyzing
2. synthesizing
3. Valuing.
An effective decision-maker knows that quick decisions are not necessarily the best ones and
decisiveness only results from thinking things through. Key decisions (and recognizing when
you are being asked to make or be involved in the making of key decisions) demand that great
care must go into analyzing (the component elements), synthesizing (putting ideas together) and
valuing (assessing relative worth).
Characteristics of decision making
1. It is a continuous process.
2. The question of decision making comes in to picture only when there are alternatives.
3. Decision making is always purposive.
4. It is an intellectual process supported by sound reasoning and judgment.
5. Decision making is all pervasive in that all levels of management take decisions though
impact and scope of decisions vary.

the