Engineering Management: Decision Making

• Managers provide leadership to achieve organizational objectives and must master decision-making.
• Situations often require choosing from options, each impacting organizational operations.
• An engineer manager's decision-making is vital for professional success.
• Poor decisions can destroy an organization, while good ones foster growth.

Decision-Making as a Management Responsibility

• Workplace decisions occur at all levels and management stages.

• Authorizing resource use requires decision-making.

• Engineer managers are responsible for decisions, and while mistakes happen, wise managers correct them promptly.

• Managers who avoid decisions are considered dangerous.

• Management aims for the best decision.

• They are accountable for decision outcomes.

• Higher management levels face bigger, complex decisions.

• Decisions require sound reasoning, as managers are held responsible.

What is Decision-Making?

• Decision-making involves identifying and selecting actions suitable for the situation's demands.
• Engineer managers use processes to determine the optimal solution.
• Decision-making happens at all management levels and functions like directing, organizing and planning.
• According to Nickels and other writers, decision-making is key to all management.

The Decision-Making Process

• Rational decision-making involves a series of steps:
  • Diagnose problem
  • Analyze environment
  • Articulate problem or opportunity
  • Develop viable alternatives
  • Evaluate alternatives
  • Make a choice
  • Implement decision
  • Evaluate and adapt decision results

Diagnose Problem

• First identifying the problem is the first step to intelligent decision making
  • Overlooking this makes future success impossible
  • Identification of the problem is key to the problems solution.
• A problem arises when there's a gap between the actual and desired situation and can be illustrated as follows:
  • Construction firm missing it's 25 story build target

Analyze the Environment

• The environment significantly affects an organization's success.
• Environmental analysis identifies internal or external constraints:
  • Internal constraints like limited funds, training, or poor facilities.
  • External constraints examples include patents, limited markets, or zoning regulations.
• Internal and external limitations must be considered when making decisions.
• Ignoring constraints can be costly, causing the president to relocate a chemical factory due to resident concerns.
  • The environment has two components, internal and external.
  • Internal environment pertains to organizational activities that inform decision making.
  • External environment involves variables outside the firm's control.

Develop Viable Alternatives

• Problems can often be solved and can be made possible by using the following steps:

  • Prepare list of alternative solutions
  • Determine the viability of each solution
  • Revise the list by striking out those that are not viable

• For instance:

  • An engineering increasing it's output by 30% as the result of a new agreement between them and one of their clients

• List of the alternative courses of action show the following by the engineering manager:

  • improve the capacity of the firm by hiring more workers and building additional facilities
  • Secure services of subcontractors
  • Buy the needed additional output from another firm
  • Stop serving some of the company's customers
  • Delay servicing some clients.

• The list was then revised:

  • the 1st three were deemed viable
  • the last two were deleted due to adverse effects.

Evaluate Alternatives

• Once alternatives are considered viable, they are necessary to further reduce the list.

• Proper evaluation makes choosing the right list less difficult

• How the alternatives will be evaluated will depend on the factors determined by nature: nature of alternatives, firm & presented

• Wm.E. Souder suggests, "each alternative must be analyzed in terms of it's value, cost, and risk characteristics.

• The value of the alternatives refers to the benefits that can be expected.

  • Ex. a net profit of 10 million per year if the alternative is chosen

• Some common ways to evaluate these alternatives are:

  • Cost of the alternative: refers to out-of-pocket costs ex 100 million for construction of facilities
  • Opportunity costs: opportunity to earn interest ex. 2 million per year if money is invested elsewhere
  • Follow-on costs: Costs of maintenance of facilities ex. 3 million per year for maintenance of facilities constructed
  • Risk characteristics: Likelihood of achieving the goals of the alternatives.
  • Ex. net profit of 10 million is only 10 percent, may consider an alternative with 5 million profit, however, the probability is 80%
  • Engineers must choose how to fill a vacancy from a limited amount of applicants.
  • Evaluation by HR or by personal criteria to ensure the correct fit for all candidates.

Make a Choice

• After evaluating alternatives, the decision-maker selects a choice, ensuring prior steps were correct.
• Choosing refers to selecting among alternatives, Webber advises identifying consequences of each.
• Ranking alternatives best to worse based on factors like cost, benefit, or risk simplifies selection.
• The best way to get around this issue is to make sure particular attentiveness is given to the significance and affect of each choice.

Implement Decision

• Implementation is essential after making a decision, or decision-making becomes futile.
• Implementation means carrying out the decision to achieve objectives, and the best way to achieve them, is by having a good plan in place.
• Resources must be available, and involved parties must understand/accept the solution to follow through properly said Aldag & Stearns.
• The process should go into effect and be looked over thoroughly.

Evaluate and Adapt Decision Results

• Monitoring outcomes and analyzing results in decision success is important to assess if it worked.
• Managers should use feedback mechanisms to ensure the overall results and ensure information of future decisions.
• Feedback involves checking each stage of the process to ensure the alternatives generated, the criteria used in evaluation, and the solution selected.
• Control involves actions to ensure that activities are completed to the desired amount and on task.

Approaches in Solving Problems

• Engineer managers address simple/complex problems using:
  • Qualitative evaluation
  • Quantitative evaluation
• Qualitative evaluation uses intuition.
• Managers use the qualitative approach when the decision making is:
  • Fairly simple
  • Familiar
  • Low Cost
  • Immediate decisions

Quantitative Models for Decision Making

• Types of data techniques which may be useful in decision-making:
  • Inventory
  • Queuing
  • Network
  • Forecasting
  • Regression analysis
  • Simulation
  • Sampling Theory
  • Statistical decision theory

Inventory Models

• Inventory Models assist engineering managers in inventory decisions:

  • Economic Order Quantity Model: calculates the ideal order quantity to minimize annual costs.
  • Production Order of Quantity Model: applies economic order to specific production order, and scheduling.
  • Back Order of Quantity Model. inventory model used for planned shortages
  • Quantity Discount: minimizes total cost using discounts offered by supplier
  • Queuing Theory: describes determining service units to minimize customer waiting time and cost.
  • Network Models: break down complex tasks into smaller, independently managed segments. Consists of PERT and CPM

• Key network models:

• PERT: schedules, monitors, and controls complex projects using three time estimates.

• CPM: schedules, monitors, and controls complex with one time factor

• Forecasting: Engineer managers must make decisions for future implications

• Regression analysis examines the association of two or more variables and comes in the form of either Simple or Multiple depending on the variable types.

• Simulation: simulation is modeled to represent real life which helps determine decisions mathematically for the decision maker.

• Linear programming optimizes solutions within imposed constraints and is a very useful decision-making tool when supply and demand limitations are a constraint.

• Sampling: a quantitative data technique when samples are statistically determined for quality control

  • This is helpful when data gathering is expensive in time and money.
    • Statistical Decision: using a rationalize way to conceptualize, analyze and solve problems situations

• Additional info is helpful when revising for even probability.

  • When the decision maker is able to assign probability the use of probalistic happens

Explore the impact of engineering manager decisions on organizations. Learn strategies for flawed decision correction, resource allocation, and risk assessment in project selection to improve management responsibility and effectiveness.