EIM2301 Engineering Management Lecture 08 PDF

12/1/2024 EIM2301 Engineering Management Lecture 08 The Functions of Engineering Management: The Controlling Function Outline 1 Introduction 2 Activities of Controlling...

12/1/2024 EIM2301 Engineering Management Lecture 08 The Functions of Engineering Management: The Controlling Function Outline 1 Introduction 2 Activities of Controlling 2 1  12/1/2024 Introduction The function of controlling in engineering management refers to activities carried out by an engineering manager to: assess and regulate work in progress, evaluate results to secure and maintain maximum productivity and reduce and prevent unacceptable performance. 3 Nature of Controlling Function To efficiently implement any assignment project, program, or plan, managerial control is crucial. Any forward-looking strategic plan becomes of questionable value if its implementation is poor. Furthermore, without adequate control, managerial delegation is ineffective, rendering the managerial leadership less effective. 4 2  12/1/2024 Activities of Controlling 4. 2. Measuring 3. Evaluating 1. Setting standards Controlling performance performance performance 5 Activities of Controlling 4. 2. Measuring 3. Evaluating 1. Setting standards Controlling performance performance performance 6 3  12/1/2024 Setting Standards To set standards is to specify criteria by which work, and results are to be measured and evaluated. Setting performance standards defines the expected outcome explicitly. Setting standards provides specific guidelines for exercising authority and making decisions. 7 Setting Standards (cont.) Standards are typically established in the form of how many (number of units), how good (quality, acceptance), how well (user acceptance), and how soon (timing), as imposed by the company management, the customers, or the marketplace. It is worth noting that current trends of setting standards emphasize the inclusion of customers’ perspectives. 8 4  12/1/2024 Types of Standards (1 of 2) specify metrics related to quality, quantity, Technical mean time between failures (MTBF), maintenance requirements, and so on. Historical are based primarily on past records those related to competition, sales, return Market on investment (ROI), earning expectation by securities analysts, and other factors. 9 Types of Standards (2 of 2) relate to the strategic and operational needs of the Planning company. They address topics such as objectives, programs, schedules, budgets, and policies. metrics related to the safe operation of the company’s facilities. Government programs such as the U.S. Safety Occupational Safety and Health Administration (OSHA) promulgate some of these safety standards equal specific practices related to affirmative action for the employment purpose of achieving fairness among a diversified opportunity (EEO) workforce. 10 5  12/1/2024 Example (1 of 2) The engineering director asks her managers whether they have any nominations for promotions from within their respective departments. The maximum number of promotions allowed for the entire division is two. The nominations must be selective and only for people whose performance has been outstanding. One manager thought his whole team had been outstanding, so he recommended all 10 for promotion. He reasoned, “It is better for the morale of the team that they know that I support all of them fully. If the director now promotes 1 of the 10 or none at all, then they will not feel so bad knowing that at least I have thought them all worthy of being promoted.” What should the director do? 11 Example (2 of 2) The director should call the manager in and reprimand him for not following the instructions given, for being selective in nominating candidates for promotion, neglecting the delegated responsibility of evaluating the performance of his staff fairly and objectively, and wanting to pass on his own responsibility to his director so as to be the “good guy.” She should order the manager to repeat the nomination process and come up with a rank-ordered list of outstanding performers for possible promotion within two days. If he refuses to do so, this will be registered as one incidence of disobedience. Repeated offenses of this type can lead to immediate discharge. 12 6  12/1/2024 Barriers that prevent good standards from being readily developed. Standards may be too subjective Standards may be confusing and may not clearly indicate the criteria for excellence. Standards may be qualitative and vague and thus subject to divergent interpretations by different people. Standards may also be set without proper consideration of the constraints related to resources and implementation. 13 Benchmarking a method of defining performance standards in relation to a set of internal and external references. Benchmarking Internal External uses references internal to uses references external a company to set to the company to set performance standards performance standards 14 7  12/1/2024 Internal Benchmarking Example Company X has achieved a productivity of $150,000 per employee in 2014 and is determined to continue improving performance on a yearly basis. The company president sets a new performance standard for the year 2015 at $165,000 per employee, a performance level of 10% higher than the previous year. 15 External Benchmarking Financial production, product delivery, quality Balanced set of performance metrics ratios control, time to market, customer to properly monitor additional service, reliability, customer company activities that also have a problem solving, and others. profound impact on its future success Balanced Performance scorecards metrics work processes or procedures perfected and upgraded by various An approach to new product companies over the years to address development to ensure a cost- specific problems and issues in competitive edge in the Target pricing Best Practices engineering, production, marketing, marketplace strategic management, business development and other areas of Critical corporate governance. success the necessary and sufficient conditions for achieving factors “tried-and-true” methods to achieve success in specific business management, engineering, useful results and add value to the production, and marketing domains. companies. These factors are derived from the successes and failures 16 experienced by companies in various industries. 8  12/1/2024 Example Financial Ratios Assuming that the gross margins of many service-oriented public companies are in the range of 35%–40% for the last several years, as published regularly by Wall Street securities firms, then setting the gross margin target for a specific company at the 40% level for the immediate future year is a performance standard defined by external benchmarking. Setting the gross margin at 40%, if subsequently met, will ensure that the company will be among the best performers in its industry. 17 Target Pricing 1. The company conducts a survey to determine the current prices of products that are in direct competition with the new products that the company is planning to develop. 2. Using these prices as references, the company sets a target selling price (such as 20% below the prices of the competitive products) for its new product. 3. The company deducts the required gross margin for the company to sustain itself while meeting the shareholders’ expectations. The resulting figure is the cost of goods sold target (the cost target) for the company’s new yet-to-be- developed product. The cost target is then imposed on the company’s production and engineering departments as a performance standard for developing the new product. Funds are available for developing the new product only if the cost target can be met. 18 9  12/1/2024 Sample Performance Metrics (1 of 3) ROI (Return on Investment), Financial ROA (Return on Asset), ROS (Return on Sales), Debt to Equity Ratio, Inventory turns, Number of units produced per employee, Sales per employees Profit per unit of production Break-even volume 19 Sample Performance Metrics (2 of 3) Average number of defects detected by customers in the first month of ownership Non- Hours lost to production due to unscheduled maintenance Work in progress in the plant financial Number of machines per worker Length of time to change a machine or introduce a new operation Number of job classifications in the plant Amount of materials made obsolete by model changes Average energy consumption per unit of production Rate of absenteeism in the workforce Number of months required to introduce a new product model Number of engineering change requests during a new product development program Number of units produced prior to a model change (batch production) Time metrics (response time, lead time, uptime, downtime, etc.) 20 10  12/1/2024 Sample Performance Metrics (3 of 3) Parts count Product Number of material types used related Material use in each component Assembly process used in production Service quality: field repair versus field replacement Failure-mode effect analysis Quality of product as experienced by customers Long-term durability of product Fraction of sales to repeat customers Company responsiveness to service requests 21 Activities of Controlling 4. 2. Measuring 3. Evaluating 1. Setting standards Controlling performance performance performance 22 11  12/1/2024 Measuring Performance recording and reporting of work done and the outcome attained. Steps to measure performance: collect, store, analyze, and report information systematically; compare the performance with established standards; and issue reports such as data summary, collection of results, and forecasts to document findings. 23 Tools for Measuring Performance time study, work sampling, and performance rating, among others for routine work, such as that on factory floors. 24 12  12/1/2024 Activities of Controlling 4. 2. Measuring 3. Evaluating 1. Setting standards Controlling performance performance performance 25 Evaluating Performance to appraise work in progress, assess the completed job, and provide feedback. The following steps are usually taken to evaluate employee performance: establish limits of tolerance, note variations (deviation within the tolerance limits) and exceptions (deviation outside of the tolerance limits), provide recognition for good performance, and give timely, proper credit, if justifiable. Voltaire said, “Appreciation is a wonderful thing. It makes what is excellent in others belong to us as well.” Paying attention to deviations encourages employee self-appraisal, fosters initiative, and enhances managerial efficiency 26 13  12/1/2024 Evaluating Performance (cont.) A rating method often used in industry is to rank an employee in one of five categories: (1) outstanding, (2) above average, (3) average, (4) poor, and (5) failure Should the performance of an employee be rated as poor or failure, his or her manager must initiate action to correct such performance in a timely manner. 27 Activities of Controlling 4. 2. Measuring 3. Evaluating 1. Setting standards Controlling performance performance performance 28 14  12/1/2024 Controlling Performance to rectify and improve the work done and the results obtained. Reasons for performance deficiencies may include: a lack of known performance standards or feedback, not possessing the required technical capabilities to perform the tasks at hand, or not having a good work ethic and personal initiative 29 Controlling Performance Employees’ mistakes should be corrected by focusing on future progress and growth. Employers should take short-term action to overcome deficiencies, such as getting assistance from outside consultants or hiring temporary workers. To avoid repeating the noted deviations, long-term-oriented actions may be considered, such as improving training, modifying work procedures and policies, transferring employees, or recommending c 30 15