Industrial Management and Engineering

Economics

Chapter One
Basic Management Concepts and Industrial
Organization

Prepared by Alebel M.
 What comes in your mind when one talks
about Management?
 Management is the use of people and other resources
(human & non human) to accomplish objectives of an
organization.
Human - skill and knowledge.
Non human - capital, land, technology, plant and
equipment.
Objective:
 Maximize the potential of the people and coordinate
their efforts to attain some predetermined goal.
 Managers use resources to attain organizational goals.
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  Management is the attainment of organizational goals

through efficient & effective utilization of resources.

 Efficiency means “Doing things right”

Getting the most output for the least inputs

 Effectiveness means “Doing the right things”

Attaining organizational goals

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 Management as a Unifying Force

Plant
&
Equipment

Management is the process of

bringing human and nonhuman
Land resources together and
coordinating them to accomplish
organizational goals.
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 Cont.…
Organization:- is a stable and formal social structure that
takes resources from the environment and processes them to
produce outputs.

Common characteristics of organization:

- Goal

- People

- Structure

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 Type of organizations based on purposes for which
they are formed;
1. Profit oriented organization (Product/Services)
 Return on investment /for making money

2. Nonprofit-oriented organization
 For offering services like;
 Educational Institutions

 Hospitals, social welfare agencies like red cross

3. Mutual Benefit organizations

 To advance members’ interest like;
 labor unions, trade associations, Political parties. Etc.
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 Organizations structure
 Line organization: sometimes called military organizations

The chain of command is direct and so decisions can usually be

quick and implemented rapidly. Clear line of responsibility
and authority.

 Functional organization: type of activity or functions

determines area of responsibility and authority. An expert or
specialist is placed in charge of each functions and will have
direct control of that functions wherever its undertaken within
the enterprise.

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 Cont.…

 Line and functional organization: combination of line and

functional and is most successful type of organizations

 Matrix or project organization: is set for temporary time to

accomplish certain project work. Specialist from different
discipline work as team and after project completion they go
back to their role.

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 Industrial management
Industrial management is a broad field of study which is
targeted on creation of management systems and integrating the
people and their activities to improve productivity by utilizing
the existing resources.

 The subject emphasizes studying the performance of

machines and the people.

 Industrial management, therefore, is structured approach to

manage the operational activities of an organization.

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 Scope of industrial management & Eng'g economy
 Initially the scope & application of industrial management was

restricted to manufacturing industry. Later on it spread to non-

manufacturing activities such as hydroelectric power station,
construction & transportation, farm and air-line operation and
maintenance, public utilities & military operations.

 Where as engineering economics helps to make informed

financial evaluation, decision and financial report of engineering

projects, investment, lease/buy decisions.

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 Importance of industrial Management

A well skilled Industrial Manager will going to

Make business decisions easily.

Take risks for which the reward is profit

Act as an innovator by introducing new products, new

technology and new ways of organizing business.

Put together the factors of production to produce goods and

services

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 Manager’s Interactions with Other Groups of
People

Creditors &
Suppliers Superiors Customers

Manager Coworkers
Peers

Government
Community Subordinates Agencies

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 Functions of Management

The
Functions of
Management

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 Functions of Management…
I. Planning:- is the process of setting objectives for the
future and developing courses of action to accomplish
them. (What, How, Who &When)

II. Organizing:- is the process of arranging people and

physical resources to carry out plans and accomplish
organizational objectives.

III. Staffing:- is the process of matching jobs & people.

(Human resource planning, recruiting, training &
Development, Performance appraisal,

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 Cont.…
IV. Directing:- is the act of motivating or causing people to
perform certain tasks intended to achieve specific objectives.
It is the act of making things happen. (Communication,
leadership, supervision, motivation, and coordination)

V. Controlling:- is the process by which managers

determine whether organizational objectives are achieved
and whether actual operations are consistent with plans.
(Goal, actual, gap, and corrective measures)

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 Management Roles
1. Interpersonal Roles
Figurehead: All social, inspiration, legal and ceremonial
obligations. In this light, the manager is seen as a symbol of
status and authority.

Leader: Duties are at the heart of the manager-subordinate

relationship and include structuring and motivating
subordinates, overseeing their progress, promoting and
encouraging their development, and balancing effectiveness.

Liaison (unity): Describes the role of managers in representing

their organization in different occasions. As bridge like middle
management.

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 Cont.…
2. Informational Roles
Monitor: Duties include assessing internal operations, a department’s
success and the problems and opportunities which may arise. All the
information gained in this capacity must be stored and maintained.

Disseminator: Highlights factual or value based external views into the

organization and to subordinates. This requires both filtering and
delegation skills.

Spokesman: Serves in a public relations capacity by informing and

lobbying others to keep key stakeholders updated about the
operations of the organization.

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 Cont.…

3. Decision Roles

Entrepreneur: Roles encourage managers to create improvement

projects and work to delegate, empower and supervise teams in the
development process.
Disturbance handler: A generalist role that takes charge when an
organization is unexpectedly upset or transformed and requires
calming and support.
Resource Allocator: Describes the responsibility of allocating and
overseeing financial, material and personnel resources.
Negotiator: Is a specific task which is integral for the spokesman,
figurehead and resource allocator roles.
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 Management Hierarchy
Three distinct levels of management

Top Management

Middle Management

Supervisory Management

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 Cont.…
i. Top Management

 Made up of individuals who have the possibility of making the

decisions and formulating policies that affect all aspect of the

firm’s operations.

President
Vice President

Chief Executive Officers

Executive Vice President

 A manager’s assigned job duties and the authority needed to

fulfill those duties are what determine management level

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 Cont.…
ii. Middle Management

 Includes all managers above the supervisory level but below

the level where overall company policy is determined.

 Middle managers manage supervisors.

Regional Sales Managers

Academic Deans (Universities)
Directors of Nursing (Hospitals)

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 Cont.…

iii. Supervisory Management

 Supervisors manage workers who perform the most basic

job duties required in the business.

Sales Manager
Academic Department Chairperson (Universities)
Nursing Supervisors (Hospitals)

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 Management Skills

Management Success depends on both a fundamental

understanding of the principles of management and on
the application of technical, human and conceptual skills.

a. Technical Skills

Are the specialized knowledge and abilities that can be

applied to specific tasks.

Most important at lower level of management.

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 Cont.…
b. Human relation skills

 Are the abilities needed to resolve conflict, motivate,

lead, and communicate effectively with other workers.

 Equally important at all levels of management.

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 Cont.…
c. Conceptual Skills

Are the abilities needed to view the organization from a

broad perspective and to see the interrelations among its
components.

Are most important in strategic (long-range) planning;

therefore they are more important at top level
executives.

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 Management and productivity
 Management is concerned with productivity i.e. the
effectiveness and efficiency.
 In the past productivity improvement program were mostly
aimed at workers level but now it is for the management also.
 Productivity can be measured as the Output to Input ratios
within a time period with due consideration for quality.
Productivity = O P/I P(within time period and considered)
 Productivity can be improved by
a. By increasing O/P with same I/P.
b. By decreasing I/P but maintaining same O/P.
c. By Increasing O/P and decreasing I/P to change the ratio favorably.

 The I/P can be labor, material capital etc.

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 PRODUCTION AND PRODUCTIVITY
 Production refers to quantity of production
 productivity means the efficient use of resources consumed
for achieving that production.
 Resources are of several types:-
 material,
 men,
 machine hours,
 energy consumed,
 space utilized etc.

Lesser is the consumption of such resources per unit of

production, higher is the productivity.
 Productivity should not be confused with cost of manufacture, although a plant with
higher productivity will use less resources and its product is likely to be cheaper.

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 Cont.….
 28

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Thank you!!!