Cebu Institute of Technology

University
N. Bacalso Avenue, Cebu City, Philippines COLLEGE
OF ENGINEERING AND ARCHITECTURE
Department of Industrial Engineering

COURSEWARE
Week 7
ES034 | ENGINEERING MANAGEMENT

Adopted by:
Engr. Aries M. Rivero

Prepared by:
ENGR. JOYCE MARIE MONTEGRANDE

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 ORGANIZING
AND
STAFFING,

Types of Organization,
Organizational Structure,
Definition and Staffing Procedure

INTENDED LEARNING OUTCOMES

✓ Discuss organizing as a management function
✓ List and explain the vertical and horizontal dimensions of organizations structures
✓ Examine how are the directions in organizational design changing the workplace
✓ Define human resource management
✓ Discuss how organizations attract; develop; and maintain a quality workforce

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 Self-Assessment: Empowering Others

Instructions

Think of times when you have been in charge of a group in a work or student situation. Complete the
following questionnaire by recording how you feel about each statement according to this scale:

1 2 3 4 5
Strongly disagree Disagree Neutral Agree Strongly agree

When in charge of a team, I find that:

1. Most of the time other people are too inexperienced to do things, so I prefer to do them myself.
2. It often takes more time to explain things to others than to just do them myself.
3. Mistakes made by others are costly, so I don’t assign much work to them.
4. Some things simply should not be delegated to others.
5. I often get quicker action by doing a job myself.
6. Many people are good only at very specific tasks, so they can’t be assigned additional responsibilities.
7. Many people are too busy to take on additional work.
8. Most people just aren’t ready to handle additional responsibilities.
9. In my position, I should be entitled to make my own decisions.

Scoring
Total your responses to get an overall score. Possible scores range from 9 to 45.

Interpretation
The lower your score, the more willing you appear to be to delegate to others. Willingness to delegate is
an important managerial characteristic. It is how you, as a manager, can “empower” others and give them
opportunities to assume responsibility and exercise self-control in their work. With the growing importance
of horizontal organizations and empowerment in the new workplace, your willingness to delegate is worth
thinking about seriously.

ORGANIZING AS A MANAGEMENT FUNCTION

Organizing is the process of arranging people

and other resources to work together to
accomplish a goal. Its purpose as one of the
basic functions of management is to create a
division of labor and then coordinate results to
achieve a common purpose.

What Is Organization Structure?

The way in which the various parts of an

organization are arranged is usually referred to
as the organization structure. It is the system of
tasks, workflows, reporting relationships, and
communication channels that link together the work of diverse individuals and groups. Any structure should

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do a good job of both allocating tasks through a division of labor and providing for the coordination of
performance results. A structure that does both things well helps to implement an organization’s strategy.
The vertical dimension of organization structure indicates who has the authority to make decisions and who
is expected to supervise which subordinates. The horizontal dimension is the basis for dividing work into
specific jobs and tasks and assigning those jobs into units such as departments or teams.

Formal Structures

Organizational chart is a diagram reporting relationship and the arrangement of work positions within an
organization. A typical organization chart identifies positions and job titles as well as the lines of authority
and communication between them. It shows the formal structure, or how the organization is intended to
function.

Reading an organization chart should help you learn the basics of an organization’s formal structure. This
includes:

• Division of work—Positions and titles show work responsibilities.

• Supervisory relationships—Lines show who reports to whom.
• Communication channels—Lines show formal communication flows.
• Major subunits—Positions reporting to a common manager are shown.
• Levels of management—Vertical layers of management are shown.

Informal Structures

Behind every formal structure typically lies an informal structure.

This is a “shadow” organization made up of the unofficial, but often
critical, working relationships between organizational members. If
the informal structure could be drawn, it would show who talks and
interacts with whom, regardless of their formal titles and
relationships. The lines of the informal structure would cut across
levels and move from side to side. They would show people
meeting for coffee, in exercise groups, and in friendship cliques.
No organization can be fully understood without gaining insight into
the informal structure as well as the formal one.

VERTICAL DIMENSIONS OF ORGANIZATION STRUCTURE

Work Specialization

At the Wilson Sporting Goods factory in Ada, Ohio, 150 workers (with an average tenure
exceeding 20 years) make every football used in the National Football League and most of those
used in college and high school football games. To meet daily output goals, the workers specialize
in job tasks such as molding, stitching and sewing, lacing, and so forth. This is an example of
work specialization.

It is the dividing work activities into separate job tasks. Individual employees “specialize” in doing
part of an activity rather than the entire activity to increase work output. It is also known as division
of labor.

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Departmentalization

In our university, all jobs involving staffing activities such as recruitment, hiring, and training are
often grouped into a Human Resources Department. All the student services for each program
are catered in each Program Department (e.g. concerns of CE students will be addressed to the
Civil Engineering Department etc.). This is an example of departmentalization.

It is through departmentalization that related jobs, activities, or processes are grouped into major
organizational subunits. A degree of coordination is achieved through departmentalization
because members of the department work on interrelated tasks, are guided by the same
departmental rules, and report to the same department head.

The exhibits below show the five basic types of departmentalization: (1) functional departments,
(2) geographical departmentalization, (3) product departmentalization, (4) process
departmentalization and (5) customer departmentalization as well as the advantages and
disadvantages of each.

Functional Departmentalization – groups jobs according to function

Geographical Departmentalization – groups jobs according to geographic region

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Product Departmentalization – groups jobs by product line

Process Departmentalization – groups jobs based on product or customer flow

Customer Departmentalization – groups jobs based on specific and unique customers who have
common needs

Chain of Command

Suppose you were at work and had a problem with some issue that came up. What would you
do? Who would you go to help you resolve that issue? People need to know who their boss is.
That’s what the chain of command is all about. The chain of command is the line of authority
extending from upper organizational levels to lower levels, which clarifies who reports to whom.
Managers need to consider it when organizing work because it helps employees with questions
such as “Who do I report to?” or “Who do I go to if I have a problem?” To understand the chain of
command, you have to understand three other important concepts: authority, responsibility, and
unity of command.

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 Authority

Authority is the formal right of a manager to make decisions, give orders, and expect
those orders to be carried out. It originates at the top of the organization based on the
property rights of the owners and flows down the vertical organizational hierarchy from top
executives to middle managers to supervisors and operative employees. Consequently,
positions at the top of the hierarchy have more authority than positions at lower levels.

Responsibility

When managers use their authority to assign work to employees, those employees take
on an obligation to perform those assigned duties. This obligation or expectation to
perform is known as responsibility. All employees are expected to accept these
responsibilities as a condition of employment.

Accountability

A manager may delegate responsibilities to subordinates, but he or she remains

accountable for the actions of subordinates. Managers hold the ultimate responsibility for
tasks they delegate. Accountability means that a manager or other employee with
authority and responsibility must be able to justify results to a manager at a higher level in
the organizational hierarchy. One way managers are held accountable for the
performance of their units is in periodic performance appraisals.

Unity of Command

The concept of unity of command is based on one of Fayol’s 14 principles of

management: a subordinate should have only one direct supervisor. Multiple bosses may
give a subordinate conflicting instructions or goals. In unity of command, a decision can
be traced back from the subordinates of the manager who made it.

Span of Control

How many employees can a manager

efficiently and effectively manage? That’s
what span of control is all about. It
determines the number of managers and
number of levels of management in an
organization. A manager with a small span
of control supervises a small number of
subordinates (about five or six on average)
and can closely monitor the work of each
subordinate.

Centralization and Decentralization

Centralization and decentralization are related to the degree of concentration of decision authority
at various levels of the organization. Centralization is the degree to which decision making takes
place at upper levels of the organization. If top managers make key decisions with little input from
below, then the organization is more centralized. On the other hand, the more that lower-level
employees provide input or actually make decisions, the more decentralization there is. Keep in

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mind that centralization-decentralization is not an either-or concept. The decision is relative, not
absolute—that is, an organization is never completely centralized or decentralized.

Formalization

Formalization refers to how standardized an organization’s jobs are and the extent to which
employee behavior is guided by rules and procedures. In highly formalized organizations, there
are explicit job descriptions, numerous organizational rules, and clearly defined procedures
covering work processes. Employees have little discretion over what’s done, when it’s done, and
how it’s done. However, where formalization is low, employees have more discretion in how they
do their work.

HORIZONTAL DIMENSIONS OF ORGANIZATION STRUCTURE

The horizontal basis for organizing jobs into units in an organization have three basic approaches:
functional, divisional, and matrix structure.

Functional Structures

In functional structures, people with

similar skills and performing similar
tasks are grouped together into formal
work units. Members of functional
departments share technical expertise,
interests, and responsibilities. For
example, the departments shown in the
figure are engineering, production,
marketing, and finance. The president integrates the activities of these departments so that each
department’s efforts are aligned with organizational goals and objectives.

Advantages:

1. Decision authority is centralized at the top of the organization hierarchy.

2. Career paths foster professional identity with the business function. Because this
approach permits employees to do specialized tasks, it creates a high degree of
efficiency.
3. A functional form of structure causes employees to develop specialized expertise in a
functional area of the business, such as finance or marketing.

Disadvantage:

1. Communication barriers
2. Conflicts between functional departments because focuses only on its own concerns, the
“big picture” issues can easily get neglected. This relates to something called the
functional chimneys or functional silos problem—a lack of communication, coordination,
and problem solving across functions.
Example: Engineers who work in an engineering department may provide a “state of the
art” technical design that is difficult to manufacture and that contains features that are not
desired by the targeted customer. In this case, engineering goals are at odds with
production and marketing goals. If the top executive does not have time to manage the
conflict among the engineering, marketing, and production departments, the product

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 development cycle may slow down as the departmental managers try to work out their
differences. By the time these differences are ironed out the product may be late to market
and potential sales revenues are lost.

Divisional Structures

The divisional approach organizes employees into units based on common products, services, or
markets. The divisional approach is used when a company produces many products or provides
services to different types of markets, such as regional, domestic, and international markets, that
require specialized knowledge. In the divisional approach key functional activities are present in
each division and are coordinated by a general manager responsible for generating divisional
profits.
Example: The figure shows a hypothetical
computer company structured into three
divisions: computer, software, and
consulting services. The division structure
allows employees to develop expertise in
both a function and a line of products or
services. A salesperson in the computer
division can develop specialized product
knowledge in selling computer systems
without knowing about software or
consulting services. The salesperson is
likely to produce more sales revenues by
focusing on computer systems rather than trying to sell software and consulting.

Advantages:

1. Coordination among different business functions.

2. Improved and speedier service.
3. Accountability for performance.
4. Development of general manager and executive skills.

Disadvantages:

1. Duplication of resources by two or more departments.

2. Reduced specialization in occupation skills.
3. Competition among divisions.

Matrix Structures

The matrix approach superimposes a divisional structure over a functional structure in order to
combine the efficiency of the functional approach with the flexibility and responsiveness to change
of the divisional approach. Each employee in a matrix unit reports to two bosses—a functional
manager and a product or project manager. This means that there are dual lines of authority in
the matrix organization.

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 As seen in the figure, there is a vertical chain of
command for the functions of finance, operations,
manufacturing, and sales and marketing. There is a
lateral chain of command for the three regions. An
engineer under function of operations who is assigned to
work in Region A will report to both Region manager A
and the vice president of operation.

Advantages:

1. Efficient utilization of scarce, expensive specialists.

2. Flexibility that facilitates starting new projects and
ventures quickly.
3. Development of cross-functional skills by employees.
4. Increased employee involvement in management decisions affecting project or product
assignments.

Disadvantages:

1. Employee frustration and confusion as a result of the dual chain of command.

2. Conflict between product and functional managers over deadlines and priorities.
3. Too much time spent on coordinating decisions in meetings.

MANAGEMENT MINICASE - Decentralization Works at Johnson & Johnson

Johnson & Johnson has relied on decentralization as a good way to spark innovation and train corporate leaders,
according to William Weldon, CEO of Johnson & Johnson, a health-care products company that makes such brands
as Band-Aids, Tylenol, and Splenda. Johnson & Johnson’s commitment to innovative products has led to 76
consecutive years of sales increases, 25 consecutive years of adjusted earnings increase, and 47 consecutive years
of dividend increases for shareholders.

Decentralization has helped Johnson & Johnson develop leaders. Because managers know they can operate a
business unit profitably, they try hard for the top jobs at the company’s best businesses. Johnson & Johnson has
250 operating companies in 57 countries and generated annual revenues of $63.7 billion in 2008. All these separate
businesses create a wide range of development opportunities for mangers at Johnson & Johnson. A decentralized
approach helps innovation “in that it allows different
people with different skills, different thoughts, to bring together different products and technologies to satisfy the
unmet needs of patients or customers,” according to CEO Weldon. One example of this kind of innovation happened
when Johnson & Johnson brought together individuals from its medical products division with its drug business. The
combined efforts of these specialists generated the idea of putting a drug on a stent to treat cardiovascular disease,
which was a major breakthrough.

DISCUSSION QUESTIONS
1. What are the advantages of using a decentralized organization structure at Johnson & Johnson? What is the
basis of organizing employees into units at Johnson & Johnson?
2. Can you think of any inefficiencies or drawbacks to Johnson & Johnson’s emphasis on decentralization?

ACTION LEARNING EXERCISE – You are the Advisor to the Business School
The typical university business school is organized on a functional basis, with departments heads in
accounting, finance, information systems, management, and marketing all reporting to a dean. You are
on your alma mater’s advisory board and the dean is asking for advice. What suggestions might you give
for redesigning this structure to increase communication and collaboration across departments, as well
as improve curriculum integration for students in all areas of study?

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 STAFFING TO HUMAN RESOURSE MANAGEMENT

Staffing has long been an integral part of

the management process. Like other
traditional management functions, such as
planning and organizing, the domain of
staffing has grown throughout the years.
This growth reflects increasing
environmental complexity and greater
organizational sophistication. Early definitions of staffing focused narrowly on hiring people for
vacant positions. Today, the traditional staffing function is just one part of the more encompassing
human resource management process. Human resource management involves the acquisition,
retention, and development of human resources necessary for organizational success.

The human resource management, or HRM, is all about—attracting, developing, and maintaining
a talented and energetic workforce. If an organization can’t do this well and therefore doesn’t have
talented and committed people available to do the required work, it has very little chance of long-
term success.

HUMAN RESOURCE MANAGEMENT PROCESS

Attracting a Quality
Workforce

Developing a Quality
Workforce

Retaining Competent and

High-Performing
Employees

The Human Resource Management Process

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Attracting a Quality Workforce

Human Resource Planning

Human resource planning is the process of analyzing an organization’s staffing needs and
determining how to best fill them. The foundations for human resource planning begin with job
analysis—the orderly study of job facets to determine what is done when, where, how, why, and
by whom. This information is then used to write or update job descriptions that describe specific
job duties and responsibilities. The information in a job analysis is used to create job
specifications. These are lists of the qualifications—such as education, prior experience, and
skills—needed by someone hired for a given job. These specifications become important inputs
to the recruiting process.

Recruitment and Decruitment

If employee vacancies exist, managers should use the information gathered through job analysis
to guide them in recruitment—that is, locating, identifying, and attracting capable applicants.

External and Internal Recruitment

The recruiting that takes place on college campuses is one example of external
recruitment, in which job candidates are sought from outside the hiring organization.
External recruits are found through company websites and social media sites, virtual job
fairs, specialized recruiting websites such as Mynimo and Job Street, employment
agencies and headhunters, university placement centers, personal contacts, and
employee referrals. Internal recruitment, by contrast, seeks applicants from inside the
organization. Most organizations have a procedure for announcing vacancies through
newsletters, electronic postings, and the like. They also rely on managers and team
leaders to recommend internal candidates for advancement.

On the other hand, if HR planning shows a surplus of employees, managers may want to reduce
the organization’s workforce through decruitment. The following are some of the decruitment
options:
Firing Permanent involuntary termination
Layoffs Temporary involuntary termination; may last only a few days or extend to
years
Attrition Not filling openings created by voluntary resignations or normal
retirements
Transfers Moving employees either laterally or downward; usually does not reduce
costs but can reduce intraorganizational supply–demand imbalances
Reduced Having employees work fewer hours per week, share jobs, or perform their
workweeks jobs on a part-time basis
Early Providing incentives to older and more senior employees for retiring before
retirements their normal retirement date
Job sharing Having employees share one full-time position

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Selection

Once a manager has a pool of candidates, the next step is to select whom to hire. The process
of selection as outlined in the figure below which involves gathering and assessing information
about job candidates and making a hiring decision.

Selection Techniques:

A. Reliability and Validity

Whether the focus is on qualifications or the best person, the selection process is always a
prediction exercise. This makes the reliability and validity of the selection techniques very
important. Reliability means that the selection technique is consistent in how it measures
something. That is, it returns the same results time after time. For example, a personality test is
reliable if the same individual receives a similar score when taking the test on two separate
occasions. Validity means that there is a clear relationship between what the selection device is
measuring and eventual job performance. That is, there is clear evidence that once on the job,
individuals with high scores on an employment test, for example, outperform individuals with low
scores.

B. Interviews

Very few individuals are hired for professional positions without first sitting through one or more
interviews. And, the traditional face-to-face interview with HR staff and/or hiring manager remains
the most common method of assessment in the selection process. But the telephone interview
and the virtual or online video interview are rapidly increasing in frequency and importance. Both
are often part of an initial screening that tests applicants for basics such as technical skill set and
experience, as well as communication skills, personal impression, and potential person-
organizational culture fit.

C. Employment Test

Employment tests are often used to identify a candidate’s intelligence, aptitudes, personality,
interests, and even ethics. But organizations need to be careful about the way that they use tests
and make sure that they are documented as valid predictors of job performance.

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Developing a Quality Workforce

Orientation

The first formal experience of newcomers often begins with some form of orientation—a set of
activities designed to familiarize new employees with their jobs, coworkers, and key aspects of
the organization. A good orientation program clarifies the organization’s mission and goals,
explains the culture, and communicates key policies and procedures. Organization orientation
informs the new employee about the company’s goals, history, philosophy, procedures, and rules.
It should also include relevant HR policies and maybe even a tour of the facilities.

Training

Training is a set of activities that helps people acquire and improve job-related skills. This applies
both to initial training of an employee and to upgrading or improving skills to meet changing job
requirements. Organizations that value their human resources invest in extensive training and
development programs to ensure that everyone always has the capabilities needed to perform
well.

Training Methods:

• On-the-job—Employees learn how to do tasks simply by performing them, usually after an

initial introduction to the task.
• Job rotation—Employees work at different jobs in a particular area, getting exposure to a
variety of tasks.
• Mentoring and coaching—Employees work with an experienced worker who provides
information, support, and encouragement; also called apprenticeships in certain
industries.
• Experiential exercises—Employees participate in role playing, simulations, or other face-
to-face types of training.
• Workbooks/manuals—Employees refer to training workbooks and manuals for
information.
• Classroom lectures—Employees attend lectures designed to convey specific information.

Technology-Based Training Methods

• CD-ROM/DVD/videotapes/audiotapes/podcasts—Employees listen to or watch selected

media that convey information or demonstrate certain techniques.
• Videoconferencing/teleconferencing/satellite TV—Employees listen to or participate as
information is conveyed or techniques demonstrated.
• E-learning—Internet-based learning where employees participate in multimedia
simulations or other interactive modules.

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Retaining Competent, High-Performing Employees

Performance Management

Managers need to know whether their employees are performing their jobs efficiently and
effectively. That is what a performance management system does—establishes performance
standards that are used to evaluate employee performance. How do managers evaluate
employees’ performance? That is where the different performance appraisal methods come in.
Performance appraisal is the process of formally assessing someone’s work accomplishments
and providing feedback. Such a performance review serves both evaluation and development
purposes.

Compensation and Benefits

Managers must develop a compensation system that reflects the changing nature of work and
the workplace in order to keep people motivated. Organizational compensation can include
many different types of rewards and benefits such as base wages and salaries, wage and salary
add-ons, incentive payments, and other benefits and services. As illustrated in figure below, an
employee’s total compensation package is made up of three components.

• Base compensation - the

fixed amount of money the
employee expects to
receive in a weekly or
monthly paycheck or as an
hourly wage.
• Pay incentives - the
compensation that rewards
employees for high performance. Incentives may be based on employees’ own
contributions or the performance of the team, business unit, or entire company.
• Benefits – are indirect compensation, which accounts for almost 40 percent of the typical
total compensation package. Benefits include health insurance, pension plans,
unemployment insurance, vacations, and sick leave.

ACTION LEARNING EXERCISE 7.0

With your desire to help your community, you wanted to implement your Social Entrepreneurship
Business Idea in Week 2 (Action Learning Exercise – Becoming A Social Entrepreneur). But you cannot
make it possible without the help of an accountant who will manage you’re the business finances.
Because of it, you decided to hire one. Identify the following that will aid you in your hiring process.

1. Create a job description and job specification of the new resource that you will be hiring as your
accountant.
2. Recruitment Plan: What are your recruitment activities?
3. Selection Plan: What selection techniques are you going to use?
4. Once you selected the best candidate, why is orientation an important part of the human
resource management process?
5. What kind of trainings are you going to provide?
6. How often will you do the performance appraisal and how are you going to do it?
7. What compensation and benefits are you going to provide to your new hire?

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 ENDOFWEEK7

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