Republic of the Philippines

DON HONORIO VENTURA STATE UNIVERSITY

Cabambangan, Villa de Bacolor, Pampanga

COLLEGE OF ENGINEERING AND ARCHITECTURE

Department of Civil Engineering

A. Course Code / Title : ME212 – Engineering Management

B. Module Number : Module 2–Decision Making

C. Time Frame : Weeks 3 and 4 (2 hours per week)

D. Description : This module explains the role and responsibility of the Engineer
Manager when it comes to decision making and its process.

E. Objectives : At the end of this module, the learner should be able to:
1. Know the intricacies of decision-making.
2. Be able to identify problems and alternative courses of an
action which will be appropriate to the demands of the
situation.

F. Contents : I. Decision Making as a Management Responsibility

II. The Decision-Making Process
III. Approaches in Solving Problem

Managers of all kinds and types, including the engineer manager, are primarily tasked to provide leadership
in the quest for the attainment of the organization’s objectives. If he is to become effective, he must learn the
intricacies of decision making. Many times, he will be confronted by situations where he will have to choose from
among various options. Whatever his choice, it will have effects, immediate or otherwise, in the operations of this
organization.
The engineer manager’s decision making skills will be very crucial to his success as a professional. A major
blunder in decision making may be sufficient to cause the destruction of any organization. Good decisions on the
other hand, will provide the right environment for continuous growth and success of any organized effort.

I. DECISION MAKING AS A MANAGEMENT RESPONSIBILITY

Decisions must be made at various levels in the workplace. They are also made at the various stages in the
management process. If certain resources must be used, someone must make a decision authorizing certain persons
to appropriate such resources.
Decision making is a responsibility of the engineer manager. It is understandable for managers to make
wrong decisions at times. The wise manager will correct them as soon as they are identified. The bigger issue is the
manager who cannot or don’t want to make decisions. Delaney concludes that this type of managers are dangerous
and “should be removed from their position as soon as possible.”
Management must strive to choose a decision option as correctly as possible. Since they have that power,
they are responsible for whatever outcome their decisions bring. The higher the management level is, the bigger and
the more complicated decision-making becomes.

WHAT IS DECISION-MAKING?
Decision making may be defined as the process of identifying and choosing alternative courses of action in a
manner appropriate to the demands of the situation.
The definition indicates that the engineer manager must adapt a certain procedure designed to determine
the best option available to solve certain problems.
Decisions are made at various management levels (i.e. top, middle, and lower levels) and at various
management functions (i.e. planning, organizing, directing, and controlling). Decision making, according to Nickels
and others, “is the heart of all the management functions. “

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II. THE DECISION-MAKING PROCESS
Rational decision making according to David H. Holt, is a process involving the following steps:
1. Diagnose problem 5. Evaluate alternatives
2. Analyze environment 6. Make a choice
3. Articulate problem or opportunity 7. Implement decision
4. Develop viable alternatives 8. Evaluate and adapt decision results

1. Diagnose Problem
If a manager wants to make an intelligent decision, his first move must be to identify the problem. If the
manager fails in this aspect, it is almost impossible to succeed in the subsequent steps. An expert once said
“Identification of the problem is tantamount to having the problem half solved.”
What is a problem? A problem exists when there is a difference between an actual situation and a desired
situation.

2. Analyze the Environment

The environment where the organizations is situated plays a very significant role in the success or failure of
such an organization. It is, therefore, very important that an analysis of the environment be undertaken.
The objective of environmental analysis is the identification of constraints, which may be spelled out as
either internal or external limitations.
Examples of internal limitations are as follows:
1. Limited funds available for the purchase of Examples of external limitations are as follows:
equipment. 1. Patents are controlled by other organizations.
2. Limited training on the part of employees. 2. A very limited market for the company’s products
3. Ill designed facilities. 3. Strict enforcement of local zoning regulations.

When decisions are to be made, the internal and external limitations must be considered. It may be costly,
later on to alter a decision because of a constraint that has not been previously identified.

Components of the Environment.

The environment consists of two major concerns:
1. External
2. Internal
The external environment refers to variables that are outside the organization and not typically within the
short-run control of top management.
The internal environment refers to organizational activities within a firm that surrounds decision-making.

3. Articulate Problem or Opportunity

Before a strategy can be explored, a clear articulation of the problem has to happen.Getting clarity is
becoming increasingly high in value to leaders because the world and its complexity clouds our thinking.Part of
bringing in experts and outsiders is not necessarily to solve a problem, but identifying the problem and articulating
exactly what is wrong.Once the engineer could articulate the problem for themselves they feel empowered to make
the decisions and take action to getting a resolution.Getting clear on what the problem is in any given situation can
mean the difference between spending needless amounts of time and money or putting energy into the right areas of
focus to get real results.

4. Develop Viable Alternatives

Oftentimes, problems may be solved by any of the solutions offered. The best among the alternative
solutions may be considered by management. This is made possible by using a procedure with the following steps:
1. Prepare a list of alternatives solutions.
2. Determine the viability of each solutions.
3. Revise the list by striking out those which are not viable.

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 Figure 2.1. The Engineering Firm and the Internal Environment in Decision Making

THE ENGINEERING FIRM

INTERNAL ENVIRONMENT

Organizational Aspects
Like org. structure, policies, procedures,
rules, ability of management, etc. EXTERNAL
ENVIRONMENT
Marketing Aspects
Like product strategy, promotion strategy.
Etc.
DECISION
Personnel Aspects
Like recruitment practices, incentive
systems, etc.

Production Aspects EXTERNAL

Like plant facility layout, inventory control,
ENVIRONMENT
etc.

Financial Aspects
Like liquidity, probability, etc.

Figure 2.2. The Engineering Firm and its External Environment

GOVERNMENT
ENGINEERS LABOR UNION

CLIENTS ENGINEERING FIRM SUPPLIERS

COMPETITORS BANKS
PUBLIC
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5. Evaluate Alternatives
After determining the viability of the alternatives and a revised list has been made, an evaluation of the
remaining alternatives is necessary. This is important because the next step involves making a choice. Proper
evaluation makes choosing the right solution less difficult.
How the alternatives will be evaluated will depend on the nature of the problem, the objectives of the firm,
and the nature of alternative presented. Souder suggested that “each alternative must be analyzed and evaluated in
terms of its value, cost and risk characteristics”.
The value of alternatives refers to benefits that can be expected.

6. Make a Choice
After the alternatives have been evaluated, the decision-maker must now be ready to make a choice. This is
the point where he must be convinced that all the previous steps were correctly undertaken.
Choice-making refers to the process of selecting among alternatives representing potential solutions to a
problem. At this point, Webber advises that “…particular effort should be made to identify all significant
consequences of each choice”.

7. Implement Decision
After a decision has been made, implementation follows. This is necessary or decision making will be an
exercise in futility.
Implementation refers to carrying out the decision so that the objectives sought will be achieved. To make
implementations effective, a plan must be devised. At this stage, the resources must be made available so that the
decision may be properly implemented.

8. Evaluate and Adapt Decision Results

In implementing the decision, the results expected may or may not happen. It is, therefore, important for the
manager to use control and feedback mechanisms to ensure results and to provide information for future decisions.
Feedback refers to the process which requires checking at each stage of the process to assure that the
alternatives generated, the criteria used in evaluation and the solution selected for implementation are in keeping
with the goals and objectives originally specified.
Control refers to actions made to ensure that the activities performed match the desired activities or goals
that have been set.
In this last stage of the decision making process, the engineering management will find whether or not the
desired result is achieved. If the desired result is achieved, one may assume that the decision made was good. If it
was not achieved Ferreil and Hirt suggest that further analysis is necessary. Figure 2.3 presents an elaboration of
this last step.

III. APPROACHES IN SOLVING PROBLEM

In decision making the engineer manager is faced with problems which may either be simple or complex. To
provide him with some guide, he must be familiar with the following approaches.
1. Qualitative Evaluation and
2. Quantitative Evaluation

Qualitative Evaluation – this term refers to evaluation of alternatives using intuition and subjective judgment.
Stevenson states that manager tends to use the qualitative approach when:
1. The problem is fairly simple.
2. The problem is familiar.
3. The costs involved are not great. (Low cost)
4. Immediate decisions are needed.

Quantitative Evaluation – This term refers to the evaluation of alternatives using any technique in a group classified
as rational and analytical.

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Figure 2.3 Feedback as a Control Mechanism in Decision-making-process.

Step 1 Diagnose problem

2 Analyze Environment

3 Articulate Problem or

Opportunity

4 Develop Viable
Alternatives

5 Evaluate Alternatives

6 Make a Choice

7 Implement a decision

8 Evaluate Results Results not achieved Determine steps

where error was made

Results Achieved Adapt decision

results

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 QUANTITATIVE MODELS FOR DECISION MAKING
The types of quantitative techniques which may be useful in decision making are as follows:
1. Inventory models 6. Simulation
2. Queuing theory 7. Linear programming
3. Network models 8. Sampling theory
4. Forecasting 9. Statistical decision theory
5. Regression analysis

Inventory Models
Inventory models consist of several types all designed to help the engineer manager make decisions regarding
inventory. They are as follows:
1. Economic order quantity model – this one is used to calculate the number of items that should be ordered at
one time to minimize the total yearly cost of placing orders and carrying the items in inventory.
2. Production order quantity model – this is an economic order quantity technique applied to production order.
3. Back order inventory model – this is an inventory model used for planned shortages.
4. Quantity discount model – an inventory model used to minimize the total cost when quantity discounts are
offered be suppliers.

Queuing Theory
The queuing theory is one that describe how to determine the number of service units that will minimize both
costumers waiting time and cost of service.
The queuing theory is applicable to companies where waiting lines are a common situation. Examples are cars
waiting for service at a car service center, ships and barges waiting at the harbor for loading and unloading by
dockworkers, programs to be run in a computer system that processes jobs and etc.

Network Models
These are models where large complex tasks are broken into smaller segments that can be managed
independently.

The two most prominent network models are:

1. The Program Evaluation Review Technique (PERT) – a techniques which enables engineer managers to schedule,
monitor, and control large and complex projects by employing three time estimates for each activity.
2.The Critical Path Method (CPM) – this is a network technique using only one time factor per activity that enables
engineer managers to schedule, monitor, and control large and complex projects.

Forecasting
There are instances when engineer managers makes decisions that will have implications in the future. A
manufacturing firm, for example, must put up a capacity which is sufficient to produce the demands requirements of
customers within the next 12 months. As such, man power and facilities must be produced before the start of
operations. To make decisions on capacity more effective, the engineer manager must be provided with data on
demand requirements for the next 12 months. This type of information may be derived through forecasting.
Forecasting may be defined as “the collection of past and current information to make predictions about the future.”

Regression Analysis

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 The regression model is a forecasting method that examines the association between two or more variables.
It uses data from previous periods to predict future events.
Regression analysis may be simple or multiple depending on the number of independent variables present. When
one independent variable is involved, it is called simple regression; when two or more independent variables are
involved, it is called multiple regression.

Simulation
Simulation is a model constructed to present reality, on which conclusions about real life problems can be
used. It is a highly sophisticated tool by means of which the decision marker develops a mathematical model of the
system under consideration.
Simulation does not guarantee on optimum solution, but it can evaluate the alternatives fed into the process by the
decision-maker.

Linear Programming
Linear programming is a quantitative technique that is used to produce an optimum solution within the bounds
imposed by constraints upon the decision. Linear programming is very useful as a decision-making tool when supply
and demand limitations at plants, warehouse, or market areas are constraints upon the system.

Sampling Theory
Sampling theory is a quantitative technique where samples of populations are statistically determined to be used for
a number of processes, such as quality control and marketing research.

Statistical Decision-Theory
Decision theory refers to the “rational way to conceptualize, analyze, and solve problems in situations involving
limited, or partial information about the decision environment”.
A more elaborate explanation of decision theory is the decision making process presented at the beginning of this
chapter. What has not been included in the discussion on the evaluation of alternatives, but is very important, is
subjecting the alternatives to Bayesian Analysis.
The purpose of Bayesian analysis is to revise and update the initial assessments of the event probabilities
generated by the alternative solutions. This is achieved by the use of additional information.

Reference:
 Engineering Management by Roberto G. Medina

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