Engineering Management

Management Process
❑ Planning
❑ Organizing
❑ Staffing
❑ Leading
❑ Controlling
Planning

1 Stages of Strategic Planning

2 Mission and Vision
3 Strategy Formulation
Strategic Planning

Project Planning –
Risk Identification, Assessment and
Response Planning
□ Planning is a process of setting objectives and determining how best to
accomplish them. Said a bit differently, planning involves deciding
exactly what you want to accomplish and how best to go about it.
□ When it comes to planning, one of the first things that may come to mind
is time. It is one of our most precious resources and time management is
an essential career skill.
□ Strategy is another important thing. It is the method by which an
organization uses the resources of its internal environment to meet the
needs of customers in the external environment.
Managers need the ability to look ahead, make good plans, and help
themselves and others meet the challenges of the future
 • Budget “Top down” – no question asked
• Only two Budget Goals – Revenue, Expenses
• The only Planning Needed to do – “Do Better than Last Year”
• Planning was “Bottom up” – compilation of plans within the set
Planning in the budget
Old Days • No one knew what the other was planning
• The role of Accounting Department was only to compile budget for
approval
• Sales was resource priority
• KPIs were not used
• Assumed no major changes in the market
• R&D was bottom up
 • When planning is done well it creates a solid platform for the
other management functions. It helps the organization become
better at what they are doing and to stay action-oriented.

• “Planning at Eaton Corporation” means making the hard

Why and How decisions before events force them upon you, and anticipating
Managers Plan the future needs of the market before the demand asserts itself.

• Planning should focus attention on objectives and goals that

identify the specific results or desired outcomes that one intends
to achieve. But the objectives and goals have to be good ones;
they should push you to achieve substantial, not trivial things.
 Process
Strategic planning,
budgeting and forecasting
are established business
processes, although each
organization will have a
slightly different approach
in place.
Strategic planning
• Strategic planning is a process of looking into the future and
defined
identifying trends and issues against which to align
organizational priorities of the Department or Office. Within the
Departments and Offices, it means aligning a division, section,
unit or team to a higher-level strategy.

• Strategic planning is about understanding the challenges, trends

and issues; understanding who are the key beneficiaries or
clients and what they need; and determining the most effective
and efficient way possible to achieve the mandate.

• A good strategy drives focus, accountability, and results.

 Strategic plans should integrate, drive and connect to the
company’s budgeting process, providing the inputs to the
‘regular budget’ (or ‘program budget’) via the Strategic
Strategic Framework model.

planning The Strategic Framework, on a regular basis, captures the

defined objectives, expected accomplishments and indicators of
achievement for each sub-program, which would, by definition,
be found in a strategic plan.

Strategic plans should also integrate with work-planning efforts.

Work-plans (also called operational plans) outline the specific,
shorter-term operational objectives, outputs, projects and
processes of an entity.
 Developing strategy for an organization may seem a deceptively
simple task: Find out what customers want, provide it for them at
the best prices and service, and make sure competitors can’t copy
what you are doing well. In practice, things can get very
complicated.
Strategic
Management The reality is that strategies don’t just happen; they must be
developed and then be well implemented. And at the same time
Process that managers in one organization are doing all this, their
competitors are trying to do the same—only better.

Strategic management is the process of formulating and

implementing strategies to accomplish long-term goals and sustain
competitive advantage.
Strategic
Management Process
The strategic management process begins
with analysis of mission, values, and
objectives.

This sets the stage for assessing the

organization’s resources and capabilities, as
well as opportunities and threats in its
external environment.

Strategic analysis to assess the organization,

its environment, its competitive positioning,
and its current strategies
Take Build on and use strengths to create core competencies.
Advantage of
Insights from Avoid relying on weaknesses that can’t be turned into
strengths.
SWOT
Analysis Move toward opportunities to capture advantage.

Avoid threats or act in ways that minimize their impact.

 Strategic Portfolio Planning is the business process by which
organizations determine the set of innovation and new product
development (NPD) investments they will fund—and those
Strategic they won't—to achieve their business objectives.
Portfolio
It is an overall strategy that guides day-to-day decisions on
Planning investing for the long term. Portfolio planning takes into
Model account the investor's goals and tolerance for risk, among other
factors.

The Boston Consulting Group offers a portfolio planning

approach known as the BCG Matrix. BCG matrix analyzes
business opportunities according to market growth rate and
market share.
BCG Matrix
Model

The BCG Matrix (Boston Consulting Group Matrix), asks

managers to analyze business and product strategies based on
two major factors: (1) market growth rate for the industry, and
(2) market share held by the firm. The analysis shown in the
figure sorts businesses or products into four strategic types:
Dogs, Stars, Question Marks, and Cash Cows. Each type
comes with a recommended core or master strategy—growth,
stability, or retrenchment. These strategies become the
guidelines for making resource allocation decisions.
 Grow the Stars. Businesses or products with
high-market-shares in high growth markets are “Stars” in the
BCG Matrix BCG Matrix.
Model
They produce large profits through substantial penetration of
expanding markets. The preferred strategy for Stars is growth
and the BCG Matrix recommends making further resource
investments in them.

Stars are not only high performers in the present, but they
offer similar potential for the future. If we look at Apple
today, the iPad would be a Star.
 Milk the Cash Cows. Businesses or products with high-market
shares in low growth markets are “Cash Cows” in the BCG
Matrix.
BCG Matrix
They produce good profits and a strong cash flow, but with
Model little upside potential. Because the markets offer limited
growth opportunity, the preferred strategy for Cash Cows is
stability or modest growth.

Like real dairy cows, the BCG Matrix advises

firms to “milk” these businesses. They should
invest just enough to keep them stable or growing
just a bit. This keeps them generating cash that
can be reinvested in other more promising areas.
For Apple, we might wonder. Is yesterday’s
Star—the iPhone—now becoming a Cash Cow?
 Grow or Retrench the Question Marks. Businesses or
products with low-market shares in high-growth markets are
“Question Marks” in the BCG Matrix.
BCG Matrix
Although they may not generate much profit at the moment,
Model the upside potential is there because of the growing markets.
But nothing is guaranteed.

Question Marks make for difficult strategic decision

making. The BCG Matrix recommends targeting
only the most promising Question Marks for
growth, while retrenching those that are less
promising. What’s the most promising Question
Mark at Apple today? That’s a good question and
perhaps the answer is Apple TV. Will it be the Star
of the future, or a Dog?
 Retrench the Dogs. Businesses or products with low-market
shares in low growth markets are “Dogs” in the BCG
BCG Matrix Matrix.
Model
They produce little if any profit, and they have low potential
for future improvement. The preferred strategy for dogs in
the BCG Matrix is retrenchment.

Not too long ago Apple’s iPod was a Star; then it become a
Cash Cow. Is it now well on the road to being tomorrow’s
Dog?
 Among the core or master strategies just illustrated in the BCG matrix,
growth strategies seek to expand the size and scope of operations.

The goal is to increase things such as total revenue, product or service

lines, and operating locations. When you hear terms like acquisition,
Growth and merger, and global expansion, for example, the underlying master
Diversification strategy is one of growth.

Strategies Growth is a common and popular business strategy. But it can be

sometimes driven as much by executive egos as business realities.
Although there is a tendency to equate growth with effectiveness, it is
possible to get caught in an “expansion trap” where growth outruns an
organization’s capacity to manage it.

Mark Zuckerberg faced this problem at Facebook. The firm grew incredibly fast and spending
outran revenues. The Wall Street Journal claimed it had “growing pains” and Zuckerberg even
asked: “Is being a CEO always this hard?” His response was to hire an experienced Google vice
president, Sheryl Sandberg, to become chief operating officer and lead Facebook’s continued
expansion. It’s a decision that took some humility on his part; it’s also one that history has
shown to be a great move.
 Organizations pursue growth strategies in a variety of ways:

• grow through concentration—expanding in the same

Growth and business area.
Diversification
• grow through strategic diversification—expanding into
Strategies different business areas.
• A strategy of related diversification pursues growth by
acquiring new businesses or entering business areas similar to
what one already does.
• A strategy of unrelated diversification pursues growth by
acquiring businesses or entering business areas that are
different from what one already does.
• Growth by diversification can also be done by vertical
integration where a business acquires suppliers—backward
vertical integration, or distributors—forward vertical
integration.
Budgeting Strategic budgeting is the process of creating a long-range budget
that spans a period of more than one year. The intent behind this
type of budgeting is to develop a plan that supports a long-range
vision for the future position of an entity.

This involves preparing multiple budgets and forecast for short

term costs that are aligned with the long term. And thereafter
allocating and categorizing funds depending on the activities.

If the company modifies the long-term strategic plan, then it can

accordingly change the strategic budget to meet the needs. It can
be very crucial to the company for effective planning and
prioritizing. The costs have to be prioritized to satisfy the
stakeholders. Usually, the areas with the highest amount of
allocation come in high priority tasks.23
 A Strategic budget is an essential element for any organization. It
provides a long-term road map for the success of the company. A
company with a long term vision and goals have to be very constructive
and accurate in designing such a budget.
 The forecasting process also needs to incorporate
FORECASTING sustainability, ensuring relevant factors within the current and
future environment are taken into consideration

Understanding the performance to date and the reasons for

fluctuations from budget is vital for effective monitoring of
the business. When success is measurable in terms of both
monetary and non monetary factors, then interactions between
different measures need to be considered and understood.
There are factors to consider when assessing performance
against budget in preparation for reforecasting.
Cost considerations are factor that forces strategic managers to consider
forecasting. A forecasting activity with a high accuracy may be needed
especially in major planning and investment decisions based on the
forecasts of market potential or sales where high costs are incurred (e.g.
plant expansion and new facilities construction). The size of the costs or
financial resources to be invested may make firms utilize the
forecasting function in making a ground for such decisions.
Strategic Planning Process

The strategic planning process is broader—it

helps you create a roadmap for which strategic
objectives you should put effort into achieving
and which initiatives will be less helpful to the
business.

As you continue to implement the strategic

planning process, you’ll be able to maintain a
long-term perspective and make decisions that
will keep you on the path to success for years
to come.
 1. Who is accountable for risks?
2. How do we talk about risk? Do we have a common
Risk language in the department, across divisions, across the
Management campus?
Planning 3. Are we taking too much risk? Or not enough?
4. Are the right people taking the right risks at the right time?
5. What’s our risk culture? Are we risk-adverse, risk-takers,
or somewhere in between?
 • Risk management means more than preparing for the worst; it
also means taking advantage of opportunities to improve
Risk services or lower costs.
-Sheila Fraser, Auditor General of Canada
Management
Managing risks on projects is a process that includes risk
Planning •

assessment and a mitigation strategy for those risks. Risk

assessment includes both the identification of potential risk and
the evaluation of the potential impact of the risk.
• Risk is the uncertainty that surrounds future events and outcomes. Not
all risks are negative.
• Risk is the expression of the likelihood and impact of any event with
the potential to influence the achievement of an organization’s
objectives.
 • Risk (uncertainty) may affect the achievement of objectives.

• Effective mitigation strategies and controls can reduce negative

Risk risks (threats) or increase opportunities.

Management • Residual risk is the level of risk remaining after applying risk
Basics controls.

• Acceptance and action should be based on residual risk levels.

Risk Management
Process
 Risk Inventory

Take Action –
Identification Assess and
Mitigate or Accept
Prioritize

Target Date for

Completion
Mitigation Complete
Likeli- hood
Risk Number Risk Short Name Risk Description Existing Risk Controls/Measures in Place Outcome Impact Likelihood Impact Score Net Score Risk Mitigation Actions Responsibility Cost Estimate Resources Needed
Score

EXAMPLE Access To High Hazard Areas The risk of unauthorized access to *Perimeter doors have mechanical locks that *Some buildings with high hazard areas are open to the Serious Likely 4 3 12 *Installation of electronic door locks (proxy cards) will allow John Doe $3,000 3/14/2015
hazardous areas outside of normal are randomly spot checked by police after public, increasing the chances of unauthorized or 24/7 security control as only authorized users will have access
business hours normal business hours. accidental access to high hazard areas to the area.
*Random spot checks not adequate considering the
life/safety risks in some areas.

1 #N/A #N/A #N/A

2 #N/A #N/A #N/A

3 #N/A #N/A #N/A

4 #N/A #N/A #N/A

5 #N/A #N/A #N/A

6 #N/A #N/A #N/A

7 #N/A #N/A #N/A

8 #N/A #N/A #N/A

9 #N/A #N/A #N/A

 • Financial Risk - unplanned losses or expenses
• Service Delivery/Operational Risk - lapses in continuity of
operations
• HR Risk – Employment practices; retention
Example: • Strategic Risk – untapped opportunities
Identify Risks • Reputational Risk – damage to relationship with community at
large (loss of revenue)
• Legal/Compliance Risk – noncompliance with statutory or
regulatory obligations
• Technology/Privacy Risk – threats to and breaches in IT
security
• Governance Risk – wide-spread non-compliance with policies
and standards
• Physical Security/or Hazard Risk – harm or damage to people,
property or environment
 Likelihood of a risk event
Risk Impact - level of damage
sustained when a risk occurring
Assessment – event occurs
□ 5 Expected: Is almost certain
□ 5 Critical: Threatens
Consider Impact the success of the
project
to occur

and Likelihood □ 4 Serious: Substantial □ 4 Highly Likely: Is likely to

occur
to Prioritize impact on time, cost
or quality
Risks □ 3 Moderate: Notable □ 3 Likely: Is as likely as not to
occur
impact on time, cost
or quality
□ 2 Minor: Minor impact □ 2 Not Likely: May occur
on time, cost or occasionally
quality
□ 1 Insignificant: □ 1None/Slight: Unlikely to
Negligible impact occur
 F G H I J
Assessing Risks – Impact Likelihood
Impact
Score
Likeli-
hood Net Score
Score
Considering the Scoring risks Serious Likely 4 3 12

Likelihood and Impact:

Critical - 5
Impact Serious -
Moderate -
4
3
Minor - 2
Insignificant - 1
#N/A #N/A #N/A
#N/A #N/A #N/A
Likelihood: #N/A #N/A #N/A
Expected - 5
#N/A #N/A #N/A
Highly Likely - 4
Likely - 3 #N/A #N/A #N/A

Not Likely - 2 #N/A #N/A #N/A

None/Slight - 1 #N/A #N/A #N/A
#N/A #N/A #N/A
Take Action:
Mitigating or
Treating Risks –
Accept? Alter?
Transfer?
Decline?
 Example: Risk Management Assessment Report

Target Date for

Completion
Existing Risk Impact Likeli- hood Resources Mitigation
Risk Number Risk Short Name Risk Description Outcome Impact Likelihood Net Score Risk Mitigation Actions Responsibility Cost Estimate Complete
Controls/Measures in Place Score Score Needed

EXAMPLE Access To High Hazard The risk of unauthorized *Perimeter doors have *Some buildings with high hazard areas Serious Likely 4 3 12 *Installation of electronic door locks (proxy John Doe $3,000 3/14/2015
Areas access to hazardous areas mechanical locks that are are open to the public, increasing the cards) will allow 24/7 security control as
outside of normal randomly spot checked by chances of unauthorized or accidental only authorized users will have access to
business hours police after normal business access to high hazard areas the area.
hours. *Random spot checks not adequate
considering the life/safety risks in some
areas.

1 #N/A #N/A #N/A

2 #N/A #N/A #N/A

3 #N/A #N/A #N/A

4 #N/A #N/A #N/A

5 #N/A #N/A #N/A

6 #N/A #N/A #N/A

7 #N/A #N/A #N/A

8 #N/A #N/A #N/A

9 #N/A #N/A #N/A

Risk reporting and
communications
Reflection:
Strategic management is one of the most significant planning challenges faced
by managers. A complex array of forces and uncertainties must be consolidated
and integrated to craft a strategy that moves an organization forward with
success.

Risk Management is a journey, not a destination; risks should be continually

assessed and mitigation methods re-considered. Change is inevitable; recognize
new risks and opportunities.

Critical thinking is an essential foundation for success in strategic management

planning
end
 Form into groups and choose one organization/company.
Group Project Report:
1. Think about the situations currently facing of the
following well-known organizations.
Prepare a Strategic
2. Think, too, about the futures they may face in
Plan and Risk
Assessment Plan competitive markets.
3. Develop a strategic plan that will enable the organization
to deal with their future successfully.
4. Also, create a comprehensive risk management plan for
the possible risks of their future plan.

Thoroughly discuss your plan within the group and arrive at

your best possible project report.