Chapter 5 - Controlling

Dr. C. M. Chang
Department of Industrial & Systems
Engineering

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 Engineering Management
Functions
Organizing

Planning

Leading

Controlling
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Controlling
• Work done by managers to
assess and regulate work in
progress and to evaluate
results obtained, for
purpose of
(1) Securing and maintain
maximum productivity, &
(2) Reducing and
preventing unacceptable
performance
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 Nature of Controlling Function
• Primarily administrative and operational in
nature
• Critical to implementation of any plan (task,
project, program) - no implementation, no useful
outcome regardless of plan’s merits
• Important to delegation - no effective control, no
useful delegation
• Important to company renewal (pruning)
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 Nature of Controlling Function
• Balance between operational efficiency and
staff creativity and innovation - “Four
Levers of Control”
• Types of control - Output-based and Process-
based
• Resistance to control - falsifying data,
inventing excuses, sabotaging, playing
games, and pitching one against the other
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 Characteristics of Good Control
• Accuracy • Acceptable to those
• Timeliness who will enforce
• decisions
Flexibility
• Control at all levels
• Cost-effectiveness
• • Balance between
Understandability
objectivity and
• Realistic subjectivity

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 Pareto Principle
• Principle of Critical Few: 20% of factors
affecting 80% of Results - Control the few
Sales Revenue $(MM)

10

0
5 10 15 20 25 30
Number of Customers
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Controlling Function

Se tting Standards

Me asuring Pe rform ance

Evaluating Pe rfo rm ance

Co ntro ling Pe rfo rm ance

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 Setting Standards
• Standards are criteria by which work and
results are measured and evaluated at
grades: (1) Average -- generally expected
performance level for a given job, (2) Other
grades -- outstanding, better than average,
average, below average and unacceptable
• To distinguish performance grades and to
define expected impact of outcome
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 Grades of Performance
Average

Below Above
Average Average

Gaussian
Unacceptable Distribution Outstanding

Performance
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 Value of Setting Standards
• Provide specific guidelines for exercising
authority and making decisions (rewards
and punishments)
• Define yardstick to measure performance
(individuals, group/unit, project)
• Facilitate self evaluation, improvement and
self-control

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 Types of Standards
• Technical Standards (product first pass
success rate, product unit cost, mean time
between failure (MTBF) for equipment,
hurtle rate, sales per employee, ROE, etc.)
• Historical Standards (own metrics in the
past - internal benchmarking)
• Planning Standards (cost leadership target,
sales revenue, profitability)
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 Types of Standards (cont’d)
• Market Standards (market share, time to
market, EPS expected by Wall Street, order
processing cost, customer inquiry response
time - external benchmarking)
• Other Standards (OSHA, environmental
quality, EEO, ISO certification, self-
imposed performance metrics)

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 Good Standards
• Based on approved plans
• Measurable
• Considerate of human factors
• Comparable and reasonable
• Indicative of expected work performance

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 Question # 5.2
• The company has decided for an average annual
salary raise of 8%, although the current inflation
rate runs at 10%. Each engineering manager may
decide on the best way to distribute the salary
increase to his/her staff. If everyone gets an
increase of 8%, then there will be no
differentiation between good and poor
performers. What should you do as the
engineering manager?
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 Barriers to Setting
Good Standards
• Subjectivity -Technically strong managers
tend to set unrealistically high standards -
(1) Too high standards - demoralizing, (2)
Too low standards - not challenging enough
• Fearful of not meeting standards
• Lack of Consideration - Human factors and
other considerations

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 Benchmarking
Benchmarking is a method of defining
performance standards in relation to a set
of references

Internal Benchmarking External Benchmarking

How do I compare with How do I compare with my

myself over the years peers in industry

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 Internal Benchmarking
• Compare current year performance metrics
with those in past years to indicate
performance improvement (annual reports)
• Short-term goal setting based on internal
benchmarking may create a false sense of
corporate wellbeing - absent external
benchmarking

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 External Benchmarking
• Compare company’s performance with those of
peers in the same industry
• (1) Financial ratios, (2) Performance metrics -
Time to market, order processing efficiency,
quality control, unit product cost, etc., (3) Best
practices - tried-and-true methods of achieving
useful results, (4) Critical success factors -
conditions for achieving success in specific areas
based on accumulated learning,
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 External Benchmarking (cont’d)
• (5) Target pricing - surveying marketplace to
define going prices for competitive products,
subtracting desirable margin and setting product
cost target for product development - “Innovation
under duress” model generally applicable to
many business/engineering activities
• (6) Balanced Scorecard – forward looking and
non-financial versus past orientation of financial
metrics only
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 Benchmarking Metrics

Product-
Non- Related
Financial
Financial

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 Examples of Benchmarking
Metrics (cont’d)
• Financial Ratios: ROI, ROA, ROS, Debt to
Equity Ratio, Inventory turns, Number of
units produced per employee, number of
units produced per hour, sales per
employees, profit per unit, breakeven
volume

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 Examples of Benchmarking
Metrics (cont’d)
• Non-financial Metrics: (1) Average
number of defects detected by customers in
the first month of ownership, (2) Average
number of defects detected during
manufacturing and repair , (3) Hours lost to
production from unscheduled maintenance,
(4) Work in progress in the plant, (5)
Number of machines per worker,
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 Examples of Benchmarking
Metrics (cont’d)
• (6) Length of time to change a machine or
introduce a new operation, (7) Number of job
classification in the plant, (8) Amount of
material made obsolete by model changes,
(9) Average units of energy per product
manufactured, (10) Rate of absenteeism of
the work force, (11) Number of months
required to introduce a new product model,
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 Examples of Benchmarking
Metrics (cont’d)
• (12) Number of job classification in the
plant, (13) Number of engineering change
requests required during a new product
development program, (14) Number of unit
produced prior to a model change (batch
production), (15) Time metrics (response
time, lead time, up time, on time, down
time, etc.)
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 Examples of Benchmarking
Metrics
• Product-Related Metrics: (1) Part counts, (2)
Types of material used, (3) Material utilization in
each component, (4) Assembly process used in
production, (5) Service quality, (6) Failure-mode
effects analysis, (7) Quality of product as
experienced by customer, (8) Long-term durability
of product, (9) Fraction of sales of repeat
customers, (10) Company responsiveness to
service requests.
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 Limitation of Benchmarking
• No forecast of the future - Only applied to
current practice, No prediction of new
competition
• Some data may not be available (using
estimates tends to reduce accuracy and
reliability of results)

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 Question # 5.3
• A key engineer in the department handed in his
resignation notice, giving the reason for leaving as a
much higher salary offer from a competitor. The
Manager recommends to the Director that the company
should match the competitor’s offer, even though this
would allow the engineer to earn above the maximum
for his grade. “We can always give him smaller
increases in subsequently years to bring his salary back
into line,” says the Manager. What should the Director
do?
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 Measuring Performance
• Collect, store, analyze and record work being
done and results attained systematically
(progress reports, project reports, technical
documents, presentations, staff meeting
minutes, personal meeting notes, etc.)
• Compare performance against established
standards
• Document results of measurement
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 Evaluating Performance
• Appraise work in progress or completed and
provide feedback by (1) Establishing limits of
tolerance, (2) Note variations - deviation within
the tolerance limits, and exceptions - deviation
outside the tolerance limits, (3) Provide
recognition to good performance (give credit
timely)
• Focus on deviation tends to encourage self-
appraisal/control and foster initiative
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 Correcting Performance
• Rectify and improve work being done and results
obtained - Taking steps:
• (1) Correct mistakes and focus on future
development, (2) Take operation actions - get
help from outside consultants, add temp people,
(3) Take management action - add training,
improve procedures and policies to avoid
repeating deficiencies, transfer and recommend
dismissal
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 Reasons for Performance
Deficiencies
• Don’t Know - Lack
Don't Now
definition of
performance standards,
lack of feedback
Performance
• Can’t Do - Lack skills Deficiency

and/or aptitude
• Don’t Care - Lack the
Can't Do Don't Care
proper work attitude

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 Constructive Criticisms
• Negative feedback must be offered carefully to
avoid attacking people’s esteem
• Focus on results/outcome, not on person
• Avoid upsetting people by using “labels”
• Have no punitive motive and avoid causing pain
• Show helpful and sincere attitude
• Provide no threat

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Some Rules of Thumb
• Not good to make mistakes in
engineering fundamentals
• Okay to fail once in a while in
new risky development work, but
failure in every other projects will
hurt own reputation
• Making the same mistakes again
and again (human relations,
aggressiveness, poor teamwork
attitude) is perceived negatively
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 Means of Performance Control
• Personal Review - Focusing on variance
-management by exception for decision
making
• Resources - Allocation of capital, people,
staff support, technology, equipment/
facilities
• Project Approval - Initiate, modify or
terminate specific project activities
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 Guidelines for Effective Control
• Focus on location where actions take place
• Induce self-imposed control (Most effective)
• Avoid extensive control, which tends to de-
motivate people and induce strong reactions
• Manage exceptions, both bad and good
• Strive for flexible and coordinated control
(supply information with control mechanism in
place)
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 Specific Controlling Targets
(1) Managerial time
(2) Personnel
(3) Business Relationship
(4) Project
(5) Knowledge

Business
Time Personnel Project Knowledge
Relations

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Control of Management Time
• Important tasks often
12 arrive at unpredictable
11 1 times
10 2 • Trivial tasks often take
9 3 up a disproportionately
large amount of time
8 4
5 • Interruptions to
7
6 manager’s schedule are
common
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 Typical Time Wasters
• Absence of clear roles and responsibilities
-overlapping responsibilities
• Poor self-discipline - No planning, lack of personal
drive to accomplish, confused priority,
procrastination
• Lack of effective delegation - trying to do all by self
• Poor communications - unprepared meetings,
policies, politics

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 Tips to Manage Time
• Set goals (for the day, week, month, year)
• Prioritize tasks (classify into A, B and C
categories) according to value addition
• Plan tasks properly
• Minimize interruptions for blocks of time to do
A-tasks - planning, strategy development)
• Make use of waiting time
• Keep reports concise and readable
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 Time Saving Tips for Engineering Managers
1. Set Goals Write specific, measurable outcomes you want to achieve in the next
week, month, year and
five years. Consider your work, relationships, play, and well being. Go
from goals to plan to work.

2. Use a Master "to- Categorize all of your “to do” ideas according to which goal each
do" List serves. Estimate all others.

3. Get the Big Picture Plan your priorities so you work foremost on whatever gives you the
biggest payoff and potential

4. Cluster Common Do similar tasks in the same time block (e.g., a bunch of letters, a
Tasks bunch of phone calls, etc.)

5. Create Systems Keep tools, forms, checklists, and information handy and organized for
repetitive tasks.

6. Establish Place Keep everything in its pre-determined place.

Habit
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7. Delineate Time Schedule blocks of un-interruptible time (2-4 hours) to work on
Blocks projects requiring concentration.
Assure colleagues of availability otherwise.

8. Design Your Make your setting conducive to concentration (e.g., sit with your
Environment back to traffic passing your
office, and screen calls).

9. Cut Meeting Time Use proven meeting time-savers (e.g., go to other’s offices for
meetings, do stand-up meetings,
set agenda and follow through rigorously).

10. Reduce Panic Handle what worries you the most. Ask yourself, “Will this matter
seem urgent 1o years from
now?”

11. Take the One- Periodically take a minute to ask yourself, “Am I doing this in the
Minute Test best way to meet my goals,
serve others, and take care of myself?”

Condensed and Adopted from Cottringer (2003), Casavant (2003) and Anonymous
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(2003B).
 Control of Personnel
• For high skills personnel, less control is
more desirable, excess control could induce
adverse reactions - Supervision Curve
Productivity Low Skills

High Skills

Amount of Supervision
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 Four Levers of Control
• Control assures operational efficiency, but too
much control inhibits creativity and
innovation - What is proper control level?
• Four levers of control: (Source:
Robert Simons, “Control in the Age of Empowerment,” Harvard Business
Review, March-April 1995)

• (1) Diagnostic System - Management

demands standardized behavior and exercises
control (in high stake situations)
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 Four Levers of Control
• (2) Belief System - Communicate core
value, mission and vision, for encouraging
employees to add values
• (3) Boundary System - Specify what not to
do (off-limit activities)
• (4) Interactive Control System - Senior
management monitors and interacts with
low-level decision makers to stay abreast
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 Effective Control System
• Use Belief System and Interactive Control
System to set performance and business
conduct guidelines
• Apply performance guidelines and
Diagnostics System to improve operational
efficiency
• Implement business conduct guidelines and
Boundary System to improve creativity
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 Four Levers of Control
Potential Organizational Managerial
Benefits Blocks Solution

Diagnostic Systems To achieve Lack of focus of resources Build and support clear
targets

Belief Systems To contribute Uncertainty about purpose Communicates core

values and mission

Boundary Systems To do right Pressure or temptation Specify and enforce

rules of games

Interactive Control To create Lack of opportunity or fear Open organized dialogue

Systems of risk to encourage learning
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 Question # 5.4
• Motivation in the Assembly Shop was high. However, the
Shop Manager notices that while the daily production was
above average for the Shop, it drops down to a low during the
first hour after the lunch break. The problem was further
diagnosed to be that the operators tended to continue
socializing until well after the lunch break. The shop Manager
changed the lunch break and staggered it over a two hour
period, so that the operators could not go to lunch together.
To his surprise, the motivation began to fall and productivity
dropped dramatically. What do you think was the problem?
How do you advise the Shop Manager to fix this problem?
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Control of Business Relationship
• “Who does one know and how well” is an
increasingly important competitive
advantage
• Sources of contacts - University alumni
activities, technical conferences/seminars,
industrial expositions, sports events, church
• Use 5-second commercial (intro), exchange
expertise areas, make note, and follow up.
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 Control of Projects
• Understand objectives and constraints
• Use tools (computer- or Internet-based) to plan
and manage approved project
• Monitor cost, dates, critical path activities
• Control plan deviations (Risks) tightly
• Induce collaboration among team members
• Resolve problems and conflicts timely
• Communicate constantly
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 Project Control Issues
1. Cost Control Monitor the actual versus projected percentage of cost expenditure and
take proper actions to minimize deviations.

2. Schedule Control Monitor the actual versus projected percentage of completion time and
Take the proper actions to minimize deviations.

3. Critical Path Activities These are activities without time slacks, which must be managed with
extra care to avoid schedule delay.

4. Task Deviation from Plan Delays in equipment delivery or installation, equipment damage in
transportation, construction delay due to labor action, weather, utilities,
and other causes, and changes of personnel.

5. Collaboration Securing collaboration among team members is a key success factor

for any project.

6. Conflict Resolution Resolving instantly all conflicts and problems among team members
will assure a smooth progress toward achieving the project goals.
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 Skills for Managing Projects
• Organizational and planning skills
• People management
• Problem solving
• Communications (team members, sponsors, customers)
• Drive and energy
• Goal orientation and customer focus
• Broad multidisciplinary technical knowledge
• Manage changes

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 Control of Knowledge
• Knowledge refers to corporate intellectual
properties comprising (1) Patents, (2)
Proprietary know-how, (3) Technical
expertise, (4) Design procedures, (5)
Empirical problem-solving heuristics, (6)
Process operational insights, and others
• Managers are responsible for developing,
preserving and applying corporate knowledge
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 Control of Knowledge
• Major difficulties: (1) Knowledge chunks
dispersed in various documents,
(2) Most experts not fond of sharing
knowledge - job protection
• Set/Implement knowledge reporting and
management policy (progress reports, job
rotation, design specs and procedures, data
books, meeting records, knowledge sharing)
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 Specific Techniques for
Knowledge Management

• Rotate experienced people - to allow people

in different locations to learn from them
• Create a pleasant work environment to avoid
losing people with expertise
• Encourage those who are willing to use
knowledge acquisition tools to preserve
expertise (introduce performance metrics)
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 Knowledge Management
1. Write Reports Progress reports, technical memorandums, and invention disclosures
are typical documents to be systematically prepared by all employees.

2. Design Specifications Preserve specifications on disks, tapes, films, drawings and manuals,
as design specifications represent a part of corporate know-how and
expertise.

3. Data Books Prepare systematically documents preserving laboratory and pilot

test data, experimental results and other such findings.

4. Deploy Experts Rotate experts to different locations/jobs so that their expertise

knowledge may be shared with and learned by others

5. Workplace Maintain a pleasant work environment to encourage knowledge

workers to stay

6. Preserve Knowledge Apply knowledge acquisition tools to preserve knowledge from experts,
such as expert systems, neural networks and case based reasoning
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tools.
 Summary
• Controlling - administrative function, with
strategic implication (assure implementation,
support delegation, foster corporate renewal)
• Set standards using external benchmarking to
avoid losing competitiveness
• Correcting poor performance may be unpleasant
• Apply “Four Levers of Control” - Assure
operational efficiency and enhance creativity
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 Chapter 5 -Addendum
• TQM (Total Quality Management) –(1)
Customer orientation, (2) Empowerment
related to problem solving, (3) Continuous
improvement, (4) Led by corporate vision.
• Six Sigma (Statistical Process Control –
data based)
• Example of FMEA (Failure Mode and
Effects Analysis)

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2003 Corporate IQS Ranking
(Problems per 100 Vehicles)

115
Toyota Motors Sales USA

117
Porsche Cars North America

124
BMW of North America

American Honda Motors

126
133 134 135
INDUSTRIAL AVERAGE

General Motors

Nissan North America

136 139
Ford

DaimlerChrysler

VW of America

141 143
Hyundai Motor America

America Suzuki Motor

144 146
Subaru of America

168
Kia Motors America

0 20 40 60 80 100 120 140 160 180

Source: J. D. Power and Associates 2003 Initial Quality Study 59

 FMEA
(Failure Mode and Effects Analysis)
• Developed by NASA in 1963
• Ford Motor Company – Major automotive
application since 1977
• Key concept – Catch all potential failure
modes early in design/production and
eliminate costly changes in later stages of
process
• FMEA is systematic and logical
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 Types of FMEA
• Design FMEA (Product design)
• Process FMEA (Production Process)
• Service FMEA (Customer service)
• Applications FMEA (Applications of
Products/Processes)
• Others

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 FMEA WORK SHEET

A B C D E F G H I J
Step # Process Potential Potential Severity Potential Occurrence Current Detection RPN

Description Failure Effects of Causes of Process

Modes Failures Failures Control and

Detection

K L M N O P
Recommended Responsibility Actions New New New
Actions and Taken Severity Occurrence Detection

Target

Completion

Date

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 Basics of FMEA
• Severity (1 to 10)
• Occurrence (1 to 10)
• Detection (1 to 10)
• RPN (Risk Priority Number) = S*O*D
• Steps with higher RPN numbers are to be acted
upon
• Check the RPN reduction afterwards
• Documentation
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 Actions to Define
• Corrective Actions (High RPNs)
• Preventive Actions (Medium RPNs)
• I - Identify
• A - Analyze
• P - Planning
• I - Implement
• E - Evaluate
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 Use of FMEA Reports
• Customers demand FMEA reports to show
vendors’ quality control efforts
• Effectively reduce failures rates
• Communications tools
• Learning opportunities
• Most effectively produced by teams of
multi-disciplinary participants.
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 Reference
• D. H. Stamatis (1996), “Failure Mode and
Effects Analysis,: FMEA from Theory to
Execution,” ASQC Quality Press

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