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HOBERTO G, ffiEDINA
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ROBERTO G. MEDITTIA

M,;il',#;"
856 Nicanor R6yo3, Sr. St.
Tel. Nos. 741.{&16 .735.13.64
1977 C.tl. RectoAvenue
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RBS
Engineering Management
First Edition 1999
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To ttry wife Estrellita C. Hernandcz,
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Chrietian H. Medina, ond, Karl Heinz
H. Med,ino
 PREFACE

Engineers are often faced with responsibilities

requiring outputs that will depend on the individual
accomplishments of subordinates. Managing people,
however, is one area where the engineer is expected to
be least prepared. Yet, many are hoping that organizations
will continuously turn out usefui and innovative products
and seryice, unaware that many of these organizations
are under the direction of professional engineers.
To be sure that engineers are well-equipped in the
performance of their management tasks, educational
institutions require them to finish a three-unit course in
Engineering Management before they are allowed to
graduate. As this first step is already accomplished, the
burden of transforming engineers to effective mana-
gers is shifted to the teacher handling the Engineering
Management subject.
Teaching Engineering Management is not without its
attendant problem, however.Arandom survey of teachers
handling the subject indicates that their main difficulty
is finding a textbook. Inspections made by the author in
various libraries and bookstores in Metro Manila and the
provinces confirmed the difficulty.
This book is an attempt to provide not only an
alternative but a solution to the problem of obtaining a
suitable textbook. In writing the book, the author has the
teachers, the students, and the practitioners in mind.
The book contains chapters on management and
organization of engineering firms, as well as the business
aspects of profitable operations. Each of the twelve
chapters is provided with a case to give the reader a
realistic view of how the various engineering manage-
ment concepts may be applied. It is hoped that this book
will be useful to the reader, or at least provide him/her
with an eye-opener to the various challenges confronting
the engineer manager.

Roberto G. Medina

vl
 ACKNOWLEDGMENT

The author wishes to acknowledge the contributions

of the following persons in the production of this book:
EngineerVicente Salazar, former dean of the College
of Engineering, Araullo University, for giving the author
the opportunity to handle subjects in Engineering
Management;
Engineer Roy D. Bolivar, Physics Department,
University of the East-Kalookan; Engineer Consolacion
Salazar-Lagman, dean of the College of Engineering,
Tarlac State University; and Engineer Estelita Bernardo
of Wesleyan University-Philippines; for valuable insights
in engineering education;
Engineer Fernando C. Hernandez, Jr., dean of the
College of Engineering, Araullo University, for providing
a copy of the engineering curricuium;
Engineer Ermino G. Enriqu ez of the College of
Engineering, CLPC, for reviewing the manuscript;
Engineer Elenito B. Duran of Ciba-Geigy, for his
valuable insights in the operation of a manufacturing
concern; and
Engineer Roy L. Salvador of the Omega Ads. Corp.,
for providing information on the job of the engineer.

vll
 TABLE OF CONTENTS

Chapter Page

{1 The Field of Engineering Management..... 1

A Planning Technical Activities 43

-4 Organizing Technical Activities 66

75 Staffing the Engineering Organization.....' 89

6 Communicating 109

7 Motivating.............:.... 133

8 Leadipg"... .....'...:........ 158

-- . Controlling ..............
g .. 184
L0 Managing Production and Service
pperations........... ...'....:..-...... 209
11 Managing the Marketing Function........... . 237

t2 Managing the Finance Function ............-... 257

,

INDEX 284

rx
 LIST OF CASES

Case page
1 Alma Electronics: I'll Dream of you 1g
2 R. E. Construction: It's Now or Never...... 4L
3 Motorbus Company: Que Sera Sera .......... 64
4 Bits and Pieces International Corp.:
Little Things Mean a Lot........ g4
5 KundimanCommunicationsCorporation:
6 Northern Container Corporation: Time

7 Batangas Polytechnic College: The

Morning After 156
8 Buenavista Electric Cooperative, Inc.:
Masquerade............... 191
I Good Music Broadcasting Corporation:
Ebb Tide.................. 207
10 Pretty Dove Development Corporation:
I'll Follow the Boys 285
11 Bugtag Chemical Corporation: Help 255
L2 Four Aces Construction and Hardware
Supply: Here, There, and Everywhere 292
TI{E FIELD OF ENGINEERING
MANAGEMENT

The Functions of the Engineer

The Engineer in Various Types of Organization

Management Skills Required at Various Levels

What is Engineering Management?

Management Defined

The Process of Management

Requirements for the Engineer Manager's Job

How One May Become a Successful Engineer

Manager
 Chapter 1

Engineers are expected to perform a variety oftasks

depending on their specialization and job level. It is
important to the engineer that he knows what is expected
of him so that he may be abie to perform his job effectively
and efficiently. His next concern will be to identifu the
skiils required but which he does not have. As engineers
are not trained to directly deal with people, it is expected
that their weakness will most often be on people-based
skills. This difficulty will be rnore apparent once they are
assigned to occupy management positions. It follows that
if the engineer manager would want to do his job well,
some exposure to engineering management activities
becomes necessary.

THE FUNCTIONS OF THE ENGINEER

Since prehistoric times, mankind has benefited ffom
the various tools, equipment, and projects developed by
engineers.l Among these are the following:
1. the stone bladed axe which was avery useful tool;
and the irrigation system used to promote crop
growing 6000 to 3000 B.C.;
-
2. the p5rramids of Egypt 3000 to 600 B.C.;
-
3. roadbuilding by the Romans 600 B.C. toA.D.
400; -
4. the production of paper and gunpowder by the
Chinese 100 A.D. to 1600 A.D.:
-
rGeorge C. Beckley and others, Engineering,
An Introduction to a Creatiue
Pntfesskm.,Fifth E<liticn (New York: MacMillan publishing Co., 1996) pp. B-21.
 5. the production of steam engine and the spinning
and weaving machinery * 1601 A.D. to 1799
A.D.; and
6. the manufacture of cars and household appli-
ances modern times.
-
A listing of all useful tools, equipment, and projects
developed and produced by engineers will be sufficient to
produce volumes of books. These contributions indicate
that engineers have become an indispensable segment of
the world's professions. This expectation will continue for
a long time.
Even as engineers are currently producing solutions
to many of the difficulties faced by mankind, much is still
expected of them. Their outputs, new or improvements
of old ones, are very much needed in the following specific
problem concerns:2
1. the production of more food for a fast growing
world population;
2. the elimination of air and water pollution;
3. solid waste disposal and materials recycling;
4. the reduction of noise in various forms;
5. supplying the increasing demand for energy;
6. supplying the increasing demand for mobility;
7. preventing and solving crimes; and
8. meeting the increasing demand for communi-
cation facilities.
Specifically, the functions of engineering encompass
the following areas:3
1. . Research where the engineer is engaged in the
-
'2Op.cit., pp. 29-53.
3John Dustin Kemper, Introduction to the Engineering Professittn (New
York: Holt, Rinehart and Winston, 1985) pp. 22-31.
 process of learning about nature and codifying
this knowledge into usable theories.
2. Design and development where the engineer
undertakes the activity -of turning a product
concept to a frnished physical item.a Design for
ntanufacturability and ualue engineering teams
(a feature of some companies) are charged with
improvement of designs and specifications at the
research, development, design, and production
stages of product development.5
3. Testing the engineer works in a unit
where new- where
products or parts are tested for work-
ability.
4. Manufacturing
- where the
in charge of production
engineer is directly
personnel or assumes
responsibility for the product.
5. Construction
- this
engineer (a civil
is where the construction
engineer) is either directly in
charge of the construction personnel or mayhave
responsibility for the quality of the construction
process.
6. Sales the engineer assists the company,s
-where
customers to meet their needs, especially those
that require technical expertise.
7. Consulting where the engineer works as
- any
consultant of individual or organization
requiring his services.
8. Government where the engineer may find em-
p_loyment in -the government performing any of
the various tasks in regulating, monitoring, and
controlling the activities of various institutions,
public or private.
4C products Management,Third
-Illinois: Merle Crawford New
,
Richard D. Ir-win, Inc.,
1991) p. 831.
Edition (Homewood,
sJay Heizer
and Barry Render, piocluction and. Operations Managemen.i
(Boston: Allyn and Bacon, 1998) p.254.
 9. Teaching
- where the engineer gets employ-
ment in a school and is assigned as a teacher of
engineering courses. Some of them later become
deans, vice presidents, and presidents.
I-0. Management
- where the engineer is assigned
to manage groups of people performing specific
tasks.

THE ENGINEER IN VARIOUS TYPES OF

ORGANIZATION
From the viewpoint of the engineer, organizations
may be classified according to the degree of engineering
jobs performed:
1. Level One
- those with minimal engineering jobs
like retailing frrms.
2. Level Tlvo
- those with a moderate degtee of
engineering jobs like transportation companies.
3. Level Three
- those with a high degree of
engineering jobs like construction firms.

Figure 1.1 Types of Organization and the Management Skills

Required of Engineers

general

management
skills
required

specialized
level level level
12 3

The Firm's Quantity of Engineering ]obs

5
Management Skills Required at Variotrs Levels
Among the types of organizations, the engineer will
have a slim chance of becoming the general manager or
president of level one, unles$ of course, he owns the firm.
The engineer manager may be assigned to head a small
engineering unit ofthe firm, but there will not be too many
firms which will have this unit.
In level two firms, the engineer may be assigned to
head the engineering division. The need for management
skills will now be felt by the engineer manager.
Levei three firms provide the biggest opportunity for
an engineer to become the president or general manager.
In this case, the engineer manager cannot function
effectively without adequate management skills.

WHAT IS ENGINEERING MANAGEMENT?

Engineering management refers to the activity com-
bining "technical knowledge with the ability to organize
and coordinate worker power, materials, machinery, and
money."(i
When the engineer is assigned to supervise the work
of even a few people, he is already engaged in the first
phase of engineering management. His main responsibil-
ity i1 to lead his group into producing a certain output
consistent with the required specifications.
The top position an engineer manager may hope to
occupy is the general managership or presidency of
any firm, large or small. As he scales the management
ladder, he finds that the higher he goes up, the less
technical activities he performs, and the moie manage-
ment tasks he accepts. In this case, it is but proper that
the managment functions taught in pure management
courses be well understood by the engineer .rarrag"..

.Sybil P. Parker, editor in

chief, Encyclnped,ia of.Engineering,Second.Edition
(New York: McGraw-Hill, Inc. 1998) p. 164.
Figure 1.2 A Typical Advertisement for a Pure Engineering
Job (without management responsibilities)

GE

THE NAME T}IE WORLD TRUSTS }IAS PI.ACED ITS

TRUST IN US
FUJI.HAYA ELECTRIC
An affriiate of Fuji Electric Co', Ltd', of Japan
For irnmediate hiring

LICENSED ELECTRICAL ENGINEERS

Technical Services GrouP
(Canlubang-based)

Design Engineers (2)

The successful candidate will handle project design and coorelination
for switchgears manufacturing and substation installation'
APP|ication Engineers {2)
The successful canilidates will prepare lay-out drawings of switchgears
distribution/lighting panel boaids, etc., and bill of components' HdShe
will transact with customers regarding revisions and approvals'
Qualifications for Engineering Positions:
. With at least one year work experience; overseas experience
will be an advantage
. with adequate understanding of and actual operating skills
in CAD and windows software
r With efl'ective English communication skills and inter-
personalskillstoefficientlyhandletransactionsinvarious
levels
. Preferably with a driver's license
Applicants are requested to apply in person with their "gTPte.\uTiu"
,"-.-r*"., 1 x 1 photo, and college transcripts at the 2nd Flr' Matrino
Bklg., 2iZS Pasong Tamo St., Makati City. For inquiries, please call
Odetfe panganiban at 892-88-86. Interviews will be held from 8:00
A.M.-12:00 NN, Monday to Saturday. Deadline for application is
Saturday, 02 March 1996.

'kFrom an advertisement, Philippine Daily Inquirer, February 25,

1996, p. B -1.
Figure 1.3 A Typical Advertisement for an Engineer Manager
as a Lower Level Executive (Supervisor)

ONE OF THE COfINTRY'S LEADING STRUCTURE

SPECIALISTS NEEDS THE FOLLOWING FOR ITS
EXPANSION

FABRTCATION SUPERVTSOR (1)

Male, BSCEIBSME graduate, not more than 85 years old
-
At least 5 years experience in steel fabrication
-
Willing to work on shifting schedule
-
STRUCTURAL DETATLERS (6)
-_ M/I', B.S. in Engineering, below 35 years old
Knowledge in steel connections standard and steel fab-
- rication (shop drawings)

PROJECT ENGINEERS
Male, licensed Civil Engineer, with at least 5 years
- experience on steel erection and willing to be assigned
outside Metro Manila

WELDING FOREMAN
Male, at least high school graduate and with at least b
- years experience as Welding Foreman

Apply at:
STEEL CENTRE PHILS., INC.
Amang Rodriguez Ave., Bo. Manggahan, pasig City
Or send comprehensive resume to:
P.O. BOX 3702, MANILA

xFrom an advertisement, Manila Bulletin,

February 25.
1996, p. F-24.
Figure 1.4 ATypical Advertisementfor an Engineer ilanager
as a Middle Level Executlve

A PROGRDSST\IE INDUSIBHL COMPAIYY IS LOOT-

ING FOR TALENTED AIYD DYNAMIC INDTVIDUALS
wHo ARE WILLING TO FILL gp frrB roLLowING
POSIfiONS:

PRODUCTION MANAGER

Male, 35-45 years of age

-
Mechanical Engineering/Industrial Engineering graduate
- or any related course
4 to 6 years working experience in handling
- With
production preferably in a steel induqtry

Extensive experience in maintenance program

-
Cost-cutting oriented Person.
-
Interested parties, please apply in person with bio-data and
resume, 2 x 2 picture and other credentials at:
8/F GEDISCO TOWER
534 Asuncion St., Binondo, Menila
Ilel. 241-92-51
*From an advertisement, Manila Bulletin, February 25,
1996, p. F-18.
Figure 1.5 Typical Advertisements for Engineer Managers as
Top Executives

WEAREAFAST GROWING GROUP OF COMPANIES INNEED

OF A QUALIFIED AND HIGHLY MOTTVATED
GENEBAL MANAOER
Male, 35-45 years old
Preferably a graduate of Industrial or Mechanical Engineering
Highly skilled in the field of general management
Sales oriented
Fluent in spoken and written English
The qualified applicantwill receive an attractive compensation package
and benefits.
Interested applicants may send their resume with a latest photo
to the PERSONNEL DEPARTMENT, BOX 193 - MAIN'96
C/O MANILA BULLETIN

'r' From an advertiseirrent, Manila Bulletin, April 28, 1996, p. E-5.

GENERAL MANAGER
A very progressive chemical manufacturing company seeks a mature
and highly qualified candidate to assume the above post.
Directly reporting to the Vice President, the ideal candidaie mrist be:
Male, 35-45 years old
Graduate of Chemical Engineering in a prestigious college or
univerisity
Aggressive and result oriented
With leadership and management skills
Excellent communication skills
We offer a courpetitive salary and excellent benefits. Interested
applicants are requested to send their resurne with a recent photo to:
THE HRD DEPABTMENT
BOX 192 - MAIN'96
c/o MANILA BULLETIN

'r'Erom an advertisement, Manila Bulletin, April 28, 1996, p. E-5

l0
Figure 1.6 An Advertisement for an Engineering Manager

FOR IMMEDIATE HIRING

ENGINEERING MANAGER
This person will be responsible for the effective management
of the engineering and maintenance department.
We are looking for a licensed Mechanical Engineer, preferably
with an MBA or graduate school degree.
He must carry with him at least five years experience in the
operation, trouble shooting and preventive maintenance
system of all mechanical, refrigeration and air-conditioning
equipment preferably gained from a food business industry or
in a manufacturing firm in a managerial capacity.
We offer a very competitive compensation package and a car
plan to the qualified candidate.
Interested parties, may send their comprehensive resume'
application letter and a passport sized ID to:

BOX NO. 153 CUBAO ',96

c/o MANILA BULLETIN

*From an advertisement, Manila Bulletin, August 25, 1996,

p.c-3.

ll
 MANAGEMENT DEFINED
Since the engineer manager is presumed to be
technically competent in his specialization, one may now
proceed to describe more thoroughly the remaining
portion of his job, which is management.
Management may be defined ss the'creative pnoblem
solving-process of planning, organizing, leading, and
controlling an organization's resources to achieve its
mission and objectives."T

THE PROCESS OF MANAGEMENT

Management is a process consisting of planning,
.
organizing, directing (or leading), and controlling.
Explained in a. simple manner, management must
seek to frnd oirt the objectives of the organization, think
of ways on how to achieve them, decide on the ways to
be adapted and the material resources to be used, deter-
mine the human requirements of the total job, assign
specifrc tasks to specific persons, motivate them, and
provide means to make sure that the activities are inJhe
right direction.
The specific activities in the management process are
discussed more thoroughly in the succeeding chapters.

REQUIREMENTS FOR THE ENGINEER

MANAGER'S JOB
Depending on the type ofproducts or services a firm
produces, the engineer manager must have the following
qualifrcations:
1. a bachelor's degree in engineering from a repu-
table school; In some cases, a master,s degree

_ M. Higgins, Tlw Managem.ent Challenge (Nerv york: MacMillan

- _]J-ames
Publishing Co., 1991) p. G-10.

L2
 in engineering or business management is
required;
2. a few years experience in a pure engineering job;
3. training in supervision;
4. special training in engineering management.
These qualifications will be of great help to the
engineer manager in the performance of the various
management functions.

HOW ONE MAY BECOME A SUCCESSFUL

ENGINEER MANAGER
Successful engineer managers do not happen as a
matter of chance, although luck is a contributory factor.
It is very important for the engineer manager to know
the various factors leading to successful management.
Kreitner indicates at least three general preconditions
for achieving lasting success as a manager. They are as
follows:8
1. ability
2. motivation to manage, and
3. opportunity.

Ability
Managerial ability refers to the capacity of an
engineer manager to achieve organizational objectives
effectively and efficiently.
Effectiveness, according to Higgins, refers to a
description of "whether objectives are accomplished",
while efficiency is a description of the relative amount of
resources used in obtaining effectiveness.'a

sRobert Kreitner, Management, Fifth Edition (Boston: Houghton Mifflin

Co., 1992) p. 20.
t'Higgins, p. G-5.

l3
 To iilustrate:
If a civilengineer was asked by his superiors
to finish a lO0-kilometer road cementing project
within eight months, he is said to be effective if he
frnished the job within the required period. On the
other hand, his efficiency is measured by the inputs
(labor and materials) he poured into the project in
relation to the actual output (the 100 kilometer road).
If the same output is made withless inputs, the more
efficient the civil engineer becomes.

Motivation to Manage
Many people have the desire to work and finish
specifie tasks assigned by superiors, but not many are
motivated to manage other people so that they may con-
tribute to the realization of the organization's objectives.
Amanagement researcher, John B. Miner, developed
a psychometric instrument to measure objectively an
individual's motivation to manage. The test is anchored
to the following dimensions:lo
1. Favorable attitude toward those in positions of
authority, such as superiors.
2. Desire to engage in games or sports competition
with peers.

3. Desire to engage in occupational or work-related

competition with peers.
4. Desire to assert oneself and take charge"
5. Desire to exercise power and authority over
others.
6. Desire to behave in a distinctive way, which
includes standing out from the crowd.

loJohn B. Miner, cited in Kreitner, Management, pp. 2l-22.

t4
 7. Sense of responsibility in carrying out the rou'
tine duties assoeiated with managerial work.
High scores in the foregoing dimensions are asso-
ciated with high motivation to manage.

Opportunity
Successful managers become possible only if those
havingthe ability and motivation are given the opportunity
to manage. The opportunity for successful management
has two requirements:
1. Obtaining a suitable managerial job, and
2, Finding a supportive climate once on the iob.
Newspaper advertisements abound with needs for
ongineer managers. It is a littte difficult to determine if
the firms requiring their services provide a supportive
climate for effective and efficient management. A sup-
portive climate is characterized by the recognition of
managerial talent through financial and nonfinancial
rewards.
SUMMARY
Engineers are known for their great contributions
to the development of the world's civilization. There are
many areas where their presence is necessary like
research, design and development, testing, manufac-
turing, construction, sales, consulting, government,
teaching, and manageme4t.
Engineers may be found contributing their share in
the various levels of organizalion.
Engineering activities need to be managed and
engineers are sometimes placed in positions where they
have to learn management skills.
Management is concerned with planning, organizing,

l5
leading, and controlling an organization's resources to
achieve its mission and objectives.
There are certain qualifications required of the
engineer manager.
One may become a successful engineer manager if
the preconditions of ability, motivation to manage, and
opportunity to manage are met.

l6
 QUESTIONS FOR HEVIEW AND DISCUSSION
1. Why are engineers considered an important segment
of the society?
2. What are expected of engineers in general?
3. In what current concerns are engineering outputs
needed?
4. In what areas are engineers. currently involved?
5. How may organizafions be classified according to the
engineering jobs performed?
6. Which organization level requires the highest man-
agement skills for engineer managers?
7. What is engineering management?
8. How may one define management?
9. What qualifications must an engineer managerhave?
10. How may one become a successful engineer manager?

SUGGESTED ITEM FOR RESEARCH

1. Prepare a list of ten engineers who became president
or general manager of a large cornpany.

t7
Case 1. ALMA ELECTRONICS: I'll Dream of You
Mr. Andy Mallari opened a small shop selling tran-
sistor radios in 1979. His store was located at one corner
(General Luna St.) of the entire stretch of BurgosAvenue,
the main thoroughfare of Cabanatuan City'
The demand for electronic parts made him carry-a
wide assortment of parts that are used in the assembly
and maintenance of radios, tape recorders, amplifiers, and
various related appliances
By 1990, Mr. Mallari was able to save enough money
for the purchase of a 300 square meter lot along DeI Pilar
Street. He constructed a 10 meters x 15 meters two-storey
building on the lot. The ground floor is used as his store
where sales are made to customers which grew in number
month after month. The second floor is used as his
residence.
Mr. Mallari thinks that he can duplicate his feat in
the other big towns of San Jose City, Gapan, and G'uimba'
He has already started operatinghis sfores in those towns
and sales are already picking up. His current operations
cover sales and repair. There are five salesladies in
Cabanatuan attending to the various needs of the
customers. Those who bring their appliances for repair
are served by one ofthe six technicians. The parts used
come from the stocks maintained ai the store.
Those who purchase parts from the store consist of
technicians from the various towns of Nueva Ecija'
Sometimes, the technicians send somebody to do the
purchasing of parts.
Mr. Mallari's perspective has changed drasticaily
after he met his former classmate Estelito Chan in a
class reunion at Araullo University. Mr. Chan has a
well-established appliance assembly plant in Manila.
He indicated that he did not start big but rather as a
subcontractor for a large assembly piant. Slowly, Mr.

l8
Chan's business picked up until he was able to establish
his own factory.
Mr. Mallari thinks that he can follow the footsteps
of his friend. As he is already 47 yearc old and his oldest
child is about ready to enter college, he thinks this is the
best time for him to consider sending his son to an
engineering school. His decision will center on which school
and which engineering course. He feels that his children
are keenly interested in whatever career he will ask them
to take.
Mr. Mallari has three sons, all belonging to the top
ten in their respective classes. He thinks all three have
the potential to help him realize his dream of establishing
his own assembly plant. His immediate concern now is
to identify the right college courses for his children.

l9
 DECISION.MAKING

Decision Making as a Management Responsibility

What is Decision Making?

The Decision Making Process

Approaches in Solving Problems

Quantitative Models for Decision Making

20
 Chapter 2

Managers of aII kinds and types, including the

engineer manager, are primarily tasked to provide lead-
ership 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.

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 do not want to make deci-
sions. Delaney concludes that this type of managers are

2t
dangerous and,,should be removed from their position as
soon as possible'"l
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. ih" higfr", the management level is, the biggei and
the more complicated decision-making becomes'
An example may be provided as follows:
The production manager of a certain company
has received a written request from a sdction head
regarding the purchase of an airconditioning unit'
Almost simultaneously, another request from another
section was forwarded to him requiring the purchase
of a forklift. The production manager was informed
by his superior that he gan only buy one of the two
requested items due to budgetary constraints'
The production manager must now make a
decision. His choice, however, must be based on sound
arguments for he will be held responsible, later on,
if he had made the wrong choise.

WHAT IS DECISION.MAKING?
process of
-N'becision-making may be defined as "the
identifying and choosing alternative courses of action in
a manner-appropriate to the demands of the situation'"2
The defrnition 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 man-
agement functions (i.e., planning, organizing, directing,

lwilliam A. Delaney, The 30 Most Cornmon Problems in Management and'

How to Solue Them (New York AMACOM, 1982) p. 89.
zKreitner, p. G-3.

22
 and controlling). Decision-making, according to Nickels
and others, "is the heart of all the management functions'"3

THE DECISION.MAKING PROCESS

Rational decision-making, according to David H'
Holt,a is a process involving the following steps:
I1 1. diagnose problem

o'\ 2. analyze environment

3. articulate problem or dpportunity
4. develop viable alternatives
5. evaluate alternatives
6. make a choice
7. implement decision

7 ? 8. evaluate and adapt decision results

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." &
r a What is a Problem? Aproblem exists when there is
a difference between an actual situation and a desired
situation.s For instance, the management of a construction
company entered into a contract with another party for
the construction of a 25-storey building on a certain site.

3William G. Nickels and others. [Jnderstanding Businzss, Second Edition

(Homewood, Illinois: Irwin, 1987) p. 246.
{David H. Holt, Management Principles and Practices (Englewoood Cliffs'
New Jersey: Prentice-Hall, Inc., 1987) p. 79.
sJohn R. Schermerhorn , Jr., Management for Productiuity, Second Edition
(New York: John Wiley and Sons, 1986) p. 680.

23
The actual situation of the firm is that it has not yet con-
structed the building. The desired situation is the finished
25-storey building. In this case, the actual situation is
different from the desired situation. The company, there-
fore, has a problem and that is, the construction of the
2S-storey building.

Analyze the Environment

The environment where the organization 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 iden-
tification of constraints, which may be spelled out as
either internal or external limitations. Example of inter-
nal limitations are as follows:
1. Limited funds available for the purchase of
equipment.
2. Limited training on the part of employees.
3. Ill-designed facilities.
Examples of external limitations are as follows:
1. Patents are controlled by other organizations.
2. Averylimited market for the company's products
and services exists.
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.
An illustration of failure to analyze the environment
is as follows:
The president of a new chemical manufacturing

24
 company made a decision to locate his factory in a
place adjacent to a thickly populated area' Con-
struction of the buildingwas made with precision and
was finished in a short period. When the clearance
for the commencement of operation was sought from
local authorities, this could not be given' It turned
out that the residents opposed the operation of the
firm and made sure that no clearance is given'
The president decided to relocate the factory but
not after much time and money has been lost' This
is a clear example of the cost associated with man-
agement disregarding the environment when
decisions are made. In this case, the president did
not consider what the residents could do'
Components of the Enuironment- Tlhe environment
consists of two major concerns:
f. internal and
2. external.
The internal environment refers to organizational
activities within a firm that surrounds decision-making.G
Shown in Figure 2.L are the important aspects of the
internal environment.
The external environrnent refers to variables that
are outside the organization and not typically within the
short-run control of top management.T Figure 2.2 shows
the forces comprising the external environment of the firm.

Develop Viable Alternatives

Oftentimes, problems may be solved by any of the
solutions offered. The best among the alternative solutions

6C.W. Park and Gerald Zaltman, Marketing Management (Chicago: The

Dryden Press, 1987) p. 633.
TThomas L. Wheelen and J. David Hunger, Strategic Management and'
Business Policy (New York: Addison-Wesley Publishing Co', 1992) p. 12.

2F,
must be considered by management' This is made
pos-
sible by using a procedure with the following steps:
1. Prepare a list of alternative solutions'
2. Determine the viability of each solutions'
3. Revise the list by striking out those which are
not viable
To illustrate:
jnbrea-
An engineering firm has a problem of
sing its output by 307o' This is the result of a new
agriement Letween the frrm and one of its clients'

Figure 2.1 The Engineering Firm-and-the lnternal

- Environment in Decision-Making

THE ENGINEERING FIRM

INTERNAL ENVIRONMENT
Organizational AsPects
like org. structure, Policies,
procedures, rules, abilitY of
management, eitc'
Marketing Aspects
like product strategY,
promotion strategY, etc.
Personnel AsPects
like recruitment Practices,
incentive sYstems, etc.
EXTERNAL
Production AsPects ENVIRONMENT
like plant facilitY laYout,
inventory control, etc.
Financial AsPects
like liquidity, ProfitabilitY,
etc.

26
 Figure 2.2 The Engineering Firm and lts External
Environment

YU
Government
I
I
Engineers

\l/
Labor Unions
I

Clients
ENGINEERING
FIRM
(-Suppliers

Compdtitors

Public

27
 The list of solutions prepared by the engineering
manager shows the following alternative courses of
action:
1. improve the capacity of the firm by hiring more
workers and building additional facilities;
2. secure the services of subcontractors;
3. buy the needed additional output from another
firm;
4. stop sewing some of the company's customers;
and
5. delay servicing some clients.
The list was revised and only the first three were
deemed to be viable. The last two were deleted because
of adverse effects in the long-run profitability of the firm.

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 alternatives presented. Souder sug-
gests that "each alternative must be analyzed and eva-
luated in terms of its value, cost, and risk characteristics."s
The value of the alternatives refers to benefits that
can be expected. An example may be described as follows:
a net profrt of F10 million per year if the alternative is
chosen.
The cost of the alternative refers to out-of-pocket costs
0ike F100 million for construction offacilities), opportunity
8Wm.E. Souder, Management Decision Methds
for Managers of Enginzering
and Research (New York: Van Nostrad Reinhold Co., 1980) p. 20.

28
 costs (like the opportunity to earn interest of P2 million
per year if money is invested elsewhere), and follow-on
costs (like F3 million per year for maintenance of facilities
constructed).
The risk characteristics refer to the likelihood of
achieving the goals of the alternatives. If the probability
of a net profit of F10 miilion is only 10 percent, then the
decision-maker may opt to consider an alternative with
a F5 million profit but with an 80 percent probability of
success.
Another example of an evaluation of alternatives is
shown below:
An engineer manager is faced with a problem
of choosing between three applicants to fill up a lone
vacancy for a junior engineer. He will have to set up
certain criteria for evaluating the applicants' If the
evaluation is not done by a professional human
resources officer, then the engineer manager will be
forced to use a predetermined criteria.
A typical evaluation of job applicants will appear
as follows:

EVALUATION SHEET
Title of Vacant Position: JUNIOR ENGINEER
Date of Evaluation: December 28, 1996
Applicant Education Training Experience Age Total Points

1. Jose Sibayan, Jr. .40 35 4 10 89

2. Menandro Rillon 40 36 5 990

3. Dante dela Cruz 40 38 6 791
Evaluator:
Edgardo J. Viloria
Manager
Engineering Division III
29
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.
\tChoice-making refers to the process of selecting
among alternatives representing potential solutions to a
problem.eAt this point, Webber advises that ". . . particular
effort should be made to identify all significant conse-
quences of each choice."ro
alternatives
Tb make the selection process easier, the
can be ranked from best to worst on the basis of some
factors like benefit, cost, or risk.

Implement Decision
After a decisipn has been made, implementation
follows. This is necessary, or decision-making will be an
exercise in futility.
if Implementation refers to carrying out the decision
so that the objectives sought will be achieved. To make
implementation effective, a plan must be devised.
At this stage, the resources must be made avail-
able so that the decision may be properly implemented.
Those who will be involved in implemehtation, accord-
ing to Aldag and Stearns, must understand and accept
the solution."lr
Evaluate and Adapt Decision Results
In implementing the decision, the results expected
may or may not happen. It is; therefore, irnportant for the

eSchermerhorn, Jr., p. 63.

roRossA. Webber,To Be aManage4 Essentials of Management(Homewood,
Illinois: Richard D. Irwin, Inc., 1981) p. 111.
llRamon J. Aldag and Timothy M Stearns, Monogement (Cincinnati: South-
Western Publishing Co., 1991) p. 677.

30
 manager to use control and feedback mechanisms to
ensure results and to provide information for future
decisions.

it", 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 keep-
ing with the goals and objectives originally specified.l2
jl
Control refers to actions made to ensure that activi-
ties performed match the desired activities or goals, that
have been set.
In this last stage of the decision-making process, the
engineer manager will find out whether or not the desired
result is achieved. If the desired tes.tit is achieved, one
may assume that the decision made was good. If it was
not achieved, Ferrell and Hirt suggest that further analysis
is necessary.l3 Figure 2.3 presents an elaboration of this
last step.

APPROACHES IN SOLVING PROBLEMS

In detision-making, the engineer manager is faced
with problems which may either be simple or complex.
Tb provide him with some guide, he mtrst be familiar with
the;fllowing approaches:
rlt f. qualitative evaluation, and
2. quantitative evaluation.
Qualitatiue Eualuation This term refers to evaluation
of alternatives using intuition and subjective judgment.
jrstevenson states that managers tend to use the qualitative
' approach when:
l'?William E. Penney and Donald B. McWilliams, Manog;ernent Science, An
Introd.uction to Quantitatiue Analysis for Management (New York: Harper and
Row, 1982) p. 5.
rSO.C. Ferrel and Geofrey Hirt, Business (Boston: Houghton Mifflin Co.,
1989) p. 198.

3l
Figure 2.3 Feedback as a Control Mechanism in the Decision'
Making-ProcesS

Step 1

articulate
problem or
opportunity

develop
viable
alternatives

l"*ru,6-l .-,[ffi] determine

l results | 'l achieved | - ' steps where
error was
made
[r*--rlt" I ? adapt decision
Iacnieveo | results

32
 1. The problem is fairlY simPle.
2. The problem is familiar.
3. The costs involved are not great.
4. Immediate decisions are needed.ra
An example of an evaluation using the qualitative
approach is as follows:
A factory operates on three shifts with the
following schedule:
First shift - 6:00 A.M. to 2:00 P.M.
Second shift- 2:00 P.M. to 10:00 P.M'
Third shift - 10:00 P.M. to 6:00 A.M.
Each shift consists of 200 workers manning 200
machines. On September 16, 1996, the operations
went smoothly until the factory manager, an indus-
trial engineer, was notified at 1:00 P.M. that five of
the workers assigned to the second shift could not
report for work because of injuries sustained in a
traffic accident while tlrey were on their way to the
factory.
Because of time constraints, the manager made
an instant decision on who among the first shift work-
ers would work overtime'to man the five machines'
Quantitatiue Eualuation. This term refers to the
evaluation of alternatives using any technique in a group
classifred as rational and analytical.

QUANTITATIVE MODELS FOR DECISION

MAKING
The types of quantitative techniques which may be
useful in decision-making are as follows:
--lffiffir* J. Stevenson, Introd.uction to Management Science (Homewood,
Illinois: Irwin, 1989) p. 5.
 f. inventory models
2. queuing theory
3. network models
4. forecasting
5. regression analYsis
6. simulation
d 7. linear programming
8.
a

{ sampling theory
I 9. statistical decision theory15

Inventory Models
Inventorymodels consist of several types all designed
to help the engineer manager make decisions regarding
inventory. They are as follows:16
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.lT
2. Production order quantity model this is an
-
economic order quantiy technique applied to
production orders.
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 by suppliers.

Queuing Theory
The queuing theory is one that describes how to
l5Higgins, p. 216.
rGA more thorough discussion is presented by Heizer and Render, pp' 562-

578.
lTFerrell and Hirt, p. G-6.

34
determine the number of service units that will minimize
both customer 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 ear service center, ships and barges
waiting at the harbor for loading and unloading by dock-
workers, programs to be run in a computer system that
processes jobs, 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
/u\ (PERT) a technique which enables engineer
' managers- to schedule, monitor, and control large
and complex projects by employing three time
estimates for each activitY.
4f,
2. The Critical Path Method (CPM) - this is a net-
work 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 make
decisions that will have implications in the future. A
manufacturing firm, for example, must put up a capacity
which is sufficient to produce the demand requirements
of customers within the next 12 months. As such, man-
power and facilities must be procured 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 I-2 months. This type
of information may be derived through forecasting.
36
 Forecasting may be defined as "the collection of past
and current information to make predictions about the
future."18

Regression Analysis
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.1l)
Regression anaiysis may be simple or multiple depen-
ding on the number of independent variables present.
When one independent variable is involved, it is called
simple regression; when two or more indbpendent var-
iables are invoived, it is called multiple regression.2o

Simulation
Simulation is a model constructed to representreality,
on which conclusions about real-life problems can be
used.21 It is a highty sophisticated tool by means of which
the decision maker develops a mathematical model of the
system under consideration.
Simulation does not guarantee an 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.22 Linear

lsAldag and Stearns, p. G-9.

lePark and Zaltman, p. 639.
2oPhilip Kotler, Marketing Management,seventh Edition (Englewood Cliffs,
New Jersey: Prentice-Hall, Inc., 1991) p. 118.
2rBenton E. Gup, Principles of Financial Management,Second
Edition (New
York: John Wiley and Sons, 1987) p. 655.
2'?John J. Coyle and others.The
Management rfi'Business Logistics, Fourth
Edition (New York: West Publishing Co., 1988) p. 4?5.

36
programming is very useful as a decision-making tool when
r"ppiy and demand limitatiohs 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
,r."d fot a number of processes, such as quality control
and marketing research.
When data gatheringis expensive, sampling provides
an alternative. Sampling, in effect, saves time and money;

Statistical Decision-Theory
' Decision theoryrefers to the "rational way to concept-'
ualize, analyze, and solve problems in situations in-
volving limited, or partial information about the decision
environment."2s
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 discus-
sion on the evaluation of alternaiives, but is very impor-
tant, is subjecting the alternatives to Bayesian analysis'
The purpose of Bayesian analysis is to revise and
upd.ate thl inltial assessments of the event probabilities
generated by the aiternative solutions. This is achieved
by the use of additional information.
When the decision-maker is able to assign probabil-
ities to the various events, the use of probabilistic deci-
sion rule, called the Bayes criterion, becomes possible' The
Bayes criterion selects the decision alternative having
the maximum expected payoff, or the minimum expected
ioss if he is working with a loss table.2a

Mahing (Belmont'
"Clr*.oppi A. Fergionne; Quantitatiue Decision
California: Wadsworth Publishing Co., 1986) p. 881'
2aMichaelO.AndersonandR'J.Lievano,QuantitatiueManagement'An
Introd.uction (Boston: Kent Publishing Co., l'986) p' 417'

37
 SUMMARY
of the
Decision-making is a very important function
engineer manager. hit otgut'ization will
rise or fall
ali"oairrg on the outco*"" oihit decisions' It is'
therefore'
some skills
,ru""urury for the engineer manager to develop
in decision-making'
The process of identiffing and choosing alternative
to the demands
courses of action in a manner appropriate
of the situation is called decision-making'
It is done at
various management levels and functions'
The decision-making process consists of various
environm-ent'
steps, namely: diagnose problem, analyze
develop viable alter-
articulate problem-or opportunity,
choice, implement
natives, evaluate alternaiives, make a
results'
Ju"i"ion, and evaluate and adapt {ecision
There are two approaches in solving problems'
evalua-
namely: qualitative evaiuation and quantitative.
solving fairly sim-
tion. Qualitative evaluation is used for
to
pf" pt"Uf"*s, while quantitative evaluation is applied
complex ones.

38
 QUESTIONS FOR REVIEW AND DISCUSSION

' 1. ment
Can the engineer manager avoid making manage-
decision? Why or whY not?
2. When a problem becomes apparent and the engineer
manager chooses to ignore it, is he making a decision?
Explain your answer.
3. Why is proper diagnosis of the problem important?
4. What are the components of the environment from
the poiut ofview of the decision-maker? What do they
consist of?

' 5. How may one develop viable alternatives in problem

solving?
6. How may alternative solutions be evaluated?
.7. Why is it important for those who will be involved

solution to the problem?

8. What are the approaches in solving problems?
-,- 9. What
quantitative techniques are useful in decision-
making?
10. What is the purpose of Bayesian analysis?

SUGGESTED ITEM FOR RESEARCH

1. Provide an illustration of how Bayesian analysis is
used.

39
Case 2. R" E. GONSTRUCTION: lt's Now or Ne'.
When Engineer Romeo Estabillo finished his Civil
Engineering course at Mapua Institute of Technology, he
took the board examination and passed it in 1981. Wanting
to start independently, he went back to his hometown
(Santiago City) to organize his own construction firm. In
his first few years ofoperation, he accepted contracts for
the construction of residential houses. As he gained
experience, his clients grew in number, and even the most
prominent persons in the province of Isabela availed of
his services.
At the start, he hired two assistants to help him in
his daily routine as a contractor. One of the two assistants,
Mr. Silvino Santiago, was a third year civil engineering
student who had stopped schooling due to financial
difficulties. His main task was as draftsman. His duty
was to produce all documents relating to the physical
requirements of the various contracts entered into by his
boss. Among these documents are the building plan,
specifications, bill of materials, building permit, etc. His
additional duty was to assist Engineer Estabillo in
supervising the foremen and workers at the various
construction sites.
The second assistant, Mr. Romulo Mamaril, was
assigned to coordinate purchasing, bookkeeping, and other
related administrative activities.
At the third year of operations, Engineer Estabillo
was already directing operations in his newly constructed
office inside his residential compound. By this time, two
more female employees were hired to assist in the various
tasks performed in the offrce.
By 1994, Engineer Estabillo reviewed his company's
payroll. It indicated that he has in his employ six full-
time civii engineers, two draftsmen, ten administrative
personnel, one messenger and one security guard. The

40
foremen and laborers working at the various projects were
contractual.
By June 1996, Engineer Estabillo felt that business
was continuously growing, so he will have to secure the
services of four additional civil engineers on a full-time
basis. As he was directly supervising all operations, he
now feels that he may not be able to perform his functions
effectively ifhe will push through with the plan. He wants
to make a decision, but he is apprehensive. He thinks
operations are now more complex that decision-making
must be a little scientific. With this thoughts, he pondered
on how he will go about solving the problem.

al
 PLANNING TECHMCAL
ACTTVITIES

The Nature of Planning

Planning Defined

Planning at Various Management Levels

The Planning Process

Types of Plans

Making Planning Effective

42
 Chapter 3

If managing an organization is to be pursued.vigor-

ously, planningwill constitute the most important activity.
Managers who plan are afforded with the opportunity to
carefully analyze situations which directly contribute to
effective decision-making.
The engineer manager, regardless of his manage-
ment level, will have to devote some of his time to plan-
ning. The higher the management level the enginger
manager is in, the more sophisticated his planning activity
becomes. Why and how this is so shall be discussed in
this chapter.

THE NATURE OF PLANNING

There are many instances when managers are
overwhelmed by various a.ctivities which at times be-
cloud his judgment. This must be expected since any-
body who is confronted by several situations happening
simultaneously will loose sight of the more important
concerns. To minimize mistakes in decision-making,
planning is undertaken.
A plan,. which is the output of planning, provides a
methodical way of achieving desired results" In the
implementation of activities, the plan serves as a useful
guide. Withoutthe plan., some minortasks maybe afforded
major attention which may, later on, hinder the accom-
plishment of objectives.
An example of the diffrculty of not having a plan is
illustrated below.
43
 The management of an engineering firm was
able to identifu the need to hire additional three em-
ployees. The manager proceeded to invite applicants,
screen them, and finally hired three of them. When
, the hiring expense report was analyzed, it involved
more than double the amount spent by other firms
in hiring the same number of people.
When an inquiry was made, it was found out that
the manager committed some errors of judgment.
For instance, he used an expensive advertising
layout in a newspaper when a simple message will
do.
Also, it was found out that the absence of a hiring
plan contributed to the high cost of hiring.

PLANNING DEFINED
' Various experts define planning in various ways, all
of which are desig.ned to suit specifrc purposes.
Planning, according to *?.t"t" and others, refers to
"the management function that involves anticipating
future trends and determining the best strategies and
tactics to achieve organizational objectives."l This defi-
nition is useful because it relates the future to what could
be decided now.
Aldag and Stearns, on the other hand, define plan-
ning as "the selection and sequential ordering of tasks
required to achieve an organizational goal."z This defini-
tion centers on the activity required to accomplish the
goals. t0 q
The definition of Cole and Hamilton provides a better
guide on how to effectively perform this vital activity.
Planning, according to them is "deciding what will be

lNickels and others, p. 331.

2Aldag and Stearns, p. G-16.

44
done, who will do it, where, when and how it will be done,
and the standards to which it will be done."3
For our purpose, it will.suffice to define planning as
selecting the best course ofaction so that the desired result
may be achieved. It must be stressed that the desired result
takes first priority and the course ofaction chosen is the
means to realize the goal.

PLANNING AT VARIOUS MANAGEMENT

LEVELS
Since engineer managers could be occupying posi-
tions in any of the various management levels, it will be
useful for them to know some aspects of planning un-
dertaken at the different management levels.
Planning activities undertaken at various levels are
as follows:
1. Top management level
- strategic planning
2. Middle management level
- intermediate plan-
ning
3. Lower management level
- operational plan-
ning.

Strategic Planning
The term strategic planning refers to the process of
determining the major goals of the organization and the
policies and strategies for obtaining and using resources
to achieve those goals.a The top management of any firm
is involved in this type of planning.
In strategic planning, the whole company is con-
sidered, specifically its objectives and current resources.

3Kris Cole and Barbara Hamilton, Olfice Administration and Superlision

(New York: Prentice-Hall, 1992) p. 6.
aNickels and others, p. G-L4.

45
 The output of strategic planning is the strategic phin which
speils out "the decision about long-range goals and the
course of action to achieve these goals""5

Intermediate Planning
Intermediate planning refers to "the process of deter-
mining the contributions that subunits can make with
allocated resources."6 This type ofplanning is undertaken
by middle management.
Under intermediate planning, the $oals of a subunit
are determined and a plan is prepared to provide a guide
to the realization of the goals. The intermediate plan is
designed to support the strategic plan.

Figure 3.1 Types of Planning

MANAGEMENT LEVEL PLANNING HORIZON

Chief
Executive
ToP
Officet Strategic planning
."
\' Management
President, (one to ten years)
Vice Presidents,
General Manager,
Division Heads

Functional Managers,
!. Middle lntermediate planning
Product Line Managers,
Management (six months to two years)
Department Heads

Lower Unit Managers Operational planning

Management First Line Supervisors (one week to one year)

6Warren R. Plunkett and Raymond

F. Attnet Introduction to Management,
Second Edition (Boston: PWS Kent Publishing Co., 1989) p. 572.
GKreitner, p. G-5.

46
 Figure 3.2 The Organization and Types ol Planning
Undertaken

PRESIDENT/
GENERAL MANAGER

responsible for
STRATEGIC PLANNING

responsible responsible responsible responsible

for for for for
INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE
PLANNING PLANNING PLANNING PLANNING

INDUSTRIAL
ENG!NEEBING
MANAGER

responsible responsible responsible

for for for
OPERATIONAL OPERATIONAL OPERATIONAL
PLANNING PLANNING PLANNING

47
Operational Planning
Pfh" term operational planning refers to "the pro-
cess of determining how specific tasks can best be ae-
complished on time with available resources."T This type
of planning is a responsibility of lower management. It
must be performed in support of the strategic plan and
the intermediate plan.

THE PLANNING PROCESS

The process of planning consists of various steps
depending on the management level that performs the
planning task. Generally, however, planning involves the
following:
1. setting organizational, divisional, or unit goals
2. developing strategies or tactics to reach those
goals
3. determining resources needed and
4. setting standards.

Setting Organizational, Divisional, or Unit Goals

The first task of the engineer manager is to provide
a sense of direction to his firm (if he is the chief execu-
tive), to his diyision (if he heads a division), or to his unit
(if he is a supervisor). The setting of goals provide an
answer to the said concern. If everybody in the firm (or
division or unit, as the case may be) is aware of the goals,
there is a big chance that everybody will contribute his
share in the realization of such goals.
t xr',Goals may be defined as the "precise statement of
results sought, quantified in time and magnitude, where
possible."s Examples of goals are provided in Figure. 3.3.

?Op. cit., p. 151.

sEric N. Berkewitz and others, Marketing, Third Edition (Homewood,
Illinois: Irwin, 1992) p. 721.

,18
Figure 3.3 Examples of Goals, By Organizational Level

ORGANIZATIONAL EXAMPLE OF GOAL

LEVEL

To attain a return
on investmenl ol 25o/"

Buenavista
Construction
Corporation

To increase the number

DIVISION of projects undertaken
by the connpany

Project
Management
Division

To increase the number

of project engineers

Personnel
Seruices
Unit

49
Developing Strategies or Tactics to Reach Goals
After determining the goals, the next task is to devise
some meas to realize them. The ways to realize the goals
are called strategies and these will be the concern of top
management. The middle and lower management will
adapt their own tactics to implement their p1ans.
A stratery may be defined as "a course of action aimed
at ensuring that the organization will achieve its object-
ives."e
An example of a strategy is as follows:
The decision of a construction firm's manage-
ment to diversiff its.business by engaging also in the
trading of construction materials and suppplies.
When the above mentioned strategy is implemented,
it may help the construction firm realize substantial
savings in the material and supply requirements used
in their construction activities. The firm will also have
greater control in the timing of deliveries of materials
and supplies.
A tactic is a short-term action taken by management
to adjust to negative internal or external influences.lo They
are formulated and implemented in support of the firm's
strategies. The decision about short-term goals and the
courses of action are indicated in the tactical plan.
An example of a tactic is the hiring of contractual
workers to augment the company's current workforce.

Determining Resources Needed

When particular sets of strategies or tactics have
eSamuel C. Certo and J. Paul Peter, Strategic Management, Concepts and
Applications (New York: Random House, 1988) p. 13.
loRobert A. Comerford and Dennis W. Callaghan, Strategic Management,
Tert, Tools, and Cases for Business Policy (Boston: Kent Publishing Co., 1985)
p. 89.

50
been devised, the engineer manager will, then, determine
the human and nonhuman resources required by such
strategies or tactics. Even if the resource requirements
are currently available, they must be specified.
The quality and quantity of resources needed must
be correctly determined. Tloo much resources in terms of
either quality or quantity will be wasteful. Too little will
mean loss of opportunities for maximizing income.
To satisfy strategic requirements, a general state-
ment of needed resources will suffice. The specific require-
ments will be determined by the different units of the
company.
Tb illustrate:
Suppose the management of a construction firm
has decided, in addition to its current undertakings,
to engage in the trading of construction materials
and supplies.
A general statement of required resources will
be as follows: A new business unit wiil be organized
to deal with the buying and selling of construction
materials and supplies. The amount of F50 million
shall be set aside to finance the activity. Qualified
persons shall be recruited for the purpose.

Setting Standards
The standards for measuring performance may be
set at the planning stage. When actual performance does
not match with the planned performance, corrections
may be made or reinforcements given.11
A standard may be defined as "a quantitative or: qua-
litative measuring device designed to help monitor the
performances of people, capital goods, or processes."12.

tlOp. cit., p. 208.

r2Plunkett and Attner, p. 572.

6t
 An example of a standard is the minimum number
of units that must be produced by a worker per day in
a given work situation.

TYPES OF PLANS
Plans are of different types. They may be classified
in terms of functional areas, time horizon, and frequency
of use.13

Functional Area Plans

Plans may be prepared according to the needs of the
different functional areas. Among the types of functional
area plans are the following:
1. Marketing plan- this is the written document
or blueprint for implementing and controiling
an organization's marketing activities related
to a particular marketing strategy.r4
2. Production plan a written document
- thisof isoutput
that states the quantity a company must
produce in broad terms and by product family.15
3. Financial plan it is a document that summa-
- financial
rizes the current situation of the firm,
analyzes financial needs, and recommends a
direction for financial activities.
4. Human resource management plan it is a
document that indicates the human -resource
needs of a company detailed in terms of quantity
and quality and based on the requirements of the
company's strategic plan.

l3Arthur G. Bedeian, Management (Chicago: The Dryden Press, 1986)

p. 106.
laWilliam M. Pride and O.C. Ferrell, Marketing Concepts and Strategies,
Sixth Edition (Boston: Houghton Mifflin Co., 1989) p. G-10.
lsRichard J. Schonberger and Edward M. Knod, Jr., Operations
Management, Third Edition (Plano, Tbxas: Business Publications, Inc., 1.988)
p. 186.

62
Plans With Time Horizon
{Plurrs with time horizon consist of the following:
1. Short-range plans these are plans intended
6 -
to cover a period of less than one year. First-line
supervisors are mostly concerned with these
plans.
2. Long-range plans these are plans covering
- than one year" These are
a time span of more
mostly undertaken by middle and top manage-
ment.

Plans According to Frequency of Use

According to frequency of use, plans may be classi-
fied as:
1. standing plans and
2. single-use plans.

* Standing Plans. These are plans that are used again

and again, and they focus on managerial situations that
recur repeatedly.16
Standing plans may be further classified as follows:
,1 1. Poiicies they are broad guidelines to aid
managers- at every level in making decisions
about recurring situations or function"lT
1 2. Procedures
- they are plans that describe the
exact series of actions to be taken in a given
situation.18

S 3. Rules they are statements that either require

- a certain action.le
or forbid
l6Bedeian, p. 108.
iTPlunkett and Attner, p. 571.
lsHiggins, p. G-13.
leAldag and Stearns, p. G-18.

63
 Single-Use Plans. These plans are specifically deve-
loped to implement courses of action that are relatively
unique and are unlikely to be repeated.
S Single-use plans may be further classifi'ed as foll6ws:
1. budgets
2. programs, and
3. projects.
toA budget, according to Weston and Brigham, is "a
plan which sets forth the projected expenditure for a
certain activity and explains where the required funds
will come from."zo
A program is a single-use plan designed to coordinate
a large set of activities.zl
A project is a single-use plan that is usually more
limited in scope than a program and is sometirnes pre-
pared to support a program.22

PARTS OF THE VARIOUS FUNCTIONAL

AREA PLANS
The engineer manager may be familiar with engi-
neering plans, knowing the details from beginning to
end. However, the ever present possibility of moving
from one managementlevel to the next and from one func-
tional area to another presses the engineer manager to
be familiar as well with other functional area plans.

The Contents of the Marketing Plan

The struiture and content of marketing plans vary
depending on the nature of the organizations adapting

20J. Fred Weston and Eugene F. Brigham, Esse ntials of Managerial Finance,
Ninth Edition (Chicago: The Dryden Press, 1990) p. 362.
2lAldag and Stearns, p. G-17.
22loc. cit.

54
Figure 3.4 Types of Plans

TYPES OF PLANS

Functional Plans with Plans with

Area Time Varied Fre-
Plans Horizon quency of Use

human
resource
plan
them. William Cohen maintains that the following must
be included in the marketiag plan:23
1. The Executive Summary
- which
overall view .of the marketing
presents an
project and its
potential.
2. Table of Contents
3. Situational Analysis and Target Market
4. Marketing Objectives and Goals
5. MarketingStrategies
6. Marketing Tactics
7. Schedules and Budgets
8. Financial Data and Control

The Contents of the Production Plan

The production plan must contain the following:2a
1. the amount of capacity the company must have
2. how many employees are required
3. how much material must be purchased

The Contents of the Financial Plan

The components of the financial plan are as follows.25
1. An analysis of the firm's current financial con-
dition as indicated by an analysis of the most
recent statements
2. A sales forecast
2tVilliam A. Cohen, The Practice'of Marketing Management (New York:
MacMillan Publishing Co., 1988) pp. 50-56.
2aJames B. Dilworth, Prod,uction and Operations
Managemenf, Third
Edition (New York: Random House, 1986) p. 142.
26Eugene F. Brigham and Louis C. Gapenski, Financial
Management,
Theory and Praclice, Sixth Edition (New York: The Dryden Press, 1991) p. 921.

66
Figure 3.5 An Example of a Marketing Plan Schedule

Buenavista Manutacturing Gompany

Marketing Plan Schedule
For the Year Ending December 31, 1998
UNIT AMOUNT
PRODUCT A
January 85,000 P 430,500
February 90,000 455,500
March 95,000 481,500
Total 1st Quarter 270,000 F 1,367,500
2nd Quarter 260,000 1,317,000
3rd Quarter 190,000 962,500
4th Quarter 280,000 1,419,000

Total A 1,000,000 F 5,066,000

PRODUCT B
January 34,000 F 69,900
February 41,000 84,500
March 45,000 92,600

Total 1st Quarter 120,000 F 247,OOO

2nd Quarter 135,000 278,000
3rd Quarter 95,000 195,500
4th Ouarter 150,000 308,500

Total B 500,000 F 1,029,000

Total A and B F6,095.000

57
Figure 3.6 An Example of a Production Plan Schedule

Buenavista Manufacturing Company

Detailed Production Plan
For the Year Ending December 31, 1998

:REQUIRED :ADD :TOTAL :LESS :UNITS

FOR FINAL REQUIRED INITIAL TO BE
SAI-ES INVENTORY INVENTORY COMPLETED
OF FINISHED OF FINISHED
GOODS GOODS

PRODUCT A
January 85,000 225,000 310,000 240,000 70,000
February go,ooo 2i 5,000 305,000 225,OOO 80,000
March 95,000 200,000 295,000 215,000 80,000

Total 1st Quarter 270,000 200,000 470,000 240,000 230,000

2nd Quarter 260,000 180,000 440,000 200,000 240,000
3rd Quarter 190,000 220,000 410,000 180,000 230,000
4th Quarter 280,000 200,000 480,000 220,OOO 260,000

Total 1,000,000 200,000 1,200,000 240,000 960,000

: .--_.---=
PRODUCT B
January 34,000 1C0,000 134,000 100,000 34,000
February 41,000 95,000 136,000 100,000 36,000
March 45,000 88,000 133,000 95,000 38,000

Total 1st Quarter 120,000 88,000 208,000 100,000 108,000

2nd Quarter 135,000 93,000 228,000 88,000 140,000
3rd Quarter 95,000 125,000 220,OOO 93,000 127,OOO
4th Quarter 150,000 120,000 270,000 125,000 145,000

Total 500,000 120,000 620,000 100,000 520,000

68
 3. The capital budget
4. The cash budget
5. A set of pro forma (or projected) financial state-
ments
6. The external financing plan

{ Contents of the Human Resources Plan

The human resources plan must contain the following:
1. personnel requirements of the company
2. plans for recruitment and selection
3. training plan
4. retiremeht plan

I PARTS OF THE STRATEGIC PLAN

The strategic plan must contain the following:26
1. Company or corporate mission
2. Objectives or goals
3. Strategies
Company of corporate mission refers to the "stra-
tegic statement that identifies why an organization exists,
its philosophy of management, and its purpose as dis-
tinguished from other similar organizations in terms of
products, services, and markets."27

MAKING PLANNING EFFECTIVE

Planning is done so that some desired results may
be achieved.At times, however, failure in planning occurs.

26Arthur A. Thompson, Jr. and A.J. Strickland lll, Strategic Management,

Concepts and Cases, Fourth Edition (Plano, Texas: Business Publications, Inc.,
t987't pp. 22-32.
z?Holt, p. 792.

59
 .9, Planning may be made successful if the following
are observed:
1. recognize the planning barriers
2- use of aids to planning
The planning
barriers, according to Plunkett and
b Attner, are as follows:28
._1. manager's inability to plan
improper planning process
3. lack of commitment to the planning process
4. improper information
5. focusing on the present at the expense of the
future
6. too much reliance on the planning department
7. concentrating on only the controllable variables
Among the aids to planning that may be used are:
1. Gather as much information as possible
2. Develop multiple sources of information
3. Involve others in the planning process

SUMMARY
Technical activities, like other activities, require
effective planning, i.e., if objectives and goals are to be
realized.
A plan is a methodological way of achieving results.
Planning is undertaken atvarious management levels.
Various steps are required in the planning process
depending on the management level.

2sPlunkett and Attner, pp. L22-L23.

60
 Plans may be classifred in terms of functional areas,
time horizon, and frequency bf use.
Plans consist of various parts that the engineer
manager must be familiar with.
Plans can be made effective by recognizing the
planning barriers and making use of aids to planning'

6l
 QUESTIONS FOR REVIEW AND DTSCUSSTON
1. Why is planning an important activity for engineer
managers?
2. How may l'planning" be defined?
3. What planning activities are undertaken at various
management levels?
4. What are the steps in the planning process?
5. What are the types of plans? How may they be clas-
sifred?
6. What is a production plan? What are its components?
7. What is a budget?
8. What is meant by "company mission',?
9. What are the barriers to planning?
10. What may be used as aids in planning?

SUGGESTED ITEM FOR RESEARCH

1. Interview the general manager of a construction
firm.
Inquire about the planning activities undertaken
by the firm.
Prepare a report about the result of the inter-
view.

62
Case 3. MOTORBUS COMPANY: Que Sera Sera
Engineer Hermogenes Ancheta has just received his
appointment papers from his new immediate superior,
the Vice President for Operations. he has beeir promoted
from Assistant Manager to Manager of the Maintenance
Department. After congratulating him, his boss gave him
a verbal directive that he should put some order in his
department and make it work in the most effective and
efflrcient manner possible.
Engineer Ancheta has just passed the board exam-
ination for Mechanical Engineering when he joined
Motorbus Company in 1993. By June 1995, he informed
his former classmates at the University of Santo Tomas
that he was promoted as Assistant Manager for Main-
tenance.
The former manager of the department, Engineer
Gaudencio Inductivo, joined the company since it started
operations in 1989. Atotal often buses began plying the
Manila-Isabela route. A maintenance unit was put up at
the Manila terminal in Sampaloc.Another unit serves the
Ilagan, Isabela terminal. Each unit has a full-time
mechanic and one assistant.
When a company bus comes in for repair, the mech-
anic diagnoses the various automotive systems in the bus
and later produces a list of parts needing replacement.
The mechanic sends the list to Engineer Inductivo, who,
in turn, forwards the same to the company accountant
for approval of the purchase request. Oftentimes, Engi-
neer Inductivo performs the actual purchasing himself.
Later, he sends the purchased items to the mechanic who
made the request.
The maintenance units were operating normally
until 40 new buses were procured by the company in 1993.
Since then, every maintenance personnel was so busy
that they threatened to quit their jobs unless additional

63
mechanics and assistants were recruited. By the end of
1993, each unit has a personnel complement of 5 mechanics
and 5 assistants.
Even with current developments, the old method of
purchasing was not improved. Purchase requests started
to pile up. Mechanics and drivers began complaining to
the VP for Operations about delays in the delivery of
needed parts.
The VP for Operations immediately sent a note to
Engineer Inductivo ordering that the problem should
be resolved immediately. Engineer Inductivo was hard
pressed and he could not offer an immediate solution. The
next day, Engineer Inductivo informed the VP for Opera-
tions that he is requesting for the approvatr of his appli-
cation for retirement as he is already 62 years old.
Ttre VP forwarded the request to the President with
an endorsement justifying the request. On the same
day, the request for retirement was approved. The next
day, Engineer Ancheta received his appointment papers
promoting him to Manager.
One of the first things Engineer Ancheta did was to
inspect the storage room for parts. He found out that the
room was full of an uneven supply of parts. Some parts
were of excessive quantities, while some important ones
were inadequately stocked. Acorner of the room contains
a big volume of obsolete parts.
At the end of the day, EngineerAncheta was informed
by the VP that the company will be fielding an additional
50 new buses within 30 days. Tl:is will mean that by next
month, about 100 buses will be servicing the various
routes assigned to Motorbus Company.
Engineer Ancheta is now mulling over how he will
make the operations of his department as efficieqt and
effective as possible

u
 ORGAMZING TECHMCAL
ACTTVTIIES

Reasons for Organizing

Organizing Defined

The Purpose of the Structure

The Formal Organization

lnformat Groups
-_
Types of Organizational Structures

a Types of Authority
a The Purpose of Committees

66
 Ghapter 4

The engineer manager needs to acquire various

skills in management, including those for organizing
technical activities. In this highly competitive environ-
ment, the unskilled manager will not be able to bring his
unit, or his company, as the case may be, to success.
Thevalue of a superior organizational set-up has been
proven dramatically during the Second World War when
a smallerAmerican naval force confronted the formidable
Japanese navy at Midway. Military historians indicated
that the Americans emerged victorious because of the
superior organizational skills of their leaders.
Even today, skills in organizing contribute largely to
the accomplishment of the objectives of many organiza-
tions, whether they are private businesses or otherwise.
The positive effects of business success becomes more
pronounced when they come as a result of international
operations. International businesses, however, cannot
hope to m6ke huge profits unless they are properly
organized to implembnt their plans.l
The opportunities offered by skillful organizing are
too important for the engineer manager to ignore. This
chapter is intended to provide him with some background
and insights in organizing.

REASONS FOR ORGANIZING

Organizing is undertaken to facilitate the imple-

lVera Terpstra and Ravi Saraihy, International

Marketing (Chicago: The
Dryden Press, 1991) p. 652.

66
mentation of plans. In effective organizing, steps are
undertaken to breakdown the total job into more man-
ageable man-size jobs. Doing these will make it possible
to assign particular tasks to particular persons. In turn,
these will help facilitate the assignment of authority,
responsibility, and accountability for certain functions
and tasks.

ORGANIZING DEFINED
Organizing is a management function which refers
to "the structuring of resources and activities to accomplish
objectives in an efficient and effective manner."z
The arrangement or relationship of positions within
an organization is called the structure. The result of the
organizing process is the structure.

THE PURPOSE OF THE STRUCTURE

The structure serves some very useful purposes. They
are the following:
1. It defines the relationships between tasks and
authority for individuals and departments.
2. It defines formal reporting relationships, the
number of levels in the hierarchy of the organi-
zation, and the span of control.
3. It defines the groupings of individuals into
departments and departments into organization.
4. It defrnes the system to effect coordination of
effort in both vertical (authority) and horizontal
(tasks) directions.s
When structuring an organization, the engineer
manager must be concerned with the following:

2Ferrell and Hirt, p. G-L3.

sHiggins, pp. 247-248.

67
 Division of labor
- determining the scope of work
1.
and how it is combined in a job.
Delegation of authority
- the process of author-
2. assign-
ing various degrees of decision-making
ity to subordinates.
3. Departmentation the grouping of related jobs,
-
activities, or processes into major organizational
subunits.
4. Span of control the nurnber of people who
-
report directly to a given manager.
5. Coordination -- the iinking of activities in the
organization that serves to achieve a common goal
or objective.

THE FORMAL ORGANIZATION

After a plan is adapted, management will proceed to
form an organization to carry out the activities indicated
in the plan.
The formal organization is "the structure that details
lines of responsibilites, authority, and position."a What is
depicted in the organization chart is the formal organi-
zation. It is "the planned structure" and it "represents the
deliberate attempt to estabiish patterned relationships
among components that will meet the objectives effect-
ively."5
I ttre formal structure is described by management
through:
1. organization chart
2. organizational manual and
3. policy manuals.

aNickels and others, p. G-b.

sFremont E. Kast and James E. Rosenzweig,
Organization an,d. Man-
agem.ent, A Systent and Contingency Apprctach (New york: McGraw-Hill Book
Co.; 1979), p. 199.

68
 The organization chart is a diagram of the organ-
ization's official positions and formal lines of authority'
The organizationai manual provides written des-
criptions of authority relationships, details the func-
tions of major organizational units, and describes job
procedures.
The policy manual describes personnel activities
and company policies.

INFORMAL GROT.IPS
Formal organizations require the formation of formal
groups which will be assigned to perform specific tasks
airned at achieving organizational objectives. The formal
group is a part of the organization structure.
There are instances when members of an organiza-
tion spontaneously form a group with friendship as a
principal reason for belonging. This group is called an
informal group. It is not a part of the formal organization
and it does not have a formal performance purpose'
Informal groups are oftentimes very useful in the
accomplishment of major tasks, especially if these tasks
conform with the expectations of the members of the
informal group.
The informal organization, useful as it is, is "vulne-
rable to expediency, manipulation, and opportunism,"
according to Valentine.6 Its low visibility, Valentine added,
makes it "difficult for management to detect these
perversions, and considerable harm can be done to the
company."
The engineer manager is, therefore, warned that he
must be on the lookout for the possible difficulties that
cRaymond F. Valentine, "Dangers of the Informal Organization",World's
Executiue Djgesf, March 1982, p. 77.

69
 the informal groups may do to the organization. It will
be to his best
interest ifhe could make the informal groups
work for the organization.

TYPES OF ORGANIZATIONAL
STRUCTURES
Before the commencement of activities, the decision-
makers in an organization will have to decide on what
structure to adapt. Depending on the size and type of
operations, a certain structural type may best fit the
requirements.

t'{)rganizations may be classifled into three types. Th"y

are the following:?

t. Functional organization
- this
partmentalization in which
is a form of de-
everyone engaged
in one functional activity, such as engineering
or marketing, is grouped into one unit.

2. Product or market organizati this refers to

the organi zation of a company by divisions that
brings together all those involved with a certain
type of product or customer.

3. Matrix organization an organizational struc_

-
ture in which each employee reports to both a
functional or division manager and to a project
or gToup manager.

. S Tt different types of organizations, with their own

distinct"advantages and disadvantages, are briefly pre-
sented on the next page.

Uames A. F. Stener and R. Edward Freem an, Managlenrent,

(Englewood Cliffs, New Jersey: prentice_Hall, ' Fourth Edition
ig89l p. ZeZ.

70
Figure 4.1 Reasons or Factors for Joining or Forming a
Group

like: concern for en-

vironment or
love for clas-
sical music

which gives people the

chance to share
ideas, opinions,
and feelings

NEED
SATISFACTION

which are derived

from unions, cultural
societies, f raternities,
etc.

COLLECTIVE INFORMAL
POWER GROUP
which is derived
from unions,
fraternities, etc.

GROUP GOALS
which attract
individuals like:
consumer society,
sports club, etc.

7t
 Figure 4.2 A Typical Functional Organization Chart of a
Construction Company

Vice President Vice President Vice President Vice President

Marketing Construction Finance Human Resources

Functional Organization
Functional organization structures are very effect-
ive in smaller firrns,-especially "single-business firms
where key activities revolve around well-defined skills
and areas of specialization."s
Functional organizations have certain advantages.
They are the following:
1. The grouping of employees who perform a com-
mon task permit economies of scale and efficient
resource use.
2. Since the chain of command converges at the top
of the organization, decision-making is central-
ized, providing a unified direction from the top.
3. Communication and coordination among em-
ployees within each department are excellent.
4. The structure promotes high-qualit;r technical
problem-solving.
5. The organization is provided with in depth skill
specialization and development.
8Arthur A. Thompson, Jr. and A.J.
Strickland, Ill, Strategy Formulation
and Inrplementation, Tasks of the General Manager, Fifth Edition (Homewood,
Illinois: Irwin, 1992) p. 223.

72
 6. Employees are provided with career progress
within functional departments.t)
The disadvantages of the functional organization
are the following:
1. Communication and coordination between the
departments are often poor.
2. Decisions involving more than one department
pile up at the top management level and are often
delayed.
3. Work specialization and division of labor, which
are stressed in a functional organization, produce
routine, nonmotivating employeb tasks.
4. It is difficult to identify which section or group
is responsible for certain problems.
5. There is limited view of organizational goals by
employees.
.
6. There is limited general management training
for employees.

Product or Market Organization

The product or market organization, with its feature
of operating by divisions, is "appropriate for a large
corporation with rnany product lines in several related
industries."lo
The advantages of a product or market organization
are as follows:
1. The organization is flexible and responsive to
change.
2. The organization provides a high concern for
customer's needs.

0Richard L. DafL,Management, Second Edition (Chicago: The Dryden Press,

1991) pp. 257-259.
loWheelen and Hunger, p. L29.

78
 3. The organization provides excellent coordina_
tion across functional departments.
4. There is easy pinpointing of responsibility for
product problems.
5. There is emphasis on overall product and division
goals.
6. The opportunity for the development of general
management skills is provided.
The disadvantages of the product or market organi_
zation are as follows:
1. There is a high possibility of rluplication of
resources across divisions.
2. There is less technical depth and specialization
indivisions.
3. There is poor coordination across divisions.
4. There is less top management control.
5. There is competition for corporate resources.

Matrix Organization t

^ l matrix
strickland,
organization, accord.ing to Thompson and
"is a structure with two -(or more) channers
ofcommand, two lines ofbudget authority, and two sources
of performance and reward.',11 Higgins declared that,,the
matrix structure was designed to keep employees in a cen_
tral pool and to allocate them to various projects in the
firm according to the length of time they were needed.,,r2
. The matrix organization is afforded with the follow_
ing advantages:
1. There is more efficient use of resources than the
divisional structure.

llThompson and Strickland,, p.229

l2Higgins, p. 274.

74
 Figure 4.3 A Typical Product/Market Organization for a
Construction Company

PRESIDENT

Vice President Vice President Vice President

Government lndustrial Residential
Accounts Accounts Accounts

Marketing

Construction

Human
Resources

76
 2. There is flexibility and adaptability to changing
environment.
3. The development of both general and functional
management skills are present.
4. There is interdisciplinary ccoperation and any
expertise is available to all divisions.
5. There are enlarged tasks for employees which
motivate them better.
The matrix organization has some disadvantages,
however. They are the following:
1. There is frustration and confusion from dual
chain of command.
2. There is high conflict between divisional and
functional interests.
3. There are many meetings and more discussion
than action.
4. There is a need for human relations training for
key employees and managers.
5. There is a tendency for power dominance by one
side of the matrix.

TYPES OF AUTHORITY
?Y The delegation of authority is a requisite
for effect-
ive organizing. lt consists of three types. They are as
follows:tJ
1. Line authority a manager's right to tell subor-
dinates what to- do and then see that they do it.
2. Staff authority
- a staff specialist,s $ght to give
advice to a superior.

l3leon C. Megginson and

others, Brrsjze.ss (Lexington, Massachusetts: D.C
Heath and Co., 1985) pp. 185-186.

76
 Figure 4.4 A Typical Matrix Organization of a Construction
Firm

PRESIDENT

Vice President Vice President Vice President

lor for for Human
Finance Construction Resources

Contract
Administration
Manager

Project X Purchasing
Manager Specialist

I Project Y Purchasing
I Manager Specialist

77
 3. Functional authority - a specialist's right to
oversee lower level personnel involved in that
specialty, regardless ofwhere the personnel are
in the organization.
Line departments perform tasks that reflect the
organization's primary goal and mission. In a construction
firm, the department that negotiates and secures con-
tracts for the firm is a line department. The construction
division is also a line function.
Staff departments include all those that provide
specialized skills in support of line departments. Exam-
ples of staff departments include those which perform
strategic planning, labor relations, research, accounting,
and personnel.
Staff officers may be classified into the following:-
1. Personal staff
- thoseto individuals assigned
to a specific manager provide needed staff
serrices.
2. Specialized staff
- those individuals providing
. needed staff services for the whole organization.
Functional authority is one given to a person or a
work group to make decisions related to their expertise
even if these decisions concern other departments. This
authority is given to most budget officers of organiza-
tions, as well as other officers.

THF PURPOSE OF COMMTTTEES

When certain formal groups are deemed inap-
propriate to meet expectations, committees are often-
times harnessed to achieve organizational goals. Many
orghnizations, large or small, make use of committees.
A committee is a formal group of persons formed for
a specific purpose. For instance, the product planning
committee, as described by Millevo, is "often staffed by

78
Figure 4.5 A Line and Staff Organization

of Director Director Director

r and of of ol
Marketing Manufacturing Personnel

lndustrial
Engineering
Manager

First Second Third

shift shift shilt
Supervisor Supervisor Supervisor
 top executives from marketing, production, research,
engineering, and frnance, who work part-time to evaluate
and approve product ideas."ra
Committees are very useful most especially to engi-
neering and manufacturing firms. When a certain con-
cern, like product development, is under consideration,
a committee is usually formed to provide the necessary
line-up ofexpertise needed to achieve certain objectives.
,/Committees may be classified as follows:
1. Ad hoc committee one created for a short-term
purpose and have-a limited life. An example is
the committee created to manage the anniver-
sary festivities of a certain firm.
2. Standing committee it is a relatively per-
manent committee that- deals with issues on an
ongoing basis. An example is the grievance
committee set up to handle initially complaints
from employees of the organization.
Committees may not work properly, however, if they
are not correctly managed. Delaney suggests that.,it might
be useful to set up some procedures to make the commitlee
a more effective tool to accomplish our goals.,,rs

SUMMARY
The proper management of engineering actrvities,
whether at the unit, department, or firm level, requires
effective organizing. The organizing function is undertaken
to facilitate the implementation of plans.
Organizing refers to.the structuring of resources and
activities to accomplish objectives. The structure serves
as a way to reach the organization,s goals.

rrBonnie M. Millevo, Handbook

on product Design and, Deueloprnent
(Manila: National Book Store, 1998) p. 26.
rsDelaney, p. 24.

80
 The formal organization is the structure that will
carry out the plan. It is described through the organiza-
tion chart, the organization manual, and the policy
manual.
Informai groups oftentimes find their way to exist
side by side with formal organizations. These groups
may make it easy or make it hard for the organization
to achieve its objectives.
Organizations may he classified into: (1) functional,
(2) product or market, or (3) matrix.
Authority delegated to the members of the orga-
nization may be classified into: (1) line authority, (2) staff
authority, and (3) functional authority.
Committees are used as a supplement to the existing
formal organization. Committees are formed to perform
specific tasks. Committees are classified into: (1) ad hoc,
and (2) standing.

8l
 QUESTIONS FOR REVIEW AT{D DISCUSSION
{. Why is it important for the engineer manager to
acquire skills in organizing?
2. How may organizing be defrned?
,3. What purpose do organizational structures serve?

n4. What must be the concern of the engineer manager

when structuring the organization?

5. What is the purpose of the formal organization?

-6, What are informal groups? Why are they formed?

7. What are the types of organizational structures? How
may they be distinguished?
8. What is meant by "line authority"? by "staff autho-
rity"?
9. Distinguish "personal staff' from "specialized staff'.
10. What dre committees? How may they be classified?

SUGGESTED ITEM FOR RESEARCH

1. Prepare an organization chart ofa large engineering
frrm showing line and staff relationships.

82
Case 4. BITSANDPIECES INTERNATIONALCORPORATION:
Little Things Mean a Lot
The Bits and Pieces International Corporation (BPIC)
is one company that appears to be succeeding and growth
has become a part of its agenda for the next few years.
This is quite unusual for a company whose certificate of
incorporation has only been approved by the Securities
and Exchange Commission four years ago.
BPIC is maintaining an offrce at Makati Avenue in
Makati and a plant at Sta. Rosa, Laguna. The company
is producing various injection molded plastic products
classified as consumer and industrial.
The key officers of the company are as follows:
President and Chairman of the Board: Engineer
Rodrigo Reyes
Vice President and General Manager: EngineerJesus
Ualat
Corporate Secretary: Mrs. Mildred Salazar
Treasurer: Ms. Purita Toquilar
Auditor: Ms. Elsa Marzo
Engineering Manager: Engineer Silvino Santiago
Production Manager: Engineer Severo Lagayan
The organization chart of BPIC is shown in Exhibit
1.

The company, classified as a manufactur-ing corpo-

ration, operates on two activities.
1. production of stocks to be sold to the local market
2. production as a subcontractor -

BPIC does not maintain a sales force. The general

manager acts as marketing executive and directly tran-
sacts business with customers.

8i|
 The company's average sales per month are as follows:
Product Average Sales Per Month
Ball Pen Tips P 340,000
Sputum Cups 900,000
Grease Cups 100,000
Bottle Caps 100,000
PVC Fittings 200,000
Tbtal P1,640,000

At current output levels, was declared

profitable. "" "orrr*ny
The following financial data were provided:
1. profit margin (net income/saies) = 327o
2. return on total assets (net income/total assets)
= 'lZa/o
3. annual turnover = 15 times
4. current ratio = 1.1
5. acid test ratio-= 1.05
An analysis of the company's market potential con-
vinced the top management to consider expansion. It was
also decided that a new product, the tissue holder, must
be added to its existing line of products.
The target sales for the next three years are as foliows:
Products 1 Year 2
Year Year 3
Ball Pen Tips P6M P7M P 8[,{
Sputum Cups 12M 22M 33M
Grease Cups 12M 13M 14M
Bottle Caps 24M 36M 54M
PVC Fittings 48M 58M 70M
Tissue Holder 48M 58M 70M
Total F154M P194M P249M

u
 The company rnade provisions for improving its
facilities including land, building, machinery, and equip-
ment. The hiring of additional manpower was also pro-
posed.
The following constitute the positions proposed:
Position Quantity
Finance Manager 1

Quality Control and

Research and Development
Manager 1

Senior Machinist 1

Junior Machinist 2

Helpers 2

The president ordered the general managerto'prepare

an organization chart for the new set up. The key offrcers
of the company were directed to review the proposed set-
up and present their comments on an executive meeting
scheduled next week. The proposed organization chart is
shown in Exhibit 2.

Engineer Lagayan is now contemplating on what

credible points he is going to raise in the meeting.

85
Exhibit 1. Bits and Pieces lnternational corporation current
Organization Chart

PRESIDENT/
CHAIRMAN
OF THE
BOARD

Vice President Corporate

General Manager Secretary

Warehouseman

86
 Exhibit 2" Bits and Pieces lnternational Corporation Proposed
Organization Chart

PRESIDENT/
CHAIRMAN
OF THE

Vice PresidenU
General Manager

Engineering
Quality Control,
f.,lanager
R & D Manager
new position new position

Senior
Machinist

new position

l-
l--l Utitityman
l-
1-l operator
I

shi,t
Supervisor

new position

new position

87