ME2 Management and Business for Engineers

By Rich Mathieson
Lecture 1: Introduction

Interactions between project, firm and macro environment.

Quantitative and qualitative factors influence project success. Success is difficult therefore include
contingency plans.

Complexity is determined by interdependent engineering and management decisions.

Examples:
1. VW – Emissions Scandal
2. Daimler Trucks restructuring

Why management?
1. Analyse RELATIONSHIPS within different parts of the organisation
2. SOLVE problems and tackle new opportunities

Lecture 2: Motivation

Individuals have different needs and managers can help employees satisfy their needs.
EXPECTANCY THEORY

Managerial Implications:
1. Make links clear
2. Make performance standards clear
3. Monitor value of rewards

EQUITY THEORY

 Perception of inequality
 Experience of tension
 Motivation to resolve
 Action to resolve
 Equity restored

Greater perceived inequality => Greater motivation to act

Managerial implications:
1. Alter outcomes
2. Adjust inputs
3. Alter comparison outcomes
4. Alter comparison inputs
5. Compare with someone else
6. Rationalise the equity
7. Leave

Case Study: Skylab 3

Purpose => To explore living in space

Prefix:
 NASA funding depends on project success
 Reused parts and reduced mission control
 Skylab 1 and 2 faced difficulties
Issues:
1. Medical incident
2. Design and conditions
3. Mistakes and behind schedule
4. Work load and poor communication
5. No leisure time

Astronauts TURNED OFF radio

Consider efficiency vs effectiveness!

JOB CHARACTERISTICS MODEL used to deduce what caused the strike

Lecture 3: Groups and Teams

TEAMS
PROS CONS

 Expanded skills  Coordination

 Energizing  Free riding
 Satisfaction
 Synergy

GROUPS VS TEAMS
GROUPS TEAMS

 Strong leader  Shared leadership

 Purpose same as organisation
 Individual projects
 Efficient meetings
 Effectiveness indirectly analysed through
business
 Discusses / decides / delegates
 Specific team vision
 Collective projects
 Open-ended discussion
 Effectiveness directly analysed
 Discusses / decides and does real work
together
TEAM EFFECTIVENESS MODEL

COMMON INFORMATION EFFECT

Groups tend to spend little time discussing unshared (unique, uncommon) information

Why?
 Probability
 Mutual enhancement
 Bias for consistence

Solutions:
1. Focus on unique information
2. Suspend initial judgement
3. Frame as information-sharing problem
4. Minimise status differences

NOT!! Bigger team, more information, more discussion, separate review, accountability.

Case Study: Everest (research separately)

SOCIAL LOAFING

The tendency for individuals to exert less effort when working as part of a group than when working alone

Why?
 Inequity of effort
 Diffusion of responsibility
 Negative effect of group reward
 Problem of coordination
 Anonymity
Solutions:
1. Increase group significance
2. Upgrade task significance
3. Strengthen group cohesion
4. Identify workers
5. Reward contributions
6. Threaten punishment

TEAM MEMBER ROLES

TEAM DEVELOPMENT

 Forming – orientation
 Storming – conflict
 Norming – establish roles
 Performing – cooperation
 Adjourning – separation

TEAM COHESION

The degree of attraction people feel toward the team and their motivation to remain members
Factors affecting: Similarity, team size, interaction, somewhat difficult entry, success, challenges.
COMMUNICATION PATTERNS
Lecture 4: Organisational Design

Primary example: Boeing  Outsourced and offshored components  Modular design

Elements of Organisation Structure

Departmentalisation  Structural Design

1. Functional – skills
2. Divisional – projects
3. Horizontal Matrix – Functional / Divisional Overlay
4. Team approach
5. Modular organisation

FUNCTIONAL
DIVISIONAL

MATRIX ORGANISATION
TEAM APPROACH

 Delegate authority
 Low level responsibility
 Engage commitment of workers
 E.g. Permanent of cross-functional teams

Structure of NPD Teams

1. Functional
2. Lightweight  Project Manager
3. Heavyweight  Project and functional managers
4. Autonomous  Team members collocated and report to project manager

Matching team to project:

1. Functional  Maintenance and some derivative projects

2. Lightweight  Derivative projects
3. Autonomous  Platform and breakthrough projects

FACTORS AFFECTING STRUCTURES

1. Strategic goals
2. Environment
3. Manufacturing and service technologies
4. Departmental interdependence

Relationship of strategic goals to structural approach

To be profitable  Willingness to pay vs. total cost to produce

COMPARISON WITH COMPETITORS

1. Perform different activities

2. Create value
3. Advantage  Higher prices/lower cost
4. Competition  Be unique
COST DRIVERS

 Scale – Capacity utilisation

 Learning – Lower cost
 Linkages – Increase differentiation
 Interrelationships
 Integration

VALUE CHAIN

KEY COST DRIVERS IN VALUE CHAINS

Lecture 5: Leadership

Primary example: Diamler-Chrysler merger must establish a vision  Vision must be: Brief, clear, abstract,
challenging, future-oriented, stable, inspiring.

REASONS FOR MERGER

Chrysler Daimler Other

 Low geographical scope  Low US sales  Global pressure
 Low growth forecast  Growth opportunity  Economies of scale
 Takeover target  BMW overtook Mercedes

LEADERSHIP VS. MANAGEMENT FUNCTIONS

LEADERSHIP STYLES

1. Coercive
2. Authoritative
3. Affiliative (harmony)
4. Democratic (consensus)
5. Pacesetting
6. Coaching (performance)
LEADERSHIP BEHAVIOUR: Tannenbaum-Schmidt Continuum

FAILINGS OF USELESS LEADERS

1. Kill culture
2. Kill trust
3. Kill enthusiasm
4. Kill emotion
5. Kill explanation
6. Kill reward

UNSUCCESSFULL LEADERS

1. Autocratic
2. Narcissistic
3. Abusive

MANAGING AN ABUSIVE MANAGER

 Don’t be aggressive
 Don’t be cynical
 Maintain self-confidence
 Engage in contextual performance
 Organisational climate abusive  Deal with it/Leave
Lecture 6: Management by Design

IMPLEMENTATION OF PRODUCT STRATEGY

Really New Products (Best Practice Ranked 1-6)
1. Product Commercialisation
2. Strategic Planning
3. Technical Development
4. Idea Development + Screening
5. Product Testing
6. Business/Market Opportunity Analysis
Incremental Products (Best Practice Ranked 1-6)
1. Business/Market Opportunity Analysis
2. Product Commercialisation
3. Technical Development
4. Idea Development + Screening
5. Product Testing
6. Strategic Planning

NB. Actual practice is usually different

ALTERNATIVE APPROACH FOR INNOVATION

INCREMENTAL NEW PRODUCTS

 Strategic planning simplified and sped up
 Synergies with existing knowledge
 Detailed market studies critical

REALLY NEW PRODUCTS

 Detailed market studies high cost/low value
 Information gathering + uncertainty reduction through experimentation + iterative learning

DESIGN THINKING
 Overcome inefficiency/inaccuracy of traditional form of market learning
o Tackle complex problems
o Overcome constraints
 Design thinking applied to different companies
o Start-ups, large/inflexible, banking etc.

DESIGN THINKERS PERSONALITY

 Empathy
 Experimentalism
 Integrative Thinking (Collaboration)
 Optimism

KEY TAKEAWAYS

 Business-like approach starts with analysed opportunity

 Designers create ideas to better meet customers’ needs and desires

IDEO’S Approach (Human-Centred Design)

 Empathy
 Discipline of Prototyping
 Convert Assumptions into Knowledge
 Tolerance for Failure  Fail fast, cheaply and learn
Lecture 7: Managing Uncertainties

DEFINITIONS

UNCERTAINTY Unpredictability of environmental/organisational variables that impact corporate

performance.
RISK Unpredictability in corporate outcome variables.

EXPOSURES Sensitivity of a firm or project’s cash flow to changes in any number of interrelated
variables

CATEGORISATION OF UNCERTAINTIES

General Environmental Uncertainties

 Political (War, Revolution)
 Government Policy (Regulations, Restrictions)
 Macroeconomic (Inflation, Exchange Rates)
 Social (Riots, Terrorism)
 Natural (Rainfall, Natural Disasters)

Industry Uncertainties
 Product Market (Consumer Tastes, Substitutes)
 Input Market (Quantity, Quality)
 Competitive (Rivalry)

Firm Uncertainties
 Operating
 Labour
 Production
 Liability
 R&D Uncertainties
 Behavioural

RESPONSES TO MITIGATE RISKS

Financial Risk Management

 Forward Contracts, Insurance, Hedging (Out of Syllabus)

Strategic Management
 Avoidance
 Control
 Cooperation
 Flexibility
 Imitation

UNCERTAINTY CAN BE USED TO YOUR BENEFIT IF YOU CREATE AN ENTREPRENEURIAL MINDSET

CREATE OPTIONS  CREATE OPPORTUNITIES

∴ MITIGATE UNCERTAINTY

Options modify exposure to uncertainty

 Right to further investment
UNDER UNCERTAINTY

1. Use flexibility + new info

2. Probability of success increases with learning
3. Option premium (flexibility under uncertainty)

UPSIDE OPPORTUNITIES UNDER UNCERTAINTY

Uncertainty creates opportunity  Real options  Flexibility to management

OPTION CATEGORISATION

1. Wait-to-invest options  Irreversible investment

2. Growth options  Investment  Opportunities
3. Flexibility options  Switch Continents/Hedging
4. Exit options  Abandon/disperse resources
5. Learning options  R&D, Stages investments

OPTION CONSIDERATIONS

Iteratively test assumptions on:

 Market
 Product development
 Competition
 Manufacturing

EXPANDED NPV = STATIC NPV + OPTION PREMIUM

MINIMISE DOWNSIDE RISK  MAXIMISE UPSIDE VALUE

 Upside potential to investments
 Small initial investment
 Portfolio  Stage/Sequence funding
 Stop further investment if necessary

DISENGAGEMENT  Review internal + external opportunities in case of possible disengagement. TAKE

ACTION TO AVOID FURTHER DISSAPOINTMENT  LEARN from these failures
POSSIBLE REASONS FOR NOT FUNDING IDEAS

 If performance of current products low  Investors need short-term success

 Managers in large organisations want predictability  Uncertainties + Unknowns = Bad
 Type/Size of investment
o Limited time
o Unrelated
o Often irreversible

Lecture 8: Strategic Management

BAD STRATEGY VS. GOOD STRATEGY

BAD STRATEGY KERNEL OF GOOD STRATEGY

Failure to face problem Diagnosis
Mistaking goals for strategy Guiding Policy
Fuzzy strategic objectives Coherent Actions
Fluff!

STRATEGIC MANAGEMENT PROCESS

SWOT ANALYSIS
INTERNAL CAPABILITY OF A FIRM

RESOURCES (Financial, Physical, etc.)

 Tangible + Intangible

CAPABILITIES (Marketing, Teamwork, etc.)

 Subset of resources
 Conceive  Implement strategy

PORTER’S 5 FORCES INFLUENCE PROFITABILITY IN AN INDUSTRY

ADVANTAGES
 Helps explain average performance.
 Provides implications for strategy.
LIMITATIONS
 Long term industry profits vs. (short-term) firm level performance
 Static vs. changing environments
 Industry rivalry vs. firm level competition
Lecture 9: Managing Change

DRIVERS OF CHANGE

External Triggers Internal Triggers

Technological advancements New product + service innovations
Market changes Low performance
Demographic characteristics  Diversity High staff turnover
Social + political pressures New CEO/Management team
Demands by labour unions
Accidents
Ethics violations

PLANNED ORGANISATIONAL CHANGE

ACTORS IN A CHANGE PROCESS

Strategists  Implementers  Recipients

WHY THERE IS RESISTANCE TO CHANGE

Organisational Group/Team Individual

Structural Inertia Fear of the Unknown
Cultural Norms Habit
Politics Anticipate being worse off overall
LEWIN’S FORCE-FIELDS MODEL

Performance tends to worsen immediately after change before (hopefully) getting better. The size of this
‘Valley of Despair’ depends on how well the change has been managed.

KOTTER’S 8-STEP MODEL

NB. Mistakes are doing the opposite of above

APPROACHES TO OVERCOMING RESISTANCE TO CHANGE

1. Coercion
2. Communication and education
3. Participation
4. Top management support
5. Negotiation

DAIMLER-CHRYSLER POST-MERGER ISSUES

Hard Issues Soft Issues

Sales + Marketing Communication
Manufacturing Fragmented human resources
Not harmonising cultures and management