Answered Essay: provide a reflective writing on the attached document of Engineering Management

provide a reflective writing on the attached document of Engineering Management ( 1 page summary)

Planning and Forecasting

PREVIEW

There are four basic management functions as defined by Fayol and mentioned in Chapters 1 and 2, and they are still accepted today. These basic functions of management are commonly identified as planning, organizing, leading, and controlling. Of these, planning is the most important, and with- out it the other functions have little meaning. Here, overview information about the first and basic management function, planning, is presented.

This chapter begins with the development of a model of the planning/decision-making process. Then the importance of defining an organization’s mission, goals, objectives, and strategies is con- sidered. Next, management by objectives and some planning concepts are introduced. An important part of planning is forecasting. Quantitative and qualitative methods are discussed. The end of the chapter considers strategies for managing technology.

Management Functions

Planning

Decision Making

Organizing

Leading

Controlling

NATURE OF PLANNING

Importance of Planning

The basic functions of management are commonly identified as planning, organizing, leading (or directing or motivating), and controlling. Of these, planning is said to have primacy—to come first; organizing, leading, and controlling have little purpose unless they are focused on achieving desired objectives. The importance of planning in warfare was emphasized by Hsun Tzu (298–238 B.C.) in The Art of War (the world’s oldest military treatise):

The general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes few calculations before hand. It is by attention to this point that I can see who is likely to win or lose.1

Planning provides a method of identifying objectives and designing a sequence of programs and activities to achieve these objectives. Amos and Sarchet2 define planning simply as “deciding in advance what to do, how to do it, when to do it, and who is to do it”; from that definition, planning must obviously precede doing!

The Planning/Decision-Making Process

There is a basic, logical method for solving problems that may be called, depending on the application, the planning process, the decision-making process, or the scientific method. Although there seem to be as many diagrams of this process as there are authors, a typical representation of this process follows the general logic of Figure 3-1.

A problem cannot be solved until it is recognized. When the “roof falls in” or the workers go on strike, the existence of a problem will be obvious. On the other hand, chronic (perennial) problems or opportunities often go unrecognized. American automobile manufacturers, for example, did not realize that they had a quality problem until the Japanese recognized better quality as an oppor- tunity; the United States lost billions of dollars in markets as a result.

Once a problem is recognized, the nature of the desired solution must be defined carefully in terms consistent with the overall objectives and strategy of the organization. Assumptions about the environment (premises) need to be stated, and the solution found will be valid only if these assump- tions prove true. Finally, the constraints or limitations bounding the solution must be defined.

Information bearing on alternative solutions is then gathered, and alternative solutions are formulated. This is the most creative step in problem solving, since alternatives that are not con- sidered are lost. Simply stating an alternative is not enough—each concept must be fleshed out in enough detail that its benefits and disadvantages can be effectively evaluated. At the same time, some “value model” or measure of merit—quantitative or qualitative—needs to be defined, against which alternatives can be evaluated. The solution that best satisfies this value model is then recommended.

Seldom is the decision process as linear as the preceding paragraph suggests. Identification of alternatives often leads to a search for more information. Evaluation often leads to modification or combination of alternatives to find a new one that combines the advantages of several. After the solution is put into effect (implemented), it is important to check back later to determine if the prob- lem as stated was really resolved by the solution. Often there will be unexpected secondary effects that, once realized, need to be defined as a new problem, and the process begins anew. Problem solving/decision making is therefore more often an iterative process, involving feedback at several steps before the best resolution is found.

THE FOUNDATION FOR PLANNING Strategic Planning

A successful enterprise needs to develop effective strategies for achieving its mission, and strategic planning is the organized process for selecting these strategies. Customer focus impacts and should integrate an organization’s strategic plan, its value creation process, and business results. One approach that corporations use in strategic planning is to identify the businesses they are in and the ones they want to be in in the future, and to define a strategy for getting from the first set to the second.

A clear vision of the basic purpose or mission for which it exists is essential to the long-term suc- cess of any enterprise. Drucker3 cites the old German tradition of the Unternehmer (entrepreneur or, lit- erally, “undertaker”), who alone or with a few top managers was all that was needed to understand the underlying purpose of a firm in earlier, simpler times. In today’s complex and dynamic economy, how- ever, the basic mission of the organization must be communicated clearly and repeatedly to the many managers and professionals whose actions determine whether these purposes are indeed achieved.

Drucker provides an example of a vision of central purpose in the statement of Theodore N. Vail of the American Telephone and Telegraph Company about 1910 that “our business is service.” He believes that without this vision of the social responsibility of a natural monopoly, the “Bell System” would have inevitably been nationalized in the 1930s, as was the case in other countries. Only in the late 1960s, when technology provided alternatives to Bell’s monopoly, was it time to pursue a revised purpose.

Strategic planning suggests ways (strategies) to identify and to move toward desired future states. It consists of the process of developing and implementing plans to reach goals and objectives. The identification of the organization’s vision and mission is the first step of any strategic planning process, as shown in Figure 3-2. A vision statement describes in graphic terms where the goal set- ters want to position themselves in the future. A mission statement resembles a vision statements a more immediate business focus with a time horizon. The mission statement sets forth what the company is attempting to do and is usually what the public sees. The role of an organization’s mission and vision is to align work toward meeting customer expectations.

Vision—Eastman Chemical Company

To Be the World’s Preferred Chemical Company Source: http://www.eastman.com 9/07/05.

Mission—Microsoft

At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.

Source: http://www.microsoft.com. 9/07/05.

It is difficult to develop future strategies for the business without knowing the current status and their success at this point. At this time an analysis of the status needs to be made. One tool which is often used is the SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). This analysis should address all factors that are key to the organization’s future success. Strengths and weaknesses are basically internal to an organization and may include the following:

Management

Marketing

Technology

Research

Finances

Systems

The external opportunities and threats may be in some of the following areas:

• Customers

• Competition

•New technologies

•Government policies

Once the SWOT analysis is complete, future strategic planning may continue. The SWOTs identified will assist in the planning as well as determining the gap analysis. A gap analysis is a technique used to analyze/assess where you currently are with respect to where you would like to be in the future.

The basic vision, purpose, or mission of an organization must next be interpreted in terms of goals and objectives. Goals give purpose and direction to accomplish the mission of an organization. The goal statement answers the following questions: What do we do; why do we do it; and for whom do we do it? It is used as a continual point of reference regarding the scope or purpose. The objectives further clarify the goal and answer the question, “How do we go about it?” There may be several goals, and each goal may have several objectives. Strategies are statements about the way objectives are to be achieved. They are relevant only to the extent that they help meet the objectives. Different organi- zations may interchange the words “vision” and “mission,” and “goals” and “objectives.” The impor- tance is not in the words, but in the meaning.

One must distinguish between two types of goals that often coexist: the official goals that man- agement says it is pursuing in its public statements, and the operative goals that it actually is pursu- ing. Managers of rural electric cooperatives in the United States, when asked by the author for their underlying goals, often replied, “to provide the best possible service at the lowest possible cost.” This is hardly an operative goal, since “best service” implies a high level of staffing of maintenance and repair crews, and “lowest cost” implies a lesser level. Only by examining the level actually being maintained could one deduce the operative goal.

Peter Drucker4 believes that objectives need to be established in all areas on which the organi- zation’s survival depends. He distinguishes eight such “key result areas”:

1.            Market share. Market share is the ratio of dollar sales of an enterprise in a particular market to the total sales of all competitive products and services in that market. Firms with a small market share usually are less profitable because they have fewer sales over which to spread the fixed costs of operation, and managers often decline to enter or remain in a specific mar- ket unless they can either achieve a satisfactory market share or can define a smaller “mar- ket segment” in which they can be a leader.

2. Innovation. Most successful companies, especially in the areas of technology where most engineers will work, are continually searching for new products and services. 3M, for exam- ple, requires of its 40-odd divisions that at least 25 percent of sales be of products introduced in the last five years. Nonetheless, some successful companies deliberately choose to be fol- lowers and to provide low-cost, high-volume products without the high expense of being first.

3.            Productivity and quality. Productivity measures an organization’s ability to produce more goods and services per unit of input (labor, materials, and investment). In recent years quality has been added as a related and essential area for setting objectives. The two are not inconsistent, since higher quality usually leads to lower scrap and rework losses, fewer returns, and greater customer satisfaction, increasing productivity and profitability.

4.            Physical and financial resources. An enterprise needs to establish goals for the resources (plant, equipment, inventory, and capital) it needs to perform effectively.

5.            Manager performance and development. Since good management is the key to enterprise success, effective firms plan carefully to assure that managers will be available in the years ahead in the quality and quantity needed for the organization to prosper. Supporting goals are then developed in areas such as recruitment, training, and evaluation.

6.            Worker performance and attitude. Peters and Waterman5 found that respect for the individ- ual employee was a common thread running through America’s most successful businesses. Personnel are “crew members” at McDonald’s, “hosts” at Disneyland, “ambassadors” at Six Flags, and “associates” at J.C. Penney stores. An unfortunate outcome of Frederick Taylor’s scientific management revolution was, as we saw in Chapter 2, the division of work into deciding how to do it (by management) and doing as you are told (by the work- ers). Today’s more educated workforce has much to offer the company that knows how to motivate it and challenge it effectively.

7.            Profitability. The profitability of an enterprise is essential to its continuation, and the desired level should be set explicitly as an objective against which to measure enterprise success. 8. Social responsibility. Every enterprise has responsibilities as a “corporate citizen” that

extend beyond the legal and economic requirements. These include responsibilities to cus- tomers, employees, suppliers, community, and society as a whole. The organization that does not at least take responsibility for its effect on the environment deserves to be penalized by society.

Management by Objectives

In the same 1954 work,6 Drucker formulated the concept of management by objectives (MBO). Since then, MBO has been widely adopted to translate broad organizational goals and objectives like those discussed previously into specific individual objectives. MBO can (and usually should) be employed between superior and subordinate at every level. The steps in MBO are generally as follows.

First, both superior and subordinate should have an understanding of the goals and objectives of the overall organization and those of the superior’s group.

Superior and subordinate then meet to establish objectives for the subordinate’s attention over the next six months or year that are consistent with group objectives. These objectives should require some effort to attain, yet not be beyond reach. They should be quantifiable if feasible (e.g., reduce scrap by 20 percent); if not feasible they should be verifiable (e.g., write a new quality assur- ance plan) so that it is possible to determine at the end of the period whether or not the objective has been achieved. The relative amount of input from superior and subordinate in negotiating these objectives may vary, but the result should be mutual agreement. In agreeing to an objective pro- posed by the superior, the subordinate may identify specific resources or authority that need to be supplied by the superior to make it possible, and this is to the advantage of both. Objectives should not be confined to tasks for the sole benefit of the superior, but should also include developmental objectives designed to strengthen the subordinate’s capabilities.

The subordinate then proceeds over the ensuing period (typically, six months or a year) to carry out his or her job with an emphasis on achieving these objectives. Naturally, if problems occur or priorities change, superior and subordinate can meet at any time and may modify the objectives, but they should not be changed without such agreement.

At the end of the period, superior and subordinate meet again to evaluate the subordinate’s suc- cess in meeting assigned goals. This should be a constructive process, not an excuse for placing blame. This review session should end by mutually establishing a new set of objectives for the fol- lowing period, of which some may be extensions of earlier objectives and some may be new objec- tives, and some earlier objectives may be deemphasized.

Advantages claimed for MBO include greater commitment and satisfaction on the part of sub- ordinates, enforced planning and prioritizing of future activities on the part of both superiors and subordinates, and a more rational method of performance evaluation based on contribution to orga- nizational objectives.

Disadvantages include the time and paperwork involved, misuse when superiors simply assign (rather than negotiate) objectives, and the gamesmanship of subordinates who try to negotiate easy goals. There is also a tendency for subordinates to focus on the relatively few, verifiable, MBO objectives negotiated to the detriment of the many other objectives, both qualitative and quantita- tive, that a professional must also keep in balance.

While annual salary reviews should not be scheduled at the same time as the periodic MBO evaluation, there needs to be some relationship between the ability to meet objectives and the reward system to make MBO effective. Finally, MBO will not be a success unless it has the initiat- ing and continuing support of higher management.

SOME PLANNING CONCEPTS

Responsibility for Planning

Planning is a continuing responsibility of every manager. The higher managers rise, the more time they must spend in planning and the further into the future they must try to foresee. Most large orga- nizations have staff offices for planning. The planning staff can coordinate the overall planning effort, gather and analyze information on the economy, markets, and competition, and perform other assigned tasks. The ultimate responsibility for planning, however, must rest with top and middle management. Line management must establish the objectives for the enterprise, devise the overall strategy, provide planning guidelines, and periodically review and redirect the planning effort. To have purpose, plans must lead to action, and managers are unlikely to carry out with any enthusiasm plans they have not “bought into” by being part of the planning process.

Planning Premises

An essential for effective planning is establishment of the premises, or assumptions, on which plan- ning is to be based. Weihrich and Koontz7 define planning premises as “the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the operation of plans.” Examples of planning premises include assumptions about future economic conditions, government decisions (regulation, tax law, and trade policy, for example), the nature of competition, and future markets.

In managing technology, it is essential to establish planning premises about the future of tech- nology and competition. Betz8 cites Monsanto as an example. In the early 1980s it became clear to Monsanto executives that the basic chemicals they depended on were produced with mature, well- known technologies that could be replicated anywhere, and that countries with cheap sources of raw materials (principally, petroleum) would have a relative advantage. Monsanto therefore divested itself of these traditional products and made major investments in biochemical research and in acquisition of electronic companies.

Where there are uncertainties about critical premises, prudent managers develop contingency plans that can be implemented if indicators show a change in the environmental conditions from those on which mainstream planning is based. Modest changes in current plans may be needed to add flexibility so that a switch to a contingency plan can be made quickly if needed.

Planning Horizon

The “planning horizon” asks how far into the future one should plan. This varies greatly, depending on the nature of the business and the plan. The vendor of pins and pennants outside a baseball sta- dium need not plan beyond the current season. In contrast, after Julius Rosenwald bought out Sears in 1895 he built a continuing business of mail-order service to the American farmer that included the Chicago mail-order plant described previously. His planning period needed to look far enough ahead to encompass a return on this long-term investment. Koontz and Weihrich summarize this dif- ference in the “commitment principle: Logical planning encompasses a future period of time neces- sary to fulfill, through a series of actions, the commitments involved in decisions made today.”9 High-technology products may have short effective lives, and therefore short planning horizons:

For example, in the 1960s and 1970s, IBM introduced new mainframe computers in 1964 (Model 360), in 1970 (Model 370), in 1977 (Model 303X), in 1979 (Models 38 and 4300 and 308X), and in 1983 (Model 4381), and each of these model generations was about a 100 to 200 percent improvement over the previous models in terms of improved performance and price.10

The decision of a utility company to build a nuclear power plant, on the other hand, must con- sider at least 10 years’ time to obtain necessary approvals and build the plant, and several decades’ operation to recover the investment. Many utilities who made such decisions based on 1970 projec- tions of energy-use growth had no way to foresee the energy conservation following the OPEC oil crisis of 1973 or the increasing public attack on nuclear reactors, and they had to cancel partially built reactors at costs of billions of dollars. The planning horizon can vary from days to years depending on the level of the manager.

Systems of Plans

Usually, not just one plan is involved, but a system of them. In 1916 Henri Fayol divided his “Plan of Action in a Large Mining and Metallurgical Firm” into “yearly forecasts” and “ten-yearly fore- casts,” the latter redone every five years. Current practice is not much different, involving strategic plans of from 3 to 15 years futurity and operating plans, usually one year in duration (but some- times as much as three years in duration). Complex programs will require not just a single plan but a system of plans, each describing a related activity. For example, a complex project might require most or all of the plans listed in Table

Policies and Procedures

Policies are guides for decision making that permit implementation of upper management objec- tives, with room for interpretation and discretion by subordinates. Rules, in contrast, do not permit discretion. Policies have a hierarchy of levels, just as plans do. For example, the president of an engineering firm might establish a policy that approval of “small” design changes should be dele- gated to an “appropriate” level to reduce the number of matters demanding higher management attention. The chief engineer of a project might then implement this by establishing a supporting policy that engineering design supervisors could approve design changes costing up to $5000 involving technical specialties in their area of responsibility (which in turn involves judgment on the part of the supervisors). To be effective, policies should be clear, flexible, and communicated throughout the organization; involve participation in their development; and be reviewed regularly.

A procedure, on the other hand, is a prescribed sequence of activities to accomplish a desired purpose. Procedures tell you “if you want to do this, do it this way.” For example, while the decision to approve (release) a design drawing requires technical judgment, the established procedure for doing so must be followed to assure that appropriate individuals have had a chance to approve the drawing and that its official existence is communicated to those who need to be informed of it. “Stan- dard operating procedures” (SOPs) are examples of procedures used at the operating (working) level.

FORECASTING

An essential preliminary to effective planning is foreseeing, or forecasting, what the future will be like. Planning provides the strategies, given certain forecasts, and forecasting estimates the results, given the plan. Planning is what the organization ought to do, and forecasting relates to what happens if the firm tries to implement given strategies in a possible environment. There must be alternatives

to the plan based on the forecasts. For example, if one of your strategies is to encourage people to travel by car more to your destination, and the price of gasoline is at an all-time high, then there should be an alternative strategy.

The engineer manager must be concerned with both future markets and future technology, and must therefore understand both sales and technological forecasting. The most important premise or assumption in planning and decision making is the level of future sales (or, for nonprofit activities, of future operations). Almost everything for which we plan is based on this assumption—the pro- duction level (which determines how many people we must hire and train or, if production declines, lay off); the need for new facilities and equipment; the size of the sales force and advertising bud- get; and new funding for purchases and for investment in inventory and accounts receivable.

Qualitative Methods

Jury of Executive Opinion.

This is the simplest method, in that the executives of the organiza- tion (typically, the vice presidents of the various divisions) each provide an estimate (educated guess) of future volume, and the president provides a considered average of these estimates. This method is inexpensive and quick and may be entirely acceptable if the future conforms to the assumptions the executives have used in estimating.

Another use of expert opinion is the Delphi Method, which begins with the present state of technology and extrapolates into the future, assuming some expected rate of technical progress. A common forecasting method is the use of a panel of experts in the technical field involved. Panels are sometimes consulted using the Delphi Method (named after the Oracle at Delphi in ancient Greek mythology). Each expert is asked independently when some future technical breakthrough (such as the launching of a space shuttle or the feasibility of a new product, for example) will occur, if ever. Averages of the estimates are then reported back to panel members, who are then given a chance to modify their estimate or explain why they hold their belief. A final value is adopted after several such iterations. One of the advantages of this technique is that it eliminates the effects of interaction among experts.

Sales Force Composite.

In this commonly used method, members of the sales force estimate sales in their own territory. Regional sales managers adjust these estimates for their opinion of the optimism or pessimism of individual salespeople, and the general sales manager “massages” the fig- ures to account for new products or factors of which individual sales people are unaware. Since the field sales force is closest to the customer, this method has much to recommend it. However, if there is any suggestion that the estimate a salesperson provides will next appear as a minimum goal they must achieve, the sales force may find it in their own best interest to “play games” with the figures.

Users’ Expectation.

When a company sells most of its product to a few customers, the simplest method is to ask the customers to project their needs for the future period. The customers depend for their own success on reliable sources of supply, and so communication is in the best interest of both parties. This might be done by market testing or market surveys. For consumer goods, though, not only is such information expensive to obtain, but consumers often do not know what they will purchase in the future.

Expert Answer

The most basic management functions identified are:

  • Planning
  • Decision Making
  • Organizing
  • Leading
  • Controlling

Planning: Among the above mentioned management functions, planning is the first and foremost hand holds the primary position. It provides a method for identifying objectives and designing steps and activities for achieving these objectives. Different authors define planning and decision making in different ways.

It is important for solving problem to first identify it and than defining the limitations bounding the solution, than alternative solutions are gathered and formulated. Benefits and disadvantages of every possible solutions should be evaluated effectively. Value model should be prepared and evaluated. The solution that best fits in value model is recommended.

Strategic Planning:

In order to develop successful enterprise it is extremely important to develop effective strategies. For this purpose strategic planning is used as a tool. Clarity on vision and mission of any organization is essential for the long-term success.

Vision statement defines the place where the goal setters want to position the organization in the future. And the mission statement sets forth what the company is attempting to do and is usually what the public sees. Both mission and vision focuses on meeting customer expectations.

SWOT analysis is used to know the current status and setting the future goals of the organization. Strengths and weaknesses are basically internal to an organization for example, Management, Marketing, Technology, Research, Finances, Systems etc. Whereas, external opportunities and threats include following the areas like Customers, Competition, New technologies, Government policies etc. SWOT analysis determines the gap analysis.

It is important that the basic vision and mission of an organization must be interpreted in terms of goals and objectives. There may be several goals, and each goal may have several objectives. There are two types of goals that often coexist: the official goals that management says it is pursuing in its public statements, and the operative goals that it actually is pursuing.

There are eight key result areas where objectives need to be established. These are: Market shareInnovation, Productivity and quality, Physical and financial resources, Manager performance and development, Worker performance and attitude, Profitability and Social responsibility.

There is a well known concept of management by objective (MBO). MBO can be employed between superior and subordinate at every level. Apart from MBO there are some planning concepts that are important. These are: Responsibility for Planning, Planning Premises, Planning Horizon, Systems of Plans, and Policies and Procedures.

FORECASTING:

Forecasting is an essential preliminary to effective planning. Given with the forecasts planning provides the strategies. It is important for the engineer manager to be concerned with both future markets and future technology, for this understanding of both sales and technological forecasting is necessary.

There are two important Qualitative Methods namely Jury of Executive Opinion and Sales Force Composite.

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