Addis Ababa Science and Technology University

College of Electrical and Mechanical Engineering

BSc Program in Electromechanical Engineering

Course Title: Industrial Management and

Engineering Economics

By: Ephrem Gidey (Dr.)

Address: B-64, R-207
E-mail: ephyalem@gmail.com, Mob. 0911002935

March, 2020
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 OBJECTIVES OF THE COURSE
1. To know the principles and applications of
Industrial management.
2. Understand the basic concept of engineering
economics to make various decisions in
industrial environment.
3. To know how to estimate cost of various
resource utilizations of industrial operations.

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 CHAPTER 1

BASIC MANAGEMENT CONCEPTS AND

INDUSTRIAL ORGANIZATION

–Introduction to Management
–Functions of Management
–Organizational Structure
–Basics of Productivity
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 Introduction

• Organizations set a variety of goals and direct their

energies and resources to achieve them;

• Goals: Business firm (RoI); Hospital (Patient care);

HEI (T-L, R, CS);

• All organizations also have resources that can be used

to meet these objectives;

• Such resources can be classified into two categories:

human and non-human resources;

• Therefore, management is the force that unifies

these resources;
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 Management as a Unifying Force

Financial
Resources

Plant
&
Employees Management
Equipment

Land

Management is therefore the process of bringing

human and nonhuman resources together and
coordinating them to accomplish organizational goals.5
 Resources
Human
 Skills
 Knowledge
 Attitude
Non-Human
 Capital
 Land
 Plant and Equipment
 Technology
 Time 6
 Definitions of Management

• Management: is the act of getting people

together to accomplish desired goals and
objectives using available resources efficiently
and effectively;

• It is the act of deploying and manipulating

human resources, financial resources,
technological resources, and natural resources.

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• Management is both science and art;
• It is a science in the sense, that it adopts a
systematic approach through knowledge
acquired by continuous and vigorous efforts;
• It is an art
– As it is an application of some skills to achieve the
desired results;
– Because it utilizes the talent of the people; and
– Because it manages human beings.

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 Basics to Industrial Management

• Industrial management deals with the creation

and management of systems that integrate
people, materials, and energy in a productive way
for the production of economic goods/services.

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• Industries can be classified on the basis of raw
materials, size, and ownership.
• Raw Materials: agriculture based, Marine based, Mineral based,
Forest based, etc.
• Size: based on amount of capital invested, no. of people employed,
or volume of production.
• Ownership: private, state owned or public, joint, or co-operative;

• Industry is also often classified into three

sectors: primary or extractive, secondary or
manufacturing, and tertiary or services; 10
 Managerial abilities

• Ability to plan
• Integrity (Honesty + Reliability)
• Technical skill
• Intelligence
• Initiative
• Resourcefulness
• Judgment
• Ability to organize
• Tactfulness
• Reliability (consistency)
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Management applies to:

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 Importance of Manager

Manager
• Puts together the factors of production to
produce goods and services;

• Makes business decisions;

• Takes risks for which the reward is profit;

• Acts as an innovator by introducing new

products, new technologies and new ways of
organizing business; 13
Functions of Management

Functions of
Management

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• Planning is the process of setting objectives for
the future and developing courses of action to
accomplish them.

• It is a systematic activity which determines

when, how and who is going to perform a
specific job.

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• Top-level managers set plans for the entire
company;

• Lower level managers prepare plans for their

immediate areas of responsibility;

• Planning is done in light of budgetary

constraints, personnel requirements, and
other factors.

“Well plan is half done”

“Failing to plan means planning to fail”

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• Organizing is the process of arranging people
and physical resources to carry out plans and
accomplish organizational objectives.

 I.e., through organizing, managers must develop a

system in which people can perform tasks that lead
to the desired results.

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Organizing

• Organizing by top-level executives includes

the following activities:

A. Creating job positions with defined duties,

responsibilities, & salary ranges based on job
requirements;

B. Arranging positions into a hierarchy by establishing

authority-reporting relationships.

C. Determining the number of subordinates each

manager should have reporting (span of control or
span of management);
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• Staffing is the process of matching jobs and
people;

 It involves the recruitment, selection, development, and

retention of employees with appropriate qualifications;

 Staffing – the most important duties of managers as the

success of any firm depends on the quality of its employees.

 Staffing includes: HR planning, announcing vacant positions,

receiving applications, preliminary and final interviewing,
testing, medical examination, and final selection and
orientation.
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• Leading is the act of motivating or causing
people to perform certain tasks intended to
achieve the specific objectives.

• It is the act of making things happen.

• It is developing relationships that ensure

adequate communication with subordinates.

• It also includes managing personal conflict,

helping employees deal with changing conditions,
and disciplining employees.
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• Overall, leading involves developing a climate of
individual integrity, corporate honesty, and high
productivity.

• To be effective leaders, managers need to

understand individual and group behaviour,
techniques of motivation, and effective styles of
leadership.

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 A manager to be effective leader:
 Objectives must be identifiable, measurable, and
individually attainable;

 Must recognize and reward outstanding performance;

 Must surround himself with competent employees and

ask their advice when making decisions; i.e.,

 a manager should use all the organizational resources

available-especially people;

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• Controlling is the process by which managers
determine whether organizational objectives
are achieved and whether actual operations are
consistent with plans.

 It is the continual comparison of performance

with goals and taking corrective action, if
needed.

 Three things that require the most attention in

controlling: product quality, worker
performance, & cost; 23
 Management Roles

Carrying out management functions requires a manager to

behave in a certain way- to fill certain management roles.

1. Interpersonal Roles

1.1. Figurehead: All social, inspiration, legal and ceremonial

obligations. In this light, the manager is seen as a
symbol of status and authority (E.g. Dr. Arega –
MIDROC Investment Group)

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 Management Roles

1.2. Leader: Duties are at the heart of the manager-

subordinate relationship and include:
 structuring and motivating subordinates, overseeing
their progress, promoting and encouraging their
development, and balancing effectiveness.

1.3. Liaison: representing their organization in different

occasions.
 Maintain information links both inside and outside
organization;

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2. Informational Roles
A second set of managerial roles relates to receiving
and transmitting information;

These informational roles require managers to serve

as:
• monitor,
• disseminator and
• spokespersons.

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3. Decision Roles
 The third set of managerial roles involves decision
making, or decisional roles;

 As decision maker, a manager becomes

 entrepreneur,

 disturbance handler,

 resource allocator, &

 negotiator.

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 Management Hierarchy
 Although all managers may perform the same basic duties
and play similar roles, the nature and scope of their
activities differ.

 Hence, three distinct levels of management are available.

Top Management

Middle Management

Supervisory Management

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1. Top Management
Made up of individuals who have the possibility of
making decisions and formulating policies that affect
all aspect of the firm‟s operations.
President
Vice President
Chief Executive Officers
Executive Vice President
General Manager/Deputy

A manager‟s assigned job duties and the authority

needed to fulfill those duties are what determine
management level. 29
2. Middle Management

Includes all managers above the supervisory

level but below the level where overall
company policy is determined.
Middle managers manage supervisors.

Regional Sales Manager

Academic Deans (Universities)
Production Manager (in an Industry/Factory)

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3. Supervisory Management
At the base of the pyramid is supervisory management
Supervisors manage workers who perform the most basic
job duties required in the business.
Technically, supervisors are managers. As such, they
must reflect the company‟s view to their subordinates.
Because of the expectations placed on supervisors from
above and below, many people claim that „the person on
the firing line-the supervisor-has the toughest job in
management.‟
 Eg. Sales Manager, Academic department head
(Universities) 31
 Management and productivity
 Management is concerned with productivity i.e. the
effectiveness and efficiency.

 Productivity can be measured as the Output to Input ratios

within a time period with due consideration for quality.

Productivity = O/I (within time period & considering quality)

Productivity can be improved:

a. By increasing O with same I.
b. By decreasing I but maintaining same O.
c. By Increasing O and decreasing I;

 The I can be labour, material, capital, etc. 32

 Management Skills

 Management success depends both on a fundamental

understanding of the principles of management and on
the application of management skills.

 Modern business organizations are dynamic and complex,

and competition in the market place is fierce. Thus,
managers must be highly skilled to succeed.

 The skills managers need can be classified as technical,

human relations and conceptual

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 Management Skills

1. Technical Skills
 Are the specialized knowledge and abilities that can be
applied to specific tasks.

 Most important at lower level of management.

 In most cases, technical skills are important at this level

because supervisory managers should train their
subordinates in the proper use of work-related tools,
machines, equipment and Standard Operation Procedure
(SOP).
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 Management Skills
2. Human relation skills

 Human relations skills are the abilities needed to resolve

conflict, motivate, lead, and communicate effectively with
other workers.
 Because all work is done when people work together, human
relation skills are equally important at all levels of
management.
 it is cooperative effort; it is teamwork; it is about making
people to feel secure and free to express their opinions.

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3. Conceptual Skills

 Conceptual skills are the abilities needed to view the

organization from a broad perspective and to see the
interrelations among its components.

 Conceptual skills are most important in strategic (long-

range) planning, therefore these are more important at
top level executives.

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 Management Skills

Top
management

Middle
management

Supervisory
management

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 Management Styles
Description Advantages Disadvantages

Autocratic Senior managers Quick decision making No two-way

take all the communication so can
important Effective when be de-motivating
decisions with no employing many low Creates “them and us”
involvement from skilled workers attitude between
workers managers and workers
Paternalistic Managers make More two-way -Slows down decision
decisions in best communication so making
interests of motivating Still quite a
workers after Workers feel their social dictatorial or
consultation needs are being met autocratic style of
management
Democratic Workers allowed Authority is delegated Mistakes or errors can
to make own to workers which is be made if workers are
decisions. motivating not skilled or
Some businesses Useful when complex experienced enough
run on the basis of decisions are required
majority decisions that need specialist skills

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 Organizational structure

• Activities such as task allocation, coordination and

supervision should be directed towards the
achievement of organizational goals;

• Organizational structure is the typically hierarchical

arrangement of lines of authority, communications,
rights and duties of an organization;

• It determines how the roles, power and

responsibilities are assigned, controlled, and
coordinated, and how information flows among the
different levels of management;

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 Types of Organizational Structure

• There are three main types of organizational

structure: functional, divisional and matrix structure.

a) Functional structure
• It is set up so that each portion of the organization is
grouped according to its purpose.

• One of the drawbacks to a functional structure is

that the coordination and communication between
departments can be restricted by the organizational
boundaries of the departments working separately;

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b) Divisional structure

• Typically is used in larger companies that operate in a

wide geographic area or that have separate smaller
organizations;

• For example, engine division, a compressor division, a

parts division and etc);

• Needs can be met more rapidly and specifically;

however, communication is inhibited because
employees in different divisions are not working
together;

• It is costly because of its size and scope. 42

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c) Matrix structure

• It is a hybrid of divisional & functional structures;

• Typically used in large multinational companies;

• It allows the benefits of functional and divisional

structures to exist in one organization;

• This can create power struggles because most areas

of the company will have a dual management or shared
management responsibilities;

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