INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182) 1. BASIC MANAGEMENT CONCEPTS 1.1 INTRODUCTION The theory of ma a!eme t !

oe" #a$% to the &a' of h(ma $)*)+),at)o - 'he h(ma #e) ! "tarte& !ro(. a$t)*)t)e" for the atta) me t of "ome $ommo o#/e$t)*e"0 1he e*er a !ro(. )" forme& a & a !ro(. a$t)*)ty )" or!a ),e& to a$h)e*e $erta) $ommo o#/e$t)*e"- ma a!eme t )" ee&e& to &)re$t- $oor&) ate a & ) te!rate the ) &)*)&(a+ a$t)*)t)e" of a !ro(. a & "e$(re team 'or% to a$$om.+)"h or!a ),at)o a+ o#/e$t)*e"0 The ee& for eff)$)e t ma a!eme t )" h)!h+y fe+t ) #(") e"" a$t)*)t)e"0 The o#/e$t)*e" of a++ #(") e"" are atta) e& #y (t)+),) ! the "$ar$e re"o(r$e" +)%e me - mater)a+"- ma$h) e"- mo ey et$0 The #a")$ e$o om)$ o#/e$t)*e" of #(") e"" a$t)*)ty are .rof)t ma2)m),at)o or $o t) (o(" !ro'th a & "(r*)*a+0 It )" o +y eff)$)e t ma a!eme t 'h)$h he+." ) a$h)e*) ! the"e o#/e$t)*e" e$o om)$a++y #y effe$t)*e (t)+),at)o of the "$ar$e re"o(r$e"0 Ma a!eme t )" a ( )*er"a+ .ro$e"" ) a++ or!a ),e& e$o om)$ a$t)*)t)e"0 It )" fo( & ) e*ery 'a+% of +)fe 'here the e$o om)$a+ a & ) te++)!e t a..+)$at)o of "$ar$e re"o(r$e" )" ) *o+*e&0 It )" ot mere+y re"tr)$te& to "ho.- fa$tory or off)$e0 It )" e$e""ary for a #(") e"" f)rm- !o*er me t e ter.r)"e"- e&($at)o a & hea+th "er*)$e"- m)+)tary or!a ),at)o "- tra&e a""o$)at)o " a & "o o 0 I fa$t ma a!eme t )" a o.erat)*e for$e ) a++ $om.+e2 or!a ),at)o " try) ! to a$h)e*e "ome "tate& o#/e$t)*e"0 It $a #e !e era+),e& that o e ter.r)"e $a e /oy a "($$e""f(+ e2)"te $e a & "(r*)*a+ ')tho(t the $om.ete t ma a!eme t0 The "+o' rate of e$o om)$ !ro'th of ( &er &e*e+o.e& $o( tr)e" )" &(e the .oor ma a!eme t0 3eter Dr($%er ha" r)!ht+y remar%e& that there are o ( &er &e*e+o.e& $o( tr)e"- there are ( &er ma a!e& $o( tr)e"0 A$$or&) ! to 4o+) C+ar%- a em) e t e$o om)"tthe +o' rate of e$o om)$ !ro'th of ( &er &e*e+o.e& $o( tr)e" )" ot &(e to the &earth of $a.)ta+#(t )t )" &(e to the &earth of the ma a!eme t0 1.2 DEFINITIONS OF MANAGEMENT Ma a!eme t ha" #ee &ef) e& #y &)ffere t th) %er" ) a (m#er of 'ay"0 5or o(r ( &er"ta &) ! ma a!eme t may #e *)e'e& a" 'hat a ma a!er &oe" ) a forma+ or!a ),at)o to a$h)e*e the o#/e$t)*e"0 Some of the )m.orta t &ef) )t)o " of ma a!eme t are6 10 The art of !ett) ! th) !" &o e thro(!h other .eo.+e0 20 The art of a..+y) ! the e$o om)$ .r) $).+e" that ( &er+) e the $o tro+ of me a & mater)a+" ) the e ter.r)"e ( &er $o ")&erat)o 0 70 The for$e that ) te!rate" me a & .hy")$a+ .+a t ) to a effe$t)*e o.erat) ! ( )t0 80 A ta"% of .+a ) !- $oor&) at) !- mot)*at) ! a & $o tro++) ! the effort" of other" to'ar&" ".e$)f)$ o#/e$t)*e"0 50 A m(+t).(r.o"e or!a that ma a!e" a #(") e"" ma a!e" a ma a!er a & ma a!e" 'or%er" a & 'or%0 90 4 o') ! e2a$t+y 'hat yo( 'a t me to &o- a & the "ee) ! that they &o )t the #e"t a & $hea.e"t 'ay"0 :0 The $reat)o a & ma) te a $e of a ) ter a+ e *)ro me t ) a e ter.r)"e 'here ) &)*)&(a+"- 'or%) ! to!ether ) !ro(."- $a .erform eff)$)e t+y a & effe$t)*e+y to'ar&" the atta) me t of !ro(. !oa+"0

1. By Yegetaneh T

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182) 80 G()&) ! h(ma a & .hy")$a+ re"o(r$e" ) to &y am)$ or!a ),at)o ( )t" 'h)$h atta) the)r o#/e$t)*e" to the "at)"fa$t)o of tho"e "er*e& a & ')th h)!h &e!ree of mora+e a & "e "e of atta) me t o the .art of tho"e re &er) ! "er*)$e0 ;0 To fore$a"t a & to .+a - to or!a ),e- to $omma &- to $oor&) ate a & to $o tro+0 1<0 The .ro$e"" of .+a ) !- or!a ),) !- +ea&) ! a & $o tro++) ! the effort" of or!a ),at)o mem#er" a & of (") ! a++ other or!a ),at)o a+ re"o(r$e" to a$h)e*e "tate& or!a ),at)o a+ !oa+"0 The &ef) )t)o "(!!e"t" that6 a0 Ma a!eme t )" a $o t) (o(" .ro$e""0 #0 Se*era+ ) ter=re+ate& a$t)*)t)e" ha*e to #e .erforme& #y ma a!er" )rre".e$t)*e of the)r +e*e+" to a$h)e*e the &e")re& !oa+"0 $0 Ma a!er" ("e the re"o(r$e" of the or!a ),at)o - #oth .hy")$a+ a" 'e++ a" h(ma to a$h)e*) ! the !oa+"0 &0 Ma a!eme t a)m" at a$h)e*) ! the or!a ),at)o " !oa+" #y e "(r) ! effe$t)*e ("e of re"o(r$e"0 110 A "o$)a+ .ro$e"" ) *o+*) ! $oor&) at)o of h(ma a & mater)a+ re"o(r$e" thro(!h the f( $t)o " of .+a ) !- or!a ),) !- "taff) !- +ea&) ! a & $o tro++) ! ) or&er to a$$om.+)"h "tate& o#/e$t)*e"0 There are f)*e .art" to a &ef) )t)o of ma a!eme t a" a "o$)a+ .ro$e""6 a0 The $oor&) at)o of re"o(r$e"0 #0 The .erforma $e of ma a!er)a+ f( $t)o " a" a mea " of a$h)e*) ! $oor&) at)o 0 $0 E"ta#+)"h) ! the o#/e$t)*e or .(r.o"e of ma a!eme t .ro$e""0 &0 Ma a!eme t )" art of !ett) ! th) !" &o e thro(!h other .eo.+e0 e0 It )" $y$+)$ at(re- )0e0 a o !o) ! ($o t) (o(") .ro$e"" that re.re"e t" .+a ) != a$t)o =$o tro+=re=.+a ) ! $y$+e0
Me Me Mater)a+" Mater)a+" Ma$h) Ma$h) e" e" Mo Mo ey ey Mar%et" Mar%et" Re"o(r$e" Re"o(r$e" 3+a 3+a )) ! ! Tra Tra "format)o "format)o .ro$e""e" .ro$e""e" D)re$t) D)re$t) ! ! Goa+" Goa+" O(t.(t" O(t.(t" Co Co tro++) tro++) ! !

Or!a Or!a ),) ),) ! ! 5)!0 101 3ro$e"" of Ma a!eme t

1.3 CHARACTERISTICS OF MANAGEMENT The )m.orta t $hara$ter)"t)$" of ma a!eme t are6 10 Ma a!eme t )" .(r.o"ef(+ a$t)*)ty6 &ea+" ')th the $+ear atta) me t of $+ear+y &ef) e& o#/e$t)*e"0 20 It )" a eff)$)e t ha &+) ! of e$o om)$ re"o(r$e"0 70 Ma a!eme t )" a &)"t) $t .ro$e""6 $o ")"t) ! of .+a ) !- or!a ),) !- "taff) !&)re$t) ! a & $o tro++) !0 80 Ma a!eme t )" ( )*er"a+6 )" fo( & ) e*ery 'a+% of +)fe0 50 Ma a!eme t )" a "y"tem of a(thor)ty6 ma a!er" at &)ffere t +e*e+" .o""e" *ary) ! &e!ree" of a(thor)ty that e a#+e" them to .erform the)r f( $t)o " effe$t)*e+y0 90 Coor&) at)o )" the "o(+ of ma a!eme t6 e$e""ary ) !ro(. a$t)*)t)e"0 :0 Ma a!eme t )" &y am)$6 )t 'or%" ) e*er $ha !) ! "o$)a+ e *)ro me t0 80 Ma a!eme t )" &e$)")o ma%) !6 ma a!er" &e$)&e a#o(t 'hat to &o- 'he to &o'here to &o et$0
1. By Yegetaneh T
2

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182) ;0 Ma a!eme t )" a .rofe"")o 6 ma a!eme t )" ot o +y a "$)e $e #(t a+"o a art0 1.4 ADMINISTRATION, MANAGEMENT AND ORGANIZATION I the "t(&y of ma a!eme t there )" a $o tro*er"y ) (") ! the term" a&m) )"trat)o a & ma a!eme t0 >(t )t "ho(+& #e $+ear that a&m) )"trat)o - ma a!eme t a & or!a ),at)o are e)ther "y o ymo(" or ) ter$ha !ea#+e0 They ha*e the)r o' f)e+& of o.erat)o 0 A&m) )"trat)o &eterm) e" the o#/e$t)*e" a & .o+)$)e" of a e ter.r)"e0 Ma a!eme t $ar)e" o(t the"e .o+)$)e" to a$h)e*e the o#/e$t)*e" of the e ter.r)"e0 5or a&m) )"trat)o a & ma a!eme t to f( $t)o effe$t)*e+y- there m("t #e .ro.er "tr($t(r) ! of the e ter.r)"e (or!a ),at)o )0 A&m) )"trat)o !)*e" .ro.er &)re$t)o 0 Ma a!eme t .ro.er+y e2e$(te"- )t )" a e2e$(t)o f( $t)o 0 Or!a ),at)o )" a effe$t)*e ma$h) ery to a$h)e*e e ter.r)"e o#/e$t)*e" ) a team ".)r)t0 Ma a!eme t $ar)e" o(t the .o+)$)e" of a&m) )"trat)o thro(!h the frame'or% of a or!a ),at)o 0 The fo++o') ! ta#+e )++("trate" the &)"t) $t)o " #et'ee a&m) )"trat)o - ma a!eme t a & or!a ),at)o 0 Administ !ti"n M!n!#$m$nt O #!ni%!ti"n 3ro$e"" of &eterm) ) ! the 3ro$e"" of .+a ) ! the 'or% a" 3ro$e"" of &)*)&) ! 'or% ) o#/e$t to #e a$h)e*e& .er the o#/e$t)*e +a)& #y the to &)ffere t &(t)e" a & ta"%" a&m) )"trat)o a" .+a e& Lay" &o' .o+)$)e" a & E2e$(te" .o+)$)e" a & .ro!ram" It or!a ),e" the 'or% .r) $).+e" 3re.are" frame'or% ( &er S(.er*)"e" a & $o tro+" the Dra'" the +) e of a(thor)ty 'h)$h o e )" a"%e& to 'or% a & e2e$(t)o of a"")! e& 'or% a & &eterm) e" the +) e of e2e$(te a$t)o 3ro*)&e"6 Coor&) ate" a$t)*)t)e" It &e+e!ate" the a(thor)ty a & f)2e" re".o ")#)+)ty D)re$t)o G()&a $e a & Lea&er"h). 1.1 &E'E&S OF MANAGEMENT I a y or!a ),at)o a++ tho"e are re".o ")#+e for the 'or%" of other" are $a++e& ma a!er"0 Tho(!h the)r .r)mary ta"% rema) " the "ame !ett) ! the th) !" &o e #y other .eo.+e- there )" a ')&e *ar)at)o ) the)r a(thor)t)e" a & re".o ")#)+)t)e"0 The"e &)ffere $e" are ma) +y &(e to the +e*e+" of ma a!eme t0 Le*e+" of ma a!eme t refer" to a +) e of "e.arat)o #et'ee &)ffere t .o")t)o " &ra' ')th a *)e' to &)"t) !()"h ea$h other ) re".e$t of the)r &(t)e"- re".o ")#)+)t)e"- r)!ht" a & a(thor)t)e"0 The three +e*e+" of ma a!eme t that are $ommo +y fo( & ) or!a ),at)o " are6 a0 To. ma a!eme t #0 M)&&+e ma a!eme t $0 Lo'er +e*e+ ma a!eme t T"( m!n!#$m$nt6 to. ma a!eme t $o "t)t(te" the h)!he"t +e*e+ ) the ma a!eme t h)erar$hy0 Th)" )" the .o+)$y ma%) ! +e*e+ ) a y or!a ),at)o 0 Th)" +e*e+ $o ")"t" of "ma++ !ro(. of e2e$(t)*e"- #oar& of &)re$tor"- $ha)rma - ma a!) ! &)re$tor- .er"o e+ ma a!er- $h)ef e2e$(t)*e et$0 they &ef) e the a)m of the $om.a y- e"ta#+)"h the .r)mary o#/e$t)*e"- .o+)$)e" a & "trate!)e" to #e .(r"(e& to a$h)e*e the"e o#/e$t)*e"0 They a+"o form(+ate the .+a " of or!a ),at)o a & .ro$e&(re- ) a(!(rate the #oar& .ro!ram- a & a..ro*e ".e$)f)$ ma/or o#/e$t" ) the .ro!ram0
1. By Yegetaneh T
7

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182) Midd)$ " d$ m!n!#$m$nt6 m)&&+e +e*e+ o$$(.)e" a $e tra+ .+a$e ) the h)erar$hy0 It )" $o $er e& ')th e2e$(t)o of the &eta)+e& .o+)$)e" a & .+a " &eterm) e& #y to. ma a!eme t (A&m) )"trat)o ) thro(!h the frame'or% of the or!a ),at)o 0 M)&&+e +e*e+ ma a!eme t )" a "'era#+e to to. ma a!eme t0 It" ma) f( $t)o " are to .+a - to !()&e- to "(.er*)"e- to $oor&) ate- to e2er$)"e $o tro+ o*er the +o'er +e*e+ ma a!eme t0 &"*$ )$+$) m!n!#$m$nt6 th)" )" the +o'e"t +e*e+ ) the h)erar$hy of ma a!eme t0 Ma a!er" at th)" +e*e+ f( $t)o ( &er the $o tro+ a & &)re$t)o of m)&&+e +e*e+ ma a!eme t0 The)r f( $t)o " are a+"o to .+a - to !()&e- to "(.er*)"e- to $oor&) ate- to e2er$)"e $o tro+- #(t a++ the"e f( $t)o " are .erforme& to !et 'or% &o e from the o.erat) ! "taff0 Th)" +e*e+" ma a!eme t ta%e" or&er" from m)&&+e ma a!eme t a & e2.+a) " to the 'or%er" at o.erat) ! +e*e+0 Th)" +e*e+ ) $+(&e" forema - "(.er*)"or- "(.er) te &e t- ) ".e$tor et$0 The fo++o') ! !ra.h ma%e" the a#o*e h)erar$hy more $+ear6
A&m) A&m) )"trat)o )"trat)o To. To. Ma Ma a!eme a!eme tt

Ma Ma a!eme a!eme tt Lo' Lo' Le*e+ Le*e+ Ma Ma a!eme a!eme tt 5)!0 102 Le*e+" of Ma a!eme t

1., MANAGERIA& S-I&&S Ma a!er)a+ "%)++ )" the a#)+)ty of a ma a!er to ma%e a "mooth f( $t)o ) ! team of .eo.+e 'or%) ! ( &er h)m0 Ma a!eme t /o# )" &)ffere t from other /o#"0 It ) *o+*e" o#+)!at)o to ma%e effe$t)*e (t)+),at)o of h(ma a & mater)a+ re"o(r$e"0 It re?()re" "o( & /(&!me t to ha &+e $om.+e2 ")t(at)o "0 5(rther- the at(re of the /o# #e$ome" ) $rea") !+y $om.+e2 at ea$h h)!her +e*e+ #e$a("e of the ) $rea"e ) the "$o.e of a(thor)ty a & re".o ")#)+)ty0 Th(" the "%)++" re?()re& ) ma a!eme t are &)ffere t ) at(re at &)ffere t ma a!eme t +e*e+"0 Ea$h h)!her +e*e+ re?()re" ) $rea"e& % o'+e&!e- #roa&er .er".e$t)*e a & !reater "%)++"0 Ma a!er ha" to re$o $)+e$oor&) ate a & (.ra)"e the *ar)o(" *)e' .o) t" a & ta+e t" of .eo.+e 'or%) ! ( &er h)m to'ar&" the or!a ),at)o !oa+"0 The "%)++" re?()re& of a "($$e""f(+ ma a!er 'hether he )" 'or%) ! ) #(") e"" or!a ),at)o - a e&($at)o a+ ) "t)t(te or a ho".)ta+ $a #e $+a"")f)e& a" )0 Te$h )$a+ "%)++" ))0 Co $e.t(a+ "%)++" a0 De$)")o ma%) ! "%)++" #0 Or!a ),at)o a+ "%)++" )))0 @(ma re+at)o "%)++" a0 Comm( )$at)o "%)++" #0 Mot)*at) ! "%)++" $0 Lea&er"h). "%)++" T$./ni.!) s0i))s refer to the a#)+)ty to ("e metho&"- .ro$e""e"- too+"- e?().me t- te$h )?(e" a & % o'+e&!e of a ".e$)a+),e& f)e+&0 It )" .r)mar)+y $o $er e& ')th the 'ay" of &o) ! th) !"0 It refer" to the .rof)$)e $y ) ha &+) ! metho&"- te$h )?(e" a & re+ate& to a ".e$)f)$ f)e+& of a$t)*)ty0 Te$h )$a+ "%)++" are mo"t )m.orta t for +o' +e*e+ ma a!er"- #e$a("e #y at(re the)r /o#
1. By Yegetaneh T
8

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182) ) *o+*e" "(.er*)")o of the 'or%er" o the "ho. f+oor0 Effe$t)*e "(.er*)")o - !()&a $e- &)re$t)o a & $oor&) at)o of the 'or% .erforme& #y the "(#or&) ate"- therefore &e.e &" o the te$h )$a+ "%)++ .o""e""e& #y the +o'er +e*e+ ma a!er"0 C"n.$(t1!) s0i)) )" the a#)+)ty to "ee the or!a ),at)o a" a 'ho+e- to re$o! ),e ) ter=re+at)o "h)." amo ! &)ffere t f( $t)o " of the #(") e"" a & e2ter a+ for$e" a & to !()&e effe$t)*e+y the or!a ),at)o a+ effort"0 Co $e.t(a+ "%)++ e2te & to *)"(a+),) ! the re+at)o of the or!a ),at)o to ) &("try- to the $omm( )ty a & to the .o+)t)$a+- e$o om)$ a & "o$)a+ for$e" of the at)o a" a 'ho+e a & e*e to for$e" 'h)$h o.erate #eyo & the at)o a+ #o( &ar)e"0 It )" a $reat)*e for$e ')th) the or!a ),at)o 'h)$h )" $o $er e& ')th &e")! a & .ro#+em "o+*) !0 A h)!h &e!ree of $o $e.t(a+ "%)++ he+." ) a a+y,) ! the e *)ro me t a & ) )&e t)fy) ! the o..ort( )t)e" a & threat"0 H1m!n $)!ti"n s0i))s are .r)mar)+y $o $er e& ')th .er"o " a" $o tra"te& ')th th) !"0 @(ma "%)++ refer" to the a#)+)ty to 'or% effe$t)*e+y ')th other" a & #()+& $oo.erat)*e !ro(. re+at)o " to a$h)e*e or!a ),at)o a+ o#/e$t)*e"0 It )" the a#)+)ty to 'or% ')th- ( &er"ta & a & mot)*ate .eo.+e0 @e ( &er"ta &" 'hy .eo.+e #eha*e a" they &o a & )" a#+e to ma%e h)" o' #eha*)or ( &er"ta &a#+e to them0 @e $a fore"ee the)r rea$t)o " to .o"")#+e $o(r"e" of a$t)o a & )" a#+e to ta%e the)r att)t(&e" ) to a$$o( t0
@(ma @(ma

To. To.ma ma a!eme a!eme tt M)&&+e M)&&+e ma ma a!eme a!eme tt Lo' Lo'+e*e+ +e*e+ma ma a!eme a!eme tt

Co Co $e.t(a+ $e.t(a+

Te$h Te$h )$a+ )$a+ 5)!0 107 Ma a!er)a+ S%)++"

I had to let her know what I was thinking

1. By Yegetaneh T