Industrial Management

Industrial Management

DM

INDUSTRIAL MANAGEMENT HANDOUTS

LECTURE 1

INTRODUCTION

FUNCTIONS OF MANAGEMENT AND LEVELS OF MANAGEMENT

EVOLUTION OF THE INDUSTRIAL MANAGEMENT
AN ANALYSIS OF THE EMERGENCE OF THE INDUSTRIAL UNIT
STAGES OF EVOLUTION OF INDUSTRIAL MANAGEMENT

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INTRODUCTION
FUNCTIONS OF MANAGEMENT AND LEVELS OF MANAGEMENT
Management supposes directing an organization in its way to become
profitable and competitive. It represents a dynamic endeavor carried out amid
constantly changing factors, both internal and external to the organization.
Management takes place in all economic functions of an industrial unit: research &
development, production (operations), human resources, finance &accounting
and commercial.
Management represents the process used to accomplish organizational goals
through planning, organizing, coordinating, leading, and controlling people and
other organizational resources. They are known as the primary functions of
management.
Planning includes anticipating trends and determining the best strategies and
tactics to achieve organizational objectives. The trend today is to have planning
teams to help monitor the environment, find business opportunities, and watch for
challenges.
Planning involves:
Setting organizational goals
Developing strategies and tactics to achieve those goals (through strategic
planning, tactical planning, operational planning and contingency planning)
Determining resources needed
Setting precise standards
A common planning tool is represented by SWOT analysis (see figure 1). It is
used to analyze an organizations strengths, weaknesses, opportunities, and
threats. The company begins such a process with an analysis of the business
environment in general. Then it identifies strengths and weaknesses. These are
internal to the firm and can be studied relatively easily. Finally, as a result of the
environmental analysis, it identifies opportunities and threats that are external to the
firm.
Potential STRENGTHS (Internal)
Core competencies in key areas
An acknowledged market leader
Cost advantages
Better advertising campaigns

Potential OPPORTUNITIES (External)

Ability to serve additional customer groups
Expand product lines
Falling trade barriers in attractive foreign markets
Ability to grow due to increases in market
demand

Potential WEAKNESSES (Internal)

No clear strategic direction
Obsolete facilities
Lack of managerial depth and
talent
Weak market image

Potential THREATS (External)

Entry of lower-cost foreign
competitors
Rising sales of substitute products
Costly regulatory requirements
Vulnerability to recession

Figure 1. SWOT analysis.

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Organizing includes resource management, designing the structure of the

organization (including organization chart) and creating conditions and systems in
which everyone and everything work together to achieve the organizations
objectives.
Organizing involves:
Allocating resources
Preparing a structure (organization chart) showing lines of authority and
responsibility
Assigning tasks and establishing procedures for accomplishing goals
Recruiting, selecting, training, and developing employees
An organization chart is a visual device that shows relationships among
people and divides the organizations work (is a graphical representation of the
company structure). The corporate hierarchy may include top, middle, and first-line
managers and these are known as the levels of management (see figure 2)

Top level
management

President
Chancellor
Chief Executive Officer

Middle level management

Division heads
Branch managers
Deans

Lower level management (suvervisory)

First-Line managers

Section heads
Supervisors
Foremen

Figure 2. The management pyramid: levels of management.

There are different manners to portray an organization chart of an industrial
unit. Two of the most usual are functional and departmental charts and are presented
next (see figure 3).

Industrial Management

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Person or group of persons

OWNER
Administrative Council

Production workshops, sections, etc.

Figure 3. a. A functional organizational chart of a large industrial unit

OWNER

Person or group of persons

Administrative Council

Personnel

Personnel

Supplies

Supplies

Sales

Sales

Accounting

Accounting

Administrative

Administrative

Product A

Marketing

Division X

Quality Control

....

Finance

Division A

Research & Development

General Manager

Product X

Figure 3. b.The divizion chart of a large industrial unit

Accounting

Finance

Marketing

Head of
Economic Activities

Invoices

Sales

Head of
Commercial
Activities

Supply

Automation

Electric power

Steam (heat)

Head of
Maintenance

Quality
Control

Design activities

Production programming

Head of
production
Work, production organizing

Administrative

Personnel

Planning & Development

General Manager

Industrial Management

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Coordinating supposes synchronization of people, processes, and

information within organizations in order to maximize productivity. It relies on how
actors can work together harmoniously. Pure coordination processes include
identifying goals, ordering activities, assigning activities to actors
(scheduling), allocating resources, and synchronizing activities. Group decision
making is a second class of co-ordination processes and is about making collective
decisions. This includes proposing alternatives, evaluating alternatives, and
making choices. Communication is another class of co-ordination processes and is
about establishing common languages, routing information flows, and diffusing
information within an organisation. Finally, the last class of co-ordination
processes is about the perception of common objects. It is important that actors
see objects (products, customers, plans, etc.) in the same way so that any decisions
made are not based on different interpretations of the facts. This is where standards,
training, or the use of shared databases come into play.
Coordinating involves:
Direct supervision: how a person is made responsible for the work of another,
and how a person manages this relation, are the prime responsibilities of a
line manager.
Standardization of work processes.
Standardization of outputs: this is done through the planning function, where
levels of outputs (quantities, costs, quality levels) are set.
Standardization by skills and knowledge: when workers are given specific
roles that use their specific (and standardized) skills.
Leading supposes creating a vision for the organization and communicating,
guiding, training, coaching, and motivating others to work effectively to achieve the
organizations objectives. The trend is to empower employees, giving them as much
freedom as possible to become self-directed and self-motivated. Empowerment
means giving employees the authority (the right to make a decision without
consulting the manager) and responsibility (the requirement to accept the
consequences of ones actions) to respond quickly to customer requests . This means
that more planning, organizing, and controlling are being delegated to lower-level
managers.
This function was once known as directing, meaning telling employees exactly
what to do. In many smaller firms, that is still the role of managers. In most large
modern firms, however, managers no longer tell people exactly what to do because
knowledge workers often know how to do their jobs better than the manager.
Nevertheless, leadership is necessary to keep employees focused on the right tasks
at the right time along with training, coaching, motivating, and the other leadership
tasks.
Leading involves:
Guiding and motivating employees to work effectively to accomplish
organizational objectives.
Giving assignments
Explaining routines.
Clarifying policies.
Providing feedback on performance.

Industrial Management

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Controlling involves establishing clear standards to determine whether an

organization is progressing toward its objectives, rewarding people for doing a good
job, and taking corrective action if they are not. Basically, it means measuring
whether what actually occurs meets the organizations goals and seeking new
opportunities.
Controlling involves:
Measuring results against corporate objectives
Monitoring performance relative to standards
Rewarding outstanding performance
Taking corrective action when necessary.
EVOLUTION OF THE INDUSTRIAL MANAGEMENT
Industrial Management deals with the development and improvement of
integrated systems of resources (people, materials - raw materials, energy,
equipment-, money, knowledge, information).
Historical events have shown that crucial shifts in firm organization coincide
with industrial revolutions. Even the factory itself was the result of the First Industrial
Revolution and later, following the Second Industrial Revolution, the large modern
business enterprise appeared by the 1920s.
An analysis of the emergence of the industrial unit
The factory (industrial unit, plant) replaced the system that was based on the
family firm craft-shop. The craft-shop was run by a master craftsman together with
family helpers and apprentices. The entrepreneur owned the raw materials, the
goods in process, the equipments and tools, and outsourced the labor to workers
who usually operated at home. The factory was a new organizational form: it was a
firm, while the putting-out system was a market-like organization based on market
contracts. The main factors characterizing the emergence of a factory are considered
to be:

Technological factor: largely driven by the new technology: new source of

power - steam engine (1789,James Watt)
The technological advances occurred mostly in the following four areas:
o energy (water power, steam engine)
o metallurgy (iron making)
o cotton (cotton spinning, mechanical weaving)
o several industries and services (canals and road building).
The main technological features were a new infrastructure (railways), a new
source of power (steam engine), and new machine tools that led to
expanding trade.

Commercial factor: expanding markets - growing population due to a longer

lifespan gained through the improvement of living conditions (hygiene,
development of medicine).

Financial factor: partner ownership, important investments.

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Stages of evolution of industrial management

1. Empirical management (1650

1850)

2. Scientific approach of the industrial management (1850

War)

1stWorld

3. Humanistic/behavioral approach (between the 2 World Wars)

4. Industrial management as a science (2ndWorld War

present)

Main characteristics
1. small units (workshops, manufactures)
no or slow evolution of technologies and products
the manager is also the sole owner
the managerial process is based on applying the ancestral ideas (formula)
2. large units (factories)
development of many technologies and products
distributive ownership
experimental approach of some management aspects.
For the first time the management process is approached on a quantitative,
rigorous way. This approach called the classic approach has 2 points of view:
Scientific management represented by Fr. W. Taylor (an American
mechanical engineer; Principles of Scientific Management, 1911). This
perspective is concentrated on the problems of lower-level management
dealing with everyday problems of the work force.
The classical organization theory represented by Henri Fayol (a French
mining engineer; Administration industrille et gnrale, 1916). This
perspective is concentrated on the problems of top level management
dealing with everyday problems of managing the entire organization.
Within the administrative activities he identified the most important tasks of a
manager: planning, organizing, commanding and controlling.
3. Humanistic/behavioral approach appeared as a rejection of the scientific
management and has two directions:
The human relations approach has as focal point the human personality,
the work relation between groups of workers. This approach refers to the
manner in which managers interact with subordinates. For the first time
training programs for managers have appeared.
The behavioral science approach considers that an individual is more
complex and they are motivated to work for many reasons in addition to
making money (social relations, social status, etc.)

Industrial Management

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4. This stage is characterized by the use of mathematics and statistics to solve

production & operation problems.
Systems approach: the organization must be viewed as total systems with
each part linked to every other part.
Contingency approach: the correctness of the managerial practice
depends on how it fits the particular situation to which is applied.

Rapid development of new technologies (electronics, nuclear physics)

Development of computers (allow solving of very complex problems).