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CHAPTER 7 MANAGEMENT PRINCIPLES.

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PRINCIPIOS DE ADMINISTRACION

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Enrique Dounce Villanueva.


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CHAPTER 7 MANAGEMENT PRINCIPLES. Its development started approximately in 1880. CHAPTER’S OBJECTIVES At the end of this chapter, the reader will:  Understand the need of human beings to study modern Management principles to successfully carry out the roles he must play throughout his life (in the family, at work, in sports, religious, social, etcetera) and to obtain his satisfactors from the resources existing in his habitat.  Know the different phases that comprise the managerial process as well as the most important techniques used in each of them.  Obtain current criteria to structure a department to appropriately manage the company’s capital resources conservation, striving for continuous improvement in its working procedures.  Get the Basic Concepts for a “Management Manual” and how to write one.  Make generalizations about practices to support the inspection and control functions from a business strategy point of view.  Obtain a practical methodology to train good supervisors who know how to improve their personnel and simplify their work procedures.  Identify selection criteria and computer usage for the company’s capital asset conservation management.  Know the new foundations that support modern businesses, (Vision, Mission, and general objectives).  Verify that the current and mistaken “maintenance” concept is finding its place in the new conservation philosophy.

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Content 7.1 THE WHY OF MANAGEMENT………………………………………………………………………...148 7.1.1 A company’s resources. ..................................................................................................... 149 7.1.2 Human behavior. ................................................................................................................ 150 7.2 MANAGEMENT PROCESS…………………………………………………………………………...154 7.2.1 PLANNING. (Management process first principle).............................................................. 154 7.2.1.1 Objetives. .................................................................................................................... 155 7.2.1.2 Policies. ...................................................................................................................... 155 7.2.1.3 Procedures. ................................................................................................................. 156 7.2.1.4 4 Programs. ................................................................................................................. 158 7.2.1.5 Budgets. ...................................................................................................................... 160 7.2.2 Organization (Management process second principle). ...................................................... 162 7.2.2.1 Positions. ..................................................................................................................... 162 7.2.2.2 Persons. ...................................................................................................................... 165 7.2.2.3 Authority. ..................................................................................................................... 165 7.2.2.4 Responsibility. ............................................................................................................. 167 7.2.3 INTEGRATION. (Management process third principle). .................................................... 167 7.2.3.1 Selection. .................................................................................................................... 167 7.2.3.2 Induction. ..................................................................................................................... 168 7.2.3.3 Training. ...................................................................................................................... 168 7.2.3.4 Development. .............................................................................................................. 168 7.2.4 EXECUTION (Management process fourth principle). ........................................................ 168 7.2.4.1 Motivation. ................................................................................................................... 169 7.2.4.2 Communicate. ............................................................................................................. 170 7.2.4.3 Direct. .......................................................................................................................... 173 7.2.4.4 Coordinate................................................................................................................... 176 7.2.5 Control (Management process fifth principle). .................................................................... 177 7.3 THE COMPANY AS A SYSTEM………………………………………………………………………186

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7.1 THE WHY OF MANAGEMENT. Man’s most important activity, at World level, is doubtlessly, to manage rationally the resources existing in his habitat, to avoid its rapid destruction and achieve an appropriate human evolution. We understand by rational management the creation and direction of companies that are true sources of attention for human needs, in which man can find the psychic, and physical satisfactors that he needs to live in harmony with the system. An industry thus considered must be comprised by human teams in which every member is interested in achieving synergic results in the interrelation of his work with that of his team mates; and, in turn, the set of groups will set up a great team, which will then set up another, and so on, and so forth, until they finally form the company. It must be structured as a great system made up of thousands of subsystems, in which each of the million elements that comprise it would be performing within the same environment to obtain the product which when it is turned into a system (see topic 3.1), it will become a satisfactor for the user. Within this context, from the top Management to the last man, will all be aware that they are working for the integral development of humanity, and not only to make the product manufactured in their company. From this point of view, we can deduct that if there were many businesses of this type, they would be creating the already mentioned psychic and physical satisfactors, and, as a final result, we would achieve world harmony. Nevertheless, even though this is utopian, it is useful to regard it as a strategic objective so that we can work towards something that in the end will give us hope and a desire to fight to achieve it. This simple fact will allow us to live with more satisfactions and work towards its achievement, at some future date, with the objective of finding solutions so that men can live harmoniously and striving towards their progressive evolution. Let us briefly study how Management was born and evolved up to the present (See topic 4.1). Let us return our thoughts to 1880, when World industry was comprised of only rustic businesses, with bourgeois managers of rustic origin, and laborers as slaves. From the growth of the bourgeois interest in owning their company, there was, at World level, an “industrial platform” permeated by empiricism for Business Management. That is, the bourgeois wanted to acquire a factory, whether producing cloth, shoes, etcetera: the seller of the company, himself a “Rustic-Entrepreneur” would instruct them in everything in detail regarding work procedures, machine and tool design and construction, their operation, “personnel management”, etcetera, thus creating the afore mentioned management chaos. It was not until 1911 when Frederick W. Taylor published his book “Scientific Management Principles and Methodology”, where he captured all the knowledge he had gained during his working life, thus living rise to rationality in management from a scientific approach, since he guided the solution of industrial problems with the application of observation and measurement. A few years later, and without any relation within them, French engineer and Business Manager, Henry Fayol created in France a collegiate Group formed by cultured entrepreneurs that studied how to increase efficiency in both industrial and any other type of company. They concluded that this could be achieved through the arrangement of the organization’s components (departments) and of its interrelationship (functioning). Fayol published his best work in

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1916, “Administratión Industrielle et Generale” in which he describes Business Management as an abstract process comprised by five general principles (Planning, organization, Direction, Coordination, and Control) related within themselves in order to achieve their objectives. THE MANAGEMENT PROCESS Henry Fayol (1916) Planning Organization Direction Coordination Control Figure 7.1 H. Fayol’s Management process general principles In few years, these were combined with ideas from characters such as Charles Babbage, Walter Andrew Shewhart, William Edwards Deming, Joseph Moses Juran, Seiichi Nakajima, Kaouru Ishikawa, among others. In this period, the human being was considered as another resource that should be forced to work for a minimum wage and in the way decided by his bosses. However, the work about human behavior developed by, among others, Elton Mayo with his experiments in Hawthorne, Douglas McGregor with his X & Y theory, and Abraham Maslow and his human need hierarchy. All of these provided the human resource of an important value that we will study later. . 7.1.1 A company’s resources. A dictionary definition says that “resources are the set of elements available to solve a need or carry out a business”. From an administrative approach, these are grouped in three general types: Technical, Physical, and Human, all of them immersed in the resource time, fixed for all companies (24 hours a day), and not renewable but which, in the best of cases can be used appropriately, but which is positively or negatively interrelated with the other resources.

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Figure 7. 2 A company’s resources (Fixed Assets) Technical resources: are those that do not have their own behavior and are intangible, since they deal with human ideas established to define how to do things, the so awaited for technology. Physical resources: these do not have a voluntary behavior either but are tangible such as machines and tools, money, the products manufactured by the company, and the materials used for production. Human resources: we are talking about human beings, the only resource with a will and thus able to appropriately manage themselves and the rest of the resources required performing the job. He is formed by biologic, psychic, and social characteristics, and he is also able to act by thought and choice. Such attributes make it feasible for man to be the only resource that besides improving the other resources, can improve himself, so we can conclude that he has a very important place in the organization. Let us study more closely human behavior 7.1.2 Human behavior. British psychologist, William MacDougal (1871-1938) in his book “The study of behavior” (1912), proponed the idea that human behavior is caused by the self and is not caused by vital phenomena that obey the mechanical laws for inorganic bodies, as was believed at the time. The above awakened a lot of interest about the study of human behavior, which can be verified through the works of the following personalities. Charles Robert Darwin (1809-1982) British naturalist whose studies were centered in the natural sciences, he joined, as a naturalist, the five year expedition (1831 – 1836) done by royal British navy brigantine H.M.S. Beagle which traveled through South America, Pacific Islands, Australia, New Zealand, and the south of Africa. In this trip, he collected a large amount of material that allowed him, on his return to England, to work in his “Evolution theory”, which 20 years later, Darwin published as “The origin of the species” (November 24, 1859), where he states that given time, species evolve through Copyright ©


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natural selection and only the fittest survive. The above leads us to think that from the scientific, systemic, and ecologic approaches, our solar system is telling us that evolution is a natural characteristic, as is the existence of entropy in systems, so that human beings are obligated to study in which way can we help the universal system. George Elton Mayo (1880-1949) Australian psychologist. Was a professor at Harvard Business School. Mayo researched, with a group of colleagues (1927-1932) in Chicago’s company “Electric’s Hawthorne Works” the relation existing between productivity and the worker’s satisfaction where he succeeded achieving the verification that it was necessary to “humanize, democratize, and free management from rigid and mechanical concepts”. The above supported in industrial Management analysis, the creation of three “forces” that try to explain the reasons behind human behavior: Psychoanalysis, Behavior, and Human psychology. 

Psychoanalysis was developed in Vienna, Austria by psychologist Sigmund Freud (1856 – 1939) who, in 1900 published his book “The interpretation of dreams” creating a scientific approach to understand human personality. His results have been controversial due to the fact that all of Freud’s studies were based in human beings generally sick. Behaviorism was developed in USA by John Broadus Watson (1878 – 1958), an American psychologist who in 1913 published an article “Psychology from a behavioral point of view” where he states that behavior in animals (rational or not) can be modified through the managing of stimulus and response. The findings in these studies are very useful to discern human behavior regarding the care of man’s habitat. Humanistic psychology was developed in the US by Abraham Harold Maslow (19081970), American psychologist that in 1934 proposed his theory “Human needs hierarchy” in which he states that human beings have a basic tendency towards mental health. This hypothesis provides important foundations to consider that a person (moral or physical) that has worked towards his self fulfillment finds it when he knows in depth his inner structure.

Stephen R. Covey (1932-¿?). American, Harvard’s Business Administration Ph.D., author of the book “Seven habits for highly effective people” in 1989, which has sold over 15 million copies to date. His thesis is that management and leadership must be based on principles, and that as humans we have noble thoughts and actions, and we can influence other persons looking for the common good. Covey states that when man is born, he is the most unprotected being in the universe. One can assure that he is completely Dependent in the environment that surrounds him, and that thanks to his effort to acquire habits to manage his life according to a creative idea, he can modulate the Temperament with which he was born by creating, throughout his life, appropriate habits in order to obtain each day a better character, which will allow him to

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move from a dependent to an independent stage. Covey thus recommends that each person, while traveling from childhood to maturity, should create three personal performance habits, all of them based in principles. These three habits are: 1. - Be proactive, (Do things per own initiative) 2. - Start with a goal in mind (Think about the objective of the action) 3. - First things first (All actions have a natural order of performance) If we practice these actions during childhood and youth, it is certain that as an adult, we will perform them habitually and without any effort, from which we will obtain true satisfaction. Reaching the independence level will drive us to do better work each time. But these actions require much and varied human quality, and thus, due to our desire to be more useful to society every time, we will see ourselves fighting for our interdependence, that is, the interaction with other persons at our same level to achieve performing great works. To reach an interdependent level, Covey recommends creating another three habits, which are: 4. - Always think Win-Win. Our interrelation should be mutually satisfactory. 5. - Try to understand first and be understood later. Diagnose first, express your opinion later. 6. - Synergize. The interdependency result is greater than the sum of its partial results. When we reach this level, we can live our life in full because our achievements turned into satisfactors will be used by world society and from which we will be receiving the corresponding “feedback”. Now, we only need to create a seventh habit to avoid its decline and to maintain it in us and in our group. Covey calls this habit: 7. - Sharpen the saw. Improve your Tools (habits) continually in order to be coherent with that moment’s reality.

Daniel Goleman (1947-¿?). American, Ph.D. in psychology from Harvard, where he also taught psychology. In 1995, Coleman published his first book “Emotional Intelligence” in which he explains the period’s findings about the brain’s emotional architecture which affects genetic inheritance that provides emotional features which determine our temperament which, as the person lives and interrelates, he/she changes and as a result builds his/her character, which in turn is better or worst depending on how the person has handled his/her emotions. The above fits with Maslow’s and Covey’s thoughts in the sense that human beings are immersed in a constant physical and psychic evolution.

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Luis Castañeda Martinez (1943-¿?). Mexican, Ph.D. in Business Administration, currently CEO for Panorama Publishers. He is an International lecturer on Business, and personal development topics. He has obtained for his works the Yicatlicutli award, from the American Chamber of Commerce, and the National Creativity Award from the Mexican Creativity Association, A.C. He has written 63 books about personal development and business improvement. One of his books “A Life Plan for the Young”, presented in 2001 has been reprinted over 30 times. Its objective is to make young persons aware that he/she is the architect of his/her own destiny, and he/she is responsible for the direction of his/her life. He also shows what the Vision is (who am I), and how to obtain it and how, based on the Vision, he/she can determine his/her Mission (who and how can I serve), and decide on which Principles he/she should rely and from them define his/her Values and Objectives. Summary Every human being, regardless of the his/her character, he is always looking for his satisfactors but it is necessary that the leader always consider the following premises: 1. All persons are different. 2. Every behavior has a cause. 3. Every behavior pursues a goal. Let us now see our next topic:

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7.2 MANAGEMENT PROCESS. The Management process, through it evolution from several trends of thought, has become a very successful system at World level, and has become a behavior guide choosing the most appropriate school of thought. In our book, we will use Koonts & O’Donnell’s Management process, developed in 1955, and in our opinion, it has made a trustworthy evolution, as shown through its continuous and improved re-editions.

Figure 7.4 Koonts & O’Donnell’s management process general principles Let us analyze these general principles: 7.2.1 PLANNING. (Management process first principle). There are several definitions for planning, but they mostly use the same criteria. However, we relieve that Agustin Reyes Ponce’s definition is very clear: “Planning consists in determining a concrete course of action to follow, establishing its guiding principles, the sequence of operations to perform it, and ascertaining the time and numbers required for its execution”, Thus, to plan, we need to establish the objective first; that is, what we want to achieve with our actions. Next, we need to issue the policies, those statements that serve as guidelines to ease Management tasks. The following step is to determine the procedure that is to be followed, from which we can define the interrelation of resources to be used, including time; these in turn, will provide us with programs. Finally, we can make budgets so that we can know in advance, if our performance is according to plan. Some of these budgets will be useful to us in the last stage of the management process (control), as comparison points for our “control indicators”. Let us analyze each of the main elements of planning (Objectives, Policies, Procedures, Programs, and Budgets).

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7.2.1.1 Objetives. The set of a goal, plus the corresponding action, and the time required to achieve it is called an objective. This is the final result that we want to reach. The objective guides the leader’s efforts, provides a clear outlook, and makes it easier to predict actions. During the planning meetings, the objective must be perfectly discussed and understood. Besides stating the objective in writing to all participants, they must be absolutely convinced that it is necessary to reach it. An objective’s characteristics are that it must present a challenge, that it can be divided, that it can be measured, that it can be communicated, and that it be specific.

Figure 7.5 The parts that form an objective: goal, action, and time. Examples of objectives:  Decrease in 5% work accidents by the end of next June.  Increase yearly production in 7% over last year’s production.  Decrease delivery time in 15% in comparison to last years, in three months time, starting next January. 7.2.1.2 Policies. “Are statements or concepts that serve as a guide for a manager’s physical and mental actions; they indicate broad limits that allow him to use his initiative and judgment” George R. Terry They are rules that direct managerial actions, which can be written, verbal, or simply understood: Its importance lies in the guidance they provide for Management to achieve the objective within the limits imposed by the company’s resources considered during planning

Figure 7.6 Policies are managerial guidelines. They also allow a better authority delegation since established and known policies permit supervisors, managers, or leaders at any level to regulate their criteria, to make it easier to

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take decisions, since policies show, though in general terms, the limits to be be abided by during their performance. There are different types of policies, according to the operation in which they will be applied (sales, production, finance, etc.). All of them are usually broad and dynamic rules. It is necessary that there be written policies in any Business, although there are special cases in which they must be implicit, such as those rules that apply to delicate or confidential matters. Management decides which policies are printed in the manual and which must be implicit (know by a select number of participants). Examples of policies:  All sales must be paid in cash only.  Spare parts purchases for conservation operations greater than six thousand dollars must be authorized by the General Director.  No extra work time is allowed. Production increases must be achieved through methods simplification, motivating incentives or increase in part-time employees. 7.2.1.3 Procedures. Procedures are a series of chronologically interrelated activities that comprise a way of performing a job. During planning, and based on the objective, the different tasks to be performed are studied in order to coordinate and link each of their parts. This analysis must be thorough, detailed, and synthesized, so that simple procedures are implemented, thus making it easier for them to become a routine. This study is to be done about specific facts, without assumptions, or ambiguities, and considering, resides the objective, the policies established, the human and material resources available, and the kind of work to be done. It is necessary to use and study in depth the procedures, once and again, to achieve their maximum simplification. Methods correspond to a part of a procedure and show the way to perform a specific task, generally by one man. When we want to improve a procedure, it is necessary to study each one of its methods, to try to eliminate, substitute or modify them.

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ELECTRIC SUBSTATIONS MAINTENANCE CORP. Reforma N° 107 Monterrey, N.L.

Industrial Engineering Department PROCEDURE TO REPAIR ELECTRIC TRANSFORMERS

PROCESS Performs initial tests and fills F.128 reporting the sate of the transformer; records for control Extracts oil, removes caps, lets winding drain, and sends to cleaning. Washes box and windings, filters oil, and sends set to winding shop. Checks windings, determines damage, calculates, winds, and sends to drying. Sets oven, watches temperature (80°C) does periodic tests with megger until OK insulation is obtained, returns to winding. Assembles the set, test electrically, and sends to filtering shop. Fills up oil in transformer, does hermetic tests, does electricity tests, cleans set and sends to office Writes invoice and sends it with transformer to client.

Prepared by Industrial Engineering

Receiving office

Dismantling shop

Cleaning and filtering shop

Winding shop

Drying shop

                                        Checked by Procedures Head

Accepted by Ind. Eng. Dept. Head

Figure 7.7 Example of a procedure. As a corollary of above, we can conclude that there must be procedure manuals, printed and perfectly explained in every company, so that the personnel that will put them into practice knows them in depth, and in case of questions, can access the necessary information source. If there are only inadequate procedures, it is preferable to construct with them the required manual, than to wait until its correction is feasible. That will come more quickly and easily when the current manual is studied, since it is logical that there is some experience about it. This is not true when there are only implicit procedures. In such case, the Business suffers a chaos caused by mistaken ideas in each chief, supervisor, etcetera, when applying procedures that they assume are better, and that change overtime, even in the mind of the person that “designed” them as the person acquires new experiences and knowledge.

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7.2.1.4 4 Programs. Programs are list or graphs clearly showing the interrelation between human, physical, and technical resources, linked in time (Figure 7.6). They provide a behavioral line to be followed to reach the objective. They also show who should perform each task, when the task is to be started and when to finish it, thus making it easier to coordinate the resources by comparing them to the needs to be covered. Programs indicate:  Resources to be used.  Actions to be taken.  Their sequence.  Who will perform them.  When they will be started and finished.  The critical points in their performance.

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Electrical Substation Maintenance Corp. Reforma N° 107. Monterrey, N.L.

Transformers department – Dismantling shop

José Sánchez

136

Industrial Textil

IND.

José Sánchez

18

Manuel, S.A.

COM.

José Sánchez

29

El Apagón, S.A.

COM.

José Sánchez

121

Ladrillera MEX

IND.

José Sánchez

1396

Lada, S.A.

COM.

José Sánchez

16

Harina Soir

IND.

José Sánchez

21

Gutiérrez y Cía.

COM.

José Sánchez

135

Sr. J. López R.

RES.

José Sánchez

122

Lara, S.A.

COM.

José Sánchez

137

Barbados y Cía.

IND.

José Sánchez

30

Sr. Ramón Sánchez

RES.

José Sánchez

22

Telefónica Sur

IND.

José Sánchez

123

Med. y Medicinas.

COM.

José Sánchez

130

Celulosas y solv.

IND.

José Sánchez

23

Sr. Samuel Cárdenas

RES.

José Sánchez

134

Focos y alumbrado

IND.

José Sánchez

40

Bat y accesorios

IND.

Programmed by Shop’s Head

Approved by Winding Supervisor

Figure 7.8 8 Example of a work program

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Order No.

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MONTHLY WORK PROGRAM


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Programs are a result of planning and they will be more valuable and exact as long as it is done carefully. Good programs can not be obtained if they are not based on a perfectly weighed planning. Inadequate programs will behave in a circumstantial manner, and thus become useless. It is clear that there are not programs that do not change, but it is also true that the more detailed that the planning is, the programs will be more stable and secure, and will not require frequent revisions, thus simplifying many control tasks. 7.2.1.5 Budgets. Once we have done our programs, we can then presuppose the resources we need: for example, how many and what type of employees we need for a project; the type and quality of resources to be used, their cost, etcetera. We can presuppose with a high degree of certainty the different events that will take place, many of which may be critical. Budgets are shown in specially designed formats that inform us about the requirements or future results to which we are supposed to reach. In summary, budgets are done based in the programs resulting form planning, and can be expressed in different units, not exclusively in money terms; thus, there are labor budgets, material budgets, overtime budgets, sales, production budgets, and etcetera. . Budgets are done in both the general, and the specific type, and determine previously in quantitative, as well as qualitative terms, the origin and distribution of the company’s resources, in a specific period, showing Cost-Profit expected results.

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Figure 7.7 Example of a procedure Electric Substations Maintenance Corp. Budgets are required for control since with them, we can compare what we expected with what we obtained. We can also know the deviation rate to apply the corrective measures that are deemed necessary (see figures 7.7 and 7.8).

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7.2.2 Organization (Management process second principle). To organize is to structure, form, and relate the parts of a previously planned complex, distributing the company’s resources (human, physical, and technical) in such a way that it can operate according to what was anticipated in the plan. The organization stage is started by defining the work activities and all the details about each position in the corresponding documents (job descriptions). Then, the personal characteristics required by each person in accordance to the position he/she is to perform are defined: and next, we need to determine the authority to be delegated, and, lastly, the degree of responsibility to be shared with the rest of his/her work team. Let us analyze more closely the general functions that comprise the principle of organization, which are: Positions, Man, Authority, and Responsibility. .

7.2.2.1 Positions. We need to develop a list of activities that are to be performed, dividing them in functional similarities; we need to determine an estimate of the man-hours for each team, in order to decide how many positions are required in that category (one for each person). Next we perform a job analysis to find out not only the tasks that belong to each job, but also their generic description, the degree of ability (training, experience, skill), effort (physical and mental), responsibility (own and others), and finally, the work conditions for the persons performing those jobs. This analysis creates a document called Job description, which will help us to do a good personnel selection, training and development programs, and job evaluation, which will, in turn, support our managerial activities. Because of its importance, figure 7.9 shows an example of a Job Description.

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Electric Substation Conservation Corp. Reforma 107

Monterrey, N. L.

Job description Position:

B shop chief

Code:

BSC

Location:

Winding shop

Reports to

Supervisor in Transformer Department.

Analysis date: June 20, _____ Updated on:: June 7, _____ Done by:

Industrial Engineering Manager

Checked by:

Personnel Department Manager

Accepted by:

Chief of Transformer Department

Generic description Does receiving and delivery tests for transformers received and repaired in shop, estimating, if necessary, the windings to substitute and supervising from six to eight winding operators. Continuous tasks a) Record the arrival and exit of transformers in format F-128, signing as responsible person. b) Supervise the winding Jobs planning and getting from warehouse the materials and spares needed for each job. c) Verify, a day before, each operator’s work program, and supervise the quality and quantity of his/her work during its execution. Weekly tasks

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a) Inform office worked time data for payment purposes. b) Sign payroll authorizing incentive or overtime. c) Plan next week’s work for personnel under him, in order to insure work continuity. d) Do weekly program based on plan. Monthly operations a) Check the condition of measurement equipment in his area and verify exactness. b) Check winding machines, drying oven, etc., and report condition in format F-381, to the Conservation Department. c) Find out the necessary information to fill format F-1B “Report on work progress” and send it to the Winding department. Semester operations a)

Evaluate his personnel and fill form F-112, “Personnel Evaluation” as specified, and send it to the Winding department. Review and prepare his creative objectives for next semester, and have them ready when requested (June and December, each year).

Intermittent operations a)

Write memorandums to Winding Department Head, Personnel Head, and Quality Control Head in order to request or report about work matters

b)

Comply with orders and recommendations of his immediate supervisor.

Job specifications A. Abilities 1) Education. Requires a minimum of junior high education and electric technician. He should also know Management principles, programming techniques, and be fully cognizant about his shop’s organization and the Winding Department, to which he belongs. He should know Warehouse activities and procedures about materials and spare parts supply. Fully know document procedures that comprise a work order, from its receipt in the department until the repaired transformer is delivered to the client. 2) Experience- Requires at least a year in the shop to fully perform his tasks. 3) Skill. The Skill required planning, program and achieving results from the operators under his Copyright ©


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supervision (six). B. Effort 1. Physical. Practically none, since only occasionally will he need help raise the transformers with the shop’s forklift. 2. Mental. Frequent and in depth attention to his own tasks, as well as the operators under him. He must guide and attend to his personnel when they request it or he deems it necessary. C. Responsibility 1. For his and the personnel under him tasks. A mistake in the calculations for winding or quality tests can cause thousands of pesos financial losses. 2. For the programming he does. A failure in this area can cause losses in the hundreds of pesos. D. Work conditions 1. Surrounding environment. Average temperature is warm, the place is fairly comfortable, and the noise is a little irritating. 2. Position. He performs his work in variable conditions, standing up, sitting down, walking, and in a middle size area. Risks. He sometimes work with an Electric current of up to 13 000 volts which, in case of accident, can cause death. Figure 7.9 Example of a job description. 7.2.2.2 Persons. Once the job characteristics for the different positions are known in retail, then, we proceed to describe the profile for the most appropriate person to fill it, because we must know which human attributes are positive, and which are negative for the position. At this moment, we should consider the personality or characteristics the future employee should have; that is, his thoughts, feelings, habits, and attitudes. Therefore, it is useful to get, through personnel specialized in human behavior, the ideal description that will be used for personnel selection. 7.2.2.3 Authority. Authority in physical persons is the ability to obtain action from third parties and in moral persons (companies) it is defined as the right for a position to use with discretion his power to make decisions that will positively or negatively affect other persons. There are two types of authority in a company, Line which applies vertically and which makes it Copyright Š


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possible the efficient and efficacious achievement of the company’s objectives, and the support called staff authority, which applies horizontally, and its mission is to aid the General Director in the appropriate flow of specialized communication between the different Line departments. 7.2.2.3.1 Line authority. For this type of authority, the upper position has it over all its subordinate positions. For example, the General Director has line authority over all the company’s departments, and generally delegates it by functions and in a vertical way downwards; see figure 7.10 GENERAL DIRECTOR

SALES

PRODUCTION

FINANCE

MANAGER

MANAGER

MANAGER

NATL. SALES

INTERNATL

PRODUCTION

CONSERVATION

PLANNING

ACCOUNTING

DEPT.

SALES DEPT.

DEPT

DEPT.

DEPT.

DEPT.

Figure 7.10 Example for Line authority The Sales department has Line authority over its group but does not have it over any level of the rest of the department. The same happens with the Production and Finance departments: each fulfills its own objectives. 7.2.2.3.2 Staff Authority. This type of authority is needed to provide advice to the line personnel to solve problems which require some kind of specialized knowledge. Figure 7.11 shows the Staff subordinated directly to the General Director (full line) and applying its support authority (dotted line) to all the teams that require it (Managers, Departments, and etcetera).

Figure 7.11 Example for Staff authority Authority should not always be integrated in the same way for any position: for example, a line head need a greater formal authority degree than a technical advisor, who, by natural

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reason, will support his orders basing them mainly in a high degree of technical and charismatic authority. Therefore, it is required that the appropriate authority be defined and delegated for each of these positions so that they work correctly. During the “execution” stage, the superior will delegate this authority according to the subordinate’s capability to exert it with justice. If the Superior detects deficiencies in his subordinate and thus cannot delegate the needed authority, it is his responsibility to facilitate, and many times, to force, the employees training until he is capable to exert all the authority he needs. Once this is achieved, automatically the subordinates accept the responsibility implied in the authority they exert. We should take it as an axiom that authority must be delegated. A supervisor, manager, or director can give reasonable orders if he is sure that the subordinate has the necessary resources to fulfill them; physical, technical, and personal resources; that is, resides having the personnel, tools, vehicles, or materials. He must also possess the knowledge and the abilities required by his position and to be motivated enough in order to join the “want to do” with the “can do”. 7.2.2.4 Responsibility. At this stage of the Management process, we must also analyze the degree of responsibility that the position’s owner has when exerting his authority. We call responsibility the obligation a person has to respond before his superiors for his performance while doing the tasks inherent in his position. The responsibility can not be delegated like authority, it can only be shared. That is, the supervisor must delegate authority to a subordinate but that does not take away his responsibility before his superior for the good or bad use his subordinate does with the authority that was delegated to him

7.2.3 INTEGRATION. (Management process third principle). To integrate means to constitute a whole with the company’s human resources so that they know in depth the technical and physical resources the company has. Thus, it is necessary to define which persons soul fill each position and train him to obtain truly qualified human resources, that comply, not only fulfilling the position requirements, but also his personal expectations or needs, psychic, as well as physical. The company can achieve the above by taking the following steps: Select the ideal personnel, Induct him into the company’s knowledge, train him for the work he will be doing, and constantly develop him during his stay in the company. Let us explain what these four integration activities mean. 7.2.3.1 Selection. It refers to the analysis done for both internal and external personnel regarding the individual characteristics they must have (knowledge, abilities, experiences, and attitudes) to perform

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the position’s functions; all of them in accordance with the characteristics mentioned in the Job description manual (see topic 7.4). At this moment, the selected candidates are recruited and go to the following phase. 7.2.3.2 Induction. Each new person in a position must find out in depth about the products manufactured by the company, about his work environment, who his boss will be, and who are to be his closest fellow employees, what are pay day and place of payment, among other things. During his first day of work, he is invited to do a short round through the company’s facilities, talk to different employees, see videos, magazines, and manuals referring to the company’s internal policies, principles, rules, norms, its products, clients, and etcetera. According to the company’s size, this stage can last a few hours to several days. 7.2.3.3 Training. In the next step, the personnel are subjected to an integral training plan, in the site and the work tools that he will perform in the future. This will prepare them to perform the activities pertaining to their position in the expected way. Usually, this training is done by his/her own supervisor or a capable and efficient operator who knows the job in depth. 7.2.3.4 Development. Besides being impossible, to a position holder, - or to the company – it is not advantageous tor him/her to remain all his working life in the same position, but he/she will try to evolve, better himself, learn something new, etcetera, due to his temperament’s own needs. For this reason, companies in Mexico, not only for their own advantage, but also because it is legally required, must provide development courses for its personnel , to prepare them for positions above the jobs they already hold. 7.2.4 EXECUTION (Management process fourth principle). To execute means “to make a thing act”, thus, from a managerial point of view, we can say that execution is a managerial action (by a manager or supervisor) so that his subordinates work towards achieving the objectives established in planning, structured in the organization, and learned during integration. If we take a retrospective overview from the point in which we started planning up to this point of time, and considering everything we have studied so far, we would have a perfectly planned, organized entity, with all its human resources already integrated to it, so that now we only need to make this entity act so that it will enter its execution stage. Let us remember that the most important resource is man. A good manager or administrator will apply his knowledge to insure that his subordinates are motivated, that there is an appropriate Communications to be able to direct their efforts in an adequate way, by obtaining a good coordination for his human resources team. The execution principle is comprised by the following four steps: Motivate, Communicate, Direct, and Coordinate. Let us see what these four execution activities mean.

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7.2.4.1 Motivation. We refer to the feelings or internal impulses of a human being that direct his organism to achieve goals, that, at a given moment, he is obligated to reach: for example, avoid hunger, heat, cold, and etcetera. For this subtopic, we will lean on American psychologist Abraham Harold Maslow’s theory, proposed in 1934, “Human needs hierarchy”. Abraham Maslow’s postulates regarding human needs state that man, regardless of race, gender, or culture, his true internal nature is comprised by two types of general needs, Physical and Psychic. Let us analyze each of them: 7.2.4.1.1 Physical needs. Its characteristic is that they are not motivational; that is, once they have been attended to in a way the individual deems it as enough, this need disappears so that he does not feel any compulsion until it is present again. As men, we take care mainly for our physical survival, so any need that represents it is given priority before any other needs (breathe, eat, drink, sex, and dream). If at any time we really lack completely of any of these physiological needs, we will leave any other need unattended to be able to obtain the corresponding satisfactor. It will not be until we feel that the need has been satisfied to a degree we feel sufficient, and then we will start attending the next need in the compulsive order of priorities. That is, we will be, all the time, ceaselessly searching this type of satisfactors. Once we have satisfied relatively our physiological need, then our worry to satisfy our security needs start- These are also physical type Basic need and are caused by the Desire to feel protected, for not being afraid or our surroundings, the need for our universe to be stable, predictable, and, up to a point, have a routine, for example, the cave or fire for prehistoric man or the strong company for modern man. 7.2.4.1.2 Psychic needs. The need to belong or social need is the first psychic need and is structured by our natural desire to live in groups, to relate to other human beings, that the group or groups we are interested in consider us as part of them. We usually look for them once we reach a level we consider the minimum physical needs satisfactory (physiologic and security). It is considered motivational because we are attending it and we find satisfaction in it. This causes an eagerness to indefinitely continue to relate, and creating new groups or attending those groups we already belong to. Self esteem needs are manifested in us through the recognition and affection from others. We know that, ever since there is a man, we are always looping that our opinions and acts be accepted by others. This is also a motivational need because even though we may have

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affection, recognition, and acceptance, we will keep on working on it, so as not to loose what we have obtained and to get more. Self actualization needs are caused because, being human beings, we are always curious about our surroundings; we want to learn new things, and when we achieve something we think is difficult to do, we obtain a satisfaction that invites us to keep acting in a similar way. This is also a motivational need. Psychic needs will always be present for man, even though they are attended to. Figure 7.12 shows “Maslow’s hierarchy of needs” and is a great help in our understanding of this topic SELF ACTUALIZATION

ESTEEM

LOVE/ BELONGING

SAFETY

• This stage is reached when all the other levels have been fulfilled, up to a point.

•Self – respect, confidence, success, etc.

•Friendship, love, and respect for others.

•Security of: body, employment, resources, health, property, etc.

PSYCHOLOGICAL

•Breathing, water, food, sleep, sex, etc.

Figure 7.12 Abraham Maslow’s Human Needs Hierarchy. Creating a motivational environment in a company must not be an intermittent act, nor a simple speech for a specific case, but a constant labor, by devoted manager and supervisor, which requires a careful planning, using his five senses, as well, as continuously using his positive character attributes, and also using the acquired knowledge about human behavior, always keeping in mind that all persons are different, all behavior has a cause, and all behavior pursues a goal. 7.2.4.2 Communicate. The basis for any human relationship is Communications; that is, a person’s capability to transmit his feelings and ideas to others. Man, ever since he appeared on Earth, has had the ability to modulate his voice, and also to express himself through graphs, and signs. Advancements in Communications have brought advancement in human culture and, as a consequence, an improvement in Communications, thus creating a virtuous cycle. So, currently we have a considerable number of Communications media that permit us to learn, almost immediately, about events occurring in any part of the world. Communications are Copyright ©


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vital for men. Its problems affect negatively our coordination, and its decrease, impacts obtaining our satisfactors of any type. The above brings to mind a quote from Edmund Burke (1729-1797), Irish politician and writer: “No human group can act efficaciously if it lacks coordination, no human group can act coordinately if it lacks confidence, no human group can act with confidence if it is not linked by opinions, affection, and common interests”. We relieve this statement is very logical and precise; we can only add that the nourishing soup for it is a good communication. Establishing a good Communications requires three Basic elements (See Figure 7.-13), the emitter, the channel or communication medium, and the recipient.

Figure 7.13 Essential elements in communication. 

The emitter. He is responsible for Communications to achieve its expected effect. So, he will transmit the message in the most appropriate manner, considering the personal characteristics of the receivers (culture, attitudes, abilities, etc.). We must keep in mind that the meaning of the words used will be in the Receiver, and that the important matter is not only that the message goes through, but that the Receiver acts according to expected. To be a good emitter requires a clear idea of what he wants to transmit, to use a language appropriate for the Receiver, and to restructure the message according to the feed-back we obtain from the Receiver. The channel or Communications medium. We are referring to the 5 senses the Receiver usually has (seeing, hearing, taste, smell, and tact), which must be considered as “Communications channels” and the emitter must use them rationally to get the expected result. Thus, on occasion, besides the voice, he will use mimic, films, Pictures, smells, texture, and sounds among other elements to consider communicating effectively. The receiver. We are talking about the persons receiving the message. We expect that as a result from the Communications, they modify their conduct and will act in the desired manner. Therefore, they will pay attention and direct their effort to understanding what the emitter wants to communicate them, considering also his personal characteristics.

We should be aware that in the same way that Communications has taken us to the evolution level we have reached, it is clear that it can also be destructive. Let us imagine for a moment that we have reached a point in which we can communicate mentally and without limitations;

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that is, we can “see” other people’s thoughts, and that at that time, our minds are full of positive and negative thoughts, for sure (based on the point of view of our current culture). That would cause many human relations problems. At present, we take care of transforming to actions only those thoughts we consider positive, and only in extreme cases, or due to temperamental characteristics, do we act on basis of negative thoughts.

7.2.4.2.1 Communication in human relations. A concept that is of great help to obtain a practical and realistic idea of what our Communications should be is Johari’s Windows, shown in figure 7.14. This model was developed by American psychologists Joseph Lull and Harry Ingham in 1955, at the University of California, and is used as a tool to help us understand the dynamics of human groups, and used the first syllables of their names to name it. Let us analyze this tool, and to make it easier to understand, I will use the first person to make it easier to understand. The Windows is comprised by four squares (I, II, III, and IV) which mean the following.

Figure 7.14 Johari’s Window. Rectangle I and II include everything that is known about me by others, for example, my age, my hobbies, if married or single, etcetera. Rectangle III and IV contain what others do not know about me for whatever reason. Rectangles I and III include everything I know about me. Rectangles II and IV indicate what I do not know about me. With this provision are four tables with the following meaning. Square I, open area through which I communicate. It must be modulated according to my interests to relate with the person or persons I am communicating with. For natural reasons, I

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have an “open window” that is different for each person I deal with. I try to open it more every time, with my family, colleagues. In short, with all the persons I am interested in improving my relationship with. Square II, blind area, also called the “bad breath area” due that it contains everything I do not know about myself, but the person I am dealing with does know; for example, that a have a dirty spot on the back of my clothes and I do not know, that I misspelled a word and did not realize it, or situations even more embarrassing or important for me, and which I know nothing about unless the other person tells me. Square III, hidden area, includes data I know but others do not, either because it has not been commented spontaneously or because I intentionally have not made them known due embarrassment or because I am afraid to be rejected. Square IV, unknown area, which includes things about me, events or experiences that neither I nor others know about, and will probably never know about them. When we are interested in improving our relationship with a person or group, we can open our “open area” to the width we consider necessary. We can achieve that by decreasing the hidden or blind areas. There are two techniques for this, the first one is the openness, and the second one is to request feedback from the person that knows what we ignore. Up to here, we know that Communications always has two ways, the one going from the emitter to the receiver, and vice versa. In our work group, there is reciprocal Communications between each member, and if it is good, the group grows healthy and strong, since it will not only know about the solution to his work problems but will also know what happens in his environment. This set of Communications in a group, is called “human Relations””.

Figure 7.15 Communication in human relations. 7.2.4.3 Direct. To direct is to show the way to reach a point. The manager must know his company in depth and must feel part of it. These factors give him the capability to efficiently direct his subordinates, favoring in them that their actions have the tendency to achieve the company’s objective. This objective must always be present for the manager, so that if he notices any Copyright ©


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deviation of efforts, he will take decisions to achieve it. With this goal in mind, he will issue orders, instructions, or rules, according to what he thinks it is necessary considering his own opinion after analyzing the problem. These orders, instructions or rules must be given to the employees attending the motivation and Communications principles we have seen; the end is for the manager to act as a guide, directing or driving his subordinates in an appropriate way, ordering what should be done. To promote a good direction there must be unity of command so that orders come from one person. We must take special care in making sure orders are complied with to avoid insubordination from one or more members, which would distort the wish to the progress and development environment we have already mentioned. Discipline is necessary in all our acts in life, but above all, when one is working in a team, so that it is necessary to apply corrective measures with justice and equality. This does not imply that punishment must be applied in all cases to correct; nevertheless, a disciplinary correction is one capable to solve the discipline problem. Such corrections vary according the individual’s temperament, since many times one can get positive results rewarding the offender instead of punishing him, generating an opposite reaction to the one the manager wishes to obtain. We must take into account that before considering the individual’s reaction to a punishment, we need to analyze the group’s reaction, since their interests have priority. When our mission is directing, we usually have in mind two big interests, which occasionally are in conflict due to our desire to direct our personnel in the best possible way. These two interests are, on one hand, our employees, the people that work for us; on the other hand, obtaining the product, because if we are managing, we need to obtain results through our personnel. One of the theories that explain this managerial dilemma was developed by American psychologists Robert Blake and Jane Moulton in 1964. They called it the “Management grid”, and they explain it through a graph using the y axis to estimate the degree of interest for the people; the x axis estimates the degree of interest for the productivity. Black and Mouton assume that there are 81 managerial styles through the interrelation of both interests, since they have divided each of these interests in parts from 1 to 9. Studying five of the more representative styles we will have an idea about the leaders’ behavior with the interests represented by the set of values 1-1, 9-1, 5-5, 1-9 and 9-9. Figure 7.16 explains the five resulting behaviors.

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Figure 7.16 Important leadership styles. Let us analyze the more relevant managerial modes or styles: Mode 1.9 Good human relations. Communicates in all ways and informally; instructs in a general manner, expecting questions and offering help; errors and mistakes are forgiven and forgotten: difficulties among subordinates seem important to him if they damage human relations; feelings against him affect him a lot; performance evaluations tend to be overestimated. Mode 1.1 Minimum contribution. Communicates in a “Pass the message” way; instructs in a general manner, without expecting questions; he considers errors and mistakes as inevitable; he does not care about difficulties among subordinates; he is not affected by feelings against him; his employees’ performance evaluations tend to be superficial. Mode 9.9 Involvement, participation, and commitment. Communicates in a free and honest way; instructs about the what and not the how; he considers that errors and mistakes are originated by causes that should be analyzed; he

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analyzes and duly attends difficulties among subordinates; he seriously tries to understand and correct feelings against him; his employees performance evaluation is done by relating to the objective attained. Mode 9.1 Authority and obedience. Communicates forcefully downwards; instructs clearly and thoroughly, without expecting questions; he considers that errors and mistakes are done in purpose and against him; he thinks difficulties among subordinates are signs of weakness; he is very affected by feelings against him and finds them unacceptable; his performance evaluations are of the reward and punishment type. Mode 5.5 Justice and strength. Communicates appropriately and formally; instructs in a general manner and offers help; he considers errors and mistakes as signs of incapacity; he attends difficulties among subordinates immediately; he analyzes and resolves adequately the feelings against him; in his employees performance evaluations, he considers the good and the bad. From the information in figure 7.16, the most appropriate style is 9-9, but from our experience, we know we will fight constantly to set our rudder towards that direction. First, we have to be aware that our human team is formed by physical persons, with heterogeneous characteristics; he is a moral entity whose behavior, if we analyze it, we can place it in some point within those coordinates; our mission will be to place ourselves at his level and from there to move him towards the 9-9. In other words, to direct in a good way, we need to act in a situational manner with each of our subordinates. 7.2.4.4 Coordinate. One of the essential points in execution is to achieve that the group’s efforts be synchronized and adequate in time, quantity, and direction; this is called coordination. To fulfill these requirements generates great yields for human resources performance, because the effort of each person is added to those of the rest. The above produces a result that is always bigger than the sum of partial efforts. We could observe the opposite phenomena when an individual effort is not coordinated, either because of lack of synchronization, or because it was too big or too small; or because it acted in a different direction, which weighs heavily in the result and decreases the yield highly. Coordination helps to do an appropriate weighing of all our resources, avoiding high costs for obvious reasons. It is difficult to achieve coordination, mainly in big companies in which specialization increases departmentalism, which, in turn results in Sales Department, Corp., Production Department, Corp., Finance Department, Corp. Small minded interests in each department drive their members to not see further than the department objective. The above can also be

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seen at internal levels or departments, one in relation to the other. To avoid this it is required that all employees know and accept the company’s main objective, as well as the secondary objectives, their importance and relative priorities, in relation to each objective. This will develop a unity of beliefs among employees. We should also strive for the existence of meetings to Exchange opinions and ideas, as well as to know the limitations or problems in each department, in order to create mutual personal interest in their solution. 7.2.5 Control (Management process fifth principle). Control is the verification that human, physical, and technical resources are performing what was planned in the time allotted, with or without deviations to predetermined norm. For all practical purposes, control is a procedure that starts as soon as planning ends, since at this time, budget derived norm or standards are established. This process continues throughout the Management process, so it is constant and dynamic. The first thing to do is to determine what is to be controlled, which is easier to do at the end of the planning process, since this is the basis to presuppose what will happen in a large range of events. Based on experience, criteria, and events observed by Management, budgets for relevant events with points of control will be chosen. For example, if our plans include paying for a certain quantity of overtime hours, which, if we are not careful, can increase our cost considerably, then the overtime budget is an element to control. In the same way, we can consider, for example, Vehicle acquisitions, hiring of personnel, production results, etc. Once we know which elements are to be controlled, then we need to establish if these elements are to be controlled in terms of quantity, quality, or time, thus facilitating the establishment of a norm. Remember that all of the above happens during planning. These norms will be written and known by the persons that will attend to the control process. Usually, the control tools for a company are the financial and production statements, even though there, are in each office or department, control tool appropriate for their levels and interests. The appropriate selection of “control points” during the planning phase and their strict observance during the control phase helps avoid the emergence of human conflicts caused by a constant control action or by the lack of it. The control is performed through sporadic measurement of the results obtained; then, these measurements are compared with the programmed standards, analyzing and correcting the deviations found. To make the control process easier, it is necessary to sequentially attend to the following stages:

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Figure 7.17 Control Stages. 7.2.5.1 Measure. Throughout the Management process, the results obtained for the elements of control previously chosen are measured: the data will be recorded in the financial or production statements (control means) and the correct persons will be informed. 7.2.5.2 Compare. These measurement results will allow its comparison against the established norms to know I there are significant variations in relation to them. We must proceed with an open mind in order to choose the important or exceptional deviations. 7.2.5.3 Analyze. Important variances must be analyzed in order to find out clearly why they are present. Many times it will be necessary to review the procedures, or even the methods, because this will show us where the employees control actions failed. 7.2.5.4 Correct. Based on the diagnosis obtained form the analysis, above, we will apply the required correction, considering that it must remove the cause and not only correct the defect. That could be compared with trying to repair an electric installation by simply changing the damaged fuse, without considering that the damage may be caused by a broken appliance, which will still be connected to the installation. The fuse will continue to blow until the true cause is corrected. We must insist that control is easier if the attention is centered in the important deviations. In order to exert a good control, it is necessary to analyze the problem with an open mind, and

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to remember that we are trying to measure the work performance of persons and not only the work per se. Therefore, the corrections should be directed to the persons and should be based on facts and not on assumptions. Control is facilitated by the invariability of the policies, the simplification of production, and the standardization of procedures, times, or activities. All of this helps to achieve a better coordination, and, as a consequence, better yields. 7.2.5.5 Control tools. Control tools, usually called “indicators”, tell us about three important events to detect the development of our plans: 1. What is supposed to happen. 2. What is happening. 3. The tolerance for the deviation degree that can happen between points 1 and 2. For example, if we plan an action to improve the results in the conservation department, may be the planning shows that, among many other cases, the following will happen:  The cost that will be incurred by performing the plan will be 2 million 500 thousand pesos.  The down time cost will decrease in approximately 27% by next December.  Two positions for mechanic will be increased.  We will increase two vehicles.  We will purchase two sets of tools for mechanics.  We will purchase two sets of test equipment for mechanics, etcetera. The above includes many budgets: the cost of the plan, the positions for mechanics, the vehicles, the tools, the test equipments, the down time cost, etc. and each, if required, can be used as a reference point to form a control indicator. Let us suppose in our example that we opt to control only the down time cost. Executing this plan presupposes to obtain a decrease in the cost per down time from 10 million 680 thousand pesos to 7 million 810 thousand pesos. In this order of ideas, we will Guild our yearly Budget, and, alter a thorough analysis, considering the planning developed and historic data related to the behavior of down time from past years – we can write a budget similar to figure 7.18

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Down time cost budget for the year (next) Month Month Month January January January February February February March March March April April April May May May June June June Total in year

180

Month January February March April May June Total in year

Figure 7.18 Down time cost budget for the year (next). As a next step, since we are living within the budgeted year and developing the action plan as initially created, we will proceed to establish a procedure to collect data every time there is down time for a vital or important resource, to report it to the accounting department. This area will analyze it each month and will report the result of our work using a format similar to the one in figure 7.19, in which any deviations occurring will be signaled. We can see in the above mentioned figure that they are living the first days of August, since we have already recorded data until the month of July.

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Manse, S. A. Mechanical Conservation Department Project: Improve the quality of conservation Control indicator: Cost per downtime. Date: 10/08/xxxx Cost per down time Month Budget January 890000 February 850000 March 800 000 April 740000 May 700000 June 630000 July 600000 August 570 000 September 525 000 October 510000 November 500 000 December 495 000 Total 7 810 000

181

Real 961 200 884000 816 000 710400 798000 614250 606000

Deviation % + 8.00 + 4.00 + 2.00 – 4.00 + 14.00 – 2.50 + 1.00

Figure 7.19 Cost for down time control indicator. We mentioned that all budgets resulting from planning can be used as a reference for control. We should, however, remember that the overuse of data will make us loose objectivity. So, it is important to establish only those control indicators necessary and appropriate to provide the information that allows us to put in place, in a timely manner, corrective actions. This information must have characteristics such as: 

That it be reliable.

That it be obtained in regular intervals

That it can be easily interpreted

That it provide comparative data.

We should not forget that control indicators have the unique mission of showing performance trends in relation to the chosen budgets, and it is advisable that they can be used in combination since as single units, they provide insufficient information. Control indicators are classified as:

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Figure 7.20 Control Indicators necessary for the whole company Let us analyze each of these indicators.

7.2.5.5.1 Work load indicators. They report everything related to the programmed conservation work in the department and that is represented through routines and work orders written by the planning and control center. Their common denominator is the time or man-hours in which all these documents are measured in. The work can be place in any of the following events: a) Programmed Works. All works must be considered here, regardless of them waiting to be assigned, in process, behind schedule, or interrupted, since it is necessary to reprogram those Jobs that for any cause can have execution problems, by estimating new dates in which it will be possible to execute them; otherwise, we would face the fact that any unscheduled work automatically gets out of control. b) Works waiting to be assigned. These are jobs that cannot be placed in process due to lack of labor, materials, tools, or idle time for the resource to be attended. c) Work in process. All works that are being performed, for which there is everything that is required to keep on executing them. It is convenient to have a remainder corresponding to two to three team-weeks to cover fluctuations that would otherwise cause labor loses. d) Works behind Schedule. These are woks that due to unexpected events get performed with a slower programming than expected. e) Interrupted Works. These are jobs that it was necessary to interrupt for some cause and are kept waiting until the problem is solved in order to continue their processing.

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f) Finished Works. Work that is finished and only waiting for their documentation (requisites). g) Requisite Works. This are finished Works that have complied with the necessary accounting requisites and that will be kept on file for possible clarifications or for statistical data recording.

7.2.5.5.2 2 Planning indicators. These indicators allow us to detect the efficacy or our work planning based on the interrelationship between work loads. a) Planning level of fulfillment (%)

b) Planning efficiency (%)

7.2.5.5.3. Productivity indicators. These indicators make it possible to learn the efficiency in the use of the company’s resources. a) Work efficiency

b) Equipment availability level

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c) Conservation level

7.2.5.5.4 Cost indicators. These indicators tell us about the relation between the conservation costs and the different costs of any type we want to compare. a) Quality of installations level.

b) Equipment replacement indicator.

c) Conservation costs level.

d) Conservation cost level by man-hour.

e) Budget compliance

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f) Conservation impact

It is obvious that control indicators must be designed exclusively for the company that will be using them since they vary significantly from one industry to the other due to the heterogeneity of labor and materials used. For example, the indicator:

In industries such as Chemicals, petroleum, and radio have low average percentages for this indicator at around 4%, while aeronautical, steel, and glass have an average of 9%, and in the automotive industry it is usually over 12%. The already mentioned indicators do not cover all possibilities for control tools. Each company can design its own, according to its characteristics and needs. In the final analysis, the objective of indicators is that the different Management levels can have appropriate information to act at their own level. For example, first and intermediate levels are interested in information the allow them to take actions with immediate results (tactic), such as the level of compliance for planning, the level of availability of equipment, emergency level, etc. Top Management is interested in information that allow them to take strategic actions, and mainly, in the indicators that show work efficiency, conservation cost compared to installations value, conservation cost compared to replacement cost, budgeted cost compared to real costs, the “three fives�, that is the five resources with more frequent down time, the five resources with the longest down times, and the five resources with the highest conservation costs. Finally, let us remember that all this information will not be useful at all if the required corrective actions are not taken. 7.2.5.5.5 Conclusion. We have shown here a general overview of the Management process. We consider it useful to wake the interest of all those persons, of whatever education level that have not had a chance to acquire the basis of what management truly is. In our own experience, we thought the manager was o desk person without technical knowledge, and therefore, a load to be carried by the company. Years later, through the study and daily practice of Management, we came to relieve it is a great profession, and that it is an art as much as engineering is. Let us think about the millions of persons that at any given moment, and at different levels are managing, whether in world class companies, small and medium companies, or simply in a family. We can affirm that each person has his/her own Management style, that each is an artist (good or bad) expressing his feelings and ideas while he is performing his role as manager. The work of a manager will be rated according to the quality of the objective he

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seeks, compared to the universal principles that require ecologic sustainability from human intelligence in our planet. It helps to think about the work performed by famous people and analyzing the outcome of their actions, for example, Henry Ford, Margaret Thatcher, Adolf Hitler, Lido Anthony Iacocca, Joseph Stalin, etcetera. They were all important managers living their best to express themselves in our world. 7.3 THE COMPANY AS A SYSTEM. In all the chapters of this book, we have applied 3 kinds of knowledge, scientific, ecologic, and systemic. All of them help us to imagine a company interacting as a great system comprised by thousands of subsystems in which, each of the millions of elements that are part of it are operating to obtain the specific product or products. Due to the above, we can consider a company as a great system constituted by three main subsystems: 

General Subsystem (The Board of Directors which defines which strategic and tactical results should be reached)  Strategic Subsystem (Top Management, which based on Planning sees to general and departmental strategy for the company).  Tactical Subsystem (Employees, operators, and suppliers, which based on Programming attends to the general and departmental tactics for the company). And all of this functioning in harmony with the corresponding internal and external environments through their Feedback. The Board of Directors is responsible for the integrating function, achieving it through the application of Feedback with a systemic approach between the external environment (society, clients, environment, etc.) ant the internal environment (the company itself). It is through this combination that the products required by the external environment are generated. (See figure 7.21).

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Figure 7.21. Systemic approach of the three Business management basic functions. Seeing the company as a system allows us to take the first step towards understanding how our solar system achieves its sustainability. From our point of view, this is the model that world industry should follow.

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