Is Good Engineering Management Related to a Respectable Performance

8/8/2019 Is Good Engineering Management Related to a Respectable Performance

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IS GOOD ENGINEERING MANAGEMENT RELATED TO A RESPECTABLE PERFORMANCE?

Masaaki HiranoWaseda Bus iness School

3-4-1 Okubo, Shin juku-kuTokyo 169, Japan

A b s t r a c t

This a r t i c l e f i r s t t r i e s t o o p e r a t i o n a l -i z e t h e measurement o f "good e n g i n e e r i n gmanagement" t h rough i n t e r v i e w s o f o p e r a t i o n smanagement s p e c i a l i s t s . Then, t h e e n g i n e e r l n gmanagement score i s o bt ai ne d f or a sample o fl a r g e Japanese f i r m s , an d c o r re l at e d a g ai ns tt h e i r f i n a n c i a l per fo rmance . A p o s i t i v e c o r -r e l a t i o n between t h e s t a n d a r d o f e n g i n e e r i n gmanagement an d a s a l e s p r o f i t a b i l i t y amongstt h e s am p le c om p an ie s wa s found. Discuss ionson th e r e s u l t s an d methodo log ies a r e fol lowedby t h e conc lud ing remarks .

o v e r a l l s ta nd ar d o f e ng in ee ri ng management o fa company, r a t h e r t han t h a t o f each p l a n t o rs i t e , s i n c e it would n ot be too easy norr e a l i s t i c to o bt a in th e f i n a n c i a l r e s u l t s f o reach p l a n t o r s i t e .

I ) To p Managemen t /Organ iza t iona l C u l t u r e

* Does t h e to p management u n d e r s t a n dtechno logy an d e n g i n e e r i n g i s s u e s ?

* I s o rg an iz at io na l c u lt ur e l i b e r a l , a ll owing t o r i s k a ne w t echno logy?

I n t r o d u c t i o n

* I s th e work f o r c e young,encourag ing c r e a t i v i t i e s ?

s u i t e d f o r

I I ) Resea rch O r i e n t a t i o n

I I I ) Development O r i e n t a t i o n

* I s th e des ign s t a b l e ?

* Does th e company have a b ig r e s e a r c hbudge t?

I s th e company a c t i v e l y i n v o l v e d i nb a si c r es ea rc h?*

I t seems a l l to o obv ious t h a t good eng i n e e r i n g management i s c l o s e l y r e l a t e d t o agood b u s i n e s s per fo rmance . On t h e o t h e rhand, e v e r y o n e o f us seems t o know a t l e a s tan example o r tw o o f good e n g i n e e r i n g comp a n i e s whose per fo rmance i s f a r fromr e s p e c t a b l e . Obviously t h e r e must be o t h e rf a c t o r s t han e n g i n e e r i n g management ( e . g . ,wrong o v e r a l l s t r a t e g i e s ) which a r e caus ingl a c k l u s t r e r e s u l t s .

* I s th e company good a t i n c r e m e n t a limprovements?

* How wide i s the range o f produc t s in asame f ami ly?

P r o j e c t Management

* I s th e l e a d t ime to l aunch a newp r o d u c t l ong o r s h o r t ?

I s th e l i n k w it h m a rk et in g an d product i o n f u n c t i o n s good?

* I s th e company good a t managing andc o n t r o l l i n g s u b c o n t r a c t o r s an dsupp lyers?

IV )

I t i s b e l i e v e d , however, t he c lo se ne sso f t h e l i n k between good e n g i n e e r i n g management an d good b u s i n e s s per fo rmance must beknown i n a d v o c a t i n g t h e fo rmer, as a m a t t e ro f p r i n c i p l e . I t i s t h i s i s s u e t h a t p r e s e n ta r t i c l e a d d r e s s e s . F i r s t , e le me nt s o f goode n g i n e e r i n g management a r e i d e n t i f i e d t h rought he i nt er vi ew s wi th P r o d u c t i o n an d O p e r a t i o n sManagement (POM) s p e c i a l i s t s . Then, th esamples o f l a r g e J ap an es e f ir ms i n e l e c t r i can d e l e c t r o n i c s , heavy i n d u s t r y an d automot i v e s a r e scored a g a i n s t the y a r d s t i c k ss p e c i f i e d above. T h ir d ly , th e s e e n g i n e e r i n gmanagement s c o r e s a r e c o r r e l a t e d a g a i n s t th ete n y ear av erag e o f t h e s e sample compan ies 'f i n a n c i a l per fo rmance . Discuss ions on th em e th od o lo g y a nd th e r e s u l t s a re fol lowed byc o n cl u d in g r em a rk s .

Elements o f Good Enginee r ing Management

There does n o t seem to e x i s t an y a g r e e dupon o p e r a t i o n a l d e f i n i t i o n s o f good eng i n e e r i n g management , which i s r a t h e rs u r p r i s i n g . To l ook i n t o th e r e l a t i o n s h i pbetween th e q u a l i t y o f e n g i n e e r i n g managementan d th e company ' s per fo rmance , it wouldn a t u r a l l y be neccesa ry to be r e a s o n a b l yc l e a r abou t what c o n s t i t u t e s good e n g i n e e r i n gmanagement . T h e r e f o r e POM s p ec ia li st s a tBus iness School an d System Sc ience I n s t i t u t e

o f Waseda U n i v e r s i t y, as w e l l as some o f th eproduc t ion an d e n g i n e e r i n g managers who a t -t end Waseda Bus iness School ha d beeni n t e r v i e w e d , t o o b t a i n a t e n ta t iv e d e f in i ti o no f good e n g i n e e r i n g m an ag em en t. They came upwi th t h e l i s t below.

These y a r d s t i c k s a r e i n t e n d e d t o measure

Enginee r ing Management an dF i n a n c i a l Per fo rmances

Measurements

To o p e r a t i o n a l i z e th e l i s t o f e lement sp r e s e n t e d i n t h e above s e c t i o n , th e q u e s t i o n -n a i r e below wa s made.

I ) To p Managemen t /Organ iza t iona l C u l t u r e

* I s th e to p management s c i e n t i s t o r eng i n e e r by t r a i n i n g ? (Y/N)

* I s th e c u l t u r e l i b e r a l an d r i s kt a k i n g ? (Y/N/DK)

* Ave ra ge a ge o f th e work f o r c e

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I I ) Resea rch O r i e n t a t i o n

* Research b u d g e t / S a l e s

* I s th e company a c t i v e l y invo lved i nb a s i c r e s e a r c h ? (Y/N/OK)

I I I ) Oevelopment O r i e n t a t i o n

* Oesign s t a b i l i t y (Y/N/OK)

* Range o f p r o d u c t s in a f ami ly (Y/N/OK)

* I n c r e m e n t a l improvements (Y/N/OK)

* S u b c o n t r a c t e r management and c o n t r o l(Y/N/OK)

* C a p i ta l i n v es tm e n ts /S a le s

IV ) P r o j e c t management

* Lead t ime (S/L/OK)

* Link w i t h marke t ing an d p r o d u c t i o n(Y/N/OK)

Since th e i n t r i n s i c p r o f i t a b i l i t y o f th ei n d u s t r y d i f f e r s from one t o a n o t h e r , abovementioned s p e c i a l i s t s an d managers were askedt o gauge each company, i n compara t ive

t e r m s ,a g a i n s t th e o t h e r s in th e sample i n t h e samei n d u s t r y . I n compar ing t h e i r r a t i n g s "Yes/No/ O o n ' t Know" answers ( "Nar row/Wide /Oon ' tknow" o r " S h o r t / L o n g / O o n ' t Know",as approp r i a t e ) a r e given t h e p o i n t s of + 1 / - 1 / 0 ,r e s p e c t i v e l y . As t h e r e l a t i v e impor tance ofeach y a r d s t i c k i s n ol a p r i o r i known, it wa sdec ided t o g i v e t h e c o e f f i c i e n t s so t h a t th ee lement s o f "Oevelopment O r i e n t a t i o n " c o l l e ct i v e l y a r e given th e w e i g h t o f two, w h i l eo th er t h re e groups o f e lem en t s r e s p e c t i v e l yg e t th e w e i g h t o f one . Then, by add ing upt h e r a t i n g s t imes c o e f f i c i e n t s , t h e o v e r a l le n g i n e e r i n g management s c o r e f o r each companywa s o b t a i n e d .

Samples

Samples o f l a r g e Jap an es e f irm s a r es e l e c t e d i n e l e c t r i c an d e l e c t r o n i c s , heavyi n d u s t r i e s , an d au tomot ive i n d u s t r i e s . A llo f them h av e b een i n th e l i s t o f th e "HundredL a rg e s t Companies i n Japan" f o r over twen tyy e a r s . I n o t h e r words , they a re r ep res e n t a t i v e s o f th e m a n u f a c t u r i n g companies inwhich e n g i n e e r i n g a r e i m p o r t a n t and whichh av e b ee n l a r g e f o r twen ty y e a r s . They a r e :

* E l e c t r i c and e l e c t r o n i c s

H i t a c h iTosh ibaM i t s u b i s h i E l e c t r i c sNEC

M a t s u s h i t aSanyo

*Heavy i n d u s t r i e s

M i t s u b i s h i Heavy I n d u s t r i e sI sh ikawaj ima-Har ima I n d u s t r i e s

*Automotive i n d u s t r i e s

NissanI suzuToyo taMazdaHonda

Assuming t h a t th e s t a n d a r d o f e n g in e e ri n g management i n a company does n o t changee a s i l y f rom year t o y e a r , t e n y e a r a ve ra ge o ff i n a c i a l per fo rmances o f th e s am p le c o mp an ie sa r e c o r r e l a t e d a g a i n s t t h e e n g i n e e r i n gmanagement s c o r e . Per fo rmance measurementschosen a r e :

* S a l e s p r o f i t a b i l i t y

* S a l e s growth

* P r o f i t p e r employee

Firm EM s c o re S a le s S a l e s P r o f i t !Growth(%) P r o f i t (%) Employee------------- --------- ---------- --------- ----------

H i t a c h i 1 .4 7 10 .79 6 .149 1 .726Tosh iba 2 .0 3 11 .1 4 4 .220 1 .078M i t s u b i s h i -1 .1 0 12 .07 3 .3 80 0 .8 68NEC -0 .87 16 .69 3.811 1 .209M a t s u s h i t a 1 .63 12 .52 6 .8 8 7 4 .176Sanyo - 0 . 3 3 11 .97 5 .050 2 .0 76--------------------------- -----------------------------M i t s u b i s h i HI 0 .83 6 .04 2 .225 0 .62 8IH I 0 .13 2 .89 1 .756 0 .5 14--------------------------- -----------------------------Nissan 0 .00 7.95 5 .239 2 .739I suzu - 1 . 0 0 11 .52 1 .864 0 .898Toyo ta 1 .30 13 .47 8.471 6 .067Matsuda 1 .80 12.41 3 .0 7 8 1 .2 5 3Honda 1 .70 15 .05 3.651 2 .024

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R e s u l t s

Th e t a b l e shows th e summary o f t h er e s u l t s o b t a i n e d , an d i t s g r a p h i c a l r e p r es e n t a t i o n s a r e g iven i n [F igures 1 - 3 ] .

S a l e s P r o f i t a b i l i t y seem t o have a ~ o s -s i t i v e c o r r e l a t i o n wi th th e e n g i n e e ~ i n gmanagement s c o r e i n a l l o f th e t h r e e s e c ~ o r sexamined. Enginee r ing management 's r e l a t i o n

s h ip to S a l e s Growth an d P r o f i t p er Employee,however, i s n ot t o o c l e a r . Th e P r o f i t p e rEmployee may w e l l be i n t e r p r e t e d t o have apeak a t t h e e n g i n e e r i n g management s c o r e o faround 1 . 0 ; o b v i o u s l y, we need l a r g e r samplest o be more s p e c i f i c .

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Discuss ions

Desp i te th e seeming ly i n t e r e s t i n gr e s u l t s above, t h i s s t u d y i s n o t f l a w l e s sc o n c e p t u a l l y, as w ell a s m e t h o d o l o g i c a l l y.

S t a b i l i t y o f Standard o f Enginee r ing Manaqement an d I t s Causa l Link wi th F i n a n c i a l P e rformance

Although it does n o t seem p la u si bl e t oassume t h a t th e s ta n d a rd o f e n g i n e e r i n gmanagement i n a company (o r even i n af a c t o r y ) changes s u b s t a n t i a l l y y e a r by y e a r,i t would be a l s o c er ta in t ha t t he s ta nd ar dcou ld b e c ha ng ed o ve r t i me . We seem t o havel i t t l e knowledge abou t th e e f f e c t o f changei n t he s ta nd ar d o f a company's e n g i n e e r i n gm an ag em en t o n i t s f i n a n c i a l per fo rmances .

E c o n o m i s t ' s a s sampt ion o f e q u i l i b r i u m ,i . e . , t h e e f f e c t s o f th e change i n th e f a ct o r on th e o v e r a l l per fo rmance i s i n s t a nt e n e u s l y a d j u s t e d , seems u n r e a l i s t i c . On th eo t h e r hand , we do n o t have r e l i a b l e d a t a ont h e t i m e l a g between t h e change i n t h e s t a n da rd o f e n g i n e e r i n g management o f th e companyan d t h a t i n t h e company's per fo rmance .

In t h i s s t u d y, th e te n y e a r av erag e o fs am ple c om pa ni es per fo rmances a r e comparedwi th t h e s e compan ies ' e n g i n e e r i n g managements c o r e s . Th e l o g i c a l l i n k between t h e two,however, i s u n f o r t u n a t e l y f a r from c l e a r , an dwe do n o t know i f th e f i v e y e a r av e ra ge , fo rexample, i s more a p p r o p r i a t e .

Ya r d s t i c k s an d Weights

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As t h e s t a r t i n g p o i n t o f th e r e s e a r c hi n t o t h e r e l a t i o n s h i p between t h e s t a n d a r d o fe n g i n e e r i n g management in th e company an d i t sf i n a n c i a l per fo rmance , r a t h e r crudey a r d s t i c k s were adopted i n t h i s s t u d y.Fur the rmore , most o f th e y a r d s t i c k s a remeasured s u b j e c t i v e l y , a l though judgement a remore o r l e s s unanimous among paM s p e c i a l i s t s .

N a t u r a l l y, it i s hoped t h a t more sophist i c a t e d measurements fo r s t a n d a r d o f eng i n e e r i n g management w i l l be deve loped , t oa l low r e g r e s s i o n a n a l y s i s o f per fo rmance .

J a pa n es e C on te xt

Th e s t u d y was c a r r i e d o u t w ith o ut an yc o n s i d e r a t i o n o f i n t e r n a t i o n a l compar i son .I t i s t r u e t h a t th e paM s p e c i a l i s t s in Japana re reasonably unanimous on th e i m p o r t a n te lements o f e n gi ne er in g management , as wel las th e s c o re s f o r each company. There i s agood p o s s i b i l i t y , n e v e r t h e l e s s , t h a t th es p e c i a l i s t s i n o t h e r c o u n t r i e s may come upwith a comple te ly d if fe re n t s e t o f y a r d s t i c k st o measure th e s ta n d a r d o f e n g in eer in gmanagement i n th e companies i n t h e i r c o u n t r y.I t cannot be c la imed t h a t th e measurementsgiven i n t h i s a r t i c l e a r e u n i v e r s a l . In t h i sv e i n , it i s hoped, i n t h e f u t u r e , i n te r n a -t i o n a l comparison o f good e n g i n e e r i n g management w i l l be c a rr ie d o u t.

I t i s obvious t h a t good e n g i n e e r i n gm an ag em en t b y i t s e l f would n o t b r i n g about i nt h e r e s p e c t a b l e f i n a n c i a l per fo rmance ; ani d e a l e n g i n e e r i n g an d e n g i n e e r i n g managementon a wrong produc ts would l e a d t o a f i n a n c i a ld i s a s t e r . F i r s t , th e management must g e t th es t r a t e g y r i g h t . On th e o t h e r hand, as th er e s u l t s o f t h i s a r t i c l e show, t h e r e i s ao ve ra ll r el at io n s hi p between th e s ta nd ar d o fe n g i n e e r i n g management an d th e company ' sf i n a n c i a l per fo rmances . T h e refo re , th e to pmanagement 's r e s p o n s i b i l i t y seems t o c a l l fo ra good s t r a t e g y, a lo ng w ith a s u s t a i n e d e f -f o r t t o improve th e s tan d ar d o f e n g in e e r in gmanagement in th e company.

I m p l i c a t i o n s t o th e P olic y Makers

Although it i s a m a t t e r fo r th e management o f i n d i v i d u a l compan ies t o dec ide wheret o app ly t h e i r e n g i n e e r i n g managemente x p e r t i s e , it cou ld be impl ied from th er e s u l t s t h a t good e n g i n e e r i n g managementl e a d s t o more e f f i c i e n c y i n th e economy as awhole. To have more e f f i c i e n c y i n th e weal thc r e a t i o n p r o c e s s , i t i s hoped t h a t more emp h a s i s shou ld be pu t on e d u c a t i o n an d t r a i n -in g fo r e n g i n e e r i n g management , as w e l l ast a x an d o t he r i n ce n ti ve s fo r th e e f f o r t s t oimprove t h e q u a l i t y o f e n g i n e e r i n g managementi n th e i n d u s t r y .

Concluding Remarks References

[2 ] D. Boddy an d D.A. Buchanan, Managing NewTe ch n ol og y. O x fo r d: B a s i l B l a c k w e l l , 1986

[3 ] D.A. Garv in , "Managing Q u a l i t y , " Th eMcKinsey Q u a r t e r l y, p p . 6 1 - 7 0 , Summer1988 ,

[1 ] V. B i g n e l l , M. Dooner, J . Hughes, C. pyman d S h e i l a Stone ( E d . ) , Manufac tu r ingS ys te ms . O xf or d: B a s i l B l a c k w e l l , 1985

[5 ] B.W. Mar, W.T. Newell , an d B.a . Saxberg(Ed . ) Managing High Technology.Amsterdam: E l s e v i e r Science P u b l i s h e r sB.V. , 1985

Manufac tu r ing S t r a t e g y .Macmil lan E duca tion L td ,

[4 ] T. H i l l ,Bas ings tone :1985

In t h i s a r t i c l e , t o o b t a i n a s e t o fmeasurements t o gauge t h e "goodness" of e ng i n e e r i n g management i n a company, f i r s t , th ee lements which c o n s t i t u t e good e n g i n e e r i n gmanagement were i d e n t i f i e d with th e h elp o fpaM s p e c i a l i s t s . Then t h e s e y a r d s t i c k wereo f o pe ra ti o na li z ed t o a l low th e e x p e r t s t om ea su re e ac h company i n th e sample in t e rmso f goodness o f e ng in ee ri ng management. Eng i n e e r i n g management s c o r e o f t h e s e samplecompanies a re c o r r e l a t e d a g a i n s t t h e i r f i n a n -c i a l per fo rmances . A p os it iv e c or re la ti on swas found between t he e ng in ee ri ng managements c o r e an d t h e company's S a l e s P r o f i t a b i l i t y .Although th e m ea su re me nt s e mp lo ye d in t h i sa r t i c l e a r e crude , t h e r e s u l t s have r a t h e rs i g n i f i c a n t i m p l i c a t i o n s , t o t he e n gi ne er in gmanagement c i r c l e , t o t h e management , an d t ot h e p ol i c y makers .

I m p l i c a t i o n t o th e Engineer ing ManagementC i r c l e

Th e e n g i n e e r i n g management c i r c l e hasalways assumed t h a t good e n g i n e e r i n g management i s good fo r th e company, as a m a t t e r o fc o u r s e . Although th e assumpt ion seems i n t u i -t i v e l y p l a u s i b l e by i t s e l f , n o t a l a r g eamount o f e f f o r t s n e c c e s s a r i l y ha s beendevoted t o prove t h i s . Consequen t ly th emanagement a r e n o t always s y m p a t h e t i c f o r an

inves tment fo r b e t t e r e n g i n e e r i n g management ,e s p e c i a l l y when t h e company i s p r e s s e d . Th ee n g i n e e r i n g management c i r c l e , both p r a ct i t i o n e r s an d academic , s h o ul d a c cu m ul a te th eev idences on how good e n g i n e e r i n g managementi s r e l a t e d t o t h e f i n a n c i a l per fo rmances .

I m p l i c a t i o n s t o t h e Management

[6 ] T. N i s h i g u c h i , "Good Management I s GoodManagement," Th e JAMA (Japan AutomobileManufac tu re r s A s s o c i a t i o n ) Forum, v o l .7,No 4, p p.3 -7 , A p ri l 1989 .

[7 ] E. Rhodes an d D. Wield ( E d . ) , Implementin g New Te c h n o l o g i e s . Oxford : B a s i lBlackwel l , 1985

[8 ] H. E. Riggs , Managlng High-TechnologyCompanies. Belmont: Life t ime Learn ingP u b i c a t i o n s , 1983

[9 ] W. Skinner, Manufac tu r ing i n th e Co rp o r a t e S t r a t e g y . New YorK: J oh n W il ey ,1978

[10]L.G. Sorderberg , "Fac ing Up t o th e Eng i n e e r l n g Gap," Th e McKinsey Q u a r t e r l y,pp . 2 -1 8, S pr in g 1989

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Is Good Engineering Management Related to a Respectable Performance