ENGG 401 X2 Fundamentals of Engineering Management Spring 2008 Chapter 1: Engineering, Business, and Society Dave Ludwick Dept. of Mechanical Engineering University of Alberta

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Why Should Engineers Study Business? Engineers often take on managerial roles (and are managed themselves) –Understanding basic business concepts will greatly improve how you interact with your organization Engineers are tasked to make business decisions –Which engineering projects are economically worthwhile? –Which projects should have higher priority? –How should the projects be designed? –How should the project be implemented? A better business sense will improve your personal lives

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Business’s and Engineering’s Impact on Society Business activity and engineering practice (technology) have an enormous impact on society: –The nature of work is defined by and defines technology and business practices –Business creates and conveys status in modern society (the nature of work and the relative rewards) –Businesses use common environmental “sinks”. –Business create value for society, but are also a risk to certain societal interests

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Society’s Impact on Engineering and Business Engineers and business in general operate within a society and are bound by its rules –Anti-combines or anti-trust laws –Labour laws –Environmental standards –Professional associations –The concept that an incorporated company is a “person” In other regions, different regulations or societal rules exist –Communism versus capitalism –Language laws –Farm subsidies All human activity takes place in a social settingAll human activity takes place in a social setting

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Regulation and Standard Setting Regulation is the key mechanism for imposing social values on business, and often involves setting standards Three classes of regulation: –Protect business from business –Protect individuals from business –Protect society at large from business Two competing forces: –Streamline and reduce regulations for efficiency –Increase detail of regulations for effectiveness

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Money and Values This is a course about money, we will spend a bit of time talking about its limitations Money is the measure of commercial value, but… Many values can’t be measured by money Business takes place in a social framework and so society assesses the values of competing interests –Society does it by democratic processes which and better than central planning but are messy and imperfect nonetheless

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Money and Values (2) Our basic assumptions regarding money are tied to consumerism –we work to have purchasing power –the function of savings is future purchasing power This is overwhelmingly true today, but is not typically true for hunter/gatherer tribes, and in some other cultures –Some individuals in today’s society fall outside this norm.

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Managing A Business Is Like Medicine A business is like a complex organism, with many systems “running” at the same time. –In the long run, all these systems must be within acceptable boundaries to maintain organizational health. –Some systems are very critical in the short term: Cash (like oxygen) can not be postponed –Some systems are only critical in the longer term: new product development retaining good employees attracting dedicated investors Management checks that it works, and tries to ensure the illnesses are cured

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management A Manager’s Skill Set Financial analysis: (ENGG 401) –can read the health of a business from its statements –can distinguish cash and income Financial management: (ENGG 402, a little in ENGG 401) –can raise money from different sources Company organization: (ENGG 402, a little in ENGG 401) –Can organize an enterprise, and knows the risks and tax consequences of alternate structures Business law: (ENGG 402, ENGG 405) –Knows basic contract law, can acquire and protect intellectual property Marketing: (ENGG 405) –can identify a need, target a market niche, understand and “sell” the benefit, and knows the choices of channels to market Selling: (ENGG 405) –“features and benefits,” “overcoming objections,” “asking for the order,” and closing

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management A Manager’s Skill Set (2) People management: (ENGG 405) –knows management styles & personality variations –can lead (communicate, motivate, assess, discipline) Operations management: (a little in ENGG 401, MEC E 513) –can budget & operate for steady growth –can continuously improve and push responsibility downwards Project management: (ENGG 402) –can run a one time effort on schedule and budget; can plan and track performance Historical and social insight: (an exposure in ENGG 405) –knows enough history and current affairs to place issues (e.g. unions) in context Strategic planning: (an exposure in ENGG 405) –can assess synergies in products, locations, supply chains, customers Human resources: –knows employment law, union legislation & contracts, severance, benefits

Dave Ludwick, Dept. of Mech. Eng. Engineering, Business, and Society Summer ENGG 401 X2 – Fundamentals of Engineering Management Society and Values: A Summary What is the purpose of society? –to maximize social values What is the purpose of business? –to maximize commercial values (measured by money), within social constraints Practically, there is a great deal of judgment and latitude in each, but social concerns will always be the over-arching framework in which business and management activities take place. Engineers apply science to create commercial value.Engineers apply science to create commercial value.