Managing People and Operations

1
Managing People and Operations

• March 18, 2004

2
(No Transcript)
3
The Importance of People

• The Need for Quality Employees
• Employee performance affects the capability of
  the firm to service customer needs.
• Employee performance affects profitability.
• Payroll costs affect firms bottom line.
• Quality of employees determines the long-term
  competitive potential of the firm.

4
The Lure of Small Firms

• Advantages of Employment in Small Firms
• Quicker movement to decision-making levels of
  management
• Greater managerial freedom
• More opportunities for broad-based managerial
  experience
• Flexibility in work scheduling and job sharing

5
Leading and Motivation

• Personal Involvement of the Entrepreneur
• Creates a significant personal relationship with
  employees based on loyalty and respect.
• Directly influences employees understanding of
  how the firm operates (e.g., its ethics).
• Makes the firm attractive to new employees.
• Building Enthusiasm
• Empowerment
• Work teams
• Benefits

6
Sources of Employees
Sources of Employees
Walk-ins
Executive SearchFirms
InternetRecruiting
Schools
Employee Referrals
Help-WantedAdvertising
Public Employment Agencies
Private EmploymentAgencies
Temporary HelpAgencies
7
Job Descriptions

• Job Description
• A written summary of the essential duties
  required by a specific job
• Aids in personnel recruitment.
• Helps focus employees on their work.
• Provides direction in training.
• Serves as the basis for performance review.
• Job Specification
• A list of the skills and abilities needed by the
  job holder to successfully perform a specific job
• Aids in selecting the most qualified job
  applicant.

8
Example for a Stock Clerk in Retail Food Store
Title Stock ClerkPrimary Function To stock
shelves food products and other itemsSupervision
Received Works under direct supervision of store
managerSupervision Exercised None Duties1. Rec
eive and store products in storage area.2. Take
products from storage, open outer wrapping, and
place on store shelves.3. Provide information
and/or directions to customers seeking particular
products or having other questions.4. Monitor
quantity of products on shelves and add products
when supplies are low.5. Perform housekeeping
duties when special need arisesfor example,
when a container is broken or products fall on
the floor.6. Assist cashiers in bagging products
as needed during rush periods.7. Assist in other
areas or perform special assignments as directed
by the store manager.
9
Evaluating Prospects and Selecting Employees
Steps in Recruiting Employees
Application Forms
Applicant interview
Reference checking
Applicant testing
Physical Examination
10
Training and Development

• Purposes of Training and Development
• Prepare recruit to perform the duties of the job.
• Improve the performance of current employees.
• Prepare employees for career advancement.
• Improve morale of current employees.
• Serve as an inducement to potential applicants.

11
Compensation and Incentives

• Financial Incentives for effective bonus plans
• Set attainable and meaningful goals.
• Bring workers in (employee participation).
• Keep targets moving.
• Aim carefully.
• Profit Sharing
• Fringe Benefits
• Supplements to compensation designed to be
  attractive and beneficial to employees.
• Benefits are a substantial portion of payroll
  costs (40-50)
• Small firms tend to provide fewer benefits.
• Outsourcing the administration of benefits
  programs.

12
Employee Stock Ownership Plans (ESOPs)

• Plans through which a firm is sold either in part
  or in total to its employees.
• Employees performance is motivated by their
  sharing of ownership in the firm.
• Owners can cash out and withdraw without selling
  to outsiders.
• ESOPs offer tax advantages to owners and
  employees.

13
Very Important Job Factors
14
Special Issues in HRM

• Contract employees
• Independent contractors hired for fixed periods
  of time or specific projects
• Less expensive for small firms and provides
  increased flexibility to staff-up or down
• Employee Leasing
• The renting of personnel from an organization
  that handles paperwork and administers benefits
  for those employees
• Rapidly growing
• Allows small firms to provide increased benefits
• No paychecks, government reports, payroll taxes
• No monitoring of vacation or sick days
• Less employee loyalty and attachment to the firm

15
Special Issues in HRM

• Formalizing of Employer-Employee Relationships
• Employee handbook contents
• Expression of company philosophy
• Recruitment
• Selection
• Training
• Vacations
• Grievances
• Discipline
• Performance reviews

16
Special Issues in HRM

• The Need for a Human Resource Manager
• Conditions favoring the appointment of an HR
  manager
• A substantial number of employees (100)
• Unionized employees
• A high labor turnover rate
• A strong need to recruit skilled and professional
  employees
• Supervisors or operative employees in need of
  training
• Low employee morale
• Intense job market competition for personnel

17
The Operations Process

• The activities that accomplish a firms work
• Operations management
• The planning and control of the operations
  process
• Involves acquiring inputs and overseeing their
  transformation in products and services

18
The Operations Process
19
The Operations Process

• Manufacturing Versus Service Operations
• Productivity is more easily measured in
  manufacturing than service operations
• Quality is more difficult to establish in service
  than manufacturing operations.
• Customers are more involved in service than
  manufacturing operations.
• Manufacturing can produce goods for inventory
  service operations cannot store or bank services

20
Competitive Strength ThroughImproved Productivity

• The Importance of Improving Productivity
• Productivity is the efficiency with which inputs
  are transformed into outputs.

21
Quality

• Quality
• The features of a product or service that enable
  it to satisfy customers needs.
• A perception of the customer as to the
  suitability of the product or service of a firm.
• Total Quality Management (TQM)
• An all-encompassing management approach to
  providing high-quality products and services

22
Essential Elements of Successful Quality
Management
23
Customer Focus

• Customer Expectations
• Quality is the extent to which a product or
  service satisfies customers needs and
  expectations.
• The customer is the focal point of quality
  efforts.
• Customer Feedback
• Customers are the eyes and ears of the business
  for quality matters.

24
Organizational Culture and TQM

• Organizational Culture
• The behavior, beliefs, and values that
  characterize a particular firm.
• Continuous Quality Improvement
• A constant and dedicated effort to improve
  quality.
• Benchmarking
• The process of studying the products, services,
  and practices of other firms and using the
  insights gained to improve ones own operations

25
Tools and Techniques of TQM

• Employee Participation
• Employee performance is a critical quality
  variable.
• Quality circles
• The Inspection Process
• Inspection standard
• Attribute inspection
• Variable inspection

26
Quality in Service Businesses

• More difficult to measure than for tangible
  products
• Factors affecting customers perception
• Being on target
• Care and concern
• Spontaneity
• Problem-solving
• Follow-up
• Recovery

27
Purchasing

• The process of obtaining materials, equipment,
  and services from outside suppliers to meet
  production/marketing goals
• The Importance of Purchasing
• The process of acquiring quality raw material
  inputs affects
• The timely and consistent production of quality
  products.
• Retailer sales of finished products to customers.
• The costs of products, their profitability and
  their selling prices

28
Make vs. Buy

• A firms choice between producing and purchasing
  component parts for its products.
• Reasons for making
• Increased utilization of plant capacity
• Assurance of supply of critical components
• Maintaining secrecy in designs and processes
• Saving on transportation costs and supplier
  profits
• Closer coordination and control of overall
  process
• Higher quality components for inputs

29
In-house vs. Outsource

• Outsourcing
• Purchasing products or services that are outside
  the firms area of competitive advantage.
• Reasons for Buying
• Suppliers part/service is cheaper and/or higher
  quality
• Investment savings on space, personnel, equipment
• Greater flexibility in matching supply and demand
• Increased focus on production of core
  product/service
• No risk of equipment obsolescence

30
Purchasing Policies and Practices

• Diversifying sources of supply
• Reasons for having a sole supplier
• Outstanding supplier quality
• Quantity discounts for volume purchases
• Single orders too small to divide among suppliers
• Quality of supplier-customer relationship
• Reasons for having multiple suppliers
• Choice of best quality, price, and service
• Supplier competes for business
• Insurance against input interruptions

31
Purchasing Policies and Practices

• Reciprocal buying / Bartering
• Purchase discounts
• Pooling purchases
• Forward buying
• Budget buying

32
Relationships with Suppliers

• Selecting suppliers
• Price and quality
• Location and delivery reliability
• Services credit, product support, promotion
• Building good relationships with suppliers
• Purchasing practices
• Pay bills promptly
• Be courteous to sales representatives
• Avoid abrupt cancellations of orders
• Maintain a professional relationship

33
Developing Strategic Alliances

• An organizational relationship that links two
  independent business entities in a common
  endeavor. Involves close coordination of buyers
  and sellers to
• Reduce product introduction lead time
• Improve product quality
• Engage in joint problem solving
• Make joint adjustments to market conditions
• Involve the supplier early in product development

34
Inventory Management

• Objectives of Inventory Management

35
Inventory Management

• Inventory Cost Control
• Economic order quantity (EOQ)
• The quantity to purchase in order to minimize
  total inventory costs.

Totalinventorycosts
Totalorderingcosts
Totalcarryingcosts


36
Graphic Portrayal of the Economic Order Quantity
37
Controlling Inventory Costs

• ABC Inventory Analysis
• A system of classifying items in inventory by
  relative value
• Category A (close/continuous control)
• High-value or critical production component items
• Category B (moderate control)
• Less costly, secondary importance items
• Category C (periodic control)
• Low-cost and noncritical items

38
Inventory Management

• Reorder point and Safety Stock
• Just-In-Time Inventory (JIT) System, also Kanban
• A method of reducing inventory level to an
  absolute minimum.
• New items arrive at the same time that the last
  inventory item is placed in service
• JIT promotes
• Closer coordination with suppliers
• Consistent quality production
• Lower safety stock levels

39
Inventory Record-Keeping Systems

• Physical inventory system
• A method that provides for periodic counting of
  items in inventory
• Cycle counting
• A system of counting different segments of the
  physical inventory at different times during the
  year.
• Perpetual inventory
• A method for keeping a running record of
  inventory.

40
Summary Operations Management

• Discussed the nature of the operations process
  for both products and services
• Discussed the key elements of TQM programs
• Discussed the factors to consider in choosing
  suppliers and how to maintain good relationships
• Discussed the objectives and techniques of
  inventory management