ENGG 401 X2
Fundamentals of Engineering Management
Spring 2008
Chapter 1:
Engineering, Business, and Society
Dave Ludwick
Dept. of Mechanical Engineering
University of Alberta
http://members.shaw.ca/dave_ludwick/
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
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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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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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 setting
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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.
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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.
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Dave Ludwick, Dept. of Mech. Eng.
Engineering, Business, and Society
Summer 2008
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