Exploring the need for a new paradigm in engineering management and the decision-making process in technology-based organisations

This paper is directed at the field of Engineering Management as opposed to management in general. It is acknowledged that there is no clear division between the two disciplines that has been universally agreed upon (Lannes, 2001), but it should be noted that this research study is directed at Engineering Management in particular. To draw from one of the pioneers of Engineering Management as a recognised field, Sarchet (1989) offered that Engineering Management is specialised towards organisations dealing with processes and products of a technical nature. These organisations would have a notable contingent of their labour force employed as engineers. The narrower focus for this study is due to the proficiencies, backgrounds, and certifications of the authors. Although the topics may be applicable to the management field in general, the case studies, cited literature, and outcomes specifically deal with technical elements. The qualifications of the authors specifically to Engineering Management require a cautionary disclaimer that the applicability to management in general would require others to verify.

The concept of paradigms to define the collective understanding of a specific scientific field is attributed to Kuhn (1977). Discussions on the applicability of defining management, or Engineering Management, as science have shown such an approach to be problematic. McGuire (1982) proposed that taking an overarching view of the tracks within management theory does not yield a unified position. He also noted that the application of the existing tools often falls short of helping a manager deal with the required tasks. The lack of explicit consensus on fundamental principles within the management of knowledge workers is highlighted by Hazlett, McAdam, and Gallagher (2005) who contend the current state of the field would be best defined as a “pre-science” in Kuhn's taxonomy. Kennedy and Nur (2012) warn that focusing on prescriptive task definitions for knowledge workers creates inefficiencies in execution, but that high employee turnover appears to be driving organisations down that path. There is evidence that management practitioners would benefit from a more unified collection of theories, and many of the existing frameworks may fall short of the intent to aid managers in decision-making. This research study intends to highlight factors that may provide significant benefit to academics in developing tools to guide future practitioners. The lack of an existing unified body of knowledge hinders the presentation of modifications to improve understanding. This work intends to spur investigations in a direction that may prove highly beneficial to engineering and technology-based organisations going forward.

Frederick Herzberg is one of the major influencers in the development of management theory (Balzer & Smith, 1990). Much of his research was devoted to improving the quality of work and improving organisational performance as a result. Herzberg recognised that managers and academics looked to him for guidance. However, Herzberg (1966) warned that following his advice would not automatically result in the quantum shift in outcomes that his audience may be seeking. He acknowledged that the financial success of organisations is mostly determined by often one-time strategic decisions made relating to elements such as the physical location, engineering facility design and marketing strategy adopted. W. Edwards Deming is often credited with leading the move to focus on modern quality principles, including increasing the workers’ ability to self-determine their processes (Phelps, Parayitam & Olson, 2007). Despite Deming's focus on quality and stressing the folly of measuring employee performance, he stated that the most important decisions determining organisational performance could be the hiring of talented workers.

Herzberg did not devote attention to the factors he listed as being the most critical because he acknowledged that these decisions are typically made long before managers find themselves in charge of their departments. He focused on the issues that managers typically have control over. Similarly, Deming did not write extensively on the hiring process and finding these talented people. Like Herzberg, Deming viewed the turnover of employees as so low that managers did not have much influence on who is actually on their team (Gabor & Tarrant, 1990). Furthermore, in Deming's time, lifelong employment at the same company was realistically expected by workers and managers. Therefore, in Deming's view, there was little point in measuring performance differences in workers since there was very little managers could do about the findings. These examples of the focus of Deming and Herzberg are offered to provide a possible explanation for the lack of study on those factors they recognised to be most influential on organisational performance.

Taylor's work supports the ideas of Deming and Herzberg that worker performance is mostly influenced by the workplace they occupy, which is analogous to the contingency theory of management, i.e. the design and implementation of control systems is dependent on the context and environment of the organisational setting (Fisher, 1998). Taylor proposed that it is the duty of management to provide the optimum tools to allow the workers to excel. Deming stated that measured variations in worker performance are most likely to be rooted in the variances in the physical system the worker occupies (Carson, Cardy & Dobbins, 1991). During the Hawthorne Experiments, Roethlisberger & Dickson (1939) recorded an analysis of the top performers as defined by the measures used by management. They were very surprised to find a negative correlation between talent (as measured by elements such as IQ and aptitude tests) and performance. The explanation given was that the reward system discouraged the better-skilled workers from achieving their full potential. All workers demonstrated a reluctance to push themselves to the maximum and the best effectively held back the most. The workers’ explanation for this was that management was not aligned with supporting top performance. The most skilled workers reported that management tended to thwart their efforts and that they were generally unrecognised when they did put in any extra effort. That this was observed more than 80 years ago, hints that an opportunity was identified and appears to have had little attention paid to it over that time.

To quantify the order of magnitude in worker performance, Tom Peters (2004) reported that a top worker performing manual tasks might be three times better than an average, competent worker. Recognising the shift towards increasing numbers of people performing tasks with non-tangible outputs, Drucker (1959) coined the term “knowledge worker” to provide insights on how to manage such work. Peters (2004) proposed that the potential with knowledge work productivity improvements is significantly greater than manual, tangible outputs. Top knowledge workers are around seven times more productive, given that knowledge workers can eliminate unnecessary steps and still achieve the desired results. When combined with the reductions in team communication paths and supervision requirements coming from a drastic reduction in labour, a highly effective team can potentially achieve better results than a large complex organisation due to possessing a higher level of per-worker output. Moreover, Kennedy (2010) provided several examples of observed situations where these levels of output by top performers were achieved for both manual and knowledge work. In one case presented by Kennedy, not only could the one worker equal the quantity of output of six peers, but the client-reported quality of work was also superior.

There are pockets of literature examining the critical nature of top performers to organisational survival. These individuals are seen to be scarce enough that an organisation may not be able to find a suitable replacement should they lose key talent (Aguinis, Gottfredson & Joo, 2012). In what is widely considered the project management “bible” (Zhang, Kitchenham & Jeffery, 2007), Kerzner outlines how top performance comes when highly competent people are allowed to deviate from the prescriptive processes sanctioned by upper management (Kerzner, 2017). This is in contrast with Taylor's “one best way” of performing tasks that should be specified by management for the workers to follow. Taylor's strategy will likely be satisfactory for the typical worker, manual or knowledge focused. If the rare highly skilled knowledge worker is a reality, potentially game-changing results will only be realised if these workers can deviate from the way their peers are instructed to perform.

Looking at current trends, it appears the level of automated processes will increase, and the managerial toolbox previously developed under a system heavily reliant upon manual, tangible outputs per worker will decrease in suitability for future organisations (Kennedy & Philbin, 2018). As noted in the introduction, technological developments associated with Industry 4.0 (Xu et al., 2018; Krykavskyy et al., 2019; Vetrova et al., 2020; Nwaiwu et al., 2020) and the wider area of digitalisation (Parviainen et al., 2017; Afonasova et al., 2019; Siderska, 2020) can create a system highly sensitive to the decisions of a single worker. The increasing interconnectedness of technologies leads to greater levels of complexity as demonstrated by increasing interest in concepts such as system-of-systems (Lucia et al., 2016; Philbin, 2008). The potential for an increased impact on performance by single individuals is more significant to managers given the global trends for much higher employee turnover than that experienced by early researchers (Rana et al., 2009).

Despite the importance of individuals in the organisation as discussed by Herzberg, Deming and others, they spent little time discussing employee selection because of the expectation of lifelong employment for the worker (Wolff, 2008). To be better prepared for future workplaces, managers should therefore be equipped with the tools to capitalise on the dual impacts of greater sensitivity to the performance from individual workers and the high turnover of employees providing much higher incidences of opportunities than expected by the earlier researchers in management.

The rarity of those with game-changing skills has been broached by Fox (2009), when looking at mutual fund managers. Fox contends that any detailed analysis of fund performance yields that differences in managers over time cannot be shown to be anything more than random chance. Managers who have fund returns above average one year are as equally likely statistically to be below average the next as those who finished below average the prior year. As well, gross performance above the market indices is typically less than the management fees charged for the work.

This has given rise to the increase in exchange-traded index funds (ETFs) at the expense of investment in mutual funds. However, Fox notes that there will be those rare managers who are worth their fees and who will adapt their strategies to match conditions to beat random performance defined by the indices. Fox provides Warren Buffett as the most famous of these. The scarcity of these people makes it very difficult to find them among the population of their peers who do not secure statistically significant results.

It appears that the nature of the situational understanding required for these talented people to make the decisions with long-lasting impacts is not deep or overly complicated from a technical perspective. As with the example of mutual fund managers, it is more common than it should be for senior managers to not know who is providing higher-quality information. Upton (1998) provided the case in the 1980s when Kodak considered improving their chemical processes. Feedback from many employees at lower levels varied about the benefits to the proposed upgrade. The manager burdened with the final decision, ultimately decided to cancel the project in what was viewed by his superiors as a bold move. This allowed rival Fujifilm to hire Kodak's now unneeded technical experts and establish a modern plant based on the concepts of the scrapped Kodak upgraded production facility. The impact on Kodak's business resulted in losing 10% of the domestic U.S. market share within a few years with a corresponding uptake by Fujifilm. This highlights how a single decision can have billions of dollars in impact (Gavetti, 2004) and how a different person in that position could make the opposite decision given the same evidence.

In another case of when a company's swings in fortune result from a few decisions, Xerox provides evidence of how individuals can greatly impact performance. In 1999, new CEO Thoman attempted to take Xerox away from their roots as an equipment manufacturer to a provider of services. After a 90% drop in market capitalisation to under USD 300 million, Thoman was let go (Chesbrough, 2002). New CEO Anne Mulcahy returned Xerox to a focus on manufacturing and reversed the downward spiral in earnings and investor trust (Slocum, 2006). Xerox is again a solid, consistently profitable company with a market capitalisation now over USD 8 billion. The technology sector has several further high-profile examples of where decisions were taken that had a profound impact on the company — in some cases, a positive impact, and in others, a negative one. In the widely reported case for the previous market leader for video rentals, Blockbuster, once had the opportunity to acquire a major share of the startup Netflix (Sim, 2016). At the time, the CEO decided not to pursue the acquisition; within a short period of time thereafter, Blockbuster became a bankrupt company, completely losing its market dominance and being swept aside by the rapid success and growth secured by Netflix. The CEO's decision, in this case, having a catastrophic outcome for Blockbuster employees and shareholders. In terms of management theory, this is also an excellent example of the impact of creative destruction (Diamond, 2019), where the new technology-driven business model of Netflix disrupted the marketplace and ultimately led to the demise of Blockbuster.

The above examples are provided to demonstrate how individuals make decisions that are difficult to judge objectively on quantitative analysis, are not overly technical, but can have a significant and long-term impact on an organisation's performance. The authors contend that there are opportunities for these types of decisions at most levels and how they are generally not noticed by management.

The first case involved an EPC (engineering, procurement and construction) company hired to design and build a process plant for an operating company. A part of the design involved numerous piping runs. The design process involved best practice stages with supervision by experienced engineers, interdisciplinary reviews, approvals by owner company engineers at various stages of design maturity and final engineer stamped drawings issued for construction.

Along with the physical design, there were process calculations, operations modelling and control logic programming. This process involved more than 100 people. At no point were any reservations raised in the proposed design. However, a part of the design proposed 14-inch piping, including fittings and valves. When a project engineer assigned to the construction of the approved facility was requested to approve the purchase order for the 14-inch valves, she raised a flag about the appropriateness of the sizing. The experienced procurement officer noticed nothing unusual because three quotes were received for the material, and the lowest was selected. The project engineer, however, was aware that 14-inch piping was not a “common” size. The design engineers selected the “standard” 14-inch sizes but herein lies the difference. Although many of the people involved in the project to this point were fully experienced in similar engineering projects, none were ever sufficiently required to consider the financial impact of their decisions.

A summary review of published literature on optimising piping designs found the inclusion of 14-inch piping as a “standard” size and an equally viable choice as 12-inch and 16-inch piping (e.g., Akbarnia, Amidpour & Shadaram, 2009). Only a rare team member who has looked at the financial impact of such decisions would know that 14-inch piping is not “common”. Deviating from what is typically used, such as selecting an uncommon piping size, can have a significant and unexpected impact on the cost (Fig. 2). Once the impact of the choices was highlighted by the project engineer, modifications to the design were made substituting 12-inch valves along with other engineering changes to accommodate the hydraulic impacts. The installed cost of the project was reduced by USD 120 000, or 2% of the total project cost. In an industry where average profit margins on such projects are typically less than 5% (Silva, 2014), such savings have a notable impact on the viability of the engineering company. Again, the issue was not technically complex, but the improvement was not apparent to the first hundred people involved. It is also notable that the engineer who identified the recommended change had to expend several hours demonstrating to the other team members that the point was valid. It is also notable that a slowdown in the engineering company subsequent to these events resulted in the layoff of approximately 5% of the staff and the project engineer who identified the opportunity was one of those let go. This is offered to suggest that management may not recognise the value of such a person within their organisation.

Fig. 2

The relevant highlights of Case I are as follow: a team of more than 100 people developed a plan according to their accepted work methods; ii) one person offered a more cost-effective alternative; iii) the group at large required convincing of the validity of the proposal; and iv) senior management appeared to not recognise the value of this individual.

The authors contend that the types of potential benefits from Case I are more common than senior management may understand or at least acknowledge within their organisation. To demonstrate, the authors provide further illustrative examples from their industrial experiences of identifying how key individuals who have a better understanding of the factors leading to success can greatly influence outcomes. A second case involved a situation where a company decided to adopt a new ERP (enterprise resource planning) process and data management system for improved tracking of the company's history. One technology expert offered a personal opinion that the existing data could not be easily uploaded into the new ERP system, and a conversion effort was required to convert the data into a more compatible format. After expending around USD 500 000 in data conversion, an outsider to the process discovered what was being done and pointed out that the internal expert made an error as the new system had the ability to easily absorb the existing data without the conversion step.

The relevant highlights of Case II are as follow: i) an established company with thousands of employees implemented a change in knowledge work processes; ii) the in-house expert in the digital information system made a decision based on experience that needlessly expended important resources; iii) no one else in the organisation recognised the inefficiency; and iv) the management did not appear to acknowledge any suboptimal performance.

A third case relates to the expansion of a chemical company's operations through the development of a new storage system consisting of tankage to store liquids. The company recognised the potential for further expansion and acquired the real estate to double the number of tanks from four to eight, as shown in Fig. 2. The design team decided to place the pumps used to transfer the liquids close to the main road. Five years after the engineering facility was designed, approval was received to proceed with the expansion. The head engineer, relatively new to the company, reviewed the scope and pondered why the pumps were not placed in the middle of the eight tanks instead of at one end. The pumps do not have the ability to draw the liquid from the required distance. Adding a second set of pumps cost the company circa USD 2 million, an expenditure that would not have been necessary if they were placed as shown in the right side of Fig. 3. Such an approach was not considered at the time of the original design but had someone been on the project team who better understood engineering design, the improved design would have been selected.

Fig. 3

As with Case II, Case III involves a decision that has significant operating and capital impacts. The highlights can be summarised as follow: i) a fully qualified and certified design team is used to design new plant infrastructure; ii) a fully qualified in-house worker evaluates the proposed design and determines a suitable location for facilities that meets all the current requirements; iii) an equally qualified person then identifies how a better decision could have been made that improves operation and avoids significant future costs; and iv) the management did not acknowledge any lessons learned from the new revelations.

A fourth case involved two competing open-pit mining companies, A and B, which have been operating for several decades in geographic proximity. A review of the financial reports indicates that Company A consistently has 10% lower operating costs than Company B. In speaking to geologists at both companies, they acknowledged that the difference is largely due to the locations selected for the mines. The original chief geologist for Company A selected regions to acquire where the amount of soil required to be removed was minimal. The chief geologist for Company B selected regions where the ore was richer in the product. The savings from moving much less soil gave Company A an advantage of several million dollars annually over its closest rival.

Case IV highlights Herzberg's contention that the initial design decisions can have a much greater impact on organisational viability than any of the motivational policies he championed. The relevant elements of this case can be summarised as follow: i) both companies had hundreds of engineers and support staff involved in the initial design of their facilities; ii) each company proceeded on a slightly different path in selecting the locations for their plants using fully trained and qualified people; iii) after years of operation, the decisions made by a key person proved to be significantly better for profits compared to the competing design team; and iv) published financial statements and analyses by neither company recognised the fundamental difference in the decision made at the time of design and how this affected the relative performances of the two companies.

The fifth case involves a situation where a company incorporates advanced automation into its manufacturing assembly line, and an unfortunate fire destroyed a section of the control equipment. It was estimated that it would take about eight weeks to complete repairs to the stage where the hardware cards will be needed to be reinstalled into the control panels. The project engineer directed the purchaser to obtain the cards in four weeks to assure they arrived in time with a healthy buffer. Aiming to adhere to company protocols, the request was made explicitly by a required form, where the required date was entered as a single cell that does not allow for any leeway in the form of a range. The procurement team held vendors to the four-week deadline. This required substitution of the specified cards with another more readily available model that would provide a suboptimum solution allowing the plant to restart but with less than the desired performance. The team changed plans to accommodate the new direction, but one team member on the design team decided to telephone the vendor. It was discovered that the proper cards would be available in six weeks (within the time available to reinstall on schedule), but the vendor was not told there was some flexibility in the delivery schedule. Although the inquisitive team member was reprimanded for overstepping their area of responsibility, the company followed through with buying the desired cards. If that one team member had not taken the initiative (knowing the reprimand might come), the company would have gone down the less desirable path.

The relevant elements of Case V are as follow: i) a fully qualified and experienced team of company employees is executing a project; ii) one person oversteps their assigned duties to challenge the decision made by the team; iii) the alternate is shown to have an advantageous outcome; and iv) despite an improved outcome, the employee is reprimanded by management for not following the company policy.

The sixth and final case is based on a designer with decades of experience drawing P&IDs (piping and instrumentation diagrams), who is asked for their opinion on two alternatives for a particular engineering layout and operating philosophy. The designer recommended the option that would require 40 hours to draw, noting the other option would require 160 hours to draw. When the drawings were completed, they were sent for review by several stakeholder groups. After being approved by most of the stakeholders, one operations worker noted that a solution equivalent to the rejected alternative is better because it would save an estimated USD 200 000 a year in operating costs and be simpler to maintain. The operations worker championed the alternate design and won over support for the improved design, including some dissension by the design team. The designer was then instructed to go back and produce a new set of drawings in line with the originally rejected proposal.

The elements of Case VI which parallel the previous cases are as follow: i) a fully qualified and experienced expert on design makes a decision; ii) a company with hundreds of engineers on staff reviews and accepts the decision with no questions on the design; iii) one person without experience in design offers a beneficial alternative; iv) the better alternative is not accepted immediately and encounters resistance; and v) no specific lesson was documented, or any change to company design standards was made.

Following the recommendations of Yin (2002), a cross-case analysis is provided in Table 1. The key elements from the summaries of each case are shown in tabular form to emphasise the points being illustrated.

These cases from the industry are offered as examples of situations that have been encountered many times by the authors. As shown, many people are often fully communicated to make sure that engineering plans reach a wide set of reviewers. However, there is a small number of people whose involvement is necessary for the best choices to be made. The examples from the industry do not require a specialised area of expertise from a technical or quantitative perspective. But there is a requirement for the individual to have a more complete or systemic understanding of the success factors for the enterprise. Further, the adoption of an integrated systems view of project can allow engineers to be aware of a broader set of factors to be considered when overseeing the delivery of complex engineering projects, namely, process, technology, resources, impact, knowledge and culture (Philbin & Kennedy, 2014). Engineers able to display such a systemic perspective will benefit from considering the full range of factors and issues to be addressed when designing complex systems and engineering projects and, thereby, avoiding so-called “stove pipe” behaviour of specialists (Ireland et al., 2010), which can lead to negative outcomes associated with a reduced selection of options. Indeed, management guru Tom Peters identified a problem in modern organisations by creating a narrow focus in their workers with the result that specialists are encouraged to control a small portion of the overall operation without learning the impact it has on other departments (Kennedy, 2015). However, the high employee turnover rates now experienced in the 21st century (Cohen, Blake & Goodman, 2016), provide some opportunities mostly ignored by management studies of a few decades ago, as noted above. Firstly, managers now have many more opportunities to hire the type of special individuals identified in our examples. Secondly, the succession of jobs now experienced by engineering workers provides the potential to be exposed to many more circumstances and chances to learn perspectives that can be beneficial in new situations. A caution is noted here that in some of the examples reported, the workers who proposed the beneficial changes met resistance and did not receive recognition by their management or were even reprimanded in one case.