Principles Of Management BBPP1103

Faculty Science And Technology

Semester 1 / Year 1

BBPP1103

Principles of Management

MATRICULATION NO : 911129015025001
IDENTITY CARD NO. : 911129-01-5025
TELEPHONE NO. : 017-4620901
E-MAIL : najibroslan91@oum.edu.my
LEARNING CENTRE : Sabah, Kota Kinabalu
 Principles Of Management BBPP1103

The company that I have chosen for this assignment is nonetheless than our country’s
finest oil & gas company, Petrolium Nasional Berhad also mostly known as PETRONAS. It’s a
Malaysian company that was founded on 17th august 1974, which makes it 43 years old as of
2017, currently the company is being lead by the CEO Datuk Wan Zulkiflee Wan Ariffin. It has
secured the entire oil and gas resources in Malaysia and has given trust to hold the responsibility
of improving, developing and adding value to these resources. It has been ranked among the
fortune 500 global, since it started it has now grown rapidly and enormously into an international
company. It comprised into 103 wholly owned subsidiaries, 19 partly owned outfits and 57
associated companies, the company is engaged in a wide spectrum of petroleum activities.

Main businesses that’s done by PETRONAS contains two area known as Upstream and
Downstream. Upstream are basically all sectors including searching for potential underground or
underwater crude oil and natural gas fields, drilling wells, and operating the well to recover and
bring the resources up to the surface, the upstream sector are mostly what people know as
offshore work, it requires employees with certain technical skills to literally take a boat or by
chopper to go to platforms in the middle of the sea. Downstream are the sector that commonly
refers to refining crude oil or processing and purifying of raw natural gas, and also distributing
these products to consumers such as gasoline, petrol, diesel, methanol, lubricants and, many
others. Specifically for this assignment we are focusing on Downstream, Methanol Plant in
Wilayah Persekutuan Labuan, Malaysia. It produces pure 99.9% Methanol in the form of liquid
state and being sold to consumers, primarily used as a feedstock for manufacture of other
chemicals. There is two PETRONAS methanol plant, the first one was formed in 1992 after it is
bought from Sabah Gas Industries; the second one however was formed in 2005.
 Principles Of Management BBPP1103

The types of decision making environment that usually happens are risky and certainty
conditions. Risky environments are when we have incomplete information about certain things
but the decision that’s been made can be based off past history, experience or any sort of wave or
trend. Certainty conditions however means the manager is able to predict future with certainty,
usually these are small decisions.

A decision that’s been made in the plant (PETRONAS methanol) is for example a simple
leak on equipment, in this example it is a heat exchanger, a heat exchanger is a device used to
transfer heat between one or more fluids. The fluids may be separated by a solid wall to prevent
mixing or they may be in direct contact, they are widely used in space heating, refrigeration, air
conditioning, power stations, chemical plants, petrochemical plants, petroleum
refineries, natural-gas processing, and sewage treatment. A heat exchanger leaking is a bad thing,
it can cause inefficiency of the equipment, further damage and might cause environmental
damage, it’s considered as a risky environment since the manager has incomplete information.
Information such as the size of the leak is obtainable but not the strength of the material under
leak, the manager can however roughly predict what will happen based on his experience. This
means the manager has to make two decisions, whether to keep going and use the equipment
until something even bigger may happen or may not, or shut down the whole plant and repair the
equipment but can cause delay in production.

A certainty condition however is when the manager absolutely knows what will happen
because of all the information he has is complete and he is able to choose the best solution. An
example can be seen such as when a water tank that’s attached with a pipe to a pump. When the
tanks level is about to overflow, the solution is to drain whatever is inside so it doesn’t overflow
and possibly damage the tank itself, the solution is either drain a little bit or turn on the pump and
it will reduce the tank’s level.

In this organisation, the steps in making a rational decision are firstly defining the
problem; in this case, we give an example the problem being is why the factory can’t be
increased its capacity from 90% to 100%, management decided the solution is because there’s
not enough feed to produce needed product, for example natural gas are needed to produce pure
methanol, since there is not enough natural gas therefore the amount of methanol needed can’t be
produced.
 Principles Of Management BBPP1103

The Second step is to establish the decision criteria, since our solution has been decided,
it is to get more feed, many consideration need to be put into account for example, where will the
source come from? Will it be worth the investment to find a second source of feed? Which
company can be reliable the produce feed at the amount that is needed? How long will it take to
get the second feed?

Thirdly after identifying the criteria’s needed in order to make the correct solution, the
next step is to put weight on each criterion to decide which is priority and which one is not, for
example deciding the cost factor is not a priority since the financial budget is big or the
reliability for the second feed is not important since there will always be another feed to use. A
method that is normally used in this organisation is a head to head comparison, like a pros and
cons table where each solution is put side by side in a table and simply compare it, this method is
to see clearly which is solution is the best for the organisation or the second best just in case the
first did not work out and third, fourth and so on. This method however can create a bit of
internal conflict since priority is different to each own perspective, a person might choose cost as
the main priority while another can see reliability as the main priority.

Fourthly, after identifying which criteria are prioritised it is also best to brainstorm or any
method and come up with as many alternatives as possible. This is a good step because
sometimes we have solutions that were never thought before or something that is completely out
of the box that can solve the potential problem. The problem that is faced in this organisation is
not enough feed to produce methanol, another method to solve this problem might be buying
feed from other companies and send them on a daily or weekly basis another consideration can
be to produce the feed itself within the organisation, the more alternatives are generated the
better the process, it can help us be more creative in solving problems.

Now we need to evaluate the alternatives, creating them are important but finding which
ones are worth doing is more important. An example that can be given within the organisation
are such as producing the feed (natural gas) within the company itself, how logical is this?
Creating another plant is not an easy task, nor is it cheap, it is time consuming which can take
years, the level of expertise and experiences that’s needed are immensely huge. The more
 Principles Of Management BBPP1103

decision criteria that are fulfilled by an alternative, the better it is at being the solution. Lastly at
the end of a discussion, one final answer will be chosen, this will be based of the criteria needed
and which ones are prioritised first, for example lastly the manager decided that the best solution
was to get a second source for feed (natural gas) so that it can produce enough product
(methanol) as the plant was intended in the first place.

There are a couple of ways that can immensely improve the decision making by the
organisation, firstly is top managers also needs technical skills instead of just leading skills, this
will improve in terms of differentiating between theory and practical. An example can be seen
from the problem above, which is to increase plant load from 90% to 100%. In terms of theory, it
is simple, increase the maximum capacity of each equipment, either it be a pump, a boiler and so
on, but in reality doing these tasks are not as easy as it seems. If the top managers know a bit of
technical knowledge, they can see that there will be issues and problems that arise such as
overheating pump, maximum pipeline pressure, and maximum fuel burn temperature. Another
reason is the top managers can see what it is like to physically do the work how hard it is, how
hot it is under sunny temperature, how cold it is under raining seasons. After all these then only
the top managers can actually visualise how to get an objective done.

Another way to improve decisions made is by a method called decentralisation, its

handing down authority to subordinates, employees, lower levels; it has more delegated authority
to all levels. This can improve the decisions made because most physical work done at the plant
is done by subordinates, not the top managers. Subordinates are the ones that face the physical
work, the issues of the work, and the mismanagement of the work and so on. Subordinates know
what will work and what does not, handing certain authorities to them can improve decision
making, and they will have experiences on practical more rather than theory, for example, liquid
sample needs to be taken daily, the top managers just knows whether the sample is taken or not
but the employee will be the one who knows if the sample smells differently, looks differently or
if there is anything wrong with it. This can also improve the speed of decision making if the
consumer and product are in different places, for example methanol is needed by a shipping
company, managers have to come down and calculate how much methanol is sold and at what
price, if this authority is handed down to employees, they can quickly calculate these for them
and thus making the manager’s schedule less packed.
 Principles Of Management BBPP1103

The third method to improve decision making in this organisation is by doing a various
variable test, this can achieve multiple evaluations at the same time and also increase efficiency
and accuracy at the same time. Before a decision is made, multiple factors can be at play, and to
determine which factors are important, tests are made. Each test can create one result per
implication; therefore only one implication can be made per test. An example is when a manager
needs to motivate employees at the workplace, so the manager decided to give free coupons for
food on Tuesdays and then records the employee’s level of motivation, the manager also decides
that on Wednesday the parking would be free, and also records the level of motivation for
employees. After two tests has been done in the same weeks for a month or two, the manager
realises that the free parking motivates the employees more, and ended up using that for
motivation. Another example is when employees are complaining food at the canteen, the
manager decided to get another food supplier in the canteen, and also standardised the food
price, by doing this two test at the same time, the manager can record employees feedback and
decide which is the best for the employees.

The fourth method to improve decision made by the organisation is by using a Delphi
technique. It is a method where it comprises of panels containing experts and experienced people
answering to questions, or problems to find the best solution possible. The first step is to find the
right experts and the right experienced individual to represent the panel, the problems are then
written in some type of a questionnaire. An example of a question can be how to detect the
source of abnormal sound from a pump. The question is then given to the panel and waits for
their discussion and when a solution is found, it is then return back to the manager. The answers
are then summarised again in a form a report and returned back to panel with a more specific and
detailed questionnaire, for example how to detect the source of an abnormal pump noise when
the discharge is at a low pressure, the flow is low but the discharge pressure is high. The panel
reads the report and hear opinions and proposals from other members, also the panels complete
the second question. This whole process of questioning and answering is repeated until an
unanimous decision is made.
 Principles Of Management BBPP1103

All the things we choose can affect immensely in a company, a good manager has to
foresee all the things possible, be it comes from the types of decision making, the steps to make
rational decisions or ways to improve decision making. The types of decision making consist of
uncertain and risky, the manager has to consider carefully which decision to choose, the
conditions both with its own positives and negatives such as incomplete information or uncertain
of future, the manager has be aware on which type of decision making environment it is in.

The steps to make rational decisions must be followed closely; the steps have been
formulated so it does not miss out on anything and covers all aspect. It is based on facts, opinions
and reasonable reasons based on experience, it is also the process of defining problems,
evaluating alternatives and selecting best solution. It has 6 steps consisting of defining problems,
identifying decision criteria, allocating weight to each criterion, generate alternative solutions,
evaluating alternatives and lastly selecting the optimal decision. These steps are important to
make the best decisions

The ways to improve decision making are when we want to maximise the positive impact
on a company, no one wants to make a bad decision, it can ruin reputations, assets and relations.
Making decision can sometimes be a long and tedious process which can produce many human
errors from fatigues, incorrect actions and so on. In this case it makes sure the decision that is
chosen by managers are not bad decisions, or at least improves the decision making process.

In conclusion it all goes to one objective which is to keep improving the company and be
the best, either in terms of profit, reputation or any matter. No company wants to disappear in a
short time, all company wants to be the number one for the longest time, therefore to achieve this
objective of being the best, an organisation has to do its work in the most efficient and most
effective way. Decisions has to be made, whether it is an easy decision or a tough decision, a
long term or a short term decision, a small decision or a huge decision, all things has to be
considered and that’s why there are guidelines to follow, mind sets to follow, trends to follow to
achieve this objective. At the end of the day to improve an organisation can differs from one to
another, one strategy might work for tremendously while the same strategy might not work for
another, no matter what happens we must always work hard, try our best and if the first plan does
not work there will always be another day.
 Principles Of Management BBPP1103

( 2548 words)

ATTACHMENT

REFERENCES
Author’s name (year). Book, Title, Publication
Carola Hoyos (2007). The new Seven Sisters : Oil and Gas giants dwarf western rival, Financial
times
Smriti Chand ( 2006) Decisions Making Environments: Certainty, Uncertainty and Risk,
<http://www.yourarticlelibrary.com/decision-making/decisions-making-environments-certainty-
uncertainty-and-risk/10269/>