Case Study
Case study Armco Inc: Midwestern Steel Division
The case is about the new implementation of the new performance measurement system at Armco Inc, a steel making company. The old performance measurement system at the company was focused on the cost performance measurement which included the cost added per ton of steel at each production stage. Each month, the operating statics reports were issued every month with the most detail of the cost. Bob Nenni, the director of finance, was not satisfied with the performance of the firm, he thought there were too many details in the operating statics report which cost too much. It also made the operating managers focus on every aspects of the cost during the operation, and kind of ignore the big picture of the cost saving objective. In his opinion, more profit could be generated when the operating managers focus on five or six big things that cause 80% of the costs than on everything that caused 100%. Then, the new performance system came up. The new performance measurement system is based on the objective of cost saving during the operating process. Operation managers are desired to focus on the major cost during the operating process and would not get involved in the detail until the problem in the small factor happened. In addition, the new measurement system would help measure the performance measurement of individual operating managers in terms of what he or she takes charge of.
The implementation of the new performance measurement system met some troubles at the beginning. The employees who were used to the old system complained about the new system as the new system doesn’t provide enough information about where the cost goes. Bob believes that the implementation of the performance measure would be profitable to the overall performance of the company. In my opinion, it always takes some time to make people change the mindset. It would be difficult in the beginning, but it would be finally profitable at the end if
The case is about the new implementation of the new performance measurement system at Armco Inc, a steel making company. The old performance measurement system at the company was focused on the cost performance measurement which included the cost added per ton of steel at each production stage. Each month, the operating statics reports were issued every month with the most detail of the cost. Bob Nenni, the director of finance, was not satisfied with the performance of the firm, he thought there were too many details in the operating statics report which cost too much. It also made the operating managers focus on every aspects of the cost during the operation, and kind of ignore the big picture of the cost saving objective. In his opinion, more profit could be generated when the operating managers focus on five or six big things that cause 80% of the costs than on everything that caused 100%. Then, the new performance system came up. The new performance measurement system is based on the objective of cost saving during the operating process. Operation managers are desired to focus on the major cost during the operating process and would not get involved in the detail until the problem in the small factor happened. In addition, the new measurement system would help measure the performance measurement of individual operating managers in terms of what he or she takes charge of.
The implementation of the new performance measurement system met some troubles at the beginning. The employees who were used to the old system complained about the new system as the new system doesn’t provide enough information about where the cost goes. Bob believes that the implementation of the performance measure would be profitable to the overall performance of the company. In my opinion, it always takes some time to make people change the mindset. It would be difficult in the beginning, but it would be finally profitable at the end if