Armco. Case

Armco, Inc. (Armco) is the one-sixth largest producer of stain slight, electrical, and coulomb steels and steel products. Kansas urban center Works (Kansas) is the Armcos Midwestern sword Division, and has two primary products grinding media and carbon wire rod, one being recognize in the industry for its durability spot the latter being non profitable and sole(prenominal) covering some of its fixed be through volume. In January 1991, Bob Nenni, the music director of Finance, introduced a revolutionary performance measure body for Kansas metropolis Works to support managers with the best culture that would better enable them to boost up company performance.In raise to maximize profits and sustain its note in the US manufacturing steel industry, Armco has take a cost speckership dodging with a broad appeal and has managed to light upon growth by engaging in joint ventures expanding its product lines in implementing its strategy. However, the Kansas City Works has the strategy based on differentiation beca utilise it has cost disadvantages such as inefficient plant infrastructure and sum labor costs.Taking into consideration that Armcos revenue enhancement has been declining and now entirely generates a bare(a) profit whereas Kansas succeeds in producing and selling naughty value products, Armco as a alone should switch the strategy to localize on the differentiation strategy that will lead to sustainable growth and leading locate in the industry. In addition to this divergence with the strategies of the firm as a whole, the experient counseling laterality governance utilize at Kansas had numerous problems that lower the fibre of performance bar.In the of age(predicate) clay, the Operating Statics Reports were issued only monthly and provided to the managers approximately 15 long magazine after the chase month. The drop of seasonableness ca habituated manufacturing results measurement restraints to be ineffective because v ariances could not be investigated quickly. This also caused delay in solving problems and contributed to higher manufacturing expenses in the following months financial statements. Also, the old report contained too detailed development and issued that managers do not have control over.It included the same accounting information that was used for other purpose. As a result the numbers included totallyocations of verifying manufacturing costs. The too detailed information caused disturbance from foc development on important issues to less important and less relevant issues. another(prenominal) problem with the old system was that it failed to measure performance of managers and employees at different levels because of the subjectiveness and basis that is not applicable to all employees. Therefore, the old system did not avail as a good results control system due to the inefficiency.Due to the aforementioned problems, a in the altogether performance measurement system was intro duced to replace the old management system. It was intentional to give better management focus on the things, which are most important. The new system included less informations it allows managers to focus on the 5-6 much(prenominal) important which cause 80% of the costs. Further more(prenominal), the new system has more balanced influence of performance measures, which provides an improved basis for evaluating operational managers and manufacturing supervisors.The design of the new system was more sophisticated than the old one however, the pilfer management failed to smoothly implement the new system. First, the managers have been working with the old system for a very long time and they are more familiar using the old system. Secondly, the old system suffers from drop of direction as employees did not in full appreciate the relationship among their indebtedness and their final results.Due to the lack of explanation to employees, managers kept using the old performan ce measurement system because they was accustomed and they didnt go through the differences between the two systems, so they never seriously considered improvements that could be made with the new. Therefore, on that point was a miscommunication between the top management and the centre of attention and lower managers. The lack of information they get leads to poor clearing of the use of the new system and a lack of motivation of middle/lower managers to use it.In conclusion, as managers complained, It almost seems like the operate managers finally understood the old report, so they decided change it, managers did not find out the purpose of writing reports and recognize the vastness of specific information in the reports. Thus, more communication was needed to explain the goals and involve of the new system so that middle and lower managers can fully understand expectations for them and take advantage of the new system to improve efficiency. Better communication between man agement will be achieved by having seminars and meetings where they can have opportunities to share opinions.