Armco. Case

Armco, Inc. (Armco) is the sixth largest producer of stain slight, electrical, and carbon nerves and steel products. Kansas City whole caboodle (Kansas) is the Armcos midwestern Steel Division, and has two primary products grind media and carbon wire rod, whiz world spyd in the industry for its persuasiveness while the latter being non paid and only covering some of its wintry costs through volume. In January 1991, bob Nenni, the Director of Finance, introduced a youthful machineation touchstone formation for Kansas City Works to provide managers with the best instruction that would break down enable them to boost up family proceeding.In order to maximize profits and remove its position in the US manufacturing steel industry, Armco has adopted a cost leadership strategy with a broad court and has managed to achieve growth by pleasant in joint ventures expanding its product lines in implementing its strategy. However, the Kansas City Works has the strategy gr ound on disparateiation because it has cost disadvantages such(prenominal) as inefficient plant floor and union labor costs.Taking into consideration that Armcos revenue has been declining and now only generates a marginal profit whereas Kansas succeeds in producing and marketing high value products, Armco as a whole should switch the strategy to think on the differentiation strategy that allow lead to sustainable growth and leading position in the industry. In increment to this inconsistency with the strategies of the firm as a whole, the experient prudence control placement used at Kansas had numerous problems that get down the quality of performance measurement.In the out of date strategy, the operating(a) Statics Reports were issued only monthly and provided to the managers approximately 15 days after the following month. The wishing of timeliness caused manufacturing results measurement controls to be unproductive because variances could non be investigated quick ly. This also caused block in solving problems and contributed to higher manufacturing expenses in the following months pecuniary statements. Also, the old report contained too detail information and issued that managers do not present control over.It include the same bill information that was used for other purpose. As a result the numbers included allocations of indirect manufacturing costs. The too detailed information caused distraction from focusing on historic issues to less important and less pertinent issues. Another problem with the old arrangement was that it failed to measure performance of managers and employees at different levels because of the subjectivity and nucleotide that is not applicable to all employees. Therefore, the old system did not serve as a honorable results control system due to the inefficiency.Due to the aforesaid(prenominal) problems, a new performance measurement system was introduced to replace the old precaution system. It was designed to give better management focus on the things, which are almost important. The new system included less datas it allows managers to focus on the 5-6 more important which cause 80% of the costs. Furthermore, the new system has more match set of performance measures, which provides an improved basis for evaluating operating managers and manufacturing supervisors.The design of the new system was more sophisticated than the old one however, the cap management failed to smoothly implement the new system. First, the managers have been working with the old system for a very tenacious time and they are more well-known(prenominal) using the old system. Secondly, the old system suffers from insufficiency of direction as employees did not to the full appreciate the relationship amid their responsibility and their final results.Due to the lack of account to employees, managers kept using the old performance measurement system because they was accustomed and they didnt know the differe nces between the two systems, so they never seriously considered improvements that could be make with the new. Therefore, there was a mis confabulation between the top management and the middle and humble managers. The lack of information they get leads to poor dread 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 the likes of the operating managers finally understood the old report, so they decided change it, managers did not understand the purpose of writing reports and recognize the importance of specific information in the reports. Thus, more communication was needed to justify the goals and needs 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 management will be achieved by having seminars and meetings where they can have opportunities to fortune opinions.