Analyst at Project Guru. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She likes to pen her thoughts about the latest issues gripping these areas across the world. Latest posts by Ankita Agarwal see all. How to write the theoretical framework of the research? Discuss Name. Older discussions. Order now. As low as However, it can also have a negative impact, as it could result in decreased motivation and productivity level of the employee.
In control theory employee performance is also controlled by the rewards and recognition which an employee achieves once his performance meets the standards of an organization. However, control theory sounds too mechanical and fails to contemplate that humans are not mechanical objects Locke, Control theory sounds more mechanical in terms of human behavior and performance.
It can go well with a Bureaucratic, strict organization framework where employee actions are continuously monitored and controlled. But now days work environment has become more dynamic, challenging, and competitive. Employees need to undergo all types of self-learning and skills up-gradation in order to survive. There are multiple applications of Control theory in the workplace.
In order to increase the performance of employees, managers must assign specific and challenging goals to employees that will upgrade their performance. This is because, without clear feedback and proper standards, employees will not be able to rectify their errors. So organizations can apply Control theory in the areas where there is the evaluation of performances, team meetings, and check-ins.
In the case of human resource management, all three types of a control system which are behavior control, output control, and input control can be utilized to analyze behavior and performance of an employee Shell, Nowadays, organizations have open work culture which involves regular sharing of ideas and opinions. Employee behavior, output, and input cannot be controlled completely in such present business environments.
Similarly, organizations should ensure that employees have the freedom to handle the complexities and challenges they are facing. So, more research is required on control theory to tackle dynamic work culture and environment. Bowen and E. For a recent empirical research study in this area, see S. Seibert, S. Silver and W. For a theoretical study on the feasibility and limitations of empowerment and decentralization, see G.
Baker, R. Gibbons and K. Don Keough quoted in J. Chandler, quoted in T. Brickley, C. Smith and J. Nadler, M. Gerstein and R. Milgrom and J. See also H. See N. Fast and N. Arya and B. Campbell, S. Datar, S. Kulp and V. Euske, M. Locke and G. Wenner and R. Kulp and R. Feltham and J.
Irwin, , p. Schiff and A. Case Study Armco, Inc. The new performance measurement system is designed to give us better management focus on the things that are most important for them to worry about, earlier warning of problems, and improved commitment to achieve objectives.
In the summer of the new system was still being implemented and its design refined. But Bob Nenni believed that the new system would be successful at the Kansas City Works, and he hoped that its use would spread throughout Armco. Through joint ventures the company also produced coated, high strength and low-carbon flat rolled steels and oil field machinery and equipment.
A division organization chart is shown in Exhibit 2. Like that of most of the firms in the US steel industry, business at the Kansas City Works had declined significantly in the last decade. Employment was down from 5, employees in to 1, in The Kansas City Works produced two primary products: grinding media and carbon wire rod.
Carbon wire rod was used to make shopping carts, bed springs, coat hangers, and other products. In the Kansas City Works sold , tons of steel: , tons of grinding media and , tons of rods. Armco was recognized as the leading supplier of grinding media products in the United States.
Carbon wire rods, on the other hand, were basically a commodity product. But the rods did generate volume and helped cover some of the fixed costs of the plant. The Kansas City Works was not a low-cost manufacturer. Its union labor costs in Kansas City were higher than those of some of its nonunion competitors, particularly those located in the southeastern United States and non-US locations.
And the Works had an inefficient plant infrastructure because the plant was designed to accommodate five times as many employees as were currently working there. Instead of being efficiently laid out, the buildings still being used were spread across a acre plant site. All salaried employees in the Works were eligible for cash incentive awards based on a performance evaluation made by their immediate superior and, ultimately, Rob Cushman, the division president.
The performance evaluations were subjective but were based on, typically, three measures of performance applicable to the position. First, scrap steel was melted in the ladle arc furnaces. The rod mill shop worked with square cross-section bars. It formed them into spheres using a roll-forming machine. The other two weeks of the year were used for extensive preventive maintenance and installation of new equipment.
For a number of reasons, good performance in the melt shop was critical to the performance of the Kansas City Works as a whole.
Hence, the name for the process. The largest expenditures in the melt shop were for labor, production materials of various types, and energy.
Works managers were working toward computer control of energy, but in the melt shop manager still made most decisions about the heat used in the furnace, a major energy consumer. Third, the quality of raw steel produced by the melt shop was an important component in determining whether the finished products met the required specifications. Quality was affected by the grades of scrap steel and nonmetallic materials used in the process. Nonmetallic materials were consumable items added to batches to remove contaminants from the steel.
Armco managers purchased a variety of grades of scrap steel and nonmetallic materials, and they used different proportions of scrap to nonmetallic materials depending on the grades of scrap and nonmetallics being used; lower grades of scrap typically contained more contaminants. Some of the production processes were standardized, with the addition of some nonmetallics done either by automated equipment or by production employees following standardized recipes.
Other processes, however, required the manufacturing manager and his technical supervisors to exercise judgment. Rolling and Finishing Personnel in the Rolling and Finishing areas were asked to make parts to specification while controlling yields and costs. Customer specifications for rods usually contained physical property requirements, such as for ductility and elasticity. One specification for balls required a two-story drop test. If the test ball cracked into parts on impact after being dropped from two stories, then the product was rejected on quality grounds.
The rolling areas were heavily capital intensive. Significant costs in the finishing areas were for labor, energy, maintenance, and yield losses. Maintenance Maintenance was also an important determinant of success in the Kansas City Works. The goal of maintenance was to maximize equipment uptime while controlling maintenance expenditures. Organizationally, the maintenance activities were divided into three groups. Teams of electrical and mechanical maintenance employees were assigned to each manufacturing cost center.
A third group operated a centralized maintenance shop. Each responsibility center was comprised of one or more cost centers. Before changes were made in the performances of the cost center managers and their superiors in the plant were evaluated in terms of cost control and safety. Cost Above and the items that comprised it were reported to the manufacturing managers on an Operating Statistics Report that was produced on approximately the 15th day following each month end.
The Operating Statistics Reports provided a five-year history, monthly and year-to-date actuals, and monthly and year-to-date objectives and variances from objectives for each of the factors that determined total Cost Above for each cost center.
Exhibit 3 shows a portion of the Operating Statistics Report for one cost center — the 2 melt shop. The Operating Statistics Reports used the same accounting information that was used for financial reporting and inventory valuation purposes, so the figures included allocations of indirect manufacturing costs. For example, to provide smoother cost patterns, the charge for the two-week plant maintenance shutdown was spread over the 50 weeks of operations.
The operating managers had become accustomed to the Operating Statistics Report and in general they liked it. Paul Phillips, the Rolling and Finishing Manager, liked having the monthly and annual trends and the information comparing actual costs with objectives. For example, one report showed the cost for nonmetallic materials broken down by the specific materials used. The goals of the new system Bob Nenni, the director of finance, had been working on a performance measurement system since , but due to staff constraints he had been unable to design and implement the new system while 3 The 1 melt shop contained obsolete equipment and was no longer used.
On November 1, Rob Cushman was appointed as president of the Midwestern Steel Division, and Rob sponsored the implementation of a new performance measurement system. He allowed Bob Nenni to discontinue production of the Operating Statistics Report in January in order to implement the new system.
People were relying on something that was not adequate. Enough companies are using good performance measurements as building blocks to excellence. I want to give my managers the information they need. This system is part of a spirit of change that has to happen. We will give people more responsibility. Bob Nenni added: The cost part of our old performance measurement system was built for accountants. It was designed to produce financial statements, operating reports, and product cost reports.
The vision and goals of the organization were to be translated into key success factors which would be disaggregated into department and individual objectives that would be compared with measures of actual results. The basic philosophy is illustrated in chart form in Exhibit 4. Rob Cushman and Bob Nenni thought that the new system promised two major improvements. First, the new system was designed so that managers would focus on the few key objectives that largely determine the success of the Kansas City Works and not get involved in the detail until a problem existed.
Second, the new system was designed to provide an improved basis for evaluating operating managers and manufacturing supervisors. The system would include a balanced set of performance measures, including quality, schedule achievement, and safety, in addition to costs. And the cost reports would be improved because they would include only those costs deemed controllable by each individual operating manager. They would not be distorted by volume changes as in the old system.
The design of the new system The new system design process began early in Performance measure 1, heats per week, was only relevant to the melt shop. However, since the melt shop was the bottleneck operation, heats per week was a critical measure for the Works as a whole. Measures 2 through 6 were applicable to all manufacturing areas. Tons per man hour was a productivity measure. The disabling injury index was a safety measure.
The total quality index was the product of three measures: physical yield, percentage of product meeting specification, and percentage on-time shipment. Spending was the accumulation of all expenses incurred by the people reporting directly to a manager. The maintenance performance measures had not yet been clearly defined by the middle of , but maintenance labor cost and material cost were being measured. Performance measures 7 through 10 were plantwide not cost center measures.
Cash flow was measured monthly for the plant. Product mix was the percentage of high carbon products sold compared to low carbon. Inventory days on hand was tracked monthly. Accountability for inventory performance was shared among plant purchasing managers, manufacturing managers, and commercial managers. Sales price minus net metal, a measure of value added, was tracked monthly. The design group discussed the components of each performance area and the ways in which each measure could be disaggregated to guide performance at lower management levels.
For example, the cascading of goals relating to total quality is illustrated in Exhibit 5. Total quality at the Works level was affected by the proportion of products meeting customer specifications, the yields, and the percentage of on-time shipments; and each of these indicators could be disaggregated further.
The intent was to measure each of these areas of performance at the lowest relevant level of the organization. One of the most significant changes was the elimination of the Cost Above measure. Production managers were no longer held accountable for all costs incurred in or allocated to their respective areas so, in effect, they were no longer cost center managers. The cost detail in the new performance reports was reduced considerably. In the new system the only cost figure on which managers were evaluated was the spending by the employees in their organizations.
As the entire task could not be accomplished immediately they focused their attention on producing some pilot reports for a subset of the measures. They focused first on heats per week, tons per man hour, physical yield a component of the total quality index , and spending. Exhibit 6 gives an example of a report for the Melting Operations Manager. The early reports did not provide the line-item expense detail to which they had become accustomed.
This change was made to give the operating managers a number that they could compare to their budgeted spending targets which had been prepared using the old measurement philosophy. Starting in , however, they promised that the reports would reflect only the new cost performance philosophy. By then the performance targets would be set using that same philosophy. In June Bob Nenni reflected on nine months since the design meetings began. He was convinced that the company was on the right track even though some of the managers were uncomfortable with the new system.
And he knew that the delays in the implementation process had frustrated both the information users and his accounting staff. The new system is not yet part of their mentality. Changing mindsets is ultimately more important and more challenging than the technical job of producing the reports. But we in accounting feel we will now be more useful to the organization. For example, early in the melt shop suffered two transformer failures, apparently because of fluctuations in the line voltages provided by the local utility, Kansas City Power and Light.
Such failures had happened nearly every year, but shop managers had recently upgraded some of their electrical switches to try to eliminate the problem.
Nonetheless, the failures occurred again, and by April Gary Downey knew that his goal to average heats per week was impossible. The failure of the melt shop to achieve its plan would mean that the Kansas City Works as a whole would not be able to achieve its plans for Rob Cushman knew that at the end of the year he would have to decide whether or not to let this, and perhaps other similar occurrences, affect the evaluations of his operating managers.
The second was an issue as to whether to increase the proportion of total compensation that was linked to individual performance evaluations.
In other words, how much of total compensation should be provided in fixed salary, and how much should be paid only to those who were good at getting things done and done well? Effective May 13, Excludes discontinued operations, associated companies, and Armco Financial Services Group. The limitation of working in two dimensions forced designers to create separate drawings for each dimension of every piece.
Designing items such as car parts, vacuum cleaners, or dolls, required thousands of calculations and hours of drawing, measuring and erasing, before each piece fit correctly into the whole. Products designed in this way were extremely difficult to evaluate without physical prototypes since it was nearly impossible to visualize the end product and see how the pieces fit together. Exhibit 1 displays a 2-D product drawing.
The introduction of Computer Aided Design in the early s automated the measuring of lines and angles, significantly reducing the amount of time it took to draw actual objects and making alterations easier and more timely. CAD usage spread to smaller companies with the proliferation of personal computers in the early to mids.
But the early CAD programs did no more than computerize the manual drawing process, which continued many of the limitations of two dimensional drawing. Monsler under the direction of Associate Professor George P. All names and numbers have been disguised to protect the privacy of the company.
Harvard Business School Case The founders credited much of their success to the quality of their people and to their philosophy of empowerment combined with generous rewards for performance. The company was unusual both in the degree to which employees were granted autonomy, and in the way they were rewarded.
Every employee was a shareholder, and earned significant compensation through commissions and bonuses. Things were not progressing quickly enough and top management did not know what to try next. Designers could rotate the picture and view the product from all angles. Objects were now easier to identify because the relationships between the sides of a piece were displayed as they would be in the final product.
However, the wires delineating the front were indistinguishable from the wires delineating the back, making it difficult to accurately visualize an object from its 3-D wire drawings. Three dimensional solids design, the newest CAD technology, included many new capabilities and provided clear discernible pictures with shading and depth. The image provided by 3-D solids modeling resembled an actual object, making it far easier to construct and evaluate product designs.
Exhibit 1 demonstrates the clarity provided by 3-D solids modeling. In addition, advances in the machine-designer interface had made the actual drawing of parts significantly easier.
Other features and dimensions would automatically adjust. Using solids modeling, designers could create an object in four hours, when it would have previously taken four days to create on earlier CAD systems, and weeks to create by hand. These price drops significantly reduced the margins for producers of low-end systems. After , prices for even these high-end products plummeted with the falling price of desktop workstations.
Prices and margins remained high because the systems were far more complicated than the simpler commodity software. Solids modeling provided many more capabilities and required designers to learn many new funtionalities. Companies purchasing 3-D solids CAD systems usually needed a partner CAD company to explain the system, instruct the designers, and help integrate the system into the organization. Recent developments in the industry As CAD systems became increasingly sophisticated in their ability to help designers actually draw and visualize products, they also became the building blocks for broader applications of computer technology in the product design process.
The ideal design and manufacturing scenario involved getting all the details of design, prototyping, and production right the first time, and doing so quickly. Concurrent engineering — simultaneously designing, testing and manufacturing a product — worked toward this goal.
Most developments in manufacturing technology contributed to automating one of these stages and integrating it into the rest of the product development process. Computers could verify product designs by simulating laboratory tests that previously had to be performed on physical prototypes. The effects of temperature, air flow, stress, and impact on a potential product could all be determined by computer simulations.
These computer tests determined whether products would break if dropped from a certain distance, or if they would crack after being shaken for extended periods. Computer simulations verified production possibilities as well, by testing whether a plastic would flow through a particular mold completely, or if it would cool correctly.
Analysis tools identified weaknesses and flaws in early product designs, greatly reducing the time and cost of the testing period. Together, analysis tools and CAD dramatically shortened the length of the typical product cycle. The database, much like an electronic vault, stored drawings with labels and dates to make recalling a specific version or set of drawings quick and easy.
All business divisions — management, engineering, marketing, and manufacturing — could contribute to and access data in the PDM system. PDM had also expanded to include a communications capability which linked its database or storage capacity, the CAD software, and the other computers within a company.
This enabled individuals to send product drawings along with production or market information and personal communications to other people in the company. The ability to document, communicate, and change product information online opened countless opportunities to restructure old design processes.
Change requests and change orders could now be sent and received instantly. All affected product specifications drawings, bills of materials, manufacturing instructions, marketing information, etc. These process changes enabled companies to reengineer their design flow, maximizing the efficiency of the organization and their communications structure.
Exhibit 2 diagrams this process change. Like many promising new technologies, PDM was receiving lots of attention from the market. New companies were emerging rapidly with large parent companies or venture capital firms backing their initiation. PDM firms were battling for prospective customers, each hoping to make a name for itself and establish its product as the emerging market standard.
But like many new fields, no one could predict when the market would take off. Plenty of the entrants were losing their investments as customers scaled down their requirements and delayed implementing their PDM programs. Each office was opened by a Sales Representative and an Applications Engineer. The Sales Reps were the primary link to potential customers. Applications Engineers were the consultants and trainers.
VDS also employed software engineers who wrote integration software and interfaces for the various programs used by VDS. With no need for production facilities or inventory, and a supply contract with HP, VDS was able to start up with a few good salespeople and almost no outside financing.
Tyson believed that selling the product was not enough; customers needed customized software, training, and help restructuring their design process, if they wanted to use their new systems to capacity. They began by providing customers with a new interface for the CAD software so that the tools were intuitive and easy for people to use. To help their clients use these tools, VDS provided both training and consulting. Training classes were held for groups of 10—15 people in the various VDS offices around the country.
The founders named their conception for the coming generation of mechanical engineering processes Vision TM. VDS believed that companies should focus their attention on improving the design process, specifically improving their use of information. Founding beliefs Apart from having new ideas on how CAD systems should be sold, the founders wanted to start a company with a different style of managing employees. They envisioned a company in which management and employees respected one another and worked 54 together as a team.
Like a partnership everyone would be an owner, share in the profits, and take responsibility for making the company succeed. As a management team they reflected those beliefs in their own interactions as well as in their interactions with the rest of the company. Employees referred to them affectionately as the Founding Fathers. If HP gives us a lower price, the Sales Reps pass the savings on to the customer.
Management worked with the sales force and the engineers to specify goals and then let the offices work as independent teams to fulfill their goals. I was getting my degree in mechanical engineering from Purdue, which is where I met Donald Conway, and we often talked about how beaten down and unmotivated employees were, and how we would do things differently if we were in charge.
I believe that people are the greatest and most wasted resource in most companies. I worked at HP for seven years and then quit for a year to go home and take care of my father who was sick. The final document was distributed internally, binding management to an agreed upon set of goals and conveying those goals to their employees. It was a very painful process. Every word in the document was a blood battle; every word is precise; every word is deliberate.
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