presentation notes - OLD PERFORMANCE SYSTEM(result control...

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OLD PERFORMANCE SYSTEM (result control) Managers spent more time explaining why changes in costs were caused by problems with our accting system than they did fixing the problems. –Bob Nenni Goal in Kansas City Works: differentiation oriented Cash incentives adwards: all salaried employees were eligible Based on performance evaluation by immediate superior Rang from 5-30% of annual salary depend on the individual’s organization level 3 measures: 1/3 on plant safety; 1/3 on hard production; 1/3 on leadership(abstract, do I hear good things and see good things going on?) 5 responsibility centers (comprised of 1 or more cost center): melting, casting, 19” mill department, grinding media department Cost center managers and their superiors were evaluated in terms of cost control and safety. Key cost performance measure: Cost Above Cost Above : A summary measure that included the cost added per ton of steel at each production stage and for the entire plant. Reported to the manufacturing mnger on an Operating Statistics Report Operating Statistics Report: o produce on the 15 th day following each month end o provide a 5-yr history, monthly and year-to-date actual; monthly and yr – to-date objectives and varioances from objectives for each of the factors that determined total Cost above for each cost center. o Cost per net ton o Use the same accting info that was used for financial reporting and inventory valuation purposes, may include the indirect manufacturing cost( uncontrollable) o Smoother cost pattern (cons—not reflect actual performance) The system’s information is not adequate. Cost part of the OPS was build for acct. It was designed to produce financial statements, operating reports and product cost reports. But can’t do all things well.—Rob Cushment Cons: Too much data, mng easily get confused and unfocused (inefficient in terms of mngm) would be distorted by volume changes.
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