Armco Midwestern Steel Division Essay

1384 Words Mar 3rd, 2011 6 Pages
I. Introduction
In January 1991, the management of the Kansas City Works of Armco’s Midwestern implemented a new performance measurement system that was “designed to give us better management focus on the things that are most important for them to worry about, earlier warning problems and improved commitment to achieve objectives”.
However, the changes top management wanted to institute and integrate into the system were met with less than favorable impressions, not excluding outright dissatisfaction and resistance to change, evidenced when“managers kept using the old data and never seriously considered improvements that could be made”.
As a result, this has caused the accounting group to temporarily discontinue the initial
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Operating managers may experience information overload consequently become unable to focus on the costs that should really be controlled.
• The system only presents raw data and does not factor in externalities such as gas price increases, economic fluctuations, and other analyses.
• The performance evaluation of managers is not standardized. They are evaluated based on gut-feeling and hearsay if top management and without the consideration of external factors.
• Information production and delivery is inefficient. Information takes a long time to collect and consequently impairs the timeliness and relevance of the reports.
• The job roles managers perform are not value-adding to their job roles and satisfaction. Because information is not translated into objectives, managers do not understand how their actions and decisions concretely affect the company’s operations.
• Managers are completely focused on their subunits rather than the performance of the entire company.
• The old system is inefficient. Managers spent more time explaining why changes in costs were caused by problems with the accounting system than they did fixing the problems.

Why operating managers resist change
Despite the shortcomings of the old performance evaluation system Operating managers have responded less than favorably when top management attempted to implement the new performance evaluation system. This is presumably

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