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Introduction Armco Inc., is the sixth largest producer of stainless, electrical, and carbon steels and steel products in the United States, and the Armco Inc Midwestern Steel Division is its largest division. The largest subdivision of the Steel Division is the Kansas City Works which produces two products: grinding media and carbon wire rod. In January 1991, a new performance measurement system for Kansas City Works was implemented by Bob Nenni, the Director of Finance, with the aim of providing managers the best information that would better enable them to enhance company performance. According to Mr. Nenni, the new system was designed so that managers would prioritize certain key objectives and not the numerous details provided by…show more content…
* By limiting evaluation of managers to the cost that they could control directly, which is the spending of their subordinates, unlike the costs of their whole department, they now have a wider scope of what they are responsible of above and beyond minimizing cost. Disadvantages * The system was not able to provide a performance measure for each individual, particularly the managers in the company. * Some of the key performance measures were not applicable to other divisions of the company. 3. Adopt a Modified System (see exhibit 2) Advantages * This system not only caters to the top management but also the middle and lower branches of the company. * It provides a more objective and reliable measures of performance both in the division and individual performances. * Each division and individual will be able to assess their strengths and weaknesses in their performance to the company. * It provides a more objective way of giving compensations and incentives to the employees. * The system can easily adapt to unforeseen events. Disadvantages * There is a possibility of resistance in the part of the managers thus resulting to delays and inefficiencies. * Additional opportunity costs may arise due to the fact that the employees need some time to adapt to the new system. * Evaluating each individual using

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