Case study of HCC Industries

¶ … HCC Industries

The need to set and regulate performance standards targets is an important aspect of developing a solid managerial strategy which will take business to another level. It is important to choose the best solution for the development of performance standard within any given company, and that development should be highly tailored to the established performance of the past. As seen in the case study of HCC Industries, choosing the most appropriate performance target method is crucial. If a company goes off target and uses a style which is unrealistic, goals will not be met. This was the case when HCC Industries changed its style from stretch targets to minimum standards performance targets in the late 1980s.

Case Summary

Using appropriate target techniques depends on those available and practical to the company. In his research, Barnaby Donlon states that "Traditionally, targets are used in planning processes to establish explicit performance outcomes," (2008 p. 1). This was the case in HCC Industries. An explicit performance target was desired, and was not being met by the previous use of the stretch target system. Management is responsible for reviewing existing practice, collecting views, and therefore setting the pace of the strategy at hand, (Pearson Publishing 2009). When management at HCC realized the stretch targets had the potential to be improved, they looked towards other standards of performance measurement.

Evaluation of the Move From Stretch Targets to MPS

Stretch standards are in many cases not typically met in full. They are actually used "to denote those objectives which are seemingly unobtainable with present resources," (12manage 2009 p. 1). When a stretch target is implemented, it represents the best possible outcome and the percentage of that outcome that was actually made. They work well for a variety of settings and "If done right, a stretch target, which basically is an extremely ambitious goal, gets people to reform in ways they never imagined possible," (12manage 2009 p. 1). This potential for vast improvement is probably why HCC chose this style of performance setting in the first place. It offers great potential for future growth, "The purpose of stretch targets is not only to allow employees to stretch their abilities to new levels, but also to change the organization's competitive position by dynamically altering its businesses processes,"(Thompson et al. 197 p. 1). However, upon management review, a new system was implemented -- that of minimum performance standards (MPS). In contrast to stretch targets MS targets are not the level of possible potential, but rather the minimum bottom line needed to meet performance. Anything below that line shows that this minimum output was not met for whatever reason.

In the case of HCC, MS targets proved unrealistic. HCC Industries Inc. is a company that deals with the manufacturing of "precision hermetically sealed electronic connection devices," (Business Week 2009 p. 1). The company was a huge name in its field, and had a staunch reputation; "HCC was an industry leader in electronic connectors requiring glass-to-metal and ceramic-to-metal seals, and particularly those requiring unusual or close tolerance machining and the sealing of exotic metals," (TEXTBOOK GIVEN 1). They excel in producing electronic components to be used under harsh circumstances, such as rough environments, in the automotive and aircraft industries (HCC Industries 2009). The company was broken up under 4 managers with their own operating divisions. Under these four divisions were separate connector divisions which handled their own growing business and strategies on their own; "The three connector divisions were similar in that hey were profitable but growing slowly," (TEXTBOOK GIVEN 1). These separate divisions were basically autonomous from one another, with the ability to work independently and separately from one another. This is why the stretch target system, which was more fluid, seemed to actually work better than the more rigid implemented MPS system.

HCC Manager's Expectations

HCC decided to make the change to MPS target style for a number of reasons. It came with an incentive for both employee and managers within the separate departments; "This philosophy was based on the belief that aggressive targets would motivate the managers to perform at their highest possible levels," (TEXTBOOK GIVEN 1). Corporate managers believed that the MPS target setting philosophy would be equally effective in all four divisions, but it was clear that the actual division heads themselves were a little concerned with the rigidity of the new system. No one knew better than the division manager exactly how different each division was. Therefore, many should not have expected such a system to be very effective in truly uniting such different departments under the same basic performance scale -- the divisions were just too vastly different. Because the two ends of the product spectrum were so vast, there was a large variety within the products produced by HCC themselves. HCC produced Sealtron as a standard size with little variation between the connectors. However, the Hermatic seal was such different, and was produced in small orders of custom fitted connectors. While corporate managers believed that the MP system would be successfully equally across the board, division managers showed some resignation. They knew that each division had its own set of performance successes and problems, meaning that each division was vastly different from the others. Therefore, division managers had the right to worry about the practice of MPS system over that of the more fluid stretch target system.