Performance target strategies at 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.

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.

Of the reasons for moving to a MPS target system, there were three specific motivations which stood out. First, moving to an MPS-based target system means that the targets an forecasted production numbers are more universal across the board. This makes the various departments within HCC easier to manage from an executive standpoint. Secondly, the MPS the push towards placing a minimum rather than using the stretch system which aims for unrealistic numbers allows for better maintenance and analysis of department performance. They can be set by previous years numbers, and therefore hold the departments to their past successes. Lastly, using MPS rather than stretch standards can show more clearly the failures of certain departments over others. If single departments can not even make their bare minimum performance targets, this means that the targets need to either be adjusted or the department needs an overhaul. It is easier to spot specific problems within the various departments using the MPS system.

The corporate side of the company did monitor expectations and performance results very closely, making stretch targets a little out of reach of production standards. Therefore, in 1987, "a corporate marketing function was created to assist the divisions with market research, advertising, and promotions," (TEXTBOOK 2). In order to best regulate these new standardized departments which streamlined business as a whole in the HCC production house, performance standards were set by division management. These performance standards were set and then promptly reviewed by corporate officers. HCC was known to have several performance production problems, especially within the Hermelite line. To keep proper