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case study final assesment Order Description 360 Degree Appraisals In Durham, North Carolina, 170 GE employees work in nine teams to produce the GE90 jet engines that Boeing installs in its long - range 777aircraft. Each TEAM OWNS the engines they build From the beginning of the assembly process to getting them loaded onto a truck for delivery. As they begin each engine, these teams generally receive no instructions except for the date on which the engine is to be shipped from the plant. Getting the engine produces is the tea m goal, but the goal can be reached only if the teams effectively manage themselves. Besides producing and 8.5 - ton jet engine out of 10,000 individual parts, team members order tools and parts; schedule their vacations, training, and overtime; make adjustments to the production process to improve their efficiency ; monitor their product quality; and take responsibility for diagnosing and resolving problems that arise among members of a team. Decisions about these and all other issues that the teams face are made by consensus , which was a founding principle for the plant. Each employee understands that living with ideas that they don’t necessarily agree with is part of the job. They don’t blame others when things go wrong, because they make the decisions. The process of reaching agreement on decisions is so much a way of life here that people routinely talk about “ consensusing ” on this or that. The one boss in this plant - plant manager Paula sims keeps everyone's attention focused on the common goal: making perfect jet engines quickly, cheaply, and safely. Her job is to make sure that the efforts of all teams are coordinated so that together their decisions optimize the plants performance and then to free up resources for growth and improvement. In her four years as the plant manager responsible for GE's jet engine production teams, Sims has learned that communicating your intentions properly isn’t always easy. She describes her plant manager's job as the most rewarding. To do it well requires a different level of listening skills - significantly different. More and more of what I do involve listening to people, to teams, to councils, to ideas, trying to find common them es. ” In this culture of continuous feedback, one reason Sims has listened so carefully is to monitor her own effectiveness. She learned early that her actions can be easily misinterpreted. Recalling an accident from her early days, she explained. “ An employee came to me and said, ‘ Paula, you realize that you don’t need to follow up with us to make sure ’ were doing what we agreed to do. If we say we will do something, we we will do it for you. - you don't need to micro manage us. ’ ” At most plants’, following up is just part of a manager ’ s job, but here it was sending the wrong message because she always followed up, people concluded that she didn’t trust them. The real problem was the she had not yet learned the plants norms about decision making. Sims also listens when the plant is trying to solve a problem. At other companies the title of managers almost means “ decision maker ” , At GE/Durham, however, the manager actually makes only about a dozen major decisions each year. All other decisions either rely heavily on input from, or actually made by, the other plant employees. The plant manager is responsible for making sure plant employees know about problems , and for informing the GE 360 - Degree Appraisals 2 managers that she reports to about the solutions.But to get the solutions, the plant manager is expected to listen, not decide. For major issues, such as reducing cost of important moving safety, a task force is formed to decide how to address the problem. The plant manager educates the task force and everyone else about the problem and e explains why is important . then the task force takes responsibility for finding solutions. when they have a plan for the future, the plant manager informs those above her about how the plant will proceed and makes sure the higher ups are on board with the plan. As the HR manager for the plant, Sims has approached you with a request: she wants you to help her install 360 degree appraisals for everyone in the plant, including her. The 360 degree appraisals will not replace the other performance measures that already are being used. They will be simply be added on as a new element in the performance management system. You have expressed some concerns about the idea, but she is determine to move ahead with the plan. Describe how you will proceed Case Questions Begin by analyzing the possible advantages and disadvantages of using 360 - degree appraisals in this plant. Then indicate the decisions you would make regarding each of the following questions: 1.Will you use one set of performance dimensions for everyone, or will people in different jobs be evaluated on different dimensions? Explain YOUR LOGIC 2.How will you determine the specific content of the 360 degree appraisal form? 3. What type of rating format will be used to make the appraisal rating? 4. For the members of the nine production teams, who will provide performance assessment: All members of the team? Members of other team? will Sims evaluations for all employees . 5. How will the feed back be answered? 6. What plant is operation well right now. What steps will you take to ensure that this new activity doesn't reduce the plants productivity
16 October, 2015
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Conch Republic Electronics, Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department. One of the major revenue-producing items manufactured by Conch Republic is a smart phone. Conch Republic currently has one smart phone model on the market, and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smart phone has limited features in comparison with newer models. Conch Republic spent $750,000 to develop a prototype for a new smart phone that has all the features of the existing smart phone but adds new features such as WiFi tethering. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smart phone. Page 349 Conch Republic can manufacture the new smart phones for $215 each in variable costs. Fixed costs for the operation are estimated to run $6.1 million per year. The estimated sales volume is 155,000, 165,000, 125,000, 95,000, and 75,000 per year for the next five years, respectively. The unit price of the new smart phone will be $520. The necessary equipment can be purchased for $40.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.1 million. As previously stated, Conch Republic currently manufactures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smart phone, sales will be 95,000 units and 65,000 units for the next two years, respectively. The price of the existing smart phone is $380 per unit, with variable costs of $145 each and fixed costs of $4.3 million per year. If Conch Republic does introduce the new smart phone, sales of the existing smart phone will fall by 30,000 units per year, and the price of the existing units will have to be lowered to $210 each. Net working capital for the smart phones will be 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Conch Republic has a 35 percent corporate tax rate and a required return of 12 percent. Shelley has asked Jay to prepare a report that answers the following questions. QUESTIONS What is the payback period of the project? What is the profitability index of the project? What is the IRR of the project? What is the NPV of the project? All the cases are Excel-based HINTS ON MINI CASE 5: CONCH REPUBLIC ELECTRONICS, PART 1 First, the cost of research & development ($750,000) and marketing study ($200,000) are sunk cost, and should not be considered for investment decision. Second, the revenue calculation of the first two years is different from other years. The introduction of new smart phone generates erosion cost (negative side effect) to the existing smart phone. The loss from the total revenue of existing smart phone should be attributed to the new smart phone. The net incremental revenue of new smart phone is equal to the total revenue of new smart phone minus the total revenue loss from the existing smart phone. The revenue loss of existing smart phone comes from two parts. Part one: the sales units will be reduced, and the original price revenue on these sales unites will be gone (the sales units of the existing smart phone will fall by 30,000 units per year, and the price of the existing smart phone is $380 per unit). Part two: the remaining units will be sold at a lower price (the price of the existing units will have to be lowered to $210 each), and the price difference is a source of revenue loss. Take first year for example: Revenue of new smart phone = 155,000 × $520 = $80,600,000 Revenue loss of existing smart phone = revenue loss from part one + revenue loss from part two = 30,000 × $380 + [(95,000 – 30,000) × ($380 – $210)] = 11,400,000 + 11,050,000 = $22,450,000 Net incremental revenue = Revenue of new smart phone - Revenue loss of existing smart phone = $80,600,000 - $22,450,000 = $58,150,000 The calculation of net incremental revenue of the second year is similar to the first year. Starting from the third year, there is no revenue loss of existing smart phone attributed by the new smart phone, because the production of the existing smart phone is terminated. The incremental revenue is just the revenue of new smart phone. Third, the variable cost calculation for the first two years is also different from other years. The introduction of new smart phone reduces the production and sales units of existing smart phone, resulting in a decreased variable cost for existing smart phone. Therefore, the net variable cost should be equal to the variable cost of new smart phone minus the variable cost decrease of existing smart phone. Take first year for example: Variable cost of new smart phone = 155,000 × $215 = $33,325,000 Variable cost decrease of existing smart phone = 30,000 × $145 = $4,350,000 Net variable cost = Variable cost of new smart phone - Variable cost decrease of existing smart phone = $33,325,000 - $4,350,000 = $28,975,000 The calculation of net variable cost of the second year is similar to the first year. Starting from the third year, there is novariable cost decrease of new smart phone. The net variable cost is just the variable cost of new smart phone. Four, the fixed cost is just new smart phone’s fixed cost. The existing smart phone’s fixed cost should not be taken into consideration. Five, please refer to the document of “Chapter 10 Explanation on MMCC example” for the calculation of other variables, such as depreciation, net income, operating cash flow, change in new working capital, net capital spending, etc.
16 October, 2015
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