Professional Documents
Culture Documents
Company Background
o Metal Distributor - Mature, highly competitive and fragmented industry o Corporate Strategy
o To focus sales efforts on specialty metal users o To identify those industries and geographic markets where these metals were consumed o To develop techniques to increase market share
Organization Structure
Chairman
CEO
VP
District Manager
Sales Manager
Credit Manager
Warehouse Superintendent
Purchase Manager
Administrative Manager
Current Performance Evaluation and Incentives Incentive Bonus for District Managers linked to meeting & exceeding 90% of their ROA
75% based on District Performance 25% based on Region s Performance
Investment Opportunity at Columbus District Capital Intensive Project Investment $600,000 10% Tax Credit was available on Equipment Cost of Capital 15% NPV of $286,000 Low Payback 4.5 Yrs compared to Company s Criteria of 10 Yrs Opportunity to expand into a new market
Cons
Personal Incentives creates a bias in decision making Lack of R&D Initiatives by managers Does not measure EVA/ Share holder Value Misalignment of GOAL CONGRUENCE
Recommendation ACCEPT proposal - +EVA and Share holder Value Change Performance Evaluation
A mix of ROA & EVA Have ROA/EVA Slab structure Incentives Higher CAPEX level decisions to District Managers
Q&A