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Mountain Lumber Company Case Solution
A product manager researches, chooses, and develops products for a firm by performing several activities. He not only works on and managers the existing products but also innovates and create new products or product changes. The product manager is responsible for doing the industry research, market and margin analysis and performance evaluation of various products. He determines the product positioning and profitability. Moreover, a product Managers also manages the launches, integrations and changes of various products the implementation of product cycle.
Following questions are answered in this case study solution:
What does a product manager do?
What's wrong with the current system of performance management?
Are the proposed changes an improvement?
Is the proposed system conceptually sound? Is it feasible / practical?
How would you implement the proposal? What changes would you make to the plan?
Mountain Lumber Company Case Analysis
Another fundamental job of a product manager is to identify business opportunities and their operational requirements based on the product. He schedules the meetings and upholds company policy in all matters. Additionally, the pricing is also determined by the product manager. He needs to work in team and build strong relations with in the various internal organizations.
For Mountain Lumber Company, a product manager would manage the pricing, promotions and performance of the antique floors, door frames, raw timber and moldings. The product manager will also be responsible for developing new lumber products that the firm can launch. The product manager would be required to have good knowledge about the organization as well as the industry.
2. What's wrong with the current system of performance management?
Mountain Lumber Company was a reclaimed wood flooring company. The company had other products as well such as door frames and moldings. Over the recent years, the company saw a growth in its revenue. However, the margins did not grow as rapidly as the revenues. This shows inefficient management of expenses. The company aims to keep up its yield and revenue while also increasing its margins. Currently, the company has no incentive system to encourage the employees to improve the operations of the business. The performance is not evaluated or measured to reward the employees with a bonus accordingly. Hence, in order to increase its margin, motivate the workforce and evaluate their performance, the company needs to have a different incentive system in place for different departments.
3. Are the proposed changes an improvement?
The new proposed changes are definitely an improvement because they provide an incentive system to improve and manage performance. For different departments, the incentive plan is different. For instance, for the sales department, the employees receive a bonus based on the sales made by the employee. It is like a commission. The sales employees receive a percentage of the sales they make. Similarly, in the production department the employees have bonuses based on the amount of lumber worked on.
Moreover, the incentive system is also important for measuring performance. It is said “what cannot be measured cannot be improved.” Hence, once the firm is able to measure and monitor the performance of its employees it could identify the workers not doing the job right and the reasons behind the inefficiency. Once these are identified the employees could be trained to improve their efficiency and skills.
The incentive plan will also be useful in determining the promotions of employees. The workers who consistently perform well can be promoted to a higher post.
4. Is the proposed system conceptually sound? Is it feasible / practical?
The Proposal is conceptually sound because it gives the firm a method of measuring performance. As mentioned earlier, for the vice president sales and purchase, the incentives are based on the amount of revenue generated by an employee and the amount of timbre purchased. For the vice president operations the incentive system is based on the output and labor efficiency of different process units like saw mill and mill shop. In case of supervisors, the bonuses are provided on the basis of average monthly output of the relevant department.
However, this proposed system will not be feasible for the organization. The reason for this is that the incentives are based on the quantity of units produced and on the amount of timbre purchased. This means that the vice presidents and the supervisors will focus on increasing the quantity and in the process they will compromise on the quality of the product produced or bought. There are no incentives for quality in the new incentive systems. Also, there is no quality control department in the firm. Furthermore, for its sales the firm relies on the good word of mouth from its past customers. Hence, as the quality of output falls, the firm will lose a lot of customers in the long run.
Another reason why the incentive system is not feasible is because it does not provide incentives for people working in below the supervisors. Productions and sales are mainly done by employees from the lower level of the firm. This includes the laborers in saw mill, nail shed and mill shop. In order to reduce cost and gain efficiency, the firm will have to make an incentive plans for these laborers rather than only the top management. If these laborers are motivated to work harder and reduce costs, the overall margin of the firm will increase in the coming years. The incentive system is also important in order to measure the performance of these laborers. Once the performance is measures, it should be evaluated and relevant steps could be taken to improve productivity. These steps include training the ineffective workers, firing unnecessary workforce and educating workers about their performance.
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