What is Performance Ethic Program (PEP)

Operations Management


What is Performance Ethic Program (PEP)

case study (20 Marks)

In 19992001, TISCO took measures to reduce costs further by adopting innovative strategies and other cost cutting exercises. For example, TISCO stopped using manganese, an expensive metal used to increase the strength and flexibility of steel. The company made efforts to reduce its product delivery time from 34 weeks in 1998 to 2 weeks in 2000. The company aimed to further reduce the time to one week. TISCO also took steps to reduce its manpower costs. Between 1996 and 2000, TISCO reduced its workforce from 78,000 to 40,000 employees. Analysts opined that cutting its workforce by 38,000 employees was not an easy job and the company was able to do it with a lot of communication with employees. TISCO had adopted Performance Ethic Program (PEP),

under which, it planned to promote hardworking young people to higher positions depending on their performance, rather than following the convention of seniority. This exercise was expected to cut the management staff from 4000 to 3000. PEP had two core elements. Firstly, it proposed a new organizational structure, which was expected to foster growth businesses, introduce more decision making flexibility, clear accountability, and encourage teamwork among the managers and the workforce Thus operational changes were made at TISCO that enabled the company to become the lowest cost producer of steel in the world. TISCO initiated a five phase modernization program in the early 1980s, to overcome problems in the steelmaking process. The program’s primary objectives were to enhance the operational processes and reduce costs. The operations’ aspect was addressed in the Phase III of the program with the help of consultants McKinsey and Booz Allen Hamilton. McKinsey designed a program called Total Operational Performance (TOP). TOP’s main objective was to impact the bottom line with minimum expenditure and minimum time. TOP enabled TISCO to improve its performance. TISCO also achieved cost reduction through other strategies like manpower reduction, organizational restructuring, and using information technology to enhance certain business processes. With the completion of the modernization program, TISCO was able to record profits despite the low global demand for steel and cheap imports.

Answer the following question.


Q1. What is Performance Ethic Program (PEP)? Discuss


What is Performance Ethic Program (PEP)


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