Chapter 8-Case Study 2-Performance Management System Helps Freeport-McMoRan Switch Strategic Gears
Answer the following questions:
Why did Freeport-McMoRan need a performance management system? How might it have helped the company adjust its strategy?
Do you think a pen-and-paper performance management system could have been as effective as the web-based system Freeport-McMoRan adopted? Why or why not?
The following requirements must be met:
Write between 1,000 1,500 words using Microsoft Word in APA style.
Use an appropriate number of references to support your position, and defend your arguments. The following are examples of primary and secondary sources that may be used, and non-credible and opinion based sources that may not be used.
Primary sources such as government websites (United States Department of Labor – , United States , ), peer reviewed and scholarly journals in (Grantham University Online Library) and .
Secondary and credible sources such as , , trade journals, and publications in (Grantham University Online Library).
Non-credible and opinion based sources such as, Wikis, Yahoo Answers, eHow, blogs, etc. should not be used.
Cite all reference material (data, dates, graphs, quotes, paraphrased statements, information, etc.) in the paper and list each source on a reference page using APA style. APA resources, including a template, are provided in the Supplemental Materials folder.
CASE STUDY
Case Study 2Performance Management System Helps Freeport-McMoRan Switch Strategic Gears
What do you do when your organization needs to completely turn around its strategy due to a changing marketplace or for competitive reasons? Situations such as these are common in todays fast-paced business environment. How does a firm manage drastic changes like this? A good performance management system can help.
Freeport-McMoRan Copper & Gold is a case in point. The company, which is based in Phoenix, is the second-largest copper mining company in the world. It employs approximately 35,000 workers and has mining operations that span five different continents. But it wasnt a poor market condition that caused Freeport-McMoRan to shift gears. It was a booming one. During much of the 1990s and 2000s, the price of copper was lowonly about 75 cents per poundmaking mining less profitable than it had been in the past. Mining a large amount of copper therefore became less of a priority than keeping costs low for Freeport-McMoRan.
However, after the price of copper jumped sharply upward and hit $4.50 a pound, Freeport-McMoRan realized it needed to change its strategyand fast. It needed to ramp up production and invest in new people and equipment in order to mine as much copper as possible while its price was high. The question became how to implement the change. Compounding the task was the fact that each mine was run separately. The firms top managers did not even know how its employees were organized at the separate mines, let alone what their goals were or the metrics they were expected to achieve. The company had also acquired a rival mining company twice its sizePhelps Dodgewhich made coordinating the performance of its people and operations even more difficult. In 2013, Freeport-McMoRan went to into a completely new line of businessoil and gasmaking the coordination even more difficult.
To align the goals of everyone in the company and get all of its various mines performing at top capacity, Freeport-McMoRan needed a new performance management system. The system would hopefully enable the company to quickly implement and monitor the changes needed, while giving it the agility to change strategies again if or when the price of copper dropped.
Many of the employees who work in its mines and oilfields do not use computers regularly on the job, so Freeport-McMoRan needed a system that was easy to use. For this reason, the company adopted a web-based performance management system that employees could use at home. Initially, the firm rolled out the system to 500 employees as a pilot program. When it proved to be successful, the entire company began to use the system.
The software keeps everyone in an organization focused on a companys most important goals, which can have a strong impact on the firms financial performance. It also helps organizations measure the contributions of its employees and to nurture, motivate, and reward employees based on their achievements. Managers need reliable real-time data and pragmatic e-tools to measure, identify, analyze, and understand their organizations people capabilityand what capability is needed to compete in the future, explains Jonathon Hogg, with PA Consulting Group, an IT and management consulting firm. The performance system, along with the companys strategic move into oil and gas seems to be working for Freeport-McMoRan. In 2013, the company posted a 19 percent return to shareholders, despite copper prices plummeting again.
