HCC Industries
Context HCC Industries is a small publicly owned company headquartered in California that has four divisions across the United States. Three divisions manufacture and sell hermetically sealed electronic connection devices of various types, while one, Hermetite, produces microelectronic packages. HCC’s divisions are very self-‐contained and independent. A general manager runs each division and is responsible for nearly all its functions. Additionally, a controller is employed to do the reporting for each division. Corporate head office oversees each division and has recently implemented corporate marketing and engineering services to assist the divisions. HCC’s divisions combined to make $36 million in revenues in 1987. The connector divisions (Sealtron, Glasseal and Hermetic Seal) are profitable in a slow growth and fragmented industry. In contrast, the Hermetite division is in a fast growing market, however production is complex and the division has seen serious backlog and losses since its acquisition in 1985.
Until this year, the company used stretch performance targets. The system was designed by a consulting firm and reflected the needs of a large organization. Under the stretch budgeting system, the company developed a cultural problem where failure to meet targets was a non-‐issue. Additionally, the bonus scheme was kept secret, so most
Until this year, the company used stretch performance targets. The system was designed by a consulting firm and reflected the needs of a large organization. Under the stretch budgeting system, the company developed a cultural problem where failure to meet targets was a non-‐issue. Additionally, the bonus scheme was kept secret, so most