Catalytic Solutions, Inc (CSI) is a young Californian company that produces catalytic converters, which are used to reduce the toxicity of emissions from a combustion engine, as a motor. CSI possesses a technology that allows producing better and cheaper catalytic converters than competing products. This asset rests on the fact that CSI's converters are using between 50 and 80% less Platinum Group Metals than competitor's converters, which allows a lot of savings (between 40 and 200$, depending on the size of the car). This is a big advantage for CSI, particularly since the prices of these rare metals are increasing (exhibit 3).
Concerning management control system, CSI is still in a preprofit stage of operation, that is why its performance measurement and incentive systems are based on non financial data. For the moment, these systems are working well and according to Michael Redard, Vice President of Finance and Administration, CSI is "a very exciting place" and the 125 employees are working "24 hours a day, seven days a week". But the strategy of the company will certainly evolve in the future, jointly with its development.
Company history
Bill Anderson and Steve Golden founded CSI in 1996. For three years, they developed innovative catalytic converters for automotive sector, whose we described the advantages before. So, in 1999, they registered first patents to prevent the copy of their products and began the production to supply the auto industry after-market. CSI's immediate goal was to supply the automotive sector, which supposed to find Original Equipment (OE) commitments. In the same year, Honda started evaluating CSI's technology.
In 2000, Honda became the first OE adopter. Sales occurred in December 2010 to supply the production of the Honda Stepwagon model. Everyone at Honda appreciated CSI's products a lot: they were indeed impressed by their performance and realized that CSI's technology had a great potential. So they awarded the company with the Gratitude Award for Excellency in Research and Development in 2002.
[...] Concerning the base salaries too, we can notice two other points: there is not so much difference between top and bottom salaries and salary raises are modest. II.2 - Stock options Stock options are granted to all the employees by CSI in addition to their base salary, giving them the right to buy a certain amount of shares in the company. So, it allows them to get an extra remuneration if they buy these shares at the right time. The vesting period occurs during the first 4 years per year). [...]
[...] Each department should have 4 to 6 objectives that it can fully control and understand in order to get the best results. These measures must also be well defined and must not have any counterproductive effects. Finally, they must also be reachable. However, with different objectives, one department's objectives can have a negative impact on another's. For example, sales forces might promise low lead times to customers to close the deal when production can't keep up (have low lead time and high quality at the same time). [...]
[...] Indeed, once they have received all their stock options, they could be tempted to think in a short term perspective and even cheat. III.4 - Annual bonus based on corporate performance and not individual performance In our case, the bonuses are given in function of the company's performance. The main advantage is that it enhances the company's great culture through good team work and a pleasant atmosphere. It is especially good for small companies where everyone knows each other and can communicate which was the case of CSI until 2000 (38 employees). [...]
[...] three years, they developed innovative catalytic converters for automotive sector, whose we described the advantages before. So, in 1999, they registered first patents to prevent the copy of their products and began the production to supply the auto industry after-market. CSI's immediate goal was to supply the automotive sector, which supposed to find Original Equipment commitments. In the same year, Honda started evaluating CSI's technology. In 2000, Honda became the first OE adopter. Sales occurred in December 2010 to supply the production of the Honda Stepwagon model. [...]
[...] This is indeed the work of the managers. Therefore, some employees might feel frustrated because they cannot have a big impact on this specific part of their bonus. The 60% weight is good for top managers but too high for low-level workers. Concerning program commitments”, it is the same as the previous year. We do not like it because of the same reasons as before. It might still be a good idea to promote growth (even if it is done in a low profit way) but, since they want to increase profit in 2002, this measure could be counterproductive. [...]
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