Case Study 6 – I am the busiest person of the organization but making huge losses

Introduction

Venturing into new avenues, Mr Karmakar set up his own turn-key management company in the year 1995. The company manufactured and installed engineering products- mainly pressure vessels, chemical plan equipments and pharmaceutical machineries. Its orders mostly poured in from the pharmaceutical, chemical, oil and gas sectors. While the company manufactures most of the products in- house and outsources a few to vendors, the installation and commissioning of the products is wholly looked after by the company itself.

Though the company has its own design, manufacturing and installation teams located at various branches in Gujarat, Hyderabad and Chennai, the main head office is in Mumbai, which deals with designs, finances, purchases and sales for all the branches and offices. Besides that, they also have a manufacturing unit in Aurangabad.

With so many branches and offices spread all over the country, it doesn’t come as a surprise that the total strength of the entire company would be a massive 400 employees and workers. As per reports, the company‟s turnover in the financial year 2013-14 was about 70 crores and the growth of the company for the last five years has been satisfactory.

Interestingly, Mr.Karmakar‟s main pillars of support in the organization have always been his two Vice Presidents – Mr.Mathur and Mr.Sihi. Handling all the projects based on their domains of knowledge, the duo also has a separate team under each of them for the execution of the project. Another gentleman named Mr.Shinde, is the plant head at the factory and is responsible for the manufacturing and supplying of the products and also reporting to both the Vice Presidents.

Vesting his trust and confidence in these three men, Mr. Karmakar did not have to get involved in the day to day operations of the company, which in turn allowed him more time to focus on sales and related activities. With customised ERPs for project management, which aimed at improving the efficiency and service to the customers, the purpose was fruitfully met.

Scenario

During the annual financial meet in 2013 and after a budget meeting with his finance manager and Chartered Accountant, Mr.Karmakar realised that his company‟s net earnings had not improved despite undertaking so many projects and providing quality products and services to his customers. Besides this, his cost of operations had gone very high as compared to the last 3 years. On analysing the root cause of the situation, it was found that a lot of customized products and services were being provided to the customers without cross checking facts of the contract.

So, in spite of satisfied customers, the cost of execution was more than its estimation. These issues were further discussed with both the Vice Presidents and they assured that in the coming financial year, they would bring the executional costs under control. 6 months later, in the course of its half yearly review with the finance manager, Mr.Karmarkar realised that the cost of operation shot even higher than the previous year. Due to cost control pressure on Mr.Mathur and Mr.Sihi, there was a compromise in the quality of the products and services which further led to dissatisfied customers. This caused Mr.Karmakar to call a meeting with both his Vice Presidents and discuss cost control and executional issues. Rightly so, both the Vice Presidents promised to get the situation in control within the next 6 months. But both Vice Presidents were unable to present a concrete plan and even after the additional 6 months there were no significant developments in this scenario. That is when Mr.Karmakar decided to take a review of the company‟s organization by a third party and selected an able AUGMANTUM Management to carry out the entire study and give the company a future road map.

Finding Facts

After keenly observing the processes and taking a GAP analysis, we found the following things which were creating an impact on the „bottom line‟

  1. There was no proper structure below the Vice Presidents‟ posts
  2. Roles and responsibilities were not properly defined
  3. Being a Project Management Company there was no proper kick- off meeting and project There was no road map and responsibility matrix defined project wise.
  4. Even though everyone was busy, there were no proper roles and duties assigned to each employee
  5. There was no proper reporting structure followed by Mathur and Mr.Sihi
  6. They did not make use of the ERP completely to get the data for analysis, reporting and decision making. Internal Process mapping was also a big
  7. There was no interdepartmental “PULL” system, since everything was driven by Mr.Mathur and Mr.Sihi, single directionally.
  1. Changes in design, schedule, plan and tasks were not communicated down the line at the right time and right place and due to that the indirect losses were heavy, which was not accounted for.
  1. All decisions and communication revolved around Mr.Mathur and Mr.Sihi, creating information overload
  2. There was no sign of delegation by Vice Presidents which was resulting in wrong decision making or delay in decision making, which was creating direct or indirect financial impact
  3. Lot of confusion and work over- lapping of subordinates was observed, which resulted in delays in projects which led to financial loss on site
  4. It was observed that all employees did not follow the procedures to correct the issue permanently in order to avoid making the mistakes
  5. Mathur and Mr.Sihi were handling all the activities and were very hard working and honest to their work, but they don‟t realise that even though they were very busy, they were creating huge financial losses for the organization—due to lack of delegation.
  1. All the HODs and management members were not aware about planned execution, review and conducting agenda-based review meetings. Decisions were taken on incidences and actions, but were not taken to eliminate the issues permanently
  2. All of them needed to be trained and needed hand-holding on planning, actions and review
  1. Due to increase in number of orders and hasty decision making, Mr.Mathur and Sihi were not able to manage the execution in a systematic manner

 

We submitted the report to Mr.karmarkar and told him that we have designed two strategic plans, one for redefining the organization structure and process mapping, and the other to make Mr.Mathur and Mr.Sahil aware about the importance of delegation and help them adopt the right methodology and processes.

“Delegation means letting others become an expert and become their best under your guidance. Leaders must learn how to motivate and encourage their subordinates in order to do effective work. As a leader, delegating work to your subordinates does not take away from your responsibilities. In fact it increases your responsibility as you have to keep a check on the delegated task till it is complete.”

Perhaps, Mr.Mathur and Mr.Sihi were delegating work, but did not follow up on the task delegated.

We convinced Mr.Karmarkar to be a part of the exercise and remain positive throughout, though some highly sensitive issues were to be brought to the fore during the execution process. It was inevitable that some internal turbulence would arise in the process, but it was needed that he remained calm and under control.

Solution Implemented

We divided our task into two teams. One team concentrated on improving the organization structure, process mapping and mapping process in ERP. The team also took the employees into confidence by initiating regular interaction. The other team consisted of senior members from AUGMANTUM management who made Mr.Mathur and Mr.Sihi aware about their weaknesses so that they could be guided with the right tools and techniques of delegation.

The Task of Team A:-

  1. Redefinition of the organization chart
  2. Redefinition of the roles and responsibilities
  3. One round of interviews with all existing employees, to check the task distribution
  4. Process Mapping
  5. Defining various cost centres to calculate the direct and indirect financial losses, and mapping them in ERP for bench-marking and to set KRAs for all the departments
  6. Guiding the ERP team to map the process and generate reports with the help of HODs
  1. Conducting regular rounds of meetings with the HOD, and inter department meetings
  2. Participating in management level meetings with all the management members
  3. Generating financial impact charts based on day to day incidents and accidents

 

The Task of Team B:-

  1. Meetings with all the management members
  1. Making the Vice Presidents realize that due to their weaknesses the company was facing financial issues
  2. Regular weekly meetings with Mathur and Mr.Sihi, to study their day to day activities and correct them gradually
  3. Gradually involving HODs in regular meetings with specific agendas
  1. Defining regular review meetings with all departments and participating in all the meetings
  2. Handholding for all the HODs and other team members on how to conduct and close meetings under the direction of Mr.Mathur and Mr.Sihi
  3. Defining KRAs of all the HODs with Mr.Mathur and Sihi so that they can be mapped in ERP
  4. Providing checks and guidelines during regular rounds of meetings, so that they get the confidence about how to delegate the work/ tasks

 

 

Outcome

After a period of around 10 months, Mr. Mathur, Mr. Sihi & Mr. Karmarkar have now started monitoring the financial loss through ERP (Various Cost Centres) and all of them can now control and improve the present situation. They have started delegating effectively and Mr. Karmarkar gratified that the financial losses are minimised due to the entire exercise. The entire exercise has revealed to all the management members that “don’t try and do everything by yourself because you can’t’, because doing that will make you a bottleneck for the organization”. It is observed that most of the entrepreneurs / managers in the Indian Industry always feel happy, that they are very busy and are working very

hard. But what they don‟t realize is that being busy with the right kind of work is what is more important.



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