The cost of profit

Businesses are increasingly looking to improve their bottom line, but at what cost to the consumer, and the organisation itself?



commentary Businesses are increasingly looking to improve their bottom line, but at what cost to the consumer, and the organisation itself?

I will come straight out and admit that this month's column has allowed me a chance to "vent", and given my recent experiences the subject matter, what I am writing about is quite relevant to a wide section of the corporate world.

I have recently had the dubious honour of dealing with a large company that was to supply us with services -- as you are well aware it's normally the other way around. Sadly, the service was sorely lacking. This was because of some fundamental business flaws, flaws that everyone should be able to clearly spot and that, quite bluntly, anyone with the most basic understanding of psychology should know to avoid.

Lets call this company Company A. Put simply, Company A became too greedy. Now I'm all for company growth and greater profit, it's what the Lab has been striving for itself, but we (hopefully) have not lost sight of our commitments to our employees and clients in the process.

Company A was to supply us with some widgets. Delivery time was crucial and they were promised in less than eight months. Company A is also extraordinarily successful at what they do and their growth has been remarkable.

Well, it actually took more than 12 months for the widgets to arrive and what happened in the meantime could only be described as an administrative disaster.

The Company's growth was so great that an insufficient number of management staff were put in place and existing staff were simply loaded up with additional work.
The company's growth was so great that an insufficient number of project management staff were put into the key roles and existing staff were simply loaded up with additional work, to the point where they collapsed or quit.

Typically, in the industry in question, a project manager will coordinate around 10 projects -- this was considered not long ago to be a very solid but achievable workload. Each of these projects, on average, is worth approximately AU$200,000. In this case we found that the supervisors were now responsible for up to 19 projects.

As a result of this increased workload, the number of supervisors started to fall. One after the other they fell like dominos, leaving either because the stress was far too great or because they were laid off after it was found they could not perform under such appalling workloads. This was all to the detriment of the services the company could provide.

The short sightedness of upper-level management in relation to this work load, and resulting stress, meant much of the experienced core of their project management team was lost, so guidance for new recruits was pretty darned thin. Deadlines slipped and crucial stages in the product development pipeline were missed simply because the new project manager, through no fault of their own, had no idea of the status of each project and needed to dig through the notes of the previous project managers to glean the status of each unfinished project.

Each time this happened, even though the deadline continued to slip alarmingly, we gave the project manager in question time to find their feet to ensure our order did not lack quality, despite having to push out the completion date. But in one case the project manager lasted less than three weeks. In the end they were not building new widgets as they should have been but were trying to fix compounded mistakes in faulty ones.

I am led to believe from Company A's management that our experience was an exception -- although I have my doubts. If that was the case then why did the company continue to miss amended deadline after amended deadline after our case was brought to the attention of senior management? And how come each time I contacted senior management they were unaware that yet another deadline had slipped? Where was the process that identified the problem projects and diverted additional resources to them? I can state with conviction that there were no processes in place to handle any exceptions in an acceptable manner; growth had outstripped business process.

In the end I took on the role of project manager for the company and continued to report directly to senior management. I fear for Company A's future, because as far as I can see it has none if it continues to do business this way.

Steve Turvey is Lab Manager of the RMIT IT Test Labs, and can be reached at stevet@ rmit.edu.au.

This article was first published in Technology & Business magazine.
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