Saturday, June 19, 2010

The factories of hidden waste that the awards failed to ventilate

Sunil Kumar Awasty, the CEO of the 100 Million $ public limited IT company was on the look out for a smart MBA to handle a very sensitive portfolio of managing press publicity and investor relations. Given the level of influence Balakrishnan Senior had as a board member, Sunil looked at the resume of Ramesh Balakrishnan, his only son, and decided to award the position to Ramesh. Ramesh having just then completed his MBA in the US, found a ready job in India too tempting to let go of and promptly assumed charge.

Ramesh took to the assignment with great enthusiasm. This job gave him a sweeping view of the operations of the entire company. In addition it gave him the much needed visibility with very well informed and forward thinking community of bankers, press and investment advisors. It was intellectually stimulating and financially rewarding as well.

Sunil, feeling he was not getting full value out of his investment in a US educated MBA, wanted Ramesh to design a media event that ventilated the unique achievement of their company. He asked Ramesh to consolidate all the relevant information about the various awards and citations they had won over the last ten years into a dossier. By projecting the company’s achievements as a highly distinguished and qualified practitioner of scientific management to the investors, they could improve the valuation of the company by several folds.

Unimpressed, when Ramesh continued to watch, Sunil pointed to the various audit certificates adorning the walls issued by bodies worldwide:

  • ISO 9000 and 14000. They are getting ready to be certified on ISO 22000 on CSR next
  • 300 people are certified as black belts; another 200 of the 8000 employees pursuing lean six sigma certification
  • They are challenging the MAKE award ( Most Admired Knowledgeable Enterprise)- next only to Infosys
  • They have been certified at Level 5 on CMMi thrice and PCMM twice by the Software Engineering Institute, USA
  • Their ERP is almost installed and fully automated

Sunil exhorted Ramesh to cheer up and appreciate the heritage that was going unnoticed and unappreciated. Could Ramesh consider the sterling opportunity his role offered him to educate the share holders about the virtues of the company they had invested in ? Could he get them to appreciate the value of the management practices that had stood an independent examination from so many bodies of international repute?

That night, at the dinner table, Balakrishnan Senior found a pensive and taciturn Ramesh. Something was definitely eating away Ramesh from the inside, felt he.

“Can I be of any help?” asked Balakrishnan Senior.

“ Dad, how do you refuse politely to do something to a CEO when you are sure he is headed up the wrong direction?”.

That shook up the father.

“Why do you ask? I have known Sunil Awasty for twenty years and he is a thorough professional ? He would never dream of asking you to do anything that was unacceptable. What has come over now?”

Ramesh continued. “ Sunil knows very well that our financials are so stretched every month that unless we bill for a clear 21 days of work every month, we are unsure of meeting even the monthly payroll. We had engaged a young team of Business analysts to trace the way our investments in cash go through various departments to generate cash and bring it back into the system. They not only traced the leakage at every step of the chain but also found out that it takes us 270 days to bring back a Rupee we invested. In other words, ( pointing to the illustration below) when you put in Rs 100 into the system, you get merely 70 rupees back because there is a leakage of 5% at every point it crosses the departments.”

Resources Invested

Talent Used up

Decision Quality

Supplier Quality

Product Quality

Quality of access to Market

Quality of Customer care

Quality of Financial prudence

















“ Tell me dad. You are on the board of this company. Where should Sunil Awasty focus his attention? Should be stop the ‘factories of waste’ he is overlooking or humor the shareholders about the colorful certificates he has managed to get from the world, over blowing up a fortune of shareholder’s money? Do we have a reason to celebrate at all?”

Balakrishnan Senior was perplexed about the situation but felt very proud of him.

Ramesh had inadvertently, but brilliantly, pointed out the failure of the CFO and the audit committee to alert the board to a potential business risk. He encouraged Ramesh to persist with his idea and resolved to precipitate the subject at the next board meeting.

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