Tuesday, September 28, 2010

Why be honest when it is inconvenient to be so?

Peter Kolaco is a tough no no-nonsense CEO of a National Insurance company in the US. He knew his subject well and treated all his employees, suppliers and stakeholders with great respect. He is always empathetic to wards his people because he knew he demanded a lot more from them than what they were capable of. That is why he rewarded them at a 20% premium over the others in the market place.

Yet, if there was one thing that annoyed him most, it was this. He hated nasty surprises. Especially so after sufficient opportunity is given to people to clarify issues in advance, air their difficulties and renegotiate the commitments they make to him. If ignorance was thoroughly unpardonable, dishonesty was totally unacceptable.

He learnt that the Indian Software supplier had failed to keep his delivery commitments for one more time. He had served them an ultimatum, very politely but firmly though, at the last meeting with the Indian CEO, Mr. Kedlaya. He just then called up Mr. Kedlaya and told him that the contract for the project stood terminated. He had consulted his lawyers who found enough grounds for breach of contract and non fulfillment of the terms of the agreement. Regrettably, he will have to turn the matters over to his attorneys to serve the notice the following week.

Kedlaya convened an emergency meeting immediately. He was fuming at his executives that he had not been kept informed about the displeasure of Peter well in advance. The adverse publicity generated by the legal notice will go around the industry making it harder for them to book more business. After a lot of deliberations, he was informed that the project delivery team had shipped the product in spite of the Quality Assurance team not approving of the despatch.

Kedlaya appealed to Martin Bird, the newly hired Director of Quality Assurance, to call up Peter and somehow placate him to hold off his ultimatum for now. Peter, an Irish National was fanatical about Quality and enjoyed the highest reputation in the industry for enforcing the most stringent standards of commitment to quality. Peter knew about Martin’s unimpeachable track record; after listening to Martin patiently, Peter elected to wait for 48 hours by when the “promised miracles must happen” he said.

Martin lost no time. He studied the various weekly progress reports thoroughly and concluded his investigations within an hour. Promptly, Martin convened an emergency meeting of the CEO and the sales team. “ We all know about the gravity of the issue here. I will get to the point straight. Peter is right. Whoever gave them the wrong commitment needs to step forward and repair the situation or face the consequences.

As you all very well know, the Quality Policy is very clear. Ms Kamala, the QA officer was perfectly justified in holding back the shipment. She did her job. I want you all to appreciate her for her diligent efforts to do her job to the highest standards we expect of QA staff. The team round the table applauded her after which she excused herself. The project director felt let down and protested that if QA is given a free hand to stop shipments, he would find it very hard to show profits.

Kedlaya concluded, “We cannot undermine Quality. That is why we have brought in a person like Martin with a fine reputation. His decision will be final and binding on all of us. We must appreciate that this is the last straw. Either we produce quality or face the consequences from high profile clients like Peter. Time is running out. I trust Martin’s judgment and will empower him to take appropriate measures.” Returning to his desk, Kedlaya called in the CFO and asked him to brief Martin informally on how he can avoid the inconvenience of the company by adopting a more ‘practical view.’

Martin chuckled to himself at the diplomatic doublespeak and the convenience with which Kedlaya tried to escape from his commitments made to the client. He also noted the tacit support Kedlaya extended to the project team when Martin, as a Director, was obliquely advised to take a more balanced view. Implicitly, the pressure of commercial considerations were being cleverly passed on to the Director Quality. He felt it was his moral duty to remind the CEO of his role in the matter. He was in no dilemma as he walked out into the cool December night of Chennai, after dictating a note to the board for approval.

Guess the message Martin would have put out to the board invoking the CEO’s responsibility for Quality?


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