I'll Never Do That Again!
Thursday, May 13, 2010
At the conclusion of a sales
call and fact finding mission, my firm submitted a proposal (requested by the
CEO) to assess and measure the effectiveness of the current management and
organization structure and to make recommendations for improvement. The objectives were crystallized after
separate interviews with several VPs and the CEO. All agreed that a change was necessary due to
internal power struggles, erratic production scheduling and a lack of
communication. Can you say "silos”?
The engagement letter was
approved and signed by the CEO. It
included important contractual points such as a statement of work and,
importantly, a "bail out” clause. This
clause required 30 days notice for contract termination and for the client to
pay the firm for all work up to the date of termination. An upfront payment of
1/3 of the 10-12 week project costs was invoiced with the engagement
The client was a non-union,
$200MM manufacturing company with plants in three states produced plastic
products, many custom-made, on a 3-shift basis.
Its organizational structure consisted of Senior VPs in charge of other
VPs who oversaw various operating functions including international
business. The staff structure included
the usual suspects: Finance, HR, PR, Marketing, Sales, Legal, Engineering and
The company had a strategic
plan but little attention was given it.
Although scheduling systems were in place, the company actually operated
on a day-to-day basis. Production
departments spent most of the time putting out fires and handling panic
calls. Schedule changes were constant
because the CEO had special customers he wanted to serve above all others. He also
was focused mainly on high volume business, although much of the more
profitable business was custom. In
effect, a micromanager was at the helm with a limited financial focus, much to
the exasperation of the Senior VPs who complained about "a lack of
Payment was received and work
started with a small team of consultants assessing work flow, production data,
communications and effectiveness, management practices, and budget forecasting.
It became apparent as we
conducted our assessment that the power struggles were very real. The CEO was an authoritarian leader expecting
no rebuttal on his orders. The Senior VP
of Operations was very vocal to the study team about the lack of leadership and
management practices throughout the production plants. Clearly she believed
that she could do a much better job as CEO.
Other VPs voiced similar opinions to us but were not as vocal about
As the study team made its
way learning and assessing the overall organization, the Board of Directors was
moving in a different direction. The
Board fired the current CEO and appointed the Senior VP as his replacement. Later
we learned that the outspoken Senior VP of Operations was related to one of the
Immediately the newly-minted
CEO put a halt to the study and a hold on all new purchase orders, including
our invoice for a second payment. We were
already about 2 weeks into the second invoicing period and were finalizing our
interim report at the time of contract cancellation.
We wrote a letter requesting
payment, per our bail out clause, up to the time of the new CEO ending the
contract. No payment appeared to be
forthcoming during the next 30 days.
What should a consulting company do to
get paid in a situation like this? Share
your thoughts and comments.