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Silo Mentality Strkes Again!

Saturday, September 29, 2007   

The Role : Quality Manager - Automotive Industry

The Hiring Circumstance –  This international automotive 'tier one' supplier was providing vehicle interior modules for a new model being launched by a renowned car manufacturer.    This case study was provided by someone at a senior level within the company's finance function.

On the day of the meeting where these details were provided, there was an area roughly the size of a football pitch in this factory, three quarters full with interior modules marked 'REJECT'.

The financial person reported that the firm had been having quality problems since the plant had been commissioned and that the company had been trying to recruit a quality manager for the previous eight months. 

They had actually appointed someone for the role several months earlier but they had lasted just nine days before resigning.

The Strategy – At the time of the meeting the company had previously advertised the position in the specialist automotive media on four occasions at a cost of just under sixteen thousand pounds.  They had also used a supply base of 20 recruitment agencies working on a contingency (no placement no fee) basis.

The interview process was to hold off-site interviews because the Operations Director feared that candidates were being put off by the poor state of the on-site office facilities 

The interviews involved the HR Manager, the Operations Director and the Plant Manager.   Interviews, on averages lasted one and a half hours. The 2nd interview involved 'walking the line' with the Plant Manager.

The Consequence –   Over the eight month period the company had already interviewed more than sixty people.  At one and a half hours per meeting, considering the seniority of the attendees, that represented more that two hundred and seventy hours of senior management time; collectively, the equivalent of having a senior manager out of the business for almost two months. 

According to the finance person, quality problems combined with production problems to create an atmosphere that was poorly managed into a state of blame and recrimination.  It was his opinion that the company  had made a hiring mistake in bringing in the Operations Director in the first place, which compounded into further hiring problems due to his lack of judgement in the subsequent hiring strategy.

That mass of reject interior modules previously mentioned was the result of a quality problem that had written off the entire previous night's production for the customer.  The financial penalty for doing so was almost one thousand five hundred pounds per minute; a shift was seven and a half hours.

To gauge the full level of financial impact, consideration had been made to the labour costs of manufacturing then re-manufacturing of the faulty modules, plus the material costs.

The finance person recognised that the company needed an interim trouble shooter  to help stabilise the problems, THEN to bring in someone to run the quality department on a permanent basis, once they had established a steady ship.

The Operations Director refused to sanction either the cost of a head-hunter to locate a trouble shooter, nor the additional cost of bringing them in on an interim or contract basis.  When challenged by the finance person regarding the losses that were being incurred through the penalties, management time and scrap modules, the Operations Director made the following statement:-

"I have headcount clearance for a quality manager and a recruitment fee at 15%.  Using a contractor or head-hunter means having to go back and request additional budget which will cause questions to be asked.  The penalties come out of a totally different budget, so we're going to carry on doing what we've been doing until the right person comes along".

Considering its net profit margin, the company has to turn over just under £14million to regenerate the profit that will pay back the money that was wasted in just this one incident.

The Cost: £710,000 + 270 management hours

 

 

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Establishing a Hiring Profit Centre will eradicate such silo behaviour; all it takes is the CEO to take the matter seriously

Comments so far

Monday, October 15, 2007 by Peter Schofield

The numbers tend to stand out in automotive because - bizarrely - they are so cost conscious that everything is measurable and quantifiable.

The one thing that is messing is my oft-mentioned 'Cost of Crap Recruitment' column. Put one of those in and the automotive industry could well lead the way with best hiring practice.

Thursday, October 11, 2007 by Angus

Staggering! The worst of it is I'm sure this goes on all over the world but nobody digs deep enough to see it. I'm sure it would "cause questions to be asked" if Head Office had even the slightest idea that this was happening. What kind of set up allows a Plant to "hide" this sort of malpractice? Absolutely shocking!