I have gone through the case study. The replies to the questions are as below:
1. How would you recover Rs.35.5 Lacs from Sundaram. Except his salary, there are no dues payable to him?
Reply: - It would be difficult to recover the the excess payment made to the vendors. Before awarding the contract, the company must have issued the Purchase Order (PO). This is a legal document and valid under the provisions of Indian Contracts Act, 1872. Therefore, payment must be made to the contractors for the services rendered by them and that too as per the conditions of PO. Otherwise, it would be breach of contract from company's side.
2. Would you terminate the services of Sundaram?
Reply: - Termination of services of Mr Sundaram is possible provided company has obtained agreement from him on Conflict of Interest. Again verbatim of the contract also matters. However, company may terminate services of Mr Sundaram for selecting the contractors whose charges far exceeded that previous contractors.
3. What preventive measures should we take to prevent such incidences in our organisation?
Reply: - Problems of this kind arise when Contract Department is ineffectual. Most of the time when contractor is brought on board, there is proper selection process. Do they have proper selection procedure? generally, declaration from the contractor on conditions of conflict of interest are included in the contract. If these conditions had been included in the contract, it was possible for the company to sue the contractor for the suppression of material information and ask for the refund of the amount paid to them.
Secondly, what about increase in the inputs cost for awarding the contracts at higher price? Who was measuring that and how it was measured? How it escaped from the attention of the higher authorities? The case study explains importance of inclusion of KPIs based on costs. Mr Sundaram was Marketing Head of FMCG company. By awarding the contracts with higher price, his distribution cost must have gone up. Did HR include KPI titled "*Per cent of Distribution Cost against Total Sales Revenue*" in Mr Sundaram's KRA sheet? Had it been so, Mr Sundaram would not have dared to change the contractors.
Thirdly, acquiring contract is easy but what about meeting the deliverables? On what KPIs, the performance of the contract was measured and were these KPIs included in the contract itself? Was the performance score card designed? Was it included in the contract?
Fourthly, problems of this kind arise when persons are given prominence over the process. In many companies, the master contract is designed by hiring external legal consultant. This master contract is one conflict of interest as well as on non-disclosure of the information. Nobody has authority to change the verbatim of this contract. Marketing Head can design only the functional contract. When the new Marketing Head was appointed, why he was not apprised, what is his authority and where it ends.
Lessons learnt: -
1. Taking lesson from this, HR can create policy on whistle blower. When the Marketing Head promoted nepotism, why nobody came forward to point out his anti-organisational activities. Why nobody told to HR even surreptitiously? Why it took audit department to observe the malpractices of Marketing Head and that too after the damage was done?
2. The case study brings to fore the superficiality on HR jargon like teamwork, leadership, competency mapping and so on etc. HR lives in their own imaginary world. HR can address the brass tacks and take preventive measures by designing right KPIs.
Final note: - I conduct the training programme on Contract Drafting, Management and Negotiations. I also provide consulting services on establishing comprehensive Performance Management System (PMS). The case study is result of lack of proper KRAs for Marketing Department in general and Marketing Head in particular. If you wish to avoid the case study like situation in your company, then contact me for the training on contract management or consulting on PMS.
From India, Bangalore