Below we have Eli's 2nd Riddle, Eli's answer to his own riddle AND the top answers given by others. The winning answer was submitted by Jimmy Conway so he is the winner of the 2nd Riddle! Congratulations to Jimmy! The other answers are the next TOP answers with comments given by Eli. The rest of the answers (without comments) are at the end. 1. Jimmy Conway's Answer (Winner): "Forecasting sales, particularly in a new market with no track record, is as
good as guesswork. It would be an unfair to Jonathan to be held accountable for
simply guessing wrong. Managers should be held accountable within their area of
responsibility for: 1. The quality of their strategies and tactics, and their
ability to adapt based on market feedback, and 2. Implementing the necessary
and sufficient actions that need to be taken to make good on their strategies
Riddle: Ben, the CEO of BBQ-Made-Easy, describes his pressing problem:
"What should I do with Jonathan? On one hand he proved himself to be an
excellent supply-chain manager. He has been with me since we have established
the company in 1999. He built the relations with the suppliers and he also
established the logistical relationships with our overseas clients. On the
other hand he has built the Turkish subsidiary company almost three years ago
and this operation is still losing money. Jonathan predicted that within
three years the sales in Turkey would come to five million dollars, resulting
in one and half million of net profit practically doubling our annual net
profit. The sales after three years do not reach even the level of the
predicted bottom line!
"BBQ-Made-Easy produces kitchenware for preparing and cooking meat. We
have developed some unique products in this area and we cover the full range of
clients from restaurants and hotels to domestic tools for meat. In the last
five years we have stabilizing the annual sales at $10M, not counting the sales
in Turkey, which this year would come to $1.4M.
"The question is not how much money we lost in Turkey and whether we
should close the office in Istanbul or not. My question is strictly about
accountability. Jonathan came with a specific business case and he failed
to deliver. It is as simple as that. I think every one of the key managers of
my company should be kept accountable. For me this is an important business
principle. Jonathan got our full backing for three years and now is the time to
judge his performance, and being unable to deliver upon his promises he should
leave the company. Am I wrong? How can we make our managers truly
responsible if they not truly accountable to the results they put on the table?
Here is what Jonathan has to say:
"I do not believe that BBQ-Turkey is losing money. Fact is that the
combined P&L of BBQ-Made-Easy, including Turkey, did not go down in the
last two years, while sales, not including Turkey, did not go up.
I’m not a financial expert, but this is a fact to be explained.
"Turkey is a natural market for our products. Three years ago we did not
sell in Turkey. Now we have a nicely growing demand. Sales went up this year by
50%. When I presented my assessment for the Turkish market for our products I
said $10M sales in five years. I was then pushed to give an assessment for
three years and, yes, I did write $5M. It is clear now I was mistaken regarding
the time frame required to achieve that amount. But, where were all the
other managers? Am I considered to be an expert for Turkey? It is right
that I was born and grew up in Istanbul until the age of 12 when my family
immigrated to Israel. So, I speak the language and I still have friends in
Turkey, which are very instrumental in bringing the Israeli products into the
mainstream of the hotels at Antalya (the largest tourist area in Turkey). And,
by the way, do not forget the serious political problems between Turkey ans
Israel since 2009. Should I have predicted that as well? It definitely impacted
our sales in Turkey.
"I have no doubt that given enough efforts and time the target of $10M can
be reached and then it’d become very profitable for BBQ-Made-Easy. I reject any
notion of failure. I claim I succeeded to progress the business of the company
– and I like to be accountable for this success rather than be blamed for a
So, who is right? Who is wrong? What Ben should do with Jonathan?
In what way should managers be accountable for their predictions and their
area of responsibility?
Eli's Answer to his own riddle:
This time I
first verbalize my own answer, and only then comment on some of the reader’s answers.
To my mind
the truly main issue in this case is how to measure the performance of
managers. Ben asks it this way: How
can we make our managers truly responsible if they are not truly accountable to
the results they put on the table?
words "accountability”, according to Ben, is a mean to motivate managers to
become responsible. I detest the
word "accountability” because it means ignoring uncertainty. In CCPM we have revealed how making someone
"accountable” for finishing on time causes tasks to finish early only in rare
cases. When a manager of a new
initiative is required to put a number on the table that person is in the
On one hand
he wants the initiative to be approved: so, he should quote a high number.
On the other
hand he does not want to be caught "under-performing”, so he should quote a low
I assume any
TOC reader can easily build the cloud.
Note that the short term pressure is to quote a high number and if you
cannot break the hidden assumption that a manager has full control on his area
(meaning he is controlling all the uncertainty) including his market, then you
might look for a compromise preferring the short term. Do you blame Jonathan for doing it?
I think that
any requirement to put one number on the table is an illegitimate request
causing very damaging answers. The right
approach is to use a range (reasonable minimum and reasonable maximum) OR
asking specifically "What is the minimum result you can achieve that
below that it’d be judged as a failure?”
Even then you should not condemn the person for not achieving the
minimum, unless your analysis shows the specific failures of his/her management. Reality is too unpredictable to allow us
judge people on the basis of prior expectations.
to the main issue: how should
managers be judged?
It seems to
me there are two different aspects one should pay attention to:
a. The skills,
capability and capacity of the person.
b. The motivation
to do whatever it takes to accomplish the mission or to achieve as much as
possible from the organizational goal.
never say we know how to evaluate the two aspects, but we should also admit we
do know something. Eventually we are
able to approximately estimate the contribution of people to the organization.
critical to know whether the Turkish initiative is losing money or not? It seems like after three years it is about
breakeven. Is it good or bad? I do not think this is the issue here.
Many of the answers are about 70% in line with my
assertion above, which makes me feel good that the TOC knowledge does achieve a
common-sense state of mind. I urge readers who do
not agree with the way I have stated my approach to send me their arguments and
I’ll respond to them.
"Eli's Comments on Winning Answer: "Like most answers it does not fully match my own, but it is quite good in itself. It focuses on the right issue: How to judge the performance of a
manager? Jimmy also makes his points clear,
2. David Peterson's Answer (runner up): "1. Who is right? Who is wrong? Both Ben and Jonathan have made
mistakes. But Ben's mistakes are more serious in that they are leading
him towards sacking an outstanding entrepreneurial manager, unaware of
the damage it will cause to the company's prospects.Ben believes
the Turkish operation is losing money, yet this appears to be
contradicted by what Jonathan tells us: the P&L in the company did
not go down in the last two years, while sales, not including Turkey,
did not go up. It is theoretically possible that the subsidiary is
losing money and the losses were offset by cost-cutting in the parent
company, for example by reducing the R&D budget, but neither manager
suggested anything along these lines.Another, perhaps more
likely, explanation is that Ben has allocated a proportion of the
company's operating costs to the Turkish subsidiary based on Jonathan's
original projections. Since his projections were on the high-side, the
costs allocated to his operations are also on the high-side and make it
look like the subsidiary is running at a loss, and at the same time make
the rest of the organization look like it's performing better than it
is.In fact, the Turkish operation is arguably the best part of
the organization. Sales growth in Turkey was 50% this year while the
rest of the organization is stagnating (or "stabilized" as Ben
euphemistically calls it) with no increases in the last five years.
Jonathan has done a remarkable job taking the subsidiary from nought to
$1.4M in sales in three years.However, Jonathan did fall short
of his projections and inadequately communicated with Ben. Ben should
not treat any manager's guesses as inviolable commitments, but Jonathan
should not have made his guesses the way he did. The figure of $5M that
Jonathan stated as his sales prediction for 3 years, was especially
unfortunate and suggests that Jonathan was making his forecast entirely
by intuition rather than based on an explicit financial model.A
(spreadsheet) model would likely have shown sales growth to be
exponential rather than the straight line that Jonathan seems to have
intuitively applied to arrive at his guess. This would have reduced the
figure for the 3 year mark and increased the figures for years 4 and 5.
An explicit model would also have allowed Ben to understand and question
the assumptions behind it, apply sensitivity analysis, and provide an
opportunity to involve other subject matter experts. For example, during
the growth of BBQ-Made-Easy, Jonathan was the supply-chain manager, but
who was the sales manager? Why wasn't the sales manager involved in
building the model?Having a model would also have provided Ben
with a way to monitor the operation and improve the reliability of the
forecast as real-life results came in and other information came to
light and new situations, such as the political problems, unfolded. This
would have spared Ben the shock of finding such a big gap between his
expectations and reality and would have allowed him to take decisive
action earlier, if necessary.In summary, Jonathan would have
been far better off presenting a model rather than presenting numbers,
and Ben should have insisted on it. Ben failed to provide proper
governance by accepting Jonathan's figures without questioning the
assumptions behind them and without involving other more knowledgeable
managers.2. So, what should Ben do with Jonathan?Ben
should marshal the resources of the company in support of Jonathan.
Sales aren't growing in the home market which suggests the home market
is saturated, whereas the Turkish market is growing at a fast pace. It
may well be worth redeploying sales people from the home market to the
Turkish market to capitalize on the opportunity.Neither manager
has mentioned any manufacturing or supply problems, but fast growth
could easily cause the constraint to move into these functions. Ben and
the other managers have to make sure that this does not happen and that
the organization and the suppliers are ready to take on the growth in
sales. Exactly how to do it is probably out of scope for an answer to
the riddle, but, having a model that is frequently updated and
communicated, will be an important aspect of this. The organization must
work together as a single unit.What Ben should definitely not
do is sack Jonathan! This would have major negative effects all round.
It would harm the opportunity for growth in Turkey, the company would
lose a lot of experience, not to mention the long-standing personal
relationships Jonathan has with the suppliers, and it's not beyond the
realms of possibility that Jonathan could take clients with him to a
competitor. It would also send a strong message to the other managers in
the organization that making mistakes is not tolerated. This will be a
huge dampener on innovation as any innovation can fail. Many excellent
growth opportunities will be avoided because of fear of failure.
Problems are also likely to be concealed from Ben, with managers unable
to tell the truth for fear of losing their jobs. Bad situations will be
made worse by managers pressing on in the vain hope that a miracle
happens that will turn things around.3. In what way should managers be accountable for their predictions and their area of responsibility?Managers
should not be accountable for their predictions, but should be
accountable for their actions, and particularly the way they manage
uncertainty and risk in their area of responsibility.Predictions,
by their nature, involve uncertainty. Any manager held accountable for
his predictions is likely to be extremely conservative and when forced
to make a prediction will pad it heavily to protect his skin.Buffering
is a vital tool for managing uncertainty, but buffering everything is
not the best approach. In large organizations, particularly, having
managers at each level add padding to the estimates of the layer below,
will result in massively distorted data for high-level decision makers.Buffers
should instead be applied explicitly and strategically, for the benefit
of the organization as a whole. Not all variables are equally
important. Some variables carry much more risk (or opportunity) than
others and these are the variables that managers need to manage
carefully.Managers cannot be expected to predict exact values of
uncertain variables, but they can be accountable for their approach to
dealing with the uncertainty. Managers should be expected and trained to
think through and articulate the assumptions behind their estimates and
the consequences of errors and to explicitly address the risks.
Eli's Comments: "I highly recommend the
readers to read David Petersen detailed answer, especially the part analyzing
the Turkish initiative and whether it loses money or not. I disagree with David on the issue of "the
exponential model” in describing the trend in the market, but this is a
discussion for another time."
3. Christophe Lambert's Answer: "This problem is well worked out in the Requisite Organization
literature. A manager is accountable for the results of his
subordinates. When assigning a task to a subordinate, a manager comes to
agreement with the subordinate on what is to be done, by when, to what
quality standards, with what resources. After agreement is reached, the
subordinate is accountable for making his best efforts to do the task
AND notify the manager well in advance if, a) the task is at risk of not
being completed on time, to quality standards, or within allotted
resources, or, b) if substantially more can be accomplished and/or
sooner. If the employee fails to so notify the manager in order for
appropriate actions to be taken by the manager, the subordinate is
derelict in his responsibility and should be subject to disciplinary
action, potentially including deselection from his position. Similarly a
subordinate who does not make his best efforts to accomplish the task
is subject to disciplinary action. In the absence of communication
otherwise from the subordinate, the manager assumes that everything is
on track.Thinking of it in terms of an S&T tree, a
manager is accountable for the set of strategies under him/her and works
with the responsible subordinate for a given strategy/tactic pair to
decide the best tactics. The subordinate is responsible for making his
best effort to accomplish the tactics and must tell the manager if the
tactics are not working to accomplish the strategy, or if significantly
better results are occurring than expected.The CEO (Ben) is
wrong in having his employee be accountable for the results – the CEO is
accountable for the results ($5M in 3 years). The subordinate
(Jonathan) also did not appear to notify his CEO well enough in advance
that the results were not going to be as expected for action to be taken
(though you would think that warning signs would have been evident in
the annual financials). The CEO should have either replaced Ben earlier
if he was not up to the task, or changed the tactics, or changed the
target. Since the 3 years are up, the CEO now needs to decide the next
task, and decide whether Jonathan can accomplish it. If not, let him go
(including to possibly somewhere else in the organization). If so, let
him stay, but be clear that in the future Jonathan must notify early if
either the target (the strategy) is in jeopardy, or if even more can be
Eli's Comments: "Christophe Lambert uses
the term "accountable” in the meaning of "being judged upon”, which I disagree
with, but then asks how to do it right - a question I like very much. It is an interesting answer, making an
emphasis of an ongoing process rather than judgment at one point of time."
4. Alejandro Cespedes' Answer: "We think both Ben and Jonathan have right and wrong arguments. Generally
speaking, no one should be held accountable for a somewhat arbitrary
figure. Forecasts should be done but they should be a range, not a
deterministic number. Every forecast should have an optimistic and a
pessimistic scenario, and should be done with inputs from the most
suited people in the company. And Jonathan himself recognizes that he
isn't the person to do it; he is good at supply chain management but he
doesn't know the market. Ben should've brought people from sales and
marketing to participate. Regarding accountability, we believe
that accountability should be based on the plan's design and execution,
not the end result. Jonathan can't control political events but within
his plan he should have a worst and best case scenario and a contingency
plan for them. For example, if sales are much lower than expected what
will he do increase sales? And if sales are much higher than expected
how will he elevate capacity? If Jonathan fails in executing the plan he
should definitely leave the company. But if the plan wasn't properly
constructed to begin with, we think management has big responsibility in
this as well. When deciding whether or not to open operations in Turkey
management should have identified the relevant variables that should be
considered, have the most knowledgeable people predict "realistic"
pessimistic and optimistic scenarios, and devise plans for both
scenarios. If execution is done by the book and results are not there,
management should identify the erroneous assumptions to avoid making the
same mistake in future plans and correct the strategy based on what
reality is telling them. A forecast even with ranges is still a
forecast. During execution the company needs to be open minded, flexible
and fast enough to respond to reality. Certainly this involves people
from almost every department in the company. Leaving it all up to
Jonathan is a big mistake.The operation in Turkey should be analyzed separately to avoid distortions from cost allocations. The fact
that NP didn't go up or down with Turkey should be an alarm for cost
distortions. Though Turkey is not selling what Jonathan predicted, this
doesn't mean it's losing money.Finally, we think that when
deciding who to assign to open the new branch, they should look at what
capabilities are really needed. Maybe Jonathan is not the person to do
the job, even though he is a great supply chain manager. Many times
companies give promotions to people based on their current performance
but this doesn't mean he/she will perform well in the new task.
BBQ-Made-Easey may be losing a great supply chain manager while
promoting a not so competent new operation manager."
Eli's Comments: "Alejandro Cespedes
gives a very good answer making the case for using a range rather than
one-number forecast. I disagree with
him about Jonathan being a good supply chain manager and not a good sales
one. I don’t know whether Jonathan is a
good sales manager because I cannot tell whether the sales he did achieve were
close or not to what they could have been.
All the rest of the answer is in line with my own."
The rest of the answers do not include comments from Eli, but at the request of Eli he would like to have all answers available to read. Below are the rest of the answers in the order they were received.
1. Manoj Agarwal: It is clear Jonathan is being measured locally in two ways: - by
performance of the Turkish Subsidiary; and by actual numbers against his
"commitment". Instead of firing Jonathan, Ben should recognize
that The Turkish subsidiary HAS contributed - significantly. Going by
the local measurements logic being considered for Jonathan, he would
have to fire almost all managers - including himself, as nobody would
have planned to lose money on rest of the operations! He should
more clearly define his responsibility and set up different, more
"global" mechanisms of accountability. He should set up a more
reasonable "quota" of sales; for shorter horizons (e.g. a quarter or an
year) and institute mechanisms of rewards & recognition for
exceeding it. The accountability must be on discipline establishing a
proper plan through systematic planning; and regular reviews for
recovery planning and execution.
2. Peter Milroy: So, who is right? Who is wrong? What Ben should do with Jonathan?In what way should managers be accountable for their predictions and their area of responsibility? While
I hesitate to take sides, Jonathan's position appears correct to me.
He is the Supply Chain Manager, a position in the company that should
not be given Profit & Loss responsibility for a foreign operation.
While he might be a valuable member of the leadership team, he can't be
singled out for a direction that he alone could not have initiated, only
the CEO could have given permission to begin operations in a foreign
country. Responsibility must rest with the CEO, unless he agrees to
give Jonathan broader responsibility in the company.
3. Justin Roff-Marsh: Ben is wrong, and on many counts. First, Jonathon's predication
was exactly that: a prediction and NOT a guarantee. It's true that
managers should be accountable but, they should ONLY be accountable for
those things over which they exercise control.At the time he
made the prediction, Jonathon would have considered the market
environment, in combination with the capability and effort he intended
to deploy.Jonathon has no control over the former, meaning that he should be evaluated purely based on the latter.It
appears that the claim that the Turkish operation is losing money is
misleading at best, fallacious at worst. If, as Jonathon claims, there
is evidence that the Turkish operation is not making a negative
contribution to the performance of the group, it is not a loss-making
entity in any meaningful sense.The company as a whole (senior
management) placed a bet on Turkey. Management must accept there was
always a significant likelihood of reality playing-out differently.
That's the very nature of bets! Management decisions now should
be made looking forward, not backwards. And the critical issues should
be considered in isolation.The important questions are: should
the company continue its Turkey operation? And, is Johnathon the right
person to continue to head this operation?It's clear that the answer to both of these questions is 'yes'.If there is an open question right now, it has to concern Ben's management capability, not Jonathon's.
4. Alfredo Angrisani: The basic figuresThe business figures from the recounts (in bold
print) should be as in Table A. Assuming that the truly variable costs
are about 50% of the turnover, then all else being the same, the cost of
the Turkish office is roughly 700 k$. Which is a lot for a sales
operation. Even if TVC are substantially higher (60%), then the cost of
that office (from the text there is no physical operation in Turkey, but
just an office) would be no less than 500 k$ per year, unless... there
has been an increase of cost at the headquarters in Israel. Such
inconsistency would be much higher and to be fully explained by the
Israeli management if the TVC ratio were even smaller than 50%. 2009 2011Sales Israel 10 10Sales Turkey 0 1,4Sales total 10 11,4OE + TVC (Total) 8,5 9,9TVC (50%) 5 5,7OE 3,5 4,2Profit 1,5 1,5Table AAnyway,
according to Table A, the Turkish operation provides a throughput of
700 k$ that effectively balances its own (supposed) additional operating
costs in 2011 if the TVC is around 50%. In reality, it seems to
contribute considerably to the headquarters' cost.The management issueJonathan
was naïf when he accepted the intermediate 3-year target without making
clear the underlying assumptions (i.e. excluding special causes like
the Israel-Turkey conflict) and alternate scenarios (including a risk
analysis) but that's mainly Ben's fault: a leader should set goals and
agree operational targets, yes, but also make sure that his people have a
clear and robust path to meet such goals and check frequently with them
(maybe every month) how things are rolling. Especially be reactive if
some special issues come up. What Ben did (and Jonathan did not
acknowledge) was to force predictions way beyond a reasonable horizon of
certainty.ConclusionClosing the Turkish operation would
just waste the goodwill gained in 3 years and most probably have an
immediate bad effect on the company's P&L. Ben and Jonathan should
rather have a better (deeper and more realistic) look at the future
operational plans and establish a control methodology to prevent loss of
control, including monthly reviews, and adoption of TA.
5. Emile Wegner: People are inherently good - therefore the systems and processes within
the company need to be sufficient, relevant and accurate enough to
enable management to make accurate predictions and meet targets. The
reporting and feedback systems need to give early warnings to enable
corrective actions to take place when targets are not met.
extent to which managers should be held responsible for their
predictions and performance should be directly related to the quality
and quantity of information they have at their disposal.
6. Orlando Aguilar: Who is right? First of all, what is it right? Right means moving to
the goal. What is the goal of the BBQ-Made-Easy? Is it only to make more
money now and in the future? Or is it a necesary condition to fulfill
its purpose like to be a lasting company.In either case, I think,
Jonathan is doing right. Is he improving? Definitely, yes. If he keeps
increasing the sales by 50%, like he is doing, pretty soon, he will
surpass that prediction. That was it, a prediction. In a prediction,
three years could be one or five. Is he building a stable organization
in Turkey? Probably. At least, Ben accepts, that he built lasting
relations with suppliers and clients before going to Turkey. So,
Jonathan has enough experience and intuition.
If Jonathan is fired, is it an action toward the goal? I don't think so. Shoud a manager be accountable just for numbers, cuotas, tags? I don't think either.
7. Shivaram A: Business forecast is always a touch and go situation especially an entry
forecast into a new country . When ever there is a success, ( like the
proverb, success has many fathers, failures none), a lot of people want
to take credit. But when ever there is a failure, no one wants to own
up, including Jonathan in this case.We should look for a win-win situation.The fact that the organisation is not loosing money, is a clear indication that Turkey BBQ is not responsible for the losses.The
fact that some "forced "sales forecast went wrong, is no reason to
"sack " the guy who brought the proposal to the table in the first
place. He took the risk to propose. Every one would have known
that the 5 m target was not going to happen atleasat 1 year ago. Hence,
every one who is part of the management team is equally responsible, but
Turkey being a natural market, and with some patience can be a good
long term benefit to BBQ.Instead of penalising Jonathan, the
team should think win- win all round, and help the front end Jonathan to
improve the business.Who knows, it might really reach 10 m in 5
years. ! Then ofcourse, it is to every ones credit to have turned
around the Turkish market.Sacking Jonathan, would not only push
the company out of the Turkey market, with his contacts etc, but will
also send a wrong message to the company in other markets as well.
8. Charlie Svoboda: Ben & Jonathan should have agreed on the metrics used to measure
Jonathan's success before he began. Once he began Ben & Jonathan
should have been looking at the progress of the project with some sort
of red, yellow and green framework that would enable them to develop a
recovery plan when entering the yellow and implement the plan when
entering the red. Business is a bit like surfing. You can only ride
the wave that is given you. 9/11 changed things for a lot businesses.
The ones that adapted thrived and the ones that didn't suffered.
9. Henry Camp: Turkey represents a growth market for the company and has not drained
profits company wide during its start-up. The company is not growing
elsewhere, certainly not at 50% year ofver year. Ben should ask
Jonathan for his expected increase this coming year and see how much the
expected change in T less the expected change in OE will be. My
expectation is that the new Turkish outpost will add nicely to the
company's bottom line in the coming year. Perhaps, Ben should think
about increasing the support to see that the goal of $10m in sales is
reached sooner than later. Blaming Jonathan creates disharmony and
risks undermining his loyalty. Measuring him locally undoubtedly
includes some allocation of corporate costs which would not disappear if
the Turkish operation was closed. Measure globally and support hard work that has a potential to pay of handsomely.
10. Judy Yetter: Both Ben and Jonathan are right and wrong. Ben is right in believing
people be held accountable and wrong in thinking a forecast is real,
true or more than arbitrary. Jonathan is right in seeing forces beyond
his control weighing in on the situation and wrong for not admitting his
target $ figure was simply telling the boss what he wants to hear.
Managers should be held accountable for their predictions by not making
them. Simply model the way for continuous improvement. Managers should
be measured according to the improvement margin - whatever that may be.
11. Deepak Nagar: The answer would be clear when we look at BBQ Made Easy as one single
system. Any new initiative should fulfill the criteria of Delt T >
Delta OE.From Jonathan's assertion "Combined P&L of
BBQ-Made-Easy, including Turkey, did not go down in the last two years,
while sales, not including Turkey, did not go up", it appears that if
Turkey initiative is taken away BBQ would have made lower profits. The
caveat would be that rest of the organisation has not curtailed OE to a
great extant.The key to managing long term initiative is to
create a detailed S&T and convert it into a project plan with
definite milestones. Accountability of each leader could be established
by speed of achieving the milestones and then converting them into
bottom-line results.A shooting from the hip approach might
deliver some instant results but it would be difficult for the
organisation to sustain such activities and might push the leadership in
taking rash decision by assuming the results by random causes can be
replicated time and again.
12. Felix Sanjuan: Since last 3 years Turkey has experienced growth in sales that have
allowed the group to at list have sales stabilized even that the rest of
the group has not performed, Ben should have Jonathan share in the
group how he has managed to grow sales in spite of adversity.
that are not fully back up by the top management are likely to deliver
short of expectations, manager should be accountable for predictions
their area of influence provided the has also full control of the
factors influencing their business environment.
13. Anuj Mittal: Ben is right.The sales in turkey are growing at 50%, so if 3rd year
sales are 1.4 million, 10th year sales assuming the same growth rate
will be $ 24 million. So, he is delivering far more but his 5 year
forecast he was forced to give was a straight line instead of
Assuming that the Turkey OE will not go up in the
next 2 years significantly. Given that P&L did not go down in the
last 2 years. Assuming this means the absolute value of profits stayed
the same. Profits annually are 0.5*1.5= $ 0.75 mio. (This estimates that
the net profit Turkey made was 0 in the third year. Therefore, it did
not lose any money.)As an illustration, assuming TVC to be 20% and
OE to be 72.5%, and applying it to the comined sales of both entities.
The excess OE comes to $ 1.12 million.
When we project the 50% Turkey
growth rate for the next 2 years, keeping OE the same,the profit in the
5th year comes to $2 million- far more than the promised $ 1.5 million
result!! Even the 4th year profit comes to $ 0.98 mio, more than the $
0.75 mio annual profit of the firm.
He should resign and make Ben the group CEO! :-)
14. Vilius Seskauskas: Profitability of sales in Israel might have gone up, while at the same
time sales in Turkey generated losses all these years. Jonathan gets
15. Alta Vos: Ben and Jonathan worked well together for many years and Ben
acknowledges that Jonathan is an excellent supply-chain manager, but
more importantly, he acknowledges that Ben built critical relationships
over time – relationships that the company need to maintain, but which
could make him quite valuable to the opposition. Accountability works both ways:•
As CEO Ben is ultimately accountable and therefore he must challenge
any proposed case for investment until he is comfortable with it • Jonathan is accountable for the business case that he puts forwardIn
this instance perhaps they should park their emotions and consider what
information BBQ-Made-Easy should require in future in order to make the
decision to invest in a new venture such as the Turkish one.Instead
of predicting revenue and profit figures after 5 years of operations
(and then hastily work up figures for the 3rd year) of the proposed new
venture, the following approach could serve them well:Develop
yearly projections for the number of years that they prefer, say 5 in
this case. Projections include revenue, cost and operating profit, but
these projections must be based on a set of assumptions such as how the
projected figures are arrived at, factors that may affect projections,
etc . The assumptions are almost more valuable than the figures
themselves and must also refer to matters beyond anyone’s control, such
as natural disasters, global economic uncertainty, political matters,
etc. Managers such as Jonathan should be accountable for
developing robust business cases based on well developed projections and
the accompanying assumptions. CEOs dare not accept any business case
at face value as they are accountable to the board and cannot lay the
blame for their oversight on a manager further down the line.
16. Leo Lauramaa: So, who is right? Who
is wrong? What Ben should do with Jonathan?
It does not matter who is right and who is wrong, they both are committed and
share the common goal of the company’s overall (consolidated) success.
While the idea of Ben’s potential dismissal is based on erroneous assumption,
it should not be done. The assumption seems to be that any business development
idea presented by a manager is simultaneously a personal commitment to execute
and deliver the results based on this ideation. This assumption may easily lead
to negative loop of spread fear to present and develop anything new.
In what way should managers be accountable for their predictions and their
area of responsibility?
There should be a process in place to evaluate and prepare important decisions
and projects like entering a new market. This should not be a "heroic” one man
The project execution should be teamwork and all the necessary roles, skills
and experience should be in place. The overall responsibility of this kind of
important project should be held by a competent project manager. The progress,
milestones and corrective actions should be monitored and decided by the
The forecasts should be treated as honest best guess and the success should be
evaluated by the measures delta T and delta OE.