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2nd Riddle from Eli Schragenheim

Posted By Admin, Tuesday, August 16, 2011
A Question of Accountability

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 failure”.

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?

A comment from Eli Schragenheim: I don’t think you need more information in order to answer the questions.


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