Internal Controls at a Dosa Stall

I like to begin my day early on Mondays, for primarily two reasons. I beat the traffic and get a decent parking space and I also like to get a head start to the week. The result is that most Mondays I end up not carrying my lunch and end up eating outside.

One such Monday, a friend working nearby convinced me to join her for lunch at a roadside dosa vendor. I had a look at the menu card and was flabbergasted. There were thirty five types of dosas on the menu card. I am sure, that even Udipi restaurants don’t have more than 10 to 15 varieties. One name on the menu intrigued me – it said Gini dosa. I was wondering what it was and mentioned it to my friend, who recommended it very highly.

The place was crowded. There were at least 20 people waiting for their orders. There were only two people manning the stall. One was taking orders, serving people and taking money, the other was preparing dosas on three hot plates simultaneously. The person taking orders was a genius. The piece of computer six inches between the ears, would memorise every order in sequence and remember who placed it. There was no advance payment of money, people would finish their food and pay the money.  The biggest challenge was when a group of 5 or more youngsters came it and placed the orders. They would change the orders thrice in a span of 45 seconds, and this guy would always get the order right. When it came to collecting money, he would do the calculation in his brain and had no time for a calculator. And if anybody disputed the amount, he would verbally roll out his calculation and he would be right.

The person preparing the dosas was simultaneously working on three dosas, knowing exactly what ingredients to put in which dosa, and the order in which it was to be prepared so that no customer was made to wait for a long time.

I was amazed at their capabilities and processing speeds and retention power. A stray thought entered my mind, how would these people function in corporate? After all they were competent, had a great processing speed, great calculations and a great memory.  I mentioned this to my friend, and she had an interesting reply. She said, you will destroy their skills by corporatizing them. The reason these guys are good, is they are constantly using their brain, which is getting sharpened every minute. While I agreed with what she said, I was slightly insulted by her answer. Not wanting to accept her argument, I asked her, “Do you mean to say we in Corporate don’t use our brain every minute?” She smiled and said “I didn’t say that.” 

While we were waiting for a dosa, she asked me whether the dosa maker lacked internal controls and what could be the risks for the business. I said, yes, it lacked internal controls big time. I mean, the guy could take wrong orders, he could miscalculate the bill and importantly customers could go away without paying, resulting in substantial loss of revenue.

“So what is the purpose of internal controls?”, she asked. I said “prevention of fraud, accuracy of data, correct repoting.” I had left accountancy practice 20 years ago, but not forgotten the basics. She once again smiled. Now her smiles were starting to get on my nerves. Are you saying, I am wrong?

“Which of these two guys is going to create a fraud, what data are they reporting and to whom? Do you realize that lack of internal controls also indicates presence of trust.” And then suddenly it hit me. Internal control systems are designed mostly by accountants. Their basic motto is “Trust but verify.” As a matter of fact, they want documentation and documentary evidence for everything. Their basic functioning is based on ‘mistrust’.

My friend then made a suggestion. Lets come back again at 4 and speak to this fellow about his lack of internal controls. Instinct told me, I was going to learn something.

At 4 pm, both of us returned. She was a regular customer and hence knew the dosa vendor. She started, “How many times do you prepare incorrect orders?”

“Rarely. Maybe 5 wrong dosas in a day if it is a bad day”

“And how many dosas do you make in a day?

“Close to 1000”

I was impressed. An error rate of around 0.5% on a bad day, is setting very high quality standards

“Does it happen that people go away without paying the bill? Are you not worried of that? “

“Saab.. nobody in this world steals food.”

My jaw dropped… what was he saying?

“Sometimes people forget to pay in a hurry, but they come back the next day and pay. A poor guy who is hungry will beg, ask for food and not steal it. There is only one category of persons who steals food and that is college kids who are out for a cheap thrill. We get one such bunch, once in a month, and we allow them this thrill. They are not thieves, they just want to beat the system.”

I got one of the greatest insights of my life with the answer

In the evening, driving back home, a thought struck me, “His business revolved around trust, while internal controls revolve on mistrust. I looked at the people around me and realized that most of the people at junior levels are honest. Is it time to dismantle internal controls? Maybe it is time to hand them over to a non-accountant, who will design them from a perspective of trust.

Managing Fast Growth

This is the story of two friends, Amit and Vaidehi. Both are friends, work in a technology company, and are at crossroads in their career. Amit is in his mid 40s while Vaidehi is in her early 30s. Both are bright, brilliant and achievers in their respective careers.

8 years ago, Vaidehi was graduating from B-School and was eagerly waiting for the campus placement process to begin. A reputed technology company was scheduled to visit on Day Zero, and Amit was part of the recruitment team. That is the first time when both faced each other. After a grueling interview, Vaidehi got selected and joined the company.

Vaidehi was bright and brilliant and in due course of work was also a super achiever. At the end of the first year of her career, Vaidehi stood apart from the rest of her batch and was a hot candidate for promotion. Amit was part of the committee which voted on promotions. Vaidehi’s candidature was solid and there were no grounds to deny her the same.

Amit was very fond of Vaidehi. He had personally selected her from campus and through the rest of the year, continued to groom her. He had a habit of keeping a tab on candidates having a bright potential. The information that he had gathered on Vaidehi in the last one year impressed him. He silently patted himself on the back for having unearthed a raw diamond.

However sitting on the committee for promotions, Amit was worried and not convinced about Vaidehi’s candidature. He had absolutely no doubt about her promotion, or whether she deserved it. 

His only concern was whether success was coming too fast for her. He wanted to test how she would deal with the dejection of not getting a promotion. Amit argued vehemently opposing Vaidehi’s promotion, but was outvoted. The management said, that if they did not promote Vaidehi, she would leave and the organization would lose a top talent. Fear was an integral part of the promotion decision.

Amit came out of the meeting with mixed feelings. While on one hand he was happy about his protégé’s success, he was concerned whether she had the maturity to handle success.

Over the years Vaidehi's career grew from strength to strength. However the profile of her work changed. While she had started her career as an individual contributor, with a couple of promotions, she had moved to managing a team. As she got promoted from an analyst to an associate and later to a Vice President in a short span of 8 years, she had moved from actually doing work to managing teams and stakeholders. A typical day would begin with a few meetings, followed by few more meetings, followed by conference calls with international stakeholders, followed by a few more review meetings with her team.

On the other hand, Amit being fairly senior, had become an expert at playing the meeting game. One day he wondered, whether he was doing any work himself or just conducting meetings. Meetings for leading cross functional projects, meetings for review with clients, internal strategy meetings, review meetings with teams. He convinced himself that he was a leader and his leadership skills were his USP.

But today, 8 years later, both found themselves at crossroads. Being highly successful, they were very well paid. This also ensured that they were ‘high cost’ resources. While they were proud of their success and where they had reached in their life, they did not realize that fast growth was a curse in 

itself.

Just yesterday, the company had announced that due to shrinking business and rising costs, the firm was offering a Voluntary Retirement Scheme (VRS) to AVPs, VP and Directors. Suddenly the rug of comfort was being pulled from under their feet.

This announcement had thrown the cat among the pigeons. Everyone who was in these ranks were wondering whether they would be on the ‘hit’ list. Amit was more or less convinced that he was. Vaidehi was not sure, and felt that she would ride out the storm.

Amit was now wondering, whether at the age of 45, having the brand of being a VRS beneficiary, in short a sophisticated name of being sacked, he would get a job. He wondered, how he would pay his EMIs. The total EMIs came to more than 1 lakh rupees a month, which consisted instalments for housing loan, a brand new IPhone he had purchased for his wife, and the new BMW which he had bought 24 months ago. He was also wondering, how he would break the news to his family and whether they would adjust to the reduced standard of living.

Vaidehi, had a different concern. Being single, she had splurged most of her income on partying, shopping and vacations, and hadn’t saved much. She wondered about the longevity of her working life. She felt that she had a high probability of surviving this round, but wondered whether there would be another round of VRS five years later and whether she would survive the same.

What was Amit and Vaidehi’s mistake? Over the years, both had developed strong leadership skills. There would be so many people with experience having leadership skills competing for senior management jobs which are anyway in short supply. Organisations are like pyramids. There is very little room at the top and the danger of falling off is very real.

I am sure there are many Amits and Vaidehis around at the workplace. How do they avert this danger? One of the ways is to develop strong functional skills. As we grow in an organization, we lose touch with ground level functional skills and develop leadership skills. While leadership skills are good, they are really not differentiators. Leadership skills coupled with strong functional knowledge is going to stand you in good stead and will elongate your career.

Measure your success, not only by your promotions and money, but also by what domain skills you are sharpening. If you are not sharpening any domain skills, you are living in a bubble which will eventually burst.

Remember, Sachin Tendulkar was not a great leader – as a matter of fact he realized very early that captaincy was not for him. His longevity was a function of his domain skills. To survive in the team, your leadership skills need to be backed by strong functional skills.

(The above is a fictional piece written in response to an IT Majors announcement of VRS for its AVPs, VPs and Directors. Any relation to any person is purely conincidental)