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.