These steps led to increased equipment failures, and the contracting organization started pointing fingers at the subcontractor for reneging on the contract deliverables. In response, the subcontractor made accusations on the condition of the operation. Both parties lost financially on this relationship and really should never have settled into an agreement without basic understandings.
The lesson for managers is to perform proper due diligence. What are the contract deliverables, expectations and cost structure? Agree on issues such as key performance indicators, acceptance of equipment, clearly defined roles and responsibilities for response times, and a policy on dispute resolution.
Each of these five scenarios occurs daily. We spend money and resources on technology that we don’t really need, expect a CMMS to solve all problems, spend good money to keep poor equipment running, pay employees who perform below par, and enter into contracts that we shouldn’t. Managers can’t avoid all mistakes, but avoiding some or these five can provide some financial benefits every department can use.
Andrew Gager is a principal consultant with Nexus Global. He has more than 28 years of manufacturing and facilities experience, ranging from warehousing operations to plant management. He is a registered CMRP, CPIM and Six Sigma Green Belt, and he is formally trained in change-management principles.
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The 5 Biggest Financial Mistakes Managers Make
Lesson: Perform Due Diligence on Financial Decisions
