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Fitzburg company cuernavaca's audit - 2014

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  • 1. Lucas Remisz Pablo Subra-Gomez ESCE 308 Fitzburg Company Cuernavaca’s audit May 1997
  • 2. Localisation:
  • 3. Hierarchy: Head office Represented by: Ann Block V.P.OverseasOperations Max Bierman General Construction Manager, Cuernavaca Leopoldo Sanchez Garcia Project's chief engineer Other employed workers Maestro Munoz Employed worker Subcontractors workers John Pekins Assistantof Mr. Max Bierman
  • 4. Actual situation in terms of cost & achievement: 0 5 10 15 20 CostinM€ +46% May.97April.97Mar.97Feb.97Jan.97Dec.96Nov.96Oct.96Sept.96Aug.96 76% 48% 38% 25% 15%10%5% 82% 72% 61% 53%50%45% 35% 15%10% 58% 23% 5%2% 0% 20% 40% 60% 80% 100% Achievement May.97April.97Mar.97Feb.97Jan.97Dec.96Nov.96Oct.96Sept.96Aug.96 Observed Forecast Forecasted and observed achievement of the project between August 1996 and May 1997: Forecasted and observed cost of the project between August 1996 and May 1997: Observed Forecast
  • 5. Existing Situation: • There is some major problems in terms of : -Communication -Intercultural Differences -Ethic Differences -Management
  • 6. Communication: • John and Bierman don’t have any experience in Mexico. • They try to work in Mexico as they would do in the US.
  • 7. Intercultural Differences: • Americans are more close minded • They have an individualist culture • They pay more attention to cost saving processes rather than focusing on quality. • Mexicans accord more importance to tradition • They are attached to the group, and solidarity • « La siesta » is very important to Mexicans workers.
  • 8. Ethic Differences: • TheAmerican managers always try to find out what the Mexicans workers could have done wrong. • They tend to blame only one worker… • …Whereas the Mexicans Managers try to share the fault, and avoid conflict.
  • 9. Management: • There is less dialogue between American managers and the workers • They want to do it the American way, instead of adapting themselves.
  • 10. Statement of the problem: Difficulties in the management of all those factors led to problems of costs and delays
  • 11. Option 1: status quo Measures to take Intermediary impacts Possible risks  High number of errors  Supplementary purchase of raw-materials  High increase of costs and delays  High negative financial impacts (lower margin, lower profitability of the investment, late positive cash flows) 87.5%
  • 12. 30M€ 90% 100% 20M€ 40M€ 80% 30% 10M€ 5M€ 60% 70% 35M€ 50% 40% 0 25M€ 20% 15M€ 10% 0 Mar.98Oct.97Sept.97Aug.97July.97June.97May.97 Achievement Cost 36M€ Jan.98Nov.97 Feb.98Dec.97 100% Cost curve Achievement bars Forecasted cost and achievement of the project following option 1 between August 1996 and May 1997:
  • 13. Option 2: Tighter supervisory control by a Mexican manager Measures to take Intermediary impacts Possible risks  Hire a mexican engineer (the supervisor)  Establish a daily control & report Training of the workers  Decrease of construction errors  Increase of productivity  Increase of costs and delays  Negative financial impacts (lower margin, lower profitability of the investment, late positive cash flows) 75%
  • 14. 20M€ 10M€ 20% 30M€ 32M€ 34M€ 4M€ 6M€ 2M€ 8M€ 16M€ 18M€ 22M€ 24M€ 26M€ 12M€ 14M€ 28M€ 100% 10% 00 50% 90% 80% 70% 60% 40% 30% Cost Achievement Feb.98 34M€ Jan.98Dec.97Nov.97Oct.97Sept.97Aug.97July.97June.97May.97 100% Cost curve Achievement bars Forecasted cost and achievement of the project following option 2 between August 1996 and May 1997:
  • 15. Option 3: Tighter supervisory control & pressure by John Perkins Measures to take Intermediary impacts Possible risks  Convert the siesta break (90’) in a 30min lunch break  Establish a daily control & report  Establish a climate of pressure on workers about deadlines  Negative relations between workers & the management  Decrease of construction errors  High Increase of productivity  Strike of workers 60%
  • 16. 50% 60% 30% 40% 70% 20% 10% 0 0 15M€ 90% 25M€ 10M€ 5M€ 35M€ 20M€ 30M€ 80% 100% Oct.97 Nov.97 Dec.97 Jan.98 100% Cost Achievement 33M€ May.97 July.97 Aug.97 Sept.97June.97 Achievement bars Cost curve Forecasted cost and achievement of the project following option 3 between August 1996 and May 1997:
  • 17. Option 4: Increase workers personal implication Measures to take Intermediary impacts Possible risks Offer to workers:  the possibility to work longer with the same salary  Significant bonus for the most productive workers  Some opponents  High increase of productivity  Low increase of staff cost  Resignation of severals workers / sub-contractors 75%
  • 18. 20M€ 15M€ 45M€ 40M€ 35M€ 30M€ 25M€ 10M€ 10% 5M€ 50M€ 80% 100% 0 0 70% 90% 60% 50% 40% 30% 20% Cost Achievement Nov.97 50 M€ Oct.97Sept.97Aug.97July.97June.97May.97 100% Achievement bars Cost curve Forecasted cost and achievement of the project following option 4 between August 1996 and May 1997:
  • 19. Option 5: Hiring Measures to take Intermediary impacts Possible risks  Hiring 30 unskilled workers  Hiring 4 young engineers (to supervise sub- contractors)  Decrease of construction errors  High increase of staff cost  High increase of the construction’s speed  Supplementary unexpected delays due to the training of the newly hired staff 75%
  • 20. 25M€40% 50% 35M€ 40M€ 45M€ 50M€ 55M€ 60M€ 0 90% 100% 10% 80% 70% 5M€ 60% 30% 30M€ 20% 20M€ 15M€ 10M€ 0 Achievement Oct.97Sept.97Aug.97July.97June.97 100% 58M€ May.97 Cost Achievement bars Cost curve Forecasted cost and achievement of the project following option 5 between August 1996 and May 1997:
  • 21. Recommendations: Reduce delays Reduce costs Option 5 Option 3