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Cost Center Paid Its Way

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    The Cost Center That Paid Its Way

    Eric Palmer is the head of Camden Robotics marketing communications department. He was asked by the CEO, Tom O’Reilly, to turn his department from a cost center into a profit center. Eric has a full team of professionals, some of which are very expensive but he doesn’t end up losing any of them. He simply has to start making a profit or Tom O’Reilly may cut costs in the marketing communications department. Eric starts off great. There are a few customers that are angry, like Andrea Torres, who called to ask why she received a bill for $75,000? And another complaint came from Amanda Black, whose client is Walston Scientific, a competitor of Pandemix. Pandemix received help from Eric on some marketing materials. Walston Scientific wasn’t too pleased. However, Eric is starting to make money, so Tom is pleased and feels like he is mentoring Eric. Everyone was angry about Eric’s approach except Tom.

    No one could understand why Tom couldn’t see that this idea just wasn’t working. A meeting came up and that’s when Tom finally saw some things he didn’t like. The accounting department gave Tom some numbers and it showed that Eric had undercharged a customer. Numerous complaints had reached Tom by that time so this was the last straw. He decided to have a meeting with Eric to discuss some of these issues. In the meeting Tom brought up some of his reservations. Eric seemed to brush over them and tell him what a great job he was doing. He didn’t understand why Tom wasn’t pleased with him. Eric was making money and exceeding what he thought was required of him. The meeting ended and Tom had to make a decision. If I were Eric I would concentrate on my internal customers and colleagues. Customers are very important but if employees can’t even trust their coworkers then divisions will start and people will start to feel animosity towards each other.

    This kind of environment in business is destructive. Everyone was angry about Eric’s approach except Tom. No one could understand why Tom couldn’t see that this idea just wasn’t working. Eric seemed to be spending more time with Tom than trying to strengthen his relationships with his internal clients. Changing from a cost center to a profit center is a great idea if there is a plan in place. Tom just gave Eric a free pass to start changing things without realizing that Eric could dynamically change things for the worse. However, Eric didn’t have much time to change his department. If Tom gives Eric more time, Eric could smooth things over with his internal customers and also make his department a profit center. My recommendation to Tom would be to give Eric a bit more time, but to have clear expectations that he needs to follow.

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