Reference no: EM131904012

Case Study: Factory Expansion Project Jacob Clemson is the owner of Digitsig, Inc., a growing Canadian electronics company. The company has been receiving orders from customers worldwide, and sales have been expanding rapidly. The factory is now working three shifts and is at capacity. Jacob had to lease additional space in a building several miles away. He knows he must expand his factory to keep up with growing demand, to increase efficiency, and to reduce the costs associated with trucking materials and product back and forth between his factory and the building he is leasing. The cost of the lease was very high because there just was not much good available space in the area and Jacob was desperate to get additional space right away, or he would not be able to keep up with demand and customers would go to his competitors. Jacob met Andy Gibson, part-owner of AG Contractors, at a recent business networking event. He told Andy about his expansion needs. Andy said, "We can do that for you, Mr. Clemson. We've done many similar projects. As you may know, business is booming in the region, and getting a contractor won't be easy.

But it could be lucky we met because we are just finishing up another project and could probably get working on yours if we can get an agreement soon. I've got four other proposals pending, and if they come in, we won't be able to handle any other projects. And like I said, I understand all the other contractors are just as busy. It sounds like you really need to start on this factory expansion right away, and I think we can help you out." Jacob became worried that he might not be able to get another contractor, and he did not want to waste any more time. So he signed a contract with AG Contractors, for what he thought was a reasonable price, to design and build the expansion to his factory. The expansion space would be used primarily for inventory storage of incoming materials and finished goods. He agreed to a bonus clause in the contract to pay AG Contractors a 10 percent bonus if it completed the building in 12 months rather than the 15 months Andy told him it would normally take.

It is now 14 months later. Andy Gibson and Gerri Penk, a recently hired project manager for AG Contractors, walked into Jacob Clemson's office. The receptionist asked, "May I help you?" Andy asked, "Is Jacob in?" "Yes, he is. Do you have an appointment?" responded the receptionist. Andy hurried by the receptionist, saying, "I don't need one. This will only take a minute." A surprised Gerri followed after him. He knocked on Mr. Clemson's door once, opened it, and walked in without waiting for a response. Astonished, Jacob Clemson looked up and said, "I'm right in the middle of this important" Andy interrupted. "This will only take a minute. I just wanted to say that we got your factory expansion project completed on time and within budget. We finished in 12 months, just like I knew we, I mean, like I hoped we would. I had to kick butt with some of our subcontractors, but that's the way it goes in this business. Sometimes you've got to be an SOB to get the job done. I'm sure you're the same way, Jacob, or you wouldn't be where you're at." Jacob Clemson spoke up. "Well, there were some problems ...." But Andy interrupted again. "In a big project like this, there are always problems, and some people's feathers get ruffled. But that always happens. Don't be concerned about that. In the end, it all worked out.

I thought maybe we could go to lunch to celebrate, but we have another meeting across town. Give me a call sometime, and maybe we can get together and see if I can help you with any other projects you might have." Andy then turned and quickly left Jacob's office, walking right past Gerri, who ran to catch up with him. After they left, Jacob was somewhat stunned and became furious. He thought to himself, "Another project? Over my dead body. An SOB? What kind of person does he think I am? Getting the project done on time and within budget-does he think that is all that it's about? This project was a nightmare. It finished up costing about 50 percent more than AG's original price because of all the changes they came back with. They never asked, never listened, never told me what was going on, and never returned my phone calls. What a bunch of jerks! I'll never do business with them again." As Andy and Gerri walked to Andy's car, he told Gerri, "There you go, another satisfied AG customer. And a pretty naive one too," Andy chuckled. "I knew we could get the project done in 12 months. But I knew he was desperate, and I told him it would take 15 months, and then got him to agree to a bonus payment if we got it done in 12 months."

Gerri asked, "Andy, isn't that unethical?" "Hey, business is booming for Digitsig; they have plenty of money. Besides, it's his problem for waiting so long before deciding on doing the expansion anyway. He was lucky we helped him out of a bind. But I've got to tell you, Gerri, I wondered why he was building all that warehouse space for inventory when most other businesses are going to just-in-time deliveries. But I wasn't about to tell him that. It's amazing he's in business at all. Oh, well, you'll find out it's a dogeat-dog world out there, Gerri." Gerri responded, "Andy, I got a sense that maybe Mr. Clemson wasn't totally satisfied. I mean he really didn't say he was." "He didn't say he wasn't either," snapped Andy. "Besides, he never seemed interested in the project, he never asked to have any meetings, and when I tried to schedule a meeting, he was too busy. And then his payments were always late-like he was anal or something. Believe me, he's tickled with what AG did. He was desperate to get the project done, and we did it for him-on time and within budget. And made a bunch of money on the project. So we both came out winners." "In fact, I'll use old Jacob as a reference with the new customer we'll be meeting this afternoon to review their RFP. Customers always ask for references from previous projects, but quite frankly, they hardly ever call them." "Hey, Gerri, you'll learn that you've got to focus on the next customer and not worry about the old ones. It works, believe me, or I wouldn't be driving this Porsche. Maybe they didn't teach you that in MBA school, Gerri, but I learned from the school of hard knocks when I took this business over from my father. He was well liked in the community, and I'm just following in his footsteps."

CASE QUESTIONS

1. What should Andy Gibson have done differently in his meeting with Jacob Clemson in Jacob's office?

2. What are some things Andy could have done differently in his initial contact with Jacob and during the project?

3. What are some things Jacob could have done differently from the time he met Andy Gibson initially and during the project?

4. What should Gerri do?