Reference no: EM132232749

1) What are the implications for O’Hara if she does not tell anyone about the error in the spreadsheet?

2) What would be the implications be for Ergonomica ?

3) Do you think Ergonomica Consulting has contributed to the problem facing O’Hara? If so, how?

4) What action would you recommend for O’Hara and why?

Give each answer in atleast 500 words.

Case: ERGONOMICA CONSULTING AND SOLLTRAM HOTELS: AN ETHICAL DILEMMA

In April 2017, Kawun O’Hara, senior manager at Ergonomica Consulting (Ergonomica), was under pressure to demonstrate within the next month, to her employer, as well as to key account Solltram Hotels (Solltram), that Solltram’s investment in high-frequency (HF) fluorescent lighting would meet or exceed the expected payback for the client. A lot depended on her being able to do this: winning an extension of the contract with Solltram, developing a new specialist practice area within Ergonomica, improving her chances of promotion, and cementing her reputation. Besides this, she was passionate about helping businesses with their environmental strategies.

However, at a critical moment, O’Hara had discovered that a previously hidden error in her main spreadsheet, which contained over two million data points, had resulted in her overestimating the cost savings for the client. The error would be virtually impossible for the client to discover. Should O’Hara conceal the mistake and win the important contract, improving her chances of promotion? After all, there could be other errors in the data or in the spreadsheet, and the client would still achieve cost savings and other positive outcomes from the project, including great publicity. Or should she own up to the mistake and risk losing the account, her promotion, and her reputation?

OPTIONS FOR O’HARA

O’Hara looked again at the error. She checked previous versions of the spreadsheet and found the error had always been there. She put her head in her hands. It was getting late and she could see only two options.

Option 1

Ignore the error and do not tell anyone about it. Issue the business case with the (incorrect) savings and secure a major piece of work and a promotion, and achieve something positive for the environment.

Option 2

Own up to the mistake and to the fact that the savings were only half of what was reported previously.

This could jeopardize everything—the firm’s relationship with Solltram, O’Hara’s promotion, and, perhaps more than anything, her reputation.

ERGONOMICA CONSULTING

Speed had thought he was taking a risk when he started Ergonomica in 2002, but it was one with which he had felt comfortable. After all, having majored in engineering at Princeton University and accumulated 10 years’ experience in the automotive industry, an MBA, and 10 years working for a major engineering consultancy firm, if he could not make it, who could?

Speed considered there to be a gap in the market for a consultancy firm that could identify and deliver pragmatic and cost-effective environmental programs for businesses. He believed that the big consultancy firms that claimed to assist with environmental programs were composed of either accountants with no practical engineering skills, engineers with no communication skills, or environmentalists with no commercial skills. Ergonomica was going to fill that gap. Moreover, Speed felt passionately that, as well as having technical skills, Ergonomica would be a consultancy firm with a reputation for honesty—it would genuinely put the client first.

Speed quickly found a winning formula, and Ergonomica grew steadily between 2002 and 2007. This growth was in no small part because of Speed’s personality and charisma. He was a natural leader and a larger-than-life character; he was always smiling, always positive, and always reassuringly confident. People knew they could trust Speed. Clients liked engaging him, and his employees liked working for him. In the firm’s first six years, Speed employed two junior partners, six directors, 15 senior managers, and 24 managers—all who worked along the West Coast. The remaining employees were consultants and support staff.

In the fall of 2007, disaster struck. Financial markets crashed. Within weeks, Ergonomica had lost some of its longest-standing clients. Although the type of projects Ergonomica specialized in offered very good returns, cash flow was suddenly at the top of clients’ agendas. Capital investment abruptly stopped.

Up to that point, Speed had given his employees only good news, such as “positive sales growth,” “new projects,” “new clients,” and “bonuses.” Now there was no good news. He decided to try to ride out the storm and shield his employees from the reality of the situation. Speed hoped the crash was simply a short- term overreaction in the stock market and that the economy would be back to normal within a few months.

However, by spring 2008, there had been no uplift, and Ergonomica experienced a loss for the first time. Speed realized that if things did not improve by mid-year, he would be forced to let staff go. Until then, he wanted to keep a positive front for his employees.

“We’re nearly through this—there’s lots of new projects just around the corner,” he would tell his team.

To his partners, he would justify his approach to employees by explaining, “There’s no point in dishing out the bad news until it is absolutely necessary, otherwise people will start looking for new jobs. Unfortunately, it’ll be our best employees who find new jobs first, the ones we really want to keep. So let’s try to keep things positive.”

By summer of that year, things had not improved. Despite Speed’s best efforts to remain positive, rumours were rife within Ergonomica that there were going to be cuts. Morale dropped, and absenteeism increased through sickness and one-day holidays, which Speed suspected were used for job interviews. At the end of August, Speed and his partners decided to cut Ergonomica’s workforce by 35 per cent. Forty-eight non- billable and underutilized staff were let go, including a large portion of a program management and quality assurance office that had only been set up in 2006. Speed figured these job cuts might have been more than what was necessary, but he wanted to do only one round of cuts. As for the employees left behind, Speed wanted them to be utilized as much as possible on billable projects, and to “be really, really busy with clients, generating cash flow.”

Although the redundancy program was painful, Speed noted that it had the desired effect. Ergonomica returned to breakeven at the end of the year. During 2009, the Federal Reserve System’s quantitative easing started to take the pressure off corporate cash flow, and Ergonomica’s clients began to invest in new projects again. By the end of 2009, Speed felt positive about the company’s prospects, and at the company’s February 2010 board meeting, he and his partners decided to start recruiting again (see Exhibit 1). One of the partners asked Speed, “Have you thought of approaching Kawun O’Hara at the [California] Department of Public Health?”

KAWUN O’HARA

As O’Hara’s flight came in for a landing at the Los Angeles International Airport after a family holiday in Canada in 1990, she stared in amazement at the smog covering the great city. The family had just spent a week in the fresh air of the Canadian Rockies.

“Why has the cloud fallen on the ground?” she asked her father, who sat next to her. Despite his uncertainty, her father did his best to explain air pollution and exhaust emissions to his 11-year-old daughter. O’Hara never forgot her feeling of apprehension that day as the plane dipped into the grey–blue fog, nor the acrid air when the plane doors opened and the drive home through gloomy streets.

That day sparked in O’Hara, although she was young, an interest in the causes and effects of pollution that she pursued throughout high school. She was particularly inspired by Erin Brockovich, a woman who, despite a lack of formal education in law, was instrumental in building a successful lawsuit against the Pacific Gas and Electric Company of California in 1993 for contaminating drinking water. O’Hara subsequently became a supporter of the Erin Brockovich Foundation, and a lifetime member of Greenpeace.

At university, O’Hara majored in biology, after which she undertook research that involved developing a mathematical model to describe the relationship between fertilizer-intensive farming and freshwater algae blooms. Algae blooms occurred when algae grew out of control. This process produced toxins that were harmful to people, marine life, and birds, and was often related to the pollution caused by fertilizer runoff from intensive crop farming.

O’Hara could have happily spent the rest of her life working in the fascinating and stimulating—though poorly paid—world of environmental research. However, at age 27, she unexpectedly became a single mother, and reality hit. She wanted to get a better-paying job and earn more money to be able to support herself and her daughter Jasmine, and to afford a live-in nanny so that she could stay active in her career.

In 2006, O’Hara got a job with the California Department of Public Health. Her role was to promote an understanding of climate change and advise the public and local businesses on what they could do to prevent it; for example, she promoted the use of public transit and investing in renewable energy. O’Hara rose quickly through the ranks as she showed real talent, persuading people to change through a combination of her positive and engaging personality and her use of robust facts and data analysis to support her case.

By 2010, O’Hara had built an excellent local reputation as someone who could make a difference— someone who could help businesses to deliver environmental improvements without compromising their strategy for growth and shareholder returns. So it was no surprise when she received a call from Speed at Ergonomica.

O’Hara had heard of Ergonomica from some of the local CEOs she had advised. The company appeared to have a good reputation for guiding businesses on how to invest in new energy-saving technologies.

Over lunch in downtown Seattle, O’Hara was quickly persuaded by Speed to join Ergonomica as a manager. She liked Speed’s honest and pragmatic approach. Although the salary was slightly lower, the package from Ergonomica included a performance-related component and sales bonus, which meant she should be able to earn significantly more than she did in the state sector. This, she hoped, would be enough to allow her to afford the beach condominium she wanted for her growing daughter.

After O’Hara joined Ergonomica, she enjoyed a successful honeymoon period, when everything seemed to go her way. She was assigned to receptive clients with interesting projects, which she delivered on time and on budget. She also began to sell some small pieces of repeat business to existing clients, which helped raise her income above the income she had enjoyed at the California Department of Public Health. By 2012, O’Hara felt she had the best job ever. She was working hard, was well paid, had been promoted to the position of senior manager, and was helping to save the environment—her passion for the past 20 years. How could it get any better?

However, 2013 got off to a bad start. First, O’Hara’s live-in nanny, who had worked for her for seven years, notified O’Hara of her intention to leave the job, as she would be getting married and moving to the East Coast. Although O’Hara was able to get another nanny, Jasmine reacted badly to the change. She became more demanding and more intolerant of O’Hara working late at the office. This meant O’Hara had to cut back on her hours, and cut back on client and company social events. After six months, she noticed that her sales started to drop. Her income then started to drop, and she was worried she was no longer the rising star she had once been.