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Chapter 12 ■ Diagnosing change
Closer examination of the functional analysis reveals a number of key organi-
zational weaknesses. The pay, training, promotion and performance of staff are
relatively low. This particularly applies to pay, where the company pays at or
below current market rates. Its technical training is excellent, but management
training is widely felt to be inadequate. These points are problematic on two
counts. First, the company essentially exists to sell the services of its engineers.
They specify, design and detail process plants and/or provide project manage-
ment, maintenance management and, increasingly, operational management
services. Second, the company increasingly provides the latter three management
services. More and more, the company sells technical and managerial expertise.
One estimate has it that halving the rate of staff turnover could return as much
as £1.5 million each year into the profit and loss account, taking into account the
costs of recruitment, lost time, induction and training against the costs of pay
and other changes to reward systems.
A second area of weakness lies in that of management control information.
The company has elaborate information systems but does not yet have systems
on which managers can and do rely. Therefore, managers tend not to utilize
information very effectively. This also impacts on performance. Little attempt is
made to use feedback from the management information system to motivate
higher levels of effort, or even as a basis for solving problems.
Marketing and marketing information is a further weakness. The company has
only limited competitor information. More fundamentally, it does not seem to
make good use of the information it does have available. Principally, the weakness
lies within the bidding process. Bid teams appear to be put together in an ad hoc
manner. There is no guarantee that a bid team will have a high-level input from
engineering, project management, estimating, commercial or marketing functions.
The organization keeps estimating and commercial functions apart and currently
has neither a commercial nor marketing director. The chief executive, the techni-
cal director and the engineering director lead the bid process, although they may
not lead the bid team. There seems to be scope to improve this process as a means
of beginning to grapple with the company’s core commercial weakness. It is unable
to obtain high-value projects. It has obtained a record level of work but at relatively

low staff-hour rates for its engineering personnel. The implication of this is that the
company could combine record levels of activity with record losses.
All this links back to performance yet again. Engineers often feel that the con-
tracts obtained have ridiculously low staff-hour rates, tight delivery dates and
project milestones. Many of the contracts specify staff-hours and staff-hour rates.
Yet engineers and managers feel no incentive to seek improvements in engineer-
ing work structures and systems: ‘It’s impossible to make profit from this project’
is the response. Yet if we could find ways of achieving the same milestones with
fewer staff-hours the company would, first, reduce its losses and, second, improve
its market standing. The latter could help it gain more profitable contracts, and
these exist. Other companies in the group are attracting profitable, high-value
work. International Engineering’s competitors are not all in the same situation.
Many are very profitable.
The analysis of operations/service supports this conclusion. The main point is
that there is a clear lack of integration between project management, engineering

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