Tuesday, March 2, 2010

Working the Ethical way

Once upon a time I worked for a large organization, so large that there were departments and each department was responsible for its own budgeting and expenditure.

My job was to invoice out existing and new clients for equipment hired. The turn-over of the equipment was quite high with the clients. They may only hire for 1,2,3 weeks, sometimes a lot longer, but generally no longer than 1-2 months.

There was also an option to purchase the equipment, which was rarely taken up by the client as they didn’t anticipate the long-term need or the overall cost.

After about 6 months, it became apparent that for some people in some instances it was cheaper for the client to purchase the equipment, so a decision was made for those clients, where it became economically viable to purchase, a note of sale was sent instead of an invoice.

This suited both parties, and allowed for more stock to be purchased and it was also found that equipment when purchased by the client, was returned to us, rather than being dumped somewhere. This was a win win for all parties concerned.

The long term effect was that this department became the most profitable, simply because they looked after the clients needs and not the needs of the business formula.

Equipment turn-over although increased, allowed for better quality equipment and equipment previously sold was returned more frequently and in better condition than hired equipment, which in turn allowed for it to be put back into circulation for new clients. Profit for that department increased by 25% in one 12 month period and grew every year I was there.

This policy is still in place today, some 5 years down the track. Due to unionisation within the site, my presence was detected and because I was contract and not a full-time employee, I was given the boot, not by my department head but by the union.

The decision to bill the client for equipment sold rather than hired, appears at first, to be cutting the profits, because you are actually reducing the income. Hire equipment is generally not treated as well, than if sold. People have an attitude. Oh well, it’s only hired, so it doesn’t matter. Whereas if they purchase an item, the attitude changes completely.

By turning over the older stock and selling it (it would have been hired anyway) the department was able to increase the quality of the stock on hand and thus please the client. By turning the stock over, we were able to buy more stock, more often and thus receive quantity discounts.

By selling stock instead of hiring it – the admin charges were reduced and then to top off all these benefits, in appreciation of the reducing the cost to the client, the client returned the favour, by returning the stock and thus saving more money again!

A win win for ALL involved!


  1. This is a great example of business calculating the full range of numbers and using a strategy to get a good outcome for the long-term benefit of the business.

  2. Thanks Lindy - I don't know about strategy! - Made sense from both sides of the fence and worked better than I thought possible!
    The department head was doubtful at first - but has since seen the light.