Collusion and Food Cost Control

Dear Joe,

Its quite late for me to find your blog, I have been in the hotel industry for almost twenty years, and from your posts I found all the similar questions and basically I have answered similarly to any hotel management that I have worked for, about the importance of controlling the purchase, but there come problems when The Purchasing guys happened to be the best friend of Financial Controller or the Golden Boy of  The Hotel General Manager, then all those theories that any Cost Controllers in the world follow, suddenly dissappear in the broad daylights.

For Example I have made a kind of Price Changes Index Calculation ( by the daily purchase price update from the suppliers invoices data ) to obtain that the purchase prices for all the goods highly fluctuative to catch the culprits when they play with the purchase prices , of course by getting the help from the suppliers to play this kind of game, it will be useless for me to make this kind of calculation.

 My question is, Have you ever found this kind of situation, and if you have, what tools dou you use to bring this situation into attention.

Thank you very much, I am expecting your response.

 Best Regards,

Zuhar

Thanks for your email Zuhar!  You very clearly isolated a pervasive problem with the cost control function.  Lack of follow through on recommendations is the number one issue in many organizations.  Outright collusion is a problem with too many operations.

My gut tells me over half the operators just don't take action when profit killing problems are brought to their attention.  The tendency is to show "patience" and wait for the next period's report.  By reporting daily, you are forcing their hand.  This process of timely follow up will often expose a crooked executive.

As a food and beverage controller, you may find career survival forces you to soft sell your suggestions.  Often, the person in this position has no access to the people who could take action.  If they go up the chain of command without a by your leave, they risk a loss of their income.

In the long run, the numbers will tell the story for everyone to see when they recognize the dishonesty has put the organization in jeopardy of non-existence.

When I was young, I left a job at a hotel due to very poor cash controls and constant theft.  At the time, I simply landed another job in my off hours and left.  Many people in hotels do not have this luxury.

Ski resorts tend to have timely reporting systems in place since their season is relatively short and weather patterns can have a major impact on profits.  I once encountered a management team at a ski resort with major denial issues.  The food and beverage controller documented significant unexplained inventory losses at every meeting and no action was ever taken.  The top executives were lining their home stock with top bottles of wine.  The wine steward had a great resume with many accolades.  He was ordering terrific labels and the wine went straight to the parking lot where it filled the trunk of the manager's car.

Years ago, I read an article which stated 20% of workers are dishonest, 20% are completely honest and the other 60% tend to follow the lead of the dominant players.  You could find yourself on the outside looking in if your organization has turned 80% dishonest.