Inspection management

Management Theory - Inspection ManagementItalic text
Watchfulness
Watchfulness or Vigilance is the most important function of the top management in an ethical company. This function has to be performed both at the Board level and at the top management level. Of course, the Board can delegate its function to the top managerial team who has to report to the Board. This function is different from the function of audit being undertaken on behalf of the Board by the Audit Committee. A car driver has to be vigilant on the road lest he should end in accident. Similarly, a manager or a supervisory official has to be vigilant over the subordinate officials at the working level.
In the Central Public Sector Undertakings/the Govt. owned Banks and in the Central Government Ministries/Departments/Subordinate or attached offices/Govt. autonomous organizations of Government of India or institutions funded by the Government of India, a specialized department or wing called Vigilance Department functions under the supervision and guidance of the Central Vigilance Commission, the apex Anti-corruption body.
Vigilance Department in India
One of the important functions of this Vigilance Department is preventive. It has to prevent irregularities or corruption by conducting regular and surprise inspections in corruption/irregularities prone areas which are, In other words, known as grey areas. The Vigilance Department identifies the grey areas in the organization and then plans regular and surprise inspections to be conducted in such areas so that the loopholes in weak systems or procedures that give place to mismanagement or fraud may be plugged. The Vigilance Department after conducting such inspections submits its report to the top management. Regular inspections are conducted after informing the head of the department concerned in whose jurisdiction the area to be inspected falls. But surprise inspections are conducted without informing the head of the department or any official.
In every organization, there is a category of employees who are supervisors or supervisory managerial staff. They are entrusted with the task of supervising the vital management functions. Supervisors watch over the employees under their control. There should be perfect systems to keep a watch or surveillance over the functional or working level staff. At remote construction sites or manufacturing units, CCTVs should be installed and the same should be under the watch of supervisors. Supervisors have to record on line or in a register what they observe through the CCTV cameras. Nowadays, there are many software programs to record observations.
The work of supervisors needs to be monitored by the inspection wing of the Vigilance Department or any other Department called Ethics Department, Compliance Department or any other Department/wing suitably named by the Board.
Management theory from Bible - Inspection Management
Let me now take you to a parable spoken by Jesus in Luke 12: 35 to 48 for studying a management theory relating to watchfulness or vigilance on the part of the servants on behalf of the master.
“Be dressed ready for service and keep your lamps burning, like men waiting for their master to return from a wedding banquet, so that when he comes and knocks, they can immediately open the door for him” (Vs.35=46). The first requirement of a managerial inspection team is to equip itself for undertaking inspection at any time and the members of the team should be known for their absolute integrity and absolute devotion to duty. Special care should be taken for selecting suitable personnel for this ethical function. They have to be knowledgeable and to possess working experience in the area to be inspected. The team should consist of technical experts, marketing experts or manufacturing process experts and accounting professionals. They should be humble and maintain a low profile in the organization. They are in fact servants to the master. They are answerable to their master who is supposed to have gone to a wedding banquet. Their master can return any time and the time of his return is not known. The lord or the master is likened to the Board of the company or the owners of the company. Normally, the Board of Directors, except the functional directors, is not involved in the management of the company. The Board Members are mostly supposed to be at a wedding banquet where they meet their counterparts in other companies or their business partners, whereas the CEO or the top managerial staff is engaged fully in supervising and monitoring the work of the managers or the Heads of many departments. The lord is supposed to return to the house any time. Similarly, the Board through its Functional Directors or a sub-committee of Functional Directors intervenes in the affairs of the company and rewards or punishes the management team entrusted with the work of inspection or with other supervisory functions.

The top management inspection team can be christened as Special Inspection Team (SIT). It is different from the regular Inspection Department of the company. It is accountable to the Board of the company. There is always unholy nexus between the corrupt officials of the regular Inspection Department and the company’s vendors. Hence, the need to constitute this special inspection team under the direct supervision of the Board or the owner. The SIT has to open its door for the Board’s scrutiny. The inspection reports of the SIT should be “immediately” put up to the Board. These reports should directly go to the Board and not through some intermediaries. This is very important. Of course, the Board can delegate its authority to a special committee or sub-committee of Directors for scrutinizing the inspection reports submitted by the SIT.
Servants watching and being watched over
“It will be good for those servants whose master finds them watching when he comes. I tell you the truth, he will dress himself to serve, will have them recline at the table and will come and wait on them.” (Vs.37)
For the purpose of watchfulness or vigilance, there are two level inspections, one on behalf of or at the Board level, by the specialized inspection team of the top management (SIT) and another by the regular Inspection Department of the company. The master likened to the Board is watching over its servants i.e. top managerial inspection team in the service of the company, who are supposed to conduct surprise inspections in sensitive areas and to watch over the Heads of Departments (HODs). This kind of function is performed by the Vigilance Department in the Government of India. The Vigilance Department keeps surveillance over the work of the Heads of Departments, apart from conducting inspections. The second level inspection has to be conducted by the Inspection Department of the company at regular intervals. The Inspection Department watches over all the Departments by conducting regular inspections. This is called regular inspection.
The Board is required to find the servants in the special inspection wing watching over the managers at the operational level including the HODs. If the servants of the inspection wing are found to be sincere by the Board, then the former are to be rewarded suitably. The members of the SIT are the eyes and ears of the management.
Service by the Board to the management team
The lord or the Board has to “serve” those sincere servants engaged in all managerial functions. Nowadays, we find the Board not exhibiting due exuberance towards the sincere management team. The Board has to come down from its throne just to serve the hard working management team engaged in the onerous task of running the company according to its mission. Of course, the management team can have its own vision for achieving the company’s mission. The Board has to appreciate the work of the top management or the CEO and his/her team and to reward them suitably. Nowadays, there is a wide gulf between the Board and the top management.
Regular inspections
Inspections truly help the management in identifying the fragile areas in managerial functions. Inspections in retail outlets by marketing managers would reveal the real state of affairs existing in consumer -dealer relations. Inspections in manufacturing areas would reveal the use of sub-standard raw-materials or production of finished goods that do not conform to the field quality plans of the company.
Apart from the specialized inspection team of the top management conducting surprise inspections, there should be a full-fledged inspection department in every company for conducting regular inspections at regular intervals. Regular inspections should be detailed, whereas surprise inspections should be short. If a detailed inspection has to be carried out following a surprise inspection, the matter should be referred to the Inspection Department.
Surprise inspections
“It will be good for those servants whose master finds them ready, even if he comes in the second or third watch of the night”. (Vs.38)
Surprise inspections are carried out in the second or third watch of the night. Inspections have to be made by surprise. The SIT should devise a system to monitor the function of the top management. It should not have any control or lordship over the management team. It should be an ally of the management team. It should be a bridge between the Board and the top management. The Board can appoint a sub-committee which can be in charge of the SIT. The Board has to be proactive and dynamic. Nowadays, the Board lives in a fantasy world without knowing the path on which the company is driven by the top management.
Surprise inspections provide ample hindsight to the Board who are responsible for framing company’s policies. The author while working for his company engaged in power transmission business conducted a surprise inspection of a construction site where the foundation work of a transmission tower was in progress. He paid a surprise check to the site without informing the site engineers. When he visited the site, he did not find the site engineers but found the contractor’s men casting the foundation without supervision by the company’s site engineers. The site engineers did not expect the visit of the author at that odd hour.
The surprise inspection reports generated by the Vigilance Department or by the specialized inspection wing of the top management are to be sent to the Board whereas the regular inspection reports generated by the Inspection Department have to be submitted to the Departments concerned.

Inspections preventing fraud or theft
“If the owner of the house had known at what hour the thief was coming, he would not have let his house be broken into” (Vs.39).
Thieves or those who pilfer or misappropriate the funds are prowling everywhere. The Board and the top management should know the grey or the corruption/irregularity prone areas in the organization and should put such systems and procedures in place so that pilferage or misappropriation can be detected and prevented. Such foolproof systems and procedures should be in place so that the organization may not be put to loss due to mismanagement or fraud. An ethical organization has to be system-oriented rather than people-oriented. People of integrity may come and go but the foolproof systems and procedures stay with the organization. If there is a good and foolproof inspection system in the organization, it can detect the malaise and nip it in its bud. Prevention is better than cure.
Rewarding faithful managers
“The Lord answered, “Who then is the faithful and wise manager, whom the master puts in charge of his servants to give them their food allowance at the proper time? It will be good for that servant whom the master finds doing so when he returns. I tell you the truth, he will put him in charge of all his possessions.” (Vs.42-44).
The Board should honor and reward the faithful and wise manager and put him in charge of all its possessions. The Board has to identify each individual manager who is faithful and wise and reward him or her suitably. The faithful and hard working manager has to be elevated and has to be given a due place in the Board at the proper time. This elevation should be available to all faithful and wise managers. There should be a proper system of appraisal of the work of managers in all departments. The appraisal should be twofold i.e. one by the immediate superior official and another by the immediate subordinate official, in addition to the self-appraisal by the official under appraisal.
Punishing dishonest managers
“But suppose the servant says to himself, “My master is taking a long time in coming, and he then begins to beat the menservants and maidservants and to eat and drink and get drunk. The master of that servant will come on a day when he does not expect him and at an hour he is not aware of. He will cut him to pieces and assign him a place with the unbelievers. (Vs.45 - 46).
This refers to the category of managers who are not faithful and sincere to the management or the company. They mismanage and loot the company and harass and persecute the employees at the working level. They also misappropriate the funds for selfish purposes. During surprise inspections, such managers are caught unaware of. When they are caught red-handed, the management punishes them. This is the punitive function of the management.
“That servant who knows his master’s will and does not get ready or does not do what his master wants will be beaten with many lashes. But that servant who does not know and does things deserving punishment will be beaten with few lashes. From everyone who has been given much, much will be demanded and from the one who has been entrusted with much, much more will be asked.” (Vs.47-48).
There are managers who know the company’s policies and ethical policies but are not doing the company’s will. They will be imposed major punishments. But those employees at the working level who do not know the company’s policies or the procedures concerned will be imposed minor punishments. The top managerial staff or the managers who have been given much are expected to give much to the company more than the lower level managerial staff or the staff at the working level who are supposed to carry out instructions of their superiors.
Major and minor penalties in Govt. of India
In Government of India, there are two categories of penalties being imposed on officials who are found guilty of the misconduct after conducting inquiries or disciplinary proceedings. Major penalties include removal or dismissal from service, reduction in rank, reduction of pay to the minimum in the time scale of pay. Minor penalties include withholding of increments, issue of censure, withholding of promotion, etc. Those who willfully violate the rules or whose action is malafide are imposed major penalties, depending upon the gravity of the misconduct committed by them. Those who commit procedural lapses without any malafide intention are imposed minor penalties.
Procedure of conducting inspections
Before carrying out inspections, documents or rules are to be studied thoroughly and copies of such documents, contract documents, etc. should be with the inspection team. A detailed plan has to be prepared and the team members to be identified. A check list of items to be inspected has to be tentatively prepared by the inspection team.
For conducting surprise inspections, the movement of the inspection team and their tour plan should be kept secret. The inspection team should be provided with adequate funds for managing their tour and inspection expenses. No advance payment for a specified tour has to be made so as to guard the secrets of their journey. Their journeys have to be planned by the team and not by the administrative wing of the company.
The inspection team has to record what they observe during their inspections. In their field observation report, they have to merely write what they observe through visual inspections or what they collect as samples. They should not draw any inference from their observations in preliminary inspection report prepared at the site of inspection. On this observation report, the signatures of the officials of the department whose department is under scanner and the signature of the vendor’s representative are obtained.
After reaching the headquarters, the inspection team has to prepare a detailed report, drawing inferences from their observations. There is a system of recording such reports on line in software programs in some Central Public Sector Undertakings of the Govt. of India. First of all, the report is put up to the Board or the CEO of the company authorized by the Board. At this stage, the Board or the CEO of the company is apprised of what the inspection team has prima facie observed. Then the report is sent to the department concerned for their comments. The department is at full liberty to explain the shortcomings observed by the inspection wing. Then the inspection wing recommends further course of action and also recommends improvement in the systems and procedures that led to irregularities detected during the course of inspection. If a detailed inspection is required to be conducted, the matter will be referred to the Inspection Department. Or if a detailed investigation is to be carried out for fixing responsibilities on the officials concerned, then the matter is referred to the Vigilance or the Ethics Wing of the organization.
Benefits of Inspection
Inspections expose the weak links or the grey areas in the organization and thus improve the systems and procedures by plugging loopholes. Inspections prevent fraud or irregularities as the unscrupulous elements are kept under check by a vigilant management. Over-payments made to vendors can be detected during scrutiny of payment records and recoveries made from vendors. Vendors can be asked to rectify defects in the works already executed by them.
During the month of July 2013, about 26 school children died of food poisoning after consuming the free mid-day meal given to the poor children. Had the enforcement authorities concerned conducted surprise inspections at random, this incident could have been averted. Many railway accidents, terror attacks, etc. can be avoided if the law enforcement authorities always conduct surprise checks at vulnerable points prone to accidents or terror attacks, as the case may be.
Marketing Management:
Sustained inspections in the marketing outlets help the top management identify the vulnerable areas where the customers are cheated by the dealers or where the dealers cheat the Marketing Department by preparing inflated sales bills (to get more incentive from the company). An MNC with its corporate office or the Board of Directors situated in New York of US may not know about what happens in a remote marketing outlet in India. It may not know the customers’ preferences in a particular region in India. If the SIT under its control conducts a surprise inspection at random, it can get the correct picture of the Indian market. Online feedback of customers may not reveal the true picture of the marketing outlets because customers are mostly self-centered and are not genuinely concerned about the growth of the company.
Production Management:
Sustained inspections in the factory do expose the use of substandard raw materials and the produce of finished goods which do not conform to the technical specifications or the quality plans. Nowadays, the manufacturing job is also outsourced to vendors. Employees of vendors generally do not know the ethical policies of the company. Inspections help the top management assess the work of vendors. There is also collusion between the corrupt inspecting officials of the Inspection Department and the vendors. Surprise inspections by the SIT expose this collusion.
Stores/Inventory Management:
Surprise inspections in the stores of the company would reveal the shortage or the excess of store materials indented by the company. The unused inventory can also be identified and disposed of. The author during one of his inspections in the stores of a power plant found unused inventory in the form of Russian butterfly valves lying in the stores for a number of years. These valves were found to be unfit for use. But these were indented by some corrupt officials long ago.
Surprise inspections in a hospital stores room would help the enforcement officials identify expired medicines or substandard drugs.
Construction Management:
Construction of buildings is mostly outsourced to vendors or contractors. Inspections at construction sites would reveal the use of sub-standard building materials and of less cement in proportion to sand and coarse stones. Good quality of water is not used at construction sites. Test reports are fudged by the vendors. The inspection team has to pick up samples and get the same sealed in presence of the vendor’s representative and then send these sealed samples to laboratories approved by the company for test.
A model preliminary inspection report
The Special Inspection Team consisting of team members………..visited the construction site of quarters for the staff and inspected the construction of staff quarters in phase II, in presence of the representative, namely………of ABC construction on 7 August 2013 at 11 a.m. The team visited the site without informing the site engineers of the company or the contractor’s representative at site.
The following are the observations made by the inspecting team:
(i) As per approved drawing, two RCC plinth beams were to be provided at the plinth level but brick work was executed in place of approved plinth beams. It is also found in the Measurement Book, measurements of RCC plinth beams were recorded for payment.
(ii) As per item No.2 of the civil works, ABC construction had to provide and place 6 mm diameter MS bars at every third course of brick masonry work. But it is observed that no MS bars of the specified diameter were found in the half brick masonry work executed by the contractor.
During the course of inspection, two samples of plasters were picked from the walls of staff quarters No.5 and sealed in presence of the representative of the vendor.
Sd/- (Team Leader)
Sd/- (Team member)
Sd/- (Team member)
Sd/- (by site engineer of the company)
Sd/- (Representative of contractor)
Place,
Date:
___
:

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