Thursday, January 08, 2004
Inside Halliburton
Well, this is cool:
Critics say Halliburton had no reason to hold down costs because of the way the Army pays for the company's services. The contract guarantees Halliburton will be reimbursed for all of its expenses, plus an additional profit equal to between 2 percent and 7 percent of those costs.
Let’s cut to employee orientation for new manager trainees at Halliburton and Kellogg, Brown and Root.
Scene: A white-painted room with a cherry-wood varnished particle board conference table. Simplistic motivational posters festoon the eggshell-white walls. A dry erase board hangs upon one wall, a computer projector beams a powerpoint presentation along the other. A row of fresh-faced recent college grads line both sides of the conference table, eagerly taking in the trainers’ presentation. One of the youngsters speaks up…
Youngster: Wow. So no matter how boneheaded an incompetent manager I am, my department is 100% guaranteed to be profitable as long as I’m good at keeping my receipts?
Trainer: Absolutamente! But wait—there’s more: the more money you can profligately waste, the more money your department will earn. In fact, if you can spend enough, and increase our profits even more, we’ll even give you bonus, equal to 50 basis points on the amount you can spend over and above what you spent last week.
Youngster: Cool! So who pays my bonus? Does that come out of my own departmental budget? Or does it come out of the human services budget?
Trainer: It comes out of your department’s budget. Or rather, it goes into it. Because bonus expenses are a business expense, your department is reimbursed for your bonus expense, plus 2% of your bonus. At 50 basis points of 2%, you get 25 percent of the overage for your own bonus. Which itself is another business expense, of course. Which generates another reimbursement. Which generates another bonus. For you! This is the greatest business concept since multi-level marketing. Imagine the possibilities! Ain’t life grand? Imagine the possibilities!
Youngster: Is the bonus in the form of a paper check? Or an automatic deposit?
Trainer: Neither. Neither method is expensive enough. We send a courier to find you in the field, and we just hand you a sack full of cash. Arthur Anderson reports that 2% of every cash dollar in a business leaves in an employee’s pocket. So we just assume the courier’s a thief, and write off 2% in theft as an expense. The expense—along with the courier’s fee-- is reimbursed by the government, of course, plus an additional 2%-7% profit margin.
Youngster: Wow! Do we get stock options?
Sure! We include 100 shares of Halliburton stock, along with options on more 500 more shares of Halliburton stock every year you stay with the company, as a sign-on bonus for all new manager trainees. It’s just our way of welcoming you aboard.
Youngster: Cool! Do you expense stock options, too, in your annual reports?
Trainer: Great idea! We hadn’t even thought of that.
Critics say Halliburton had no reason to hold down costs because of the way the Army pays for the company's services. The contract guarantees Halliburton will be reimbursed for all of its expenses, plus an additional profit equal to between 2 percent and 7 percent of those costs.
Let’s cut to employee orientation for new manager trainees at Halliburton and Kellogg, Brown and Root.
Scene: A white-painted room with a cherry-wood varnished particle board conference table. Simplistic motivational posters festoon the eggshell-white walls. A dry erase board hangs upon one wall, a computer projector beams a powerpoint presentation along the other. A row of fresh-faced recent college grads line both sides of the conference table, eagerly taking in the trainers’ presentation. One of the youngsters speaks up…
Youngster: Wow. So no matter how boneheaded an incompetent manager I am, my department is 100% guaranteed to be profitable as long as I’m good at keeping my receipts?
Trainer: Absolutamente! But wait—there’s more: the more money you can profligately waste, the more money your department will earn. In fact, if you can spend enough, and increase our profits even more, we’ll even give you bonus, equal to 50 basis points on the amount you can spend over and above what you spent last week.
Youngster: Cool! So who pays my bonus? Does that come out of my own departmental budget? Or does it come out of the human services budget?
Trainer: It comes out of your department’s budget. Or rather, it goes into it. Because bonus expenses are a business expense, your department is reimbursed for your bonus expense, plus 2% of your bonus. At 50 basis points of 2%, you get 25 percent of the overage for your own bonus. Which itself is another business expense, of course. Which generates another reimbursement. Which generates another bonus. For you! This is the greatest business concept since multi-level marketing. Imagine the possibilities! Ain’t life grand? Imagine the possibilities!
Youngster: Is the bonus in the form of a paper check? Or an automatic deposit?
Trainer: Neither. Neither method is expensive enough. We send a courier to find you in the field, and we just hand you a sack full of cash. Arthur Anderson reports that 2% of every cash dollar in a business leaves in an employee’s pocket. So we just assume the courier’s a thief, and write off 2% in theft as an expense. The expense—along with the courier’s fee-- is reimbursed by the government, of course, plus an additional 2%-7% profit margin.
Youngster: Wow! Do we get stock options?
Sure! We include 100 shares of Halliburton stock, along with options on more 500 more shares of Halliburton stock every year you stay with the company, as a sign-on bonus for all new manager trainees. It’s just our way of welcoming you aboard.
Youngster: Cool! Do you expense stock options, too, in your annual reports?
Trainer: Great idea! We hadn’t even thought of that.
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