CASE STUDY 2: Another High Cost for Expertise


CASE STUDY 2


 Another High Cost for Expertise: Justifying ₱ 300,000.00 charge


 The Problem

          The same university that had a dilemma in cutting its costs due to facing financial issues resulting in the staff downsizing has faced another complex problem. The automation systems are nearing their end of life due to the risk of component failure and downtime, leading to the inability to upgrade its business processes ever since the absence of their top computer programmer who was left unsatisfied with the allocated salary and contractual employee agreement. Ever since the absence of the said top computer programmer, the university has faced many more problems that resulted in disrupting its business processes leading to the situation of the dissatisfaction of its clientele.

 

The Solution

          In order to resolve this problem, the university utilized and formed several committees but concluded to no progress nor results with their most efforts. They have finally decided to outsource and get the former top computer programmer himself to which in turn was able to resolve the problem in just 10 days.

 

The Controversial Cost: P 300,000.00 invoice

          The top computer programmer later submitted an invoice for upgrading their business process automation for the value of P 300,000.00. This in turn sparked controversies as the top computer programmer was later then asked what was the exact amount for accomplishing the task within the 10 days to which he replied to a value of P 50,000.00 for material cost, leaving the rest of the invoice for his service.    

 

The Justification for the P 300, 000.00 charge


Value of Expertise

           Similar to the first case, the computer programmer’s charge reflects the value of his unique expertise and his ability to solve a critical problem efficiently. This can be compared to industries like engineering or law, where specialized high rates, especially when dealing with complex systems that could result in significant losses if not addressed promptly, properly, and immediately.  Given that the damage was getting worse the later it was being handled, the problem required more work, precision, and focus. The fact that the damage was already disrupting a lot of services and processes in the university, there must be action taken immediately.  The programmer had specialized knowledge that internal committees lacked. Solving the problem within ten days showcases the value of experience, domain expertise, and deep understanding of the university’s automation systems.

   True expertise brings deep knowledge, refined skills, and valuable experience that help you solve complex problems, anticipate challenges, and make smarter decisions (Stalwarts, 2024). Every other expertise does not come cheap. These professionals, like the top computer programmer of the university, have honed their field of expertise and craft for years in order to excel and master the forte. It is important to note that while the university came up with gathering a committee in order to “solve” the reoccurring problem, they had little to no progress as their level of expertise differed from what a real expert, in this case, the computer programmer, in comparison to them.


Charging for High-Valued Skill Expertise

           Highly skilled professionals, especially in specialized fields like IT, are justified in setting higher prices for their services. The top computer programmer’s pricing reflects both the complexity of his task and the years of experience required to develop such proficiency. As noted in studies, skills that are in high demand and contribute to economic growth are often priced at a premium. Skills-based compensation rewards employees based on their individual skill sets and competencies rather than their job title, qualifications, work history, or tenure in the company (Skills-Based Compensation, n.d.). In context to skill-based compensation, it is commendable and just to pay for expert individuals who excel in their honed and crafted skills as they have worked over them for years in their education.

  To charge an expert is not you paying the time or how long or fast they have achieved in solving the said problem. Rather, one has paid for their high-valued skills that no other individual such as them who has a dedicated and specialized skill for the said problem (What Are You Really Paying for, Expertise or Time?, n.d.). The university was paying for the computer programmer’s years of studied craft and experience that solved their very problem and has saved them valuable and precious time that could’ve cost more than just what the computer programmer invoiced to them.


Cost of Downtime

    The university’s decision to delay engaging the expert technician likely resulted in significant hidden costs, primarily related to operational inefficiencies. IT downtime has well-documented financial consequences, and the university’s prolonged server issues could have caused substantial disruptions, far exceeding the P 50,000.00 repair charge. Engaging the technician promptly may have saved the university from even greater monetary losses, both directly and indirectly. Information technology (IT) downtime is a big deal; it drains revenue and weakens customer loyalty and trust.

    The cost of IT downtime can range from $5,600 per minute to $9,000 per minute based on industry vertical and company size.(Santos, 2024). In this case, not only are big-hit companies experiencing such big income and loss, big universities can also experience such devastation. Not only does this cost them financially but also customer loyalty, in which involves the students and other staff, future attendees, visitors, and investors that has interest for the school. Prolonged downtime or failure to upgrade the university’s business process automation could result in exponentially higher costs due to lost productivity, poor service delivery, and potential reputational damage.  The P 250,500.00 service charge could be seen as a cost-saving in the long term, especially considering the disruptions the university was facing.


Conclusion

           This case underscores the high cost of losing key talent and highlights the immense value of specialized expertise, particularly in technology-related fields. The ₱ 300,000.00 charge is justifiable when considering the rapid and effective solution provided, the financial and operational damage avoided, and the tailored nature of the service. Organizations must recognize the importance of investing in employee retention and specialized skills to avoid long-term losses due to system failures, downtime, or inefficient problem-solving strategies. Applying knowledge management can play a vital role in ensuring the preservation of critical points and knowledge that can help further understand the complexities of things, especially when data gets involved and the facilities it handles.

           The case also highlights knowledge retention which is one of the core functions of knowledge management. The programmer had tacit knowledge, which is hard to document, gained through experience with the university's systems and processes. This knowledge is typically undervalued but becomes evident when only the original employee can resolve certain issues. As for explicit knowledge, there may have been documents or procedures in place regarding the automation system, but without the expertise to interpret and implement them, the internal committees could not solve the problem.

          If the university had established a formal knowledge management system, the expertise of the computer programmer could have been documented and shared before his departure. Before the end of the contract of the top computer programmer and their departure, the university could have created a structured knowledge transfer plan, ensuring that both tacit and explicit knowledge about the automation systems was passed on to other employees. It could have been beneficial if there was the pairing of junior IT staff with senior employees such as the computer programmer. In this way, it could have helped create internal expertise in which reduces dependency on one individual. Possibly establishing clear documentation for the configuration, maintenance, and troubleshooting of the automation system would have empowered other staff or future employees to manage the system without the need to rehire the original programmer.

       In conclusion, this case demonstrates how crucial knowledge management is in retaining organizational knowledge, especially in fields where technical expertise plays a key role in day-to-day operations. The university's failure to retain both its top computer programmer and the institutional knowledge tied to its business automation systems led to costly outsourcing, operational inefficiency, and customer dissatisfaction. By integrating knowledge management practices, organizations can prevent such issues, ensuring that knowledge is captured, shared, and utilized efficiently, reducing their reliance on individual expertise, and minimizing the financial impact of unexpected system failures.

    Ultimately, the ₱ 300,000.00 charge is justified not only by the complexity of the task and the expertise required but also by the long-term cost savings from preventing further system downtime. This case also serves as a lesson in the value of retaining critical talent and the importance of establishing a culture of knowledge sharing within organizations.

 

 

 

 

REFERENCES:

Corporate Stalwarts. (n.d.). The hidden value of expertise: Why paying more can mean getting more. Corporate Stalwarts. Retrieved October 12, 2024, from https://www.corporatestalwarts.com/the-hidden-value-of-expertise-why-paying-more-can-mean-getting-more/#:~:text=True%20expertise%20brings%20deep%20knowledge,there's%20a%20reason%20for%20that

 

LinkedIn. (n.d.). What you're really paying for: Expertise, time, and metacognition. LinkedIn. Retrieved October 12, 2024, from https://www.linkedin.com/pulse/what-you-really-paying-expertise-time-metacognition-speaker

 

Unity Connect. (n.d.). IT downtime: How it affects businesses and how to reduce it. Unity Connect. Retrieved October 12, 2024, from https://unity-connect.com/our-resources/blog/it-downtime/

 

TestGorilla. (n.d.). Skills-based compensation: A fairer way to pay. TestGorilla. Retrieved October 12, 2024, from https://www.testgorilla.com/blog/skills-based-compensation-a-fairer-way-to-pay/

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