SAS REAL

ESTATE

Report on SAS
Real Estate:
To Fire or Not
Fire
An Operational Dilemma

Section F: Group 1
Ajinkya Mahajan
Harshil Singhal
Itisha Gupta
Neha Adiga
Nipun Baruah
Paila Santosh
Vivek Vishal D

SAS Real Estate, Sadiqabad, Pakistan

Date: 15-10-2015

To
Abha Chatterjee
Department of Communication
IIM Indore

From
Group 1
Section F, PGP I
IIM Indore

Subject: Report on SAS Real Estate: To fire or not fire

Dear Madam,
We are submitting the detailed report on the situation Haider Ali is in, to
handle the dilemma he is facing on firing or not firing Tanveer shah with
respect to the severe financial loss incurred to the company SAS Real
Estate. We have analysed all possible options and consequences that Ali
have in front of him and the recommended action he can take in the best
interests of the company. All case premises have been put in due
consideration while making the recommendations.
We hope this analysis brings to your notice what decision can be taken
forward.
We will be glad to seek any further clarification regarding the analysis.

Yours Sincerely
Group 1
Section F, PGP I
IIM Indore

SITUATIONAL ANALYSIS:
Haider Ali is the owner of Sufi Abdul Samad Real Estate (SAS) in
Sadiqabad, Pakistan which is an established Real Estate Firm in the area. It
was founded by three partners with Ali having the major stake (50%) in
the company. The company has an owners equity of 1 million Pakistani
rupees and a bank loan of 2 million Pakistani rupees.
SAS has a differentiated operations model. It buys land in areas which it
considers viable in terms of the direction of the urban sprawl occurring as
expansions took place. Upon purchase, SAS starts developing the area to
transform it into a residential colony after careful and responsible
planning. After the development work is complete, the plots are made
available to the general public.
To cope up with such humongous amount of work, Ali had defined a proper
structure of employees and hired people specialising in finance. The need
arose because the firm had replaced its manual bookkeeping process with
accounting software and manual record of sales and purchases with
computerized databases. However the constraint was that such highly
skilled professionals were difficult to hire in smaller cities. Moreover given
the complexity of the system, the designated personnel was supposed to
undergo a one year long training program to gain ability to use the
software efficiently which had to be sponsored by the company. The cost
of replacing such employees was high along with the opportunity cost of
work which would remain pending in case of resignation/firing of
employee.
Tanveer Shah was the only person working at SAS with the required skill
set to operate the book keeping software and had specialised financial
knowledge pertaining to the real estate industry.
SAS had recently become a victim of theft and fraudulent act wherein a
six months old cheque of 7.5 million Pakistani rupees had been stolen
from the company and had been cashed from the bank by forging the
signatures of Haider Ali next to the amended date on the cheque along
with the usage of a fake Identification card. Ali approached the bank
regarding the same and even reviewed the CCTV footage when the
withdrawal was being made. But the footage was too blurry and moreover
the person making the withdrawal had his back towards the camera and
hence no decisive conclusion could be drawn. Ali also setup an internal
investigation to probe into the matter and also informed the police about
it. The prime suspect of the theft was Tanveer Shah who was working late
in the office the day the theft occurred. Also, Shah was the only
accountant who held keys to the drawer in which the cheques were kept
for safekeeping which made him the prime suspect. Moreover, since the
bank had made such a huge mistake of not verifying the signatures and

issued money to a person with fake ID, SAS had filed a lawsuit against the
bank whose first court hearing was scheduled on April 3, 2014.
Ali was in a dilemma whether to fire Shah or not because of many
arguments, the major one being that there was no evidence to prove him
guilty and he was the only person in the company who had the requisite
financial expertise and ability to use the software, given the fact that the
company was about to venture into its largest building project which
required Shahs valuable contribution. Secondly, it was difficult to hire
such skilled talent in smaller cities and even if they could find one, he
needed to undergo a one year training program to become efficient in
handling the software. Moreover, there was the risk of losing customers
confidence and trust as Sadiqabad was a small city where people kept a
close eye on the local news and believed what they heard through word of
mouth. Any negative news involving fraudulent activities and firing of an
employee not proven guilty could make customers wary about companys
dealings and could result in huge losses for the company. Then there was
the possibility of a lawsuit by Shah for wrongful termination. Although the
probability of such a law suit was less due to a variety of reasons but still
the possibility existed and if such a situation arose, it could completely
ruin the companys reputation.

PROBLEM STATEMENT:
To decide whether Tanveer Shah is accountable for the loss of money to
the company

OPTIONS:
1. Wait for Internal Investigation Committee to come up with
conclusive evidence of the theft.
2. Fire Tanveer Shah immediately based on circumstantial evidence.
3. Consider the loss as sunk cost and move ahead with the new
venture while retaining Tanveer Shah.
4. Direct the external investigation towards involvement of the cashier
in the theft.

CRITERIA FOR EVALUATION:

1. Financial Cost Involved
2. Impact on firms reputation
3. Time involved in each option

EVALUATION OF OPTIONS:
1. Wait for Internal Investigation Committee to come up with
conclusive evidence of the theft:
a) Financial Cost: The employee of the company who was
involved in the theft might repeat the same if Internal
Investigation Committee doesnt come up with the conclusive
evidence. Also to conduct the investigation across the whole
company will require substantial amount of money.
b) Impact on firms reputation: Customers and investors might
lose trust if the information about the theft and consequent
investigation delay leaks out which will reveal the inefficient
regulatory system in the company.
c) Time involved: This will retard the normal functioning of the
company as employees will be more focused on the outcome
of the investigation and the probing circumstances they can
be into, rather than their daily jobs and the firm will not be
able to move efficiently with future projects.
2. Fire Tanveer Shah immediately based on circumstantial evidence.
a) Financial Cost: The hiring and training cost of new accountant
along with the missed opportunity cost will add significant
financial burden to the firm.
b) Impact on firms reputation: Tanveer Shah might file a lawsuit
against the firm for wrongful termination. If this becomes
public, the firms reputation among the stakeholders will take
the hit as reputation travels through word of mouth.
c) Time involved: Very less time involved in terminating Shah but
training the new employee which would take at least a years
time, which is not affordable given the new project at hand.
Moreover, if Shah files the above mentioned lawsuit then the
legal course will take a long time as legal processes move at a
slow pace in Pakistan
3. Consider the lost as sunk cost and move ahead with the new
venture while retaining Tanveer Shah
a) Financial Cost: The 7.5 million Pakistani rupees will be lost if
the bank wins the case and hence it would be a big financial
loss to the firm.
b) Impact on firms reputation: The investors might take it very
negatively due to the negligence on the firms part and
moreover its inability to recover it from the bank
c) Time involved: It would take a lot of time to regain that lost
amount, for the market share price to come back to normal
levels and to regain the trust of investors and customers

4. Direct the external investigation towards involvement of the cashier

in the theft.
a) Financial Cost: The cost of the entire lawsuit and hiring fee of
lawyer for representing SAS in the court of law.
b) Impact on firms reputation: Investors and customers will think
that the firm is trying to protect the accountant and shift the
blame on an external party and aims to embezzle the money.
c) Time involved: The court hearing would be prolonged and
hence the money would not be recovered till then.

RECOMMENDATION:
Continue with the internal investigation committee alongside the courts
hearing. If the court finds the bank guilty of the fraud, the money would
be recovered from the bank. If the internal investigation committee turns
up with any conclusive evidence against Shah, he will be fired
immediately and money would be recovered from him.

ACTION/IMPLEMENTATION PLAN:
The internal investigation committee set up should intensify the
investigation process and arrive at the conclusive evidence. The firm must
wait for the courts judgement coming up. If the court orders that the bank
is the reason behind the fraud, then financially recover the amount but
still verify if there can be any involvement between the company and the
bank. The internal investigation committee may probe the case to find
whether Shah is guilty or not. If he is found guilty then he must be fired
and the money should be recovered from him via legal protocols. Later,
the firm should appoint someone with the financial skill set required for
the real estate industry and should immediately commence his/her one
year training to use the software efficiently.

EXECUTIVE SUMMARY:
Haider Ali, is the owner of Sufi Abdul Samad Real Estate, operating in
Sadiquabad, Pakistan. A pre-signed cheque of $ 7.5 million gets stolen
from the office and Ali suspects Shah, the chief accounting officer, to be
the culprit. Now, he is in a dilemma to fire or retain Shah, who is
suspected of doing fraudulent transaction. A case has also been filed
against the bank which facilitated the transaction without verification.
Shah, being the sole operator of the accounting software is a critical
resource. Hiring and training a replacement for Shah involves huge cost
and time. Alis decision also affects reputation of firm which in turn affects
customers trust. Based on the evaluation of different alternatives in light

of the situation at hand, we recommend Ali to intensify the internal

committee efforts to investigate who from the company is responsible for
the theft. If Shah is found responsible, he should be fired immediately.