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Passion, People and Principles

A Case Study In professional Ethics

post # 310 — February 15, 2007 — a General, Strategy post

This (true) story was researched by Julie McDonald O’Leary, my former business manager.

She interviewed a property management company, whose client was a hospital. In dealing with government agencies regarding hazardous waste, the paperwork submitted has to be exact. In many cases, the paperwork is incidental to actual importance of cleanup work being done, and it can be more time consuming and costly than the actual work itself. However, it’s more than required — it’s mandatory.

The property management firm (let’s call them Acme) realized there was a mistake in the paperwork regarding a specific cleanup for the hospital. Basically, the paperwork said that waste was dumped in one particular site when it actually went to another. Both sites were the same type, but a clerical error had been made. No actual harm done because both sites accept the same type of waste—but in these situations paperwork is supposed to be exact.

This was Acme’s mistake, but it would be a costly one to rectify. The team involved knew that they could say nothing and no one would ever know and there would be no actual harm done.

They asked their CEO what to do, and he said: “We will meet with the hospital and take it on the chin. We’ll look like fools—it’s a silly error. The hospital has had a lot of bad press lately and the last thing they need is any kind of environmental error going to the press.”

Up until now, the relationship with the hospital had been a great one (representing a $0.5 million account) and admitting this mistake could become a real thorn in Acme’s side, making them look incompetent. They could lose the account and the word of mouth publicity that would follow would hurt future business in health care circles.

Acme’s CEO decided to meet with the client, bringing along to the meeting the whole team who had worked on the project — fom the most senior person to the most junior. He revealed the error and told the client that action was already in progress to fix the error. The meeting lasted 4.5 hours, adjourning with no outcome.

The next day, the CEO received a call from the client saying that they had discussed it further and that it was obvious to them that Acme could have swept the whole thing under the carpet and the hospital would never have known the difference.

They also said that they recognized that Acme made a lot of extra work for themselves by honoring what they knew the wishes of the hospital would be and that is to fix it. They said “We totally trust you to do the right thing.”

Another firm may have elected to go honest route as well, but may have been reluctant to do so with their juniors as an audience. By witnessing all of this first hand —lessons in professionalism are usually learned first hand this was better than any training session. The juniors had a taste of what “owning the problem” really means.

Acme’s young workers saw first hand the meaning of “ethics in action.” They saw the CEO “take it on the chin” rather than be anything less than completely excellent to very high standards. They also saw that because of this, they had probably obtained a client who will work with them (and advocate them to others) with total trust.

Now here’s another interesting question. A CEO might take the decision to handle things this way, but would a middle manager inside a company ever feel empowered enough to make a similar decision (absorb a significant expense to make right an error that no-one outside the company would ever know about?)

Or is this kind decision, which requires guts, courage and ethics, always kicked upstairs? Are any companies so “ethical” that a middle manager wouldn’t need to ask permission to “do the right thing?”

Comments?

Would your CEO do this?

Has your CEO ever done this?

What about your “middle manager?”

What about you?

16 Comments

Lance Dunkin said:

I just think the inseparability of good ethics and good business (long-term profitability) is very interesting.

posted on February 15, 2007

Eric Brown said:

I’m always amazed when I read stories like one above…I would love to work for someone that has character, integrity, values,etc such as this CEO. I’d take any job I could get to be able to work with a CEO like that.

I wish the CEO that I used to work for had acted this way…instead he acted in the opposite manner.

While working for him, I witnessed the following:

1.) CEO telling the client that they should ‘take it outside’ and settle it like men.

2.) CEO telling the procurement manager at a very large telecom company that he was a ‘baby’ and to stop ‘wasting our time’.

3.) While in a town hall meeting, the CEO starts screaming, cussing and throwing things at a VP while the rest of the office looks on.

These are just a few examples. This same CEO couldn’t understand why the company couldn’t seem to stay profitable, why people weren’t motivated and why it was so hard to keep good people. He also wondered why our clients hated working with us.

I refused to be bullied by him and his cronies and was asked to leave the company.

During the time at that company, I learned more about how NOT to do business than I learned about how to do business in my MBA program.

posted on February 15, 2007

Duncan Bucknell said:

These situations make or break us – as professionals, and as people.

I have witnessed first hand two such potentially cataclysmic events in former senior roles in professional service firms in my career. Each time, the problem was caused by the systems in place and unusual circumstances and a junior member of staff in my team was at the epi-centre.

Each time, senior management ran a mile, and I was left to take the junior with me and sit down, red faced, with the client and explain. In neither case was it ‘my fault’ but in each case I told the client I was taking full responsibility as it happened on my watch. Each time this only served to deepen my relationship with the people who I was serving (we all seem to like to refer to these people as ‘the client’).

Each time I faced that awful moment of realisation, and that deep down question – who are you, Duncan, what are you really made of. I can’t begin to describe how tough it is to sit down with a client under those circumstances. But then again, I can’t begin to tell you how much good it did for me, either.

So, people, who are you, deep down? What are you made of?

Are you a ‘professional service provider’, or do you serve people?

posted on February 15, 2007

jerk bosses said:

This will all end with crying.

posted on February 16, 2007

Andre (Redbeard) Mazerolle said:

I would assume that many accountants have had clients like this try to bully them through audits, other engagements, issues on financial statement or billing matters.

As Jean Paul Sarte once penned, “existence precedes essence.” The true value and meaning in a person’s life is created only later – and their year’s of experience drives forward their place in the world (and their place in other’s worlds).

David you also bring into play “ethics.” For most of my life, I have seen tone at the top drive ethics in an organization. Many might quietly dispute a leaders actions but few are willing to risk losing their job over it. Most are beaten down into complacently adhering. When it comes to ethics versus paycheque (American: pay check), there’s where you separate the wheat from the chaff.

Cheers.

posted on February 16, 2007

Jennifer said:

Not as difficult an example, but this story reminded me of a time in my professional career when a mistake was made. There were a number of service providers, inside and outside, and the mistake was something that fell through the cracks between responsibilities.

So although it wasn’t exactly my fault, it happened on my watch. I subsequently learned through a client service review that I was the only service provider who took responsibility – I just said sorry, that I should have found the error, or at least noticed the cracks, and moved the conversation on to how we could help to fix it.

All the rest of the service providers spent considerable time explaining why it wasn’t their fault.

It was a valuable lesson to make in the power of taking responsibility for an error, rather than trying to talk about why it wasn’t your fault all the time.

posted on February 16, 2007

Wally Bock said:

It will certainly be easier for a middle manager at Acme to make the ethical decision in the future. The story your office manager relayed is likely to become one of those stories people in that company will use to explain “the way we do things around here.”

posted on February 18, 2007

Sonnie said:

This is what the corporate world needs. I like the term “take it on the chin” to own responsibility and take the consequences.

Stories like this should be used in MBAs and board room discussion across the world.

posted on March 3, 2007

Sonnie said:

A great leadership example on this case. In my opinion, the middle managers tend to adopt the practices they see around them. The organizational culture also plays a big part. If the culture kills the honest and good guys, employees will just cover their respective asses.

posted on March 5, 2007

Robert said:

My CEO wouldn’t do this?

posted on April 17, 2007

Robert said:

Ups, sorry, I mean my CEO wouldn’t do this.

posted on April 17, 2007

Johnson Paul said:

I appreciate the attitude of the CEO and his team of ACME and the customer.

I have experienced this and believe me the relationship with the such customers stays long.

But when it comes to giving somebody else the chance or when the same happens to us we tend to forget these ethics.

I believe that when we deal in business we forget that we are humans and tend to behave as instruments to make profits for the organisation. Thats when we make the relationship with our customers more complicated.

posted on May 10, 2007

Shaun Stevens said:

This goes to show what proper ethics are .

In the end you get what you pay for so to say.

My firms are shortsighted – indeed our whole culture and the mentality of responding to short term stockholder profit statements are.

There are two important points here

- to lead by example and to set the example is something that no amount of money of spin can buy

- many people in the end have values that they follow in their whole lives based on such exampled

such examples are rare , exceptional and should be more than noted

secondly- if the client had complained in this situation somewhere along the line it would of turned out that this was not a client that was worth having for a profitable long term mutually beneficial relationship in the long run

look at the american car industry as a case in point

the american car industry was the backbone of america

now due to shortsighted management who were legends in their own minds hand in hand with ovepayed unions they milked and abused their life blood of their customer base

When the market changed – we don’t want to make small econoboxex ( no money , no ego , too much effort)

Instead the us car industry has now lost the lead to the Japanese car industry,

What are the main products of the us car industry – large old trucks laden with options – called suvs , financing and laying off experienced workers

A case in point.

-

posted on June 24, 2007

Bill Peake said:

It can be said to be both rare and a qood thing of such philosiphy of business management.

We live in a day of quick fixes and attention and concern on the daily bottom line for the benefit of the stock markets rather than any instrinsic valuation of real company values both for its employees , future employees and ultimate value and logevity of the firm.

posted on July 14, 2007

Kerry Francis said:

The lesson of life is that with patience it all works it out in the end. One should have ethics and live by one’s values.

The true result and the true wise man is the man with patience and virtue who lives by his morality. His ( or hers) is the kingdom to come – regardless of the quick and easy path ( or so it seems).

posted on August 20, 2007

Jackie Le Fevre said:

We all love an authentic leader. The one who does what they say they will irrespective of whether it will “look good” to the outside world. I was a middle manager who had to face up to a big mistake made by me and my team. When I recommended to my CEO that we come clean and take it on the chin it was an uphill struggle to get permission. When we did tell the cleints – warts and all what had happened – like the hospital in the case study they said our confidence in you has gone up because of your honesty and then they suggested a way to manage the situation to minimise the financial impact on my department. There are friends to be found in unlikely places when we live our values!

posted on February 28, 2008