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?