ALL CHAPTERS
Chapter Six
The Matter of Ethics
“That’s what makes this work so exciting. Will I survive or have I committed career suicide? And so perhaps the moral of the story…. is always do the right thing. Do your job.”
- Geert Van Dee
Ask a veteran consultant about industry ethics and you’ll get an animated, strongly-voiced response: of course we’re honest and of course we hold ourselves to the highest standards, both personally and within our firms. It’s almost an article of faith among consultants.
Ask the question a second time and you’ll get a slightly different response: that regardless of your own or your firm’s ethical code, being honest is simply good business. Our veterans have learned over the years that consulting is a long-term business, and nothing is more important than the reputation of being honest. If you lose your reputation, you are out of business. Good bye, see you later.
Where is this matter of ethics most important? Our veterans (for the most part) zero in on resolving what is good for the client and what is good for the firm. To whom is the consultant responsible? The client contact? The company itself? His or her own firm? And what if the client is the problem? The answers aren’t always obviously black and white: rather they are more nuanced. Sometimes being absolutely right now isn’t the best answer for either the client or the firm in the long run.
At the end of this chapter, we are pleased to offer insight from Alan Andolsen, who has chaired the Code of Ethics Committee for the Association of Management Consulting Firm. In addition to offering his perspectives, he includes in his response the 12 Principles that have been adopted by the Association of Management Consulting Firms.
Ethical Consultants
“Even When They Are Wrong, Consultants Are Ethical”
In my practice I have found that consultants are extremely ethical. I do a lot of work in the confidentiality field. I’ve got about 100 clients, whether firms or individuals and I’ve seen them across the board in terms of how they operate. But without exception, consultants maintain client confidences. Everything that I’ve seen has always been extremely ethical.
Even when they are wrong, they’re ethical. I’ve seen situations where consultants get involved in dispute with their clients. I have handled malpractice cases, and you know that’s not the high point of a consultant’s career. But I’ve seen those, and I’ve seen how consultants deal with legal situations and moral situations. When it comes down to question of integrity, they take it very seriously. For example, say a vice president is accused of sexual harassment. Consultants don’t care if he’s the best salesman in the world, he’s out of there. They just are not going to tolerate that.
In a law firm it depends on who’s sucking up to whom. And in a big corporation you might find same thing—there’s always a little brown nosing. That has a very minimal play in consulting. And when these legal situations do arise, be it a malpractice case or whatever, consultants will fess up to it.
It’s very difficult to restore your reputation. I mean it’s almost like that Christmas party where you had one too many and had a lampshade over the head. How do you get over that? Well, it takes time.
Look at those ads for Jamaica. Come back to Jamaica and all that. Well, that’s because nobody went there for years because they were being shot at and robbed on the golf course. So come back to the new Jamaica.
“None of Us Are Good With Shades Of Gray”
We spend some time on what I won’t call ethics but rather principles. We have a creed that we share with candidates, and we hope that they’ll self-select out if that creed doesn’t make sense to them. We go through a lot in our selection so by the time somebody comes into our firm, we feel that they’re properly aligned with us. That isn’t to say that our ethics are right or wrong. It’s just that they’re ours. Our principles are ours. I’ve never had the types of problems that I’ve read about, where consultants milk clients. It’s just not an issue.
I’ve only had one experience with a consultant who cheated on his expense report. We don’t even check expense reports anymore. We feel that if there’s an issue with the client, then the consultant will deal with the client. It won’t be the home office. We’re hiring adults and if we do the right job of hiring, we won’t have to do this kind of monitoring.
What I found early on is that our typical consultant profile is generally very black and white. None of us are real good with shades of gray. A lot of our people are of this sort of classic technician ethic, they believe you should share everything with everybody. I also see this huge need among consultants to feel that they should be providing more value than they’re being paid for. I don’t why exactly. Maybe it goes back to self-esteem. I sense it’s not uncommon for people to feel that they’re not worth the exorbitant rates we’re charging. Consequently, they’re always giving more.
“It’s a Gentleman’s Game.”
I’m a glass is half-full kind of guy versus thinking the glass is half-empty. I think by and large ethics in the industry are very good. I think it’s kind of like golf – it’s still a gentleman’s game. You keep your own score. You call the penalties on yourself, you count the strokes.
You learn quickly if the firm you’ve joined has a commitment to being ethical, and if it isn’t, I don’t think you should stay. Give it up and move on. There’ve only been a couple really awful exceptions over the years, firms that were known to be bait-and-switch firms. There were some cost-cutting firms back in the ’50s and ’60s that did work on a percentage of dollars saved basis. They’d go in and basically do job elimination work. There were only a couple of those companies within the province of consulting and they were viewed as not being very ethical about the way they worked. And there was a fair amount of bad reputation that the industry suffered due to these two companies. But those companies either went out of business or into a different line of operations.
“Basically People Are Ethical.”
I believe most of those who profess to be consultants are in the business for the long haul. They're not hanging a shingle out in between other operations. I think they tend to realize that if they’re not ethical, they ain’t in business. But that still leaves a rather wide range for what we mean when we talk about ethics. There is a gray area in this business, instances where you have to ask questions. Is this on the borderline?
I also know there are some people who end up doing consulting who don’t think about ethics much. These folks are basically in there for the money. They come in and they bomb and strafe and also don’t last very long because they don’t build the reputation.
In the 25 years I’ve been doing this, it’s been my personal experience both from the business and consulting side of things that basically people are ethical. Most people may not be explicitly focused on their ethical framework per se, but when you sit down and start talking you’ll find in their own way that they have an ethical structure they’re working with. Of course, sometimes that is exactly what gets them into problems. If the ethic is only give management what management wants, and they misperceive what management wants.
As far as working with senior management, almost universally in my experience I’ve been very impressed with their ethical level. I can’t think of any senior executive that I ever thought wanted us to cut an ethical corner. And our client list is pretty impressive. Yes, we have been in the situation where we’ve had to politely disagree with clients, at the risk perhaps of losing the project. But we’ve never been fired from a job so we know they’re listening.
As I say, there is a kind of gray area in this business. A client might be in litigation, for example, and you find yourself in a situation where they want you to say this or that, back them up on something that’s not quite right. Or, it’s a matter of do you destroy records or not destroy records? And you’ve got to advise them no, that’s not appropriate. We have to try to keep our independence in such matters. We have to stay objective.
Frankly, if you’re only there to just get the fee, and are willing to say whatever they want to get that fee, you really should be questioning how you’re running your firm. If you’re not strong enough to stand up to a client on principles, then I think you call into question the credibility of your organization.
“We Only Build Honest Models”
Several years ago, we got a call from a bank about a possible engagement. The president had apparently gone out and looked at a bank that had very good MIS productivity in all the branches. He then came back and called in his top MIS guy and gave him a rash of trouble because he thought they fell short by comparison.
Someone referred them to us and I went and met with their MIS person in San Francisco. Well, this guy wanted us to make a PC-based productivity tool that would tell them their productivity was good. I remember saying, “You want us to do what?” I had to tell him what we could do, which was an actual analysis of productivity and recommendations for improvement. But no, that's not what he wanted. He just wanted something to get the president off his back.
I told him you’ve got the wrong company. Well, he couldn't believe I would say that. He thought maybe we just couldn’t construct the right kind of model. I said, “No, you don’t understand. We do models all the time. But we only build honest models.” With that I packed up my bag and left.
I had another incident like that. We had just done a major restructuring for a large finance company and toward the end of the engagement one of our principals reported he’d been contacted by another large finance company. I thought, great, they probably heard what we did and now they want our help.
I went to this meeting and there were four or five guys in the room. I got everybody's name but I didn't quite know everybody’s position. Well, as the meeting went on I found myself thinking, “Jeez, I thought these guys were decision makers. They're acting like a bunch of people five levels down, asking me all kinds of inappropriate questions.”
They wanted to know exactly what I did for their competitor. Of course, I couldn’t discuss that and told them so. They responded by saying, what do you mean you can't discuss that? If you want to work for us, then you’d better tell us what you did for them. I made it clear that wasn’t going to happen. What we would be happy to do was evaluate their network, tell them the most efficient way to set it up.
They were indignant. I had to end the meeting. When I got outside, I said to my guy, “What were we in this meeting for? I thought these were decision makers.”
He said, “Hey, that was the president throwing those questions at you.” I couldn't believe that. I couldn’t believe they would ask us those kinds of questions.
“Integrity Isn’t A luxury.”
If I were stupid enough to think that I could do ill or do wrong and get away with it for long, well, I’d be very naive and reveal my inexperience in the ways of the world. As a consultant, you may sometimes make an honest error of judgment and give a client advice that turns out to be bad or wrong. You try, in good conscience, to give the best advice you can. That's the only way to survive.
But giving the best advice you can at that time and not being right is a very different thing from deliberately giving poor advice because you think it is what the client wants to hear. An opportunist will be seen through quickly. Integrity isn’t a luxury. It’s a business necessity for survival. When the truth begins to be seen, opportunism will ruin a person. There’s no future in giving less than your best honest advice.
Recently, in retirement, I had a very interesting experience. I'm officially a member of an advisory council to the Secretary of the Air Force Office of Public Affairs. They've been taking me around the country, letting me see some of their operations and their problems. It's marvelously interesting. They took me down to Kirkland Air Force Base in Texas where the Air Force gives basic training to the volunteers.
During training, the drill sergeant is with these recruits from morning to night for the first six weeks of their basic training. He has total authority over their lives until they become full members of the Air Force. While I was down there, a sergeant told me that s when he calls the recruits out for reveille at 5:00 in the morning, as they are moving into formation, sometimes he might notice one of them scratching his face. He waits until they are all lined up at attention and then he hollers out, “All right, the man who scratched his face, fall out.” He said they never do. Never once did anyone ever step forward.
So then, he points to the recruit who scratched his face. “You, fall out.” And the kid is terrified. What am I going to do to him? And he says to him, “I don't care whether you scratched your face or not. It makes no difference to me. But I care that you lied. Don't you ever lie again. The lives of these other men depend on you telling them the truth and your life depends on them telling you the truth. Don't you ever lie again.”
The sergeant said “That’s how he makes his point and the new airmen never forget it.”
Sooner or later, the lack of ethical standards catches up with you. Lying or telling halftruths will destroy the future for a management consultant as well as for anybody else. I'm not preaching from the mountaintop about high-and-mighty ethical standards. I'm talking pragmatic, down-to-earth reality.
“Who Wants That Kind Of Person In Their Firm?”
I’ve seen people trying to shop relationships: if I join your firm, I will bring clients with me. These aren’t common breaches, but you see them. I think if a client wants you to continue to serve them, then its fine. But it’s very different from setting your own market value based on the client base that you could pull away from the firm. Because clients are not individual clients, the client is the firm. And if you’re to do that going in, you’re going to do it going out. So who wants that kind of person in their firm?
“Hmmm, What’s This About?”
Several years ago, I called on a major bank in California. I was talking to an executive vice president about what we did and how we did it. Well, he wanted to know if we ever worked as subcontractors. I said no, we never have, but we would if we thought it was appropriate. He then told me that all the consulting work for his bank was done through a subcontractor. I thought, hmm, okay, what’s this about?
I felt uneasy about the arrangement so I never went to meet the contractor. But I’ll be damned if about a year later this guy didn't get caught. He was running all the consulting business through a phony company, taking 10 percent off the top for himself. We’re talking about something like $25 million worth of consulting work every year.
“The Interview Is Over.”
I think a bad apple gets thrown out very quickly. I’ve looked at statements and values of the number of consulting firms and integrity is always one of those value statements. At Mercer Consulting Group, the statement of values begins with “We value integrity above all.” It’s the number one statement and it’s a non-negotiable. And I think that is fundamental to any good consulting firm. Integrity can’t be defined. It’s one of those things you know when you see it and when you don’t see it you get the people out of there very, very fast. There will be mistakes in every big firm.
There will be some people who don’t adhere to the value system but they should be weeded out ruthlessly and quickly. And I think in most cases they are.
I can remember a person I was interviewing who gave me a writing sample. It was a strategic plan that he had developed for a competitor. He was offering to leave it with me. My answer was real clear, “You take that and the interview is over. I don’t have a decision to make, it’s over.”
I recall another time when I was interviewing a consultant. I asked him for the assignment that he was most proud of. And he said, “We had a client who wanted this computer system in their operations and they didn’t want to add a single employee and we did that. They are fully computerized and they didn’t add a single employee.”
I said, “How are they going to maintain the system?”
“That’s the beauty,” he said, “they don’t have a clue as to what’s in that system so any time there’s a change they have to hire us.”
And again I said, “The interview’s over.” I don’t think he ever understood why. It was a complete breach of reasonable judgment on how to serve a client.
“Act On The Road The Way I Act At Home.”
I always want to act on the road the way I act at home. At home, I don't go to five-star restaurants, so if I'm on the road, I don't go to a five-star restaurant. At home, I'll have a very basic lunch and I’ll take maybe half an hour for it. So on the road, I take a half-hour lunch and eat something quick. When I'm on vacation; I stay at a moderate hotel, so when I’m on the road, I do the same.
“Number One, I Try To Do Unto Others”
Number one, I try to do unto others. I don’t lie or steal. Of course, we all have professional standards of ethics. We have them in every professional association. But I don’t look at ethics just in that light. I mean, it’s nice to have a document. But I look at the standards issue as a very personal thing. Integrity is saying yes when you mean yes, and no when you mean no. I try to live that and sometimes it’s very difficult to do that and be a consultant.
Good Business
“It’s Just Good Business To Be Honest.”
I always remind our people, you're only as good as your last job. You know we're not McKinsey. We can't screw up and come back to market and get a $5 million contract. In a service business such as ours, you’re only as good as your last job. You always have to do a good job, be truthful and above board. It's hard enough to get things done right when you're honest. If you've got to keep covering up lies, there's no way that’s going to work. No one’s clever enough to always cover their tracks. It's just good business to be honest with people and do things right.
When you work overseas, you are going to run into situations where people routinely make payoffs to get work. I won't get involved in that. If we can't do the work legitimately, then we don't want it. Frankly, it's going to bite you in the ass sooner or later. You only need one circumstance like that to ruin your reputation forever. It’s never worth.
“The Accusation Is Going To Be On The Front Page”
In general, we are going to have access to certain sensitive information, like marketing strategies and the like. Anyone who violates that kind of confidentiality probably should be tied to the stakes and burned. All you need is one instance of confidentiality being violated to put a tarnish on your firm. Of course, the accusation is going to be on the front page, but if it turns out not to be true, the retraction will be way back on page 18.
“The Only Thing We have In This Business Is Out Reputation.”
When you think about it, the only thing we really have in this business is our reputation. If you lose that, you don’t have a consulting firm.
“Honesty Is The Best Policy. It’s A Long-term Business.”
In general, honesty is the best policy. It’s a long-term business, and somebody who’s dishonest cannot survive long term.
More specifically, I look at the level of intellectual dishonesty, rather than an out-and-out lie. Intellectual dishonesty means, is that really the best advice you can give to your client, or are you just trying to sell add-on work or the next job? That’s intellectually dishonest. That is a very short-term gain.
My belief and that of my firm is that by and large, if you give the best advice you can give, that’s in the client’s best interest. And over time if you do that well your interests will follow those of the clients.
You have the ultimate weapon and that is you can simply dissolve the relationship. I’ve pulled the plug on a number of major assignments because we really couldn’t work with the client. And the pain of doing that, depending on how far into it you are, is huge. You’ve got stuff you haven’t billed, or stuff you’ve billed but you haven’t been paid. All that gets put at risk.
But on the other hand, it’s necessary if you’re going to be intellectually honest with yourself and your team. One of the partners and I were talking a while back about when he joined the firm, I was the client partner and I showed up about two weeks into his assignment and spent three days doing a review. The third night was the big dinner with the project team. And this was a big assignment in those days. This was a multi-million dollar deal at a time when if you got over seven figures you were doing well. I went around the table, and there were probably twenty people at the table, and I asked each one of them individually, do you think that we can be successful in meeting the client’s expectations under the current conditions?
And I got 100 percent no’s. I said well, this tells me that we ought to pull the plug. It was one of those things where the client was supposed to be taking actions but they hadn’t moved, and we were getting further and further behind.
So the next morning we pulled the plug and packed it up. Now, the short-term hit was big. I think the short-term hit was a million and a half bucks, which was pretty big numbers back in the ’70s. It took about six months to renegotiate the relationship. And six months of renegotiations costs you a lot of money too.
And here we are 25 years later, and the total revenue from that client in those 25 years is past 100 million dollars. So you know, we took the right action, but in the short term, it was very painful. We got the relationship reinitiated on the basis in which the client’s expectations could be met in a way that we judged successful. And the relationship is still there today.
“We All Make Good Money”
I knew a guy who claimed that it's easy to fudge on your expense reports – that you can get a receipt and use it in a lot of different ways. You can rebook a flight multiple times and receive for each flight and just keep charging those through and nobody can really tell. And because expenses are always passed through at cost, there's less of a screen on what you spent than would be otherwise.
So I guess you could cheat if you wanted to. But I’d say that the number of people who actually do or did that is like one percent, or even less than one percent. I mean, we all make good money. Faking expenses is a really stupid way to lose your main source of income because you're going to make an extra 100 bucks or whatever the hell it was on your expense report. It’s just stupid.
In the long term, you just can't get away with being a slime ball.
“A Nice Companion”
I’ve seen situations where some individuals, usually new to the consultant business, decide that perhaps an employee or client might make a nice companion over the six months or however long they’re on a project. I’ve also never seen it work out well. Our company approach has been that this sort of thing shouldn’t happen--definitely a no-no. When it starts to become obvious, then maybe it’s time for reassignments to be made. I’ve never seen a client who was happy when this happens, either. It’s pretty much a relationship killer. If you’re the person doing it, you just better be very influential in your company, so you still have a job when the assignment’s over.
Client Interests vs. Consultant Interests
“The Interest Of The Client Versus The Interest Of The Firm.”
It seems to me the biggest ethical issue that most consultants deal with is the interest of the client versus the interest of the firm. And increasingly that involves the ownership of intellectual property. That’s the biggest issue.
The second biggest issue deals with conflicts of interest. I got sued once for not taking a consulting assignment with a client who wanted my services. I said I have a relationship with a direct competitor and I can’t take your assignment. And they tried to sue me. They argued that as a public accountant I was failing to hold myself available for the public. I actually got a lawyer’s letter on that and it was very quickly thrown out.
But I do think that one of the real challenges in today’s world – who you can serve. Realistically, how do you build barriers in a firm the size of the largest consulting firms today? You can’t just serve one client per industry. You can’t just serve non-competing clients.
I think an awful lot goes back not to systems but to the basic integrity of the consultant. Consultants have to understand when there’s a conflict. And they have to protect their client interest. I think they do an awfully good job of this. Better certainly than legal and investment banking and other areas that might be compared to consulting.
“There Is A Tension Between Telling The Truth And Solving Problems.”
I prided myself on being the truth teller. In the final analysis, I’m not sure it was always the most effective means of communicating on some tough issues. I remember getting a couple of clients really upset to the point that on one occasion my boss literally had to leap in and take over the presentation. I remember him being very angry, and sitting across the aisle on the plane back home and not speaking with me. Then, as we waited for our luggage at the airport, he came over to me and said, “Just remember, if your client wants to jump out the window, your job is to help him up onto the window sill.”
I’ve never forgotten that bad advice. It presents a fundamental question about the consultant’s obligation but I’m glad I heard it early in my career. It made a big difference in how I thought about myself in relation to the profession. It’s obviously advice I didn’t take, but at the core it has a very thorny real life problem, and that’s that things are not reducible so quickly and easily as to always be able to tell the truth.
For example, we had undertaken a turnaround study for a large industrial company to figure out what would be the most economically beneficial way to get them out of a business that one of the divisions was in. There were about five different ways to get out of the business, and we calculated the after-tax consequences of each and made a presentation as to what the five alternatives were. The study was a great success, beyond the client’s expectations. And the chairman, who was not the person who hired us to do the study, was terribly impressed with the piece of work.
About three or four months later, as we were implementing that study, he asked to see me. He asked if I would take on a personal assignment, not as part of a team but as an individual consultant. And what he said was that he was terribly concerned with the performance of his immediate subordinates. He anecdotally explained what he was disappointed in, and said he wasn’t quite sure what to do about the problem because it was kind of pervasive. It wasn’t one or two people who might be replaced. He was very concerned about his whole second tier. So he asked me to look into it, see what the problem was, evaluate it, and make some recommendations. I was pleased to be asked to deal with such a sensitive matter, and I was complimented that the chairman of a major corporation would look to me to do that kind of work.
I spent a couple of months looking at the problem and reached the conclusion privately that the problem wasn’t his immediate subordinates—he was the problem. I sat down to think through the recommendations and I had a crisis regarding whether I should tell him the truth or not. If the client wants to jump out the window, do I help him up to the sill? Certainly one can always find some fault in any subordinate. None of us are perfect, but in terms of the systematic problem he was describing, he was the problem.
But the problem was pretty straightforward. If I tell this guy that he’s the problem, that’s going to be the end of my relationship. He won’t have the capacity to take any criticism. In the end, I decided that the higher ethical calling was to tell the client the truth. I proceeded to draft a 16-page report to the client and to this day, in terms of the quality of writing, I think it’s the finest piece of work I’ve ever done. It was well-crafted, it was tactful, it was direct but diplomatic, it explained a lot but took him off the hook but in the end, made it quite clear that he was the problem. That he had to address certain issues and forces within himself. And that was the last time I had any contact with that client.
Not too long after that, there was an unfriendly takeover of the company. While some people got out with money, it was just a matter of time before every last employee lost his or her job. For more than a decade after that I kept asking myself, did I do the right thing? And for the better part of a decade I said yeah, it’s always best to tell the truth. And it was only later that I came to think that that was not the case. This man didn’t have the capacity to hear the truth, and if I couldn’t solve the problem he would never rely on another consultant again. So in a sense, I had the last opportunity to try to effect change. And in telling the truth, I surrendered any chance of being a force for change within the enterprise.
I finally understood that the opposite of telling the truth was not to tell a lie, but rather it was rather to be effective in bringing about change. That the issue wasn’t truth or lack thereof but rather how can I be potent, how can I be effective. In retrospect, there were probably some things that I could and might and should have done other than simply point out that he was the source of the problem. I could have hung around long enough to try to work through the problem because I don’t think you solve those kinds of problems overnight. Somebody had to hang in there to try and work through it.
You grapple over what is the obligation of the consultant, what is your responsibility. There’s a tension between telling the truth and solving problems. And those are not always synonymous.
“My Son Is Not Going To Be President?”
When I first joined the firm I learned a good lesson. We were doing a study of a paper converter here in Chicago. The company had two owners. The chairman was an inventor, and he developed machinery for converting paper, and for making decorative paper and ribbons and bows.
His partner was the president; he was a salesperson. The third player was the chairman’s son, who was the vice president of marketing.
Our task was to do a complete review of the business. They were having trouble. The chairman was about 75, the president perhaps 70. They were trying to think about what they should do with the business after they retire. We did all the interviews and analysis and we interviewed the son.
We concluded that the son was absolutely unqualified to be the vice president of marketing. He was a physics teacher from a Chicago high school who they brought into the business because his father and the president had decided that they were eventually going to leave the business. They wanted to see if they could leave it to the son. By the way, he reported not to his father but to the president.
Once we got the whole thing laid out we said, “Boy, we’ve got to tell the chairman that his son’s not qualified to be president. In fact, he’s not qualified to be vice president of marketing. In fact, he should go back and teach school.” He had no qualifications whatsoever to be in this business.
So we said to ourselves, “How do we say this? Do we sugarcoat it somehow? If we tell the old man, he’s going to be really, really upset.” Finally we put together a very high level report that included what had to be done to revitalize the business, how the company should be organized, and the issue of the son. We had the meeting on top of the Prudential Building, which was then the tallest building in Chicago. We were looking out over the lake, as we made the presentation.
Finally we get to the part about the son. This is the organization and this is the way it should be structured. And when we talked about the son, the president asked if he would be a good successor. We all said “No,” in unison so that no single consultant would be exposed. “Well, he’s really not qualified. He doesn’t have his heart in it. He really should go back teaching physics.”
The father said, “So you mean my son is not going to be the new president?” We said yes. He said, “That’s the best goddamned news I ever heard! This nincompoop,” he added, “if we ever put him in here as president, I would sell my share in this company in a heart beat!”
Well, the president looked at him and said, “I thought you were the one pushing him for this.”
“No,” the chairman replied, “I thought you were the one who liked him and was pushing him.” They start to talk to each other, and it comes out that neither one thought the son was qualified. They each thought that the other person did, and that the other was pushing him to be president. And we’re looking at one another and I’m saying to myself, well, that’s a lesson to learn early in your career.
You don’t fool around. You don’t make up answers. You tell the truth. And that turns out to be the best policy. Honesty is the best policy in consulting.
(A brief and humorous sidebar here: The president wore a toupee that was perhaps 30 years old. It was made with fine mesh like the back of a carpet, with the hairs somehow glued to it About four square inches of the hair had fallen out, but he was still wearing it. So whenever you met him and talked to him you could see the four inches of mesh on his head, a bald spot underneath, and then the hair. And you think to yourself, here’s the president of the corporation, can’t he afford a new rug? It was constantly on your mind. And you’re always afraid that you’re going to say “Mr. Rug” or “Mr. Toupee” instead of his name. Constantly in the background, you’re thinking about how you have to avoid calling him “Mr. Rug.” So I never used his name in order to avoid a slip.)
“Am I Going To Anger The Client Who Pays The Bills?”
I'm trying to deal with the consulting side versus the CPA side because there are whole different sets of rules. If I uncover questionable situations, I am bound to deal appropriately with them. The question is how do you do it and with whom? Of course, the first thing you have to do is verify the facts. Then there are certain choices. I'll go to the Board of Directors or other leadership if I think some inappropriate action has taken place. It’s tough. After all, these are the people paying our bills. Am I going to anger the client who pays the bills?
For the consultant, the issue is not necessarily legal versus illegal. I had a case where we uncovered some highly questionable expenditures, and mob connections were suspected. But I don't know that they were necessarily illegal. We run into a lot of situations that involve shades of gray, as opposed to matters of legality.
Frankly, if you're in this business long enough, you're going to run into all kinds of crap, some of which may involve legal issues. As a CPA firm we have to be absolutely clear. If a client will not do something according to Generally Accepted Accounting Principles, then we will resign the account. Period! We don't have a choice. You can be sure that most of the bad stuff will come out at some point. I'm absolutely sure of that.
“You Have To Be Upfront With Clients”
What I believe is that you have to be up front with clients. If they ask you to do X, and you’ve never done X, but it sounds like an area you’d like to get into, do you say, of course we’ll go ahead and do this work? Or do you say, we’d love to team with you on this, but we don't have much experience here?
If they say, well, you’ve never done this type of project before, no thanks, then we'll just move on. But 98 percent of the time the response is okay, let’s work on it. The clients are usually glad we’ve told them where we're at. The attitude is that this can be a learning experience for all of 15 us. Of course, they will expect some consideration in pricing. But if you’re building a new practice base and somebody’s paying you for it, that’s not such a bad deal.
“No Free Lunches”
The ethical question that I've seen more of involves people in a position to make decisions who look for gifts or some kind of reward if they give you the business. I know sometimes it has hurt our business because we don't do that. Sometimes they'll be very straightforward and say, "Well, you're bidding against XYZ company." They’ll let you know it might be in your interest to throw in something extra. Our policy is if we have to do this kind of thing to get business, then we're probably doing something wrong. So let's not do it, particularly when somebody just comes right out and asks for something. I think you'll find it's not an uncommon occurrence in large companies.
Some companies have recognized the problem and put in place strict rules on what can and cannot be done. No free lunches. We do have quite a number of clients who are very adamant about this issue. Consequently, I probably get more free lunches from clients than I take clients to lunch.
“I Stayed In The Hotel Room.”
There's a great potential for conflict of interest for all firms that have more than one service line. We do economic development consulting in addition to our location consulting business. Sometimes potential sites would offer us a development project, on the condition that they were chosen to get a plant. We would always say that's not how it's done.
But that was the most obvious and the most common occurrence. Sometimes you'd find a bottle of wine in a hotel and some fruit, but that was fairly innocuous. At what point is it a bribe and at what point is it just an attempt to be gracious? But if you got an offer to go off to a party, well, it was pretty obvious what was going on. I stayed in the hotel and read and read.
“You Have To Believe What You’re Selling.”
If you put your client’s interests first, what does that mean in terms of taking risk with clients on new ideas? You know there’s going to be some risk there. But is it unethical or unprofessional if you have a deep conviction that this is where the industry’s going? You should go out and convince the client, dare I say sell the client on that idea.
You have to believe what you’re selling. But that’s a very personal decision. You have to do due diligence on what is a new value proposition. You may think, I haven’t done this work, but I can get a couple of my partners to come in and work with me. I think I can learn how to do it, and I do think it’s right for the client. And I don’t think anybody else can deliver it any more cheaply than we can.
You just have to have some objectivity and guts about it on both sides. And I think that if you ignore your objective conclusion, then you’re being unprofessional. I’m not sure where the line is between unprofessional and unethical, but it’s pretty thin. I suppose a lot of salesmen sell people things they don’t really believe they need. Some people say that’s smart, other people say it’s unethical. I’m not sure it’s either one, just self-serving.
The spectrum of ethical behavior is pretty broad in consulting firms, although it’s probably not much different than it is in other industries. Whether you’re selling chicken to restaurants or corporate strategy studies to big oil companies, you still have to ask yourself, am I putting my client’s interest first? If you sell a bad chicken, you’re going to lose the customer.
An interesting question is whether bad ethical behavior is punished more or less promptly in consulting compared to other industries. And from what I’ve seen, it is certainly not punished more promptly. There’s a lot of tolerance for bad behavior. And that tolerance seems to go along with ability to get clients.
“The Data Needs To Speak.”
Consulting involves dealing with people’s jobs, internal politics, all sorts of sensitive issues. I had an engagement with a fairly good-sized bank, for example, where their IT organization was just not cutting it. When we looked at the organization structure we found the CIO was very ineffective. It was a situation where no one wanted to upset the guy. So I walked into the chairman’s office and just laid it out. I said, “you’re not getting any value at all from the CIO, and as a matter of fact, he ought to leave.” I mean, he was literally taking naps in the afternoon in the office. He was just of no value.
The chairman asked for my recommendation about how to handle it. I said, “this guy is close to retirement, just buy him out, give him a retirement package.” His response was, “Wow, this guy! We can’t do anything with him.” I said “I thought we should take that challenge. Not only was he not adding any value, he was holding them back.” I suggested they start to put a couple of people in place to fill his role. We could help with putting the right skills in place.
We had to work with the chairman over a six-week period until he was ready to do this. Then we helped put a retirement package together, and they were able to let the guy go. He was not as direct as I would have liked, but within a year to a year and a half, the guy was out of the organization.
My take on things is that the data needs to speak, but on the other hand you have a lot of people involved, and for the most part people have a very difficult time disrupting or ending someone else’s career. I would say the profession does a pretty good job of making sure that the data speaks. But then you have to get realistic on the implementation, and that involves individuals.
“Do You Give Somebody A Can of Coke?”
There’s a movie Doc Hollywood with Michael J. Fox where he’s on his way to Los Angeles. He’s this young, sharp whippersnapper from out East, heading out to LA to be a doctor at a big hospital. He either gets a speeding ticket or his car breaks down in some small town so he has to serve as their doctor a few weeks while their regular older doctor is unavailable.
And what happens is that somebody rushes in this little kid. He’s turning blue and everything and the young doctor diagnoses this as some terrible thing, we have to operate right away and send for the chopper and I need all this equipment.
The old doctor finally shows up and he looks at the kid. He gives him a can of Coke to drink. The kid drinks the Coke, belches and he’s okay.
So the question is, as a consultant, do you use the so-called best practices, established practices, or do you give somebody a can of Coke?
“The Moral Of The Story ………Is Always Do The Right Thing.”
The most controversial thing I ever had to do was to fire the whole managing executive board of a client. I was hired by the supervisory board, which is a non-executive oversight body, to review the executive board's performance. It was actually their own job to do, but they handed it off to me.
I did my interviews and research and found myself coming to the difficult conclusion that the three executive directors on the board were in fact not functioning at all. The chairman was terrible, nobody could mention anything that he had ever done. Most of the people didn't even know him. The other two members were functioning just as poorly. I thought they all had to go.
This caused me an enormous dilemma, and for good reason. Any recommendations regarding the executive board would entail a royal decision signed by the Queen. This particular institution had a national charter. So my recommendation would have to be approved by the appropriate minister, verified by parliament, and then signed by the Queen.
So there I was, the simple consultant, about to recommend that the chairman and the executive board be fired. As you might imagine, I really had to weigh my decision carefully. I must have spent three weeks considering and reconsidering my recommendation. I did talk to some of my colleagues, but I was pretty much on my own on this one. The chairman of the supervisory board was also a weak manager so he was very happy to put it all on me. But I knew what I had to do. This institution would never be a success as long as they were there.
The next step was to go to the minister. Well, the last thing you need is a top civil servant who says to you, you’re crazy and that’s impossible. And that’s exactly what I got. I had to tell him, “Well, maybe I am crazy but it took me weeks to come to this conclusion. And right now I am very, very serious about it. It must be done this way.”
There was another potential problem. I was very afraid that when I told the board they had to go, it would be all over the media. And that in turn would cause questions in parliament and you can imagine what else. Fortunately, the minister decided he would accept my advice. He gave me the green light and at 10:00 the next morning I spoke to the chairman, at 10:30 to the second man, and by 11:00 to the third. By noon we had held a meeting with the supervisory board and by 2:00 in the afternoon they were all fired. And by 2:30 the work council, parliament, and the local press had all been informed.
This turned out to be one of my most sensational assignments. There was tremendous news coverage of the story. Fortunately, everyone who knew about the situation was convinced that this was good advice. In fact, just recently I met the man who was then chairman of the supervisory board and he still says, wise decision. You did a good job.
But you never know if that will be the outcome, until that moment when you tell them what your advice is. That’s what makes this work so exciting. Will I survive or have I committed career suicide? And so perhaps the moral of the story, in a Calvinist sort of way, is always do the right thing. Do your job. Be absolutely honest and convinced and never do something because you’re counting on a certain type of reaction. Do it because you are absolutely convinced that this is the right advice. Even if everybody keeps telling you that you should do something different. Hopefully, you will leave convinced that your contribution has added something.
Some Parting Thoughts
I am familiar mostly with the firms that are part of the Association of Management Consulting Firms. I chaired the Code of Ethics Committee which rewrote the code back in the late ’80s. I also have a deep academic interest in the topic. My wife teaches social ethics, and I frequently get into conversations with clients about these issues.
You could look at our industry code of ethics as a form of self-policing. We are honor bound to report violations of the code is we observe them. But it is more than self-policing. There 19 is an educational element for both consultants and potential clients. We want to get the word out there are principles, and whether you hire an association firm or not, here is what you should be looking for as far as qualifications.
We have constructed 12 general principles that make up the key elements of conduct in the consulting business. These set a very high standard indeed.
CODE OF ETHICS-ASSOCIATION OF MANAGEMENT CONSULTING FIRMS
Clients
1. We will serve our clients with integrity, competence, and objectivity.
2. We will keep client information and records of client engagements confidential and will use proprietary client information only with the client's permission.
3. We will not take advantage of confidential client information for ourselves or our firms.
4. We will not allow conflicts of interest which provide a competitive advantage to one client through our use of confidential information from another client who is a direct competitor without that competitor's permission.
Engagements
5. We will accept only engagements for which we are qualified by our experience and competence.
6. We will assign staff to client engagements in accord with their experience, knowledge, and expertise.
7. We will immediately acknowledge any influences on our objectivity to our clients and will offer to withdraw from a consulting engagement when our objectivity or integrity may be impaired.
Fees
8. We will agree independently and in advance on the basis for our fees and expenses and will charge fees and expenses that are reasonable, legitimate, and commensurate with the services we deliver and the responsibility we accept.
9. We will disclose to our clients in advance any fees or commissions that we will receive for equipment, supplies or services we recommend to our clients.
Profession
10. We will respect the intellectual property rights of our clients, other consulting firms, and sole practitioners and will not use proprietary information or methodologies without permission.
11. We will not advertise our services in a deceptive manner and will not misrepresent the consulting profession, consulting firms, or sole practitioners.
12.We will report violations of this Code of Ethics.
STORIES FROM READERS
Do you have a story about how you got started in consulting? We would love to hear it. Please send your best to the email address below. Top submissions may be included on this site or in future editions of Lore of Wizards. Submissions will be reviewed and contributors will be contacted prior to publication.
“When we speak of ethics, we think of some minimum level of acceptable behavior below which one is unethical – protecting confidences, abiding by the law, being truthful, respecting diversity, etc. – and above which one is either naïve or too passive. Sometimes we talk of ethics and trust together as if they were the same thing. From my perspective, ethics is just the poker chip to get into the game while the appropriate trust-level wins the pot of money. What’s appropriate is usually the highest level among competitive alternatives. And, as is always the case with money – some is better than none and more is better than some. John Henke (MSU Ph D currently at Oakland University) has studied trust levels in the automotive sector for almost 20 years. He claims that trust is the real factor separating GM and Toyota. (that would be interesting testimony in Washington as our representatives debate the auto industry bailout). In soon to be published research, John “will prove” that “trust” accounts for 40% of an automakers profitability and 20% of it’s revenue. If John is even close to being right (and all my gut feeling, consulting work and years of gossip with practioners think he is spot on) we must teach something like, “Understanding and Building Trust in Important Business Relationships.”
The Eli Broad School of Business
Michigan Stat University