Author Archives: Andrew Rudin

Would an Idiot Do That? A Practical Guide for Ethical Marketing Decisions

In the fall of 2016, my son headed off for his first year in college. Compared to today, it was a halcyon time to leave the nest. I envisioned him frequenting bacchanalian block parties before Summer faded into Fall and his classes reduced the time available for such pursuits. Along the way, I reasoned, he’d learn moderation the same way I did.

Still, I didn’t want my son to repeat my youthful mistakes. But forty years hence, any specific insights I might have imparted had fizzed from memory. Besides, in my son’s mind, my two-score head start on the college experience might as well be 200 – or more. Any wisdom I was to share had to be contemporary. Ergo, avoid verbosity, and compress all guidance into a single text message. So I turned to online search, where I was immediately rewarded with a fitting quote attributed to Dwight Schrute, a character in The Office:

“Before I do anything, I ask myself: ‘Would an idiot do that?’ And, if the answer is yes, I do not do that thing.”

Wise counsel for any young person about to be confronted by relentless temptation and moral ambiguity.

Also, valuable advice for business developers, from interns to C-Something’s.

Business development professionals routinely encounter situations where they must choose among different strategies and tactics, and the ethics of each are often murky. No epiphany that the distinction between ethical and unethical isn’t consistently crystal clear. Accordingly, business developers must weigh the ethics of each choice, and decide whether they comport with their personal values. “The answer is simple!” has gained popularity in business development among those who want to demonstrate their decision-making chops. With ethics, however, that’s rarely the case.

A few examples:

  • Is it appropriate to offer something of value to a prospective customer in exchange for an order? Does calling it a ‘gift’ make it ethical?
  • When does a marketing claim cross the line from exaggeration to misrepresentation?
  • Is it OK to withhold information about your company, product, or service from a customer if you feel that information could jeopardize your sale?
  • Should you attempt to sell your product to a prospective customer despite knowing a more suitable one could be sourced from a competitor?
  • Is it ethical to expedite a purchase by creating false urgency?
  • If you have unsubstantiated information about the performance shortcomings or dissatisfaction with competitor’s product, is it ethical to share it with a prospective customer ?
  • What are a vendor’s ethical obligations when they possess a clear information advantage over a customer?
  • When a prospect offers you access to a competitor’s pricing and proposal, is it ethical to accept such information?

When I consider similarly vexing questions, I always hear Dwight’s voice. Dwight’s advice doesn’t presume “right” and “wrong” choices. It doesn’t pander to religious or moral dogma. And it doesn’t demand conformity to impossible standards like “above all, never lie!” (I violate that admonition every time I tell a customer that I can’t lower my price. In those instances, the truthful expression is that I won’t.)

Still, ethical decision making adds complexity, and for some, only asking would-an-idiot-do-this?  is an insufficient bar. After all, Apple and Samsung made some astonishingly idiotic decisions, from which they rebounded.

When mulling the ethics of a marketing decision, ask these additional questions:

  1. Would I be embarrassed if another customer learned about my choice or actions?
  2. Would other business developers consider my decision ethically borderline or unethical?
  3. If I were confronted about this decision during a future job interview, would it disqualify me from consideration? Would I be able to convincingly justify my actions?
  4. Would I feel regret or remorse if I described my decision or activity to a family member?
  5. Would I be upset if someone else shared my actions on social media or in the news?
  6. Would I feel wronged if the same thing were done to me?
  7. If everyone engaged in this practice or activity, would society be worse off?

These days, I think about ethical risk every time I drive by a McDonalds outlet, purchase a product from Amazon, see an advertisement from Wells Fargo, read an article about Liberty University, or send a message on Facebook. No company is immune to the risks – a confusion I experience when I talk with senior executives who sometimes tell me, “that type of thing would never happen here.” The same attitude prevailed at BP before the Deepwater Horizon oil spill.

If there are ongoing ethical concerns at your company that cause you to answer “yes” to any of these questions, you may want to escalate your concerns. Some do’s and don’ts:

Do: Use introspection to know your personal values. Write them down – and be confident to advocate for them when they are confronted.

Don’t: Rationalize inaction by believing that you’re too [senior/junior/new/entrenched] to raise concerns.

Do: Document your objections, record what you observe, and the reasons you object. This helps clarify the issues and provides needed material should you decide to escalate them.

Don’t: Pigeonhole possible alternatives others suggest as morally “right” and “wrong”. This polarizes conversations, makes people defensive, and distracts them from ultimately achieving the best outcome.

Do: strive to understand the point of view of others who might not share your concern.

Don’t: attribute malintent or deviousness to others before fully learning the reasons for their action or recommendation.

Do: seek the support of others who might be similarly uncomfortable with a decision, policy, or practice.

Don’t: assume you’re the only one who objects.

By far, the most cost-effective, powerful mitigation for ethical risks is a values-driven workforce, empowered to speak up for themselves when they are confronted, and knowing that their employer makes it safe to do so. Advocating for one’s values is a skill that must be practiced regularly and often. It requires listening to your gut and recognizing when something feels wrong.

Asking whether an idiot would take a particular action is as good place as any to start.

Let’s Restore Sanity to Stretch Goals

Stretch goals are “deliberately challenging or ambitious aims or objectives.” Known colloquially as BHAG’s – Big Hairy Audacious Goals – they are ubiquitous in revenue planning and deeply entrenched in sales culture. Fittingly, stretch goals themselves carry a bold sales pitch: Outsize performance reaps outsize reward.

To attract investors, CEO’s have conjured semantic theatre around stretch goals. Robert Reffkin, CEO of upstart real estate company Compass, brashly promoted his “20/20 by 2020” plan, boasting that the company would have 20% market share of the top 20 US markets by 2020. He walked that back following layoffs and financial under-performance at the company. And Wells Fargo’s ex-CEO John Stumpf fatuously proclaimed “eight rhymes with great” to goad staff into establishing multiple accounts for every bank customer. Stumpf’s catchy slogan came back to haunt him when Senator Elizabeth Warren famously reminded him about it during the government inquiry into the bank’s systemic customer fraud. Watch the video. You won’t see a better example of a polished CEO caught off guard.

Why do some companies have a decent shot at making stretch goals, while others trip all over themselves, making it clear they don’t have a snowball’s chance? How do some companies manage to extend the benefits beyond investors, while others create incalculable harm and wreckage? And importantly, why do some executives persist in using stretch goals as a mallet rather than an incentive?

Before Google became the dominant search engine, the company established a goal “to organize the world’s information and make it universally accessible and useful.” While this has caused unintended negative consequences, the benefits to society are incalculable. By contrast, “in the early 1990s, Sears gave a sales quota of $147 per hour to its auto repair staff. Faced with this target, the staff overcharged for work and performed unnecessary repairs. Sears’ Chairman at the time, Ed Brennan, acknowledged that the stretch goal gave employees a powerful incentive to deceive customers,” wrote Daniel Markovitz in a Harvard Business Review blog, The Folly of Stretch Goals (April 20, 2012).

When do stretch goals work? Another Harvard Business Review article, The Stretch Goal Paradox, by Sim Sitkin, C. Chet Miller and Kelly E. See reveals likely success factors. “Before launching stretch goals in sales, production, quality, or any other realm, how can you be confident that your grand aspirations will trigger positive attitudes and actions rather than negative ones? When facing radically out-of-the-box opportunities or threats, you can’t just rely on intuition. You need clear guidelines for assessing and addressing risk. You have to know when stretch goals do and do not make sense, and when to employ them rather than set more achievable objectives.”

Two key conditions influence the likelihood that stretch goals will produce positive results.

  1. Existing success momentum. “If a company has just surpassed an important benchmark in the industry or in its own recent history, it’s well positioned to tackle a stretch goal . . . Winning affects attitudes and behaviors positively. When confronting an extremely challenging task, the employees of recent winners are more likely to see an opportunity, systematically search for and process information, exhibit optimism, and demonstrate strategic flexibility.”
  2. Available resources. “If the supply of money, knowledge and experience, people, equipment, and so on exceeds a firm’s needs, the surplus can be used in a discretionary way. It can help organizations search broadly for ideas, experiment with them, and remain committed in the face of setbacks. Well-resourced organizations are better positioned to absorb failures that come with trying a variety of new ideas—not just because they have funds to move forward but also because they have emotional reservoirs that increase their resilience.”

As an operational tactic, stretch goals are not inherently bad. But like many business tactics, they get a bad rap after they have been misused. Senior sales executives often institute stretch goals as a “hail Mary” to turn things around at companies with flat or declining revenue growth. That’s a mistake. At companies in low-growth markets or suffering from repeated revenue setbacks, the effort often backfires, causing frustration, disillusionment, and employee churn. Instead, Sitkin, Miller, and See advocate pursuing small wins over stretch goals. Further, when the sales organization’s pursuit of stretch goals exceeds the company’s capacity to fulfill its promises, infighting and bad customer experience are the inevitable outcomes. In these situations, instituting stretch goals risks corroded morale and jeopardizes corporate strategy.

The important thing to remember about implementing stretch goals is that they should never be considered a “no brainer.” Stretch goals don’t fit every organization, and they don’t mitigate every revenue or performance challenge. The opportunities stretch goals create must be realistic and their probabilities should be carefully assessed. So should the risks.

Advantages of stretch goals:

  • Discourages complacency based on past success
  • Encourages employees to take intelligent risks
  • Encourages innovation and new approaches to solving problems
  • Provides employees a more equitable share of financial rewards

 

Disadvantages of stretch goals:

  • Low morale, disillusionment, and skepticism if goals are missed
  • Potential de-motivation and fear
  • Unintended consequences, such as harm to customers and other stakeholders

For deciding whether to implement stretch goals, Sitkin, Miller, and See offer succinct guidance: “We understand that the next Panama Canal, moon landing, and iPhone cannot be produced without bold ambitions. But attempts at such outcomes should not be ill-advised lottery bets. Savvy strategic choices are better by far. Shoot for greatness. But greatness doesn’t always come from dramatic leaps. Sometimes it comes from small, persistent steps.”

The Road to Trust Begins with Intent

In the 1980’s, I demonstrated my company’s accounting software to a prospective buyer, the CEO of a large lumber and plywood wholesaler in Virginia. A few minutes into our meeting, I showed him how a credit hold worked.

“If an account is delinquent,” I said, “our software lets you know at the point-of-sale, and the system prevents you from filling a new order until the credit hold . . .”

“Andy, I don’t need that,” he interrupted. “Before I accept a new customer, I look at him in the eye and ask, ‘are you going to pay me?’ It’s that simple. In 40 years, I’ve never had a bad debt.”

I offered no argument or rebuttal. Any attempt to hammer home the value of this feature would be pointless. Instead, I moved on to show him a different shiny software object. I had no doubt the CEO’s trust instincts served him well and protected his company. After all, he had built his business into one of the area’s largest lumber and plywood suppliers. You don’t do that by being gullible.

But today, his approach would spell trouble.

The Covid-19 pandemic has forced buyers and sellers alike to re-assess intent and trust. Honest trust depends on honest intent – and no one controls our intentions except us. Although we’ve often heard people say, “Trust me on this one . . .” as a practical matter, we cannot demand that others trust us.

Instead, it’s important to remember that the extension of trust is a decision based on perceptions. Even though we might believe our intentions to be trustworthy, it’s up to others to decide.

The linkage between trust and intent is one of the most important concepts in business.  Actions are the vehicle for intentions of every type – whether they’re good or bad. Therefore, if ethical conduct is of paramount importance, it’s crucial to start with intentions that more likely to foster that outcome.

While positive intentions don’t always yield positive actions, nefarious or malignant intent will almost always result in actions that are harmful. Purdue Pharma made this connection clear when its myopic intention to grow revenue produced a litany of marketing actions that proved lethal to customers, including encouraging physicians to over-prescribe opioids.

Consider these intention scenarios in selling and buying:

Role 1: sales representative

Intentions: close the deal, make quota, earn commission

Likely actions based on intentions:

  • Exert pressure on prospects to order now, even when it’s not in their best interest
  • Upsell expensive, but unnecessary products, features, and upgrades
  • Conceal consequential quality problems that could delay purchase
  • Disparage a competitor’s offering

Role 2: buyer

Intentions: get the lowest price, earn performance bonus

Likely actions based on intentions:

  • Inflate projected procurement quantities
  • Withhold opportunities for vendor to meet. Instead, request “best and final” price quote only
  • Give vendor price targets that are artificially low

In both scenarios, misguided intention is evident to the other party, sacrificing trust.

 

Consider what happens when intentions are more considerate of trust:

Role 1: sales representative

Intentions: Create customer success, earn commission

Likely actions:

  • Recommend the best product for the prospect to buy, even if it costs less
  • Encourage customer to purchase the right amount for their need
  • Request feedback about how to improve future deliveries

Role 2: buyer

Intention: Cultivate valuable vendor partnerships, earn performance bonus

Likely actions:

  • Openness about future production and marketing plans
  • Collaborate on market forecasts and demand generation activities
  • Share information about quality improvement and product efficiencies

Better intentions cause better actions.

Bellwethers of trust that my prospect depended on flourished in the old economy – the firm handshake, direct eye contact, statements of unequivocal commitment. Now, they have gone the way of the diskette. Today we navigate spaces and situations where trust signals are less proximate. During Zoom meetings I often struggle to identify trustworthy vibes among the matrixed talking faces. “The person in Row 1, Column 2 appears earnest, and their surroundings seem normal . . .” But can I really read their intentions and know whether they can be trusted? This conundrum has spawned a new combination of trust-bearing signals:

  1. Benign intent. Both parties must feel that the other is entering the relationship, engagement, or transaction for positive reasons.

Questions for deciding whether to extend trust:

  • Are they considerate of my best interests?
  • Are they active in protecting them?
  • Are their motivations transparent?

 

  1. Competency: Buyers and sellers must perceive that they are working with a partner that has competency to provide or use the product or service.

Questions for deciding whether to extend trust:

  • Are the company’s products and services fundamentally good?
  • Beyond the performance of the product or service, is there evidence of deeper competencies? If so, what is it?
  • Are the competencies core to their business strategy – now, and in the future?

 

  1. Stakeholder investment. Today, having a good product and a strong brand reputation are table stakes. Companies are increasingly evaluated based on evidence of their corporate social responsibility (CSR), and their record for investing in the communities in which they operate.

Questions for deciding whether to extend trust:

  • Does the company demonstrate that it values all stakeholders? If so, how?
  • Are its stakeholder investments sustained and integral to its strategy?

 

  1. Authority and responsibility. Trustworthy companies recognize their fallibility and demonstrate they’re committed to addressing and fixing problems.

Questions for deciding whether to extend trust:

  • Does the company conform to its stated values?
  • Does the company demonstrate that it listens to its customers and suppliers?
  • Does the company consistently follow through in rectifying problems, including going above and beyond the minimal expected resolution?

Based on a recent customer post on a Facebook dog group, we can infer the intentions of pet supply retailer Chewy.com:

“I just had $75.00 of prescription dog food delivered by CHEWY.COM just three days before my dog Lexie died.  I phoned Chewy.com on Sunday and told them that I just received an order of dog food and that my dog had died.  I told the girl that I completely understand if they cannot take the case of dog food back for a refund but that I thought that I would just call to find out.  I am sure that the girl from Chewy could tell that I was crying, and she said ma’am, I just credited your account and I want you to go donate Lexie’s food to someone who needs it.  (We are donating the food to Animal House tomorrow.) I just arrived home this evening to a dozen of roses in a vase from Chewy.com with the nicest sympathy card attached!  What a company!  It made me cry, but it also made me realize in a time where there is so much hate and turmoil in this country, that good caring people/companies still exist!  If you have never used Chewy.com please give them a try!  They have always been great to work with!”

If Chewy.com intended to maximize its profits, and nothing more, I doubt we’d see this trusting sentiment.

The road to building trust begins with good intentions. They come from within, and are always under your full control. Choose your intentions well. Good intentions don’t guarantee trust happens, but they make it much more likely.

Time to Re-Think Your Company’s Sales Compensation Plan

Years ago, a recruiter for an IT company asked me for details about my earnings history in a prior sales role. Although many hiring managers make the same request, hers went further. She wanted copies of my past three years of W-2’s. “It’s part of our interview process,” she told me. “We need earnings proof so that we can propose an appropriate base salary and commission for this job.”

I asked her for the rationale. “Because we might end up providing significantly more overall comp than you were making before. If we paid you 15% over your earlier income, that would be tantamount to a raise,” she told me. “We don’t think we should be doing that.”

I pressed her on this point. “What if the pay I received at my previous job was inequitable. Are you telling me that the compensation I earn for one job should ratchet down my income for future jobs?”

At this point, you might figure that my interview process did not progress past this conversation. You’re right. But the outcome was mutually beneficial. As much as I chafed over this wrongheaded pay policy, I was irked by what the recruiter made clear through her request, but failed to say directly: “By joining our sales team, you’ll make a middling income as a pawn in a cost center. If that vision is appealing, you’ve come to the right place! . . .” Honest disclosure would have saved everyone some time.

This company’s pay practice was misguided. Fortunately, I never encountered it before – or since. In addition to turning off qualified job candidates, it’s hard to imagine how this plan could have been administered. Various compensation levels for sales reps contingent on what they were previously earning would make a payroll administrator gnash their teeth, and clamor for reassignment to a different department.

In a way, I felt sorry for this hiring manager. She was transparent in her effort to sidestep a vexing challenge for organizations: how to assign value to the contribution a sales role provides to the company, and what is fair remuneration when someone is successful at it. Hard stop: A person’s income at a different company has no bearing on either.

There are many things that companies ask salespeople to do, but ultimately, they are paid for delivering a result that is difficult  for most people to produce: in the face of uncertainty, persuading a person – or persons – to make a specific decision, and succeeding again, and again, and again. If that’s not valuable to a company, I don’t know what is.

According to sales consultancy The Alexander Group,  a well-structured sales pay plan includes the following elements:

  1. Definition of eligibility. This is especially important if there are multiple plans used to pay different categories of sales personnel (e.g. inside sales and outside sales).
  2. Target total compensation, including the intended pay curve for lower producers, those at the middle or median, and those at the top.
  3. Ratio of fixed compensation (salary) to variable compensation (commission, incentives, and bonuses).
  4. Upside leverage that, when achieved, skews compensation toward the higher end of the pay scale.
  5. Objective measures and metrics that are (or will be) used to calculate fixed and variable pay.
  6. Performance and payout period for how long a company will pay for attaining a goal, milestone, or target, and the timeframe between achievement and payout.
  7. Commission rates and calculations for deriving variable pay.
  8. Quotas and targets.
  9. Accounting policies regarding revenue recognition, and company policies on payouts for revenue booking, territory splits, account registration, and channel sales.
  10. Special incentives and rewards (monetary and non-monetary)

Unfortunately, simply having these elements does not ensure success. To be strategically effective, pay plans must have other characteristics:

Dynamic. Companies quickly found that the Covid-19 pandemic upended their pay plans. “Two Alexander Group surveys on sales compensation/quotas (March 30 and April 20, 2020) revealed that more than 80% of the companies were implementing pay protection methods to replace some or all lost target incentives for sellers. The most popular methods include pay guarantees (percent of target earnings), quota adjustments and formula changes.”

Reviewed regularly. At least annually or semi-annually.

Cohere with other management, talent, and retention tools. For example, to reduce sales force churn, a software company converting from selling one-time licenses to a SaaS model must make congruent changes to its pay plan.

Fit the job. Companies that have multiple sales roles, such as inside, outside, and retail sales should consider maintaining different plans for different roles.

Simple, transparent, and easy-to-understand. At an IT hardware manufacturer where I worked, the VP of Sales proclaimed his objective was to “fit the commission plan onto the back of a business card.” He never got there, but it was a worthy goal.

Centrally administered. When payroll activities are distributed, the opportunities for foul play and unfairness are magnified.

Process for appeal and resolution. Even the best pay plans contain ambiguities, creating the need for judgement. Companies should have an internal process available to employees to document, adjudicate, and resolve pay disputes.

Risk informed. All pay plans carry the risks of unintended consequences. Companies must understand the potential and mitigate conflicts-of-interest before policies are enacted.

Ethical. Above all, a pay plan must never sacrifice stakeholder safety. A top-level question to ask: “Could this plan or policy hurt our customers, employees, suppliers, contractors, channel partners or investors?” And if the answer is “yes” or “maybe”, don’t do it.

Sales pay has an important influence on growing revenue. By thinking of it as a vital instrument for sales strategy and execution, and not as a pesky cost to be squished into the budget, you will make better decisions.

On My Honor as a Salesperson. A New Look at Why Sales Ethics Matter

Which risk poses the greatest threat to a company’s market value – Pandemics and natural disasters? Terrorism? Product defects? Patent infringement? Theft of intellectual property? Lack of moral boundaries?

If you answered anything but the last choice, think again. The decimation of market value at Tyco, Worldcom, and Enron – three of the most prominent ethical meltdowns of our time – illustrates what can occur when a company lacks ethical footing. According to Public Citizen’s Congress Watch, the cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion.

The financial impact of Covid-19 on the global stock market may never be fully known. But one thing stands out: unlike most risks, companies have ultimate control over their moral conduct.

Many corporate scandals are hatched in the executive suite and metastasize into the organization. The sales operation is a fecund spot for seeding schemes because it is directly connected with the most watched measurement a company maintains and shares: revenue.

Sales is also the linchpin for the trust between a company and its customers. For example, the Wells Fargo consumer credit card scandal was the consequence of stock-price bonus incentives granted to then-CEO John Stumpf and a cadre of senior executives. To enrich themselves, they usurped customer trust and exploited employees by encumbering them with onerous performance quotas, and followed through by browbeating them into hitting targets that would be attractive to investment analysts. The rationale was that when thresholds were met, analysts would make buy recommendations for Wells Fargo stock, elevating its price. The scheme worked for a while before the business media uncovered the story. In the end, Stumpf was fired over the scandal and his bonuses clawed back or terminated.

Bad ethics can take root elsewhere in the hierarchy. When governance and audit controls are ineffective, they can easily spread, infecting employees, suppliers, channel partners, and customers. In 1998, ethical violations at Prudential Insurance Company’s sales organization became so pervasive that the company’s management eventually estimated its liability from the pending class-action lawsuit at $2 billion. Among the voluminous courtroom testimony from the case was this statement from a Prudential sales rep: “Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.” More than two decades later, sales reps face the same difficulty.

How can harm from unethical behavior be prevented? First, accept that no company is immune from facing ethical dilemmas, and second, understand that there are no guarantees that ethical decisions will somehow prevail. This is especially true for companies proclaiming themselves “customer-focused” or “customer-centric.”

Companies must purposefully and actively reduce the opportunities for unethical behavior to enter an organization. Taking key steps such as developing and communicating a corporate code of conduct, modeling ethical behavior in the C-Suite, implementing strong governance and accountability, and making it safe for employees to speak up without fear of retaliation are vital. Importantly, companies must take prompt and decisive action when incidents are reported.

Still, when it comes to acknowledging the possibility of malfeasance in their organization, many senior executives are dismissive. I often hear, “that type of thing could never happen here,” quickly followed by “we don’t hire those kinds of people,” as if “those kinds of people” are easy to spot in the interview. In fact, in companies large and small in any industry, the potential for making unethical choices always exists. If the risks aren’t acknowledged, understood, and managed, stakeholder harm becomes not only probable, but certain.

One “sales-driven” company I worked for felt immune to ethical risks, and their hubris cost them more than $1 million from a scam that began with one rogue sales employee, “Travis Doe.” Travis was a reseller account manager. He was tall, charismatic, confident. He was good at golf. At sales meetings, Travis could always be found in the center of a group of colleagues, sharing a bawdy new joke, or regaling them with something useful he learned over his long career in computer sales.

Travis’s compensation plan earned him a comfortable six-figure income. But he figured out a way to augment that. Travis began his scheme with a transaction my employer made routine: he established a new reseller account. In this case, Travis gave this one a bogus name, bogus address, and bogus line-of-business. Bogus everything. He even anointed himself CEO – a move that came back to haunt him.

The cleverness of Travis’s scheme came from the fact that resellers received 40% discounts for all IT hardware. When customers and prospects sent requests for quotes or placed orders, Travis circumvented them to his bogus company. In this way, Travis pocketed a healthy margin on every order his bogus company processed. There’s more. In addition to that revenue stream, my employer also paid Travis commission on his “reseller’s” sales because, of course, the bogus company was in Travis’s portfolio.

It took an alert order administrator who spotted a part number anomaly to unravel Travis’s scheme. When she called the “reseller” to explain the problem, she was told, “Our president, Travis Doe, will call you back.” The order administrator reported Travis, and he was quietly fired about a week later.

Travis’s scheme created only losers. A characteristic common to all ethical breakdowns. If Travis’s immediate boss knew about his dishonesty, why didn’t he stop him? If he didn’t know, what excuse could he offer for being ignorant about a scam happening in his own office? You know it’s a bad day when any answer you provide isn’t a good one.

In their desire to move on, many executives at the company looked no further than blaming Travis. “You’re always going to have a ‘bad apple,’ or two,” senior managers somberly told me. A convenient rationalization, but very misleading. Other people, from the CEO down, were culpable. Sales Administration allowed account managers to establish reseller accounts without any oversight. Internal audit didn’t see a glaring opportunity for fraud in the order entry process. Contracts administration had no vetting rigor beyond “can you fog a mirror?” Flush with sales orders, the company blithely looked askance despite ongoing grumbling from staff that large dollar orders were routinely being processed through a “reseller” whose qualifications were murky, at best.

This incident happened before social media platforms became ubiquitous. The total direct cost from Travis’s scheme totaled more than $1 million. But that’s without adding the incalculable cost of broken morale and corroded trust. The company issued no press releases or public explanations. No trade journal carried the story. The cost of this scam got paved flatter than a pancake into company’s Income Statement.

Any discussion of ethics involves drawing boundaries. But drawing boundaries for sales ethics is much easier said than done:

“I’ll sell an early version of my software that isn’t fully tested, but I won’t sell anything that I know doesn’t work.”

“I won’t bring up the fact that I’m missing a key feature, but I won’t lie about its absence.”

“At the end of the quarter, I will commit resources I don’t control so I can win the sale, but I won’t promise my prospective customer anything I know cannot be delivered.”

“I won’t overcharge anyone, but I won’t sell at the lowest possible price, either.”

“I’ll look out for my client’s best interests but only if doing so doesn’t jeopardize my business.”

As author David Quammen writes in Wild Thoughts From Wild Places, “Not every crisp line represents a triumph of ethical clarity.” An individual’s ethical interpretations are rarely constant. Rather, they’re a combination of of a person’s current emotions, situation, values, experience, logic and personality. What makes a practice ethical or not can be difficult to define.

This is why evaluating what’s ethical, what’s the right thing to do, or how to get the right thing done requires having conversations about dilemmas. Unfortunately, that idea is heretic in many sales cultures today, where perceiving things as black or white is often considered a badge of honor. “Never lie!” and “A half-truth is the same as a lie,” were among the opinions readers posted when I asked about resolving ethical dilemmas on LinkedIn sales forum. The problem is, judging actions as “right” and “wrong” discourages conversations about ethics in the first place. Most situations business development professionals encounter are not that clear.

Mitigating ethical risk is a vexing challenge for organizations – particularly those with global operations – because ethical standards must first be defined, documented, communicated and followed. In addition, companies must remember that their employees don’t enter the workplace a tabula rasa. Corporate expectations for ethical conduct will always be interpreted through an individual’s awareness of his or her own values.  Even then, we can only be protected when people have the motivation and resolve to act accordingly.

Companies should embrace ethical dilemmas by fostering a culture for open, candid discussion about them. That means  encouraging salespeople and marketing personnel to identify issues, confront them, and take action before they spiral out of control.

Malfeasance thrives in the eye of the perfect storm 1) high financial incentives for fraud, 2) lax audit controls and governance, and 3) non-integrated processes. We need a tocsin to sound in the boardroom and executive suite. Ethical lapses can destroy the best business plans, corporate and personal reputations, and brand integrity. There are too many opportunistic Travises in the world, and too much value at risk, to ignore the warning signs