Category Archives: Business Development Ethics

Top Sales Producer Meets Foreign Corrupt Practices Act

Which of the following transactions violates the 1977 US Foreign Corrupt Practices Act (FCPA)?

A. Paying a Bloomberg employee’s taxi fare to JFK Airport
B. Offering cash to a Czech Republic government official to expedite processing for a business permit
C. Buying lunch for a senior logistics manager at General Motors

The correct answer, all of these*, underscores an emerging problem: the FCPA has become the legislative equivalent of the Ford Pinto. Useful, but burdened with obvious flaws that get worse with age.

“C’mon! The Feds would never prosecute anyone for something as trivial as paying for a client’s cab fare!” you exclaim. Pause for my sarcastic expression. According to Mark Mendelsohn, who was responsible for recent growth in FCPA enforcement during his time working for the Fraud Section of the US Department of Justice, “If you look at who we’re prosecuting, we’re prosecuting mid-level to senior level corporate officers and employees, CEO’s, CFO’s, heads of international sales.”

And, I might add, earning more than chump change for Uncle Sam. The top ten FCPA settlements total $2.8 billion. In 2010, over half of the civil and criminal penalties the US Government collected were from the FCPA. That’s ahead of a lot of better-known, oft-reviled consumerist, environmentalist, protectionist legislation that collapse into three- and four-letter acronyms like OSHA, FDCA, CWA, and EPA.

Why should anyone reading this care? Because regardless whether your title is CEO, VP Sales or Marketing Rep, the government has unleashed its flying monkeys, and they’re looking for you! According to the US Chamber Institute for Legal Reform, “Five of the top ten FCPA settlements occurred in 2010 alone. The remaining five have all occurred since 2007. An added sign of increased enforcement is that there are currently more open FCPA investigations pending resolution than at any other time since its inception. “ Before you complete the PowerPoint deck for your upcoming sales meeting, I suggest including a slide with the jocular title, FCPA Regs. It will help settle everyone down after the morning coffee.

But before I jump into my Indiana-built Subaru and head out to a big-government-bashing tea party rally, let’s be fair. Without the FCPA, we’d have chaos. Corruption undermines everything we do as marketers, brand managers, and salespeople. Our foundational assumptions include that a major part of the value of our products and services are derived from quality and unique benefits. A payment-with-wink here, an expedite fee there, and that no longer applies. And although it’s hard to believe in today’s litigious and protectionist world, before 1977 there wasn’t a government on the planet that made it a crime to bribe officials of a foreign country. We’re not talking suitcases filled with cash left at arranged drop points. Just fees that were buried on financial statements as a cost of doing business.

But in the thirty-four years post-FCPA legislation, the sales and buying landscape has buckled, shifted, and changed dramatically. What worked in 1977, doesn’t today.

These forces have sharpened the need for FCPA reform:

Globalization. The importance of international trade has increased significantly since 1977. Today, nearly one third of our economy—over $3 trillion—comes from offshore. At the same time, the line between foreign government and foreign business has become hard to discern. Where to begin, where to begin? Did I hear anyone mention Airbus or OAO Gazprom? Require your sales executive to look up the ownership status of his prospect’s company on his iPad before he pays for business lunch.

Demands for economic growth. According to a recent Deloitte survey of companies in the financial services industry, 63% of respondents reported that FCPA issues caused their companies to renegotiate or abort planned business contracts, mergers, and acquisitions in the last three years.

Increasing legislative complexity. According to the US Chamber for Legislative Reform, “American companies seeking to sell their goods and services overseas need straightforward, reasonable guidelines so that they know what the standards are and can communicate them clearly to employees and foreign workers. The FCPA in its current form does not provide such guidelines.”

Not to throw another selling risk on the already-large pile that includes “no decision,” and “competitive pricing,” but FCPA compliance has earned a rightful place among the usual suspects. If you sell internationally, the macho adages “do whatever it takes to close the deal,” and “I don’t care how you make your number, as long as you make it,” should be replaced with the meeker “better run this past Steve in Legal . . .”

Yes, it’s less fun, less “shoot from the hip.” But whether you work for an offshore company that sells in the US, or a US company that sells worldwide, understanding your sales risks is just as important as knowing your opportunities.

* Bloomberg is a company owned by the mayor of New York City, Michael Bloomberg; the United States Government is the primary shareholder in General Motors

Does This Software Make Me Look Fat?

“Does this software make me look fat?”

Hmmm . . . . what will complete honesty get you? How much should you tell your prospects? Something to ponder when debriefing your colleagues about your latest sales call. “Boy, that was an awful meeting. The way that company works with suppliers is like a train wreck. I’m glad I don’t own any of their stock.” Was your prospect too demanding? Price gouging? Plain obnoxious?

That’s exactly what your prospect needs to know. According to Dr. Mary Lacity, Professor of Information Systems at the University of Missouri, St. Louis, “clients were most satisfied when suppliers earned their target margins.” In fact, in a recent IT outsourcing study she conducted, 60% of the cases (n = 85) matched those criteria. Similarly, a large percentage of negative outcomes occurred in situations in which vendor margins were below expectation. You get what you pay for. Duh!

Dr. Lacity addressed last week’s session for the Center for Management Information Technology in Virginia. Her talk, entitled What Suppliers Say about Clients and More . . . , reminded everyone of the business value of brutal honesty. “Thanks, I needed that!”

The problem is that for many salespeople, the ability to say what you see is stored in a recessive gene. Instead, salespeople are told, “do whatever it takes to win the business!” That means invoking the oft-reviled D-word, then cutting support. “Hey, we had to recover the discount from somewhere!” Sure, some salespeople over-promise, and then use fine print to protect contractual loopholes. But at the end of the fiscal year, salespeople just call that earning a bonus.

And in the interest of pointing fingers, prospects create their own disincentives for brutal honesty by predictably shooting the messenger. “You’re not on the short list. If you wanted this project, you would have complied with our performance milestones, and offered more aggressive pricing.” Clearly, customer rage for over poor product performance often has its own back story . . .

I’ve been that messenger more than once. Injuries aside, I still prefer to err on the side of candor. “Never say anything behind someone’s back that you wouldn’t say to his or her face,” my mother told me, not knowing how useful the advice would be forty-five years later.

Based on Dr. Lacity’s presentation, when the goal is successful outcomes, here’s what suppliers should tell prospects and customers:

1. “We may not want your business.” –We’ve experienced the Winner’s Curse, and our CFO doesn’t want a repeat.
2. “The worse our business gets, the worse your business gets.” –The survival of your business depends on the survival of your key suppliers.
3. “We hate novice customers.” –Expect bumps in the road, and have the will to overcome them.
4. “If procurement says ‘it’s all about price,’ don’t expect innovation.” –If your business strategy favors commoditization of your own product, your purchasing tactics will work just fine.
5. “We are not insurance agents. We cannot absorb all of your risks.” –What you’re asking for requires a new pricing and delivery model.
6. “We can spot a faux bid.” –We are not in business for the purpose of keeping your current supplier’s prices low.
7. “The length of your RFP is ridiculous.” –We can’t prepare this RFP when the expected revenue doesn’t cover our investment.
8. “Get real with the numbers.” –No client has ever achieved year-over-year productivity gains like you’ve specified.
9. “Your advisor may not be helping you.” –I know that Jim advised you when you were with your previous employer, but how much experience does he have in your current industry?
10. “There is no such thing as a fixed price.” –Any products or services outside of the scope of our proposal will require a separate purchase order.
11. “Where are your good people?” –Really . . . who will lead the project on your end?
12. “We sometimes invent new buzzwords for old ideas.” –Don’t ask us about application hosting and dashboards when cloud computing and business intelligence sound so much sexier.
13. “If it favors us, we’ll stick to the letter of the contract; otherwise, it’s the spirit that counts.” –Understand that if you’re inflexible by holding our feet to the contractual fire, we’ll do likewise.
14. “We have to trust you too, you know.” –It isn’t just about salespeople burning client relationships . . .

Does this software make me look fat? Yes, dear. And I hope my honest answer will lead you to best practices. One characteristic of a successful vendor-client relationship is that it reeks from brutal honesty. After all, who is served when vendors do whatever it takes to close the business? And can customers achieve goals when they make difficult demands in the buying process, but learn little about whether they’re achievable?

Whether you’re a vendor or a customer, why wait until you’re both knee deep in low-margins before finding out?

Overhaul the Sales Profession and Fix the Economy: An Open Letter to President Obama

It would never work, but it’s fun to think about . . .

Dear President Obama:

Buyers and sellers are not getting along, at great cost to our economy. Our selling model is broken, and the sales profession cannot sustain itself. We’ve tried everything we can to fix the problems, but nothing has worked. We need government intervention, and we need it now. We’re not asking for a bailout—just an overhaul.

The unbending truth that nothing happens until someone sells something underpins our great financial system. Yet, trillions of dollars are wasted annually on ineffective sales strategies and processes. Day in, and day out, buyers and salespeople across the US fail to achieve the right outcomes. Buyers are miserably disappointed. Many salespeople don’t make quota. Companies fail to achieve their revenue objectives. Our GDP declines, and opportunities to build lasting wealth are lost—a vicious, seemingly unstoppable chain reaction.

Symptoms of this crisis pervade our daily conversations. Pejorative sales stereotypes infect social media and popular discourse, and they ripple into other areas of commerce. The Occupy Wall Street movement was but one artifact of consumer disdain for how our economic system and its institutions operate. Worlds collide: Bernie Sanders is gaining traction as a 2016 presidential candidate, as is Donald Trump.

In the past, the Federal government has stepped in to stem the rancor. We have the Do Not Call Registry, and the Federal Communications Commission approved spending $4.5 billion per year for the Universal Service Fund so that people living in rural areas can have more information power with which to make purchases.

It’s not enough. The problems in our economy are caused by systemic frictions between buyers and sellers. Leaving it to the “free market” to lessen the discord hasn’t worked in the past, and it won’t in the future. If anything, we need more government, not less.

I have a solution that will improve the economy and create jobs: make every American salesperson a Federal Department of Commerce employee, and give them the title Federal Trusted Advisor. Make them all GS-9, Step One at an annual salary of $42,399. That’s almost $1,000 above the current median sales compensation of $41,468. The extra income can be taxed to pay down our national debt.

Overnight, two million Federal jobs will be created, offsetting the two million that will be eliminated in the private sector. Fear not, because an additional 500,000 new senior Federal managers will be needed to staff the agency, creating a net job gain, ensuring Federal Trusted Advisors a secure retirement, and injecting a new stream of disposable income into our economy.

A nationwide force of Federal Trusted Advisors will correct everything that plagues buyer-seller interactions by:

1. mandating Trusted Advisor Process Step #1 as DEFINE THE BUSINESS PROBLEM. Under today’s selling model, vendors first bring solutions to customers, then ask what the problem is—if they ask at all. In the absence of government control over buyer-seller collaborations, sellers always have an agenda. This broken model creates the winner’s curse, and endless buyer complaints.

2. creating strong governance. Today, sales professionals do not have to conform to universal ethical standards. Rather, it’s left up to each company to establish guidelines—or not. There’s a wide strike zone between right and wrong, and government control would make it a requirement for every Federal Trusted Advisor to sing from the same ethical hymnal. As you know, without sales ethics, trust cannot flourish. And without trust, no economy on this planet will work.

3. standardizing professional credentialing and staff development. Today, there are no standards of competency for sales professionals. All Federal Trusted Advisors will be required to meet the same standards for business knowledge, social skills, and problem-solving capabilities. We should implement this by hiring all private-sector professional sales trainers to work as government employees within the Department of Education. Making it the responsibility of the Department of Education to train 2 million Federal Trusted Advisors and their managers would thwart any attempt to eliminate the department.

4. implementing a single salary model, and eliminating variable compensation. All Federal Trusted Advisors will receive the same salary, without regard to what customers purchase. Federal Trusted Advisors would not be trusted if they had a vested interest in “closing the deal,” or “upselling,” as they do with the current model. And no customer would feel pressured or shunned because their planned purchase wasn’t sufficiently large, or was outside of a specific timeframe.

5. providing customers warmth, empathy, and understanding. Let’s face it: a root cause of buyer-seller friction today isn’t that products fail, or that they’re “oversold,”—it’s that buyers feel unloved. By institutionalizing love, we can eliminate passionless terms like Customer Relationship Management, and buyer loyalty programs, that aren’t serving customers in ways that are valuable to them.

I couldn’t propose adding 2.5 million new Federal workers without acknowledging the counterpoint arguments:

1. “It’s Big Government.” True, but like the GM and banking bailouts, there’s no time like the right time.

2. “We can’t afford it.” Understood. But the department will be self-funding because every customer will pay a 9% flat fee to the US Government on every purchase.

How much value would this initiative bring to US taxpayers? Before you answer, consider this: by outsourcing all sales and business development to the Federal government, the private sector could reallocate billions of dollars to fund R&D for product innovation. The positive impact on America’s global competitiveness cannot be overstated.

There are no simple answers and no silver-bullet solutions for securing America’s position as the world’s leading economy. But we must begin by overhauling the sales profession, and by establishing—and enforcing—harmony between buyers and sellers. I urge you to enact this initiative right away.

Respectfully,

Andrew Rudin
August 26, 2015

Sgt. Dakota Meyer Is Right: Some Sales are Wrong

“We are taking the best gear, the best technology on the market to date and giving it to guys known to stab us in the back . . . These are the same people killing our guys.”

A Marine Medal of Honor recipient, Sgt. Dakota Meyer, wrote that in an email quoted in The Wall Street Journal (Decorated Marine Sues Contractor, November 29, 2011).

If you’re following this story, you already know that Sgt. Meyer is suing his former employer, BAE Systems, alleging that they “retaliated against him after he raised objections about BAE’s alleged decision to sell high-tech sniper scopes to the Pakistani military. He says his supervisor at BAE effectively blocked his hiring by another defense contractor by making the claims about drinking and his mental condition.” If you want to contact BAE’s Investor Relations about investing, you might wait until their damage-control staff has handled the last seething caller.

But put aside Sgt. Meyer’s legal case for a moment, and recognize that he won his Medal of Honor for “braving enemy fire as he tried to save the lives of fellow Marines who had been trapped in a Taliban ambush.” And what’s the relationship between the Pakistani military and the Taliban?

No matter how sure the answers might be from BAE or the US State Department, they’re not sure enough. So Sgt. Meyer’s objection to BAE’s pursuit of this sale makes poignant sense. Sgt. Meyer found a point when revenue becomes filthy, and he spoke up. We need more people like him.

The pending BAE rifle scope sale isn’t the first in which revenue pursuit has collided with public policy issues, or with moral and ethical beliefs. Ambivalence over a prospect customer’s business mission, products, and services occurs more often than people might expect. Here are some examples from my selling past:

1. Cigarette manufacturing

Cigarette manufacturing is huge part of Virginia’s economy. The Philip Morris Richmond Manufacturing Center alone is located on 200 acres, with six connected buildings that cover 43 acres, totaling 1.6 million square feet. An outsider cannot appreciate the size of the industry until he or she drives on I-95 through Richmond and experiences the smell of ambient tobacco leaf in the air. Then you know. The huge network of providers—from production machinery to carton printers to filter manufacturers to warehousing—have the same logistics challenges that all manufacturers face.

For years, the technology I sold to companies in the tobacco value chain helped them manufacture and distribute a legal-lethal product better, faster, and cheaper. Not exactly a conversation starter at parties I attended with members from my masters swim team, or with my relatives in the health care profession. You see where I’m going with this. I overcame my dissonance because I rationalized that cigarette smoking is voluntary—as long as I suspended the nicotine-as-addictive-drug idea.

Had I stood on principal and refused to help these producers, my competitors would have gladly filled the void. Just as important, could I subtract tobacco-related revenue from my account portfolio and still make quota? Answer: no. But what happens when you can? (see #2)

2. Firearm manufacturing

One of my prospects was a large handgun manufacturer. While some might find my choice heretic, I decided not to call on the company because I didn’t need the revenue to make quota. Unlike cigarettes, theirs was a “stand-alone” plant, without an ecosystem of suppliers in my sales territory.

OK. Before we get into a heated philosophical debate over the intended meaning of the second amendment to the US Constitution, let’s agree that it’s perfectly legal to manufacture and distribute firearms in the US. No controversy. Done.

So what was my objection? Once again, it’s the lethal thing. For me, it would have been indescribably strange to walk the production floor, looking at bins of forged parts and watching Quality Control test bays, knowing the likely use of the finished product. I imagined speaking with the same clinically-detached operational terms used for the production of automotive seats and headlamps, but unable to escape knowing the ultimate purpose of the precision and quality was to deliver bullets better. Just writing about it still makes me a touch queasy. Call me a wimp. I can handle it.

As in life, nothing in sales ethics comes easily. Was my idealism fair to my employer? Was it fair to my resellers? Probably not. I referred the gun manufacturer to a VAR who was not conflicted. And I still made commission on the sales—a twist to the story that I’ll save for another day.

3. Meat production.

Full disclosure: I’ve been a vegetarian for over 30 years. OK, I’m not really a vegetarian, because I eat fish. And I only mentioned that because it’s an important fact for wrapping this up with a not-so-neat ethical bow at the end, which I promise to do in just a moment. That said, it doesn’t bother me when other people eat meat, just that I don’t.

Yet, I don’t sell to meat processors for the same reasons I don’t sell to tobacco processors: for me, it doesn’t feel good. Yes, I did write about a big sale I made to a meat plant following an e-coli outbreak. Yes, I got a great shot of adrenaline, and yes, there was a nice commission for my sale. But—and I’m not trying to win converts to veganism here—there are times in sales when you have TMI (Too Much Information). Vegetarian or not, if you’re selling to the meatpacking industry, you should have the appetite for it (pun intended).

My friends say, “Andy, you won’t eat meat, but you’ll eat fish. You won’t sell technology to a handgun manufacturer, but you will sell systems to automate navy supply warehouses—what’s the difference?” Great question, worth a conversation over a beer, at least. As author David Quammen wrote, “not every crisp line represents a triumph of ethical clarity.”

Back to Sgt. Meyer, BAE, and gun sight technology for the Pakistani military. Few will argue that a core idea for sales success is belief in your product or service. But belief in the value of your customer’s mission and purpose is just as critical—maybe even more. Sgt. Meyer’s story is important, because in tough economic times, being moral about how you produce revenue is difficult enough. Having the courage to be vocal when something seems amiss is truly remarkable.

Penn State Board of Trustees, are you listening?

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