Category Archives: Business Development Ethics

Is ‘Made in USA’ a Good Marketing Schtick?

“Your Honda isn’t welcome here. Go park it in Japan.”

In the US auto industry’s muscle-car heyday, it wasn’t unusual to see such xenophobic signs sprouting from factory pavement throughout the rust belt. Detroit was as much an automotive statement as a city. Today, figuring out how American your car is requires sophisticated sleuthing.

Turns out, Hondas are pretty darn American. In 2012, the company built 1.2 million vehicles right here in the good old US of A. In fact, every major Japanese auto manufacturer except Mazda has US production capacity. A US-built engine powers the Toyota Sienna, which is assembled in a Princeton, Indiana plant, not far from a gaggle of Denny’s and Cracker Barrel restaurants. More than 75% of the vehicle’s components are sourced from US suppliers. Compared to the Chevrolet Spark, which is built in Korea from mostly Korean parts, these Japanese nameplates are as American as mom and apple pie.

Made in America was once dependably rock-solid easy to grasp. But The Wall Street Journal recently reported a new confusion—the very definition of made. A new business model called factory-less goods producers (yes, you read that correctly) has become a trend. According to the newspaper, factory-less goods producers “handle every part of making their products except the actual fabrication. As industries have gone global, this model has proliferated – from furniture making to electronics . . . Now there is a move afoot among US government agencies to count these companies as manufacturers, which is a surprisingly fraught issue.” (Feds Try Redefining Manufacturing, March 15, 2014). An iPhone shipped from China with a proud Made in America emblem? Don’t laugh. Soon, the packaging might be perfectly legal.

Even America, once synonymous with US, doesn’t reliably mean US, at least for advertising and promotion purposes. Technically, the term encompasses our neighbors to the north and south, Canada and Mexico. NAFTA, the North American Free Trade Agreement, accounts for 17% of all global trade. And bilateral US-Mexican trade alone now equals $1.4 billion per day, according to former Mexican ambassador to the US, Arturo Sarukhan.

The fuzzification of American-made presents difficult challenges for US consumers. “Given a choice between a product made in the US and an identical one made abroad, 78% of Americans would rather buy the American product,” according to a nationally representative survey by the Consumer Reports National Research Center.

The survey further revealed that “more than 80% of those people cited retaining manufacturing jobs and keeping American manufacturing strong in the global economy as very important reasons for buying American. About 60% cited concern about the use of child workers or other cheap labor overseas, or stated that American-made goods were of higher quality.” A 2012 study by another company, Perception Research Services International, corroborated these findings. Their research found that 80% of shoppers notice a Made in the USA label on packaging, and 76% said they would be more likely to buy a product because of the label.

But when money comes up, patriotic Americans sit down hard on their wallets. “Just 21% said they would definitely pay slightly higher prices to buy American-made products. 60% said that they would pay slightly higher prices to buy American made products only in some cases. And 19% said they wouldn’t pay more to buy American made products,” according to the Consumer Reports survey.

Does the case to Buy American help or hinder US producers? Does it help US global competitiveness if patriotic fervor becomes the primary consideration for a purchase decision? In a global economy, aren’t US producers best served when they win on merits of superior quality, better features, and wide availability? These are not easy questions to answer. After all, a revenue dollar is still a dollar—regardless the reason a customer decided to buy.

But beyond patriotism, there are compelling reasons that a Made in USA label drives demand:

Safety. In a widely publicized case beginning in 2007, pet food imported from China was implicated in sickening many dogs and cats in the US, prompting the FDA to issue a warning, updated in 2011. “The Food and Drug Administration (FDA) continues to caution consumers about a potential association between the development of illness in dogs and the consumption of chicken jerky products. The products—also called chicken tenders, strips, or treats—are imported from China. FDA continues to receive complaints of sick dogs that their owners or veterinarians associate with eating chicken jerky products.”

Corporate Social Responsibility. Many Americans are troubled by the labor and environmental standards in the developing world, and want to make buying choices that are ethical. The factory collapse that killed 1,100 workers in Bangladesh in April, 2013, exposed the hazardous conditions that many workers outside the US encounter every day. Still, finding clothing with a Made in USA label isn’t easy. The American Apparel and Footwear Association reported that in 2011, just 2.3% of all apparel sold in the US was made in the US.

Profit. The competitive price advantage for offshore goods has started to fade. “’With rising labor and energy costs overseas, a few manufacturers have even told Walmart privately that they have defined the ‘tipping points’ at which manufacturing abroad will no longer make sense for them,’ William S. Simon, the Walmart U.S. chief executive, said in making the announcement at the National Retail Federation conference in New York,” according to a January, 2013 article in The New York Times, Walmart Plans to Buy American More Often. Last year, Walmart announced plans to increase sourcing of American-made products by $50 billion by 2023.

Despite claims that customers have more information power than ever, supply chains remain highly opaque. In February, 2014 The Wall Street Journal reported that “the top three canned-tuna brands in the US are foreign-owned, but that doesn’t stop them from bickering about which is the most American . . . StarKist cleans and cans tuna in the US territory of American Samoa. Last year it drove home that point by introducing a label depicting Charlie the Tuna backed by an American flag. Chicken of the Sea (owned by Thai Union Frozen Products PLC of Thailand) and Bumble Bee rely on plants in Thailand and elsewhere for labor-intensive cleaning, then ship their tuna to the US for canning.”

If you think scientists find it difficult to track the migration of wild tuna, try tracking the product once it’s canned! But David Roszmann, COO of Chicken of the Sea, helpfully set things straight when he said, “We’re as American as any other major seafood company.” Good to know.

But the ultimate obfuscation comes from the American Glove Company of Dalles, Oregon. The Consumer Reports article I mentioned earlier shows a pair of the company’s gloves with a label showing a flapping, red white and blue American flag aligned at a bold diagonal, offset against a white oval background. One mention appears right above the flag: made in Vietnam.

What Makes a Highly-Effective Sales Culture? A Tiger Mom Might Have the Answer.

On Sunday, the Oscars awarded The Wolf of Wall Street nada. Bupkus. A big goose egg. Too bad there wasn’t a category for Best Movie about Selling. It might have won the honor.

The Wolf of Wall Street reveals two important realities about how sales organizations operate: “You can’t build a culture in a comfort zone, and there is a dark side in the drive to be first,” as Cliff Oxford wrote in The New York Times. The movie brilliantly executes a believable drama based on a true story. Take a group of egotistical people, and feed them a motivational diet rich in high-octane hype. Focus them on a single goal—make money, and subtract morality. The audience knows from the get-go the incendiary mix will create a bad ending. “I may be going to hell in a bucket, but at least I’m enjoying the ride,” as the song goes.

It’s not hard to identify what makes the sales culture in The Wolf of Wall Street highly dysfunctional. But figuring out what makes a culture highly effective proves much more challenging. The answer comes not from a heavy-hitting, quota-busting Sales VP, but from a formidable parental authority—Amy Chua,Tiger Mom.

Chua and her husband Jed Rubenfeld are in the news after publishing a controversial book, The Triple Package: How Three Unlikely Traits Explain the Rise and Fall of Cultural Groups in America. In the book, the authors express their views about what enables certain cultures to achieve disproportionately higher success compared to other cultures. “The reality, uncomfortable as it may be to talk about, is that some religious, ethnic and national-origin groups are starkly more successful than others,” they write. The authors highlight three distinguishing values:

1. Superiority complex—a deep, abiding belief in their exceptionality.

2. Insecurity—a feeling that whatever you’ve done isn’t good enough.

3. Impulse control—based on a sense of awareness, future-thinking, and common sense.

We can save for another day a spirited discussion about the validity of these insights, and their ramifications for society. But in my experience, these same elements are consistently present among the best sales organizations. The best have embedded a firm belief not only in the great power of their products and services, but in their organization, too. The best have ingrained an ambient insecurity that fosters urgency—an “us against the world” attitude. And the best refrain from knee-jerk impulses by placing high value on methodical strategies and disciplined action.

But these three don’t complete the picture when explaining what makes sales cultures effective and successful. We’re missing ethics, particularly noteworthy because its absence lies at the root of a growing problem. As The Economist reported this week in an article, The Enemy Within, a Kroll study found that 70% of the companies it surveyed were affected by internal fraud in 2013, up from 61% in 2012.

While the Kroll study reported on all cases of corporate fraud, the issue has always had a strong presence in selling cultures as well. As I shared in a recent blog, Announcing the Winners of the 2013 Sales Ethics Hall of Shame, when corporate leaders lose sight of the right thing to do, confidence and trust are damaged immeasurably. Few business risks are more corrosive to culture than bad ethics.

Which of these four elements was present in the The Wolf of Wall Street sales culture? Superiority—check! Insecurity—for a while, check! Impulse control—no! And ethics—emphatically, no! Had the latter two not been utterly smothered, The Wolf of Wall Street, too, could have had a highly effective sales culture. But few would want to make a movie about it, and even fewer would be interested in seeing it.

Washington Redskins: Venerable Brand Or Racist Slur?

Originally published 02/07/13

There’s a major clash going on in Washington, DC. One that involves race politics, freedom of speech, and free enterprise. It pits the rights of one group of people against the rights of another.

Just another day in Congress? Could be, but this one’s different. It’s a marketing, branding, and trademark issue. As I am writing this, the Smithsonian Institution is hosting a symposium, Racist Stereotypes and Cultural Appropriation in American Sports. The problem involves how Native Americans are depicted in our society, and the matter has been festering for many years. This discussion is long overdue.

According to The Washington Post, “of the 3,000 Indian team names and mascots once used by sports teams at the professional, college and school levels, more than two-thirds have been scrapped.” I just learned this today! What’s the next domino to fall? The Washington Redskins? The Cleveland Indians? The Atlanta Braves? No doubt those venerable brand names, along with some others, will be included somewhere on a PowerPoint slide, and shown at today’s meeting.

You don’t need indigenous American ancestors to empathize with those who find the caricatures and stereotypes personally demeaning. When my son got his Indians jersey for Little League, I cringed because I find the cartoon logo disgusting. But I let him wear it because he would have been the only kid whose uniform didn’t match the rest of the team. Funny how that works. “Be the change you wish to see in the world,” Gandhi said. He probably didn’t consider that at times, idealism can be quite inconvenient.

I admit that as fans and consumers we’re complicit in perpetuating racism by supporting teams and brands that are inarguably offensive to others. So why not kick the can up the road, by asking team owners to do the right thing? That might not be totally fair, but it is logical. After all, businesses re-brand all the time, and people keep buying their products. The Washington Bullets became the Wizards as a response to growing gun violence. Datsun became Nissan for reasons I have yet to understand. Philip Morris became Altria. Continental Airlines became subsumed into United. And who knows what will happen now with Dell. Brands change. Businesses endure. Life goes on.

To a sports brand marketer, the potential projects from this controversy must resemble gold bricks dropping from the sky. Employment for life creating new logos, websites, promotions, loyalty programs, fan memorabilia, and marketing collateral. “We’ll be rich!” Sheez, if you can’t kill an offensive brand name because it’s the right and ethical thing to do, then heck, do it for the money! What are you waiting for? You should be clamoring for change! Do it! Do it! Do it! Do it! Do it!

Oh. I think I wandered into the flip-side of this controversy, and just slammed into the wall. It is about the money. According to Forbes Magazine, the Washington Redskins are the second most valuable franchise in the NFL, valued at approximately $1.467 billion, after the Dallas Cowboys. Who wants to threaten that? That’s really what this debate is about, isn’t it? Talk about what keeps Daniel Snyder up at night! Losing in the playoffs and Griffin’s knee injury were bad enough. But losing The Brand?

Never mind that certain mascots are racially insulting. Or that some brands perpetuate horrible stereotypes. Or that the Atlanta Braves franchise profits from sales of foam tomahawks. “It’s not intended to be offensive. It’s just part of the fan experience,” I hear people say. Even though I don’t like yes–but’s, I’ll say it here: yes, but . . . you’re forgetting that profiting from such stereotyping is just wrong.

What-eh-ver! We still haven’t talked about tradition—or rather, Tradition! I can’t speak for other cities, but many Washingtonians would sooner change the name of our nation’s capital from Washington to Squeaky than change the name of our football team. RGIII wouldn’t look right with a different logo on his uniform. The song, Hail to the Redskins, wouldn’t sound right played any other way. I still get all goose bumpy when I hear it. And what about reminiscing about the good old burgundy and gold? George Allen! Joe Gibbs! Sonny Jurgensen! The Hogs! “. . . Remember that? Oh, that was before the 2014 season when the team changed its name to . . .” Aaarrrrgh! I don’t care what they do! I’m still not getting rid of my license plate frame!

As Victor Hugo said, “There is nothing more powerful than an idea whose time has come.” That time is now.

“On My Honor, As a Salesperson . . .”: Why Sales Ethics Matter

Which business risk represents the greatest threat to shareholder value?

a) Natural disasters

b) Terrorism

c) Product defects

d) Piracy and patent infringement

e) Lack of ethical boundaries

If you selected anything but the last choice, think again. The massive collapse of market capitalization at Tyco, Worldcom, and Enron underscores the grave dangers posed to shareholder value when employees lack an ethical compass. The cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion, according to Public Citizen’s Congress Watch. If you followed these stories, you know that the scandals originated in the executive suite and required an corrupt ecosystem of compliant people to execute.

But what about ethical problems that originate elsewhere? What happens when ethical violations spiral from what are euphemistically called “aggressive sales practices?” In 1998, ethical violations at Prudential Insurance 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 nugget: “Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.” Very often, senior business development executives tell me, “that couldn’t happen here.” Unfortunately, no company is immune.

Could ethical problems affect your company? How might your company’s reputation or your personal reputation be affected? How real are the ethical risks you face, and what, if anything, should you do about them? These are questions that managers at one company I worked with should have asked—but didn’t. As a result, the indiscretions of a person I’ll call Travis Doe cost MegaCorp (not the company’s real name) more than $1 million.

Travis Doe was a reseller account manager for MegaCorp. He was affable and gregarious, and his compensation plan enabled him to earn a comfortable six-figure package. But Travis had a revenue scheme that would make his day-job earnings pale in comparison, and it paid him very well—before he was caught. When the dust began to settle a year later, the total estimated cost to MegaCorp was more than $1 million. That’s before adding the 40 percent revenue loss of the diverted direct sales. What about the greater cost of diminished employee morale and broken customer trust?

The loss was buried in the income statement of MegaCorp’s financial report, away from the eyes of investors. No mainstream publication or trade journal carried the story. What was Travis’s scheme? I’ll get to that in a moment.

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 (Scribner, 1998), “Not every crisp line represents a triumph of ethical clarity.” What causes this obfuscation? Individual ethical interpretations are a function of a person’s current emotions, situation, values, experience, logic and personality. What do blurry interpretive boundaries mean for sales? They mean that ethical practices and behaviors are difficult to define.

Travis’s plan

Travis executed his plan by setting up a bogus reseller account. When prospective clients sent requests for quotes, Travis intercepted them and sent the requests to his bogus company, instead of sending them to a legitimate reseller. Because the bogus reseller purchased from MegaCorp at a 40 percent discount, Travis made a tidy personal profit on every order his bogus company processed. Only when an order administrator on the West Coast spotted a benign part number anomaly did Travis’s ruse begin to unravel. She phoned the “reseller” with a question, and the person who answered stated that “our vice president, Travis Doe, will contact you tomorrow with an answer.” The order administrator blew the whistle. An embarrassed MegaCorp quietly fired him about a week later.

Travis’s laptop contained evidence that exposed how far the ripples from the scam had traveled. There were copies of letters and proposals bearing the name, “Travis Doe, Vice President,” on fake letterhead. Under the guise of a legitimate reseller, Travis had created price lists, spreadsheets that tracked the status of quotes, customer lists, marketing material and more.

Surprised colleagues (and some not-so-surprised) came forward to describe how Travis had pressured them to send orders to his bogus reseller rather than place them directly with their employer. Betrayed customers who had unwittingly placed orders with the reseller loudly expressed their woes because Travis’s company had no capabilities to support them. Legitimate resellers were especially irate because they had been deprived of valuable orders.

No one else was terminated, but except for the alert order administrator, Travis’s indiscretion created no winners. Where were the boundaries of ethical responsibility? MegaCorp utterly failed by not having adequate controls to prevent Travis’s scheme. If Travis’s immediate boss knew about his dishonesty, why didn’t he stop him? If he didn’t know, why not? You know it’s a bad day at the office when any answer you provide isn’t a good one.

Ethical risk presents vexing challenges for organizations because ethical standards must first be defined, then documented, communicated and followed. In addition, the subjectivity of what constitutes good ethics, and resulting interpretive challenges, defy standard-setting. Senior managers should not avoid this problem. Instead, they should embrace it by creating an environment for open, candid discussion about ethical challenges that will encourage salespeople, and those who support their efforts, to identify issues and confront them before they spiral out of control.

Establishing an ethical culture requires strong leadership, and strong governance; expectations for ethical behavior must be visible and consistent throughout the enterprise. Risks are highest when three conditions coexist:

1. High financial incentives for dishonesty

2. Lax audit controls

3. Non-integrated processes

When these exist simultaneously in an organization, a shrill alarm should sound in the boardroom or executive suite indicating that conditions are ripe for fraud and exploitation. Ethical lapses can irreparably undermine the best business plans, corporate reputations, and brand building. There are too many opportunistic Travises in the world, and too much value at risk, to ignore the alert.

Goofus and Gallant Make CRM Decisions

Originally published 02/07/08

For those who may not be familiar with Goofus and Gallant, the Highlights Magazine feature contrasts how two children—Goofus, who is bad, and Gallant, who is good—make divergent ethical choices when faced with the same set of circumstances. The text is presented as captions below simple drawings that illustrate the action. (A quote from a 1960 Highlights: “Goofus turns on the television when there are guests; whenever guests arrive, Gallant turns off the television at once.”)

Reading Goofus and Gallant is a great dose of reality on days when I’m feeling totally ethical. I always ask myself “What would I do?” While I don’t think I’m as flagrantly selfish as Goofus, I’m clearly socially and ethically maladjusted next to Gallant’s consistent kindness, thoughtfulness, and sense of fair play.

What if Goofus and Gallant outgrew their permanently juvenile forms and became grown-up executives faced with contemporary ethical decisions? How might they decide when they aren’t guided by flowcharts, formulas, and sophisticated software, but rather when answering the question, “what is the right thing to do?”

Here are some examples:

“Goofus believes that only frequent passengers on his airline have the right to expect good service. Gallant believes all passengers are entitled to a good flying experience.”

“Goofus markets his products as ‘green’ even though he buys many materials from unregulated offshore factories; Gallant only sells products that meet rigorous standards for responsible environmental stewardship.”

“Goofus licenses his company’s logo to other companies whose practices and motives are unknown so that he can make an extra profit; Gallant values the trust that his customers place in his company.”

“Goofus uses direct mail to circumvent regulations so he can get senior citizens to accept telemarketing pitches; Gallant complies with the FTC’s vendor guidelines for no-call lists.”

“Goofus saves IT costs by not updating infrastructure and information security software; Gallant believes the privacy of his customers’ transaction information is a strategic priority.”

“Goofus optimizes his personal exit strategy when making CRM decisions; Gallant thinks about what’s best for his employees and customers.”

As sales, marketing, and business development professionals, we have at our disposal unprecedented power to create positive outcomes for many people, or to turn that power toward tactics that exploit trust and erode value. The overwhelming majority of the decisions we make are not constrained by laws and regulations. Even if Gallant’s decisions represent an unattainable ethical purity, isn’t it worth asking “what is the right thing to do?”

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