Politicians love to judge ethics – that is, everyone else’s. If their hypocritical self-righteousness somehow produced water, Lake Mead would once again be full, and thousands of golf courses and car washes would open in California. I think I’ll look into this before the election in November, while I’m guaranteed a cornucopia of raw material.
My family routinely reminds me that I, too, am in no position to finger wag about someone else’s ethical standards. I don’t argue with them, not that I haven’t tried. Ethical ambiguity flourishes everywhere, affording infinite ways to distinguish pretty much right from kind of wrong. I guess I’m just lucky to have made so many correct ethical decisions over the years. Winking Emoticon, #humblebragging.
Isn’t it ironic that the same people who gripe about other people’s ethics often strenuously advocate rolling back regulation, and eliminating “bureaucratic red tape”? Do they really think it’s best to abdicate our society’s best interests to . . . well, there are so many checkered people whose names fit in this spot. So, no thanks – I’ll snuggle with the nannies at FINRA, OSHA, the FDA, the FCC, the CDC, and the FTC. They help me sleep better at night.
If you think Big Government has piled legal red tape too high, I urge you to peruse Article 2 of the Uniform Commercial Code (UCC), which governs sales of goods. Without the UCC, companies would be stuck navigating the laws of every state, along with the District of Columbia and Puerto Rico, just to sell a simple container of shower curtain rings, and ship it domestically.
A copy of the UCC stays in my car, submerged in a beefy volume that includes cases, titled Business Law, by Smith and Roberson. I figure the book will come in handy in case I have to change a tire, and need a sturdy wheel chock. Several cases follow a pattern: Party A deliberately and flagrantly screwed over Party B, causing grievous harm . . . Others are fuzzier on culpability, providing fodder for lively debate over whether laws were broken, despite unfortunate outcomes. “Satisfaction as an express condition.” A discussion topic that fascinates me, and underscores why Chief Customer Officers need law degrees to accompany their marketing creds. You’ve probably guessed that I don’t attract large crowds at parties.
Make no mistake: when it comes to business conduct, laws govern a miniscule sliver of possible situations. While I heartily agree that some regulations are misplaced (does it make sense for the government to shut down lemonade and cookie stands run by ambitious grade-school entrepreneurs?), I don’t think of American business as over-regulated. Not by a long shot. In fact, most day-to-day business activity occurs in spaces painted in appealing shades of Legal Gray. A joyous region where men and women of all races, religions, and ethnicities frolic unencumbered, making and selling things as they see fit. Go us! Freedom from regulation – and not a law man or law woman in sight! . . . said the Marketing Director for the dietary supplements company.
Think of commercial laws and regulations as a paper umbrella, about the size of the one a bartender uses to adorn your Singapore Sling. If you want to keep dry in the rain, you’d ask for something more substantial to preserve your coiffeur, and keep your Armani suit dry. In capitalist economies, we depend on ethics – the moral principles that govern a person’s or group’s behavior – to fill a comparable role.
Fortunately, anyone from a spunky summer intern in flip-flops to a wizened CEO in wingtips can trigger ethical circumspection by asking, “what is the right thing to do?” But providing answers can be anything but straightforward.
For example, how would a member of your biz-dev team respond if . . .
• when bidding on a large project, she had access to proprietary technical or pricing information about a major competitor?
• a prospective client proceeded to buy your product even though your rep knew it wouldn’t perform well?
• he had the ability to reduce prices for a long-time customer who consistently pays list price?
Depending on context, the answers could change.
In the first scenario, what would your rep do if she got the information passively through a mistakenly forwarded email? Or, what would she do if a prospective buyer offered to clandestinely share a competitor’s comprehensive proposal? If the rep found that unethical, would she refuse the offer if winning the deal meant earning a large commission or an important recognition, such as Achiever’s Club? And what would happen if she were below quota, and losing the deal meant losing her job?
In the second scenario, how would customer knowledge influence the rep’s action? For example, if the buyer were aware of the deficiency, would the rep accept the order? What if the buyer were aware, but underestimated the consequences?
And in the third scenario, what if a previous Account Executive no longer assigned to the account had made a vague comment to the customer to “pass along savings” whenever they became available? Would the rep feel obligated to honor his colleague’s statement?
In individual situations of ethical ambiguity, management must answer two questions:
1. How would your reps likely act or respond?
2. How does the company want them to respond?
This analysis assumes that management has made protection of customers’ best interests as much centerpiece of its culture as “driving revenue” or “optimizing profit,” two pursuits that trample best outcomes for customers. It also assumes that companies prefer that their employees act both legally and ethically.
For the first question, the sales commission and incentive plan provides important, though incomplete, insight. Usually, an unsettling gap exists between the two answers, and the greater the gap, the greater the risk for employees, employers and customers. Many executives can’t answer the first question, and can’t agree on the second – creating risks that make bungee jumping with a frayed cord seem safe by comparison.
Communication that documents and prescribes Guidelines for Ethical Conduct (GEC) not only affirms a company’s commitment to honesty, transparency, and fairness in dealing with customers, it forces management to think about what those values mean, and how they intend to demonstrate those values – not just say them. A company’s GEC won’t necessarily define the right sales decision, but it should spell out characteristics of ones that are wrong.
The International Code of Ethics for Sales and Marketing Executives International (SMEI) includes a pledge to “personally maintain the highest standards of ethical and professional conduct in all my business relationships with customers, suppliers, colleagues, competitors, governmental agencies, and the public,” to “protect, support, and promote the principles of consumer choice, competition, and innovation enterprise, consistent with relevant legislative public policy standards,” and to “not knowingly participate in actions, agreements, or marketing policies or practices which may be detrimental to customers, competitors, or established community social or economic policies or standards.”
The Direct Marketing Association’s Guidelines for Ethical Business Practice dives deeper, covering a lot in 51 pages, including,
Honesty and Clarity of Offer – “All offers should be clear, honest, and complete so that the consumer may know the exact nature of what is being offered, the price, the terms of payment (including all extra charges) and the commitment involved in the placing of an order.”
Decency – “Solicitations should not be sent to consumers who have indicated to the marketer that they consider those solicitations to be vulgar, immoral, profane, pornographic, or offensive in any way and who do not want to receive them.”
The Direct Selling Association stipulates boundaries in its Code of Ethics :
“Our Code of Ethics requires independent salespeople affiliated with DSA member companies to adhere to the Code’s guidelines and ensure a high level of professionalism, customer service and business ethics when interacting with consumers.
• Independent salespeople must respect a consumer’s wishes to discontinue a product demonstration or a sales interaction
• Independent salespeople must market income representations and product descriptions consistent with company directives and ethics training
• Independent salespeople must provide a receipt from the member company that permits the consumer to withdraw from a purchase order within a minimum of three days from the date of the purchase transaction and receive a full refund of the purchase price”
[Note: In November, 2015, Herbalife, a DSA Member, settled a $15 million class-action lawsuit brought by a former salesman which “alleged that Herbalife is a pyramid scheme in which the company’s independent distributors earn more money recruiting new sales people than they do selling its products, an allegation Herbalife has repeatedly and vigorously denied, according to MyNewsLA.com]
These excerpts are not just pragmatic – they outline essential conduct for a customer-focused culture. In addition to providing guidelines to the biz-dev team for how to resolve ambiguity and possible conflicts of interest, a GEC
1. provides the operational foundation for internal sales governance. If there are no defined boundaries, there can be no governance.
2. serves as vital counter-weight to pressures for achieving short-term sales goals.
3. establishes standards for employee disciplinary actions or termination.
4. communicates to customers and employees a commitment to practicing and enforcing high ethical standards.
5. Aligns corporate values and purpose with those of employees.
When I talk with senior sales executives about instituting GEC, I often encounter skepticism. Here are some examples:
1. “The best sales reps already have a strong sense of personal ethics.” But not every top rep made his or her quota honestly or ethically.
2. “Our mission statement covers ethical behavior.” Most don’t scratch the surface, and ethical standards are tangential to mission statements, anyway. Aflac’s, “To combine aggressive strategic marketing with quality products and services at competitive prices to provide the best insurance value for consumers,” won’t help a sales rep figure out how to evaluate a questionable approach.
3. “Those types of things could never happen here.” They can. And they do.
4. “We screen for honesty in the job interview.” Really? – How?
5. “Salespeople are ‘just wired’ to behave certain ways.” Guidelines won’t prevent anything. Possibly true. But in court, demonstrating that your company maintains GEC can be a more helpful defense than saying “we have never provided guidelines to our employees.”
6. “If senior executives model ethical behavior, reps will follow their behavior.” If you believe that, I have some land to sell you in Florida.
“An’ I’m never gonna care ‘bout my bad reputation. Oh no, not me, oh no, not me,” Joan Jett belted out in her song, Bad Reputation.
But I believe most people do care. It’s just that pressure to achieve short-term results makes the process of distinguishing right from wrong a bit . . . impure. Same for winning a presidential election, or a party nomination, for that matter. When the heat is on – or even when it’s not – a Guideline for Ethical Conduct will prepare your team to make better choices.