Category Archives: Sales leadership

Filthy Money: When Selling Creates Moral Conflict

“Have you ever encountered an ethical dilemma and how did you handle the situation?”

I’ve been asked to answer that question next week as a presenter at a Virginia science and tech high school as part of Ethics Day. My colleagues come from a breadth of professions, and each of us has been allotted 20 minutes. For me, the greatest difficulty is knowing where to begin.

One topic I will cover: are there situations when – morally and ethically – revenue is not worth having? As I answer this question and others, I expect that these savvy students will find my inconsistencies huge, like a full moon in Autumn. As author David Quammen wrote, “not every crisp line represents a triumph of ethical clarity.”

But most high school students have not had to meet a demanding revenue target or “make quota.” They can afford to be idealistic. And I hope they are. This is a good age, and a safe place, to learn and explore “what is the right thing to do?”

I plan to share a poignant example: In 2011, Marine Medal of Honor recipient Sgt. Dakota Meyer was conflicted over selling his company’s product, a sophisticated rifle scope, to the Pakistani military. “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,” he explained.

If you followed this story, Meyer worked for BAE Systems when he refused to pursue the deal with the Pakistanis. BAE fired him, and Meyer sued the company. In December, 2011, BAE announced that the parties had settled the dispute out of court.

I will follow that story with two examples of my own ambivalence in professional selling:

1. Cigarette manufacturing

Cigarette manufacturing is a huge part of Virginia’s economy. The Philip Morris Richmond Manufacturing Center alone occupies 200 acres, with six connected buildings totaling 1.6 million square feet. An outsider cannot appreciate the size of the US tobacco industry until he or she drives on I-95 through Richmond, and smells ambient tobacco leaf particles flowing into the car’s air ducts. The huge network of suppliers—from production machinery to carton printers to filter manufacturers to warehousing—have similar logistics challenges to other manufacturers.

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 a rapport builder in the health-care vertical. “My marquis customer? Sure . . . are you familiar with Marlboro cigarettes? . . .” I overcame my dissonance because I rationalized that cigarette smoking is voluntary. But that required suspending another scientific fact – that nicotine is non-addictive and that cigarette manufacturers don’t malevolently tinker with its concentration in their end products.

Had I stood on principal and refused to help cigarette manufacturers, my competitors would have gladly filled the void. Could I subtract tobacco-related revenue from my account portfolio and still make quota? Answer: no – not in Virginia.

2. Firearm manufacturing

One of my prospects was a large handgun manufacturer with a single-location factory in my sales territory. I decided not to call on the company. Unlike the first example, I wanted the revenue, but I didn’t need it to make quota. While I recognize that it’s perfectly legal to manufacture and distribute firearms in the US, my objection – again – was 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 use of the finished product. I imagined speaking with the same detached operational terms for other my other manufacturing customers, but not being able to escape knowing the ultimate purpose of the precision and quality was to deliver bullets better. Just writing about it still makes me queasy. Call me a wimp. I can handle it.

Was my idealism fair to my employer? Probably not. I referred the gun manufacturer to a third-party reseller who didn’t share my compunction.

In less than 10 years, many of the students in my session will face similar quandaries. How will they respond, for example, when an employer asks them to sell products to people with impaired decision-making abilities, as described in an August, 2015 Washington Post article, How Companies Make Millions off Lead Poisoned, Poor Blacks? The practice is borderline illegal, with the emphasis on borderline. Laws have not fully caught up with an obvious moral wrong, underscoring why ethics matters, and why it’s so important that discussions about ethical choices in one’s career begin in high school – or earlier. The biggest mistake people make about ethics is denying that conflicts can occur.

When quotas and revenue goals are on the line, having the courage to be selective about the intended purpose for one’s products and services can be difficult. These vignettes illustrate how complicated the choices can be, and twenty minutes hardly leaves time to dig beneath the surface.

Still, I will carve out time for students to question the answers.

The Exciting New ABC’s of Selling

“Selling is changing faster than ever! Selling is changing faster than ever!”

Stir up some worry, and people will follow you. That idea was tweeted before Twitter – as anyone who has read Chicken Little will tell you.

It’s hard to find a person who can credibly deny that there isn’t a force or two upending our status quo. Still, I offer to debate the whole faster than ever thing. Care to discuss? Over beer, please! I’ll buy every other round, and in case our meeting requires double-digit refills, I’ll also pony up every round that’s a prime number – assuming that we’re still keeping track. For now, I’ll stick to what I solidly know: a centenarian sales professional would find today’s sales lexicon utterly incomprehensible:

“Leverage gamification to incentivize customers to share ideas (with contests or leaderboards, for example), or host special events for top performers.” Or, “Quickly build and deploy apps that engage and impress customers. The [product name] platform allows you to accomplish this faster by providing back-end infrastructure, so you can focus on creative solutions.”

Oy. For just a moment, let’s step away from this jargon, and return to the centenarian’s sales yesteryear, a world described a 1912 book, Salesmanship and Business Efficiency. This primer, sandwiched on my crowded shelf between The Challenger Sale and Thinking Fast and Slow, appears a curmudgeonly, but wise, grandfather next to its spunky neighbors, which ooze business bravado. Just opening Salesmanship and Business Efficiency provides a unique sensual experience. Ahhh – that unmistakable old-book aroma! Its 406 brownish pages don’t bend. They crack. Handle with care. And there’s that large, enigmatic image of the author, James Samuel Knox, whose serious, angular face confronts the reader. Did people smile back then?

Entries from the index hint at the trending topics when the book was published:

Being a gentleman, Consequences of . . . . page 109
Greatness, The secret of . . . . page 68
Habits that lessen service . . . . page 104
Honesty . . . . page 101
Imagination, value of . . . . page 249
Noses . . . . page 154

Noses? Yes, noses. “The shape of the nose is a very good and reliable indication that certain characteristics exist. The straight or Grecian nose shows refinement, love of peace, and a regard for justice. The arched or Roman nose indicates a love of power and a tendency to put forth great effort to attain it.” “Pug, Turned Up, Drooping,” and “Hooked”—all lovingly hand-illustrated on page 158, should you care to examine the book. Compare to your own nose, and you, too, will have keener self-awareness. Move over, Myers-Briggs!

Whether you buy into the idea that a prospect’s Grecian nose portends a pacifist demeanor, it’s comforting that someone could write so thoughtfully and eloquently about different nasal anatomies, and what each one means. Clearly, if Jim were alive today, he’d have to get hip to some pretty sophisticated lingo before he could sit down to write Part II.

Here’s to what 100 years of technological and social progress have done for our contemporary business development parlance! To supplement Knox’s now-antiquated index, I offer The Exciting New ABC’s of Selling.

A –

Actionable: (adj) able to be done or acted on. Used commonly in PowerPoint and email to describe almost any item.

Administrative assistant: (n) person who supports collaborative teams through performing a multitude of tasks. Formerly called secretary or gatekeeper.

Agile: (adj) being nimble in the face of change.

Algorithm: (n) well-defined set of instructions for creating a result, terminating at an ‘ending state.’ (See self-service).

At-will employment contract: (n) a contract that can be cancelled by either party on short notice. The prevailing arrangement under which sales employees work.

B –

BPR: (n) Business Process Re-engineering – the analysis and design of new methods for accomplishing a program, function, or task.

Balanced scorecard: (n) A representation of a strategic plan outlining grouped sets of objectives linked in cause-effect relationships.

Bandwidth: (n) mental, or schedule capacity.

Benchmarking: (n) comparison of a vendor’s product offering to a standard. Sometimes, done fairly (see transparent).

Bicycling: (n) For salespeople, the new golf.

Bleeding edge: (n) technology or innovation that’s way, way, way out in front of anything done before (see leading edge)


Collaboration: (n) The act of two or more individuals deliberately working together to achieve a shared goal or result.

Column fodder: (n) denotes a vendor’s poor position in terms of buyer preference. Originally, a vendor designated as column fodder had a position on an Excel spreadsheet that magnified the company’s statistical or performance shortcomings, especially in terms of price, and financial return.

Connection: (n) a person who you have a direct relationship with via social media. Note: this word carries no connotation of trust.

Consultant: (n) Person who consults. A now-common job title for sales professionals.

Content: (n) pretty much anything that’s available for consuming on the Internet.

Content marketing: (n) Content marketing is a marketing technique of creating and distributing valuable, relevant and consistent content to attract and acquire a clearly defined audience – with the objective of driving profitable customer action. Capiche?

CXO: (n) Chief-something-Officer. Replace the X with the first letter of your favorite business buzzword, and you’ll probably find someone at your target company with the title.

Commodity: (n) A product with no differentiation, so that raising prices above that of competitors results in zero demand.

-centric: (adj) pertaining to an asset which a business process is designed to improve or enhance. Examples – customer-centric, brand-centric, user-centric, employee-centric.

D –

Death-by-PowerPoint: (n) effect of overuse of Microsoft’s presentation software (see pitch).

Decentralization: (n) the dispersion of power and resources away from a single department or entity within an organization.

Decision maker: (n) a person who decides.

Deliverable: (n) a product, service, or a combination that is provided from one party to another.

Do-more-with-less: management-speak for “we can’t figure out a way to re-engineer this process, so you have to.” (see workaround)

Drill-down: (n, vb, adverb) move from summary information to detailed information.

E –

Entrepreneur: (n) a person who starts a business.

Engagement: (n) interaction with prospects and customers that’s measurable and supports business development strategy.

Extrinsic motivation: (n) A desire to accomplish an objective because doing so offers rewards, typically financial compensation.

F –

Fail forward (v): to learn from mistakes – or sometimes, to take intelligent risks.

Flat organization: (n) An enterprise structure with few management layers.

Front-line: (adj) employees or business functions that have direct interaction with customers and prospects.

G –

Game plan: (n) Plan – but more sporting.

Gamification: (n) The process of incorporating game elements into employee or consumer decisions.

Gap analysis: (n) formal comparison of predicted to actual results.

Glengarry Glen Ross: (movie) a popular drama that exposes uglier machinations of a sales organization.

Green: (adj) – Connotes a company’s abiding commitment to preserving the environment.

H –

Handshake: (n) an IT term to describe the protocol for two hardware devices when establishing a digital connection (less-common meaning: the physical activity between two people when a purchase transaction is concluded).

Heavy lifting: (n) – work or tasks that are hard to perform, tedious, or onerous.

High-level view: (n) – perspective that’s devoid of detail or tangential issues; the PowerPoint slide title that always precedes the demo.

Holistic approach: (n) – relating to an entire system, rather than sub-systems or component parts.

Hype: (n) publicity or promotion that is extravagant or overly-gratuitous (see content marketing).

I –

Ideation: (n) the process of conceiving an idea and implementing it.

Incentive system: (n) incentive system – a synchronous combination of processes and controls that link sales compensation to management reports.

In-the-loop: (adj) describes a person who is involved in the communication about a specific matter or initiative. (antonym: out-of-the-loop)

Incentivize: (v) providing someone with a reason for taking a specific action.

Innovate: (v) the act or process of finding a new ways to use existing tools or technologies.

Insource: (v) to perform a function or service within an organization (see outsource)

Intrinsic motivation: (n) a personal desire to meet an objective because it is psychologically rewarding.

Involuntary retirement: (n) a situation in which an individual is forced to separate from an organization before he or she planned (synonyms: RIF, fired, terminated, let-go).

K –

KPI: (n) Key Performance Indicator (see ROI).

Key player: (n) person who holds high importance in a relationship between buyers and sellers (seedecision maker)

L –

Leading edge: (adj) new technology or innovation, often not yet widely adopted. (see bleeding edge)

Leverage: (v) to exploit the capabilities of something to greater advantage.

Low-hanging fruit: (n) a reward or desirable outcome that’s relatively easy to attain.

Loyalty: (n) – A strong feeling of support and commitment (variations: brand loyalty, customer loyalty, product loyalty).

M –

Make or buy decision: (n) – whether to produce a product or service inside the organization, or to purchase from an outside supplier.

Mass customization: (n) – A production process in which every process repeated, but output is customized by altering which processes are included in a particular product or service.

Maximize: (adj) – to make maximum. According to most marketing literature, this is something every product does for a beneficial KPI.

Methodology: (n) a set of processes, rules, and ideas that govern a system.

Mindshare: (n) the relative dominance that marketing and sales has over a prospect’s attention.

Mission-critical: (adj) vital to the desired outcome.

Monetize: (v) to transform something into money.

Multi-task: (v) to do more than one thing at a time.

N –

Net-net: (n) the most succinct possible way to state an idea or insight. (Synonyms: netnet-net-net, net-net-net-net)

Network: (n) group of people who are connected (see connection)

No decision: (n) a sales self-deception in which it’s commonly believed that a prospect failed to make a choice.

Non-value added activity: (n) An activity for which the value to customers is less than its cost to the producer, and therefore a candidate for elimination (see value-add)

North of: (adj) above. (antonym – south of: below) 

O –

Offline: (n) Not right now, and not in front of everyone else in the meeting.

On the same page: (adj) when two or more people possess mutual understanding.

On my plate: (adj) I have responsibility for a particular task, problem, or challenge. (antonym: onyour plate)

Opaque: (adj) concealed or hidden.

Optimize: (v) to make perfect, usually offered as a platitude via content marketing.

Out-of-the-box: (adj) unconventional, or creating the illusion of being unconventional.

Outsource: (v) to perform a function or service outside an organization (see insource)

Oversell: (v) to inflate a prospect’s expectations beyond what can be reasonably provided.

P –

Paradigm shift: (n) fundamental change in underlying approach, assumptions, or methods.

Partner: (v) to engage in an activity with a person or company.

Ping: (v) to contact a person without confirming the communication was received.

Pitch: (n) a statement or set of statements intended to persuade a prospect to purchase a product or service.

Proactive: (adj) active. (Not sure how this entered the lexicon.)

Pushback: (n) objection or resistance.

Q –

Qualify: (v) to learn the potential value or expected outcome of a sales opportunity.

R –

Rain: (n) inflow of cash to an organization in exchange for producing and delivering goods, which customers purchase.

Ramp-up: (n) the period in which knowledge or know-how is acquired and deployed.

Resonate: (v) cause a person to have an emotional connection to something.

Rightsize: (v) to change staffing requirements – usually through force reductions – to achieve equilibrium between demand and the resources required to supply it. (see optimize).

Robust: (adj) a product that is well-designed, well-built, and by extension, unlikely to fail.

ROI: (n) basically, any financial measurement that purports to prove the value or efficacy of a product. (see Hype, KPI, and smoke and mirrors)

S –

Scalable: (adj) capable of growing or expanding.

Seamless: (adj) boundaries between point of data capture and point of data use that are invisible; often a marketing platitude. (see pitch)

Self-service: (n) a process or software application in which customers can facilitate a buying transaction (see algorithm).

Shiny object: (n) something that has unproven worth, but people want anyway.

Skillset: (n) within an individual or team, a collection of useful capabilities.

Smoke and mirrors: (n) deliberate distortion about a product’s construction, capabilities, or results.

Social: (adj) of, or relating to anything involving social media.

Stakeholder: (n) a person who has a direct interest in the outcome of an activity or strategic initiative.

T –

Talking points: (n) essential ideas to communicate. Also, words presented on PowerPoint slides (seeDeath-by-PowerPoint).

Tire kicker: (n) a person with a superficial interest in making a purchase.

Touchpoints / touches: (n) the moment of any communication or interaction between buyers and sellers. (see engagement)

Train wreck: (n) a very bad result, usually with a known cause.

Transparent: (adj) honest and open (antonym: opaque)

Turn-key: (adj) describes a complex product or service that can be easily integrated into a company’s operations; often, a marketing distortion.

Twenty-four/seven or 24/7: (n) in a global economy, the period of time during which during which salespeople must work.

U –

Unpack: (v) to expose the details about something’s meaning (antonym: summarize).

V –

Value-add: (n) the comparison between the pre-process or pre-transaction value of something, and its post-process or post-transaction value.

Viral: (adj) a strategy or tactic that exploits spreading information from person to person, especially through social media.

Virtual office: (n) the place of employment for many workers engaged in business development, usually in located in a primary residence.

W –

WIFM – (n) What’s In it For Me?

Win-win: (adj) describes an outcome in which both buyer and seller share the benefits.

Winner’s curse: (n) quagmire that vendors fall into when a customer becomes chronically unprofitable (see oversell).

Workaround: (n) a modification or change that rectifies a deficiency or problem – often temporary.

Z –

Zero-sum game: (n) a situation in which a gain on one side is matched by a comparable loss on the other.

The centenarian sales rep has lots catching up to do if he wants to stay in the sales game and ably compete with his millenial brethren. Plus, in the last 100 years, a new pronoun has arrived in town:she.

Yet, I wonder how much has really changed. What would happen if you took the great modern sales books on my shelf and shook them hard enough for the biz-dev jargon to fall out and tumble to the floor. What would remain? Just the unpretentious, humble ideas for interpersonal selling contained in Salesmanship and Business Efficiency. As Knox wrote, “You cannot be a great success as a salesman until you bring [your] winning qualities out where they can be seen. They vouch for your honesty, your sincerity, and are a proof of your interest in others. They are your letter of introduction and will gain you admission when everything else fails.”

Some words last forever.

“Honesty is the Best Policy.” But, Is the World Ready for a CHO?

“Oh, and it doesn’t hurt to be honest about your capabilities and limitations. These will come out sooner or later,” Bob Thompson of CustomerThink wrote in a recent article. (Why Reps Can’t Sell. It’s the (Selling) System, Stupid!)
In other words, honesty is the best policy. But if you’re searching for succinct how-to’s for honesty, I’m sorry to disappoint. You won’t find any here. Wikihow already offers a practical, easy-to-follow 7-step process, and I won’t attempt to improve on it.

Besides, Thompson’s “it doesn’t hurt to be honest” admonition sent me on a slightly different tangent, piquing my curiosity to understand the cha-ching! –  the actual dollars-and-cents business value of honesty. Though I couldn’t calculate the exact amount, I will estimate it contributes substantially to our gross national product, and leave it at that.

Organizations casually talk the honesty-talk, but many conspicuously meander when walking the honesty-walk. Words, without will or motivation behind them, are just words. What’s missing is Corporate Muscle: a Kahuna of Honest Communication who wields power to make people stay within the lines of the truth, the whole truth, and nothing but the truth. If kahuna doesn’t suit your literary style, call him or her a Chief Honesty Officer, or CHO.Corporate honesty should be easy. But I’ll make a confession: it’s not. Sometimes it’s really hard to drive demand without stretching and distorting the truth like a glob of silly putty. What’s a sales pitch, “Business Case Study,” or ROI Calculation without cleverly stacking facts and figures? But despite the difficulties, honesty-is-the-best-policy can still be embedded into a business strategy. Remember how effectively Radio Shack used bold honesty to parody its own lack of innovation in the spot it aired during the 2014 Super Bowl?

JP Morgan Chase, Bank of America, Goldman Sachs. Immediately following the banking crisis, I expected to see a CHO in their executive suites. But no. How about BP and ExxonMobil? The same. Some industries are more ripe for a Senior Honesty Champion than others. Oddly, instead of anointing a CHO, corporations large and small regularly plug other chiefs into the org chart. From the important, like Chief Financial Officer and Chief Marketing Officer, to the inane, like Chief Fun Officer. But alas, not even titular homage for Honesty (sigh).

Compliance! Change! Synergy! Value! Shout out most any trendy topic, and you’ll find a Chief-Something-Officer all over it, like a fly on poop. Only in America can we find Management-by-magazine so lovingly woven into a bureaucratic corporate tapestry. This seems so wrong. Did someone say, “Well, at our company, honesty really falls under Legal . . .”? Puh-leeeeze!

Today, “honesty is the best policy,” yields 14.7 million online search results. While I didn’t analyze how much of that content contains positive sentiment, it’s seems safe to say that people clearly lionize honesty. Not bad for a 415-year-old idea that traces its origins to an essay, In Europae Speculum, by Sir Edwin Sandys, who wrote, “Our grosse conceipts, who think honestie the best policie.”

Consider three common business situations involving honesty, and how a CHO would formulate strategy, manage risk, and provide governance to increase business value:

Not enough honesty.
As the General Motors Cobalt product liability case demonstrates, companies often use Marketing and Sales to obscure sinister truths about a company’s safety and quality issues. According to Keith Crain, Editor-in-Chief of Automotive News, “This issue is not about a faulty switch. Car companies have been dealing with defective parts and recalls for decades. This does not even rank in the top 10 recalls. Far more serious is whether GM executives knew about the defective switches and the crashes long ago and someone at GM tried to keep the whole issue quiet.”

Too much honesty.
In a recent article in The Washington Post, (College tour de Farce: 5 Ways not to Sell Your School, April 25th), Melinda Henneberger wrote about a tour guide she encountered at the University of California, San Diego. The “truth-telling tour leader dispensed way too much information,” and “soon had parents and progeny alike staring intently at our shoes as she talked about her steamy dating life and her preference for being the one who picks up guys when she goes clubbing.”

Exaggeration and distortion.
There are infinite examples. But here’s a current favorite of mine, a (barely) fictitious sales pitch from the HBO series Silicon Valley:

“The greatness of human accomplishment has always been measured by size, the bigger, the better, until now. Nanotech, smart cars, small is the new big. In the coming months, Hooli will deliver Nucleus, the most sophisticated compression software platform the world has ever seen because if we can make your audio and video files smaller, we can make cancer smaller and hunger and AIDS.”

Outsized marketing floats all boats, especially if you work for a start-up. As advertising executive Milton Glaser said, “If you don’t have a change-the-world outlook, you’re doing it wrong.”–Which is great, but what happens when braggadocio permeates every conversation?

In a recent episode of Comedy Central’s Colbert Report, Stephen Colbert quipped, “Ladies and gentlemen, I believe honesty is the best policy, but a close second is lying about how honest you are.” Colbert’s comment harpooned a disturbing reality, hitting a nerve that needed to be hit. Could an honesty policy at General Motors have saved the lives of thirteen Colbalt drivers?

It’s hard to say, but without someone at the highest level within an enterprise responsible for establishing a culture for honesty, as well as creating a strategy for executing and governing it, we won’t see the end of criminal corporate liability, massive breakdowns in trust, and the implosion of business value that accompanies it.

Best Guesses, Revenue Recognition, and Compliance: A Fine Line to Walk

A nifty app called Photobooth helps people create hilarious visual distortions. Business accounting has something similar, but way more purposeful. It’s called revenue recognition. As Karen Berman and Joe Knight wrote in their excellent book, Financial Intelligence, “Revenue recognition is a common arena for financial fraud . . . the most common source of accounting fraud has been and probably always will be in that top line: Sales.”

“Those bendy numerals at the top of the screen? That’s not Captcha, that’s our revenue!” The accounting definition of Sales or Revenue is “the dollar value of all the products or services a company provided to its customers during a given period of time.” And the guideline that accountants use to recognize a sale is that the revenue must have been earned. But according to the authors of Financial Intelligence, “the sales figure on a company’s [income statement] always reflects the accountants’ judgments about when they should recognize revenue. And where there is judgment, there is room for dispute—not to say manipulation . . .”

Don’t forget: with revenue accounting, guideline – not rule – is the operative word. Suppose you’re the new VP of Sales for a technology services provider that expects to be acquired. Last week, your company landed a huge contract with a new customer. The engagement will begin right away with a pilot, and the project will be fully implemented in about 12 months. In the past, your company has always recognized 50% of the revenue at the time of contract signing, and the remainder applied after meeting key project milestones. But there’s pressure to change: you have a significant bonus riding on over-achieving your quarterly quota. And after all, you worked hard to land this deal. So why not recognize 80% percent right now? Fortunately, you have a helpful lever—the company’s desire for a high valuation. A strong revenue gain over last year will appear lovely to any investor.

The revenue-accrual change isn’t illegal. But because 80% isn’t consistent with your company’s past accounting practices, you remind your CFO that she can footnote this as a material change on the company’s financial statements. As it turns out, she’s not obligated to do so. Material, in the accounting sense, depends on her personal judgment. As Berman and Knight summed it up, “Revenue on the income statement is an estimate, a best guess.” Sales numbers don’t lie, but they don’t necessarily tell the truth, either.

There are other ways to tweak revenue reporting. One technique, Bill-and-hold, allows customers to purchase products well in advance of when they are needed. The supplier assumes all logistics overhead, including warehousing, inventorying, and staging for shipment. The supplier has committed the inventory for sale to that customer. So when should revenue be recognized? There isn’t always a clear answer. Once again, though, compensation considerations help narrow the options. Nortel Networks of Canada allegedly used bill-and-hold in 2000 to inflate the company’s revenues, allowing company executives to earn millions in bonuses.

Channel stuffing, a practice sometimes used for sales of IT hardware, is another way to skew revenue. In 1998, a class-action lawsuit against Telxon Corporation included channel stuffing among the indictments. “The Company’s increased revenues in the second quarter was not attributable to increased acceptance of its products, but was instead the result of the Company’s channel-stuffing, i.e., shipments of excessive product to its distributors that it knew would not be resold in the second quarter, and its premature recognition of revenue on such shipments.” The company was a takeover target at the time.

Sunbeam, Cendant, Xerox, Rite Aid, HealthSouth, MicroStrategy, and Qwest. All of these companies fiddled around with revenue recognition, until the chicanery tripped alarm bells of regulatory agencies in Washington, DC. And the penalties assessed were no mere rap on the knuckles. Xerox, Rite Aid, HealthSouth, and Qwest paid the government over $1 billion – each.

Rampant accounting non-compliance and other corporate malfeasance led to the passage of the Sarbanes-Oxley act in 2002. In the US alone, there are over 10,000 federal, state, and local regulations, covering healthcare, education, financial services, public corporations, and privately-held companies. No doubt, that’s a lot fine print to read. Throw in FINRA, HIPAA, and the Foreign Corrupt Practices Act, and companies face measurable risk for coloring outside regulatory lines, so to speak.

How do companies deal with the complexity? Odell Guyton, head of global compliance for Jabil, Inc. recently shared that most of his work focuses on “preventative law,” or “helping [managers] to understand the business of the company, and helping them navigate around these land mines they may not be aware of in terms of compliance risk.” “There’s a recognition that to be effective, compliance has to be knitted into the fabric of an organization,” said Paul McGreal, dean of the University of Dayton law school. “It’s more of a role in the leadership team within an organization.”

The outcome from compliance enforcement should be to provide customers, suppliers, employees, and investors protection from harm. And for revenue recognition, companies must maintain governance over how their products are developed, priced, and sold. How employees are compensated for these activities matters.

Mark Twain understood human foibles quite well. As he wrote in The Adventures of Huckleberry Finn, “Right is right, and wrong is wrong, and a body ain’t got no business doing wrong when he ain’t ignorant and knows better.”

For now, we’re stuck with compliance.

Harmful if Followed! How to Spot Toxic Leaders

Suppose you just accepted a new job with an awesome salary. A job where you will be surrounded by people who have extraordinary talent. Immortal fame, something you have always craved, is now within your grasp. You even get your own primo parking space, right next to headquarters! No need to maneuver your new 760 Li into the spot. A personal valet will happily take on that chore. So far, so good, right? But there’s a catch: your new boss is a jerk.

Jay Gruden, who joined Washington’s football team on January 9th as its newest head coach, might feel a connection with this not-so-hypothetical scenario. Since 1999, seven predecessors have filled the role he just accepted. All hired—and fired—by Daniel Snyder, the team’s owner. Now, Gruden fills the still-warm shoes of two-time Super Bowl champion coach Mike Shanahan, who was let go this month after finishing with a 3-13 record. At least Shanahan gave Washington fans one highlight worth cheering: watching the revolving door hit his backside on the way out. Sweet!

Following Shanahan’s departure, Snyder has encountered a tricky public relations challenge. He has run out of ways to say “the coach screwed up.” Right now, when people in the Metro DC area talk about a “dysfunctional team,” chances are they’re not referring to the federal government. They’re not describing colleagues at work. They’re talking about Snyder’s football organization. Who needs a Harvard Business School management case study when you have such rich artifacts in The Washington Post sports page?

Some experts have questioned whether Snyder’s team is doomed. “Yes. They are . . . Snyder is the biggest problem . . .” according to The Bleacher Report. But Gruden apparently felt otherwise. It’s a “once in a lifetime deal!” he exclaimed. I can’t blame him. You’d have to be an idiot to worry about an immature, abrasive, meddlesome boss when you have a lucrative five-year contract, and RGIII.

Spotting a toxic leader proves easy when you see a conspicuous, well-worn pathway to failure taken by those who have already trudged the trail. But what about discovering toxic business leaders when poor results aren’t so obvious? Fortunately, there are telltale signs:

1. Toxic leaders experience high employee churn, especially among direct reports.
2. Toxic leaders can’t identify anyone they’ve mentored who has become successful at their current company, or in a new endeavor.
3. Toxic leaders have a track record of running failed businesses. Most leaders and entrepreneurs have experienced some unsuccessful ventures, but there should also be successes.
4. Toxic leaders lack up-to-date references from direct reports, and from current and former customers.
5. Toxic leaders do not attract competent, capable staff.
6. Toxic leaders have a pattern of eliciting strong, negative reactions from others.
7. Toxic leaders lack a network of well-respected industry connections.

So, if you’re pondering an exciting opportunity at a new company, don’t assume that every leader in the organization leads competently. Check LinkedIn. Ask around. And remember, if something doesn’t seem quite right, make sure your opportunities—like immortal fame—compensate for the risks.

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