Tag Archives: business_development_ethics

Feeling Morally Queasy at Work? Tips for Voicing Your Values

Tuesday, 05 February 2019 18:24
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I’d like to encircle the workplace with yellow safety tape. Long ribbons of it. “Caution! Do not enter!” That would give others an inkling of the dangers lurking within. I’m not talking about back pain, eyestrain, and paper cuts. I’m talking exploitation, harassment, and passive aggression.

I’d use safety tape to protect people from the risks that threaten their personal values. Since 1943, Norman Rockwell’s Rosie the Riveter has inspired workers with her power, ebullience, and obvious self-reliance. Today she’d be tweeting #metoo.

In an uncertain world, we can count on one thing: our personal values will be challenged in the workplace. They will be challenged by what we witness, experience, and are asked to do. Mine have, many times.

Concern over this problem was revealed in a 2001-2002 Aspen Institute  survey conducted on a group of MBA students. “When asked whether they expected they would have to make business decisions that conflicted with their personal values during their careers, half the respondents in 2002 (and more than half in 2001) believed they would. The vast majority of respondents both years reported it would be ‘very likely’ or ‘somewhat likely’ that they would experience this as stressful,” according to Professor Mary Gentile, author of a book, Giving Voice to Values: How to Speak Your Mind When You Know What’s Right.

Predictably, that issue spreads risks across the organization like foul air propelled by the wind. “In 2001, over half of respondents said their response to such a conflict would be to look for another job; in 2002 that number declined to 35 percent, still a significant number.”

Nearly two decades on, the Aspen Institute findings corroborate what I see today: employees are under-prepared for responding when their values are challenged at work. Most business schools don’t teach techniques or approaches, and the few that do present choices through a moral lens that defines or prescribes right and wrong. That turns people off.

Professional development in sales and marketing is no better. Aside from the ambiguous demand, “put customers at the center of everything you do,” practitioners ignore the issue altogether. “Don’t lie. Ever.” Huzzzzahh! Easy to say at the sales kickoff. Looks nifty on PowerPoint. But Job #1 for business developers is customer persuasion. Such admonishments are flimsy, and don’t penetrate the thorny dilemmas employees routinely encounter, like choosing between pressuring customers to buy and keeping their jobs another quarter.

During my career, I have repeatedly contrived rationalizations and reasons for not speaking up when my values have been confronted. I’ve learned I’m far from alone. As we endeavor to preserve a self-image of high integrity, we have cultivated a parallel talent for sweeping concerns and better judgement under the carpet.

Not that business development culture would have it any other way. Put aside that creative mantra for a moment. In my experience, marketing and sales organizations are hives for conformity and group think: “Quit giving excuses!” “I want to know how you are going to sell, not why you can’t!” “We’re not a problems focused group, we’re a solutions oriented group.” “You’re either on the team, or you’re not.” There’s a theme to these edicts: check your personal values at the door before you begin work. Little wonder so many marketing and sales professionals find it nauseating to rock the organizational boat.

Instead of thinking, “well, I’ve already slipped on that ethical slope, so I guess I’ll just continue the slide,” recognizing past imperfections in ethical decision making frees us to move in better directions. There’s nothing to be gained beating ourselves up over workplace decisions that we’d rather re-do. Wearing egg has never been fashionable, but as a practical matter, you can’t hold a conversation about ethical choices if the person leading the discussion cops an attitude of finger-wagging judgment. And I’ve yet to meet a colleague, client, or direct report who doesn’t wear symbolic egg.

Which values challenges do business developers experience?

Pressure from management:

  • “You must not share information with [Customer X] about this defect, because it will delay their purchase.”
  • “We won’t offer [Customer X] the lower market price because it will cause us to miss our revenue target. They’ll never know.”
  • “We can give our customers verbal commitments not to raise their prices, but that information must not be explicit in our contracts.”
  • “When you prospect a C-Level executive for the first time, always make it seem that you’ve had an earlier conversation with them.”
  • “This product has high potential for misuse, but it’s too important to our profits not to aggressively promote it.”

Pressure from prospects:

  • “We haven’t made a purchase decision yet, but if you can promise a better price, I will share [Competitor X’s] proprietary proposal.”
  • “I’m willing to award your company the order, but I need a personal favor . . .”
  • “We need your developers to modify the quality algorithm so the defect rate we report to the government appears lower.”

Since 2014, dozens of companies have been inducted into the Annual Sales Ethics Hall of Shame. Theranos, Wells Fargo, VW, Takada, and Purdue Pharmaceutical became notorious because their business strategies became deeply infected with nefarious intent.

In September, 2018, Theranos announced it was formally “dissolving”, which suggests its downfall was less ugly than it was. Its two senior executives, founder Elizabeth Holmes and Sunny Balwani, were indicted the same year, charged with engaging in schemes to defraud investors, doctors and patients. Takata filed for bankruptcy. Wells Fargo got spanked with onerous restrictions on its asset growth. And VW, well, I’ll never buy a car from a company that gleefully sacrificed my respiratory system to pad their profits.

For all these companies, the proximate cause for their bad fortune wasn’t a cliché risk like rabid competition. It wasn’t warp-speed market disruption. It wasn’t onerous government regulation or economic chaos. Instead, it was unchecked greed.

Opining greed in the C-Suite won’t make it go away. Nor will moaning about high pressure sales tactics. After all, sales forces are predominantly paid on revenue production, and as we know with incentive compensation, the goal is to get what you pay for.

Instead, risk mitigation for corporate malfeasance begins at the grass roots. Employees who are prepared and equipped to voice their values provide the most effective way to stem corporate misbehavior. Put another way, we have met the responsible party, and it is each of us. Time to take the bull by the horns and wrestle it to the ground.

Some tips for voicing your values:

  1. Know what your values are. Write them down – it doesn’t need to be a long or complicated list. Own them. This is essential, because they are yours, and that makes them unassailable.
  2. Believe that your values deserve to be taken seriously. It doesn’t matter whether you’re an intern or board chair.
  3. Prepare yourself for situations where you know you will need to draw the line. This means anticipating challenges such as the ones described earlier and developing a response ahead of time.
  4. Don’t judge the action of others or presume to understand them. If you assume a manager or colleague has malintent, you will come across that way, and will be less likely to change his or her mind.
  5. Invite conversation about the issue. For example, “This doesn’t work for me. I don’t think it’s right. Do you see it differently? Help me understand.” (reference Giving Voice to Values, page 157).
  6. “Frame choices in ways that align them with broad, widely-shared purpose.” (Giving Voice to Values page 159). It’s easier to redirect a problematic request when you can gain consensus on a larger goal.
  7. Craft a description that focuses on the advantages of your recommendation or role, rather than the disadvantages.
  8. Practice, practice, practice your responses to values challenges. Reflect on your experience and that of others, figure out what you’ve learned, hone your tactics, and practice some more.

“Once we identify the common challenges in our particular line of work, it is especially useful to look for and note any examples of individuals who have effectively voiced and acted on their values in this type of situation,” Professor Gentile writes. Examples are abundant online. It’s also important to familiarize ourselves with common rationales for not resisting. The top four, according to Giving Voice to Values,

 

Expected or standard practice: “Everyone does this, so it’s really standard practice. It’s even expected.”

 Antidote question: “If the practice is accepted, why are there often rules, laws, and policies proscribing it?”

 

Materiality: “the impact of this action is not material. It doesn’t really hurt anyone.”

 Antidote question: “Does the apparent small size of this infraction make it any less fraudulent?”

 

Locus of responsibility: “This is not my responsibility; I’m just following orders here.”

 Antidote question: “Is the issue likely to cause significant harm, and are there few (or no) others able to act to prevent it?”

 

Locus of loyalty: “I know this isn’t quite fair to the customer but I don’t want to hurt my reports/team/boss/company.”

 Antidote question: “Am I being truly loyal to the company if I perform this task/operation/process and it undermines trust and credibility?”

Paraphrasing the immortal words of Glenda, the Good Witch from The Wizard of Oz, “You’ve always had the power to act on your values, my dear. You just had to learn it for yourself.”

“We are beginning from the position that we want to act.” Professor Gentile writes. “Therefore we are trying to answer the question: “How can we do so most effectively?”

Revenue: MiMedx Shows How to Fake It Till You Make It

Monday, 30 July 2018 02:31
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Suppose your company pioneered a product able to improve the health of millions of people. Suppose that over the past five years, you reported at least 50% year-to-year revenue growth. To cap it off, suppose Fortune recognized your company as the fifth-fastest growing public company in the US. How might your company’s revenue prospects appear to investors, and what would be the impact on its stock?

If you were prone to making understatements, you’d say the share price would increase. And that’s exactly what happened for MiMedx , a company that makes human skin grafts for surgical use, and whose market value once reached $2 billion. Then, in June, 2018, a load of financial poop went airborne, and traveled into the company’s twirling fan.

That’s when “the company said an internal investigation had shown that its reported financial results going back to 2012 were no longer reliable and would have to be restated,” according to a Wall Street Journal article, Highflying Medical Firm Falls to Earth, Its Sales Questioned (July 24, 2018). As of this writing (July 27), the market cap for MiMedx was under of $464 million. MiMedx’s president, Parker “Pete” Petit has resigned, and an interim executive now runs the company. His specialty: “restructuring troubled businesses.” I’m reminded of Icarus, yet again. Those ancient Greeks – they sure understood human foibles. Somehow, they did it without the benefit of social media, AI, predictive analytics, and all. Amazing.

Stories about companies that tanked after achieving soaring revenue seem commonplace. Often, it’s the result of scrappy competitors who saw an opportunity, and seized a cash cow that a company was contentedly milking. Sometimes, it’s the result of self-satisfied, complacent management, who paid little heed to oncoming trains that demolished their business strategy. “We’re going to get flattened? . . . I thought you said ‘fattened!’”

MiMedx suffered from none of these mistakes, and that’s part of the tragedy. “No one has suggested that MiMedx’s products are faulty,” the Journal says. According to a company statement, “[MiMedx] is operating its business as usual as it continues to grow, invest in its product pipeline, and focus on serving healthcare providers and their patients.”

“Business as usual.” A sound bite that analysts, customers, and prospective employees sometimes like to hear. But it turns out that there was a bit of revenue hanky-panky going on.

Well, a lot of hanky-panky – if the allegations are true. “A Wall Street Journal review of company emails, court documents and internal complaints, plus interviews with current and former employees paint a picture of a company seeking to grow at almost any cost.” Where have I heard this before? Sounds so familiar . . . Bells Cargo? . . . Fells Wargo? Help me out . . .

In the Wall Street Journal article, employees describe a potpourri of revenue inflation tactics. I can’t call them innovative – some have been around for decades – but what makes MiMedx especially disturbing is what happened to employees who blew the whistle. Among the techniques former employees described in The Wall Street Journal article:

  1. Channel stuffing. “MiMedx sometimes shipped more skin grafts than had been ordered, and booked them as sales . . . MiMedx sales records show the company recorded a shipment of 135 oversized skin grafts to a Las Vegas plastic surgeon’s office, which former employees said is way beyond the 10 or so smaller pieces in a typical physician order. The shipment was recorded at 8:00 pm on September 29, 2016, just before the end of a quarter. No one in the surgeon’s office had ordered the goods, according to a former employee of the office.””
  2. Browbeating the sales force. “What else can u ship by end of month?” read one message to a rep, which continued, “Need all u can put in today up to $100k if possible.”
  3. Booking consignment inventory shipments as sales. “Several former employees said that at times, near the end of a quarter, the company would book as sales some of the goods sent to hospitals on consignment but not yet used.”
  4. Mislabeling products for medical uses that receive higher reimbursement from insurance companies.
  5. Providing advisory services to physicians on how to maximize reimbursement for the company’s products.

Customers have the unfortunate habit of directing their ire about bad selling behavior toward salespeople. I understand. The front-line rep is a conspicuous target. Most customers never meet the Sales VP who hatched an incentive plan that encourages revenue production over anything else. They don’t hobnob with the VP of Human Resources who carries out heavy-handed sales management policies, especially the punitive firing part. If they did, they’d learn about the high-pressure manipulation under which salespeople work, and how that penetrates their customer conversations. They would understand that the objectionable behaviors salespeople display are almost always result from what management encourages, and ultimately, what employers pay salespeople to do.

But many salespeople are principled and resist adopting practices that compromise their morals and ethics. Or, violate the law.  But for some, pushback comes at a cost.  With MiMedx and Wells Fargo, management concocted penalties to ensure employees kept quiet, which allowed their devious machinery to continue operating. Both companies eventually poisoned themselves. Time will tell whether the dosage was lethal.

It would be easy to attribute the transgressions at MiMedx to good old fashioned greed, and leave it at that. Why attempt to fix what you can’t change?

But MiMedx illustrates a preventable problem. Four root causes:

  1. Flawed proxies. In the case of MiMedX, the flawed proxy was revenue growth, which investors often confuse as a sign that other things they covet are present: talented management making smart decisions, fast-growing industry or market, killer business strategy, great products, rapid customer adoption, loyal repeat customers. MiMedX demonstrates that revenue is a weak proxy because a growing company can be infected with problems, and revenue is easy to spoof.
  2. Misplaced and outsized financial rewards. As with Wells Fargo, when executive compensation plans put heavy emphasis on stock price increases, nobody needs to guess how managers will direct their energies.
  3. Ethics absent from corporate culture. Tom Tierney, a former MiMedx Regional Sales Director, described the company’s culture as “a mind-boggling level of sales and accounting irregularities,” which he characterized as a “win at all cost” company culture.
  4. Lack of safety for employees when reporting fraud and abuse. “MiMedx provided employees with a way to report issues that troubled them. Eight ex-employees said they were fired after they spoke up,” according to The Wall Street Journal.

There are plenty of sound reasons to pursue rapid revenue or market share growth. For companies that are first to market with an innovation, rapid revenue growth enables them to establish platform or production standards for an industry. It helps them build economies of scale, which raises barriers to entry. It gives them bragging rights as the market leader. All of these have positive strategic consequences. With MiMedx, the quest for rapid revenue growth appears to have backfired because its primary purpose became apparent: to line the pockets of the company’s owners.

I blame analysts and investors. We have better, deeper metrics than revenue growth to assess the future vitality of a company. It’s time to start trusting those numbers, because as we’ve learned by now, revenue is wicked-easy to fake.

Long-term Revenue Success Depends on Moral Leadership and Sound Ethical Conduct

Wednesday, 25 July 2018 23:19
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Elizabeth Holmes, CEO of Theranos, and John Zimmer, CEO of Lyft, have much in common. They are the same age – born less than two months apart in 1984. Both were accepted into prestigious universities. Holmes attended Stanford, and Zimmer went to Cornell. As undergraduate students, they were recognized with high academic honors. Holmes was a Stanford President’s Scholar, and Zimmer graduated first in his class at Cornell. (Holmes did not graduate.) Both hatched promising startups in Silicon Valley. Both became well known for their entrepreneurial talents, and for a time, both were well regarded by their peers.

But the difference in their results couldn’t be starker. Fortune named Holmes one of the World’s Most Disappointing Leaders. In 2016, US regulators banned her from owning, operating, or directing a diagnostic lab for two years.  And in June, 2018, a federal grand jury indicted her on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. You can find her bio under Leadership for Theranos, minus the stink. After all, there are only so many words you can fit onto a web page.

Zimmer, on the other hand, received the Cornell Hospitality Innovator Award in 2017, and his company’s market valuation reached $15.1 billion in June, 2018. Not bad for a company that began operating in 2012.

You can say that scruples in the C-Suite isn’t a prerequisite for generating profit and solid financial returns in a given year. And you can tell me that to be revered in business, a person doesn’t have to be a good human being. I’m inclined to agree. My argument is that the cataclysmic event that foreshadows business failure is the moment the CEO embeds deceit into corporate strategy. And when complicity becomes a condition for employment, the company’s fate is sealed. In this regard, you cannot find two more contrasting leaders than Holmes and Zimmer.

There’s a lot of digital ink devoted to “killer startup strategies,” and “must have’s” for revenue success. But too many articles concentrate on right now tactics. It’s fluffy marketing cotton candy engineered to induce a revenue sugar high, or simply to provide an adrenaline rush for the reader. A rarer find online is insight intended to benefit those with a planning horizon longer than Bryce Harper’s remaining time as a Washington National.

CXO’s can’t credibly plan beyond next quarter if moral and ethical conduct isn’t woven into their company’s cultural fabric. Yet, there’s a dearth of recognition regarding the business value of good ethics. I don’t understand why, given the hard landings we’ve seen. Wells Fargo, HealthSouth, Enron, Premier Cru, Pilot Flying J, Takata. Since I authored my first Sales Ethics Hall of Shame in 2013, over forty different companies have been inducted. Among those, many are defunct.

I see no end to the wreckage. Absent moral integrity, the revenue-now mania that infects the blogosphere, B-School curricula, leadership development courses, and popular culture compares to the Titanic crew getting finicky about how to position their deck chairs, and worrying about whether red wine will be available past April 15th. If business leaders intentionally incubate – or don’t avoid – ethical catastrophes, their strategic cleverness will plummet from on high, forming a deep crater on the revenue chart. Except unlike the Titanic, there’s no value in its recovery.

For long-term revenue success, integrate sound ethical conduct into the business. Here are eight characteristics of an ethical organization:

  1. An ongoing ethical premise for the enterprise. For what not to do, see Swanluv, or the Fyre Festival.
  2. Leadership that models ethical behavior.
  3. Audit controls that are rigorous, consistent, visible, and independent.
  4. Risk identification and mitigation, inside and outside the organization. A red flag: an executive who cops immunity by saying, “that type of thing could never happen here . . .” or, “we don’t hire those types of people . . .”
  5. Communications with staff about ethics that are clear, credible, bilateral, and ongoing.
  6. Safety for employees to report fraud, abuse, and ethical concerns.
  7. Processes for resolving problems exposed through evidence of ethical violations.
  8. Timely and effective action.

Holmes and Zimmer are both bright, ambitious business leaders, who hew to different moral interpretations. Holmes drove her company into the ground. Zimmer continues to create value for his employees, customers, and investors. The outcomes speak for themselves. A culture of sound ethical conduct is crucial for long-term success.

Announcing 16 New Inductees to the Sales Ethics Hall of Shame

Friday, 04 May 2018 16:52
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A business scam begins with collision of circumstances. A scheming opportunist crosses paths with a person prone to deception. The extension of trust sparks ignition. As Philip Broughton wrote in his book, Mastering the Art of the Sale, “the moment of maximum trust and cooperation is when the virus of dishonesty takes hold.”

A chain reaction follows where value flows from prey to predator. And the victims are not just buyers, but just as often employees, investors, and other stakeholders. As you will see in this article, some victims recover, but for others, the damage can be permanent.

Scammers have low barriers to entry. They need to concoct a scheme and have immunity to shame. Then, they must stack information to their advantage – a skill humans cultivate early in life. Finally, they need access to vulnerable people. Voila! A scam is born. Notably, investment capital isn’t always required.

Low barriers and easy access to victims are why there is a bottomless well of candidates for the Annual Sales Ethics Hall of Shame. And lately, defanged consumer protections have added to the community. Don’t get me started.

Companies inducted into The Hall satisfy three criteria:

  1. The primary purpose of the enterprise cannot be to sell an illegal product or service, like crystal meth or human trafficking.
  2. More than one employee must be involved in unethical activity. Scams involving a single, rogue employee are not eligible.
  3. The deceit must be systemic.

In 2017, a new-old revelation emerged from the muck: a network of executives and investors enriched themselves by exploiting women. They caused or allowed unspeakable human suffering. In particular, three “superstar rainmakers,” Harvey Weinstein (The Weinstein Companies), Bill O’Reilly (Fox News), and Paul Parilla (USA Gymnastics) – sat protected in their offices drawing outsize paychecks, smugly confident their behavior was unassailable for as long as they kept their cash machines humming. They were right, until they were outed by their victims. Business ethics aren’t available in a more revolting variety.

As these transgressions were taking place, Marketing and PR departments at these companies were cranking hard to keep the sunshine pumps running full bore. Their message to consumers and investors: Everything’s rosy. Profits are up! Just keep buying! Do you think Fox’s CFO didn’t maintain a General Ledger account titled Hush Payments to Victims of Bill O’Reilly’s Predations? As Fox stroked checks to victims, the CFO, the Assistant CFO, and the Internal Auditor all knew the annual amount down to the penny. So did the General Counsel, who wrote the contracts enforcing the victims’ silence. It takes a village to contain news that might harm revenue. As taxpayers, we all paid for O’Reilly’s shenanigans. Yep – I’d call that a scam.

The 16 inductees into the Sales Ethics Hall of Shame for 2017:

  1. The Weinstein Companies: “My motto is keep the peace.”

 

    1. Fox News: The company’s accountants paid victims $13 million to settle harassment claims.
    2. USA Gymnastics: Executives knew about Dr. Nassar’s sexual abuses weeks before they reported it.

 

  1. Bronze Star LLC: Sell now, deliver . . . never. “After Hurricane Maria damaged tens of thousands of homes in Puerto Rico, a newly created Florida company won more than $30 million in federal contracts to provide emergency tarps and plastic sheeting for repairs. Bronze Star LLC never delivered those urgently needed supplies.” (Business Insider)

 

  1. Mitsubishi Materials: Fake numbers. “The company revealed [in 2017] that workers had doctored quality data to make it appear that such products as rubber gaskets and copper products met customer standards when they didn’t.” (The Wall Street Journal).

 

  1. TIAA: AKA Transparency Isn’t Always Available. “TIAA says its 855 financial advisors and consultants operate in a commission- and conflict-free environment. But ex-employees counter that it pays bonuses when sales people steer clients toward more expensive proprietary products and services.” (Barrons)

TIAA spokesman Chad Peterson described its operations as ‘highly transparent and ethical.’ But 10 former employees told the New York Times ‘that TIAA managers doled out ambitious sales quotas and instructed reps to stoke clients’ fears, including those of a retirement shortfall.’” (New York Times)

 

  1. WalMart: Timely applies to supply chains, not consumer disclosures. Wal-Mart Stores was sued [in 2017] on behalf of consumers who said the world’s largest retailer sold products falsely labeled ‘100 % Egyptian Cotton’ from an Indian textile company for many years after it first became suspicious of their origin. Wal-Mart questioned the fiber content of Welspun India Ltd’s products as early as 2008, but waited until [2017] to halt sales of its mislabeled Egyptian cotton bed linens.” (Reuters)

 

  1. Zenefits: No license? No problem! In 2017, “Zenefits confessed that some of its insurance salespeople were selling products illegally, without legitimate state licenses. [Zenefits CEO] Parker Conrad had developed a software tool that allowed insurance salespeople to cheat on an online training course that’s required to receive state certification.” (Forbes)

 

  1. TD Bank: Plagiarizing the Wells Fargo sales fraud playbook. TD Bank employees across Canada “admit they have broken the law at their customers’ expense in a desperate bid to meet sales targets and keep their jobs. Hundreds of current and former TD Bank Group employees wrote to Go Public describing a pressure cooker environment they say is ‘poisoned,’ ‘stress inducing,’ ‘insane’ and has ‘zero focus on ethics.’ Some employees admitted they broke the law, claiming they were desperate to earn points towards sales goals they have to reach every three months or risk being fired.” (CBC)

 

  1. Tanium: A software demo using another customer’s live data? Sure! Why not? “For years, cybersecurity startup Tanium Inc. pitched its software by showing it working in the network of a hospital it said was a client. That and other efforts helped the company grow quickly, notching a valuation of $3.5 billion and a big investment from Andreessen Horowitz, one of Silicon Valley’s most prominent venture firms. But Tanium never had permission to present the demos, the hospital said, meaning a company selling security actually was giving outsiders an unauthorized look at information from inside its customer’s system . . .

To drive sales, co-founder and Chief Executive Orion Hindawi designed a presentation that he said showed his company’s software running inside a client. The system in the demo belonged to El Camino Hospital, a nonprofit community hospital based in Santa Clara County, Calif. He and his staff gave the presentation hundreds of times, from at least as early as 2012 through mid-2015, according to people familiar with the matter and three demonstration videos posted online by Tanium and its resellers. ‘The hospital did not authorize desktop management data or other information to be used in any product demonstration and was not previously aware of these demonstrations or videos,’ El Camino Hospital said in a response to inquiries by The Wall Street Journal.” (Wall Street Journal)

 

  1. SunRun, Inc., and Solar City: The big number they report is the CBC – Contracts before Cancellations!

“The SEC is investigating [SunRun and Solar City] because it believes the companies are not being as transparent and forthright as they need to be in disclosing their rates of cancellations, i.e., how many buyers rescind their agreements prior to installation. The cancellation rate affects the value of the shares of the solar companies because that cancellation rate is an indication of growth potential and whether the revenue stream is subject to further fluctuations.

At SolarCity, cancellations reached 50% in 2016, just before Tesla’s acquisition.  Sunrun had a cancellation rate of 40%. Some solar-energy companies have recently disclosed in public filings and earnings calls that increasing numbers of customers are canceling, but the companies have provided few details about the number of cancellations or their impact on the companies’ business.

The door-to-door sales [for residential solar energy] have become problematic because of some of the tactics used.  For example, one customer decided against a Sunrun system and called to explain that she was not interested.  The company indicated that she already had a contract and could not cancel.  She did not recall signing a contract, but the company pointed out that she had checked a box on the sales rep’s iPad and that was the contract.  Known as fraud in factum, this is a ploy often used to get customers committed.  The customers believe they are simply checking a box for the sales rep to show that there was a demonstration.  The checked box is actually the signature for a contract.  The customer is entitled to set aside the agreement when there is fraud in factum.  The customer was so taken aback by what happened that they decided to forget about solar panels entirely.” (Cengage Learning.com, Wall Street Journal)

 

  1. Fyre Festival: A start-up specializing in separating fools from their money. “Billy McFarland sold elite millennials (and his investors) on an ultra-luxurious ‘Coachella in the Bahamas,’ but the much-ridiculed fiasco that actually took place in April derailed the 25-year-old serial entrepreneur’s checkered bid for moguldom.” (Vanity Fair)

“The endeavor has also become the focus of a criminal investigation, with federal authorities looking into possible mail, wire and securities fraud, according to a source with knowledge of the matter, who was not authorized to discuss it.” (New York Times)

 

  1. Outcome Health: Baking the numbers. Outcome Health installs video screens in doctors’ offices and offers pharmaceutical companies the opportunity to pay for advertising aimed at patients. The company accepted around $500 million from investors. In May, 2017 the company had a $5.5 billion valuation, and venture capitalist Bill Gurley tweeted that Outcome Health CEO Rishi Shah, was “the real deal.”

“Somewhat less real were aspects of some deals Outcome cut with pharmaceutical advertisers, say former employees along with several advertisers. Interviews with these people as well as internal documents and other material from Outcome reviewed by The Wall Street Journal show how some employees misled pharmaceutical companies by charging them for ad placements on more video screens than the startup had installed.

“Some Outcome employees also provided inflated data to measure how well ads performed, created documents that inaccurately verified that ads ran on certain doctors’ screens and manipulated third-party analyses showing the effectiveness of the ads, according to some of these people and documents.” (Wall Street Journal)

 

  1. Uber: Trusting the honesty of thieves.

“Hackers stole the personal data of 57 million customers and drivers from Uber Technologies, Inc., a massive breach that the company concealed for more than a year. This week, the ride-hailing firm ousted its chief security officer and one of his deputies for their roles in keeping the hack under wraps, which included a $100,000 payment to the attackers. Compromised data from the October 2016 attack included names, email addresses and phone numbers of 50 million Uber riders around the world. The personal information of about 7 million drivers was accessed as well, including some 600,000 U.S. driver’s license numbers.

At the time of the incident, Uber was negotiating with U.S. regulators investigating separate claims of privacy violations. Uber now says it had a legal obligation to report the hack to regulators and to drivers whose license numbers were taken. Instead, the company paid hackers to delete the data and keep the breach quiet. Uber said it believes the information was never used but declined to disclose the identities of the attackers.

“None of this should have happened, and I will not make excuses for it,” Dara Khosrowshahi, who took over as chief executive officer in September, 2017 said in an emailed statement. “We are changing the way we do business.” (Bloomberg)

 

  1. Equifax. Profits over all!

“It took six weeks after credit reporting agency Equifax found out it had been hacked for the company to notify the 143 million customers whose private data was at risk. Following what might be the worst data breach of the past decade, such a long delay is shocking — but given the lack of regulation it’s not all that surprising.

“It hasn’t helped that Equifax has handled the situation incredibly poorly. High-level executives sold off almost $2 million of the company’s stocks after finding out about the breach in late July, weeks before they went public about the hacks.  (Vox.com)

 

  1. Unroll.me. What’s mine is mine, and what’s yours is mine.

“Unroll.me, a free service to unsubscribe from email lists, can scour people’s inboxes for receipts from services like Lyft and then sell the information to companies like Uber. The data is anonymized, meaning individuals’ names are not attached to the information, and can be used as a proxy for the health of a rival.

Slice Intelligence , a data firm that uses an email management program called Unroll.me to scan people’s inboxes for information, faced an outcry [in 2017] after The New York Times reported that Uber had used Slice’s data to keep tabs on its ride-hailing rival Lyft.

After the revelation, angry users demanded that Unroll.me explain why the company had gone into their inboxes and betrayed their trust. [In 2017], Jojo Hedaya, the chief executive of Unroll.me, apologized in response to the surprised reaction to a practice that he said the company had been open about in the past.” (New York Times)

See something? Say something!

For more information, please see Whistleblower Protection in the United States. or the US Federal Trade Commission (FTC) website

And, if you have a candidate for this year’s Hall, please email your recommendations to the Sales Ethics Hall of Shame: SEHOS2018 (at) contrarydomino (dot) com.

Past inductees in the Sales Ethics Hall of Shame:

2016, 2015, 2013

Do Salespeople Lie More Than Other Professionals?

Tuesday, 29 August 2017 17:03
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Compared to other professions, are salespeople disproportionately prone to lying? To reveal the answer, I searched online for most dishonest professions, and was rewarded with several surveys. One study conducted in 2014 listed the top 10 least honest (the number following indicates the percentage of survey respondents who believed the profession trustworthy):

Lobbyists – 6%
Members of Congress – 8%
Car salespeople – 9%
State office holders – 14%
Advertising practitioners – 14%
TV reporters – 20%
Lawyers – 20%
Newspaper reporters – 21%
Business executives – 22%
Local office holders – 23%

Go us! Of the top 10 most dishonest professions, biz-developers hold only three slots – lobbyists, car salespeople, and advertising practitioners. Still, as marketing/sales professionals, we’re over-the-top touchy about our honesty image.

Earlier this month, a writer on LinkedIn asked whether it’s acceptable for salespeople to lie. He felt that lying seems the new normal in selling, and he invited others to weigh in. Some opinions were as malleable as a steel girder:

  • “My answer is short and simple – no.”
  • “A person is either honest or a liar. The Truth is not conditional. Half-truths are lies.”
  • “Never acceptable. Persuasion is a positively reinforced message through fact and data driven decisions.”
  • “just don’t do it.”

These thoughts outline an archetype: the impeccably honest salesperson who never lies, never distorts, and never withholds facts and information. Unfortunately, that archetype represents an impossibly high bar. Try any of them out on a newbie rep. Chances are, he or she will flunk day one on the job. Same for days two and three – assuming they get that far. And experienced reps will just roll their eyes. “Get a grip, pal!”

“Just don’t do it.” If only things were that simple. For hundreds of years, the meaning of honesty has been debated by legal scholars, judged in courts, and mulled by philosophers. Honesty is difficult to define. One reason we often pad the word with adjectives: pure honesty, partial honesty, brutal honesty, radical honesty, morally honest, and mostly honest. The same for truth and lies. Few would argue that white lies aren’t acceptable, or that honest facts aren’t used for fabricating illusion.

One person’s bald-faced lie is someone else’s minor distortion. Should things be any different in selling? Is there something magical or different about sales that invites draconian edicts like these? Emphatically, no. Lying appears the “new normal” in selling because by these standards, lying is . . . pretty normal. And it’s hardly new.

The advocates of “no lying” need to abandon their idealized interpretations of truth purity because they are divorced from selling reality. A major reason is that the default rhetoric of marketing and sales tends toward certainty – especially for describing outcomes and results. We favor concrete terms like definitely, will, guaranteed, and proven. No rep wins the boss’s approval by adopting mealier – but more honest – terms like probably, possibly, could, and might. I challenge anyone to find a Chief Sales Officer willing to trade off persuasive power for a sworn commitment to tell the truth, the whole truth, and nothing but the truth.

“Never acceptable.” If marketers followed pure honesty to the letter, the first thing on the chopping block would be storytelling. I have yet to read one sales story that hasn’t been factually creative, at best. The second thing to go would be “case studies,” since they are never as objective as the name implies.

Admonishing salespeople to “never lie,” only creates dissonance and goal conflict. Managers manufacture failure by insisting their reps behave “100% honestly,” while holding a hatchet over their necks as motivation to achieve goal. Inevitably, the rep must choose. And sadly, saying “I got fired for doing the right thing for my customer” doesn’t merit an invitation for a second job interview. Sales Culture Training 101: “No matter what, make quota.” Message, received.

That’s not the only problem. When “never lie” absolutism exists, ethical risks lurk nearby. Absolutism crushes debate and discussion. And when it comes to honesty and ethical behavior toward customers, nuanced conversations are sorely needed. The problem with these LinkedIn comments is that there’s no room for interpretation.

At its most atavistic, selling is persuasion. And persuasion requires distortion. Distortion of fact, distortion of meaning, distortion of reality and urgency. Over beer, we can hold a simpatico conversation to parse the differences between distortion and lies. We can exchange information about what we allow ourselves to do and say when representing our companies, and the honesty lines we refuse to cross. We can talk about the influence of David Hume and Diogenes. One thing is certain: neither our honesty interpretations nor our ethical boundaries will be identical.

According to these absolutists, distortion and lying are equivalent. My recommendation: don’t follow their advice. If you want your customer to take action – say, for example, to buy from you and not from your competitor – you must make sure they believe that it’s fully in their interest to do so, and that ordering now is a priority. You can’t do that without tweaking reality to promote your point of view.

For salespeople, balancing honesty and persuasion means walking a hair-thin line. Same for ego and empathy. All are needed for success, but they collide and clunk against one another. “It’s a miracle anyone can do this job,” Philip Broughton wrote in his book, The Art of the Sale. No joke.

I am not a proponent of lying as a sales tactic. I am not advocating deceit and misrepresentation as a business practice. And I am not saying that anything goes as long as it results in revenue. Far from it. I am saying that marketers and salespeople should strive for honesty and high ethical standards in their professional conduct. I am also saying that to be effective, salespeople need a rational basis for ethical consideration, and “never lie” undermines that goal. We need salespeople who are strong critical thinkers, not sycophantic believers.

A personal confession: I have made sales lies. Repeatedly. Here are three:

1. “I can’t offer you a lower price.” Lie. Prices are quite easy for vendors to massage, and rarely – if ever – is it impossible to offer a lower price, as “can’t” connotes. Customers know it. Everyone knows it.

What’s more truthful? How about, 1) “it’s not convenient for me reduce my price,” or 2) “if I allow you to buy at the lower price, my profit margins will erode, and our CFO will get angry with me,” or 3) “I get higher commission selling at list price, and I need the income this quarter.”

2. “Buying my company’s product is the best use of your resources right now.” Lie. I’ve never been 100% sure when using superlatives, yet I still use them. Besides, with this lie, I have rarely had full visibility into every project a company is considering anyway. So I’m not being fully honest when making the claim.

What’s more truthful? 1) “based on my analysis of the numbers you provided me, you should probably meet your expected financial return,” 2) “My competitor’s product does pretty much the same thing, so you can’t go wrong choosing either one of us,” 3) “I understand why you want to implement my proposal now, but based on what I have seen, you’d be much better off solving [name of project that my company doesn’t provide a product for].”

3. “Our machines have highest performance rating in the industry.” Lie, by omission. But still a lie. Is highest performance rating based on MTBF (mean time between failures)? Longevity of components? Quality of output? All of these? And where was the benchmarking performed? – In house? Through an objective third-party? And there’s that superlative problem again: highest.

What’s more truthful? 1) “We have the highest performance rating in one category.” 2) “We performed the benchmarking in-house.” 3) “Our in-house test results always look better than what you will achieve in the field.”

I harbor no remorse for committing any of these. But if you’re into “never lie,” try some of the more truthful statements with your customers, and let me know the results.

I want to head off a concern right now. You might already be thinking, “These are trivial lies. They are not the kind that get anyone into trouble.” Fair point. But then I’d urge you to identify what type of lies really get your dander up. Lies like telling customers, “We have offices in 28 states,” when those “offices” are actually indirect employees working virtually from their homes? Or, my favorite, “Our software has over 48 installs,” when two-thirds of them are dormant beta accounts that have made no commitment to purchase? Smile, wink. These statements are kinda, sorta true, and because of that, they stink around the edges. I don’t like them. Mostly, I get annoyed with the CMO’s explanation, which often begins, “Well, technically . . .”

Maybe we need a new taxonomy for marketing lies. Here’s what I propose:

Class I lies: run-of-the-mill marketing fluff, flamboyant writing, and expected braggadocio. The claims prospects are already jaded to. “Four out of five dentists recommend sugarless gum for their patients who chew gum.” Or “We’re the industry leader!” There’s really no foul for broadcasting any of this stuff. If any prospect bases a purchase decision solely on such claims, well, shame on them.

Class II lies: deeper, more egregious transgressions. Stuff that generates fines, lawsuits, and bitterly negative Yelp reviews. Example: “Our brain games help users achieve full potential in every aspect of life,” which got Lumosity fined by the FTC. The FTC asserted there was no scientific proof to substantiate that claim, along with others Lumosity made.

Class III lies: I call these BHAL’s (Big Hairy Audacious Lies), because of their potential to directly and significantly influence a customer’s buying decision. Lies that obscure the true cost of procurement or operations. Lies that patently overstate the capability of a product, or promise a result that can never be delivered. The Fyre Festival debacle resulted from a series of Class III lies.

If your business objective is to instill ethics and integrity in your biz-dev organization, don’t fret over Class I lies. Just keep your eye on them to make sure they don’t become more serious. Propagating Class II and Class III lies, on the other hand, substantially increase business and stakeholder risks, and they must be carefully managed. Here are some important practices:

  1. Recognize that honesty and truth are subject to interpretation, and there’s often ambiguity in selling situations.
  2. Model ethical, honest behavior from the top echelons of the company. Executives who are not vocal proponents, or who are not rigorous about their own honest conduct cannot expect any different from employees.
  3. Encourage internal discussions among staff about what they encounter in sales and marketing situations, and how they make choices.
  4. Offer guidelines to staff when rules don’t fit. Avoid vague requests like “don’t be too salesy,” or “don’t over-promise.” Instead, ask your staff to think about what’s ethical in selling, and to always consider, “what is the right thing to do?”
  5. Don’t penalize honesty by creating conflict. It happens more than companies realize. If Wells Fargo taught us anything, it’s that a salesperson should never have to decide between being honest with customers, or keeping his or her job.
  6. Provide clarity for what’s restricted by documenting them in writing, and reviewing them routinely with your staff. The Class III lies that significantly influence customer decisions, that directly contradict product specifications or contract terms, that inflate or falsify an employee’s credentials. The restrictions should also include what can – and cannot – be said about competitors, performance benchmarking data, pricing commitments, and other financial disclosures.

P. T. Barnum, one of the greatest salespeople who ever lived, was adamantly against fraudulent selling, but he recognized the subtle nuances about honesty and lying:

“An honest man who arrests public attention will be called a “humbug,”‘ but he is not a swindler or an impostor. If, however, after attracting crowds of customers by his unique displays, a man foolishly fails to give them a full equivalent for their money, they never patronize him a second time, but they very properly denounce him as a swindler, a cheat, an impostor; they do not, however, call him a ‘humbug.’ He fails, not because he advertises his wares in an [outrageous] manner, but because, after attracting crowds of patrons, he stupidly and wickedly cheats them.”

As Broughton observed, “There is evidently a line here somewhere between humbug and deception, between Barnumesque hype and outright lies, between reading your customers to give them what they need and exploiting their weakness to your own advantage.”

I hope the “never lie” proponents figure that out.

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