Consulting Ethics

    When a professional services firm is hired to be a trusted advisor, that firm needs to keep in mind that the client’s interests may conflict with those the firm.  A consultant needs to always ask if they’re serving the client’s best interests.

    Ethics in ConsultingToday I spoke to Lew Sauder, author of Consulting 101: 101 Tips for Success in Consulting about Ethics in Consulting:

     

     

    1 – What types of conflict of interest issues are most common for a consultant?

    • Just for comparison, let me describe a scenario (asking friend for marriage advice)
    • Same type of scenario can present itself for a consultant
    • Software package analysis (firm is asked to assess a client’s legacy software system)
    • Firm may have an incentive to recommend replacing it all and hiring them to do it

    2 – What other types of ethical considerations should be considered

    • Honesty is of the utmost importance.
      • I was in a situation where my firm was proposing on a project with a prospective client.  We needed a finance expert to help with the proposal and with the project if we won it.
      • We recruited him to help with the proposal process with the condition that he would be hired full time if we won the contract
      • During the proposal presentation, the client asked our finance guy if he was a full-time employee of our firm.  He replied yes.
      • After the meeting, our firm’s executive commended him for lying.  He justified that it was just a little white lie and he would be an employee if we won the work.
      • Being an employee of a firm rather than a contractor is a big issue for many clients.  They often feel that they’re hiring the firm’s culture along with the individuals.  There is also an implied commitment with a full time employee that they don’t see with a contractor.
      • Regardless of how important that commitment is to the firm. They need to respect the client’s wishes and be honest with them.
      • I left that firm not long after that.
    • Another issue is personal relationships – either dating someone within your firm or a client employee.
      • I worked for a large firm that did not discourage dating within the firm.  I knew firm employees that were married to each other.
      • It’s not necessarily an ethics violation to date a client employee.
      • But you always want your supervisor at the firm and at the client to be aware – full disclosure is the best bet

    3 – How might a personal relationship with a client be an ethical issue?

    • If that person has any authority, they could influence decisions to have your firm get additional business
    • Even if they aren’t in a position of authority, there may be concerns of partiality where the employee could share information that would give your firm an unfair advantage.
    • There’s also the issue of a nasty break up causing problems.  It’s not as much of an ethics issue as a distraction.  The firm could fear that if there is a nasty break up, they could lose business.  The firm may want to limit those distractions

    4 – On the subject of the little white lie, many professionals would just consider that harmless non-truth.

    • And maybe it was.  If we had won the contract and hired this person, the client may never have known the difference and no harm would have been done.
    • But I also think it becomes a slippery slope
    • Once you get away with one lie, the bar tends to get lowered.  You think ‘that’s my limit”
    • But you may push the envelope a little here and there and figure out how to justify it.
    • I also remember thinking that if he was that willing to lie to a client, what would stop him from lying to me.

    5 – Have you ever been put in a situation where your ethics were tested?

    • I haven’t so much had my ethics tested as much as they were questioned.
    • In the 90s the firm I worked for performed a lot of package selections – Y2K
    • One client was selecting between 2 software packages and we were assisting.
    • When the client picked one over the other, the losing firm accused our firm of influencing the decision.
    • They asked me “Isn’t it true that you have a special partnership with them”.  It was true, but we had the same relationship with the losing firm and several other software companies to partner with them.
    • I don’t know if I was able to convince them
    • It bothered me for a long time that they thought I had been unethical and influenced a client’s decision

     

    6 – Do you think ethics is a major problem in professional services firms?

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    • For it to  be a big problem, there would have to be a lot of collusion
    • If you’ve ever read a John Grisham book about the legal profession, you would believe they charge you for hours they don’t work and expense lunches and fancy trips to their clients
    • The problem is the slippery slope
    • If you and your co-workers agree to a small ethical infraction – maybe expensing a lunch to the client that shouldn’t have been.
    • Then someone sees that and either does it again, or expenses a more expensive dinner.
    • People push the envelope each time and the incremental changes eventually get out of hand.
    • I think there are some firms out there that have a culture of bad ethics and there are certainly some individuals.
    • The real problem is when those individuals group together and permeate a firm’s culture
    • When a new person is surrounded by many of those people, they’re conditioned to think that’s how it’s done.

    7 – What advice would you give to someone caught in an ethical dilemma?

    • Establish a personal standard that you won’t violate
    • Always ask if what you’re considering is in the client’s best interests
    • If someone asks you to do something you’re not comfortable with, you need to speak up.
    • Verify it against the firm’s code of ethics – most large firms have them published.  If you have any question, take the issue to a superior.  And if it’s your superior that you think is the problem, take it to HR.
    • It’s not always a black and white solution
    • If they understand that this is a dilemma for you, they’ll probably back off or explain how it might be ethical.
    • But beware of rationalizations and excuses…
    • If you see that you’re getting fewer opportunities, you have some options:
      • Approach your superior and address the issue head on – there may be other reasons
      • Consider a transfer to another area
      • Move on – if their ethics don’t match yours, then it’s probably not a good fit

    8 – Aside from the conflicts of interest and personal relationships that you’ve mentioned, what other ethical dilemmas are common for consultants?

    • Owning a client’s stock.  I once worked for a big 4 firm that had both consulting and accounting practices.  We were required to complete a form annually that confirmed that we owned no stock in any of our clients.
    • Depending on the information you’re privy to, that’s not a bad idea.  If you’re in a situation to get insider information on their strategy that would give you an unfair advantage, it’s a good idea to steer clear of owning their stock.
    • Another concept is client confidentiality.  If you consult for firm A and you next door neighbor works for their competitor, you’re better off not even telling them who your client is.  If that can’t be avoided, you definitely need to protect your client’s confidentiality.
    • Another situation is when you’re well beyond your expertise.  If you’re afraid to tell the client you don’t have expertise in an area and give them bad advice.  They could implement a plan that causes damage to their company.
    • Finally, if your client is engaging in unethical practices, you need to speak up.  This is partially what happened in the fall of Arthur Anderson in the Enron Scandal.  They didn’t want to lose Enron’s lucrative business, so they were complicit with their “creative accounting”.  As a result, both firms went down in scandal.
    • Finally, I’ve seen the situation where the consultant wants to develop expertise in a certain area, so they’ll recommend the client adapt that technology or approach.  This lets the consulting firm develop that expertise at the client’s expense, when it may not have been the right solution for the client
    • It always comes down to keeping the client’s best interest in mind.

    9 – Do you think ethics can be taken to an extreme?

    • I do believe that there are some out there that are almost self-righteous about successful businesses – a company makes a large profit and they’re made out to be the bad guy.
    • We live in a capitalist society.  We’re supposed to be profitable.  And we shouldn’t be apologetic about it.
    • If a client is willing to pay me a million dollars for helping them realize 100s of millions in future revenues, I think it’s a win-win for both of us.
    • Consulting can be a very lucrative industry.  If you’re taking risks and being honest with your clients, putting their interests first, there’s nothing wrong with being successful.

    10 – Any final thoughts on Consulting ethics?

    • I once had an issue with my car where I took it into my auto repair shop.  They fixed it for about $400 and it worked fine.
    • About two months later, another issue came up and I took it back in.
    • They told me that to fix it would be another $400.  And then they added that their advice is that it may be time to replace the car.  If they do this fix, there’s no guarantee that these fixes won’t be more frequent and they didn’t feel right just continuing to charge me.
    • I ended up buying a new car.
    • That was 10 years ago and I still take my car to the same place.
    • They could have legitimately continued to charge me for repairs and I would eventually determine that it was time for a new care.  But because they were honest and had my best interest in mind, they developed a trust with me which I’ve repaid with loyalty.
    • If consultants keep that same mind set with their customers and always think about what’s best for the client, it will usually be more profitable in the long run.

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    Music: Kevin MacLeod – Incompetech.com

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    Consulting 101: 101 Tips for Success in Consulting

    Consulting 101: 101 Tips for Success in Consulting

    Consulting 101 provides you with 101 useful tips to optimize your professional performance and jump-start your consulting career with success.


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