Archive for the ‘Ethics’ Category

Trust is the foundation of any good business relationship or alliance. Typically, parties enter into these relationships with high hopes and with a level of trust and respect for the other party. However, trust can easily be lost if you don’t hold up your end of the bargain or if you become difficult to work with.

I realize that I’m mentioning an obvious point, here. After all, of course you build better relationships when there’s trust. But just because something is obvious doesn’t mean that it is a standard. Take this case in point.

Two allies are working together on a 2-year project that is already 1 year past due. The reason for the blown deadline is that one party won’t listen to the other and works independently without consulting with their ally. As a result, pieces of the project are completed incorrectly, and the work has to be undone, redone, and resubmitted.

The party that is responsible for the delays sends an email to the other ally, stating that they need the other ally to trust them. Huh? How is it that one would expect to be trusted just simply by asking for it. They lost the trust over the course of the project by not fulfilling their obligation to do the job they agreed to from the start.

Seriously, trust isn’t something you can ask for; it’s something you have to earn. Good effort and rationalizing mistakes won’t gain trust, either. You have to hold up your end of a deal, fulfill your commitments, meet deadlines, pay up as you promise and so forth in order to earn, gain, or keep trust.

Bonuses must have an upside and a downside.  Do a great job and win big enough to make you stay with the firm.  Do a poor job and the bonus and salary structure should reinforce  either changing jobs or rethinking/retooling your career.  Easier said than done.

In the case of publicly-traded firms in the financial sector, all that was created was an upside.  Sell and makes millions, even if what you sell is detrimental to the firm.

Wow…I love technology that pushes us to think bigger. If this…then what’s next….!!!! Blood flow to the brain…who would have thought!

US Republican Senator Charles Grassley said that he would feel better if AIG’s top managers were to take a page from Japan’s corporate management book.  In Japan, failed execs apologize, step down, and oftentimes commit suicide.  The suicide part of the equation hit a raw nerve with many.  Grassley, unfortunately, misdirected his anger. The employees of AIG, who were to receive $165 million in bonuses, are receiving contractual bonuses, good or bad, like it or not, using funds supplied to the firm by congressmen (in the house and senate) who did not do their homework, or worse yet, ignored facts that were public knowledge back in May of 2008. This is the US Congress’ problem, not AIG’s.  But our government is so used to spinning everything, that they can’t give us straight talk.

Now today, members of our US Congress, in a backlash for their own errors, want to tax individual bonuses for those working in firms that received $5 billion or more. This leadership back peddling does not exemplify leaders who are forward thinking and accurate in their execution, but leaders who believe that they know it all and then play politics when the house of cards falls. If mismanagement of taxpayer funds is the crime deserving punishment, then we should tell congressmen that they, too, should say they are sorry, give back their income, and then fall on their swords. Whether we’re talking about an annual income of one hundred thousand dollars or one million, the rationale should apply to everyone in America if the congressmen are as “American” as they espouse to be in the media.

Here’s the history. On May 8, 2008, AIG disclosed in an SEC filing their plan to pay bonuses.  This information was available while congress deliberated about saving AIG. No smoke and mirrors. On Sept 16^th, $85B was approved as a two-year loan to the institution. In doing so, congressmen made the assumption and the case that AIG needed the support to cover insurance obligations, without completely understanding the complexity of AIG as a corporation, and how some of the funds had to pay payables such as START. Congressmen did not do their homework; if they had, they would have realized that AIG had to continue repaying any obligations it had on its books, not only the programs that congressmen wanted supported.

Mirror this with TARP funding. In haste, congress approved the TARP package to help ailing firms to shore up the economy. In the end, the financial firms that received the funding have given out bonuses in the billions such as Goldman Sachs Group, Morgan Stanley and Merrill Lynch’s distribution of over $36B in bonuses. That’s 173,000 employees without including JP Morgan Chase Citi Group and Bank of America. Don’t forget there are other bonuses that have not made the news.

The reason this unfolded as it did, is that the funding came from congress with no detailed plan as to how the funds should be spent, only the inference that the funds should be allocated to shoring up the housing market. This was a congressional error in leadership as both in the understanding that if you give a firm money it’s tough to ascertain what money goes where and how. Some funds go to operations, some to sales and marketing, some to conferences, some to salaries. Most Americans knew this, so why didn’t those in congress?

What’s even more ironic is the same congressmen also passed, along with President Obama, another trillion dollars worth of spending with 8700 earmarks. In many cases, the earmarks are far worse than the million-dollar bonuses. The only difference here is that theft, and there will be theft, will happen in small amounts all across the country as friends give out deals to friends, quotes are elevated and policy is changed to fit who ever the legislature favors. In my home town of Syracuse New York, our city council just witnessed a NO-BID $8+ million-dollar renovation project for Syracuse’s Hancock International Airport. To allow this to happen, the council also voted to change limits on other policies so that the vendor could take the project. They changed the law to fit the funding?!?!

Lastly, since Rep. Barney Frank is very vocal about most of these policies, then he, too, must fall prey to telling the world he’s sorry , returning of funds, etc. Rep. Frank had his hand in the development of the policy that directed Fanny and Freddy to purchase additional home loans that spurred the housing boom, that created housing wealth, that allowed individuals to pull out “equity” to buy pools, furniture,  vacations, and to invest in the market, that assisted in AIG’s growth and helped to allow Credit Default Swaps to work and CDO’s to be created. And even if some people argue that he didn’t have a hand in some of these problems, he played his part, and in doing so, accepted tax payer money as income and used tax payer money in an inappropriate manner. I don’t have to add, but I will, Rep. Frank pushed for TARP, the Stimulus package and the recently pork-filled “government continuation bill.”

Now add the new 90% SBA loan backing and the $300B in funding to stabilize the mortgage industry, and I believe Obama’s administration and congress are going to be condemning a lot of other executives and employees in years to come. Our own American three-ring circus.

The question is, will congress act in haste through the next 3 years and 9 months and in each judgment error they make will they act as irresponsibly as they are acting today? Congress might even want to have a conference outside of Washington at a 5-star resort to discuss the issues.

This is all just mismanagement, and if it’s to ever stop, we need to require that those in congress slow down, spend more time thinking and less time in front of the cameras, and figure out what the best strategies are to take, including the TACTICS on how the policies should be executed. Remember, these people are PAID TO THINK and they are doing a poor job on both sides of the aisle.

I expect more from our youth than I’m seeing from our public servants. I’m expecting an “I’m sorry” and a return of their paychecks!

I love all news coverage given to the, soon to be dolled out bonuses of $165 Million to AIG employees.  I love the coverage because this is actually old news.  AIG’s management knew that they’d be handing out bonuses to employees as far back as last year. The reason, the bonus contracts were already signed and the ink dried.  Besides, senior management had to use these numbers when creating projections as they when they requested TARP funds. (Bonuses may have been rolled into other expenses to defray comments or lending restrictions.)

Remember, they are financial institutions run by the very same people who were to be receiving the bonuses.  This required the management to be very clandestine in developing tactics so that their expected bonus income would not be in jeopardy.

It’s the same tactic Merrill Lynch & Co.  employees used when they issued $3.6 billion in bonuses.  Keep quiet, have secret meetings, sign the checks and then see what Cuomo or any other government official can do to rescind the payments. Their belief was, distribute the money and then see how the game plays out.

So far the tactic’s worked for Merrill’s former employees.  Bank of America won’t release the names of the recipients and the global public heard little about how or if the bonuses will be affected. AIG is using the same coaching handbook.

What’s even more disturbing is that Obama and Geithner only released this information today. Hours before payment, Before anything could be changed in the loan provisions for AIG. To believe that Obama or Geithner had no knowledge of the situation is the equivalent of a physician not knowing that the heart pumps blood.  It’s the mechanics of how B of A, Chase, Merrill, Bear Sterns, Goldman Sachs, Morgan Stanley and all the other firms hired and fired their staff. Obama and Geithner had to have known this information otherwise Geithner is useless in his position and Obama is not connecting the dots. Government and AIG all participated in the charade.

So the next time you hear about the mismanagement of funds in either the stimulus package or the TARP funding, ask yourself the following questions.  1. How long ago was the information being released actually known about and by whom? 2. What decisions, both strategic and tactical, did those managing the process make to allow this to happen?  3. What would it have taken for those that are PAID TO THINK to have stopped the wasteful spending of taxpayer money from happening in the first place?

It’s my belief that those in government are PAID TO THINK.  Their job is not to build the roads or work in the schools but to think things through all policy well enough so that the future is better than the present.  This is not what’s happening at least for everyone who sitting on the side lines watching not just the $165 million convert to paychecks for a few, but the billions that have already traded hands.

This will happen again!

NOTE: (Over 70% of the worlds largest public companies do not have this bonus structure!)

Where does the responsibility lie when a customer wants to do business with a certain company? Is the person who’s been a customer responsible for keeping track of records to insure accuracy for future business or is it the responsibility of the firm that has conducted the business in the past, and profited from the exchange, to keep these records.

One might suggest it’s the responsibility of the buyer. They make the decision to use the vendor and therefore they must keep the records especially in a B2B relationship. In a B2C the clarity as not as clear. Or at least in my opinion.

In this day and age, organizations, once given personal data including name, address, and phone are more prepared to take care of purchasing records than the average consumer. Especially on larger size purchases. For that matter if a purchasing discount card is used as a tracking method. The technology exists.

In both cases there is a need for someone to take responsibility for their record keeping however when the two records don’t match then someone must step up to the plate.

Case in point. For the past 3 years we’ve been purchasing mulch from a company called local garden center. They’ve charged about $25.99US for yard and about $40US for delivery.

This year I called for another 5 yards as our records in our CRM said we purchased $180 US for 5 yards plus delivery. This year when speaking with one of the employees, she said that her records say that we purchased not 5 but 6 yards.

She should be right. She’s holding the invoice for last year!

As promised the firm delivered the mulch and we started to work to beat a rain storm headed our way. As we were finishing up we still had quite a large pile of mulch sitting in our driveway. At least a yard.

Not wanting to be wasteful, we bagged up the goods and decided call the company about the extra goods. We’d offer to bring it up to the store and they can then give us a store credit for $20-30. Think about it; $20-$30 is a small amount of money, especially when you consider that the client would stand to make several hundred dollars off the two trees we wanted to purchase for our yard.

Besides, the only thing we can do right now is send the goods to the dump!!! What a waste of money and energy used to produce the mulch.

The first person on the phone could not help me so I was transferred. The second person who answered was no use. The third person, the person who told us to buy the 6 yards versus 5 yards of mulch, finally answered the phone. During this telephone tag we also looked up last year’s credit card transaction and there was a $180 charge on our card. Exactly 5 yards worth. When I told the vendor’s employee this, she said that she would not take back the goods. In essence we should trash it.

The whole experience left a bad taste in my mouth for what’s right.

Even though there is a balance that must be kept, here are some rules I would recommend.

* Small purchases B2C (soda, candy, shirt) both parties must keep records.

* Mid to large purchases B2C (Grocery bag, Videos, anyone with a purchase card, Furniture, etc) and the responsibility should fall on the organization/company to keep track of all commerce. Consider this; compared to an office how well do you keep records on household activities? When did you order the last pool supply or had your rugs shampooed?

The values can be enormous. Marketing efforts, clean and efficient reordering. Scheduling employee and managing cash flow. Even in the B2C market.

* Small, medium, large purchases B2B – Here I would put the onus on the company making the sale to keep accurate records if only for the purposes of aiding your customer in future purchases of your product or service. This does not mean the buyer is off the hook. Yes, you can trust the vendor to keep records but people go out of business and your time and purchasing power are worth its weight in gold. Time because the faster you can find who you purchase from the faster you can create reorders and go on to delivering your own product or service. Purchase Power because this becomes leverage for future business and shifting from supplier to supplier.

You do $375,000 US from one company and there are 5 others in the space, you can open your books to negotiation for better services, decreased pricing or even preferred status.

Customers in the B2C environment can do the same however it’s not as common. For example in our household we spend between $25-$60 a week in dry cleaning. If the records indicate the volume is about $1400 per year we might be able to leverage a constant discount rate instead of grabbing coupons out of our newspaper every week to get the same deal. A waste of time.

The garden center’s employee (could be one of the owners) never thought that her records were wrong and when I called to offer to return the goods for a small credit to be used in their store, she refused. Not only did she lose out on the next sale, but she lost out on two tree sales.

Always remember, it’s not whether you are right or wrong, it’s perception that matters and in the case of who’s responsible, make sure you’re covering what other consider to be your responsibility.

Her first two pregnancies happened without any complications beyond the fact that Romani did not like pain. This one was a different story. After hours of labor it appeared that the mother’s contracts were not strong enough to push the newborn out the canal. Those in charge knew things weren’t looking good.

The 29-year-old patient — an Asian elephant named Romani, was in trouble of loosing her child after it’s legs had started to enter the birth canal and with all the medications given to increase labor nothing was happening. The longer the calf stayed in the canal the higher the risk of both animals dying

At this point the 330lb. the calf needed help and quickly. She needed a rare surgical procedure. Emergency actions were taken as experts from around the country were called in. “Dr. Dennis Schmitt, a professor of veterinary medicine from Missouri State University. Other members of the surgical team came from Cornell University in Ithaca, and Disney’s Animal Kingdom in Orlando, Fla. From both Missouri and from Florida’s Disney, experts were flown in.” (NYTimes Published: June 9, 2006)

It was not meant to be for the calf. The mother on the other hand was lucky. She awoke from the surgery, had some recuperation time and then head back out into the yard.

Upon her entry, her daughter walked up to her and in a gesture that touched everyone’s hearts they locked trunks for several minutes. To on lookers it touched their hearts. To the vets the show of affection helped to reassure them that both mentally and physically she had support.

As I heard the story all sorts of wonderful things flew through my head including the belief that in business we should also show some type of compassion to aid others when things go wrong. Obviously it depends on the individuals involved and what happened.

I’m talking about when someone gives it their all and it just doesn’t work out. Take a moment, lock trunks, nothing needs to be said, and help them to move on.

In February 2008, I saw a phenomenal play on Broadway that I would recommend you see if you have a chance to visit NYC. It’s called the Farnsworth Invention, and it’s the story of the race to invent-create television in the 1920′s and 1930′s.

Without giving you the storyline and ruining the play, I’d like to mention a quote that hit me at the very end of the story. It was:

“I burned his house down so he wouldn’t burn mine down first,”

Made me think.

Think about how this statement depicts and mirrors many moments in our lives.

In the story, there are many parallels; one being that the CEO of RCA destroyed another individual in the process of building and protecting his empire. Both a link between industrial espionage, competitive intelligence, theft, and ethical issues facing those in management.

Similar to the Detroit 3 purchasing technologies or destroying technologies that would have harmed their business and in doing so hurt “real people” in the process. As we face the energy crunch/crisis today, they and we are paying price for those destroyed technologies.

Personally, I hope, I’ve never consciously or unknowingly harmed someone in such a manner.

NOTE 1: I’ve read some reviews that say that the author took too many liberties with the lives of the two characters, so I’m not saying everything in the play is true. But the message I got from it to apply to real life is a potent one…and still, it was a great play. http://www.thefarnsworthinvention.com/index.html

Link to the website http://www.farnsworthonbroadway.com/

NOTE: Other plays I’d recommend…the short list.

Avenue Q – One of my favorites. Sesame Street on steroids.
Chorus Line
Wicked
Hairspray
Spring Awakening – only because the writer wrote the play in the 1800′s and it’s still relevant today.
Curtains

A very successful organization just started to shift to using Disney and Harley as examples of how they, in turn, should act towards their employees and their customers. For Disney, the mystique is that they run an absolutely perfect ship. Harley is about customer loyalty and putting a tattoo on your body.

To a large degree, management knows that both companies are like humans, they’re not perfect and don’t run as smoothly as everyone thinks. When you pull back the curtain, like the Wizard of Oz, there’s just a human pulling levers.

From the perspective of management, however, they know that the employees in their firm don’t know this, so their approach is to put the organizations on a pedestal and then watch the employees attempt to live up to such high expectations.

My take is quite different.

I’ve had several trips to Disney, and even though it’s a great company, things have gone wrong. I’ve waited for a room for hours with my family only to be forgotten. Rooms were not cleaned when expected. The lines for children have been horribly long. Any adult or kid should be able to figure out that 1.5 hours on line is a long time, even if you are snaking through the building.

So what happens when reality reaches those on the front line? Will they trust future management? With a little bit of honesty, some huge issues may be avoided in the future.

The lesson: aim high, but be realistic and honest, too.

You’ve probably heard in a self help book or two, you must be present to live life. Well, there are other times you must be present in order lead or manage accordingly.

During a national sales and marketing convention for an international conglomerate, the North American Director decided not to physically show at the event, however, he thought speaking through the intercom would suffice. (His history is he’s never around.)

The arrangement was a 5-minute pep talk and then off to his next project.

His senior managment team arranged for the call to be patched through right after the review of the morning achievements, which were very impressive from an outsider’s point of view.

After 4 hours of programming, the Director was given the microphone and off he went. For the first 2-3 minutes he started with what he saw in North America and then SLAM. He started commenting on where everyone was going wrong. Everyone from the front line to management. Every person in the audience in some way or another was told they were doing a horrible job. Or that’s the way it sounded.

This rant went on for 30 minutes and without being present, the director had no clue as to the damage he’d caused. One VP said, “I just wanted to kick out the cord from the wall!” Another said, “He’s destroyed everything we looked to accomplish.” An employee shook her head and under her breath said, “I can’t believe he did this over the phone.”

He was not present.

If he had been, he would have seen the faces and could have reacted.

If he’d been present, he could have informed leadership of the issues and then decided on an agreeable approach.

If he’d been present, a million dollars in travel, personnel costs, andpreparation could have been used more appropriately.

The funny thing is that after the event when a VP approached him, he was surprised at the responses, never imagining he’d done so much damage.

If only he had stuck to his approved 5 minutes, this may not have happened. The next time around I can assure you, his management team, who all voiced their anger, because they were also slammed publicly for reasons they still are trying to calculate, will try their best to keep such situations to a minimum…if they are still around.

Just remember, some things are best done when you’re present. Physically. Also remember that even though you’ve got the title of CEO, Chairman, VP, there are schedules, and if you needed more time, you should have thought it out in advance and requested a larger slot.

Lastly, don’t give bad news over the phone, unless absolutely necessary. It’s like asking for a divorce by email. Not too classy.