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Ethical Issues in Business Consulting

Aaron Blackburn

Dr. May Fall 2010 MGMT 807 Section 1100

Business consulting, like all professions, has its share of ethical dilemmas unique to its industry. It is a profession that is service-oriented, and so conflicts arise when what the client wants diverges from what the consultant is willing to do. Since independent consults have to sell themselves, there can be issues in plagiarism from successful campaigns and truth-in-advertising. Consults working as a team also have to deal with their perceptions of each other and how that will affect their team as a whole. These dilemmas touch on all of the ethical foundations: the Greatest Good, Principles, Rights, Justice, and Character & Virtue. The solution to these problems always involved acting correctly in accordance to a code of ethics, even at the cost of personal gain.

Greatest Good
The following scenario was offered by Gordon Gibson in a group interview: A corporation with which our firm had been consulting on a number of human resource management systems issues over a couple of years, informed us that they were merging with two other national firms. They requested a proposal for providing them a performance valuation system that would integrate the systems of the three corporations and could be used for a gainsharing program. Our proposal reflected an empirically supported methodology and intervention(s) that had been successfully utilized with our client two years earlier. Within a week of submission of the proposal we met with them to learn that while they appreciated the scientific rigor and deliverables, they wanted us to compress the project to three weeks and reduce the performance evaluation system to a one-page evaluation format that would assess all members on the same dimensions regardless of the qualifications, position, and the job responsibilities. To meet the new deadlines and deliverables they offered a six-figure bonus to

the contract. We declined on multiple bases and they contracted with another firm. Our firm would not compromise on the required methodology, and would not collapse multiple performance dimensions to an unsubstantiated system, and a system that would be plagued with future problems although it might appear expedient at the time. (Robinson) The major ethical issue of this case was whether the firm should accept the new contract with increased financial incentives and provide a very general and short evaluation system, or refuse the job because it means compromising their standards and forgo the monetary reward. The primary stakeholders included the consulting firm, the client firm, and the employees being evaluated. The consulting firm had both its profitability and standards on the line, and had to choose between the two, while weighing the possible loss of repeated business. The client firm wanted a quicker evaluation system so they would not have to spend more time measuring their employees performance. And the employees compensation, standing in the company, and possible employment were also a priority concern. Secondary stakeholders included the families and communities of those working for the consulting firm and the merging companies, and the other consulting firm that benefited from the first ones pass on the job. This case did contain a utilitarian concern because happiness was heavily involved (May, 10.26.2010). The consulting firms decision to forgo the rush job had short-term unhappiness for themselves, in the loss of the higher profit, but in the long-term their happiness would not suffer for having compromised in their standards. The client firm might have received shortterm happiness for getting what they wanted, however they might have had long-term unhappiness if they found out they inaccurately evaluated someone. The client firms employees might have also experienced long-term unhappiness if they felt their evaluation was arbitrary. For the consulting firm, what could maximize their happiness over the long run was the decision

they made not to create the short evaluation system. This same decision was results-oriented since it was more focused on standards than the self-interest of easy money.

The Institute of Management Consultants USA has the following ethics simulation: Fall of 1996, Rocky Edge, the president of Edge Marketing Consultants, is working with Faultless Tire Company, one of his firm's major accounts. His sponsor for the engagement is the Vice President of Marketing for Faultless. While reading corporate documents which Rocky hopes will help him in preparing a new marketing strategy for the Faultless 2000 tire, he reads an internal memo marked Strictly Confidential -- Internal Use Only. The memo mentions that the catalyst used to promote the bonding of the tread to the tire carcass occasionally does not always function as expected. When that happens, the tire may tend to self-destruct without warning in some circumstances. As he reads, Rocky is shocked to learn that such failure could lead to loss of control of the vehicle, resulting in injury or death to its occupants. It is now December 1996. Rocky brings the internal memo to the attention of his sponsor, the Vice President of Marketing for Faultless Tires. The VP says that only a small number of tires are affected, and he has a team of engineers working on a permanent solution. The VP urges Rocky not to make a mountain out of what the VP considers to be a molehill. Doing so, he says, would negate the expected success of the marketing plan that Rocky's team is preparing. Rocky responds that he wants Faultless to be in front of the issue rather than reacting to potential events, and that they need a game plan for potential developments thought out by the best minds. If his client is still unconcerned, his ethical code requires he express his concerns to his client's superior.

In early February 1997, Faultless' engineering team concludes their study and recommends a tire pressure of 32 psi for Faultless 2000 tires used on SUVs. One SUV, Sellmore's Terminator has had more instances of failures. There have been far fewer failures of the Faultless tire on other vehicles, so Faultless strongly recommends that Sellmore, the manufacturer of the Terminator SUV, insist on 32 psi for inflation pressure in Faultless' Faultless 2000 tires. Moreover, the report of an independent testing service verifies a high incidence of tread separation in Faultless 2000 tires especially those on Sellmore Motors' popular Terminator SUV model in warm climates and speeds in excess of 50 mph. Under certain conditions, the testing service believes that catastrophic failure of the tire will lead to loss of control, resulting in likely injury or death. In March 1997, Sellmore Motors decides that, for reasons known only to them, they will recommend 26 psi in the tires on their Terminator SUVs. Although Faultless is convinced that Sellmore's recommendation is wrong and potentially dangerous, Faultless continues to supply OEM tires to the SUV manufacturer for use on their SUVs. In July 1997, Rocky learns that there have been several reports of fatalities in singlevehicle crashes of Sellmore Terminator vehicles equipped with Faultless 2000 tires. In each case, at least one tire appeared to have been severely damaged; there is not much additional information. Rocky also notes that no substantive changes have been made in the Faultless 2000 manufacturing or sales processes since his discussion with the VP previous December. It is obvious that Sellmore has not adequately thought this through. Rocky recommends a meeting with Sellmore to lay out the issues. This would be a good time for all stakeholders to meet offsite to really think through the implications for all concerned and come up with a strategy to benefit all parties including the public. (www.imcusa.org.)

The simulations major ethical issue was whether Rocky should part ways with an established client since they were promoting a dangerous product that could kill, or trust his clients judgment on the tire and keep a profitable relationship. The primary stakeholders were Rocky, Faultless Tire, and the customers. Rocky could have felt tremendous guilt if he was complacent in allowing the product to go to market without objection, resulting in a possible epidemic of injury and death. He also risked his established and profitable relationship with Faultless Tire. Faultless Tire risked being exposed as a company without concern for their customers and their fellow travelers safety, but a recall would have its own heavy, financial cost. And the customers own health made them the most invested. Secondary stakeholders were Sellmore, the vehicle manufacturer buying the tires, other drivers and passengers that might have become involved in accidents due to faulty tires, as well as employees of Faultless Tires and Sellmore if their companies business suffered losses leading to layoffs. Rocky had a number of principled concerns (May, 11.2.2010). Being vigorous in bringing the matter up to his client and their customer, Sellmore, showed he was intent that no harm be done to those using the tires. This empathy also fitted the Golden Rule, where the safety of others was as much as a concern to Rocky as his own. His actions also fitted Kants Categorical Imperative, in that if it became universal law, everyone would be concerned with product safety, and not complacency. Therefore, Rockys decision to meet with Faultless Tire and Sellmore on neutral ground to discuss his concern showed his principled stance. If the two companies do not take the issue seriously, Rocky might have had to do the next principled thing by resigning from the project, and since it involved public safety, bring it to the attention of other authorities.

The Institute of Management Consultants USA provided the following ethical case: When James Knight first opened his practice, he relied on former business associates and community networking for obtaining new business. While his business grew to a respectable size, Knight soon realized that, in order to expand, he would need to learn a great deal more about marketing than he had picked up in his previous manufacturing career. He made plans to attend several marketing seminars and to implement some of their strategies. Frank Justin, the leader of one seminar series, suggested that Knight begin to collect marketing pieces that he received in the mail, viewed on websites or saw advertised in magazines. Knight understood Justins approach to be tweaking the piece using some different words while basically retaining the format of successful pieces. Justin suggested that one could tell what advertising was successful by how the ad was received in the mail or seen in magazines. Justin reasoned that people only keep spending money on things that pull in business well. He also mentioned that there is nothing new under the sun and suggested that originality may not always be a good investment of ones time. Justin did stress, however, that pieces not be copied verbatim. One approach mentioned by Justin was rewording the headlines from old successful ads. However, Justin made it clear that he neither recommended nor condoned plagiarism. Knight tried various marketing approaches he learned in Justins and other seminars and found several successful in increasing his business. As Knight invested in a website, began giving speeches around the country, filled web orders, and wrote articles and position papers, he saw his business revenue jump. He occasionally used the handy cut and paste feature to save an Internet idea that appealed to him. Recalling his seminar days with Justin, Knight thought about

how it was a waste of time to reinvent everything. Although he viewed himself as scrupulously honest, Knight began borrowing other peoples material and placing it on his website. While he knew that such verbatim use was plagiarism, he somehow rationalized that the same rules did not apply to the Internet as did to hard-copy written material. Although Knight was experienced with patent-related intellectual property rights, his experience with written intellectual property was less extensive. Not knowing the proper way to give attribution, Knight followed practices he had seen in the literature. These included reprinting passages from others work. He thought it would be sufficient to rewrite something and note that it was based on the work of another. (He later found that while the law may not be uniformly clear on this point, most attorneys advise that it is best to ask for permission before quoting someone, even before using their name.) As he became increasingly successful, Knight found that other people were appropriating his material. Once, when he learned that someone had copied passages from his website, he sent certified letters threatening all sorts of dire consequences if the party did not rectify the situation. When Knight discovered that another consultant had used phrases from Knights website, he immediately demanded that they be removed at once, or he would take legal action. Knight began to use the registered copyright symbol on some of his phrases. He also used the trademark symbol, although he had not filed for any of these designations. (www.imcusa.org.) The major ethical issue in this case centered squarely on plagiarism. James Knight, in wanting to grow his business, stole the intellectual property of others. The supposed justification came from three sources: financial desire, public speaker Frank Justin, and his lack of understanding on plagiarism. Knight should have known he was plagiarizing because of his

background in patent-related intellectual property rights. However, beyond what applied directly to his work, he was not concerned. James Knight was a primary stakeholder because of the plagiarism he committed. The authors of the original material were also primary stakeholders because it was their property that was misappropriated. Secondary stakeholders include Frank Justin, who profits from peddling plagiarism, and the clients of James Knight whom were mislead by thinking his was authentic. Plagiarism is a rights issue (May, 11.2.2010). Knight had a positive right, a right to benefit from his business. However, his plagiarism infringed on the negative rights of the original authors in that they were harmed. Although they might have been unaware of this harm, and it was not physical, they were denied the credit due to them. Since negative rights are generally given more weight of importance by society than positive rights (May, 11.2.2010), the authors rights superseded Knights beyond legality. It could even be said that Knights plagiarism interfered with the authors autonomy, in that they were not given the opportunity to decide if they wanted to give him their consent to use their materials. In the end, one should not engage in plagiarism, and not just for legal reasons, but also because no one else should profit from ones own hard work.

During an interview with Think Like a Consultant, Steven Shu offered this ethical problem: On peer consultant gossip, these situations can arise more often in consulting situations due to the short-term nature of projects. Whereas teams in corporations may be more stable, consulting engagement teams are often fluid and have members that may only work together once in a while. Things like informal feedback on peer consultants, especially when feedback

may be negative, can cascade rapidly and consultants should be extra careful because observation periods may be small and people may not know each other as well as they would in an ideal world. (TLAC and Shu) The major ethical issue for peer consultant gossip is whether it is fair to allow consultants in a group to be paired down to tidbits, or does the briefness of a project and lack group cohesion justify the use of gossip as avenues of quick information. The primary stakeholders are the consultants doing the gossiping and the consultants being gossiped about. The gossipers are the source, and besides enjoying the pastime, might be seen as key information hubs, and might feel an elevated status because of it. The subjects of the hearsay rise and fall depending on what is said about them, but ultimately they will suffer because gossip tends to over-simplify and will not allow for a full picture rounded out by various perspectives. The consulting firm is a secondary stakeholder because the overall performance of their consultants will be affected by the grapevine and their clients might view the gossiping negatively. The client is also a secondary stakeholder as the service they receive will be influenced by this kind of talk. Gossip can be seen as a justice problem because it is questionable whether or not it is fair to rely on hearsay (May, 11.2.2010). Because the nature of gossip is subjective, it is impossible to make decisions with John Rawls Veil of Ignorance. Hearsay only relates to procedural justice in that it is composed of input from employees. It does not have fairness, systematically and impartially applied criteria (May, 11.2.2010), or is unbiased. Gossip shares more attributes with distributive justice in that it is made of social comparisons and disadvantaged individuals react strongly in a negative manner. However, it is not concerned about the distribution of outcomes (May, 11.2.2010). Nor are the outcomes relative to the inputs, as there is no certainty has to how a particular piece of gossip will affect people and the situation.

Therefore, gossip cannot be relied upon as a quick measure of the personal and job-at-hand, since it cannot be seen as justice of any acceptable type. Most of it should be ignored then, or at least taken with a grain of salt until more substantial information becomes available.

Character & Virtue

The following ethical case was given by the Institute of Management Consultants USA: Jon Doe (not his real name) has been an independent consultant for almost a decade. Its been a good ride. Lately, things have not been going well, so Jons engaged in some aggressive marketing. In some paid advertising, he indicated that hed been in consulting for 15 years. That was stretching the truth a little bit. Hed been in private practice for almost 10 years, and had advised managers in a corporation when he worked as human resources practitioner. He wasnt really a consultant during that period, so this stretch could be considered to be a bit of a misrepresentation. While hed earned his masters degree, the only other university course hed ever taken was a continuing education program (non-credit) in writing skills. Describing his education as masters degree and post-graduate studies toward a doctorate is certainly out-of-bounds. Jon has had some articles published in trade magazines and professional journals, as well as a couple of op-ed pieces in the local paper. He wanted to see a feature article about himself and his practice, but hadnt been able to get a journalist excited about writing the story. He was thinking about writing it himself, and submitting it as if was coming from a freelancer. All he needs, Jon figures, is an article in print that he can photocopy and mail to prospective clients in his promotional package. This promotional package will be the cats meow. Jons going to offer a special preengagement assessment at a really good fee, as an incentive for new clients. That offer will get

him in the door, Jon expects, and then he can make the sale from there. He hasnt developed an assessment and doesnt think he really needs to. The portfolio will include a set of testimonials from clientssome authentic and some that Jon has cleverly created on behalf of clients that never got around to writing him those glowing letters. He knows what theyd probably say, so Jon will save them the trouble. (www.imcusa.org.) The truthfulness of Jon Does promotional package is the major ethical issue in this case, and whether truth-in-advertising trumps his ability to get the job done. Jon Doe is a primary stakeholder, because it is his business he is promoting while making exaggerated claims as to his background and experience. His potential clients are also primary stakeholders since their decision to hire him will be affected by his false promotional materials. Secondary stakeholders include the consultants not hired because Doe made himself seem like the better candidate. The consulting industry is also a secondary stakeholder, since it might receive a black-eye if Doe is found out to having inflated his past. Since truthfulness is so central to this case, it is a character and virtue problem (May, 11.2.2010). Doe is taking advantage of peoples trust, which could be gutted if they found out how he reconstructs his background. The situation also shows Does lack of self-control as he is activity seeking an immediate advantage. There is also an absence of empathy and fairness since Doe is not concerned about the consequences not only for his clients, but also other consultants that might prove to be a better fit in certain cases. His actions are definitely not those of a person of integrity. And Doe would certainly not want his misleading to be disclosed to the media. Ultimately, Jon Doe should realize that the long-term, negative consequences will outweigh any short-term, positive gains. What is even more disappointing is that what is truthful, in private practice for almost 10 years and having earned his masters degree, alone are impressive, but

could be meaningless if a client feels that he/she has been duped. It is much easier and better in the long-term, to remain truthful.

While the solutions to these ethical issues all involve sacrificing immediate gains, the long-term benefits always make up for any temporary deficits. The reason is because business consulting is a service-oriented industry and depends heavily on client relationships. Impeccable ethics that include objectivity, truthfulness, and a desire to do the best thing for the clients customers are required. If a consultant or consultation firm cannot live up to these standards, client relationships will sour and their customers might turn against them and the consultant. Consultation involves change, and there has to be trust in the agent of change in order for it to be successful. And the changes made have to be the right changes that generate benefits, not quick profits. Business consulting therefore is not just an industry that requires ethical behavior, it is at its core a business of ethics.


Ethics Simulation #1: Faultless Tire Case. www.imcusa.org.

May, Douglas. Chapter 4 Deciding Whats Right: Prescriptive Approaches (Part 1: Consequentialist Approach). PowerPoint presentation for MGMT 807. University of Kansas. 10.26.2010.

May, Douglas. Non-Consequentialist Approaches: Principles, Rights, Justice. PowerPoint presentation for MGMT 807. University of Kansas. 11.2.2010.

May, Douglas. Virtue Ethics: Character. PowerPoint presentation for MGMT 807. University of Kansas. 11.2.2010.

Resolved Ethics Case 1 Promotion. www.imcusa.org. December 11, 2008.

Resolved Ethics Case 2 Plagiarism. www.imcusa.org. December 11, 2008.

Robinson, Carl. Spotlight on Consulting Issues: Ethical Issues. The Consulting Psychologist. Volume Five, Issue One. Spring 2003.

TLAC and Shu, Steve. The Ethics of Consulting. thinklikecenter.com.