Home > Leadership, The Monday Musings Column > acting unethically does not make good business sense

acting unethically does not make good business sense

One of the topics I try to deal with in this column is ethical behaviour. Apart from my need to maintain such standards in order to comply with the code of ethics for each of the three professional bodies of which I hold membership it reflects a basic principle that I was brought up to observe.

A few things this week have raised ethics to the fore. One was the excellent session that Lucy Jeynes presented on negotiation at the BIFM Scotland conference which covered, amongst other things, how you play your cards when working towards a deal. Traditional thinking in such cases is to hide things that weaken your position and that is fair enough, but in doing so you are foolish if you conceal something material that is likely to come back and bite you post contract, for then your position will be even weaker, if not untenable.

Buyer beware is a very good phrase, but when we look at a typical business to business service contract I would argue that both sides are buying and selling. The buyer made be purchasing a service over a given period from the seller, but they are also selling themselves as a client. In the converse the seller is acquiring something of value in the form of that contract; it will become an asset to them while they have it.

Where then is the value in deceiving the other party during the negotiation? The truth will out at some point after the contract has commenced and will change the balance of the contract, not just in terms of what has to be done, but also in terms of trust between the parties. Why build in the potential to destroy the working relationship by being less than honest in the negotiations?

There is a difference between some bluff and posturing in a negotiation and being dishonest, so when we talk about maximising your strengths and minimising your weaknesses we  are not encouraging any dubious practice, but simply encouraging you to present your case in a way that will help you get to the best possible deal.

One of the perennial factors in buying and selling is who holds the power at any given point. “It’s a buyer’s (or seller’s) market” people say, and the basic principles of supply and demand will dictate price. If you are buying in a period when demand is high then you are probably going to have to pay a premium, especially if you want quality, but how far should the dominant party push their advantage? The is a saying that you should be nice to the people you pass on the way up because you’ll pass them again on the way down. Abusing a position of power is not the greatest of ideas not just because you may not hold that power for too long, but also because such behaviour can help swing the pendulum against you more quickly.

I’ve campaigned here against the practice of buyers seeking unlimited liability clauses. Sooner or later one of these will end up in court and we will see how in is decided, but there is already a groundswell against some of the damages claims that we have seen in recent years. In any case it will only take a couple of instances where key sellers say that they will not accept unlimited liability and the practice will stop under market pressure.

Since the financial crisis of 2008 it has been a buyer’s market in many sectors and there have been any number of attempts to do things differently. The ancient practice of barter has its merits, but a mutant strain has emerged that has borrowed the expression “soft commissions” from the financial trading sector. The practice of dual, or triple, sourcing business critical supplies is also a long established practice and one that works well for all parties if operated fairly, but here again we see a variant emerge whereby an alternative supply source is lined up, but with not commitment to use it. That practice I saw briefly back in the 1970s, also in the wake of a financial crisis, and again in the 90s, but it didn’t work on either occasion.

I wrote the other week about the folly of short term thinking, and unethical practices are a classic example. You might make a killing, but it is more likely that you are self-inflicting a fatal wound in the long term. Can your business afford to tarnish its credibility; can you? If others feel that they cannot trust you they are less likely to want to deal with you so you are gifting an advantage to your competition and that’s not a good idea.

Few deals that we do are purely one-off; in most cases we have the opportunity for a working relationship over at least the medium term and to be able to build on that regardless of which side of the table you are on. Trust and respect are at the centre of any such relationship and unethical behaviour fits nowhere. Negotiate hard by all means, but always fairly.

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