You are the chief executive officer of a medium-sized company that employs about 300 staff. A few years ago, your company embarked on a policy of outsourcing many of its processing functions and, to ensure competition, you deliberately placed the business in equal parts with three outsourcing providers: Sorted, Leapfrog and Zebra.
This has proved successful and the additional cost of managing all three has been outweighed by the more competitive pricing you have extracted from them and their keenness in wanting to increase their own market share of your ‘wallet’.
Sense of disquiet
After several years of successful operation, the outsourcing contracts are under review and it has been suggested that competition between the firms, and the economies of scale that will result from using a single provider, should ensure a considerably improved contract. Richard, your head of operations, is tasked with overseeing the process.
You returned from holiday yesterday and, while discussing a number of issues with Richard, he tells you that his son, Thomas, has been accepted on to Sorted’s graduate scheme. You recall that Thomas graduated from university last year and, having had problems in finding a permanent role, had initially undertaken voluntary work at the company.
Sensing some disquiet on your part, Richard asks if there is anything wrong and points out that Thomas has not lived with him or his wife for the past four years and is independent. He says that Thomas applied to Sorted on his own initiative and that he had not mentioned his son’s application to anyone at Sorted until Thomas told him that he had been accepted.
Given the impending contract negotiations involving Sorted, you remind Richard of the need for strict impartiality in making recommendations and decisions.
He protests strongly at the inference that he might be influenced in favour of his son’s employer. You tell him that while you may have no concerns in that area, it is important not only that the process is fair, but also that it is seen to be fair.
Serious concerns
In due course, following final presentations by the bidders, your team members discuss their views and the Leapfrog offer is considered to be more financially attractive than Sorted’s bid.
However, Richard argues strongly that, operationally, Sorted offers a better solution. He points out that past involvement with Leapfrog had thrown up several technical issues, which he was not convinced had been overcome, whereas Sorted offered proven technical competence, which was why it charged a little more.
After prolonged deliberation, you concede that there is no obvious best solution. You tell the team that you will take the matter to the board, making its members aware of all the views and ask them for their input before coming to a conclusion. As you leave, you ask Richard how his son is getting on and he tells you that Thomas is doing well and is on attachment to Sorted’s offshore processing centre, which you realise is where Sorted would handle your firm’s work.
When the board meets and you present the outcome of the contract negotiations, the discussion is fairly brief and, for the relatively small price difference, the better and more established technical performance of Sorted is felt to be crucial and you are instructed to accept its bid. When you tell Richard the outcome, he is pleased and says that it will be the icing on the cake for Thomas, whose next attachment is to work in the CEO’s office.
You telephone the Sorted CEO to tell him the good news and, during your conversation, he tells you that the firm sponsors two staff members to undertake an MBA each year, and that he has decided that one of these should be Richard’s son Thomas. Although you are a bit nonplussed by this, you say how pleased you are for Thomas and are sure that Richard will also be delighted. Because it is not clear from the CEO’s remarks whether he has yet told Thomas about the MBA scholarship, you decide not to say anything to Richard at this stage, but you wonder whether the award is an entirely objective decision based on merit or whether it may have something to do with Sorted winning the contract.
At this point, you are seriously concerned at the possible implications of what you have been told and wonder what you can, or should, do about it.
Undue influence
There are several ways of seeking undue influence in decision-making, some obvious, some less so. Indirect influence over someone in the decision chain is one of those.
In this instance, you have no evidence that Richard was influenced by his son’s employment, and nothing that he has done has caused you to doubt his integrity. However, you are concerned that Richard’s support for Sorted leaves your firm open to the accusation that his preference was influenced by his son’s employment and the subsequent MBA opportunity. Although neither is of direct benefit to Richard, there is a potential unspoken message that reciprocity will be expected at some time in the future.
Accordingly, whether or not there is a corruption of the decision-making process, it is important that your processes are seen to be open, honest and transparent by all taking part. Are you confident that is the case?
Your first step should be to raise your concerns with Richard, particularly regarding the award of the scholarship to his son. While it would be entirely wrong to try to influence whether or not Thomas accepted the award (and why shouldn’t he?), if the information came into the public domain, it would be likely to arouse suspicion of favours being bought.
In his support for Sorted, Richard made a logical case for preferring the firm to Leapfrog and his position was ratified by your board. That said, the board was asked to judge only the business case, so Sorted did not win the contract unexpectedly.
Clear expectations
It is important that the other participants in the bid, particularly Leapfrog, are reassured that the process was entirely open. It would be sensible to explain why they have not been chosen, but not in such a manner that it makes them suspicious that you have something to hide, which is not the case.
Although you feel uncomfortable about your firm’s relationship with Sorted, it would be quite inappropriate to try to influence whether Thomas accepted a scholarship. The obvious way of dealing with this situation is to ensure that Richard has no involvement in any significant decision-making processes involving Sorted, albeit that is quite difficult, given his position.
Clearly it is not appropriate to try to control the legitimate activities of the offspring (or partners) of your staff members, but they should be encouraged to be as open as possible regarding employment of family and friends in any business capacity that has a realistic prospect of giving rise to a conflict of interest.
In this instance, had you been made aware at an earlier stage that Sorted had employed Richard’s son, you would have been able to remove Richard from the contract negotiations and prevent this uncomfortable situation from arising.
Over to you:
What would you do if you were faced with such a dilemma? Have you been in a similar situation? Let the S&IR know how you would have handled it - or how you resolved a similar matter yourself. Email your response to richard.mitchell@cisi.org or post a comment below.
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