Category Archives: Business Ethics

Rethinking Business Schools After the Fall

April 8, 2009Business Education, Business Ethicsbusiness schools, Harvard, HBS, Northwestern, StanfordTim Berry

Blame the business schools? As the culprits roll out of the fancy offices in New York and Washington, it’s hard to resist the temptation. There have been several thoughtful pieces on that in the last couple months, particularly the New York Times on blaming the business schools, and Are Business Schools to Blame posted late last month on a Harvard Business School blog. If you care about business education, for whatever reason, read both of these. The first is a bit longer than most blog posts, but thorough, well researched, and significant. The second includes a long string of thoughtful comments.

I care about business education. I think there are serious issues here, and a chance, maybe, to use this crisis to promote some change for the better.

The Times’ piece raises serious issues:

Critics of business education have many complaints. Some say the schools have become too scientific, too detached from real-world issues. Others say students are taught to come up with hasty solutions to complicated problems. Another group contends that schools give students a limited and distorted view of their role — that they graduate with a focus on maximizing shareholder value and only a limited understanding of ethical and social considerations essential to business leadership.

The Harvard follow-up cites three underlying problems (and I’m paraphrasing, here; the words are mine, summarizing):

The traditional business school curriculum separates management from leadership. Management is analytical. Leadership is fuzzy.
Business school lore and legend is about making money. Get an MBA, get rich.
Business schools aren’t owning up to the possibility. The actual phrase is “There has been little contrition on the part of those involved in MBA education after the crisis.” Hard to argue with that. At least Harvard is there.

I see a whole lot of truth in most of this. And I believe in education in general, and I loved the two years I took to get the Stanford MBA, and I wouldn’t change a thing about that time (from 1979 to 1981). I teach one class a year at the University of Oregon business school. So I am involved in all this. And I do think there’s room for a lot more change. And good and bad news.

The Bad News

So much of what they’re saying is, at least from my point of view, mostly true.

Business schools tend to train people to be consultants and middle managers. In my class at Stanford we almost all wanted to be management consultants. Those were the best jobs. From what I can tell, that’s still true, and at all the good schools.

That idea of minding the stockholders interests, blindly, is very deeply rooted. It’s a very powerful rationalization. “Oh well,” they say, as they make the short-sighted, environmentally insensitive, socially insensitive, and even borderline unethical decision, “our job is to mind the share price.”

And the share price, meanwhile, drives very short-term views. The share price doesn’t often reward the strategic decision that sacrifices short term bumps for long-term health.

Business ethics are too often an afterthought. They should be at the core of business strategy, wound in and absorbed in product and market strategy, but they aren’t. They’re separate.

The Good News

The good news is the tremendous boom in teaching about entrepreneurship. It’s the absolute rage in business schools. Entrepreneurship programs are the bright new thing everywhere.

When I was at Stanford, there was only one course on anything related to small business or entrepreneurship. It was called Small Business Management, taught by Steve Brandt. It was a really good review of the startup process, the business plan, and getting investment. It was my favorite course. But it was also the only one offered that had anything to do with entrepreneurship. Today Stanford has a booming center for entrepreneurship and some amazing activities related to entrepreneurship: speaker series, videos, and so on.

And that’s the rule, not the exception.

Furthermore, people inside the schools are waking up to the growth in green business, social entrepreneurship, sustainability, and so on. I was at MERC 2009 the week before last: put on by the George Mason University Entrepreneurship Center, focusing on sustainability. The University of Oregon business school has a program on (a center focusing on) sustainable business. There too, that’s the rule, not the exception.

And a Hope for the Future

Maybe it’s still just a pipe dream, an ex-hippy delusion left over from the 1960s, but it seems to me that changes in the business landscape — increasing visibility, for example, in an explosion of small-scale quasi-journalism in blogs and social media — make it steadily more important than long-term successful business has to respect the fundamental values of fairness to employees and customers, sustainability in resources and the environment, and better citizenship in a very broad sense.

The world is revising the golden rule: do unto others as you would have posted and tweeted everywhere, and lodged in Web searches forever. I think that’s a good thing.

Maybe in the future the businesses will actually do well by doing good.

Build a Mission

March 12, 2009Business Ethics, Business StrategyTim Berry

Funny coincidence: "mission" the way we use it in business, and "mission" the way the Spanish priests used it to build colonial California. In both cases, it's foundations. As the Spanish settled California, the conquistadores who explored were followed by clerics who built missions and invited the neighboring Indians to join them in creating farms, towns, and schools around the missions.

Last year I heard Eli Halliwell, CEO of Jurlique, talk about how much extra momentum he got as he worked with that company by building a team based on a shared mission. Jurlique is about natural, healthy cosmetics.

What reminded me of that was Seth Godin's post In search of dolphin leather:

"Having a community-based quest means that there's less room for whining, for infighting and for dissolution. Having a mission not only points everyone in the same direction, it also creates motion. And motion in any direction is often better than no motion at all."

And although Jurlique comes to mind because Eli made his point very eloquently, you and I know companies like that, driven by missions. People can believe in a mission. It gives the team power and momentum. People are happier when they work on something they believe does some good to somebody.

Photo source: Mission San Diego de Alcala, flickr, by Allan Ferguson

Bad Apples Get Loud in the Crowd

March 6, 2009Business Ethics, Current Affairs, Rants, Web/TechTim Berry

What a shame. The wisdom of crowds is a good idea. User reviews is another good idea. You click and then read. There’s the reassurance found in good reviews. How many times have you been influenced by reviewers’ stars for one product or another. And lately also for services (as in Google maps, linked to reviews for services like TV installation and plumbing). It’s nice, except for the bad apples in the crowd. Sour grapes. Sweet lemons.

Sour Grapes

If you use reviews at all, you recognize them. Using the review site for revenge. “You’ll be sorry you treated me badly.” The lurking competitors are bad; the extortionists are bad. Most of them inadvertently make it too obvious, but the worst of them do it too well. They pollute the review sites.

One of my favorites was the local restaurant review that was all thumbs down. Then the reviewer shares that they refused to serve her because they said she was drunk and unruly. Hmmm … do we see two sides to that story?
The gas dryer review spews venom about the product. Read closer: it was written the day the installer failed to show up. As in, before using the product.
The bad auto review hates the dealer; not the car.
QuickBooks (bookkeeping software) reviews are a good example. A lot of hatred there, far more than the software deserves. Everybody hates the accounting software they use, regardless of the brand. And no, I don’t work for Intuit, and no, they don’t pay me to say that. It’s just a good example.
The worst of it: reviews by competitors. To stick with the QuickBooks example, people reviewing QuickBooks who are really plugging their own competing software. People reviewing one book to plug their own. People reviewing restaurants who own or work for competing restaurants.

Just in case it isn’t obvious, think about this one: people who threaten other people with bad reviews. If you don’t add that other service for free, I’m going to trash you on the web. It happens, believe me. The extortionists.

Sweet Lemons

You can usually spot them: reviews on review sites by employees, consultants, marketers of the product. For me, when there’s only one or two reviews on a site, I’m suspicious.

Can’t Touch That

Review sites can’t deal with these bad apples. Earlier this week the New York Times published this piece about Yelp. Vendors want due process, error checking, protection against competitors and such. I’ve seen that before, about Amazon.com. Well, to be honest, my company has been victimized by competitors and extortionists on Amazon.com.

Legally, practically, the review sites don’t dare touch even the most obviously spurious and malicious reviews. It’s one of those legal areas that are either black or white, with no in between: as soon as you change a single review, then you’re editing, and you become responsible for all of them. If you never touch a review, as a hosting site, then you’re not responsible for any review’s content. I’m not an attorney, so check me on this, but that’s the way it was explained to me by somebody who should know.

So it’s damned if you do, damned if you don’t, and in the meantime, those of us who would like to draw on the wisdom of crowds have to go with so much caution that it’s rarely worth it. These days I only look at reviews when there are a bunch of them, 25, 50 or more, so that the bad apples don’t distort the broad picture.

But Could They, Should They, In the Future?

I was about to write “there ought to be a law.” However, on reflection, never mind. Bad idea. But is it perhaps too much to hope for a court case or ruling that eases up on the legal liability for weeding out some of the most obviously erroneous or self-serving reviews?

Maybe at least an honor code and ethics attempt, asking people to at least identify themselves confidentially to the hosting site, so they take responsibility somewhere. It’s not a big identity theft or spammer email problem to do that; most blogs do it routinely.

It’s Not Necessarily Free Speech

Free speech is about politics, not printer drivers or restaurants. And we’re not talking about government entities limiting speech, we’re talking about review sites taking out the trash. I wish that the whole free speech thing weren’t such a slippery slope.

However, the courts do say that free speech doesn’t include shouting fire in a crowded theater (dangerous) or distributing commercial leaflets in a crowded theater (commerce). So maybe there’s hope for review sites getting a little tiny bit of slack on this, some time in the future.

Check out expert business plan software reviews.

Is Hard Sell Good Business? Ethical?

January 27, 2009Business Ethics, Business MistakesTim Berry

I'm wondering about business ethics, and good vs. bad business, related to the hard sell.

Here's a situation: you're using a script to sell to people something that is usually good for them, but relatively expensive. As you analyze results, you discover that some people who decline the offer will accept it if pressed; but if you press everybody who declines, you end up getting five people very angry at you for every one person who changes their mind and buys.

Is pressing, doing the hard sell, good business? Aside from business ethics, how many changed minds do you need to get to justify the angry people who didn't change their minds and don't like the way you pressed? Is it worth it?

What if the ratio is different. One changed mind for every one person angry? One changed mind for every 10 people alienated?

When is it a good idea to keep pushing, instead of backing down, easing off, and maintaining a friendly but unsuccessful close?

I think that's actually a math problem. How much damage do you cause by making a person very angry at your hard sell? Compare that to the benefit of the occasional changed mind, failed sales pitch turned into victory.

I don't think this kind of hard sell is good business. I don't think hard sell is okay even when we're selling something good for people. It leaves an ugly sticky negative residue. Sort of like the ring in the tub, after we played football, that my mom used to hate. You could also call it a bad aftertaste.

Selling Ice Cubes in a Snowfield

Is a good salesperson someone who sells people things they don't need? Like ice cubes in the arctic?

Okay, what if it's something they do need; something that's good for them? What about selling encyclopedias to families? Or business plan coaching to entrepreneurs? That's fine, right? Because what's being sold is good for the people we're selling it to?

What about hard sell, or even deception? Is that okay when it's something that's good for people? And what about the angry people who end up resenting the whole experience.

Years ago when I was consulting at Apple they used to say that a happy customer tells two or three people about it, and an angry, unhappy customer tells 20 people.

True Story, Long Ago

One of my more unpleasant true experiences was trying to sell encyclopedias door to door when I was 19 years old. I spent several weeks trying not to fail. But I failed.

I didn't follow the script.

It was 1967. We were supposed to get in the door by lying; we were doing an educational survey. "Do you have kids, sir? I'm doing an educational survey." Then we'd do the survey, establish that the parents cared about their children, establish that research showed having encyclopedias at home was essential to their children's success, pull out the brochures, and make the sale.

I didn't make any sales. Not one. It was all commission, so I made no money.

At weekly meetings, the successful sales people would brag. "He made me swear I wasn't selling encyclopedias, threatened me he'd beat me up, but I still made the sale." Ice cubes, arctic, and hard sell. Is that kind of selling desirable? I doubt it.

But that's just my opinion.

When Being Right is Wrong

July 30, 2008Business EthicsTim Berry

It’s good to be right, but not always. "I told you so" isn’t always a great career move.

A guy I know predicts his department reorganization is going to fail. He’s pretty sure he knows what’s wrong and what should be done. He’s not saying anything about it to his managers, though, because he wants to wait for the failure to happen, first. Then he’s going to propose a solution.

This is a friend of mine, so if that sounds critical, I’m not writing it correctly. I think he’s right.

He’s the same guy I posted about in April who was told he took "too much ownership" in his job. That was a complaint, surprisingly, not praise. So I have to be sympathetic when he wants more than just "I told you so." He wants the manager position, not just being right. And he recognizes that his chances are better if things fall apart first, without him having predicted that. Let the problems run their course.

How are you doing in your company? Do you have team members waiting, perhaps even hoping, for things to fail?

Goliath’s Revenge Part 2: Promises, Promises

July 28, 2008Business Ethics, Business Mistakes, True StoriesTim Berry

In part 1 of this post, I shared a mistake I made mainly by myself, believing what was said by big-company managers instead of what was written in the contract. That, as it turned out, was a big mistake. But that was my last post, so let’s go on to part 2.

A few years back we’d been working off and on with a very big company, publicly traded, a couple of billion dollars of revenue, that had a target market a lot like ours and product line that was potentially complementary. A product manager there (let’s call him Ralph) wanted to bundle our software into their software. That seemed like a big win for us, so we were happy.

Anxious as we were to count our chickens that hadn’t hatched, we asked quickly about the deal. "Don’t worry," Ralph said, "you’ll get a good deal. That comes later."

What felt like proper next steps were taken. Mutual non-disclosure agreements were signed. We sent details about our software to our supposed new ally. Months passed. We had meetings. We had conference calls. The project proceeded. For about eight months, our would-be ally got a nearly complete view of the details of our software, our strategy, business plan software in general, and our specific view of business planning software, and, in particular, my view on business planning.

When we asked about deal terms, which we did several times along the way, Ralph assured us we’d like it. We trusted him. Big mistake. Another one for the mistake bank, too (John, go ahead).

As we neared the end of the deal, when deal terms finally came, they were extremely disappointing; in fact, they were unacceptable. We said so. Negotiations continued.

Suddenly there was another player: a knockoff of one of our earlier versions. And they, Ralph informed us, were ready to have their software bundled for free. They were prepared to live off the upgrades that they hoped would result.

So we were screwed. Promises, promises. Actually, as the years passed, it didn’t really make much difference. Their implementation sucked. The knockoff software they bundled was as bad as they deserved.

Months later I traveled up to Portland, OR to talk with an attorney about the possibility of a lawsuit. I and my family and my company had never sued anybody, but this seemed like they’d done us wrong. We had a nice lunch with the expert, and he concluded, taking no more time than one good lunch, these points:

They did wrong. Technically, this was called promissory estoppel, he said, gaining an advantage by promising something and then not delivering.
Our likelihood of winning a lawsuit, he estimated was about 95%.
It would cost us several hundred thousand dollars to sue.
Our likelihood of being paid damages was about zero.

So, as you probably already guessed, we did nothing; chalked it up to experience, and went on with our business.

Q & A: Small Investor Returns

July 22, 2008Business Ethics, Business MistakesTim Berry

If I were to invest $40,000 to help start a trucking business, what type of return should I expect on that $40,000? I’ve never done this before and want to be fair to everyone involved. As an investor, what kind of return should I anticipate?

Being fair to everyone involved starts by being fair to yourself. You can buy a lot of things for $40K. Before you worry about what’s a fair return, ask whether there will be any return at all.

The problems here begin with the obvious fact that you aren’t a professional investor. You don’t have money set aside for investing in long-term returns; you’re looking to participate in a small company that has very little chance of ever generating the kind of return on investment that arms-length investors look for.

Furthermore, it may also be illegal. US stock laws regulate investments in new businesses and one of the more common problems it that you have to be a "qualified" investor. The law on this started back in the great depression. It was intended to protect people from getting suckered. You might be exempted under the "friends and family" provisions, but otherwise you have to have serious money or you’re not qualified.

So what’s the problem? Well, underneath it all, a trucking business getting a $40,000 investment isn’t likely to return money at all unless you’re a partner, and an employee, and you have a real voice, documented in writing, on what happens. These businesses normally live until the owner passes them on or gets tired, and they don’t get sold for the kind of money that gives an investor a return.

So here are some things to consider:

Professional investors put their money into companies that can take off like rockets, because so many fail that they have to make their money back with the winners.
What makes you think you’ll get any return at all? How do you, as an investor, get money back out? If you take ownership, like most investors do, then you get money back only if the business sells itself to another business or goes public, or is profitable and pays dividends. If you don’t have majority ownership then you can’t force any of those things to happen, you just have to sit aside and wait and hope.
How much ownership are you going to take? $40k might be the full investment in a trucking business, or just a tiny percentage. Will you have control? How much?
Is there a payback written into the documents, like a loan? Sometimes in these cases the investors get $60K or even $80K back in 3-5 years, plus substantial ownership (maybe even 100% if the business can’t make those payments). This can be done if it’s written up right.
The worst payoff is minority ownership in a privately held small company. In that case, you have no say in the business, and no way to get any money back.

So I know this is not the kind of answer you’d like, but that’s what I think.

The Black Swan’s Guide to Business Ethics

July 7, 2008Business EthicsTim Berry

I’ve been reading The Black Swan, by Nassim Taleb. If you care about understanding the difference between how little we really know and how much we think we know, you should read it. If you think we’ve figured out cause and effect, and you’re interested in how that works, you’d like this book. And don’t worry, as I use that bewildering subject matter to describe it; he’s a much better writer than I am, he sprinkles liberally with interesting examples and useful stories. The book moves right along, easily.

The Black Swan: The Impact of the Highly Improbable
by Nassim Nicholas Taleb