If you have been in management or an entrepreneur long enough, you will have experienced the gray area of decision-making where ethics, the law, your needs and expediency all collide.\u00a0 This is the time when you are paid the big bucks, and when others aware of your plight will be watching most carefully.\u00a0 It is also the time when you demonstrate your true courage to your contemporaries.<\/p>\n
I have a Ph.D. friend who teaches a graduate course in entrepreneurism at a local university.\u00a0 He uses the case method to place as many of these types of decisions in front of his students as possible each semester.\u00a0 And the responses from students are predictable.\u00a0 When faced with a gray area decision, the first response is to follow the letter of the law, the rules, the \u2018right thing to do.\u2019\u00a0 The professor then injects one or more new facts into the case, and the students waiver, more and more as the new facts are analyzed, reducing their fervent enthusiasm for the \u201calways right thing\u201d stand.\u00a0 By the end of each case, most everyone has a position that has modified since the first impression.\u00a0 Then the professor reveals the action the company executive took to resolve the problem, often one not considered by the students.\u00a0<\/p>\n
[Email readers, continue here…]\u00a0 <\/em><\/span>Consider the case of the company with goods on the dock ready for shipment, a company with an accounts receivable-based asset credit line that is already at its limit due to the calculation by the bank of availability based upon current receivables.\u00a0 The rules for \u201cpledging an invoice\u201d as collateral for borrowing call for attaching signed shipping documents showing that the goods have been picked up by the carrier, at which point the title transfers to the customer and the invoice from the company is \u201cgood\u201d.\u00a0 The senior manager, whether the CEO or CFO or head of shipping, walks over to the location where the shipment sits waiting for pickup, complete with paperwork waiting signature by the carrier driver.\u00a0 The manager picks up the paperwork, and using a blank page inserted into the stack, signs in place of the carrier driver.\u00a0 He then pulls out the now signed company copy and returns to his office with just that copy in hand.\u00a0 Within an hour, the bank receives a copy of the invoice with the signed shipping document attached, along with a very standard request to borrow the 80% of the invoice amount.\u00a0 The bank clerk approves, adds the amount to the loan and company\u2019s cash account, and all is well.\u00a0 Or is it?\u00a0<\/p>\n Invariably the students correctly point out that the company manager falsified a document, which surely is against the law since an invoice was pledged to the bank that was not represented by a completed shipment.\u00a0 After this discussion, the professor adds that he forgot to tell the students that the shipment made it to the dock minutes after the day\u2019s carrier pick-up and that payroll is due tomorrow and the cash must be in the bank today to cover the direct deposits.\u00a0 The only way to get that cash today is through the credit line borrowing, and after all, the carrier will pick up the completed shipment tomorrow morning.\u00a0 Now the students debate ethics against legality against pragmatism.\u00a0 Some hold their positions. A missed day of payroll is a small price to pay for even this small breaking of the law.\u00a0 Others state that the reputation of the company as a reliable employer is at stake, and that the employee loyalty will be shaken if payroll is delayed for even one day.\u00a0 The students divide somewhat evenly over the minor infraction.<\/p>\n Then the professor reveals that the shipment on the dock is only a small partial shipment but that the invoice that was pledged to the bank was for the entire amount of the order.\u00a0 Now the students debate whether the manager should be fired or the bank informed of the obvious falsification.\u00a0 And the professor adds that the manager in this case is the CEO himself.<\/p>\n Interesting enough, no student has yet suggested the Kobayashi Maru solution (remember, Star Trek<\/em>?) where the CEO merely thinks outside the box or changes the rules.\u00a0 The CEO could have immediately called the carrier and offered a significant sum, say $500 for a quick custom pick up of the partial order, or called for the current location of the driver and found a way to load the shipment into a car or truck to meet the driver, or even plan to drive to the carrier\u2019s dock itself.<\/p>\n You get the idea.\u00a0 Decisions go from black-and-white to gray to black-and-white again, based upon relative knowledge of the facts and of course, the law.\u00a0 Just as a personal test, what would you do if you were the manager?\u00a0 Or if you were the shipping clerk observing this happening regularly?\u00a0 Or if you were the bank auditor discovering that this was a regular practice?<\/p>\n A CEO or manager\u2019s life is not simple. But there are lines, both ethical and legal, that just cannot be stepped over, difficult as the result may be. Each of us is tested in subtle and sometimes very public ways often during our careers.\u00a0 It is a simplification to state that the \u201cgood guys finish first\u201d, but looking back over long years of experience, there is a great deal of long term truth in that statement.<\/p>\n","protected":false},"excerpt":{"rendered":" If you have been in management or an entrepreneur long enough, you will have experienced the gray area of decision-making where ethics, the law, your needs and expediency all collide.\u00a0 This is the time when you are paid the big … Continue reading