Further to my comment on October 20, 2011 titled "The Cost of Poor Management", please read the article at the following link:

http://finance.sympatico.ca/home/contentposting_reuters/steve_jobs_bio_says_apple_ceo_abhorred_corrupt_execs/32b6e2d7

I have pasted the entire article here, for your amusement.

CBC News

The late Apple CEO Steve Jobs - in an upcoming authorized biography - calls the crop of executives brought in to run Apple after his ouster in 1985 "corrupt people" with "corrupt values" who cared only about making money.

Jobs was often bullied in school and stopped going to church at age 13, according to Steve Jobs, by Walter Isaacson, which will be published Monday by Simon & Schuster. The Associated Press purchased a copy Thursday. Advance sales of the biography have topped bestseller lists since Jobs died Oct. 5 after a long battle with cancer at age 56.

According to the book, Jobs never went back to church after he saw a photo of starving children on the cover of Life Magazine. Later, he spent years studying Zen Buddhism.

As a teenager, he exhibited some odd behaviours - he began to try various diets, eating just fruits and vegetables for a time, and perfected staring at others without blinking.

Apple named after 'fruitarian' diet phase

Later, on the naming of Apple, Jobs told Isaacson he was "on one of my fruitarian diets."

He'd just come back from an apple orchard, and he thought the name sounded "fun, spirited and not intimidating."

Jobs reveals in the book that he didn't want to go to college, and the only school he applied to was costly private college Reed in Portland, Ore. Once accepted, his parents tried to talk him out of attending Reed, but he told them he wouldn't go to college at all if they didn't let him go there. Though he ended up attending, Jobs dropped out of the school after less than a year and never went back.

His pre-Apple job as a technician at Atari paid $5 per hour. He saw a classified ad in the San Jose Mercury News, went to visit the company and informed them he wouldn't leave unless they hired him.

Jobs's eye for simple, clean design was evident from early on. The case of the Apple II computer had originally included a Plexiglas cover, metal straps and a roll-top door. Jobs, though, wanted something elegant that would make Apple stand out.

Computer case inspired by kitchenware

He told Isaacson he was struck by Cuisinart food processors while browsing at a department store and decided he wanted a case made of moulded plastic.

He called Jonathan Ive, Apple's design chief, his "spiritual partner" at Apple. He told Isaacson that Ive had "more operation power" at Apple than anyone besides Jobs himself - that there was no one at the company who could tell Ive what to do. That, says Jobs, is "the way I set it up."

Jobs was never a typical CEO. Apple's first president, Mike Scott, was hired mainly to manage Jobs, then 22. One of his first projects: getting Jobs to bathe more often. It didn't really work.

Jobs's dabbling in LSD and other aspects of 1960s counterculture has been well documented. In the book, Jobs says LSD "reinforced my sense of what was important - creating great things instead of making money, putting things back into the stream of history and of human consciousness as much as I could."

In the early 1990s, after Jobs was ousted from Apple, he watched the company's gradual decline from afar. He was angered by the new crop of people brought in to run Apple, and he called them "corrupt."

Dream to get the Beatles on iTunes

He told Issacson they cared only about making money "for themselves mainly, and also for Apple - rather than making great products."

He also revealed that the Beatles is one of his favourite bands, and one of his wishes was to get the band on iTunes before he died.

He got them available for sale on iTunes in late 2010. Until then, the biggest-selling, most influential group in rock history had been glaringly absent from iTunes and other legal online music services.

The book was originally called "iSteve" and scheduled to come out in March 2012. The release date was moved up to November, then, after Jobs's death, to this coming Monday. Isaacson interviewed Jobs more than 40 times, including just a few weeks before his death.

The book says Jobs put no subject off limits and had no control over its contents.

I came across this article today - interesting perspective. I have often wondered why corporations frequently talk the good talk about hiring caring and ethical managers, then reward and promote the sociopaths. (I have my opinions, of course). Enjoy!

http://hbr.org/2011/07/why-fair-bosses-fall-behind/ar/1

The economic loss created by fear in the workplace is immeasurable. Employees who labour within a command-and-control management hierarchy are frequently motivated by threat and coercion. Not only does fear destroy any sense of team spirit and pride, but it also shuts down important communication channels, inhibiting the flow of creative, constructive, and corrective ideas upstream.  

Just how might the front-line employee fall victim to fear at the workplace? In the 1992 classic movie Glengarry Glen Ross, Alec Baldwin masterfully portrays the character Blake, who motivates a small real estate sales staff through fear and intimidation. The results of Blake’s sales contest, where salesmen placing below second place get fired, are tragic. Indeed, failure is guaranteed and engineered into the process. The characters endure humiliation, desperation, deceit, theft, and scandal as they grasp at dignity and struggle to salvage their jobs, by any means necessary.

Workplace fear and intimidation might not play out as dramatically as it did in Glengarry Glen Ross. Nevertheless, it is real and equally menacing. The weapons of fear include threats, harassment, exclusion, and unattainable goals. The fearful employee worries that he will lose his job, be demoted, be denied salary increases, be assigned menial tasks, or otherwise be constructively dismissed. Working in a constant backdrop of a fearful environment, the employee may become withdrawn, vengeful, depressed, abusive, or even violent.

Quality Management guru, the late Dr. W. Edwards Deming, included “Drive Out Fear” as one of his famous “Fourteen Points” for achieving total quality in business. Deming was concerned mostly about the kind of fear that prevents the average worker from finding out how to do the job correctly. He worried about the fear that prevents employees from asking questions, from rocking the boat, from suggesting new ideas, and from challenging the status quo. "Fear takes a horrible toll,” said Dr. Deming. “Fear is all around, robbing people of their pride, hurting them, and denying them a chance to contribute to the company."

In the 1960’s, Douglas McGregor of MIT’s Sloan School of Management developed what came to be known as “Theory X” of organizational behaviour. The Theory X manager has little respect for employees. He considers them to be lazy, work-averse, and motivated only by self-interest. He feels threatened by the employee who asks too many questions. As such, the Theory X manager institutes a system of close supervision and tight controls, bolstered by a culture of blame. Within this punitive environment, employees learn to mistrust management. They keep quiet. Such a tyrannical manager may be successful in the short term, but fails dismally in the long haul, leaving behind him a trail of destruction and shattered lives. McGregor found that this approach is a major cause of diseconomies of scale in large businesses, and proved it to be counter-effective.

Valuable employees may simply leave the toxic workplace. This is terribly costly to any enterprise. Human Resources expert Susan M. Heathfield of Michigan State University offers advice in her “Top Ten Ways to Retain Your Great Employees”. Gathering data from exit interviews, Heathfield proposes antidotes. She has concludes that in order to retain great employees, firms should:

• Ensure employees know clearly what is expected of them every day.
• Provide high quality of supervision.
• Ensure that employees feel that they may speak their minds freely within the organization, without fear of recrimination.
• Utilize employees’ talents and skills.
• Promote fairness and equitable treatment.
• Provide opportunities for staff to grow in career, knowledge, and skill
• Never allow employees to feel anonymous or alone.
• Never threaten a person’s job or income.
• Encourage reward, recognition, and appreciation.       

The enlightened manager encourages participation and input. She fosters an environment of learning and interaction. She is self-confident, but not narcissistic. She puts the welfare of the company ahead of her personal aspirations. She is a team leader. She treats her staff’s opinions with respect. She entrenches processes that allow suggestions for continuous improvement initiative.  She knows how to answer questions about methods and procedures, or knows how to get the answers. She takes great joy in seeing her employees grow, get promoted, and get raises in pay. She builds enduring teams of people who love their work. She will succeed.

The iconic Royal Canadian Mounted Police (RCMP) have endured theor fair share of troubles lately, not the least of which is the tyrranical rule of their current Commissioner, Mr. William Elliott.

From the outset, Mr. Elliott's appointment to head up the RCMP has been problematic. In today's Edmonton Sun newspaper, Pamela Roth writes: 

RCMP Commissioner William Elliott says he doesn’t regret a controversial decision to carry a gun on a trip to Afghanistan last year.

Following his visit to the war-torn country in April 2010, a photograph of Elliott — a civilian commissioner — wearing an RCMP uniform and carrying a holstered gun appeared in the mission’s newsletter.

The photograph raised questions among rank-and-file officers about whether Elliott had the proper qualifications to carry the weapon, and eventually led to a formal complaint being launched.

Elliott, who was in Edmonton on Thursday, said he was carrying the gun for personal protection and had some training before he went on the mission.

“People think I should have been trained to the same standards as our men and women who are on the streets of Canada arresting people and doing law enforcement. That’s not what I was doing in Afghanistan,” said Elliott. “I have no regrets to make the decision that I took.”

The Harper government announced last week that Elliott will step down this summer as the RCMP’s first civilian commissioner.

Elliott has been ruffling feathers since he was appointed in 2007, forcing the government to launch an internal human resources review of his management of the force.

This little incident pales in comparison to his behaviour vis-a-vis his own employees during his tenure as commisioner. It seems that he was the consummate "office bully." He regularly berated, humiliated, and otherwise yelled at his underlings, showing a total lack of interpersonal skills. The situation became so bad, that on February 8, 2011, it was the subject of a hearing with the Public Safety Committee of Canada's House of Commons.

At the hearing, Elliott was accused of causing the morale of the RCMP to sink to an "all time low" because of his abusive leadership style.

Deputy Commissioner Raf Souccar, along with former assistant commissioner Mike McDonell led was was effectively a revolt against Elliott last summer. It shook the RCMP to its core.  Elliott has announced that he will resign effective July 2011. Presumably he will be replaced by an RCMP insider.

And now I come to the point of this entry.

The comments from Raf Souccar were fascinating, and aligned directly with the Ten Toxins of Strategic Planning that I revealed in my blog entry just previous to this one.

Souccar testified before the Commons committee that he had spoken to Elliott about his behaviour, and found that he (Elliott) either could not, or would not change." "Members wanted to come forward with complaints," said Souccar, "but they were fearful that they would either lose their jobs, or that they would be moved out of their current positions." 

"I have to tell you that I had so many people complain to me about Bill Elliott's disrespectful behaviour that my very position required me to act. I was a member of the Senior Executive Committee, and I could no longer point a finger of blame at the senior executives for inaction, because I was one,. Mr. Chairman, I took my position very seriously and could not stand by and watch while two of our very core values, Respect, and Compassion, be nothing more than words hanging on a wall in our buildings across Canada." 

Bravo, Mr. Souccar. We would all be well served by more senior executives who share your sense of courage and integrity.

As for the monster called Bill Elliott? No doubt he will secure a lucrative and meaningless position somewhere in the civil service. The private sector, however, should be ashamed that it breeds and rewards brutality such as his.   

On December 15, 2010,  www.bloomberg.com reported the following:

"Goldman Sachs Group Inc.’s top executives will get about $111.3 million in stock next month in a delayed payout from last year and their record-setting 2007 awards, even as Wall Street prepares for lower bonuses.

Chief Executive Officer Lloyd C. Blankfein, 56, is poised to receive about $24.3 million in January, based on the closing share price on Dec. 14, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock’s value since it was granted at $218.86.

Within a year after the bonuses were approved, Goldman Sachs took $10 billion of U.S. bailout funds, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the New York-based firm paid $550 million to settle U.S. regulators’ fraud charges related to a mortgage security the company sold in 2007.

“Clearly we now look back and say, ‘Were things fine? Should they have paid? Maybe not,’” said Jeanne Branthover, a managing director at recruitment firm Boyden Global Executive Search in New York. “There’s nothing you can do about it. The payouts were in stone. But hopefully, in the future, they won’t be.”

In the weeks following the report in Bloomberg, it has become clear that Golman Sachs, and other large investment banks are charging full steam ahead, awarding billions in bonuses to their executives and staff. One report put the amount at an average payout of roughly $500,000 per employee. It is clear that the receptioist isn't going to enjoy a $500,000 bonus check. Executives will get the lion's share. 

So, as the US government (translateion: "taxpayer") bails out the braintrust at Goldman Sachs et. al, the extremely rich get even richer.

During Mr. Obama's State of the Union speech tonight, perhaps he ought to bring out his Louisville Slugger, and drag some of these banking mandarins out to the woodshed, giving them the arse-whuppin' of their lives. Simply put, the investment bank eecutives have been big catalysts in one of the greatest financial crises in a century, even while they feather their beds of largesse with taxpayer money. ,
 
One has to question the judgement (or motive) of the Obama Administration as well, however. After all, as Bill Waddell of Evolving Excellence pointed out on January 25, 2011, Mr. Obama has just appointed GE's Jeff Immelt to head up the government's commission to create jobs. Immell appears tp have achieved good results during his tenure at GE from 2000 to 2010. The problem is, however, that 96% of the 81,000 new jobs created within GE between 2000 and 2010 were in countries OTHER THAN the USA!

  

On Saturday, January 8, 2011, the Toronto Star published a report which revealed the annual earnings of the highest paid CEO's in Canada. The data were stunning.

The highest-paid CEO in Canada for the year 2009 was Aaron Regent of Barrick Gold. He "earned" $24,217,020 in that year. In second place was Hunter Harrison of the Canadian National Railway, who was paid a  stipend of $17,343,160 for his toil. Ranking #100 was Michael Waites of Finning International - his paycheck was $2,967,207 in 2009. The average salary among the 100 was $6.6 million, down slightly from 2008 at $7.3 million.

Compare this to the annual wage salary for the average Canadian worker in 2009, which was $42,988 and one can easily calculate that the average CEO in the Top 100 is paid 155 times the wage of the average Canadian worker.

The Star interviewed Roger Martin, dean of the U of T's Rotman School of Management, who believes that the way executives are paid was a key ingredient in the economic crash of 2008/2009. Executives like Jack Wash of General Electric can retire when stock prices are at or close to their peak. Wash owned $900 million of GE stock at the time of his retirement at time. 

Even subperforming CEO's make out like bandits. Bob Nardelli of Home Depot, who Martin argues "did a terrible job", resigned with a severance package worth $240 million. "Calling it quits can be a lucrative business" says The Star.

Remember that 2009 was the year in which we were enduring an economic downturn that was generally acknowledged as being the worst since the Great Depression. Billions of dollars in bailout cash were being delivered by the Canadian government to the private sector. Workforces were being slashed left, right, and centre. Employment Insurance payouts soared. Unemployment figures continue to be high ion spite of the modest recovery that we are now enjoying. But the CEO's, and I will wager their senior executives, were doing very well indeed. 

Would someone please convince me that these CEO's have 155 times the talent that the average Canadian worker? Do they work 155 times as hard as the average Canadian worker? Are they 155 times smarter than the average Canadian worker? Are they 155 times more ethical, more honest, more motivated than the average worker?  
 
We are told that big money is needed to attract big talent. Balderdash. There are just too many examples of very bright young people growing concepts into successful enterprizes (ever heard of Facebook or  Google?) that fly in the face of the Big Money Theory. Intelligence, talent, and work ethic are not the exclusive domain of the rich. In fact, given some of the collossal disasters seen in recent years in Big American and Canadian Business, one has to wonder whether there is an inverse relationship: is it possible that the more we pay our senior executives, the more stupid they become? Do they become more reckless? Do they become less trustworthy? Do they become less altruistic? Do they become more concerned with their own lot in life than the welfare and happiness of their employees and their customers? Do they become more short-sighted, looking toward tomorrow's stock price rather than the long-term stability of the organization? Do they become egomaniacal at the expense of society as a whole?

Demographic data seems to be indicating a growing gap between the very rich and the working poor. The middle class appears to be eroding. Wealth, it seems, is being withdrawn from the middle class into both the public sector (through Big Taxation) and the private sector (into the hands of the very wealthy). 

This cannot be a sustainable trend. 
             

The New York Times reported this week that NY Attorney General Andrew Cuomo sued Ernst and Young on Tuesday, accusing the accounting firm of helping its client, Lehman Brothers, to "engage in a massive accounting fraud" by misleading investors regarding the financial health of the investment bank.
 
It seems that Ernst and Young approved a controversial accounting maneuver known inside Lehman Bros. as "Repo 105", which involved the "surreptitious removal of tens of billions of dollars of securities [debt] from Lehman's balance sheet to create a false impression of Lehman's liquidity, thereby defauding the investing public". The NY Times reported that this tactic temporarily removed as much as $50 billion from Lehman's balance sheet to give the appearance that Lehman had reduced its debt levels. 

Cuomo referred to the practice as a "House of Cards business model, designed to hide billions in liabilities before Lehman collapsed." The shock waves were felt with great pain around the world.  

The "repo" transactions, variations of which are employed ubiquitously on Wall Street, occur when an investment bank raises cash by selling assets, then buying them back a few days later. These transactions would typically occur just before the close of the books at the end of financial quarters.
 
Ernst and Young argue, of course, that such transactions are allowed under GAAP (Generally Accepted Accounting Principles). I am not an Accountant, and as such cannot express an opinion one way or the other. But this certainly fails to pass my ethical "sniff test": is management interfering in the normal patterns of business in an extraordinary way in an attempt to distort reality and otherwise mislead stakeholders?   

There is an analagous practice which occurs frequently in the Canadian retail, wholesale, and manufacturing supply chains. From the point of views of the industrial customer, this is called "forward buying." It works something like this:

As a manufacturer or wholesaler approaches its fiscal period end (month, quarter, or year), management realizes that it is about to fall short of its sales targets. It creates incentives for its customers to buy product in quantities that the customer would not normally need. These incentives are frequently expressed as reduced cost prices or discounts from contracted prices, if the customer will buy quantities prescribed by the seller. The customer, let's assume that in this case it is a retailer, performs a quick analysis of the "deal" (comparing the reduced prices to the related inventory carrying costs, for example) and arrives at a decision to buy or not buy the incremental quantities. 

Incentives need not necessarily come in the form of reduced prices. Occasionally, they can come in the form of an "exchange of favours" by individuals in senior management, extended payment terms, and a variety of other arrangements. 

As a professional inventory manager, I have always argued strenuously against this technique. Not only does it open the seller/customer relationship to unethical practices, but the true costs of such transactions are frequently overlooked. From the seller's perspective, I call it "mortgaging the future" to relieve current pain.  

It often takes a long time for conditions to develop which lead to offering such deals, but once the firm is on the merry-go-round it is very difficult to get off. It is like a heroine addict who receives great pleasure and results from the first hit, then spends a lifetime trying to replicate that first feeling.

Pretend that Wholesaler ABC has enjoyed 50 years of relatively stable growth, with sales averaging +5% growth annually. Senior management at ABC sign on to a +5% budgeted sales increase for 2010. Shipments in 2009 were 100,000 cases of widgets. ABC must therefore ship 105,000 cases in 2010 to meet their sales target. The average price of a case is $1,000, so annual sales in 2009 were about $100,000,000. 

Significant unexpected changes happen in the marketplace in 2010. Such changes might include the entry of new competitors, a softening of the macroeconomy, a change in consumer tastes, or government legislation. Whatever the negative issue, sales for ABC start to trend downward, at a rate of 95% of the prior year's volume. Management at ABC either ignore the slide, or dismiss it as a temporary "blip", or are completely unaware of it due to flaws in their sales analysis system.     

On Dec.  1, 2010, the sales trends hit management at ABC like a shovel in the face. Not only are sales down relative to last year, they will never make budget! In fact, the gap between actual and budgeted sales looks like it will be 10%! (5% vs.LY + 5% growth). After 11 months, they realize that their shipments will be about 95,000 cases, versus a target of 105,000 cases and the shortfall is therefore about 10,000 cases ($10,000,000).

Management panics. It's "Let's Make a Deal" time at ABC. They approach their top two customers, Customer 123 and Customer 456. If each of these two customers buy an extra 6,250 cases, to be shipped before December 31, 2010, ABC will extend a 20% cost discount on the incremental purchase. (6,250 x 2 x $800 per case = $10,000,000 = sales shortfall).

On Dec. 15, 2010, both 123 and 456 agree. The incremental purchases represent about 3 months' worth of stock at each of Customer 123 and Customer 456. Ultimately, ABC achieves their 2010 sales target.

What are the costs of this deal to ABC?

One might answer, correctly, that ABC has lost potential gross margin dollars of 12,500 x $200 / case = $2,500,000. Incidentally, ABC had  to ship 12,500 cases, and not just the "gap" of 10,000 cases, because the selling price has been reduced to $800 per case rather than the contracted $1,000 per case. So, 12,500 x $800 is enough extra volume to make up the shortfall in dollars. 

But, there are other costs to ABC. Since they are shipping an extra 12,500 cases, which is about 4 weeks of normal stock, in the last two weeks of December, they are cramming 6 weeks of work into 2 weeks. This means extreme pressure on operations.
- overtime might have to be paid to warehouse workers
- inbound product (e.g. subcomponents or raw materials) might have to be expedited. ABC have to incur air freight and premium routing costs in order to ensure backorders are not accumulated?.
- standard manufacturing or assembly maintenance procedures might be foregone, as lines are dedicated to increased production or assembly.
- standard Health & Safety considerations might be overlooked in the month-end rush. Might there be a higher risk of accident, injury or burn-out?
- this is Christmas Break time, and the extra work could effect employee morale.
- integrity of inventory record accuracy and inventory control measures might be compromised in the rush to finish paperwork.

At the end of the day, is ABC any farther ahead? In many cases, the answer to this is "no." Their Big Customers, 123 and 456, have simply "bought forward" 3 months' of supply. They now have surplus. They will simply shut down their purchasing for 3 months, until the surplus is reduced to normal levels. At the end of the First Quarter, therefore, Supplier ABC is in even worse shape than they were in December! The gap between actual sales and budgeted sales widens further. 

Besides, ABC has now misled their investors, by overstating their sales potential, and the financial health of their company.

Unless ABC is willing to tackle the underlying causes of the 2010 sales erosion (competition, style, or legislation) ABC's financial condition will continue to worsen. 

Customers become perturbed as well! Customers 123 and 456 now have surplus. Their careful management of inventories for the past 11 months has now been eradicated. Their warehouses are strained to find homes for the extra inventory. They are exposed to shelf-life issues, increased risk if shrink, and increased risk already associated with forecast accuracy.
 
I have see situations where Customers 123 and 456 end up returning the surplus stock! What a disaster for everyone!

There are too many reasons not to jump on merry-go-rounds of this nature. Do the right thing: address the underlying problems and take your lumps when you have to do so. But do not matrgage the future with schemes such as these.    


  

     

Greg Walsh, a minor league hockey coach in the city of Peterborough, Ontario, was recently suspended for pulling his team off the ice during a November 15th, 2010 Midget Class hockey game. This violated Hockey Canada and league rules, and officials suspended Walsh for the balance of the season. For good reason, hockey league officials don't want coaches to nonchalantly withdraw their teams from competition because they don't like the colour of the referee's hair. Mr. Walsh's  motive? One of his young (16 years of age) players suffered verbal abuse on the ice, as an opposing player uttered racial slurs in an effort to throw Coach Walsh's player off his game. When game officials allowed the offending miscreant back on to the ice, Walsh withdrew his team from the game. 

Eventually, the offending (and offensive) player received a three game suspension. For his uncompromising support of his player, and in a valiant show of team solidarity, Coach Walsh was handed a one year suspension, "for breaking Hockey Canada rules".

In the wake of the suspensions, many have argued that the one-year penalty was unfair. Many argue that the league ought to use some discretion, and forgive Walsh's violation. No young player should be compelled to play in unsafe, or abusive conditions. 

However, Mr. Walsh pays a steep price for his actions. I heard him interviewed on radio today, and he does not sound bitter. He would have done the same again, given similar circumstances. He has shown great class, and in the face of a flawed rule book, decided that he was willing to pay whatever price was necessary to DO THE RIGHT THING. 

Frequently, there is a price to be paid for having the courage to act on principle, and to exercise good ethics. This is true in sports, in society, and in business. 

The price of unethical behaviour can be even more dramatic. Mark Madoff, son of disgraced fraud artist Bernie Madoff, committed suicide last weekend. Some feel that he was in father Bernie's inner circle, when Dad was bilking widows of billions. Father Bernie os rotting in jail for the rest of his life, and his name will be forever linked to all that is wrong with the American financial system. His son has killed himself. A costly venture indeed.

Ethical dilemmas are seldom as cut-and-dry as the examples referenced above. This will be the theme of my next few postings.   

Consider the following four scenarios:   

Scenario A:
A man has worked for a major player in the financial services industry for over ten years. He has accumulated considerable expertise, is very reliable, and has become the "go to" guy within his department. He is reliable, honest, a team player, and has a great work ethic. He was recruited into the company, in part, on the promise that the company was utterly committed to the value of "promotion from within": if you are talented and make an enduring contribution, you will advance. His paycheck is satisfactory, but unspectacular. After receiving a few modest raises and level advances in his first five years, his career has stalled. The business is successful. The employee has noticed that HR has developed a habit of hiring new MBA graduates, fast-tracking their careers, and rapidly promoting the new hires to senior executive positions such as Assistant Vice President within one or two years. He, and many others like him are routinely bypassed. He has been told to "be patient, and good things will come to those who wait." Last month, he applied for a new position within the company and his credentials matched the position exactly. A new MBA was hired into the position, directly from University. Behind closed doors, the Vice President of HR has been told by expensive consultants that MBA's must be hired to ensure that the company stays in tune with new industry trends and best practices. On the other hand, if the company rescinds the "promotion from within" policy, they will lose considerable expertise when fed up employees look elsewhere. 

Scenario B:
A large North American retailer, who has dominated the landscape for decades, is faced with fierce price competition from a new entrant into the industry. The new competitor has two distinct advantages over the older established firm: a superior logistics network which replenishes stock more quickly and efficiently, and a supplier/vendor network that is based primarily in southeast Asia. By sourcing from Asia, the new company takes advantage of labour and manufacturing costs that are one tenth of that in North America, where the established company has most of its vendors. The older retailer decides that it must aggressively develop vendor relationships in Asia to drive its costs down. Many of the vendors that it meets routinely use child labour. The vendors argue that this is culturally acceptable in Asia, and it is the only way many families can escape poverty. If the retailer turns away from such supplier opportunities, they will be unable to meet or beat the new competitor on price. Customers are flocking to the new retailer by the thousands.

Scenario C:
A European manufacturer who has been in business for centuries is facing intense competitive pressure. A major player in their market, who is in worse financial shape than they are, has decided to relocate manufacturing facilities in SE Asia. Labour costs are 90 percent lower than in their old traditional plants in Europe. Our company decides to follow suit. Their brand name has a strong association with the neighbourhood in which they have manufactured for several generations. Our company's marketing team assures the Executive Team that the brand image will not suffer, since the Asians can produce high quality product, and profit margins will skyrocket. Our company decides to sink tens of millions of dollars in setting up a set of factories in SE Asia, like the competition. The little European town where the company grew up is decimated, as our company has been the major employer in that area for more than 200 years. Supply of product to the key North American and European markets is damaged for months in the transition period. Inventory stability is destroyed. Consumers clue in to the fact that goods produced under our company's brand name is no longer from that little European town with a great reputation for craftsmanship. Our company's reputation as a producer of prestige product is at risk.     

Scenario D:
 A new Vice President is hired in to a retail company who is struggling to achieve former glories. The new woman's credentials are impecable. She is experienced, skillful, and possesses great drive. She works hard with her staff to build an internal analytical infrastructure to guide buyers in their appreciation of the impact that purchasing decisions have on inventory management, gross margin, ROII, and company profitability. Some buyers had to be terminated for refusing to accept the new direction. In the fullness of time, the changes start to take root, and ROII begins to recover. The new VP is rewarded with a new car, raises in salary and richer benefits. She goes on a Buying Trip in Asia. While there, she ignores the new buying infrastructure and decides to go with her "gut feel". She spends too much money on new inventory. Far too much money. This crushes the frail financial recovery that the company has recently enjoyed, and sends it on a downward spiral to bankruptcy. The VP is fired, but walks away with a $1 million severance. The employees are now out of work, and the company's assets are sold.   

These scenarios are loosely based on fact. 

How might a strong sense of ethics have helped resolve these problematic stuations?      
  

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