Ethics - Issues of Influence

I will repeat myself from a previous blog, in that it is the Supply Management Professional's responsibility to educate their company's management and staff about the various aspects of Purchasing ethics as defined by the Institute for Supply Management (ISM). That being said, this is probably the most misunderstood and complex issue that will need to be dealt with on an on-going basis. What is influence? Webster defines it in three ways:

1. The act or power of producing an effect without apparent exertion of force or direct exercise of command.
2. Corrupt interference with authority for personal gain.
3. The power or capacity of causing an effect in indirect or intangible ways.

As you can see this indicates that anyone that acts in a manner to change or alter the course of decisions or those who have the power to effect changes in the decision-making process. How are decisions made within your company? Are decisions made by an individual, an individual’s actions, a manager's decision, through committees, following or not following policies, administratively, or some other forum? There are those inside and outside the company that have the opportunity, desire, and/or the power to influence decisions. There are two ways to influence decisions:

1. Corporate, division, department, and employee policies and procedures.
2. Gifts, gratuities, and entertainment.

The first is easier to put in place, train, and require compliance as long as there are penalties in place for non-compliance. The hardest part of establishing policies is getting consensus from the various levels. However, once the policy is established, training becomes a requirement and continued due diligence is necessary because management and staff constantly change. Depending on your company, staff turn-over ranges from 5% to 30% on average. The higher the turn-over rate the more time will be required for training. Do not expect compliance based on staff members reading and signing an ethics statement. There are a couple of reasons.

1. They may sign the document without reading, they may skim over it, or they may not understand what they have read. In any of those examples they sign because it is a requirement of employment.
2. They interpret what they have read based on their own value system and/or past experience.

A dedicated training session allows you to gauge understanding and future compliance. This is the perfect time to clarify any gray areas in the minds of the staff. It is also the time to emphasize the importance of not only following the letter of the policy/guidelines but, also the spirit in which they were written. During an Internet search I found plenty on the "Golden Rule." With further searching this turned out to be the letter of the principles. What I found that makes me say this, is the "Platinum Rule." This became the spirit of the principles in my mind. The "spirit" in other words is beyond that which is stated verbally or in writing.
ISM states that a company should have a written policy that defines what ethical behavior encompasses and that it should be communicated to the staff. Included in ISM's statement is the frequency of accepting (if allowed), solicitation of, and acceptance of personal benefits. Let us look at the three components in ISM's guideline.

1. Gifts: Can be anything given upon first meeting, as part of negotiations, a thank you, or other occurrence. It includes marketing materials, food, merchandise, etc. It is given voluntarily without compensation.
2. Gratuities: Are basically the same as a gift except it is usually given beyond an obligation or service provided.
3. Entertainment: Is something that provides enjoyment or a diversion from normal activities. These include invitations to parties, sporting events, performances, etc.

Let us look at gifts first. It should be a company’s basic policy, that no gifts are accepted, including promotional items. That being said, I have had many students over the years challenge me on what harm does accepting a pen, a coffee mug, a calendar, etc. cause. At some future date, it fulfills its purpose in the sense that when a project starts and the identification of suppliers is necessary, the first one's mentioned are often those that have provided marketing merchandise. It is not a conscience decision to call that name up when asked - who should we include in the negotiations? This occurs on the sub-conscience level because you use the mug everyday or you look at the calendar everyday. Its there and it will surface without anyone realizing it.
The next issue is food and meals. There are two parts to this one:

1. Food brought in for staff: Often times companies will allow food to be brought in periodically (i.e. holidays, etc.). Often it is brought in by the same company. In healthcare, whether in a hospital setting or a doctor’s office, it is looked on as an expectation to the point that if food is not provided staff will not show up for a meeting or an appointment will not be given.
2. Meals (i.e lunch, dinner, etc.): It is often said that there are not enough hours in a day to meet with sales representatives and the only time I have is lunch. Even with a company policy that states that documentation (agenda/minutes) is needed and the frequency with a supplier is minimal - this is never a good idea. Supply Management Professionals are probably the busiest staff in a company and it is my belief that meals are a time away from the office to recharge. It is not a continuation of work.

Finally, food that becomes a habit becomes an expectation. Doctor’s offices actually promote supplier lunches as a benefit when looking for new hires. This is one influence that you can control and it should not be allowed in any fashion.

Entertainment: I was once told that the SC State Ethics Commission stated, if a supplier provides tickets to all of their clients, then it is not an issue of influence. It may not be. However, the perception by other is that it will influence your decisions sometime in the future. This perception is escalated if a bid is not performed or the contract renewal goes unchallenged, etc. If only that supplier provides tickets but no other suppliers in the same industry does, then that will be considered an influence by the other companies. In addition, someone who sees you at the event may not know that the supplier gives the tickets to everyone.

One other issue stated by ISM, is "Avoid accepting monies, loans, credits, preferential discounts." This can be both for the employer and personally. One, NEVER accept anything that would personally benefit you, your family, or friends. It will come back to haunt you. The same goes for business. One, it will impact decisions and it may even be against the anti-trust laws.
ISM states that extreme caution should be used when deciding to accept a gratuity. You should ask yourself the following questions:

1. Is it legal to accept the offer?
2. Is it in the best interest of your employer?
3. Will it influence your decision?
4. Will accepting the gratuity appear to be unethical?

Let us assume that Purchasing is not allowed to accept gratuities but your company's salesman have a promotional items and an entertainment budget, what perception is the company sending out? I believe the perception of other is that it is not okay for others to influence our purchasing department but it is okay for us to influence your staff.

This is a very complex subject that companies often address with less than strict or even well-defined guidelines. Even ISM only offers suggestions. However, I have found that in relation to this issue of influence, I prefer the black and white approach. This means, I accept NO gifts including promotional merchandise, I do not accept food, including lunch and holidays, and I do not accept any form of entertainment. If I do not accept it, I do not have to explain it to anyone, including my management.