The High Road

To Get Ahead of the Competition—And Stay There—Today's Project Leaders Must Give Back to the Communities They Serve, Abide by Solid Ethics and Encourage Team Members to do the Same

by Karen M. Kroll

Shifts in the business environment, the rise of new economies and the latest advances in technology are changing the rules of business.

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The race to be the best has spawned a culture of hyper-competition and sparked a bevy of high-profile, aggressive projects.

“It's not just the Davids versus the Goliaths,” says James Greene, senior consultant with M&H Informatics AG in Basel, Switzerland. “Now, you have Goliaths from all over.”

In an environment like this, delivering a project on time and within budget is no longer enough to survive. In the seemingly never-ending quest to one-up the competition, some project leaders may be tempted to push ethics and social responsibility aside. Conversely, others have chosen the high road, relying on socially responsible behavior and projects to set themselves apart.

“It is critical that companies be good corporate citizens,” says Alex Brigham, CEO of Corpedia, a provider of ethics and compliance training based in Phoenix, Arizona, USA.

Socially responsible organizations give back to the communities in which they serve, ensure their employees find the appropriate work/life balance, adhere to environmental standards and implement ethical corporate policies.

It's just good business.

To get ahead of the competition—and stay there—today's project leaders must give back to the communities they serve, abide by solid ethics and encourage team members to do the same.

LOOKING BACK on a decade of consumer mistrust and ethics gone awry, it may seem as if corporate responsibility has all but disappeared in today's fast-paced, ultracompetitive marketplace.

The list of infamous corporate scandals is long. In 2001, Houston, Texas, USA-based energy company Enron declared bankruptcy amidst a major accounting scandal and lies by top executives. Also swept away was Chicago, Illinois, USA-based accounting firm Arthur Andersen, which was found guilty of obstruction of justice relating to the shredding of Enron audit documents, though the verdict was later overturned.

A year later in 2002, a major accounting fraud scandal brought down Clinton, Mississippi, USA-based WorldCom in the largest U.S. bankruptcy in history. That same year, HIH Insurance Ltd., Australia's second largest insurance company, was placed into provisional liquidation, owing creditors nearly AUD$5.3 billion after top executives lied about the state of the organization's profitability.

Under pressure, project managers may be tempted to bend the rules, but they also have the opportunity to differentiate themselves and their organizations by following ethical standards and rolling out socially responsible projects.

“Just because the competition is strong doesn't mean you have to cheat,” says Richard D'Aveni, Ph.D., a professor of strategic management at the Tuck School of Business at Dartmouth University in Hanover, New Hampshire, USA, and author of Hypercompetition [Free Press, 1994] and Strategic Supremacy [Free Press, 2001]. Rationalizing unethical actions by pointing to intensified competition shows a lack of imagination, he says.

The Best Policy

Inevitably, conflicts of interest will arise on projects. Project managers may find themselves with insider information that can be used to move their organization—or themselves—up a notch. Although it can take some maneuvering, these situations must be avoided.

Earlier this year, James Greene, senior consultant with IT company M&H Informatics AG in Basel, Switzerland, was engaged as an outside business analyst on a team to design a data warehouse system for a client. The team also would help select a vendor to develop the application.

Although competition was stiff, M&H was a qualified and likely candidate for the job. But Mr. Greene's position on the project team presented a potential conflict of interest, and threatened to blur ethical lines for both M&H and the client.

Mr. Greene could have used his position to provide M&H with insider information, enabling the firm to assemble a very attractive bid. Instead, however, he worked with the team's project manager to ensure he was excluded from the vendor selection process.

Taking this step meant the other team members sometimes had to schedule additional meetings without him. “But this effort was absolutely necessary to ensure that there was no possibility for me to influence the vendor selection process,” he says. Had he done so, he would have risked his company's reputation and his relationship with the client. “Our clients need to know that we're doing a good job with their interests in mind,” he says.

Questions of ethics can also come up when competitors slash costs or reduce timelines at the expense of quality. Although it might be tempting to follow suit, leaders must learn to be comfortable holding their services and pricing when other firms propose prices or timelines that are clearly unrealistic.

Black and White?

Sometimes doing the right thing isn't so straightforward. In developing countries, for example, government employees may expect a bribe before they will issue a license or building permit, says Geoff Everingham, the University of Cape Town.

It can certainly be tempting for businesses to hand over a small amount, but it's the wrong approach, says Pekka Isosomppi, senior manager of corporate social responsibility with Nokia in Espoo, Finland. “The issue of cultures being different is no excuse for diverging from the ethical construction of the company.”

Mr. Isosomppi acknowledges that taking this stand may cost more money, at least in the short term. But it pays off in the future by establishing the company's legitimacy. Operating in an atmosphere of bribery and secretive deals can quickly degrade a business. “In the long term, creating a clean operating environment is more productive and sustainable,” Mr. Isosomppi says.

This starts with a commitment to ethical operations from top management, he says. They must communicate this commitment to employees and create a code of conduct that will provide guidelines for project behavior. Employees should be engaged in all discussions regarding the role of values and ethical principles in their everyday work, Mr. Isosomppi adds.

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Gary Cudmore, vice president of data services with JT Packard, a provider of power services in Verona, Wisconsin, USA, occasionally learns a competitor has submitted a proposal for a data center project—on which his firm also is bidding—with an unrealistically tight schedule. Because most companies want to get their centers up and running immediately, a firm that proposes a shorter timeframe may have an advantage in gaining the job.

But many times, these quick schedules don't account for all the issues that might arise, he says. For example, building a data center requires navigating a particular municipality's code requirements, so Mr. Cudmore will speak with local authorities to get a handle on the aspects of the project that might concern them. They might be concerned the outside generator required will consume part of the parking area, so he'll add time to the schedule for re-striping the parking lot to add space.

While his firm doesn't win every proposal, it's often successful, and the upfront honesty is helpful down the road, as he has established a level of trust that sets the stage for future dialogue. Clients know Mr. Cudmore has taken the time to do his homework and that his estimates are credible.

Project leaders must also resist the temptation to cut prices so deeply that quality might be compromised. “It's better to maintain a realistic price, so you know you can do a good job,” says Shay Shargal, PMP, general manager with PME-TEFEN, a global project management consulting firm based in Beit-Dagan, Israel. Customers interested in a long-term relationship want to know their business partners can deliver on their promises.

Cultivating Responsible Employees

It isn't enough for project leaders to adhere to a strong set of ethics. Across the enterprise, employees must be encouraged to do the same.

National Grid, an international electric and gas utility company based in London, England, makes an effort to clearly communicate to its project employees how it expects them to work. In 2002, it rolled out its “Framework for Responsible Business” that tells employees how to act with integrity, use natural resources efficiently, respect human rights, maintain sound internal controls and put in place safeguards for other workers.

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If [employees] know that an honest mistake won't mean they're out of a job, they'll more likely experiment, own up to mistakes and fix them.

—Richard D'Aveni, Ph.D., Tuck School of Business, Dartmouth University, Hanover, New Hampshire, USA

“[The framework] defines the principles by which we manage the business and take account of economic, environmental and social factors in our day-to-day decisions,” says Ian Gearing, corporate responsibility manager.

But the ethical directions aren't simply coming from the executive suite. National Grid's framework is overseen by nonexecutive employees. Twice a year, these people provide the board of directors with reports that outline their key obligations and identify any areas of non-compliance, along with plans to improve control.

Key to getting team members to follow suit is having the buy-in of all management and company leaders. “Clear involvement from the top is very important,” Mr. Gearing says. Otherwise, he adds, employees are less likely to take their responsibilities seriously.

Whoops!

Employees must also feel they work in a project environment that leaves some room for risk-taking and error. “People don't want to lose their jobs for trying new things,” Dr. D'Aveni says. “If they know that an honest mistake won't mean they're out of a job, they'll more likely experiment, own up to mistakes and fix them.”

Early in his career, Mr. Cudmore was overseeing a $700,000 high-rise office building and data center construction project in Costa Mesa, California, USA, for Prudential Real Estate. He told his crew to demolish a wall, but unfortunately, the wall he identified didn't need to be torn down.

Once Mr. Cudmore realized this, he had to tell the crew to rebuild the wall—which ended up costing about $9,000 in overtime—and let the client know what happened. Although he didn't look forward to either conversation, it was imperative that he initiate the talks, he says. “If a conversation occurs in the context of the truth, you can't go wrong.”

The discussion might be unpleasant, but owning up to a mistake diffuses the anger of anyone looking to place blame and allows everyone to focus on resolving the situation.

A New Era

It's clear that stakeholders and employees alike don't want to be associated with organizations that can't be trusted. The bottom line is simple: Ethics and competition aren't at odds. In fact, a June 2007 report by Goldman Sachs found the companies that rank high on environmental, social and governmental issues tend to fare better in the stock market. The global investment banking firm reports that 72 percent of these companies outperformed their peers in the stock market.

That's proof companies can operate ethically and still come out on top. “There are millions of ways to compete and be successful,” Dr. D'Aveni says. “There is not a limited set of choices.” img

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

Leadership 2008 / www.pmi.org
Leadership 2008

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