Ethics, Schmethics
“A healthy supply chain is the backbone of our business. We’ll pay you in 90 days.”
This is about doing the right thing.
Doing the right thing involves admitting the right thing can be an elastic term. It depends who defines rightness. And who is most qualified to make, and enforce, that definition.
It does not follow what is right for you is necessarily right for me. Nevertheless, organizations whose business it is to codify things try to freeze ethics in amber.
Case in point: Section 7.3h of the AS9100D Standard states that in a manufacturing organization, “The organization shall ensure that persons doing work under the organization’s control are aware of … the importance of ethical behavior.”
Ethical behavior.
Aware of.
Importance.
Not paramount importance, just importance. One of many competing considerations.
Problem is, again, whose ethics? Those of the authors of the standard? Were they sober when they drafted it? Of otherwise sound mind and disposition, or prejudiced by the freeway driver who cut them off at the off-ramp to the street that led to the parking lot of their ivory tower on their way to work that day? Poisoned pen, retributive ethics.
What, moreover, is ethical behavior? Who authoritatively describes it? What constitutes “awareness?” How do we know when it’s important and not trivial? Who sets the norms? What makes them universal and not mere whim or bias? What makes them binding over the rest of us? Who does the binding?
Other than that, it all seems pretty simple and straightforward.
Aristotle, in his Nicomachean Ethics, views ethics as a series of practical decisions about how best to live, both individually (excellence) and communally (politics), made by well-schooled (mature), engaged persons. You know, like American voters. The study of how best to live and act is what we commonly call philosophy. A noble endeavor.
Cue scratchy record sound.
This ain’t Aristotle. Welcome to the Wild West. Where it’s all relative.
Ask the former management of Uber for further explanation.
Our company has a new customer. Needs flying probe test support. We get the call because we have the same equipment and more experience. They need technical backup and an outlet when demand spikes. Big company. Worldwide sales. Publicly traded. Slick website.
Tell them about our capabilities. They like what we tell them. Sign the NDA. Next come the data. We quote the job. We get the job.
More paperwork: set them up in our system as a customer. They do the same in theirs, establishing us as a supplier.
Next comes the PO. Billing address correct. Check. Shipping address correct. Check. Due date matches quoted lead time. Check. Payment terms?
Uh oh.
Net 90.
“It is the policy of our company to pay approved supplier invoices in 90 days. Exceptions may be made for accelerated payment through the supplier portal on our website. Please set up login, password, and escrow account on supplier portal to initiate accelerated payment application process.”
Accelerated payment application process?
“Applications for accelerated payment will be processed within 120 business days. Approved applications will result in a 2% service charge against the total value of the invoice being applied. We reserve the right to approve or deny applications for accelerated payment, with no reason given for approval or denial. We believe a healthy supply chain is the backbone of our business. For further reference, please consult our corporate ethics policy on our website.”
So, I do. All 35 pages of fact-filled pdf. Lots of prose about this company’s virtues regarding the environment; prevention of sexual discrimination or harassment; conflict of interest; bribery; gratuities; protection of corporate intellectual property; equal opportunity and nondiscrimination in hiring practices; work-life balance; ethical and fair dealing in purchasing products and services based on best price and delivery, and so forth. A bureaucratic encomium to best practices, written by a law firm, vetted by a PR firm, justifying their existence.
Not one word about when we can expect to be paid. Not one word either about their tacit expectation that, in addition to providing services, we will also provide interest-free, 90-day financing on those services. But a wonderful portal in that well-designed website, through which we may effectively plead our case to be paid. So, we play the game mainly because we don’t have a choice. Apply for early payment, and offer a bribe of 2% to them for the privilege of them granting what should be ours in the first place.
This company’s payment application ordeal seems to have been set up by the TSA.
Evidently anticipating disgruntlement, the portal helpfully offers soothing language about how this “exciting service” helps improve vendor cash flow, through predictability of payments. It also offers hearty online congratulations when our application to accelerate payment is approved (approved!).
Payment according to our company’s stated 30-day terms also stabilizes cash flow. Ours and the cash flow of companies working with us.
Net 90 for them is just good business. It keeps the cash number on the asset side of the balance sheet artificially high at the end of the quarterly reporting period. The rest of the (smaller company) supply chain be damned.
Try telling our employees, who rightly and lawfully expect to be paid twice a month, that payment in 90 days is good business. Try telling suppliers that. Try telling the taxing authorities that. This grates because we pride ourselves on offering a service that usually solves a problem for some desperate engineer in a handful of days. Then we are forced to wait 85 more days to get what we’ve earned, and somehow be happy about it because we are basking in that big company glow. The expectation seems to be that we will just shut up and enjoy the privilege.
Try paying your bills with privilege.
Thanks, Big Company.
Then there’s the Even Bigger Company (EBC) that devotes paragraph 25 of its purchase order terms and conditions to asserting its complete right to ignore all other terms and conditions, most notably those in our quotation, against which this purchase order was issued. It states unequivocally that our quotation terms and conditions will not be legally binding to them. It also states the terms and conditions listed in their purchase order supersede any requirements we may have in our quotation.
Like price.
And lead time.
And payment terms.
And quantities.
And responsibility for shipment costs.
Other than that, our quote and their purchase order are identical.
Once again, we should feel special they have reached down from Olympus and honored us, mere plebeians, with a purchase order.
How gratifying.
That same EBC has a link in its supplier portal to report ethics violations. (Side note: Who invented supplier portals and why? Is this some new 21st-century circle of Hell, like we didn’t have enough concentric circles of responsibility fouling our lives already?) On the infinitesimally small off-chance one might encounter a violation. Right. Ethical is as ethical does.
Lest one risk thinking this to be uniquely a big company phenomenon, there’s the small company that trained us in what to expect transitioning from AS9100C to AS9100D. You know who you are. Told us everything we needed to know about the new standard (except, curiously, why the change was necessary in the first place, but I digress), most notably an increased focus on ethical actions and behavior, leading, somehow, circuitously and inexplicably to better performance, products, and services to the aerospace sector. Ethical drones take better pictures than unethical drones, I guess.
This same training company billed us the day we issued them a purchase order, two months in advance of the class actually taking place. In their eyes our company was considered delinquent and subject to collection calls before services were even rendered.
Whose ethics?
When the second collection call came, and we protested by pointing out to this company that the class had yet to take place, and that therefore the invoice aging had not yet started, much less become due and payable, there was a confused silence at the end of the line, as if the caller had been driven off script. The meek retort came a few seconds later: “Well, that’s our common business practice.”
Naturally. That makes everything okay. Why didn’t you say so in the first place? So sorry to bother you. The check is in the mail.
The basic problem with truly ethical behavior is that, practiced faithfully, it often reveals uncomfortable realities.
Like these:
- No, you can’t have what you want, when you want it, at that price. And no, it doesn’t matter who you are.
- Yes, what you want is really expensive, and if you aren’t prepared for that expense, perhaps we should not be talking and wasting each other’s time.
- Hard as it may be for you to admit, we do in fact expect to be paid for our services. This is not a charity.
- We will be happy to turn over our deliverable work product to you, as soon as you issue a purchase order that commits to our stated payment terms.
Can the recipient handle them? Or is fidelity to ethics just a checkmark on a long trendy list?
I look forward to the day when, at one of our favorite trade shows, headlining the speaker’s program is a forum with a title that goes something like this: “The Customer is always right. Discuss.”
is president of Datest Corp. (datest.com); rboguski@datest.com. His column runs bimonthly.
