Until comparatively recently, few people regularly used the phrase business ethics and few worried about managing a business ethically. This is not to deny that individuals in business had ethics or that some commercial enterprises have a long history of shaping their work based on clear moral stances. But this was usually about individual views and not a universally shared acceptance of the need for ethical business practices. This has changed. Study for any MBA, and sooner or later you will find yourself considering business ethics. In any modern company today it is ethics as well as commercialism that influences decisions and actions. The management consulting industry is no exception.
Of course, there has always been a foundation of rules defined in the law. Further rules exist in commercial regulations, which have become generally more specific and onerous over time. Remaining compliant with the law can be considered as an ethical issue, but this is not the concern of this chapter. With the number of consultants there are in the world, no doubt some are charlatans who take a relaxed attitude to adhering to legislation, but I think these are a small minority. Legal and regulatory compliance are not trivial issues, but I am going to assume that if you know the law you want to remain compliant with it. But is that sufficient? The answer is easy and simple: no. Ethics goes beyond legal issues. It is not difficult to imagine many scenarios which are legal, but which most people agree are unethical.
Thinking about ethics opens many complex debates – for instance, absolute moral principles versus relative and culturally specific values. There are deeply conflicting views on whether an action is ethically sound simply because it adheres to some fundamental principle; or if actions should be judged on their intentions or on their consequences, irrespective of underlying moral principles. No matter how clear you feel you are on ethical principles (e.g. ‘stealing is always wrong’), you can very soon find yourself challenged in valid ways (e.g. ‘Ah, but what about the pen you are writing with – didn’t you take that from the office stationery cupboard? Isn’t that stealing?’). These are deep waters and areas where there is definitely no universal consensus. Other than acknowledging the complexity of ethical considerations, it is significantly outside the scope of a book like this to even discuss issues of this complexity. My aims are much more modest. I want to raise the issue of ethics so that it is a conscious part of your consulting perspective.
Ethics can be trivialised or on the contrary made overly complex. In this chapter I will show that ethics should not be a trivial concern for the consultant, but neither should ethics be an intensely complex piece of analysis. Commonsense, pragmatism and reasoned judgement lie at the heart of most good ethical decisions. I have split this chapter into three sections reflecting these introductory thoughts:
Irrespective of what you take from this chapter and how much consideration you choose to give to ethical issues, there is a simple practical stance to take. You always have a choice as to what work you do and how you interact with a client. Part of this is an ethical choice. Engagements can usually be shaped in different ways and ethics taken into account during this shaping. In the rare case that the engagement cannot be shaped appropriately, never forget that you can always say no to any engagement you feel ethically compromised on.
A simple way to think of ethics is to look at the concepts which enable you to decide how to do good and, as important, how to avoid doing harm. Considering the consultancy context, what does this mean in practice? I have chosen seven examples which reflect a simple set of ethical guidelines or can be seen as areas of temptation for consultants:
Let’s explore each one of these in a little more detail.
The fees a consultant charges are part of a commercial relationship between the client and consultant. We should not confuse what is commercially reasonable with ethical fairness. If you have a particularly rare and valuable skill that you have developed over years of consulting, it is perfectly reasonable for you to charge a fee rate in line with what the market will bear. If you are lucky enough for this to be 10 times what your less skilful competitors can charge, this is purely a commercial issue. Fairness is concerned with how the fees are presented and handled. The client should have an understanding of what the fee rates will be at the start of the engagement, what any extras that will be charged for are, and what the total level of fees for the engagement are likely to be. If the engagement changes, then there is time for debate on the fees again. If the client wants to enter an uncapped time and materials engagement, then again there is nothing unethical in charging the client for every second you have worked, as long as the client appreciates what they are committing to. Similarly, you should not be charging clients for any time on an engagement where you are developing your company’s intellectual property and not directly adding value to the client.
One particular issue associated with fees is the charging for time working in a client office or on work related to a client engagement, when the consultant is not actually progressing the engagement but is engaged in business development. Your sales activities should be at your cost, not charged as hours to the client. Of course, you will recoup this one way or another from the client, otherwise you would not stay in business, but that should be recouped from the margin you make on your legitimate chargeable hours.
An area that often causes tension between clients and consultants is the recharge of expenses. Part of this comes down to the apparently lavish lifestyle of some consultants. This is not an ethical issue. What your expenses policy is remains an issue for you and your company. A client has the option when signing up to your services to negotiate what are acceptable levels of expenses to them. You may damage your relationship with your client by having an overly lavish expenses policy, but that is your choice. However, where it becomes an ethical issue is when expenses recharged to a client were not actually accrued related to the engagement. Typical examples are:
The second ethical issue involves performing only appropriate work. But what is appropriate work? All consulting engagements require competencies and knowledge. These include any combination of functional, sector, geographic, and service line skills and experience. Loosely defined, appropriate work is engagements that you have the correct skills and experience for. What skills are appropriate depends significantly on the role you are taking on in an engagement. If you are selling yourself as an expert then it is not unreasonable for the client to expect you to have in-depth expertise in a specific area or business. On the other hand, if you are putting yourself forward as a process consultant or facilitator, then whilst you must have process consulting and facilitation skills, specific functional or industry knowledge is less relevant.
It is relatively easy to convince some clients that you have skills which you do not, and unfortunately there are many consultants who seem to just about get away with this. I call this type of consultants chancers. They will win the work and take the chance that they will get away with it, irrespective of real competence. These chancers may not sell on very often, but survive on the basis that the pool of clients with problems is very big and they may never need to work with the same people twice. Such chancers are more common in certain parts of the world, where clients have less experience of working with consultants.
What actually is an appropriate level of skill or experience is clearly a judgement. No engagement is a copy of a previous one. Even if it could be, the client situation will vary in some ways, so there are elements of unpredictability, exploration and learning on each engagement. There will be clear-cut cases when you are confident your skills are sufficient and there will be situations which you walk away from because you are not the right person. But there are many ambiguous situations when it is not certain, and in my experience this constitutes a large proportion of engagements. There is a fine difference between a legitimate stretch in your skills and a leap into the unknown. If you are even the slightest bit unsure, the most ethical position is to explain to your client what you do and do not have experience of, and how confident you are of being able to stretch this to meet the situation. Then leave the choice to the client. Clients will usually respond positively to consultants who are open enough to admit their limitations as well as their expertise. Such openness can be the basis of a long-term trusting relationship.
A related but slightly different issue is using the client as an experimental testing ground for a new service line, or using the client engagement as service line development. Consultancies do need to develop service lines, and client experience forms the base of such service line development. This is reasonable. It is even reasonable to develop the service line as part of the work, if this is agreed with the client. It becomes unethical when:
An appropriate service is also one in which the consultant has access to sufficient data and information to draw the right conclusions from. If you do not have or cannot find the skills to analyse the situation, then you are not offering an appropriate service. Without the right data, no matter what skills or experience you have, the results of your engagement are unlikely to be correct.
Consulting services are appropriate only if they are based on an understanding of the specific, unique situation of the client. Of course a consultant brings experience from other situations, but simply giving exactly the same advice or the same plan in every situation is not appropriate. Value-adding consulting is always bespoke. Providing a ‘cookie cutter’ approach is not adding value. There is nothing wrong with a company that sells a standard service to a client which is not tailored to the individual situation. But it is not management consulting – the very word consulting implies consultation and hence dialogue and interaction. If you are selling a plain vanilla service then good luck, but do not call it management consulting.
The third issue for ethical consideration relates to only doing work that a client needs and is in the client’s interest. One situation in which this matters is with follow-on work, when you have been fortunate enough to complete an engagement successfully and part of the recommendations are for subsequent work using your skills. There is an obvious moral hazard when the person with an interest in future work is also the person advising a client as to what the future work should be. I do not see any problem with advising follow-on work that requires your skills, or winning it. The problem comes only if the advice you gave has been deliberately skewed to favour the sell-on. The easiest answer is to point out your inherent conflict to the client. Most clients see the conflict of interest, and pointing it out does not change anything other than making it clear that you are being open and honest.
There are some situations in which the bias is more covert. A classic example is that some consultants design engagements to overcome client issues by starting with the generation of hypotheses. The hypotheses are used as a starting point to explore what the client issues and solutions might be. The engagement then seeks data to prove or disapprove the hypotheses. This is common practice, especially amongst the more strategic consultancies. There is nothing intrinsically wrong with it, as long as the selection of hypotheses and the search for data is not biased to come out with a result that is in the consultant’s commercial interest. Unfortunately, sometimes the selection of hypotheses is biased. This problem can run very deep. Some consultants so strongly believe their own skills, service lines and views on management that the bias is unconscious. Unproven assumptions are made about how a business should and should not be run, and these are reflected into the hypotheses and data collection approach selected. There is then an inherent bias which results in recommendations that unsurprisingly(!) match other services the consultancy can offer. This problem can be compounded by some consultants’ lack of understanding of the difference between a hypothesis, a conviction, an evidence-based conjecture and a fact.
Another problem can arise when the strength of a consulting company’s brand is used to pressurise a client to undertake work. When a partner or other senior member of a major consultancy looks a manager in the eye and says ‘we are advising you to do this’, this can be the quality advice of a good consultancy sticking to its guns, but it can easily veer into an implicit threat. The unspoken statement is really: ‘Follow our advice and the risk is not yours, go against it and everyone will know it was your choice – if it goes wrong you will pay the penalty.’ Great care is needed here, because in some situations this is a legitimate position to take. To me, the difference between an unethical threat and a reasonable statement comes down to intentions. If it is given as a valid warning to the client, then it is ethical. If the threat is given purely to bully the client into purchasing your services, it is not.
Often consultants remain working with a client well after an engagement has really finished. Sometimes they stay beyond the time they are required, without adding value that is commensurate with their fees, simply because the client has not got round to terminating the engagement. If you keep on working beyond the natural end point, you should question whether you are still really offering sufficient value to the client. If you aren’t, then move on.
My fourth ethical concern is client dependency on the consultant. It is quite easy, with some clients, to develop a dependency on your skills. It may be accidental, but it can also be engineered. There is a point on any engagement, whether it is an engagement delivering recommendations, a plan or implemented change, when the question to answer is ‘so what should the client do next?’ Answering this question is the source of many ethical challenges. A dependency on the consultant can be developed by not providing all the information to enable a client to progress work, so they have to keep coming back to you for more. It can also be through inappropriate advice, for example selling proposals or ideas that are unnecessarily complex relative the client’s level of skill and which you know they will need your help to implement.
As so often with ethical issues, there is balance required. A client may legitimately want to retain your skills for a period of time because they continue to add value in various ways. This is the basis of long-term consultant–client relationships. But, this is quite different from the deliberate manipulation of recommendations or plans relative to the client’s skills so that they need to retain you – either to interpret the recommendations to plans, or simply because they are written in such a way that you are the only person who can fulfil them.
The fifth point on my ethical list relates to the correct use, and avoiding the misuse, of client confidential information. This must be based on a general respect for the confidentiality of data you collect as part of the engagement. This is another complex issue, as clients have to have sensible expectations with respect to information as well. Of course, you cannot take specific data and sell it to your client’s competitors. Also consultants should not be secretly collecting data on client sites which then will form part of their consultancy’s benchmarking database. But your client hired you because of some specific expertise – expertise you developed at other clients. It is inherent in hiring a consultant that they will learn whilst working for a client, and what they learn will be used on future clients. Consultants should not be embarrassed about this. It is effectively part of the definition of the profession of consultancy. If a client does not like this aspect of consultants, then they have a simple commercial decision – there is no compulsion to engage consultants. But there is a significant difference between learning on a client’s site and actually walking off with specific client ideas and business information which you use to support selling to or delivering engagements for other clients.
The sixth ethical issue boils down to the consulting contract. Clients should know better, but it is easy to fill contracts with all sorts of inappropriate small print. Of course, a client should really have the contract checked (see next page). But the fact that important clauses are hidden in the small print and not explicit in the proposal reflects the suspicion that some consultancies are trying to pull the wool over their client’s eyes. I have noticed two areas where I think some consultancies push the boundaries of ethics:
The final ethical concern relates to conflicts of commercial interest. This is almost turning the ethical problem around, as its root lies with the client. I have come across situations where company directors are simultaneously directors of consultancy companies and lobbying for the use of the consultancy in the business they are a director of. I have come across a senior IT manager pushing the services of an IT consultancy that he had a direct shareholding in. These are clear ethical breaches, and probably fall foul of most organisations’ corporate governance regulations. Requiring staff to register such commercial conflicts of interest and penalising rapidly and heavily for breaches is usually sufficient to remove most of these temptations. One possible solution that clients and consultants can adopt is to simply rule that any company the individual works for cannot be provided services by the consultancy they also have a commercial interest in.
I want to end this section on ethical guidelines by looking at it from the opposite perspective. Whilst you have an ethical responsibility as a consultant, the client also has a responsibility to behave in a sensible and competent manner. Clients have lawyers who should read the small print and accept the contract, modify it or suggest a completely different contract. Managers should only ask for appropriate services for their business, and in the end it’s their job to buy what their business needs – not only yours to ensure it is right. Managers should review findings, recommendations and plans and ensure they are fit for purpose for their organisation. You are not selling door-to-door products to vulnerable groups. You are selling a professional service to a commercial enterprise, and the working principle of caveat emptor (buyer beware) must to some extent hold. (This point is revisited, from the client perspective, in Chapter 14.) However, ethics cannot be shrugged off with the view that the clients are ‘big boys’ who should know better than to accept unethical practice. As a consultant, you have a clear ethical responsibility to your client.
Ethics is interesting as a theoretical subject and one for debate with friends over dinner. But what makes ethics real is its impact on the decisions we make and the actions we take. There are two factors which can make the applications of ethics in consulting quite complex:
As a consultant you operate in a privileged position of trust. Imagine the scenario of a client you have worked with on and off for many years. A client who values your skills and the way you execute engagements. You are regularly advising the client. You are a trusted advisor. As a trusted advisor to the client you face one of the classic moral hazards in business. It is your advice that often leads to you gaining more work. You will know when you are selling on if it is right for your client, and if it is right for you. That is the opportunity to make the right ethical choice. If you do not know, you are not thinking clearly enough, as it is usually obvious. When you legitimately sell on, your interests and those of your client align, and this is a good outcome for both of you. When your interests are not aligned, don’t try to sell on.
The privileged position can run deeper than this. We now enter distinctly muddy waters – and that is whether as a trusted consultant you have a duty of care to your client. Technically, duty of care is a legal term referring to the need for professionals to conform to a reasonable standard of care when executing their profession. I do not literally mean a legal duty of care, but the ethical duty of care a consultant has to their client. What is the difference between a commercial duty and a duty of care? To me, your commercial duty is to fulfil the terms of your contract and proposal. A duty of care goes beyond this and means upholding the standards expected of a profession. By duty of care I mean a responsibility actively to ensure your client gets the best advice, irrespective of the precise boundaries of your engagement, and to execute all your work to a high-quality standard. If you have a duty of care you cannot turn a blind eye to anything you think is substandard or inappropriate, irrespective of the scope of your consulting engagement.
There are several dangers once a consultant reasons they have a duty of care. The first is simply that you can get lost flagging a myriad of problems to a client. No business is perfect and there are always hundreds of substandard ways of working. If not, there would never be the possibility of any business improvement. Additionally, the label ‘duty of care’ is often used spuriously by consultants to barge into all sorts of areas of the business that really have nothing to do with their work. Therefore consider seriously whether you have a duty of care to your client or not. If you do, it is not a stick to beat the client into doing work they would not otherwise accept, but it is a responsibility to work professionally and advise on related matters that you are competent to advise them on.
What about the lack of clarity over who the client is? Throughout this chapter I have considered the client as the focus of our ethical considerations. But as I described in earlier chapters, the identification of the client is not a trivial matter. Consultants tend to think of the client as an organisation, but an organisation is an abstract entity. On the other hand, consultants may think of the client as an individual, but the interests of no one individual in an organisation may actually align perfectly with all the interests of the organisation. So, there is the odd situation that an organisation is made up of people, you can only interact with people and judge the organisation’s interest from those people, but the organisation’s interest may not completely align with any of those people’s interest.
Of course, for many engagements we can, in practice, say that there is no ethical dilemma. The scope of the engagement is such that the interest we should consider as described by individuals in the organisation is to all practical purposes the interest of the organisation. But this will not always be true. Consider the following questions:
Some consultants avoid the issue of conflicting client interests by saying that they are working for a higher authority; no, not God, but the shareholders’ interests. This is just dodging the issue, and is one of the great intellectual evasions of consulting. Generally, a consultant is not engaged by the shareholders. The consultant has probably never spoken to the shareholders and does not understand their interests other than some vague and generic need to increase value in some way or another. Thinking that you are working for the interests of a group of people you have never spoken to, never specifically analysed, and whom you have no relationship with, has to be considered as highly dubious.
So what classifies an engagement as in the interests of the organisation? The answer can only be for you to make a judgement of the situation based on the information that is available to you. Moreover, if you assume that you have a duty of care to the client, you should not only consider the information that is available to you, but also actively seek out the information you require to make the ethical choice.
Ethics can seem a burden, yet can also be an advantage or selling point for consultants. As always with consulting, for every problem there is also a commercial opportunity. Understand the ethical issues and how to make balanced ethical decisions well, and there is an opportunity for ethical consulting as a service in its own right. Many clients face a range of ethical issues which they are not equipped to handle and benefit from consultants to help them along.
So far in this chapter I have described basic ethical guidelines for consultants and considered aspects of being a consultant that must be taken into account when making ethical judgements. This final section goes beyond and looks at situations in which different ethical guidelines are conflicting, or when the consultant faces a conflict between ethics and other considerations.
There are many ambiguous situations when it comes to ethical decisions, where clear thinking and sharp judgement is required. With some dilemmas there may never be a truly satisfactory answer, only the least wrong one. But the ability to make a balanced decision in such situations, whilst not unique to consulting, is a regular part of the challenge of being a successful consultant.
There are three common situations where dilemmas involving ethics arise:
Let’s look at each of these in turn.
Balancing the interests of different stakeholders, both within the client and also within the consulting organisation, is a very common challenge. We have already discussed the concept of a client as being complex, and that there may be more than one client. When the role of the client is made up of different people, they will often have different interests and hence there is a risk of conflict. Examples where this can cause dilemmas for the consultant are:
There is no single solution to these sorts of issues, but the answer is to be found by a combination of the following:
Finally, if nothing else works and you are left with either an impossible engagement, one in which you will not be perceived to deliver value, or one in which you feel unacceptably ethically compromised, walk away. This may not be easy to do, and I do not underestimate how difficult some clients can be if you say you do not want the work. But you should uphold your own standards.
The second type of dilemma which faces consultants is connected to the constraints clients put on engagements. As part of scoping an engagement, or during carrying it out, the client may specify a range of factors which constrain the consultant’s freedom to decide how to pursue the engagement. Many of these requirements will be perfectly reasonable. For example, the client may need the work completed within a certain timeframe. Clients will usually have a limited budget and the engagement must be performed for whatever the client can afford. The client may be a busy manager and so may want to limit how much time the consultant can have to work with them. Similarly, clients have limits as to how many people they can allocate to work with consultants. These types of constraints are all part of a normal consulting engagement.
Most clients are reasonable and will negotiate on such constraints and listen to reasoned argument from the consultant. But in the haste to earn money or for an easy life, consultants can sometimes agree to all sorts of conditions which, in reality, are unworkable. Generally, this is a mistake. From a commercial perspective the consultant needs to think through any constraints and decide if it is still possible to complete an engagement and be paid for it profitably. The ethical perspective is different. Even if you can complete the engagement and are paid for it, you must decide at what point is the engagement so constrained that it will add no value to the client? A sensible consultant is only interested in commercially viable engagements. An ethical consultant is only interested in engagements that are of value to the client. It is possible, if sometimes difficult, to be both sensible and ethical.
Experienced consultants can think of many examples of client behaviours which reduce the value the consultant may give. Some clients regularly engage consultants, never listen to the consultant’s advice, but still pay the bill. I have no problem with clients who engage, debate and disagree with the consultant’s findings – but if the client simply ignores the advice all the time, you are taking money from an organisation for nothing. Another example is that it is not unusual for clients to want findings without giving you enough time to do proper research or analysis. Of course, it is always possible to give some advice on even minimal information. But its validity and value are questionable. Consultants can be tempted to take the risk and provide advice without sufficient information, when in reality the answer should be to decline the work unless sufficient time is allowed for data collection and analysis.
Throughout this chapter I have looked at examples of the possible conflict between commercial and ethical interests. I would like to complete the chapter by looking at two further conflicts of this kind in a little more detail. The first concerns the sustainability of consulting advice, and the second the application of knowledge from one client to another.
To add value to a client, a consultant must not only create whatever the agreed deliverables are – reports, plans, recommendations and implemented change – but also needs to ensure that the result is helpful to the client. For something to be helpful, it must be usable and appropriate to the client. Additionally, recommendations must be practical and workable in the client’s environment. There is no point giving advice which you know will not be possible for the client to achieve. Your aim should not merely be to fulfil the letter of the proposal and deliver whatever you agreed to deliver, but the contents of the deliverables must have a lasting impact on the client.
Effective consultants base their knowledge on the experience they have gained working in many businesses and many different situations. That is often the reason for engaging a consultant. The client starts by thinking, ‘I have a problem of type X, which I do not know how to handle.’ The client then goes on to think, ‘I will get help from a consultant who has dealt with problems of type X in many situations.’ The ethical problem arises from the issue of understanding when it is appropriate to take knowledge and experience from one client and apply it to another. If you are a public sector consultant, there is probably no ethical issue, but as a consultant advising clients in the commercial field, there is. Is it ethical to help multiple clients by taking the knowledge from one business and selling it to their competitors? Even if we exclude directly sharing current business data, the consultant still has an ethical dilemma. Management approaches, business processes and other intangibles are the source of most competitive edge in business, but these things are the very currency of consulting.
One possible ethical line to take is to avoid working with direct competitors, at least in areas of the business that provide competitive differentiation. If you work for company A, you will not work for their main competitor, company B. This may be fine if you are a sole trader who has a much larger list of possible clients than capacity to do work, but this is impractical for a major consulting firm with tens of thousands of staff. The big firms, simply because of their scale, must at times work for direct competitors. In some industries there are fewer and fewer major players. To survive as a specialist consultant, you are bound at times to provide services to competing organisations.
An answer may be to challenge the validity of massive consultancies providing services to competing businesses. If you are so big that you must provide services to competitors, perhaps you really are too big to maintain a clean bill of ethical health. I think this is a valid challenge, but I know it is impractical. The huge services firms are here to stay. A more realistic answer is the concept of a Chinese wall. A Chinese wall is the term used for an internal division within a business in which certain information may not pass. Individuals working on one side of the Chinese wall may not work on the other. Companies such as financial services and auditors, where information from competitors or information about possible market sensitive changes are handled, use Chinese walls all the time. I applaud the concept. In practice, I am cynical about how strong such walls really are.
I think the solution must lie in an open dialogue with the client. If the client challenges you, you should commit to keeping their real secrets secret, but you must also be open to the fact that sometime you are likely to work for a competitor. That is just the way the world is and the nature of consulting. If the client expects you to bring direct experience of competitors, then they have no ethical grounds for complaining if you share your ever-growing experience with their competitors as well. If a client wants you to guarantee your experience is never used elsewhere, you need some guarantee from them as to an ongoing income stream!
Ethics provides you with an understanding of what you should and should not do, and how you can achieve good and avoid harm.