Okay, welcome to week 6 with ethics.

You might be asking yourself, well, how

does this fit into supplier management? I'm going to go through some ethical
issues that you need to be aware of. Almost all of these in one shape form or
fashion involves the supplier, but also involves how
you act internally with the supplier. So let's go ahead and get started. Can you
name some ethical issues that have
hurt an individual procurement person or company? And maybe you were aware of
something
that happened in your company or maybe you've seen
something in the paper or maybe a particular procurement
person went to jail or something. Just jot them down on a piece of paper,
I'll give you about 30 seconds. And we're going to go through six
of these unethical behaviors, so you'll understand them. See you in 30. Okay, so
let's get started. So again, I'm going to go through
these six of the tier, but there are others and
there's a reading that is assigned by the Institute of Supply
management covers many many other ones. I thought these were the major
ones to discuss, but if you want, you can learn a lot more about it when you
read the ISM paper on procurement ethics. So let's start going through these six.
So the first one is reciprocity, and this is when you're giving preferential to
a supplier who is also a customer, right? And this is a tricky one because
sometimes
it can be restraint of trade, and there are some legitimate formats criteria to
be evaluated by a supplier's capability. So this happens very frequently in a bank.
So the bank is buying things from
the supplier, but the same time, not purposely, but the sales people
are trying to sell bank services to the individual company. So I think what you
need to
do is be very transparent. And I think, a friend of mine
said in the banking industry, they actually have a committee
that reviews these things. And they want to make sure they're making
the right procurement decision and communicating a process properly to all
suppliers, so they feel there's a fair and just way they're looking at it. If it
gets to the point where you're
not picking the right suppliers, let's say that are higher priced or
something, you better have a darn good
reason why you're doing it. So this is reciprocity,
this is the first one. Second one, personal buying. In some companies, this is
true, more so,
when I first started in procurement, I don't see it much anymore. But sometimes,
people come to you and
say could you buy this for me, get me a good deal. And there are a couple of
exceptions, but I would tell you that I would say it's
something you really don't want to do. So, hopefully, you got a policy covering.
You might say well,
what are some of the exceptions? Well, maybe you're working
in a warehouse and the warehouse people have
to buy their own shoes. So the company allows you to buy
the shoes for them at a cheaper price or under contract, but
the employee has to pay for it. That's a pretty easy one to understand. But there
are other things, maybe
there's private clubs in the business that they have a some sort of men and
women's club that they want you to buy the materials for but
it's really separately from the business. So, my advice would be,
it's not that I'm not recommending it, but just say no and
unless you have people higher up telling you that you have some rules
you want to try to understand. Accepting supplier favors. This is when people get
gifts and
gratuities. This is a pretty common one that
happens in particularly, not so much anymore, but
does still happen to this day. I'll give you a couple examples. And the point with
the word about is that, are these gifts showing appreciation
trying to influence you? Well, sales people probably
are thinking that, right? And basically,
in a bare minimum, it really, It speaks to the thing about people
have credibility issues with you. So let me just give you
a couple of examples. So one is one place I worked,
I won't mention any names, a guy was working in the plan and
all the procurement people were gone. And he found out through the grapevine
that they all were playing golf of the supplier. He called me up, and of course
when they
got back, I read him the Riot Act and said you can't do this, right? First of all,
it looks like the supplier
is trying to influence you, but more importantly, you're not at work. So it's a
double issue in that respect. So it's something that you want to do. Another one
would be when I worked
in a one particular company. I happen to be working all over the
Christmas holidays doing annual reviews, nobody is in the office and a supplier had
delivered huge, huge boxes of gift packs. So, I was only one in, so I call the
supplier, say this is unacceptable, and he said well, we do it all the people. So
we end up sending suppliers back
to a third party that was delivering the gift packs. But it was a funny story once
he said
you're the only one that's ever asked me to take these back. And of course, we had
to write the supplier level
a letter saying don't do this again, etc. So this is a big one, and
most policy is outlined. There's no gifts or favors, but
you ought to be aware of it. Sharp practices is when you kind of use
some misinformation to get results. Maybe exaggerating the problem,
maybe you're actually for example, asking for bids from
an unqualified supplier just to try to get the way to negotiate
your preferred supplier down. Basically, it's basically gaining
information unfairly through deception. You really don't want to do this. Number
one, it's just isn't
ethically right thing to do. And number two, if people see you do it, they really
have to wonder
about these practices. You want to be having an open honest
discussion with suppliers about the facts. You don't want to be
using this information. You might in this particular case,
have a couple of examples, you might share information
on competitive quotations. You'd never want to do that, that's a private
confidential
number from other people. Another one is that they find out
at the last minute that they go to issue the contract, and they tell
the supplier at the very end when they're going to hand them a contract, by
the way, we don't pay for dyes and plates. Well, that's not fair, right? You want
to tell people up
front that that's the case, so had to build it into their price,
don't surprise them at the very end. Taking advantage of
a supplier's situation such as, you know that they're weak financially,
so you try to have to do it and certainly lying in misleading the company
is not the right thing to do. Financial conflict of interest. This is when you're
very worried about
having any direct interest in any of your suppliers, all right? So what typically
would happen to me
in Colgate once a year, myself and my senior staff would come in, they'd have
to sign a legal document that I believe. I don't know the exact number,
but something like, you didn't own more than 5% of
this particular company's stock. Even if it's in your IRA, you're
probably only got a couple percentages. So you want to make sure you
don't want to tell if you have any type of interest,
either perceived or real. And then you certainly don't want to
be involved in any Insider trading, buying and selling,
you've read about that in the paper. Personal conflict of interest, right? So this
would be things like,
you find out that the, this actually happened, it was in Colgate. We are doing a
bid to do the cleaning
contract for a site in New Jersey, and at the very end, we found out that
one of the bidders was a guy's wife, wasn't in procurement or somewhere else. So
again, you it's really, you don't
want to deal with those types of things. We had to say thank you very much for
working on this, but because you're relative to somebody in the business,
even if it's you're being upfront, giving a reasonable bid,
it's going to look very unethical. So you want to have key disclosures and
openness in these types of things. So how do you support ethical behaviors? Well,
there's a couple of things. First and foremost, most companies today
have some sort of procurement policy and procedures manual. It's very common, we
had it a Colgate,
it was on the web, you could read it. People were issued it in the department,
very, very common. And it can also be sometimes outside or maybe from senior
management, is issuing
these policies or re-affirming it. They're good to review
every once in a while, just to make sure you
got everything in there. Showing a top management commitment
that this is serious stuff, and the senior manager of the company really
wants to support having ethical behavior. We had training, I was responsible in
Colgate to do once a quarter training, an ethical training that included
not just procurement, but other activities, but
procurement is always a big piece of that. You want to develop a consistent
behavior for everybody. We had a way to internally
report anything, we had a 1-800 type of thing
at Colgate that if anybody, anybody in the world had a problem
that they had thought somebody. For example,
who's taking a bribe or whatever, they could call anonymously the 800
number and we would send out a team. Sometimes I was advised about it,
sometimes I wasn't. But whatever it would be, they would
handle it through this 800 number and senior management would
do what's necessary. And they would brief me after
the fact if it did occur. Didn't occur very often, but it did occur. And you really
want to do
some preventive measures, one tactic you can do is you
can just rotate people, so they're not dealing with the same
supplier over and over again. That can be good and also have issues
with it from a knowledge standpoint, but at least that way,
you get different people and you know that you're being very ethical
in dealing with that situation. So what are some of
the key takeaways here? I think to be successful in procurement, you got to follow
your company's policies
and procedures and guidelines, right? And if you don't, you're going to find that
you can
ruin your company reputation, right? And you've seen a couple of these things
in the paper where the procurement people will unfortunately undertake or
whatever, and of course, it comes back not only on
the individual ruins his career, but it also ruins the company's reputation,
which you know is very important. And then lastly, whether you like it or
not, if you like it or not, in procurement, while other things
may be occurring in the business, you're going to probably be held to a
higher standard and you want to make sure that whatever you do, you make it very
visible, such as those Christmas gifts. I made it very visible to
everybody that was in the thing, that we're sending these things back. I talked to
the people that got the boxes. I talked to the supplier. I wrote a letter. I talked
to the distributor. We made it very, very clear that
we will not tolerate this and we're going to hold ourselves
to a very high ethical standard. So with that it, that's it for ethics and we're
going to be moving on to supply
market analysis in course six.