Tracking back to a post a little while ago on how companies are managing high-level ethical challenges in emerging markets (think government interactions, "compromises" when securing new business), one of our retail members recently took a different angle on the ethics question, this time focused more on the line. The executive expressed concerns about preventing "fraudulent behavior" among staff in a sourcing operation in China.
Three themes coming out of advice from other experienced executives in our member network:
1. Apply all of your standard tools first. The most common advice from members sounded awfully familiar: establish a firm code of conduct, conduct annual surveys on conflicts of interest and compliance, maintain a robust ethics committee and reporting hotline, and establish a strong tone at the top. You should be doing this anyway in your HQ; if you aren't, get moving. One interesting wrinkle to this from a computer software industry member: "I’ve seen and heard of cases [where] anonymous whistleblower accusations are used more to
defame or retaliate against another person for whatever reason, so keep in mind
not all escalations may be valid,
but all should be treated seriously."
2. Watch out for ghosts. Here's where the emerging markets differences emerge a bit mor starkly. Members highlighted the appearance of "ghost" vendors in their master files receiving payments from staff. To counter this, advice highlighted making it "as difficult as possible to include a
vendor in the vendor master file." This includes both a demanding vendor approval process, as well as tight controls over who maintains vendor information in those master files.
3. Don't accept "different business cultures," but be prepared for an extended transition. It's easy to explain away ethics compromises as simply being part of a local culture. While it may be true, it's not an excuse. You don't need to try and change an entire culture, but you do need to be clear about what's accepted on behalf of your company, and at the same time manage your own expectations around how quickly you can transform behaviors.
4. Be your own private investigator. A healthcare products company member shared how they check up on information passed on by local staff tasked with identifying new suppliers. The executive sends quote requests under a shell domain name directly to the same companies that their staff are quoting, and matches those to make sure there's no inflation. Fortunately they've found no pricing anomalies from their own staff to date.
This topic actually carries quite a bit of relevance in light of the current global economic slowdown. Our parent company, the Corporate Executive Board, has been working hard providing guidance to members on how to respond to the current economic crisis (see, for example, here, here, and here), and one of the items we've been emphasizing is, as our guidance has phrased it, "Difficult times often beget many more instances of less-than-perfect human behavior; counter this risk by closely managing ethical and leadership postures." In emerging markets in particular, many employees have been riding a wave of growth for several years, and this downturn introduces an era in their professional lives that many haven't before experienced. Be mindful.
