Scholarship

Background

You are the Chief Executive of a medium sized company which employs about 300 staff. A few years ago, your company embarked on a policy of outsourcing many of its processing functions and to ensure competition, you deliberately placed the business in three equal parts to three outsourcing providers. Sorted, Leapfrog and Zebra

This has proved successful and the additional cost of managing all three has been outweighed by the more competitive pricing you have been able to extract from them and their keenness in wanting to increase their own market share of your “wallet.”

After a number of years successful operation the outsourcing contracts are under review and it has been suggested that competition between the firms and the economies of scale which will result from using a single firm, should ensure a considerably improved contract. Richard, your head of operations is tasked with overseeing the process..

You returned from holiday yesterday and whilst discussing a number of issues with Richard, he tells you that his son Thomas is now working at Sorted, having been accepted onto their graduate scheme. You recall that Thomas graduated from university last year and having problems in finding a permanent role, initially had undertaken voluntary work.

As if sensing some disquiet, on your part, Richard asks if there is anything wrong and points out that Thomas has not lived with him or his wife for the last four years and is completely independent. He tells you that Thomas applied to Sorted on his own initiative and that he had not mentioned Thomas’s application to anyone at Sorted until Thomas told him that he had been accepted.

Given the impending contract negotiations involving Sorted you remind Richard of the need for strict impartiality in making recommendations and decisions and he strongly protests at the inference that he might be influenced in favour of his son’s employer. You tell him that whilst you may have no concerns about that, it is important that not only is the process fair, but also that it is seen to be fair.

In due course, following final presentations by the bidders, your team-members discuss their views and the Leapfrog offer is slightly more financially attractive than Sorted’s bid However, Richard argues strongly that from an operational point of view, Sorted offer a better solution and he points out that past involvement with Leapfrog had thrown up a number of technical issues, which he was not convinced had yet been overcome, whereas Sorted offered proven technical competence and that was why they cost a little more.

After a prolonged period of deliberation you concede that there is no obviously best solution and tell the team that you will take the matter to the board and make them aware of all the views and ask them for their input before coming to a final conclusion. As you leave the room, you ask Richard how his son is getting on and he tells you that Thomas is doing well and currently on attachment to Sorted’s offshore processing centre, which you realise is where Sorted will handle your firm’s work.

When the board meets and you present the outcome of the contract negotiations discussion is fairly brief and the conclusion is that for the relatively small price difference the better and more established technical performance of Sorted is felt to be crucial and you are instructed to accept their bid. Later that day when you tell Richard the outcome, he is very pleased and says that it will be the icing on the cake for Thomas, whose next attachment is to work in the CEO’s office.

The dilemma

You telephone the Sorted CEO to tell him the good news and during your conversation he tells you that the firm annually sponsors two members of staff to undertake MBA ‘s and that he has decided that one of these should be Richard’s son Thomas. Although you are a bit nonplussed by this, you say how pleased you are for Thomas and are sure that Richard will also be very pleased. Because it is not clear from the CEO’s remarks whether he has yet told Thomas about the MBA scholarship, you decide not to say anything to Richard at this stage, but you are concerned whether the award is an entirely objective decision, on merit, or whether it may have something to do with Sorted winning the contract.

At this point you are seriously concerned at the possible implications of what you have been told and wonder what, if anything you can or should do about it.

There are a number of ways of seeking undue influence in decision making, some obvious, some less so and indirect influence over someone in the decision chain is one of those.

In this instance, although you have no evidence that Richard was influenced by his son’s employment and nothing that he has ever done has caused you to doubt his integrity, you are concerned that Richard’s support for Sorted leaves your firm open to the accusation that Richard’s support for Sorted was influenced by his son’s employment and the subsequent MBA opportunity. Although neither is of direct benefit to Richard, there is a potential unspoken message that reciprocity will be expected at some time in the future.

Accordingly, whether or not there is a corruption of the decision making process, it is important that your processes are seen to be open honest and transparent by all taking part. Are you confident that is the case in this situation and, if not, what can or should you do about it?

Options

Your first step should be to raise your concerns with Richard, particularly regarding the award of the scholarship to his son. Whilst it would be entirely wrong to try to influence whether or not Thomas accepted the award (and why should he not?) the fact is that if the information was in the public domain, it would be likely to arouse suspicion of favours being bought. In the context of his support for Sorted, Richard did make a logical case for preferring them to Leapfrog and his position was ratified by your board, albeit that they were asked only to judge the business case, so it is not as though Sorted won the contract unexpectedly.

However, it is important that the other participants in the bid, particularly Leapfrog, are reassured that the process was entirely open and it would be sensible to explain why it is that they have not been chosen, but not in such a manner that it actually makes them suspicious that you do have something to hide, which is not the case.

Although you now feel uncomfortable about your firm’s relationship with Sorted, it would be quite inappropriate to try to influence whether Thomas accepted a “scholarship” but the obvious way of dealing with this situation is to ensure that Richard has no involvement in any significant decision making processes involving Sorted, albeit that is quite difficult, given his position.

Verdict

Clearly it is not appropriate to try to control the legitimate activities of the offspring (or wives) of your staff members, but they should be encouraged to be as open as possible regarding employment of family and friends in any business capacity which has a realistic prospect of giving rise to a conflict of interest. In this instance, had you been made aware at an earlier stage of Sorted’s employment of Richard’s son, it would have enabled you to have removed Richard from the contract negotiations and thus to have prevented this uncomfortable situation arising.