Ethics: Divided Loyalties

By Russell Ethridge

Today’s Machining World Archives November 2006 Volume 02 Issue 11

My company submitted a proposal for rigging services as part of an engineering firm’s bid to layout and install machinery at a customer’s manufacturing plant. The job will be profitable, and we work frequently with this engineering firm. Since submitting our proposal, I received a call from the manufacturing customer wanting to know if we would work directly with them and split the savings they would realize by cutting out the engineering firm’s markup. If we say yes, we’ll do better on the deal, but at minimum, the engineering firm will lose their margin on our work and may be cut out of the deal entirely. If we say no, neither of us may get the work. No one’s signed anything yet.

You are justifiably concerned about violating the time honored loyalty rule that “you dance with the one that brung ya.” If you agree upfront not to bid directly or not to bid as part of some other engineering firm’s proposal, the ethical dilemma is answered by the agreement because your agreement identifies the scope of your loyalty and was made in the absence of any actual opportunity. Here, however, you must make the decision under the pressure of real temptation.

First, determine if there is a loyalty conflict which requires further consideration. You have a good relationship with the engineering firm that benefits both of you, so there are solid business reasons to notify them of this invitation from the customer. If they don’t care, there may be no loyalty problem, assuming you get an honest answer. Some people, however, never complain. They just harbor resentment and never call you again. You should make it easy for them to be candid. If you can be sure they honestly don’t care (maybe they just wanted to submit a “turnkey” bid but expected it to be picked apart anyway), then your ethical dilemma is solved, and you demonstrated your loyalty.

If they do care, you must weigh the intangible costs of damaging a valuable relationship for what might be a one shot deal. Maybe it’s not a one shot deal, though, and a direct relationship with this type of customer is where you’ve been trying to take your business for years. Nevertheless, there is value in loyalty which must be factored into the equation. The engineering firm will admire you for taking a pass on the opportunity to cut them out, which strengthens your relationship with them. You will also convey your ethical standards to the customer, and that may put you on the direct bid list next time around because you have some principles to go with your skills. Being asked to quote directly the next time does not raise the loyalty issue you’ve raised here. It’s a reward for your good work and good fortune.

If the relationship with the engineering firm was not important or there is other strong business reasons to do an end run, explain those reasons to the engineering firm out of respect for whatever relationship you have and make your move. Although loyalty is admirable and usually makes good business sense, it is not a millstone weighing you down from opportunities you would lose by respecting it blindly. Weighing the short-term gain of disloyalty against the long-term cost is more complicated than just dollars and cents. Most of us are well advised to put an extra weight on the loyalty side of the balance.

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