Business Ethics and the Bottomline Part II

In mid-February, a number of stories appeared that Ottawa-based Halogen was being sued by SuccessFactors for allegedly creating a phony company to act as a prospective customer in order to obtain competitive information from SuccessFactors.  I have no insight into this situation or lawsuit other than what I have read in the media but did want to talk about the implications of actions like this on a company.  In an earlier Blog, I talked about the $1.3B in damages that SAP must pay to Oracle for the actions of subsidiary TomorrowNow. At the time I said, Ethics isn't about crossing the line and it being okay as long as you get away with it, but it is about a set of values you and your company have that guide your business judgment.

It is also about the real damage that this type of media does to a company.

It appears to me as a layman that Halogen's defense is that they did nothing illegal because SuccessFactors did not ask them to sign a Non-disclosure Agreement, the information provided was not confidential because it is sales and marketing material that SuccessFactors gives to other prospective customers and even if SuccessFactors' allegations were true, they cannot prove any damages caused by Halogen's behaviour.

I understand the lawsuit game but something about their legal defense offends me. They make it sound like what they did was okay and I don't think it was. Their defense is a legalistic argument which may work in the courts but that doesn't mean they will win in the court of public opinion. Do you want your company to be known to your customers as someone that wins on technicalities?  In a customer-vendor relationship, there are often grey areas between contractual entitlements and the common practices used to support customers. Often success of the relationship results from how those grey areas are handled.  When a vendor resorts to a technical legal defense for resolving any issue, I believe it should cause a customer to wonder how a vendor will behave when dealing with their issues.

Years ago, I did a deal with a very large hospital. It was a large complex project with many unknowns which would only be clarified through the course of the project.  The contract process was intense and detailed and I recall to this day the words of the CIO. He said when dealing with vendors, he puts a great deal of effort into the contract negotiation so that he can get to know the vendor and how they behave. He writes the contract with the assumption that it will only be used if the two parties have failed and little or no trust or goodwill remains. Once signed, he files the contract in his file drawer with the intent that he will never have to look at it again.

Following contract negotiation, the project tone changed. Both teams no longer focused on what they negotiated in the contract beyond the general framework of what they defined as the goals for success. The project shifted from adversarial contract negotiation to collaborative teamwork towards a common goal which was project completion on time and on budget. Without the trust on both sides, this would not have been possible.  The project had tense moment with many disagreements, but the contract remained in the file drawer and we worked out our differences. By the way, we did complete it on time and on budget.

I can't predict the outcome of the SuccessFactors-Halogen lawsuit. I also can't predict the damage it will cause to Halogen regardless of the outcome and even if I could, I don't know how it could be measured. And the story just doesn't go away. Even this week at a PwC CEO conference, one of the speakers mentioned this lawsuit in his presentation. In Customer Satisfaction studies, research shows that for every dissatisfied customer that tells the supplier, ten more just tell their friends of their bad experience and quietly take their business elsewhere.  I wonder what Halogen experience will be?

So my advice to you as you build your company, no matter how strong the temptation, if you think you can cross the line and get away with it, don't. It just is not worth it.

© 2011 Meaford Group

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