Strategy Clinic: Dealing with conflicts of interest

I have discovered that the manager I gave the job of organising our e-commerce drive has strong links with the consultants we...

I have discovered that the manager I gave the job of organising our e-commerce drive has strong links with the consultants we appointed to help us

I have discovered that the manager I gave the job of organising our e-commerce drive has strong links with the consultants we appointed to help us - to the extent that the selection process may have been seriously compromised. The manager is a critical member of my management team, and the consultants appear to be doing a good job. I have been given the task of making it a profit generator, and cannot simply dump the project. What pathways are open to me?

Is there a conflict of interest? 
David Taylor

It depends on the nature of the "strong links" - if there is any hint of fraud, such as back-handers, then that would be serious enough to suspend the relationship immediately. Ask the manager concerned about this, informally at first. If you are not satisfied with his/her answers/explanations, initiate an immediate review. Was the person concerned open about the relationship and possible conflicts of interest at the start of the project? If, however, your company's good name and reputation are not threatened, and you trust the integrity and values of the manager concerned, I would do nothing. Indeed, close links with external organisations who may then do work for you are no bad thing, as the company concerned will be keener to deliver excellent work and value. Judge the project, its progress and the people involved on the results being shown.

Be seen to take action 
Roger Rawlinson
Head of e-business technologies, NCC

In the public sector the rules of best practice ensure that all procurement decisions are made to maximise the benefits to the organisation. Although you have more freedom in the private sector, you should still follow best practice to prevent the kind of situation you have outlined.

Before you go any further determine whether the selection process was compromised. You need to find out what the selection criteria were and what proposals were presented. If they appear to be doing a good job, you should clarify this. Look at the terms of reference and the project's agreed milestones; ask to see the correspondence and check performance against these. Check that stages have been completed on time and according to plan. Conduct regular review meetings and ensure reporting structures are in place.

If you discover problems, you need to address them. Hopefully they are doing a good job but if the selection was compromised you should make the circumstances known. If you do not you could be viewed as condoning it.

Assess the risk to business
Roger Marshall

The options open to you range from sacking the manager and the consultants at one extreme to a gentle chat with them about the problem at the other. Which you take will depend on your company culture and your assessment of the risks and penalties to your company in the present situation. These can vary so much that it is difficult to advise in general terms.

In principle, however, if the manager is guilty of a serious breach of trust and has broken company rules, your duty is clear. You will simply have to pick up the pieces of the project and try to minimise the damage. To let misdemeanours go unpunished sends out the wrong message to other trusted staff and is never a good policy.

There are, though, various disciplinary actions you can take short of sacking. The project could be transferred to another manager, while retaining the consultants. The first manager should be seen to be disciplined in some way, however, and the consultants should be told that they are on probation and had better perform particularly well to retain the business in the long term.

Make sure, above all, that the company rules and culture are clear to all staff and that if something like this happens again there will be no excuses.

It could be an opportunity
Tom Kelsey

This could be an opportunity or a court case! So it needs a careful balancing act until you know that there has been no cause for invoking formal disciplinary action. As far as the latter is concerned, do a quiet review of the commercial background to the project. If there is any sniff of impropriety, get human resources/legal teams in and record everything. You may need witnesses to attend any meetings with the manager involved.

On the brighter side, if it is a case of someone just loving the thrill of working closely with a more exciting firm, then you need to talk it through - with the consultants as well if necessary. Even a period of secondment might be a good training move - you need people with those skills to work closely with your internal customers. That talk could also ensure that the consultants don't try to recruit your staff.

If your IT management has a set of team behaviour values (which it should have), the openness and honesty pact could help your face-to-face interview with the manager. Say you felt you should bring the subject up as soon as you realised how your colleagues and customers felt. Give the manager time and space to express how he/she feels. In the end, you may have to move him to another project or maybe even do some work on the project with him yourself. It might do you good too!

Formalise project management 
Neil Yeoman
Arthur Andersen

Firstly, don't automatically assume that the selection was biased - the manager may have been justified in deciding that these consultants were the best for the job based on his prior experiences. Therefore, dumping the project may be a serious over-reaction, especially considering that both the manager and the consultants appear to be performing well. It may be better to tell the manager your concerns, ask him to explain his reasoning for hiring the consultants and obtain a breakdown of the costs incurred to date and likely future spend. The arrangement between your company and the firm of consultants may be binding for specific phases of work and so should be reviewed on a phase-by-phase basis. Ascertain whether each part has been completed in accordance with this arrangement, and the cost incurred for each phase.

For non-agreed aspects of the work, ensure that a few different quotes are obtained from other consultants to determine whether you are being overcharged. You should always bear in mind that the cheapest quote may not be the best value, and make sure that the offered services are in line with your e-commerce strategy. Bear in mind, if these consultants are doing a good job at a reasonable fee, there is little reason to change them.

In future, to avoid further instances occurring it is advisable to implement a set of guidelines for sourcing and selecting outside consultants.

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