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FROM THE FIELD
February 2008
What Value, Ethics?
Okay, here's a bit of an exploding cigar for you: Do you value ethics in your business relationships? Puff on that a moment. It sounds like an odd thing to ask, even corny, maybe. Everyone would answer yes. But would we all mean the same thing? What are acceptable ethics? What behaviors do most of us agree upon most of the time? It's a squishy topic, really, and doesn't lend itself to many firm answers. But as we all plunge into the swirls and riptides of a challenging domestic market, let alone globalization that mixes conflicting ethics, it's worth examining what we think and do. Because frankly some of it smells a little funny, depending on your nose.
When suppliers and operators meet for dinner, for example, who pays, and is there a ceiling beyond which things get questionable? In our industry, suppliers generally pick up the check. But that's not true across all industries, even right here in the U.S. market. In the high-tech world, for example, at least one major corporation reverses the practice, picking up the tab whenever it meets with suppliers to avoid even the slightest whiff of undue influence. The company has an official cap on per-capita costs of such meals, and anything beyond comes out of the employee's own pocket. You go to a moderately-priced restaurant, you're fine. You go too far uptown, or the wine gets too expensive, and your own wallet takes the hit.
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"Marquis of Queensbury? Marquis de Sade? Something in between?"
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And what about supplier negotiations in general? What's the goal? Are you aiming for a win-win to optimize long-term viability, ongoing service, etc.? Or are you heading into the meeting less like the Marquis of Queensbury and more like the Marquis de Sade? It's possible to drive such a hard bargain that nobody returns your calls afterward.
Think of economics as an ecosystem for money. Everything affects everything else. Think carefully about how many channel partners are involved, whether they're providing a value, and how much that value is worth to this transaction—and here's the tricky part—and to your ongoing support in general. Just because you don't need a guy today doesn't mean you won't need him viable tomorrow.
As part of that process, sure, some of you might want to consider channel costs like rep commissions, dealer markups, rebates, etc. You might want to take on certain functions in return for lowered costs. But often, the original pricing strategy is predicated on those revenues remaining in place anyway. You can't deduct the same dollars twice, in effect. Take them out, and the pricing no longer works. If a diner who bought a lot of dinners from your restaurant wanted a discount for "hold the asparagus," think about why you would or wouldn't give it to him.
And finally, one last thought: A recent blip toward suppliers "opening their books"in a spirit of transparency offers some advantages, certainly, and has worked out very well in some cases. But at some point you have to ask yourself whether you want to disqualify a supplier just because he doesn't want to share his financial information. Not so long ago, we would have said your business is yours and his is his. Do you post financials in your restaurants? If your operation has a good year, do your customers start bargaining for lower prices at the register?
There aren't any right or wrong answers here. But especially in terms of long-term sustainability, some will work way better than others.
Brian Ward
Chief Editor
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