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Is Ethical Consulting Possible?

Integrity and ethics are important components of being a professional. In today's business environment it is not uncommon for ethically-challenging issues to arise. When working as a consultant, however, the very nature of the engagement can strain even the most seasoned professional. I am not talking about the kind of consulting where the consultant is actually a contractor - an additional resource on the client's team. For the purposes of this article, I am talking about consulting in the fullest sense of the word - providing expert advice and guidance, often combined with offering a significant service to the client.

The basic ethical challenge of consulting is that the acting in the client's best interest is often in conflict with the consultant's business goal of maximizing revenue and profit from the engagement. It is in the client's best interest to receive the most cost-effective IT services possible - to spend the least amount of money possible to obtain the best return on investment - while a consultant's revenue and profit depend on maximizing the money spent by the client and minimizing the effort spent in obtaining this money. This conflict of goals is normal in any business transaction between two parties, but for consultants it frequently leads to an ethical conflict-of-interest situation whenever the consultant influences the work being done or to be done by themselves for the client.

A conflict of interest is defined as a situation where the professional has an interest that interferes with the service provided to the client. One common example is when the client asks you for advice regarding the feasibility or scope of some item of work, perhaps a new feature on an existing application or a new business system. If you or your organization will perform this work, then providing advice on whether to do it places you in a conflict of interest. Even in a pure software development project where the requirements are specified up front, the specification is almost always either not detailed enough, unclear, or just plain wrong. The contractor must interpret and refine these requirements which means that they are providing input into the scope of the work, which produces the conflict of interest.

Under a fixed-price contract you are paid a fixed amount for a specified piece of work. A conflict of interest is automatic: you want to minimize the time spent in order to maximize your profit, while the client wants the best feature set and quality possible which requires more time. This can lead to disagreements over the specified requirements. I know of one fixed-price development project where this happened. One of the screen shots in the specification mistakenly included menu items for printing (Print, Print Preview, Print Setup). There was never an intent to provide printing capability - the specification did not describe the behavior of these menu items. When the client performed their acceptance testing of the application, they compared it to the specification and noticed the missing print functionality. The development lead tried to convince them that it was a mistake in the specification, but the client insisted on having the functionality. So the team implemented a very limited printing capability into the application. It was doubtful whether users would actually use such a limited feature. Since the specification didn't describe what the printing behavior was supposed to be, the client basically had no choice but to accept this limited functionality. It was basically a lose-lose situation: the client received a mostly-useless feature, and the development team's profit margin on the contract was reduced.

The conflict inherent in a fixed-price contract can often harm the quality of the final product. A well-designed, well-tested, easily-maintainable application takes more effort to create than a hastily-slapped together application. The contractor's profit margin shrinks if this extra time is spent, especially when the client is incapable of properly evaluating the quality of a delivered application. The temptation exists, therefore, to deliver a substandard product, which conflicts with one's ethical and professional responsibilities.

These problems do not occur in a time and material contract, where you are paid based on the time you spend working for the client. A conflict of interest still occurs - the client's best interest is for you work as efficiently as possible to minimize the time and hence the cost, while you can increase your revenue by taking longer. In the case of unclear requirements, expanding their scope will result in your revenue increasing. One unethical tactic I have heard contractors using is to supply their best people to win a contract, but then substitute juniors to do the actual work. This not only boosts their revenue, since the juniors are less efficient and will take longer to get the job done, but also boosts their profit margins, since the juniors' salaries are lower.

Consultants who are employees of a consulting company face special ethical challenges. Since the majority of income for a typical consulting company is from their consultants doing billable work, the company needs to maximize the number of billable hours in order to maximize their profit margins. This can lead to an environment where contractors are encouraged, often unofficially, to bill a client for corporate administrative or overhead types of activities that are unrelated to that client, or to bill when they have no actual work to do for that client.

With all of these ethical challenges in consulting, is it possible to be an ethical contractor? I firmly believe the answer is yes. Just because you find yourself in a conflict of interest does not mean you need compromise your ethical standards. Being a professional means fulfilling your ethical and legal obligations. The general rule is to make a full disclosure to the client of the professionals interest in every situation of conflict of interest, actual or potential. The client can then make a fully informed choice. But the pressure to bend or break the rules exists. This has been recognized in the industry, and I have seen steps taken to address some of the more significant issues. Requests for proposal (RFPs) now often require resumes to be submitted for the resources who will do the work, and the contract includes strong penalties, including outright cancellation, for substituting different people who are less skilled. This prevents the practice of substituting juniors for the seniors used to win the contract. In the government, it is not uncommon for a large RFP to itself be developed by a contractor. When this is done, that contractor is not eligible to compete for the RRP, because otherwise they could specify terms advantageous to themselves. Although they appear to be quite rare, I have also heard of contracts where a portion of the contractor's pay is linked to the client's performance, such as the return on investment of the software or IT service being provided.

These measures are encouraging, but despite them conflicts of interest in consulting remain inevitable. It therefore falls to us as professionals to remain vigilant to ensure we act in an ethically appropriate manner.

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3 Comments on “Is Ethical Consulting Possible?”

  1. amwambela says:

    why are ethical issues in consulting important to management and consultants?

  2. Great question! I was thinking of writing about why ethics are important, but it didn’t make it into this article. A full answer deserves its own article, but I believe that for everyone in business – managers and consultants as well as professionals – acting ethically is in the best interests of the business over the long term. Treating customers, employees, and shareholders properly is I believe the best strategy for long-term viability and growth of a business.

    I also believe that for someone to act ethically brings benefits to themselves, such as a less-stressed mental state.

  3. This article was referencing in IEEE Software in the article The Seven Traits of Superprofessionals by Hakan Erdogmus

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