We had established a 30 odd headcount office in Shanghai in early 2001 and were steadily ramping up our operations as Mobile2win, China. Contests2win and Softbank were the original investors and we were operating under strict Mainland China’s government’s guidelines.
As the paperwork increased, we began looking around to hire secretarial staff. As soon as we had spread the word, we intriguingly began receiving resumes of many women – all in their twenties, married and well settled. One afternoon, one of our rather talkative and assertive Sales Head took me in confidence and revealed something quite chilling – He said that all those women who had applied were actually pregnant and were applying for jobs, that they could lock into and then claim maternity benefits as per the dictated statutory guidelines. This was a standard ploy of gaining ‘free employment’ and we should be avoid falling into such traps.
Simultaneously, I was pavement pounding the streets and meeting clients in frozen China. I had a strange situation on my hands. Across Shanghai, Beijing and Guangzhou, large Chinese local Brands dominated the marketing scene and were big budget spenders. Sure, the Fortune 500 brands were around, but the Chinese brands made quick spend decisions on Internet marketing and were lucrative customers.
The only problem was that all these Chinese brand managers expected ‘gifts’ to be left behind for them. It was not money but surely enough a bribe in exchange for business. My local Chinese team members who accompanied me told me, “Sir, this is the way business is done in China.”
Both the cases above presented ethical dilemmas to me. They forced me to walk the tight rope of being ‘righteous’ vs. ‘practical’, ‘academic’ vs. ‘practical’ and most importantly a ‘rigid businessman’ vs. a ‘practical one’.
Was I supposed to ask the ladies who came for the interviews indirect questions leading to figuring out if they were indeed pregnant? Pretend that we needed men secretaries because they might be required to work the night shift?
In my meetings with the local Chinese firms, was I supposed to carry gifts bought in China and pretend they were from India and just hand them over as a token of friendship?
This blog post examines the challenges of ethics and principles in entrepreneurial and start up life.
Don’t become a cheat if someone cheats you.
Very recently, in one of the group Companies, my COO and I had vocally assured a newly recruited Business Development executive (21 years old, 15k monthly salary) that she would be compensated for the value of ‘barter’ deals that she bought into the company.
Just after a few television spots in return for a couple of web pages, she produced a commission statement of Rs 81,000 for just the first month!! I first thought she was confused but quickly understood she had the mind of a cheat.
All she had done was reproduced the top ‘rack rate’ (stated nominal value) of the media of the TV spots we had received as barter (Rs. 40 lacs), without considering that the value we had provided in exchange to the channel was actually only Rs 1 lac. This rack rate is the typical exorbitant rate you see at the back of a hotel room door (for statutory purposes) – despite you having paid less than half for it. I logically tried to explain to her that Companies exchange the ‘true’ value of goods in the end – so despite the printed rate of the media value being 40 lacs, since we had provided the channel value of just Rs 1 lac, the TV spots we had received were also worth 1 lac since that inventory was unsold by the channel! Simply explained, if I gave you a ball point pen and took another one in return from you, the real value exchanged was Rs. 10(actual value of buying the ball point pen). Sure, as a kid (or better as cheats), I can pretend that my ball point is worth Rs 400 by putting a sticker on it but I was still exchanging it with you for Rs 10! (And hence I am not a kid –just a fraudster).
She insisted that she be compensated on this ‘notional’ value of 40 lacs – given the commitment made to her.
We paid her without any more discussion and surely ‘relieved’ her of her post also.
The lesson here is that we DID not stoop down to cheating even though we were cheated upon. There was no written agreement we had with her for this payment and could have easily refused to pay but we did not.
Why did we pay her?
Because these situations test the principles and the moral fiber of a Company. There is no other way of ‘testing’ where you stand on ethics without such real situations!
In the evening, I chuckled and thought of the 80k paid as fees for an expensive GMAT test of Integrity – whose results thankfully were instantaneous and on which we had received a perfect score!
The Download Spiral of misplaced ethics
Being practical.
A couple of years ago, a labor inspector arrived in our office to check our provident fund records. To his utter disappointment, he found that everything was perfect and hence there was no scope for a bribe.
He still insisted on a ‘gift’. When we refused, he did the unthinkable – he sat down on the visitor’s sofa and refused to move. Not just the first day but 3 days in a row!
On the 4th day, tired of having an ugly, smelly owl in our pristine office, we paid him some cash and bid him a happy departure.
I found it practical to bend my ethics a bit in return for the sake of sanity and the healthy atmosphere of the office!
Taking a bullet
A few months ago, one of my ex co-founders ‘informally’ partnered with c2w (contests2win) to launch some niche vertical sports sites.
He came from a real world economy and had lost touch with the digital media world for over 5 years. He spent months in our office learning the ropes, getting lots of art and programming development work done and just leveraging the entire resources made available to him.
A few weeks before launch, this partner took me in a conference room and declared that he had new ‘views’ on the partnership %’s that were earlier agreed upon and that he was not happy to stick to the original commitment.
We had this meeting at 12:58 pm. I told him that I would think about it and revert. At 1:01 pm, I wrote a mail to him saying that there was a fracture in our business thinking and hence the deal would not be possible.
He offered to buy out what we had made in terms of the product, but we took a call and swallowed a Rs 25-lacs hit (actual cost of time and money) rather than selling out on our ethics and principles.
In this case, we made the gun and the bullet and trained the shooter – only to have him shoot us in the face.
The satisfaction was going home with the headline that we don’t SELL principles, but only our services. And they cannot be bartered!
So how did we deal with the China situation?
I did not heed my China Sales head’s warning and continued with our interviews. Amongst the 3 ladies short-listed, we finally selected a simple, homely (and possibly pregnant) lady.
9 months later, there was no baby.
I later found out that the Sales Head was trying to place a couple of his cousin brothers in the Company and hence had fabricated the entire story!
As far as the Chinese brands went, we did not work for them. Instead we focused on the Fortune 500 brands and won strong business from them – leading to Siemens investing into the Company in 2003 and the Walt Disney Company buying out Mobile2win China in 2006. Neither Siemens nor Disney would have touched us if we had started bribing our way into business.
Mao said – behind every great fortune, there is a great crime.
Rodinhood says – Inside every great entrepreneur throbs an ethical heart.
**************
Originally posted on March 28, 2011 on rodihood.com