Ethical Dilemma

Introduction

In today’s highly competitive world of business, meeting deadlines in a timely and efficient manner is crucial towards the success of any company. Organizations that are able to fulfill this simple requirement naturally excel, while the firms that fall behind are left behind permanently. If a business finds itself in such a predicament, its leaders are expected to take all necessary measures to ensure the company’s going concern. However, these management decisions pose a certain degree of risk that may or may not be acceptable to the shareholders involved. The treatment of ethics in such issues is especially important, since the grey area between right and wrong can both be justified in many instances.

Background

During the summer of 2000, I worked at a small software firm as a programmer. Characteristic of most start-ups, the company consisted of only two partners and five employees, including myself. They operated on contract basis and specialized in developing customer relation management (CRM) applications using Java.

Upon my arrival, I was immediately assigned a code a few components. From observing the milestone requirements, it was clear that the project was already falling behind schedule. Although delays occur frequently in the software industry, it is incredibly difficult to play catch-up and recover from a timing perspective. With specific client expectations and launch dates set in place, it becomes expensive and time consuming to deal with such impediments.

As required in the contract agreement, the client established mandatory site visits to monitor the progress of the project. Furthermore, the budget structure was divided between these visits so that the client maintained control of the purse strings. In other words, the company’s cash flow was dependent on meeting various objectives during each site visit, before they were granted access to the subsequent period’s funding. With a series of missed deadlines and an imminent client visit, the partners were in a panic as they were already operating on a tight budget.

Dilemma

Given the situation, the partners were extremely limited in their options. Their initial forecast and budgeting were poor and did not properly account for unexpected delays. If they took the honest approach and admitted the truth, the company’s reputation would instantly go down the drain. On the other hand, they lacked the funds required to speed up the project. Gaining additional funds would require convincing the client that they were indeed on schedule.

The main issue at hand is whether it is ethical for the company to deceive the client, as it is in the best interest of the company and its going concern. The analysis of this dilemma consists of a general discussion of each approach, followed by an ethical decision making analysis using the “5-Question Approach” framework.

Proposed Decision #1 - Honesty

If the company decides to be honest and reveals their missed goals, the client’s confidence in the company becomes severely diminished. It reflects on the two partners’ failure to properly manage a large-scale project, and concerns would surface over the company’s ability to deliver the project within the allocated budget. In the case that the project is delayed, who would be liable for the excess costs required to complete it? The client may not be solvent enough to obtain additional funding, and the company will not have enough working capital to sustain salary payments for the remainder of the project. Above that, such an incident would hurt the company image, with the aftershocks leading to their inevitable demise.

To challenge Decision #1, the “5-Question Approach” framework is used:

Is the decision..

Profitable? No. The stakeholders are the partners that own the company, and also the clients who have invested in this development contract. Both parties are at a disadvantage because ultimately, the project will be a failure. However, if the contract is nullified, the client can potentially save money and only lose their sunk costs.

Legal? Yes. The company is merely telling the truth and admitting their mistakes to the client.

Fair? Yes. The company is brave enough to admit that they are behind in schedule, and it is fair for the client to know about it since they are the ones that invested in this development contract.

Right? Yes. Deceiving the client is not right, so it is better to reveal the truth so that the client is aware of the situation.

Sustainable? No. Once the client is informed, the company’s reputation