Trust is a fundamental building block of developing and retaining customers. When it comes to the contracts, both express and implied, that have been agreed upon, trust is more important than ever. This video provides examples of companies that lost this trust and gives practical tips for living up to the terms of your contract. Your resource for practical business ethics tips, from the Business Integrity Leadership Initiative at the Sam M. Walton College of Business.
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Episode Transcript
00:03 Cindy Moehring: Welcome to this edition of The BIS, The Business Integrity School, your resource for practical tips from a business ethics pro who's been there. I'm Cindy Moehring, the founder and executive chair of the Business Integrity leadership Initiative at the Sam M. Walton College of Business. Joining me today is Dr. Matt Waller, Dean of the Walton College.
00:22 Matt Waller: Principle number four is to live up to the terms of your contract.
00:26 Cindy Moehring: Yeah, implied and expressed. All of them.
00:27 Matt Waller: Implied and expressed. Now, that seems like of course you would do that.
00:34 Cindy Moehring: Of course you would do that.
00:35 Matt Waller: Otherwise you wouldn't have agreed to the contract.
00:38 Cindy Moehring: Right, right.
00:38 Matt Waller: But we see failures all the time in this way.
00:41 Cindy Moehring: Big ones. Yeah. We see some really big ones. We're seeing that right now today with Boeing and it's still ongoing. And at its most basic level, they didn't live up to their term of their contract which was to make safe planes for their 737 Max. I'm not saying all their planes are unsafe, but their 737 Max was not a safe plane. And I think that's the situation. Nobody goes out intentionally and says, "We're gonna make the 737 Max an unsafe plane," but yet that's where we ended up. And so...
01:14 Matt Waller: It was a lot of little decisions...
01:16 Cindy Moehring: Little decisions along the way that...
01:18 Matt Waller: Compromises.
01:18 Cindy Moehring: Add up and compromises to a situation where we ended up with an unsafe plane.
01:21 Matt Waller: I wonder if today... For example when you download software or a new app, you get this huge agreement that you don't read and you click accept.
01:34 Cindy Moehring: Yes.
01:35 Matt Waller: So I wonder to what degree those kinds of things in society are training us to not pay attention to the terms of our agreements.
01:45 Cindy Moehring: Yeah. That's a very interesting way to think about it. But I do think that in some respects, it's the little things like that, the little just day-to-day aspects of your job that you go through that if you don't stop and reflect, sort of what we're doing here on these situations, you do miss it, and you miss it and once you've missed enough small steps, you're too far gone before you can actually step back and take a look at it. So for Boeing, 737 Max, the two crashes within a matter of a few months killed, what? 346 people, unfortunately. CEO's now gone. They've certainly replaced a number of people. CEO's still trying to work through the issue. Plane's not back in the air and it's been almost a year.
02:31 Matt Waller: And it's affecting our GDP.
02:33 Cindy Moehring: It's affecting our GDP. Some estimates are that in the first three months of 2020, it could affect it by half a percentage point. Some of the suppliers who make the parts for the plane... So not only are they not flying, now they've had to halt production. And so their suppliers are now having to lay people off because they can't...
02:49 Matt Waller: Then these people can't build a new deck or buy some things they wanted to buy.
02:55 Cindy Moehring: Right.
02:55 Matt Waller: And so it has a ripple effect in the whole economy.
02:57 Cindy Moehring: Huge ripple effect in the whole economy. Huge ripple effect.
03:00 Matt Waller: And it also makes planning difficult for the airlines who expected to be able to use these airplanes.
03:06 Cindy Moehring: Yes. Because they had a number of them that were on order and they'd gone out and hired pilots, and trained more people, and so now what's happens to them? Now there's not a plane for them to fly.
03:16 Matt Waller: And the impact of this isn't just on the supply chain and the economy, but it clearly hurts Boeing's... The trust people have in Boeing.
03:26 Cindy Moehring: Definitely hurts the reputation. Definitely. And it kinda goes back to one of the principles we talked about before and the importance of trustworthiness is if you don't have trust, then you're gonna lose customers or they're gonna start to go in a different direction. So it's really important that Boeing get this one figured out. It's been a long time. I think part of the problem is they kept telling all of us the public, and Congress and regulators, "Few more months, few more months. We'll have it. We'll have it. We'll have it." And they just I don't think quite saw the magnitude of what they were dealing with, which we now see it's been almost a year.
03:57 Matt Waller: A lot of this had to do with the computer programs that they used and the systems.
04:06 Cindy Moehring: Yeah.
04:06 Matt Waller: And I wonder sometimes to what degree we're developing systems that are so complicated. Yes, we're able to automate, we're able to use artificial intelligence. But what we wind up with is something that no one person understands even a small fraction of, and so trying to make sure... How do you know all the ways to even test it?
04:31 Cindy Moehring: Yeah. It's hard to say actually they're finding so many different problems now but the actual problem with the Max system, was my understanding it was a single point of failure and they didn't have a backup if this one piece of machinery failed on this one test.
04:49 Matt Waller: And they knew it.
04:49 Cindy Moehring: And yeah, in this case they knew, they designed it with a single point of failure. So there are lots of lessons in this one.
04:57 Matt Waller: So what are some practical tips for this?
05:02 Cindy Moehring: Yeah, if you break it down to it's most basic level, I think that the reason why Boeing ended up in the situation that it did which leads to the practical tips, is they were focused on cutting costs after they merged with McDonnell Douglas in the late 90s. And they really were trying to stay ahead of their competitor Airbus, and they had some tight deadlines they had to hit to get a big order with American Airlines and so they cut a deal and said, "We'll get them to you in a certain amount of time" and they've been focused on cutting costs. In business today, what business isn't trying to cut costs and operate more efficiently? And what business isn't trying to stay ahead of their competition? So it's not like they were dealing with pressures that aren't common in business. But the practical tips have to come back to at a very basic level, what is it that they did wrong in handling those pressures?
05:54 Cindy Moehring: And what I would say is that there are three things that leaders can take away from this situation that weren't happening right at Boeing. And the first practical tip is, you can never say to your folks, "Do it at all costs. Do whatever it takes to get it done" because you're not gonna be happy with the results if you say that, that you will have people on your team that will... They'll think you've given them free license to go outside the lines of what's ethical because the only thing that matters to you is get it done, get it done at all costs. And so that really sets the wrong tone, so that's something you don't ever wanna say and end the sentence there. Second practical tip is it's also not right to just be silent because if you as a leader are stressing, "We have to cut costs and we've gotta meet this delivery deadline," and you don't go ahead and say, "We wanna do it the right way. We wanna make sure that we're doing it within ethical bounds," all you're doing is just re-emphasizing kind of the... You're not saying at all costs, but you're re-emphasizing the goals, your teams will read into that. That that's really all you care about.
06:58 Cindy Moehring: You didn't say specifically, "Don't go outside the line." So maybe that's what you want me to do. So first practical tip, don't ever say at all costs. Second practical tip, don't be silent on the issue, which leads to the third practical tip, you actually need to fill that communication void and say, "Yes, we do need to focus on costs. And yes, we absolutely do want to make sure that we are trying to hit our delivery deadline, but never at the expense of safety," for example in the Boeing situation. That phrase right there takes the pressure valve off the boiling pot of business where you're really trying to achieve objectives and it creates an environment where people then feel like, "Okay, safety's number one." And sometimes it's hard decisions that sometimes you really have to sit down and make tradeoffs. Am I gonna do this or am I gonna do that? But it's having those tough conversations and making those trade-offs that actually ends up saving the day because those are the hard conversations that need to be had.
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07:57 Cindy Moehring: Thanks for listening to today's episode of The BIS, The Business Integrity School. You can find us on YouTube, Google SoundCloud, iTunes or wherever you find your podcasts. Be sure to subscribe and rate us and you can find us by searching The BIS. That's one word, T-H-E-B-I-S. Tune in next time for more practical tips from a pro.
