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Practical ethics for new consultants

David Casella
PA Consulting Group
Consulting Magazine
1 June 2008

Clients hire consultants for the people, skills and information to solve problems. To get the job done, consultants work with clients in advisory positions and have access to confidential information and influence over decisions. This is a demanding environment with unique ethical considerations.

Consulting firms address ethics, in part, by publishing rules and guidelines. Often given to anxious new employees during a busy orientation, a firm’s code of conduct can seem overwhelmingly long and esoteric. This is especially true for junior consultants, who probably won’t need to be concerned with advanced rules about investment disclosures and outside directorships. However, all consultants are responsible for their own ethical behavior regardless of seniority. I have distilled the essential issues into a list of practical ethics for new consultants.

  1. Keep track of your time 

    The cornerstone of consulting ethics is proper timekeeping. Timekeeping rules support the principles of honesty and fair dealing, so always keep accurate track of your time and report it according to company policy. If you claim hours that you did not work, or charge an account that did not benefit from your time, then your client did not receive the value it deserved regardless of the results you delivered.

    Keep in mind that billing more than one client for the same unit of time is double billing and generally not permitted. For example, if you work on client A’s project while on a flight to client B’s headquarters, you cannot charge both clients for the same hours. Split the hours between the accounts so both clients benefit from your efficiency.

    In addition, if your firm performs federal contracts, the government’s accounting rules make it even more important to keep accurate time records. Steering (instructions from a supervisor to charge time to an account other than the one a subordinate is working on) and deliberate mischarging can be serious criminal offenses.

  2. Avoid gifts

    The easiest way to run afoul of ethics rules is by giving or receiving gifts. Most consulting firms have strict rules regarding gifts to avoid the appearance of buying or selling preference. These rules support the principles of independence and impartiality.

    Remember that meals and entertainment are gifts. Typical exceptions are items of minimal value and shared celebrations. Exchanging gifts with friends who work for a client is permitted as long as the gifts are given solely for personal reasons.

    New consultants are most likely to be offered gifts from subcontractors and suppliers. Know your company’s policy and be ready to gracefully decline the gift. This doesn’t mean that you can’t go to dinner with someone with whom you are prohibited from exchanging gifts; it just means that you’ll each have to pay your own way. Doing so or even avoiding such events won’t have a negative impact on your performance, and you will be able to make decisions without the concern or appearance that your judgment was influenced by anything other than your client’s best interest.

    However, there will be times when it will be appropriate to give or receive a gift. Make sure the gift is allowed by your firm’s policy and you have the necessary approvals. It is a good idea to seek and document approvals even when they are not required since all costs go on the books. Accountants will flag any expenditure that appears to be a gift, and it’s always easier to have a written approval than to explain yourself.

  3. Disclose mistakes

    You’re going to miss a deadline, fail to spot an important issue, or make some other mistake. If you don’t, you’re either the best consultant ever or you’re not doing any actual work. Disclose mistakes to your supervisor quickly and completely. This is a big part of what ethics policies mean by honesty and transparency.

    An example of why disclosure is important occurred early in my legal career, when I was in private practice: I received a call from a consultant who, under the pressure of an impending deadline, improperly shared his password to a proprietary database. The vendor who owned the database figured it out and wanted compensation. The consultant, however, denied that he shared the password. The dispute with the vendor, and the subsequent missed deadline that resulted from lost access to the database, could have been avoided with a complete first disclosure.

  4. Keep client information confidential

    It is important to know what confidentiality obligations apply to your assignments because keeping client secrets is vital to maintaining trust and the client’s competitive position in its market.

    For some consulting jobs such as litigation support and market analysis, even the identity of the client and the existence of the work will be confidential. On less sensitive jobs, complying with non-disclosure agreements can become an afterthought as information flows freely between consultants and clients. Take the time to mark, handle and return or destroy confidential information according to the agreement. The client’s legal department takes confidentiality obligations seriously, even if the employees you’re working with don’t.

    Complying with confidentiality obligations is also important for your professional reputation. Avoid the temptation to share interesting or unusual information with colleagues and other clients. The consulting industry is made up of specialist communities whose members know each other, and lasting reputations for keeping client secrets are formed quickly. The same is true with your friends at happy hour. Let them think you have a boring job—you’ll know the truth, and it’s more fun and relaxing to talk about non-work topics anyway.

  5. Disclose and mitigate conflicts of interest

    There are two types of conflicts of interest, personal and organizational. Both result from outside relationships or activities related to an assignment that may affect the consultant’s performance or judgment. However, in many cases disclosure and mitigating measures can neutralize a conflict and allow the work to proceed.

    As a new consultant, you need to be concerned primarily with personal conflicts. It is improper for a consultant to have an undisclosed relationship with an individual who works for a client or a subcontractor. The danger is that the consultant will make decisions that favor the relationship to the detriment of the client. For example, a consultant assigned to evaluate a customer service department may have an incentive to disregard negative information if she has a romantic relationship with one of the department managers. The ignored information could lead to an artificially inflated evaluation, which may in turn benefit the consultant in the form of a raise or job security for her partner. The client will suffer because it did not receive an impartial review of its department.

    Personal conflicts can also arise if the consultant has a financial interest in the client, or was a recent employee of the client. Most public sector clients have regulations that prohibit former employees from returning to work as a consultant for a period of time after the employment relationship ends.

    Organizational conflicts of interest are often harder to identify. Some work on the same principles as personal conflicts, such as when one company has financial interests in another. Another category is instead based on conflicts between the firm’s current contracts and its interest in securing future work. For example, a firm that prepares specifications for a public works project might be tempted to favor its own implementation capabilities over the best design to give itself an advantage in the competition for follow-up work. The rule promotes competition in public procurement by excluding bidders that have an unfair competitive advantage.

    The best course of action when faced with a real or potential conflict is to disclose it in writing along with the steps you propose to mitigate it. To be effective, mitigation plans should include: (a) separation of the person or organization from the part of the work that involves the conflict; and (b) supervision and review of the mitigating actions.

  6. Give credit

    Proper attribution is essential in an industry fueled by insight and innovation. Mainly your job will be to apply established concepts and methodologies to your client’s situation. Proper attribution of other’s ideas will make your work product more professional, and you will avoid the potential embarrassment of being discovered appropriating ideas that are not your own. You will want the same courtesy when you develop your own original ideas and works.

    In addition, be careful to comply with copyright laws. It is illegal to reproduce others’ works without permission. The doctrine of “fair use” allows limited unauthorized copying for education, news reporting and research; however, it has very limited applicability in commercial settings. Keep in mind that copyright laws protect the copyright holder—which in many consulting jobs will be the client, not the consultant who prepared the work.

While these six practical rules cover a lot of ground, knowing the basics should give you a good start when dealing with the common ethical issues you will face. As a final reminder, you own and must take responsibility for your ethical conduct.  The client cannot always be relied on to know the rules and offer guidance. Instead, look internally to your legal or compliance office for help.

David Casella is PA Consulting Group's legal counsel

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