Ethics: It’s Not A Choice
“Those who stand for nothing fall for anything” Alexander Hamilton
With the popularity of “Hamilton” on Broadway, I thought this quote from Hamilton a good reminder of the importance of ethics in business. I would assume none of you feel you are unethical, but there are slippery slopes in business that need to be addressed.
Client “A” hires Designer “B”, who refers business to Contractor “C” and both are awarded the job. Designer “B” charges Client “A” an hourly rate of $175 per hour, and bills out 80 hours over the next 12 weeks for a total of $14,000 + 12% HST. Designer “B” sends Contractor “C” an invoice for a 10% Referral Fee based upon the costs of doing the job, let say it’s $28,000. No taxes are applied to the invoice. Contractor “C” increases his price to you by $3,500 to pay Designer “B” and the extra paperwork that’s needed. It’s a cost of doing business, he thinks, and everyone does it. Client “A” is none the wiser to this transaction, and Designer “B” just made $210 per hour.
The above was an example shared in an article on ethics and there are those who feel it’s an easier way to charge a higher fee rather than just being upfront with the client. This well-known practice goes by names such as, but not limited to, a referral fee, commission, or kickbacks. Be aware that if you belong to a professional association you will be violating their code of ethics and I don’t’ think you will want the negative publicity if your policies are discovered. For example the following comes directly from the ASID Code of Ethics regarding “Responsibility to the Client”.
3.4 Members shall fully disclose to a client all compensation which the Member shall receive in connection with the project and shall not accept any form of undisclosed compensation from any person or firm with whom the member deals in connection with the project.
One of the definitions of ethics is “. . . .the study of moral (truthful or good) principles that guide our conduct.” And another which most of us learned as The Golden Rule: “… do unto others as you would have them do unto you.” As ethics terms can sometimes be subjective these definitions can help provide some consistency. I find the last definition a valuable one to use whenever there is a question about a decision to be made/action to be taken.
If you do receive a referral fee or gifts for referrals, be upfront with the client and let them know you receive a referral fee, give them two other options to interview but share the reasons you are willing to put your firm’s name on the line in referring this specific company. After all, referral fees aside, if they do not do outstanding work, you are the one the client will come to and it will be your reputation on the line. Honest truly is the best policy.
I am so glad you have raised this question, and it is one of the more difficult situations to address.
We charge our client what the contractor has quoted to us. But in some cases the contractor will go directly to the client and work out their own quote and at times for additional work the client may need. The issue becomes apparent when the owner is not happy with the service or the end bill, we are then asked to get involved either to chase up the contractor to complete the work or query the bill, It then becomes the case of “your contractor” help… And almost in every case we do get involved and assist to resolve the matter, and yes mostly at our own cost.
Another situation is should we have a letter of ethics supplied to our contractors, things like what they can discuss with client directly? photography of work? quoting?
Would love your feed back on this matter.
danka
I think a Code of Ethics is a great idea!
Thank you for this great blog. I have had a day where I have had to pay for the lack of ethics with a supplier. Your words of encouragement have reinvigorated my values. Giving a dam can sometimes be a lonely place, other view you as” difficult”.. I am looking forward to when the penny finally drops with some of these individuals. Thank you.
Joanna
I totally agree, Joanna.
This is very enlightening. There are vendors who are providing designers with valuable gifts and services (and charging the clients) in exchange for referrals. I have been fighting the urge to join the bandwagon as a vendor because it feels dishonest to me. Yet, designers have told me they have a loyalty to the other vendor because of these kickbacks. I have seen invoices to their clients, which are 5-20 percent higher in cost than my normal pricing.
Such a sticky subject. If you’re a member of ASID, you are not to take kick-backs without disclosing that to the clients. Recommending just one contractor puts you in a “responsible” position if the contractor doesn’t perform. It is usually best to recommend 3 and let the client know that it is their decision, and if something goes wrong, that you’ll be happy to assist and that is done at your hourly rate.