Professionalism and Ethics in Consulting
The growth of management consulting has provided ample evidence that at one time almost anyone could call himself or herself a consultant and set up in the practice of Professionalism and Ethics in Consulting. In its early years and even now, the business attracted the good, the bad, and the indifferent. The word “business” is used deliberately: “professions” seldom start as such. Professional awareness and behavior come when the early juggling with a little knowledge gives way to skilled application of a generally accepted body of knowledge according to accepted standards of integrity. The professions of medicine, the law, and the applied sciences all followed this path, and management consulting is proceeding in the same direction.
Knowledge and skills
There is a defined body of knowledge proper to the profession, which can be acquired through a system of professional education and training. The necessary level of professional expertise is reached only after a certain number of years of practical experience in addition to completed higher education, preferably under the coaching of senior members of the profession. Furthermore, the practicing professional has to keep continuously abreast of developments in theory and practice. The professions tend to have their own criteria and systems for verifying and assessing required knowledge and experience, including examinations on entry, assessment by professional bodies, testing the results of further training, and similar.
The concept of service and social interest
Professionals put their knowledge and experience at the disposal of clients as a service against appropriate remuneration. Real professionals are characterized by the “service ethos”: they serve clients’ needs and interests, to which they subordinate their own self-interest. Furthermore, they view individual client interests from a wider social perspective and keep broader social needs and implications in mind when serving individual clients.
There is a set of recognized ethical norms, shared and applied by the members of the profession. These norms define what is proper and what improper behavior in providing a professional service is. They demand more than respecting the law: a behavior that is perfectly legal may not always be ethically judged by the profession’s norms.
Community sanction and enforcement
The community in which the profession operates and the clientele recognize the social role, the status, and the ethical and behavioral norms of the profession. There may be explicit recognition (e.g. by means of a legal text governing and protecting professional practice). This may include definitions of educational or other standards required and special examinations to be passed, as well as of behaviors considered as unprofessional and illegal, and of corresponding sanctions.
Self-discipline and self-regulation
While serving clients, members of the profession apply self-discipline in observing the profession’s behavioral norms. The profession organizes itself in one or more voluntary membership institutions (associations, institutes, chambers, etc.), thus exercising collective self-regulation over the application of an accepted code of professional conduct and over the development of the profession. An equally important purpose of member institutions is to defend the collective interests of the profession in dealing with representatives of the clients and the community.
The professional approach
What then are the salient characteristics of a professional approach in management consulting? Some of them can be found, in succinct form, in the codes of ethics or conduct adopted by the member organizations of management consultants; others are set out in information pamphlets of consulting firms. These are the norms held collectively, i.e. by the members of a consultants’ association or of a consulting firm that has formally declared what its ethical rules are. However, in many situations, it is not possible to refer to a formal declaration of norms defining professional and ethical behavior. In such cases, the consultant has to be guided by a personal code of professional ethics and behavior – his or her own conception of what is proper and improper practice, and what is beneficial to the client and the community and what is not.
The consultant is in a position of trust; the client probably believes that certain behavioral norms will be respected without their even being mentioned. Many clients believe that consultants would never use false credentials, and some clients are even unable to evaluate the consultant’s technical competence. The consultant may be in a position of technical superiority and possess knowledge and information that the client does not have. The client may then be in a position of weakness, uncertainty, and even distress.
Any consultant who seeks to act in a professional manner must clarify his or her own conception of ethics and the norms to be observed in working for clients. This applies equally to external and internal consultants, as well as to anyone who intervenes in a consulting capacity.
Impartiality and objectivity
Clients who turn to professional advisers expect to receive impartial and objective advice. They assume that the consultant will be free of biases, prejudices, preconceived ideas, and prefabricated and prepackaged solutions, which may have worked in other contexts but be inappropriate for the given client. The true professional aims to be as impartial and objective as possible, controlling emotions and not letting prejudices erode the value of advice. In practice, however, absolute impartiality and objectivity are difficult, if not impossible, to attain.
In addition to conflicting interests, other factors may affect impartiality and objectivity. Every consultant is influenced by his or her cultural background and personal value system, which may include political, racial, religious, and other beliefs and prejudices. In addition, consultants have their own approaches to problem-solving, change, and helping clients who face problems. Some consultants believe strongly in the power of behavioral sciences and process consulting, while others favor a rigorous and systematic approach to problem diagnosis and change management, using highly structured procedures, techniques, or models.
The consultant must make every effort to become aware of his or her personal values and biases, as well as of forces and interests within the consulting firm and the client’s environment that may affect impartiality and objectivity. An open discussion with the client on these issues may be necessary and helpful. In many cases, objectivity can be increased by reviewing the approach and the solutions envisaged with other members of the consulting firm, who may have faced similar problems with other clients. In an extreme case, a real professional would decline an assignment where he or she cannot be objective.
Internal consultants should be particularly aware of their dependence on their own organization and of the factors that might make them less impartial than an external adviser. They should not be given assignments where they clearly cannot think and behave impartially.
Confidentiality is another universal principle of work done by independent professionals for their clients. Management consultants should accept neither to disclose any confidential information about clients, nor to make any use of this information to obtain benefits or advantages personally, for their firms, or for other clients. Clients must be sure that they can trust consultants. As a rule, some reference to confidentiality will be made in the consulting contract, but it may be general and could be easily overlooked during the assignment. The client may not specify what information must be treated as confidential and may be unaware of the various risks in working with information.
In internal consulting, the situation with regard to confidentiality can be complicated. In certain cases, consultants have an obligation to (or there is a possibility that they might) disclose information on a client to a common superior (minister, director-general, or another official).
Under such circumstances, managers regard internal consultants as central management’s spies and are reluctant to use them. To counter this, many business corporations have declared confidentiality as a principle that will be scrupulously respected in using internal consultants as well as external ones. A similar approach is increasingly taken within the public sector.
Confidentiality can also be violated unintentionally – by carelessness in handling documentation, naivety in discussing work-related issues in social contexts, or lack of precautions in quoting confidential information in public speeches or articles.
Legal liability and professional responsibility
Management consultants, like any other professional advisers, are not immune from being held legally responsible in certain cases where their advice or recommendations are deemed to cause pecuniary damage or loss to their clients or, perhaps, others in a relationship with their clients. While such legal liability might be more problematic in the case of engineering or computer consultants, it is not insignificant in the “pure” management consulting area. This section looks briefly into the standards used in various legal systems in determining liability and in assessing the number of damages awarded, as well as the question of insurance available to consultants to cover such liability, and other means by which consultants may protect themselves.
First, it should be pointed out that, in countries where the courts have easily found liability stemming from professional advice given by consultants, and where clients/plaintiffs have been awarded large amounts of damages, one undesirable effect has sometimes been to induce a certain reticence on the part of consultants to recommend bold, novel and imaginative solutions to their clients’ problems. In other words, fear of possible legal action can lead to over- cautiousness and risk avoidance. Even where insurance is available (usually at considerable expense) to mitigate the consultant’s actual loss, the mere fact of being deemed responsible for negligence or for contractual breaches, and the repercussions on the consultant’s reputation, may be sufficient to dampen his or her enthusiasm and innovativeness in advising clients.
One way of minimizing possible legal liability is for consultants to ensure that the terms of reference and specifications of the consultancy are clearly and unambiguously spelled out in the consultancy contract. Ambiguities in this regard often lead to expectations on the part of the client which are not intended by the consultant. Such misunderstandings can, in turn, lead to allegations of failure by the consultant to adhere to the contract, and to claims and lawsuits. Such a situation should be avoidable if due care is taken in drafting the contract.
Another means of attenuating, if not eliminating, possible liability for the consultant is to negotiate a clause in the consultancy agreement in which such liability is limited to a specified amount. It is quite common to find clauses that specify that the consultant’s maximum liability for professional acts of misfeasance or nonfeasance (or breach of the consultancy contract) is to be limited to a specified amount or to the total amount of the fee. Obviously, such a clause must be negotiated and mutually agreed upon, and the agreement will depend on the relative bargaining strength of the consultant and the client. The consultant should also keep in mind that there may be national legal restrictions on the possibility and extent of a limitation of liability.
In view of the tendency towards litigation in certain countries, and the arbitration clause is sometimes included in the consultancy contract. Such clauses normally stipulate that in case of disagreement over the fulfillment of the obligations of the contract, or in case of other disputes arising under the contract, recourse is to be had to agree to arbitration (a single arbitrator or board of arbitrators) rather than to the courts. The idea is that arbitration of claims by an arbitrator or arbitration board that is knowledgeable and impartial will guarantee that the consultant does not become an innocent victim of the tendency of certain parties to sue at the drop of a hat and for judgments to be out of line with reality. Of course, any such clause must be agreed to by the client, who may also take the initiative to include such a clause to better protect his or her interests.
The relationship between legal liability and professional responsibility in consulting, generally speaking, is a relationship between law and ethics. Legal liability of professionals is a legal construct, imposed by law. It is applicable only if there are appropriate rules or laws, and an institutional framework able to enforce them. In contrast, professional responsibility can be defined as a set of voluntarily adopted and self-imposed values, norms, and constraints, reflecting the professionals’ conception of their role in the economy and in society, and their responsibility towards the clients. It is an ethical and cultural concept. Differences in the application of legal liability in various countries are due to different legal systems. Differences in professional responsibility reflect different social and professional cultures.
As discussed earlier, professional responsibility covers a wide range of issues in which a consultant must choose among alternative modes of behavior. The quality of the consulting service is the best example. In most assignments, the quality of the services provided will depend entirely or predominantly on the consultant’s own judgment, which in turn will be guided by his or her sense of responsibility towards the client. Legal liability will be applicable only to a very small number of extreme cases, where service quality has dropped to the level of malpractice and has caused damage to the client.
A strong sense of professional responsibility, and not a cautiously formulated consulting contract, is, therefore, the best safeguard in avoiding legal liability. Most instances where a professional adviser’s legal liability is in question are not due to bad intentions but can be traced to breaches of professional responsibility such as inadequate research and fact-finding, appointment of incompetent staff, hasty and superficial judgment, or failure to inform the client of the risks involved and issues that could not be taken into consideration.
It is the policy of professional consulting associations to define ethical and behavioral norms that express their members’ professional responsibility above and beyond the requirements of law. In this way, the professional associations guide and educate their members and protect the profession. This protection also includes disciplinary procedures and measures in cases of violation of the codes of conduct. However, in management consulting these disciplinary measures tend to be exceptional and their impact has remained limited. Professional associations can deal with cases of conduct that are contrary to the adopted codes if such cases are brought to their attention. They have no mandate and no resources for acting, on a continuing basis, as inspectors of their members’ professional behavior.
Therefore, in the end, it is the consulting firm that must define for itself its perception of professional responsibility and integrity, and instill in every consultant employed by the firm a strong sense of professional responsibility.