Thursday, June 14, 2007

It is tough to be fair and square in business

When I quit my job to start a business, people who knew me warned me that I wouldn't be able to do a business as it would be 'impossible to do business honestly'. Additionally I was warned that, even if I stick to my policy of doing honest business legally there would be more than enough people in the government establishment who would ensure that I wouldn't be able to get things done without bribing. Another prevalent conception among the people who advised me was that to do business one will at some point or other have to bend rules, side-step regulations and/or exploit(cheat) customers

However with my utmost faith in our legal system and in democracy I shoo shooed away the soothsayers and set out to start the business. I haven't had to interact with the government authorities except to apply for permissions, register for licenses, submit tax returns and to apply for renewals. Wherever it was possible and wherever there were corrupt officials involved they tried to get me to bribe them. But having not done any thing illegal I stuck adamantly to my stand and the officials involved couldn't get me to budge. The stand has been validated up till now.

People bribe officers when,

  1. They have not done something they should have done
  2. They have done something they should not have done
  3. They wish to do something they should not be doing
  4. They wish to not do something they should be doing
Officers demand bribes when,
  1. The person involved has done or plans to do any of the above
  2. The person involved is not aware of his rights and the officer's responsibilities
  3. The person involved does not know the rules and regulations
From the above conditions we can see that it is pretty straightforward to avoid situations where you have to bribe or where the officer demands bribe. You have to
  1. Be aware of the rules and regulations involved
  2. Be aware of your rights and the officers responsibilities
  3. Do and plan to do only those things that are perfectly legal

I have not found it very difficult to follow the simple guidelines given above and have been successfully following it till now. For example it is very easy to decide to not evade tax - tax is not my money, it is the governments fees for allowing me to run my business. Since it is not my money I don't even have the slightest qualms about giving tax, on the contrary it makes me proud to contribute towards nation building. Businesses normally try to evade tax because that alone could double or triple their normal profits. Since it is illegal I don't even look at it as a possibility.

The distinction between legal and illegal is very clear as we have laws laid out very clearly in all areas of running a business. If you decide to not do anything illegal your options would become very much simplified and it would be a straightforward issue to run your business accordingly. Now there is one aspect of business that my advisors never warned me about - the grey areas between fair and unfair. You wouldn't come across such situations if you are not running a business and this was probably the reason they missed it. I will discuss a few example to illustrate the point.

Consider the scenario where a customer comes to you with false impressions about the price and/or quality of a product. Do you as a businessman tell the customer that the prices are lower than what he thinks or that the quality of the product is lower than what he thinks? If you do that you risk lowering your profits and if you don't you could end up having a happy customer as well as good profits.

You have tied up with a company to arrange loans for the customers and the company advertizes a 0% financing scheme where there is hidden 3.5% flat service charge on the complete loan amount including the initial down-payment. Do you tell the customer that the service charge is just another name for interest and that the actual interest rate would be around 20% or just tell that it is 0% and is very cheap? If you do he might decide against buying it or could walk out and fall prey to another dealing putting the deal across to him with another perspective.

A device that came in for service gets damaged because of some accidental mistake on your part and you have a customer who would believe that the device was faulty when it was brought in. Do you tell the customer that the device got damaged because of your mistake and that you would replace it for free or do you just tell him that he will have to buy a new device? If you do then you would loose the cost of the device plus the service charges but if you don't you would not only get your service charges but also an additional sale.

These are examples of some situations where you have to make a fair decision and there is no assistance from any set of black and white rules to help you make your decision. Additionally nobody is going to point fingers at you if you make an unfair decision. And under such scenarios is the true test of fairness of a businessman. It is very easy to be fair, clean and legal under public scrutiny but would you do the same under such conditions. Almost all such cases where a fair decision is taken involves a seeming financial loss for the businessman. It is possible to take such decisions but it is tough.

I have been trying my best to be fair and square in all my dealings. This is my experiments with my business. I think it is possible to do business fair and square. It is a helluva lot tougher than the shorter and crooked path. You have to forgo financial gains that are taken for granted by other businesses and sometimes you would have to make decisions that might not make business sense at all. But it is possible. I cannot convincingly claim it now, because I haven't been in business long enough to consider it a successful experiment, but, hopefully I should, in due course of time.

1 comment:

  1. A saturated salt solution needs a nucleus to crystallize around. There's lots of people fed up with complacency in India. Maybe you will be a "nucleus" for like minded businesses to rally around. Have you tried networking ? Maybe there are other businesses in the region which are run by people with similar ethics ?

    Good Luck!