Some years back, I worked with a company that was sales and service agent of a European manufacturer of machines used to produce high-precision parts. One day, the manufacturer’s Sales Manager and I visited the factory of one of India’s most reputed manufacturers of high-precision parts to finalise an order for a machine.
The machine to be ordered would be the first machine to be purchased by this customer from this machine manufacturer. My company had introduced this manufacturer’s machines to this customer about 6 months earlier, and had provided a lot of technical and commercial information to this customer prior to this visit.
We finalised the price and terms of the order in a meeting with the customer’s GM – Manufacturing, GM – Engineering and GM – Materials that lasted about 2 hours. The GM – Materials told us that the Purchase Order would be released after obtaining the approval of the company’s Board of Directors. He then invited the manufacturer’s Sales Manager and me to meet their Chairman.
As we were seated outside the Chairman’s office, the Chairman’s secretary informed me that their Maintenance Manager wanted to meet me immediately in his office to discuss an urgent service matter pertaining to another machine supplied to them through my company earlier that year. I proceeded to the Maintenance Manager’s office, had a discussion for about 10 minutes, and returned to the Chairman’s office. By that time, the manufacturer’s Sales Manager and the customer’s GM – Materials had completed their meeting with the Chairman.
As we drove back to my office, the manufacturer’s Sales Manager informed me that the Chairman had told him that they wanted to buy the machine directly from the manufacturer without involving my company (the sales and service agent) and wanted the manufacturer to reduce the price by the commission payable to my company. The manufacturer’s Sales Manager had replied that he would discuss the matter with his management and would revert to the Chairman the next week. The Chairman told the manufacturer’s Sales Manager that this matter should not be revealed to my company. He also added that, if the machine manufacturer did not agree to supply the machine directly to the customer without involving my company (the sales and service agent), they would not buy the machine.
I was shocked! The Chairman was a highly respected businessman, an office-bearer in various national business associations, and had delivered a number of powerful speeches on the importance of product quality and business ethics!
The manufacturer’s Sales Manager told me that he did not want to lose this order. However, he assured me that, in accordance with the agency contract between our companies, his company would protect my company’s interests. 50% of the usual commission was sales commission, while 50% was service commission. Thus, if we booked an order from a company in India for a machine to be installed in another country, we would be paid sales commission, while the sales and service agent in the other country would be paid the service commission. He proposed that, on this order, and on all subsequent orders from this customer, his company would pay my company the sales commission. He would not disclose this arrangement to the customer, but would tell the customer that no commission was paid to my company. His company would proceed with this arrangement only if my company agreed to it. If we did not agree to it, he would inform the Chairman that they could not supply the machine directly to them without involving my company. He was willing to lose this customer’s order, but he was not willing to dishonour the terms of the agreement between our companies.
My company’s management agreed to the manufacturer’s Sales Manager’s proposal.
The European machine manufacturer finalised the order with this customer a week later.
The customer’s GM – Materials informed us that their Board of Directors had not approved the purchase of the machine.
The machine was supplied to the customer two months later. After they received the full payment from the customer, the manufacturer paid the sales commission to my company. The machine was installed and maintained by the customer’s Maintenance Department.
Over the next 3 years, this customer bought 4 more machines from this machine manufacturer. My company was paid the sales commission on all these 4 machines.
The customer’s Chairman continues to occupy important positions in various national business associations, and continues to deliver powerful speeches on the importance of product quality and business ethics!
Obviously, he believes in preaching business ethics, but not in practising! I wonder whether his commitment to product quality is as hollow as his commitment to business ethics!!
This is common among many ‘leaders’ in India. They pontificate about ethics, but they believe that it is not necessary for them to walk their own talk!!