Author: Charalambos Vlachoutsicos

Managers like to have control. They also like to be able to predict what’s going to happen and, like most of us, they want to feel safe. There is nothing particularly wrong with wanting these things. As a matter of fact, you need to have control. But when you try to have all of them at once, the results can be messy and expensive.

This is particularly problematic when you are operating in an unfamiliar environment. Our fear of being taken for a ride often causes us to take extremely foolish decisions — to such an extent that we might conclude that it would have been better to have gotten ripped off.

Here’s a case in point. I once advised a European multinational with extensive operations in a number of post-communist countries. My assignment was to sort out a communication breakdown between the Western manager of their subsidiary in Poland, whom I’ll call Frank, and his Russian counterpart.

The Russian manager, I’ll call him Ivan, explained what had been going on. The company had decided to move a number of delivery vans that were no longer needed in Russia to the Polish subsidiary. The vans were unavailable in Poland and the Russian subsidiary could invoice the Polish subsidiary for a higher price than it could have obtained from selling the vans in Russia. Frank was put in charge of making this happen.

In common with many Westerners, due to his lack of knowledge of the market, Frank had unfounded concerns and fears about getting taken for a ride by the Russian mafia and losing the vans in transit. So he insisted that the Russian subsidiary employ a Western freight forwarder to move the vans. This forwarder had a great reputation but was at least three times more expensive than the Russian companies that the subsidiary had been using before without any problems.

Frank, “for safety reasons,” as he put it, also insisted on renting special wagons, normally used to transport luxury cars. The wagons were expensive and not readily available, which delayed the shipment by a month, during which time the vans had to sit in the Russian Customs’ parking lot, racking up a steep daily charge.

That wasn’t all. Frank decided that the company had to insure the vans with an insurer recommended by his forwarder, whom he trusted, that charged roughly four times the amount quoted by the Russian subsidiary’s usual insurer.

Ivan, of course, protested that these decisions were piling unnecessary costs onto what should have been a fairly simple and economical transaction. He told me later that it was like talking to a brick wall. Frank said that he didn’t know any of the local companies Ivan was recommending and preferred that the company pay more to get peace of mind: “No cost is worth safety”, he primly informed Ivan. He even insinuated that Ivan might have had a “special reason” to engage local suppliers. When appealed to, the folks at HQ in the USA sided with Frank and his tales of Russian nefariousness.

Eventually the vans made it to Poland. But the Russian subsidiary footed a heavy bill, losing much more on the deal than they would have incurred by simply selling the vans cheaply in Russia. Ivan was even grilled about the transaction by the internal auditor, who couldn’t believe that management had made such a mess of it.

Frank’s behaviour reflects a common dynamic among managers operating outside their comfort zone. In an effort to reduce their perceived risk they make decisions that they are not really competent to make, though they may believe that they are (Frank might have been well placed to choose suppliers in Poland but he was not qualified to do so in Russia). But excessive control is expensive and can actually increase exposure to risk, as this company’s experience illustrates. And when the risk materializes managers often don’t learn from their mistake but instead take it as evidence that their fears were justified.

The moral of the story is that you lose less by trusting more. Managing a business is not about asserting control to minimize costs and risks, but about working collaboratively to achieve an agreed goal. To do that you have to be willing to listen to the people you work with, accept that there are decisions that they are more qualified than you to make, and then respect the decisions they make. There will be times when that trust is misplaced, but I have found that more often than not, withholding trust is far more likely to result in failure and, therefore, much more expensive.

Authenticity is rightly praised as a virtue. Like all virtues, however, it can get you into trouble, especially if your authentic expression of your values sets you on a collision path with the culture of your workplace.

In an ideal world, of course, you wouldn’t be working in a job that clashed with your values, but leaving a job out of principle is a rare luxury that you can seldom afford. Instead, you have to find a way to bridge the gaps you find between your values and the culture you work in.

This may well involve a certain amount of what one could politely call creativity and it may even feel manipulative. But the truth is that effective management invariably involves a certain amount of manipulation. You do not always get your way by being direct. As the Italian writer Daniele Varè once put it: “Diplomacy is the art of letting other people have your way.”

To illustrate, let me once more share a story from my own experience. As a student, I always worked during summer breaks. One company I worked in while studying for an MBA at Harvard was an electric appliance wholesaler managed by its founder, Mr. Vito Porto, autocratically and whimsically. Whenever an employee dared to have even a slightly different opinion to Mr. Porto’s, his standard reply was: “I have spoken” and that was the end of the matter.

The one and only criterion he applied when rewarding salesmen was sales volume. Consequently, making a sale at any cost was deeply embedded in the company’s culture, with the inevitable result that a certain amount of mis-selling had become standard practice. Mr Porto was even quite explicit about it — he would constantly repeat this mantra: “Sales Now No Matter How.”

As a supposedly “smart MBA kid” I was appointed by Mr. Porto as the sales supervisor of the highly competitive and tough Bronx district. Now, you must understand that the sales culture at Mr. Porto’s company did not sit easily with me as fairness has always been the cornerstone of my value system. So although I was selling aggressively, I was always emphasizing “honest” sales and not sales obtained under false pretenses. Telling a customer that our vacuum cleaner was the “fastest in the market” when it was not was a lie that I actively discouraged, even if it cost us a sale or two.

Inevitably, the salesmen ignored my urging and continued expanding on the completely fictional advantages of our products. Eventually, I decided to force the issue and called a meeting at which explicitly forbade them from lying to our customers on the grounds that the lies would inevitably backfire and do more harm than good. You could have cut the tension with a knife. People were deeply conflicted about the issue. On the one hand they wanted their commissions and they knew what Mr. Porto wanted. On the other hand, they were afraid that their fairytales would catch up with them. And in many cases, they shared my ethical reservations.

I had to lance the boil. I knew that ignoring my values was not a solution I could live with. Furthermore, it would certainly backfire. At some point, I seriously considered leaving the company. This, however, felt like giving in and did not sit well with me either.

Finally, after a great deal of thought and preparation I decided to raise the issue with Mr. Porto himself. I asked for a meeting to discuss what I described as a “serious problem”. At the meeting I told him a baldfaced lie. One of our biggest customers, I said, had called me to protest that he had been lied to by one of our salesmen about the features of one of our products. In light of this, I continued, my advice to Mr. Porto was that he needed to revisit his motto. “Sales Now No Matter How” should be “slightly amended”, as I put it, by simply adding the word “honest” at the beginning: “Honest Sales Now No Matter How.”

I told him that I was afraid that the company, by losing its greatest asset, the trust of its customers, risked a collapse in sales unless strict orders were given to salesmen not to lie to customers. I sensed that I had managed to scare him. He looked at me straight in the eye and replied: “OK, I will do this. And thank you. You are just here for the summer and yet you cared enough for my company to warn me.”

What have I learned about my values from this story? The big takeaway was that some of my values are more important to me than others. In order to ensure that my colleagues and I were fair to our customers — a focal value for me I was prepared to violate a less important value for me, namely my respect for the truth, and consciously deceive my boss. It was a major insight for me at the time and it showed me that balancing the tensions between adhering to one’s values and being effective may well demand uncomfortable compromises.

Bottom line: It’s easy enough to be an authentic person. Being an authentic manager is a different challenge entirely, because a manager, unlike the individual, needs to be effective and therefore flexible.