Spotlight on Consulting Issues
Ethical Issues

Carl Robinson, Ph.D.

Ethics has become an important topic in business today with good reason.  Just look at the headlines: Enron, Worldcom, Health South, etc.  When we recently asked (through the listserv) what topics would be of interest to you, ethics was at the top of the list.  Four respected members of the Society of Consulting Psychology, coming from diverse backgrounds, offer their perspectives on how they would  deal with situations that you have probably already faced or most certainly will at some point in your career.  Shirley A. Maides-Keane, Mike Atella, Gordon Gibson and Rodney Lowman, graciously agreed to provide us with their insights on these “ethical dilemmas.”  We look forward to your reactions and feedback to this Spotlight on Consulting.

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1.  Should a consultant own stock in the companies to which he/she consults?

Let there be caution and deep reflection on thought  processes that suggest  our consulting will be more  effective for the organization if we also own stock  in their corporation.
Gordon Gibson

Rodney Lowman: It depends. Generally, consulting psychologists should avoid dual relationships or conflict-of-interest situations. There may also be legal restrictions against buying or selling stock based on insider information that a consultant might have access to. Personally, I think it is “cleaner” not to own stock in companies with whom a consulting psychologist works, at least during the period of the engagement.

Shirley Maides-Keane:  The easy answer here is a flat “no.”  This is especially important for those working in larger organizations where stock ownership could interfere with objective professional judgment and limit the consultant’s true utility to the organization.  On the other hand, if the consultant is working for a Fortune 500 company, and owns more than two mutual funds in his/her 401K or IRA, it is quite likely that he/she already owns some of the company stock since mutual funds invest in many of these large organizations.  The consultant could have a difficult time tracing such ownership and, consequently, following the imperative to avoid stock ownership completely could be a tall order.  It seems to me that the crucial factor has to do with the consultant’s deliberate ownership of the client’s stock.  While a consultant may believe that his/her job is to help the organization be more profitable, and so stock ownership might be viewed as a vote of confidence, he/she needs to realize that a substantial value of psychological consulting expertise hinges on remaining unbiased in evaluation and development of human performance.  During tough economic times it may be tempting to take an offer of stock payment for some portion of one’s consulting fees, but taking that stock puts the consultant on a slippery slope that leads into an ethical quagmire (when to trade, how to view senior management, etc.).

Mike Atella:  The principle behind this deals with whether it is wrong for a consultant to hold a stake in the companies to which he/she consults.  There could be biases and blind spots if he/she does.  The consultant should seek consultation from a mature, trusted & experienced consulting psychologist when doing such consultations.  Actually, some “ownership” may help effectiveness and motivation.  The “internal consultant” has some stock – or stake – in the company in which he/she consults.  And this consulting is usually legitimate; though working with an external consultant could be helpful.  Just as an external consultant working with an internal consultant could also be helpful.  Another point is that in these days of mutual fund ownership, it is easy to have a client in which you have some stock/stake.  if the consultant has an axe to grind with the company or some other possible biases, then he/she should either not take the consulting client or be sure to be taking time for professional consultation (perhaps even ongoing) while doing his/her work.

Gordon Gibson:  There are situations in which consultants have owned stock in their client’s firm without ethical conflicts.  Some consultants have purchased a few shares blind to the client so they might observe the company performance from the perspective of the stockholders.  This has generally been in the context where the consultation intervention is directly related to the financial performance of the organization.  There are also situations in which the consultant has taken stock in place of professional fees where the client may have inadequate cash flow and the potential value of the stock is all that is available for bartering.  In some organizations the initial stock exchange has become more clearly an ethical issue of the client having been exploited by the consultant, albeit not necessarily intentional, while struggling with the organizational start-up.

Some consultants argue that when the consultant has a stake in the organizational financial performance, that consultants are more reflective and conscientious in their consulting.  More recently we have seen how the focus on the bottom line has negatively affected the judgment and behavior of both consultants and management in what have been grossly unethical situations resulting in horrific outcomes.  In sum, there are cases in which consultants have stock ownership and there are no resulting ethical issues.  There are, however, cases in which the organizational or client’s financial distress have led to stock exchanges in both an unethical process as well as unethical results.  Let there be caution and deep reflection on thought processes that suggest our consulting will be more effective for the organization if we also own stock in their corporation.

2.  Is it unethical to individually coach family members in a family-owned business when the organization is the client?

 

This potentially constitutes a dual or multiple relationship situation.
Rodney Lowman 

Gordon Gibson:  Most organizations have one, two, or more in leadership positions who are both organizationally conscientious and organizationally altruistic.  To provide individual consultation that promotes managerial leadership effectiveness and performance of an individual member of the leadership, regardless of whether it is a family-, privately-, or publicly-held organization, is not necessarily an unethical shift in the definition of the client.  However, if the consultant is in the position of providing individual consultation for a takeover by one member, or for a major acquisition, or divestiture without family knowledge and involvement, then, the individual coaching raises questions about the ethical behavior of the consultant with the client organization.

Mike Atella:  Coaching can be part of the organizational intervention and leadership development initiative.  However, if there is a conflict between the individual’s needs and the needs of the organization, it is important for the consultant to remember and even discuss with the person coached that the organization is the client.  Confidentiality needs to be worked out beforehand.

Rodney Lowman:  Generally, I would argue, yes. This potentially constitutes a dual or multiple relationship situation. With all the coaches in the world, why not refer out if the organization is indeed the client?

Shirley Maides-Keane:  Many of my clients are family-owned businesses and I usually find that some individual coaching with family members is necessary.  Since I typically start an engagement with a group meeting involving major family and non-family members, individual contact usually is evaluative with minimal performance coaching.  Most of the time there is some individual coaching with the CEO, and there may be some limited individual coaching with other family and non-family members that supports the objectives of the consulting engagement.  If more extensive coaching of family members is necessary, that seems to be outside the boundaries of the consulting, and is most ethically handled by referring the individuals to independent coaches.

3.  Can organizational consultants go to social events with their clients?  

Borrowing some discretion from the strict ethical  boundaries of clinicians can serve the consultant well.
Shirley Maides-Keane

Shirley Maides-Keane:  This is a common practice and usually is not a problem.  The first time I attended a theatrical performance by a consulting client who is a local celebrity I was a little uncomfortable.  Since I have maintained very strict social boundaries on my social contact with clinical clients, the act of going out of my way to have social contact with a client was a bit unsettling at first.  Regular business lunches and business social occasions are certainly within the scope of acceptable organizational consulting practice.  Even so, borrowing some discretion from the strict ethical boundaries of clinicians can serve the consultant well and still allow for enough social contact to help clients feel comfortable with their organizational consultants.

Rodney Lowman:  Generally, yes, if this is the norm in the field and the contacts are limited to those appropriate to a social situation. Obviously, confidential and personal matters should not be discussed at a social gathering or in earshot of those who might overhear information best kept private.

Gordon Gibson:  Over the course of years with longtime clients the consultant may know members of the client organization better than their next-door neighbors.  If consulting with religious organizations the consultant may be attending social functions of that organization including worship.  If consulting with an organization that must interact with a legislative body, government officials, and lobbyists, there will be plenty of challenges of social relationships testing the boundaries of the consulting relationship.  If consulting with a longtime client in a metropolitan area where there is an opportunity to attend an NBA or NHL tournament game, I would say have a great evening, but keep in mind the boundary threats.  If the situation has an obligation functioning where the fraternal membership is exclusive or where a quid-pro-quo interchange is evident, then there would appear to be the development of an ethics dilemma related to developing a dual relationship with the client.

Mike Atella:  Yes, as long as they do not get close or intimate.  If so, this can compromise one’s effectiveness (e.g., candor being hindered due to fear of losing a friend or lover; favoritism may also result).  Social contacts are often inevitable in smaller communities (e.g., small towns, church communities)  

4.  What do you do if you are working with a CEO and learn that she is guilty of malfeasance?

Consultation with APA and experienced consultants would be recommended before doing any reporting.  
Mike Atella

Rodney Lowman:  This would depend on how the information came to the psychologist and his/her contractual relationship with the firm. In the first place “guilt” or innocence is not decided outside a judicial context. If the person were found “guilty” of malfeasance that information would generally be in the public record and not “news” to the company. If a psychologist hears of allegations of malfeasance, the specifics matter in terms of access to the CEO or Board, purpose of the consultant being in the company. In some instances, it would be appropriate to go directly to the CEO and address the issue. In other cases there would be an obligation to go to the Board. In still others there might be a legal duty to report the information to an outside agency.

Mike Atella:  Discuss it with the CEO and work to have him correct the malfeasance.  The confidentiality agreement between consultant and client is important.  The consultant should consider reporting the individual to the board if risk to others is involved, (e.g., Enron employees’ pensions) and the person continues the malfeasance.  A consultation with the APA ethics committee, and other trusted experienced psychological consultants would be recommended before doing any reporting.

Shirley Maides-Keane:  This is a tough issue that must be addressed in order to continue working with the CEO.  There are so many possible scenarios that could play out depending on the specifics.  So the first thing I would do is to explore the specifics and how they relate to the work we are doing together.  If her behavior is grossly unethical and illegal then I might question whether I could continue to work with her.  On the other hand, if there is a good working relationship, and the CEO is willing to take responsibility for whatever consequences result from her actions, I would continue to work with her.

Gordon Gibson:  When the consultant learns of CEO/client malfeasance, there is the responsibility to name it, claim it, and determine with the client how to respond.  Generally, the client can address the problem or change the course.  Some would argue that this a bit naïve response and admittedly, I have not been in a large and complex malfeasance situation where the contingencies are far too powerful for the above approach.  If it were a situation in which leadership denied the presence of malfeasance or believed nothing could effectively be done to change the course, then I would rearrange the contingency relationships for the CEO.  Either the CEO proceed with addressing the situation or consequences will follow including notification of the governing body and appropriate legal authorities, if illegal, and termination/discontinuance of the consultation agreement.  

5.  You conducted a 360 assessment for an executive coaching client and one of the respondents (a direct report) writes in the open-ended comment section that your client has been sexually harassing people (not the direct report).  When your client reads the comment, he says it’s a lie and tries to guess who made the comment.  How would you handle that?

Gordon Gibson:  Most organizations not only have personnel policy and practices about sexual harassment, but have formal training programs.  Therefore, the direct report would be aware of the policy and practice and either there is merit to the expressed concern or it is a set-up as the executive suggests.  With the concern now identified the executive should have the Director of Human Resources or other designated independent professional initiate the investigation meeting first with the representative of the individual complaining  (or all of the individuals completing the performance appraisals) and then with the complaining individual.  There are standard practices for conducting this type of inquiry, completing reports and recommendations, and for carrying out interventions.

Mike Atella:  Fully discuss this with the client.

Shirley Maides-Keane:  First of all I would be curious about the client’s reaction and what he thought the comment might mean.  It could be really important data that could influence the client’s developmental plan in ways that might not be obvious initially.  A few years ago I worked with a business owner who was facing litigation for sexual harassment brought against him by an employee.  The fact that the allegations were not true was a minor detail in our work.  This highly successful entrepreneur was devastated by the accusations because they triggered long forgotten memories from a rough childhood on the streets of Chicago.  Fortunately, we were able to stabilize his business as well as work on the childhood issues that contrasted so sharply with his life at the time (successful business owner, devoted husband and father).  Even in the early 1990s when sexual harassment charges garnered lots of attention, public relations, business image issues, etc. took a back seat to the importance of exploring what such accusations mean to the client.  From that perspective, the consulting was able to help the business owner as well as his organization.

Rodney Lowman:  I’d advise bringing the person back to the ground rules of the assessment. If those stipulate that all comments are anonymous and confidential, the person should be discouraged from speculating on the source of the comments. If it can be done without creating inappropriate anxieties in the larger group, the person might address the issue with the group as a whole, indicating that the manager understands that this was confidential but he/she wanted to encourage anyone who had the impression of sexual harassment occurring to deal with the appropriate corporate or legal authorities about their allegations. The procedures to be followed—and the important implications of making such claims capriciously—could then be reviewed with the group.  

6.  A client asks you for referral recommendations for a consultant who will provide a service you do not offer.  You give your client 2 names, one of which you have a referral fee arrangement where you receive 15% of the fees they charge.  How do you handle that type of arrangement with your client?

 

I give the best possible referrals to clients that  I can find for their sake as well as my own.  
Shirley Maides-Keane

Rodney Lowman:  The APA ethics code clearly stipulates that a referral fee cannot ethically be paid for a referral per se. Only if services are performed for the client or referral is it appropriate to have a joint fee of this type.

Shirley Maides-Keane:  There are all kinds of financial arrangements that are so common they are considered standard and customary in the consulting industry.  I think psychologists bring a different perspective to those arrangements and, hopefully, model integrity and honesty in their arrangements.  When I give a client two names I like to give them the best possible referrals that I can find.  I do this for their sake as well as my own.  Over time I think that kind of business policy reflects well on my company.  I do not like to have referral fee arrangements because they interfere with my best judgment about referrals.  I have found myself not referring to professionals that offer those kinds of relationships because I am not comfortable collecting money for referrals.  I suppose there may be ethical ways to do such practices but I have not been comfortable with those arrangements in my business practice.   If I had such an arrangement I suppose I would let the client know about it when I gave out the referrals.

Gordon Gibson:  While there are firms that engage in fee splitting for referrals for the most part this is so unnecessary within consulting psychology or within the collegial relationships we have in the Society of Consulting Psychology.  Given the conditions specified the referring consultant could request the consulting firm to discount their fees by an amount equal to the usual referral percent/split.  Overall, fee-splitting, or finder’s fees, or other similar packages are arrangements that can lead to ethical dilemmas and in the case of consulting psychologists within our professional society should just be avoided.

Mike Atella:  Tell the client (when giving the 2 names) about the finder’s fee you will receive.  

7.  You have been consulting with a client organization, providing executive team assessment and development services.  You have developed a very good relationship with the senior executive team.  One of the executives asks you if you would be her executive coach.  Would that be unethical?

It would be preferable to let another professional  work with the individuals within that team.
Rodney Lowman

Shirley Maides-Keane:  Yes, if it overlapped and/or interfered with ongoing team focused work, but I often find that team assessment and development involves some individual coaching at different points in time.  

Mike Atella:  Not if it is as part of the overall plan to do such coaching as a development service.  It is unethical if you were getting a separate fee for this, for the temptation would be to be seeking additional private paying clients while doing work for the organization.

Rodney Lowman:  Probably not. This scenario also represents a situation of potential dual relationships. So long as there is an ongoing relationship with the organization and team, it would be preferable to let another professional work with the individuals within that team.

Gordon Gibson:  It is not uncommon that during an organizational consultation other organizational issues are identified for which other interventions are required.  An addendum or memorandum of understanding could be made to the contract so the executive consultation would be disclosed.  If it is perceived that this is a conflict, i.e., executive consultation provides a competitive advantage for the individual or limits the team functioning, then they could consider an independent coach for this member.  It may be the case that the individual is highly valued and both the team and the individual concur that individual coaching would be beneficial not only to the executive member but to the overall organization.  

8.  Drawing from your experience, would you describe one of the more challenging ethical quandaries you faced and how you dealt with it?

To meet the new deadlines and deliverables, they  offered a six-figure bonus to the contract.
Gordon Gibson

Mike Atella:  Dealing with dual relationships, especially in a large church community in which I do consulting.  I have to be careful that I am not either a friend of my client or a ministry partner.

Gordon Gibson:  A corporation with which our firm had been consulting on a number of human resource management systems issues over a couple of years, informed us that they were merging with two other national firms.  They requested a proposal for providing them a performance valuation system that would integrate the systems of the three corporations and could be used for a gain- sharing program.  Our proposal reflected an empirically supported methodology and intervention(s) that had been successfully utilized with our client two years earlier.  Within a week of submission of the proposal we met with them to learn that while they appreciated the scientific rigor and deliverables, they wanted us to compress the project to three weeks and reduce the performance evaluation system to a one-page evaluation format that would assess all members on the same dimensions regardless of the qualifications, position, and the job responsibilities.  To meet the new deadlines and deliverables they offered a six-figure bonus to the contract.  We declined on multiple bases and they contracted with another firm.  Our firm would not compromise on the required methodology, and would not collapse multiple performance dimensions to an unsubstantiated system, and a system that would be plagued with future problems although it might appear expedient at the time.

Shirley Maides-Keane:  For almost two decades I ran one business that was both a consulting and clinical practice.  In 1999 I separated the two businesses because I encountered some ethical quandaries related to a case that was originally in my clinical practice.  Several years after I had treated the youngest son in a large family, I was asked to see his older brother around issues in the family business.  There were multiple business and clinical issues that emerged.  I elected to treat the case clinically at the time but did some leadership development assessment and coaching alongside the clinical work.  The case really motivated me to establish clearer boundaries between the practices and I thought I had the issues clarified until another family member approached me in 2002 to consult with the business.  Without going into all the details, I think it is fairly obvious that the ethical quandaries in juggling clinical and consulting roles have remained central in my relationship with this client organization.  I have opted to work exclusively with the business and to refer family members to others for individual coaching.

Rodney Lowman:  Rodney already provided several of the ethical situations for this Spotlight.  

9.  In your experience, what are some of the most common types of ethical dilemmas we face as consultants that have not been mentioned above?  

Dual relationships.
Mike Atella

Rodney Lowman:  Dual relationships, informed consent, and confidentiality are the types of situations that I most often hear about as raising ethical issues.

Shirley Maides-Keane:  For consultants who have transitioned from established clinical practices, there are numerous issues about consulting business with former clinical clients.  It concerns me when I hear consultants asking clinical clients for business contacts.  I believe there is an ethical violation there.

Mike Atella:  Dual relationships have been mentioned somewhat.  Another temptation toward unethical behavior is to practice in areas in which you do not have expertise.

Gordon Gibson:  There are two areas of ethical dilemmas that could be added to those presented, at least, in the way I responded to the dilemmas.

  • First, with regard to the area of assessment in consulting psychology, all too often the organizational assessment is inadequately designed. Some client organizations may have financial limitations accompanying the identified organizational problems.  Those financial limitations may lead to insufficient allocation of resources for the organizational assessment and diagnostic process.  As a result the set of organizational interventions employed may not necessarily be the best fit for the situation and in the worst-case scenario may be harmful to the organization.  The consultant should disclose the risks about to be incurred and if the situation has critical threats, then straightforwardly do not enter into the agreement where harm is likely to be the result.

  • Second, with regard to using empirically supported, or evidence-based organizational interventions (Section 1.06, APA Ethics Code), all too often the consultation intervention may be applied without knowledge of the effects of that intervention when applied to a specific set organizational problems or otherwise dysfunctional systems.  The published research literature continues to accumulate at a remarkable pace and should be utilized by the practicing consulting psychologist.  The consulting psychologist has an ethical responsibility to select a consultation intervention(s) that is empirically supported and to report the predicted level of effects that intervention should have for the particular set of organizational problems.

While not frequently encountered in discourse about ethical dilemmas in consulting psychology, the potential power of the organizational consultation interventions consulting psychologists utilize with organizations, places the consultant in a moral enterprise as noted by our colleagues Newman, Robinson-Kurpius, and Fuqua (2002).  Our responsibility is greater than the mandatory ethics set before us in the APA Ethics Code; our responsibility is to engage in maximal moral and ethical outcomes, or aspirational ethics.  Our moral and ethical responsibilities are very, very substantial.  

10.   What advice would you give to consultants if they face an ethical situation that they are not sure about?  

Shirley Maides-Keane:  Use your resources to find the latest ethical standards, and consult mentors, colleagues, or coaches who are in your support network.  Talking through the issues with other professionals can help you get clear about the situation.

Gordon Gibson:  Build and maintain collegial relationships to prevent professional isolation.  There is a term in the field of anthropology that relates to losing one’s objectivity in the situation, that is, becoming a part of what it is you are observing and studying—going native.  Indeed, anthropologists have colleagues or others identified outside of the culture they are studying to provide them an anchor to their scientific methodology.  The consulting psychologist has an opportunity to build long-standing relationships with other consulting psychologists outside of their practice.  These relationships will enable the consulting psychologist to be better grounded and to have a resource at hand to clarify how a particular ethical dilemma could be addressed.

Mike Atella:  Seek counsel.  There is wisdom in many counselors.  Seek consultation.  Call the APA ethics committee for a consultation as well.  Don’t operate as a lone ranger.  Call your Society of Consulting Psychology friends and colleagues for their advice.

Rodney Lowman:  Consult the APA ethics code. Consult colleagues. Consult on an advisory basis the APA Ethics Office.

Shirley Maides-Keane, Ph.D. is a consulting psychologist who has been in independent consulting and clinical practice for over 20 years.  Her academic background includes a B.A. with Honors in Psychology from the University of North Carolina at Chapel Hill (1973), M.A. (1975) and Ph.D. (1979) in Clinical Psychology from Vanderbilt University.  From 1981-1986 she worked for two of the largest market research consulting firms, NPD and MSA, managing projects, consultants, and business development for the 100 largest consumer package goods companies and the top 25 advertising agencies.  Since 1986 she has been in full-time independent practice in Oak Brook, Illinois.

Mike Atella, Ph.D. works as both internal and external organizational consultant, doing coaching, assessment, OD, strategic planning.  He has been working as an in-house consultant at Argonne National Lab (of the University of Chicago and owned by the U.S. Dept of Energy) for past 13 years doing OD, coaching, team bldg, etc., doing clinical work, and also managing a Psychological Services dept (myself and interns). Recently in Costa Rica consulting and coaching with a few churches, pastors, and faith-based social/medical ministries.  Consulted in China for 2 years. Mike also has an independent consulting and clinical practice.

 

Rodney L. Lowman, Ph.D. is systemwide Dean & Professor, California School of Organizational Studies, Alliant International University is widely published in the professional literature. His most recent (edited) books include HANDBOOK OF ORGANIZATIONAL CONSULTING PSYCHOLOGY (Jossey-Bass) and THE ETHICAL PRACTICE OF PSYCHOLOGY IN ORGANIZATIONS (American Psychological Association). He is a Past President of the Society of Consulting Psychology.

 

 

Gordon Gibson, Ph.D. has a consulting psychology practice focused on the areas of evidence-based treatments, human resource management, organizational strategy formulation, and community and organizational development.  He has had extensive involvement in organizational ethics including a graduate degree in social ethics and numerous APA presentations on ethics in the practice of organizational consultation.  Gordon is on the board of directors of several private and public sector businesses as well president of an organizational consulting firm and a research development healthcare corporation.

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