Archive for December, 2010

Rajat’s Dilemma

Posted: December 9, 2010 in Business, corruption, Education, Ethics, IIM, MBA

Rajat Bhargava, Sales Manager at Shanti Steels, is looking at the purchase order issued by Theda Engineering for the past two hours. The purchase order is issed for the purchase of 24-gauge Medium Carbon Steel sheet. The purchase order was signed by the Rohan Theda, Managing Director of Theda Engineering. It was Rohan, who himself has negotiated the order over phone with Rajat. After looking at the exact specification of the order, Rajat remembered that Raghu Bhai, the Head of Engineering Department at Theda Engineering, has also contacted him couple of days back for 22-gauge High Carbon Steel sheet of same dimensions as mentioned in the purchase order he is looking at. Rajat knows that the 24-gauge Medium Carbon steel sheet can be replace a 22-gauge high carbon steel but yet the probability of failure of 24 gauge sheet MC sheet is higher than 22 gauge HC sheet, though by a very small fraction. Rajat was under the ethical dilemma that whether he authorizes the sale or inquire about the end use of the steel from Rohan.

Right after completing his management education, Rajat has joined the Shanti Steels as Sales Manager a year ago. He has been handling various big accounts of Shanti Steels and Theda Engineering was one among them. Shanti Steels and Theda Engineering have been doing business for over two decades. Rajat is in very good terms with the Rohan Theda.

About two days back Rajat has received a phone call from Raghu Bhai inquiring about 22-gauge High Carbon Steel sheet for some ship repair order, which Theda Engineering has received from a well-known shipping company. This order is important for Theda Engineering, as it will open the floor for further orders from that client. This is known that 22-gauge High Carbon Steel sheet is very specific and used particularly in ship building industry. Also, the orders for such specific steel are not very common and they are generally manufactured on demand. Raghu Bhai added that he has enquired from all the major vendors and none of them has a stock of the High Carbon steel. Also, Raghu Bhai told that the repair of the ship is urgent as it is scheduled for its voyage in a week.

Later, Rajat receive a phone call from Rohan. After exchanging pleasantries Rohan said, “Rajat, I need some 24-gauge high carbon steel sheet for an urgent repair work”. Rajat knowing that they have steel of this type available replied, “No problem, Rajat, just send across a purchase order and I will dispatch it at my earliest”. Price was not a concern as Shanti Steels and Theda Engineering already have a schedule of charges agreement for the year.

It is when Rajat saw the purchase order issued by Rohan and did a mental verification of the dimensions and quantity mentioned in the purchase order with the dimension and quantity inquired by Raghu Bhai, bells started ringing in his mind. He became skeptical about the end use of the 24-gauge Medium Carbon Steel sheets.  At lunch, Rajat shared his concerned about the purchase order to Neeraj Singhal, his boss and the Vice President of sales at Shanti Steels.  “Look, Rajat, I just don’t see where we have a problem. Rohan did not specify high carbon steel, and you are not going to charge him on high carbon steel”, said Neeraj. “We aren’t even certain that the order is for the same purpose”.

“I know all that, Neeraj,” argued Rajat. “But we both understand that the enquiries of Rohan and Raghu Bhai with the same dimensions are just not mere coincidence. It seems beyond doubt that the order is for the same ship repair work”.

“Well we both know that 24-gauge Medium Carbon Steel sheet will do a reasonable good job in that ship repair work, as far as strength and durability are concerned. Moreover, they have compensated for by using 24-gauge sheet instead of 22-gauge sheet”, argued Neeraj.”

“But, medium carbon steel not generally used for the ship repair work”, said Rajat.

“You better supply that material you have been asked for, we are in very good terms with Theda Engineering and I don’t wish to lose this account to our competitor. If you would not supply it someone else will”, Neeraj ended.

The next morning, Rajat received was summoned by Neeraj, in his office. As Rajat entered Neeraj’s office, Neeraj slid a company sales order across the desk; Rajat saw that is was a sales order for 24-gauge Medium Carbon Steel sheet to Theda Engineering. In the space for salesman’s name, Rajat saw that Neeraj has filled “Rajat Bhargava”. Rajat couldn’t control his anger and said, “I don’t want anything to do with this order. I though Theda Engineering was an ethical company, and we are doing the same thing, I am accusing them of”.

“The foremost thing you better do, Rajat is to calm down and put away your righteous superiority for a moment. You can’t make a good decision when you mind is not able to look at a bigger picture. You have been in the industry barely for a year and don’t understand how the business is done. I am in this industry for more than 20 years and I know it more than you do”, said Neeraj by calming Rajat.

When Rajat relaxed and was again in a situation of making rational thought, he said, “We both know that this steel is going to be used for the purpose which is probably is not is appropraite use. Provided there are very bleak chances of its failure, but I don’t see how we can take that chance. Don’t we have a responsibility to our customers”.

“Yes we do, Rajat, but we are not policemen, either. We are here in a business of steel and sell it up to specification. We can’t and won’t be responsible for how steel is put to end use when it is out of our floor. It may reach to the end consumer after dozens of transactions and we here cannot account for all those transactions. We have to assume, just like any other business that our suppliers and customers are knowledgeable and also act ethically. But, whether they do so it is not a duty of ours to ascertain.”

Rajat interrupted, “But we have a reason to believe that this material be used in ship repair. I think we have an obligation to follow up on that information”.

“I already told you that we are no police here, we just cannot inquire from every customer about the end user and end use of the material. Most of our customers would interpret that as an attempt to bypass them in the distribution channel. We just cannot do that.”

“In case of Theda Engineering we are selling them the steel as per the order placed by them, we are not doing any unlawful act. We are not supplying faulty materials, we are not bribing government officials, or we are not evading taxes, we are trying to do business here, this is what we do at Shanti Steels”.

Rajat still appeared to be unconvinced, Neeraj asked him, “What about the other people of this company. You are an management graduate and can find a livelihood easily. But, I have to worry about all the people of this company. Think about Khan, who drives our fork truck or Mohan who operates our furnaces. There people have worked for Shanti Steel since its inception, they probably won’t be able to find a job elsewhere. They all have families to feed. It is my duty to make sure that the furnaces of this company are on fire”.

As Rajat left Neeraj’s office, he was more confused than before. When he first entered his office, he had an intension of quitting in moral indignation, but Neeraj’s argument had made a lot of sense to him. He puts in great trust in and respect for Neeraj and value his experience a lot. But, he was still not comfortable with the decision. He was wandering whether this sale is a first blow to his fortress of ethical principle and a step towards the destination where he didn’t intend to head to?

PS: This is a work of fiction and child of my imagination. Any resemblance to any person or incident is a pure coincidence.