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Quasi-Contract and the Psychological Contract
Tuesday, February 28th, 2006

Certain requirements must be present in order to have a contract, as discussed in this posting.  Now, suppose that a “real” contract does not exist.  Sometimes, courts will pretend that a contract is created. 

One approach that courts use to reach that result is to find a contract-like relationship exists. 

Quasi-Contract

In a quasi-contract situation, either there is no contract or there is an unenforceable contract.  Courts are more likely to imply a quasi-contract if:

  1. One party confers a benefit on the other.
  2. The party conferring the benefit reasonably expects to be paid.
  3. The party conferring the benefit did not act as a volunteer in providing the benefit.
  4. Allowing the recipient to keep the benefit without paying for the services or products would result in unjust enrichment.

How does this play out in a real world situation?  Suppose that Joe is jay walking and gets hit by a car.  If Michelle, a doctor, sees Joe get hit and races to provide him with emergency medical care, many courts in the US would say that Joe is obligated to pay Michelle for the services she provides.

Psychological Contract

Psychological contract is a way of looking at relationships from a slightly different perspective.  ”Psychological contracts” originated in the context of employment relationships.  Employees expect to be treated fairly in exchange for the services they perform.  To the extent that this expectation is satisfied, employees are motivated and loyal.

Paul Pavlou and David Gefen extended the concept of a psychological contract from employment relationships to the online marketplace, looking at eBay and Amazon in this article.  Essentially their theory is that buyers are typically willing to transact business in an online community when the community is perceived as honest, reliable, and trustworthy. 

Pavlou and Gefen found that buyers who have not experienced psychological contract violations are more likely to act based on trust while buyers who have experienced such issues are more likely to seek IT-enabled institutional structures.

What does this mean for online businesses?  If one is contemplating an online business, what steps might one take to better manage expectations, avoid issues, and build trust?

Posted in Networking, Resources | 1 Comment »



Humor and laughing at oneself break ice
Tuesday, February 28th, 2006

Have you seen this joke?  

WASHINGTON, D.C. - A White House source stated that Congress is considering awarding Vice-President Dick Cheney the Medal of Freedom, the nation’s highest civilian commendation, for his act of bravery in shooting an attorney.  The source was quoted to say, ” All Americans have wanted to shoot a lawyer at one time or another and Cheney actually had the guts to do it”. 

In a related story, the Texas Parks  and Wildlife Department, which issues hunting licenses, said that it will start requiring hunters, wishing to bag a lawyer, to have the new “lawyer’s stamp” on their hunting license.  Currently Texas hunters are required to carry stamps for hunting birds, deer, and bear, at a cost of $7 annually.  The new “lawyers stamp” will cost $100, but open season will be all year long.  The department further stated that although the “lawyers’ stamp” comes at hefty price, sales have been brisk and it is believe it will generate annual revenues in excess of $3 billion dollars the first year.  Other states are considering similar hunting stamps.   

Humor in business

When it is used appropriately, humor can build bridges between people, allow people to think outside the box, foster creativity, and lead to better solutions.  When it is used inappropriately, humor destroys relationships, discourages people from suggesting innovative ideas, hampers creativity, and leads people to settle for the easy answers.

Jokes have to be aligned with the culture in which the jokes are told.  In the US, that often means one should avoid jokes about politics, gender, race, national origin, disability status, religion, sex, ethnicity, and sexual orientation. 

Conventional wisdom in the US says that, rather than telling a joke about someone else, we should tell jokes about ourselves or our professions. 

When we give people permission to laugh at us, we also enable them to work with us. 

Posted in Business Tips, Cultural Issues | No Comments »



“Successful” Decision-Making
Tuesday, February 28th, 2006

Recently, we’ve heard a lot of discussion and decisions about the decision to contract with a company based in the United Arab Emerates for port operations.  These same sorts of discussions frequently occur within organizations, by the way. 

Decisions are often evaluated based on criteria such as: 

  1. Did the decision support the goals?
  2. Was an appropriate process used?
  3. Was a reasonable decision reached?
  4. Were necessary approvals secured?
  5. Was the decision implemented well?
  6. Was stakeholder communication sufficient?
  7. Were applicable parameters satisfied in reaching the decision?
  8. Did the decision solve the problem or yield the desired results?
  9. Does new or additional information warrant reconsideration of the decision?

The best approach is to decide how the decision will be evaluated as part of the initial planning process.  This increases the likelihood of a decision that meets the criteria. 

Success of decision making might be defined as making the best decision one can based on the facts and constraints that exist. 

Typically, decisions are based on incomplete information.  A decision is made based on the situation at an instant in time, as one understands the situation to exist. 

As more facts are discovered or the impact of the decision is observed, opportunities for improvement or negative consequences may be identified.  When this occurs, it is important to examine the situation and decide if the results achieve the objectives and goals, as they too have evolved or been further defined.

Posted in Business Tips, Solving Problems, Tips for Students | No Comments »



If sex sells, who is buying?
Monday, February 27th, 2006

Tonight, a new series of The Apprentice begins.  In each of the prior series, at least one team has used sex to sell products and services.

Imagine walking into a law firm and finding women wearing suits from Victoria’s Secret.  Does that align with the image a professional, competent, and respectable organization wants to convey?

Over the years, many clients have asked for my help in buying products and services of various sorts.  To date, no one has even hinted that sex or gender had a thing to do with the decision.  Nope.  Not a one.

Clients have cited availability, specifications of the products and services, prior performance, reputation, references, price, capacity, expertise, and a whole host of other reasons.  But never sex.

Sex as a sales approach poses major problems for organizations.  It can expose the organization to legal risks for sexual harassment, creation of a hostile work environment, and discrimination.  Organizations simply can’t afford the legal risks or the cost of defending such cases.

All of which leads me to wonder… if sex sells, who is buying?

Posted in Business Acumen | No Comments »



Grocery Store Update
Monday, February 27th, 2006

This post used Albertsons’ situation to illustrate how appreciation (”so what”) can be used to help solve problems. 

This article reports that Wal-Mart and Kroger stores gained market share year-over-year in the Dallas/Fort Worth area while Albertsons and Minyards lost market share. 

The article states that the trend seen in the Dallas/Fort Worth area mirrors the national trends from across the United States.  

Key Points

$1 of every $3 spent in groceries in the Dallas/Fort Worth area is spent at a Wal-Mart Supercenter or Neighborhood Market.

Wal-Mart has 105 stores in the Dallas/Fort Worth Market.

Wal-Mart had the greatest increase in market share, up by 3.4% in the eight-county Dallas market and up 3.7% in the four-county Fort Worth market.

Dallas/Fort Worth is the first major U.S. market in which Wal-Mart dominates the market.

Other Datapoints

Here are some datapoints from the 2002 Economic Census:

339,528 stores (grocery, convenience, supermarkets, and food and beverage stores)

$1,288,170,032,000 USD in annual revenue from stores

$137,838,210,000 USD in annual payroll at the stores

7,990,785 employees

Go here to see the data from the 2002 Economic Census. 

If the numbers are correct, the average income for a person who works in the grocery industry is $17,249 per year.  (This is a bit deceptive because the industry has a disproportionate number of students and others who, by choice, work part time.)

Meaning

What is the significance of even a 1% change in market share for the grocery industry? 

Still wondering why Maryland passed the Wal-Mart Law, described in this post?

Posted in Business Acumen, Current Events | No Comments »



Business Puzzle - Managing e-mail
Sunday, February 26th, 2006

Over the past several months, I’ve heard from a lot of people who receive a tremendous amount of e-mail.  They are seeking advice for dealing with e-mail. 

Examples

Joe owns a small business and recieves more than 500 messages per day and, at any given time, has over 1,000 unread messages. 

Pat receives about 750 messages per day and is considering hiring someone just to manage his e-mail.  Currently, Pat has a backlog of several thousand unread messages.

Challenges

Joe and Pat want to provide value to their networks, yet their current networking is not working for them. 

Both are trying to network with more than 5,000 people and run their businesses too. 

Information is getting lost or overlooked and important messages are falling through the cracks. 

Pat and Joe do not have time to deal with all the e-mail.

Objectives

When they contacted me, Joe and Pat had three concerns which are:

  1. Dealing with the current backlog.
  2. Prioritizing new messages they receive.
  3. Minimizing the amount of time spent dealing with unnecessary e-mail.

Suggestions

Current backlog:

  1. Have someone else handle the backlog.
  2. Divide messages into items that are require no action, messages that others can deal with, and items that Pat and Joe must handle.

New messages:

  1. Define their priorities.
  2. Use the priorities to dispose of new messages.
  3. Delegate messages to others, where possible.
  4. Ignore messages on which they are copied.
  5. Discourage people from copying them on messages.
  6. Create a second e-mail address and use it only for messages from people that warrant higher degrees fo responsiveness.
  7. Use autoreply or autoforward features for some messages so that they are routed to the appropriate person.

Minimize time:

  1. Eliminate unnecessary e-mail by deciding what messages are unnecessary.  Use rules and filters to autosort messages, where possible.
  2. Reduce time spend dealing with necessary messages by creating standard replies with tools such as ShortKeys.
  3. Help people make good introductions by explaining what introductions have value to you.  Specifically identify who should be introduced, what you want to talk to the person about, how the introduction will be helpful to the other person.
  4. Explain what opportunities and ideas are of interest to you by explaining what you are trying to accomplish and how people can help you accomplish that goal.  Be detailed so that people can provide you with the exact information you need to evaluate the opportunities and ideas.
  5. Explain how you can help people in your network - who can you help, when can you help them, what can you help them with, and how people can make it easier for you to help them.  Be as specific as possible.  In addition, you may want to list situations where you cannot assist others.  
Posted in Business Tips, Resources, Tips for Students | No Comments »



Trust and corporate citizenship
Sunday, February 26th, 2006

Yesterday, a friend of mine told me that his mother was ill and he was burning the midnight oil to try to care for his mother and his business. 

I asked my friend if he had considered talking to his clients about the situation.  While I haven’t heard back from my friend, his situation is fairly typical.  So, what happens in this situation?  Should one do?

Status Quo

Most suppliers hesitate to tell their clients about vacations, illnesses, and emergencies, because clients may think less of the companies.

Some clients will think more of suppliers who dare to be human.  It depends on the context, the client, the supplier, and the timeline. 

The risks can be minimized if a supplier suggests a plan for minimizing disruption for the clients on a path-forward basis.  There is still a risk. 

What has been done

Clients have been known to adjust schedules, modify timelines, and change award decisions in situations like the one my friend is facing.  Here are two examples of adjusments that one can sometimes see in formal RFPs.

Timeline Example

The day that an RFP was due, an account manager’s son fell at school and broke his arm.  The account manager and her husband were at the emergency room with the son.

The account manager had her office contact the sourcing manager.  The sourcing manager extended the deadline for the RFP and contacted each bidder to let it know about the change in timeline.

RFP Example

An account manager at a large company was diagnosed with cancer.  The account manager was in the middle of an RFP.  She asked the clients to change the time of her company’s telephone presentation, but did not explain why. 

The sourcing manager adjusted the time as far as possible without changing the day.  The presentation was awful. 

The sourcing manager was surprised and called the account manager after the presentation and learned that the account manager made the presentation from her oncologist’s office right after learning that she was going to have to start chemotherapy. 

Rather than eliminating the supplier, the sourcing manager went back to the other members of the RFP team, explained the circumstances, and part of the business was awarded to the supplier on the spot.  That additional piece of information completely changed the clients’ assessment of the presentation.

Balance

In the cases cited, the suppliers had legitimate reasons for requesting the extensions and the suppliers had followed the rules to the best of their ability.

When presented with the facts, clients generally work with suppliers.  Replacing a supplier is not the clients’ preferred strategy.  Few clients want substandard service. 

Posted in Corporate Citizenship, Customers | No Comments »



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