Managing for Profit

Many business people, including farmers, experience a conflict of interest at some stage in their careers. If you find yourself in this situation, be open and honest about the problem, and extract yourself from the situation. Otherwise it could come back to bite you!

As a junior manager, I once worked for a large, diversified farming organisation. Among other interests, it ran a nursery producing a unique range of ornamentals and fruit trees. I had no involvement in the nursery, but became aware that there was a fast-growing and unfulfilled demand for one of its products. A friend suggested that we set up a small nursery on his property producing the plant concerned. I readily agreed to make an investment and assist as much as I could.

When I mentioned this to my older and wiser boss, he gently pointed out that my involvement would create a conflict of interest with the company.

“It’s a small part of our business,“he explained, “and while it might not create a major conflict, you’ll be involving yourself in producing a product which competes with one of ours, and we can’t permit it.”

THE SHOE ON THE OTHER FOOT

Many years later, as manager of a fruit business, the memory of this experience came back to me, when our packhouse manager, let’s call him Rupert, excitedly told me about a change he’d made at the packhouse.

At minimal cost, he had devised and installed a simple modification that significantly increased the hourly capacity. It was brilliant. Complimenting him, I made a mental note to do something special in the way of compensating him. But our discussion then turned pear-shaped.

Rupert told me that he was planning to patent the method and sell it to packhouses throughout the country for his own benefit. All of this, of course, he would do after hours, in his own time.

“Hang on, you can’t do that,” I said. “You devised and made the modification in our factory while you were employed by us. The innovation belongs to the company, not to you. Certainly, we’d be enthusiastic about any ideas you have as to how we might jointly exploit the technique.”

Rupert simply couldn’t see the difference between the company’s interests and his own. He was resentful, and soon left us.

Conflict-of-interest situations frequently arise in business, and farmers, who often work in co-operative initiatives such as industry and farmers’ associations, processing and exporter co-operatives, and security groupings, are exposed to them more than most.

Additionally, it’s common practice for entities serving the farming community, such as farm machinery suppliers, fruit processors and sugar companies to invite a leading farmer onto their board.

IF IT’S A MATERIAL MATTER, RECUSE YOURSELF IMMEDIATELY

Now imagine a situation where you, a farmer, are a board member of a local farm machinery dealership, and are at a meeting discussing tractor pricing strategy for the coming season. The market is strong, and management is putting up a strong case for eliminating the normal loyalty/volume discount applied in the past for regular customers. You can clearly see the merits of this proposal for the business, but it will be very costly to you, as, coincidentally, you are in the market for five units. This is a classic conflict-of-interest situation.

HOW TO DEAL WITH THE PROBLEM

In organisations such as these, situations often arise where what is best for the business is not necessarily best for you. How should you handle them? Here are some suggestions:

• Firstly, and this is crucial, be sensitive enough to recognise that there is a conflict of interest. Don’t be like Rupert or me.

• If invited to participate in a situation where it is likely that a conflict of interest will arise, decline the invitation.

• If you do get involved, make it abundantly clear that you are likely to be conflicted, and get your declaration recorded.

• Finally, if it is a material matter, recuse yourself.

Take great care when a conflict of interest arises. If you handle it badly, both the organisation involved and your reputation are likely to suffer.