Ethical Dilemma No. 4: First Quote or Ink Wins?

By Khali Henderson

The channel community has been discussing the topic of business ethics in its blogs, conferences, forums and backrooms. At the suggestion of master agent Josh Anderson, CEO of Telephony Partners LLC, PHONE+ is tackling the topic in a new and, hopefully, constructive way by presenting ethical dilemmas that have happened in the indirect sales channel and seeking comment from suppliers and partners.

Our debut effort on channel pricing conflict was published in December 2009 as Ethical Dilemma No. 1. Ethical Dilemma No. 3: Subagent End Run touched a nerve and received a lot of feedback from PHONE+ readers, including a Peer-to-Peer blog from Bill Leutzinger, president of TelecomMedic LLC. This month Ethical Dilemma No. 4, we tackle the issue of policies for preventing quoting conflicts between competing agents working with the same master agent. Comments are from master agent Brad Miehl, CEO of MicroCorp, and independent agent Colombo DiSalvatore, owner of C4 Communications LLC and service providers J.R. Cook, vice president of the agent channel for New Edge Networks Inc. and Rob Westervelt, vice president of alternate channels for Broadview Networks Inc.
To add your own comments, look for this article online at www.phoneplusmag.com. If you have an idea for our next ethical dilemma, please contact PHONE+ Editor in Chief Khali Henderson at [email protected].

Ethical Dilemma Scenario No. 4

A master agent employed several agent managers that were compensated based on the production of their respective agents. Two separate subagents of the master agent, belonging to two different agent managers within the organization, found themselves in the same opportunity. When the second subagent requested a quote for the prospect, the agent manager discovered that one had already been requested for that company. Furthermore, the channel manager for the carrier being quoted refused to issue another quote, saying that they were working directly with the subagent and were going on a meeting with the customer that week. The second agent manager decided to provide the same quote that had been provided to the first subagent, assuming that ink wins and that if he didnt provide a quote, the subagent would likely go to another master anyway.

Is this scenario unethical, and if so why?

Miehl: I think this is more an issue of policy. If there was a policy that ink wins, then the agent manager should tell his counterpart about the situation and let him know that he is providing the quote to his agent. However, if there was a policy in place that the first quote wins, then yes, I would feel strongly that providing the quote to the second agent would be a breach of ethics and policy.

Cook: Unethical? No. Could it have been handled better? Yes. Bottom line, the second agent manager wanted to protect his relationship with the subagent, which in turn was protecting the relationship with the master agent. The better resolution in my opinion would have been for the agent manager to escalate the issue to his boss and have him contact the carrier to ensure both of his subagents were given equal opportunity to earn the business. Communication is the key, and in my opinion the carrier channel manager is not in a position to make this decision. In a situation like this, it needs to be escalated to senior management to make sure whatever decision is made is fair for all parties involved.

DiSalvatore: Although the second agent managers intentions were understandable, he/she did act in an unethical manner when he/she chose to deliver the quote to the second agent, essentially behind the backs of the first agent manager and the carrier channel manager. The carrier channel manager may have also acted unethically unless that carrier had a policy only allowing one agent to quote services to an end-user customer.

Westervelt: The answer to the ethical question in this scenario relied on the master agents own policy. If the policy is one quote per deal then the second agent manager broke protocol and is acting in an unethical manner. On the other hand, if the policy is ink wins, the second agent manager is operating within his/her ethical boundaries. The real issue is that many channels do not have clear policies or do not enforce these policies in a consistent way.
Should the master agent have a policy that tries to prevent agent conflict such as this?

Miehl: Yes, by all means there should be a policy in place.
 
Cook: Proactive policies are always good. Not that we can make a policy for every situation and, of course, there are circumstances that might impact the enforcement of a policy, but a clear policy upfront will minimize issues like this.

DiSalvatore: A policy would be very helpful in this scenario. I would recommend a policy that outlines clear guidelines for engaging with customers, yet still allows for ICBs to be reviewed. In general, these policies should seek to encourage open communications between all parties and allow for the agents to compete for the customer on a level playing field, letting the agent who can add the most value win.

Westervelt: At Broadview, our policy is one quote per opportunity/end customer. The quote can be used by multiple subagents as long as the pricing and terms are the same. This creates a level playing field and allows the agent/subagent with best relationship to win the deal. In this scenario, a carrier/master agent is also less likely to end up losing the deal to a competitor. The master agent or carrier should have a process and policy in place that outlines the rules of engagement. Having clearly defined policies that are easily accessed ensures everyone is subject to the same rule set.

Does a master agent have the obligation to notify either of the two subagents of the potential conflict?

Miehl: I would say this depends on the policy of the master agent and even the carrier. There has to be consistency. For example, if a carrier has a policy that ink wins, then the master agency should consider having the same policy for that carrier. This keeps everyone playing by the same rules.

Cook: At the end of the day, it is the customer experience that matters the most. From my experience when both parties are notified upfront and both parties are required to respond professionally, the customer experience is always better. They key is not to put the customer in the middle and have them walk away with a bad taste in their mouth. At New Edge, we have released a 100 percent channel-neutral philosophy, and part of that policy is to let all parties know when there are multiple parties presenting to the customer. The quote from us as the carrier stays the same, it us up to the agent to earn the business based upon their value proposition and relationship.

DiSalvatore: I do not believe the master agent is obligated to notify the agents; however, the master agent may have the opportunity to encourage ethical behavior by providing guidance to the agent. This guidance may especially be helpful when an agent is desperately trying to establish a customer base in order to survive, or a veteran agent is caught up in the passion of winning the deal at any cost and has lost sight of where the ethical line lies. Personally, I have always respected a channel manager or master agent that has shown integrity by holding the ethical line even if it meant both of us losing an opportunity.

Westervelt: Yes, the master should make sure all parties are aware of the situation and communicate the message that the opportunity should be won based on relationship and not a price-reduction strategy. Companies that have a multiquote policy only diminish margins by pitting agents against one another. Agents that provide real value and business advice to a relationship end up winning the opportunity and developing long-term relationships that serve both the agent and the carrier. It is also important the companies listen to agent feedback to the policies to make sure agents needs are addressed. We have invested tremendous resources over the last 12 months to enhance our agent portal and develop the conversations between agents and our channel organization. Open communication is critical to everyones success.

Although very few master agent/subagent relationships are exclusive, if this master agent did require exclusivity, it would be in a more powerful position to stop this type of channel conflict. Would this be an improvement to the situation?

Miehl: Not really. If the carrier has a policy of ink wins and the master was forcing exclusivity to the second agent to not quote outside of the agency, he would still be at a loss as someone else may be quoting the same opportunity from outside the master. This is why there needs to be parity in policy between the master and the carrier when it comes to channel conflict. If the policy was based on first to quote, the carrier would be protecting the first agent/master, so even in this case exclusivity is not necessary (or practical for that matter).

Cook: I do believe so. Let me be specific though; I am saying so for this particular opportunity. If a subagent quotes it with one master agent, then that sub should stick with that master agent for that opportunity. If going forward, another master agent has a better value proposition to earn the business, a sub should be able to work with that master on new business. This ensures that we are all working hard to earn future business every day.

DiSalvatore: In the short term it might stop this unique type of conflict, but long term, having a master agent exercise its power over so-called independent agents is not the way to encourage ethical behavior. Master agents and carriers should set clear policies and keep the communication lines open to avoid channel conflict. Beyond that it is the responsibility of all stake holders in the channel, especially the agent on the front lines, to operate with integrity, understanding that the channel as a whole will prosper and become more important to carriers and end-user customers as we continue to become a trustworthy and reliable place to conduct business.

Westervelt: While exclusivity does protect the master agent from losing the business, it would not stop the actual conflict between subagents. Agent loyalty is a goal for every carrier, so fairness when dealing with conflicts and the support provided to agents is critical. Therefore, even if an exclusivity policy is in place, standardized policies and ground rules for engagement are still needed.