Preform a cost benefit analysis? please third time to post it

Martha McCaskey felt both elated and uneasy after her late Friday meeting with Tom Malone and Bud Hackert, two of the top managers in Seleris Associates' Industry Analysis Division (IAD). Malone, the division's de facto chief operating officer (COO), had assured her that upon successful completion of the Silicon 6 study, for which McCaskey was project leader, she would be promoted to group manager. The promotion would mean both a substantial increase in pay and a reprieve from the tedious fieldwork typical of Seleris's consulting projects. However, completing the Silicon 6 project would not be easy. It would mean a second session with Phil Devon, the one person who could provide her with the vital information required by Seleris's client. Now, McCaskey reflected, finishing the project would likely mean following the course of action proposed by Hackert and seconded by Malone: to pay Devon off. Seleris's client, a semiconductor manufacturer based in California, was trying to identify the cost structure and manufacturing technologies of a new chip produced by one of its competitors. McCaskey and the others felt certain that Devon, a semiconductor industry consultant who had worked in the competitor's West Coast operation some 12 years earlier, could provide the detailed information on manufacturing costs and processes required by their client (see Exhibit 1 for a summary of the necessary information). Her first interview with Devon had caused McCaskey to have serious doubts about both the propriety of asking for such information and Devon's motivation in so eagerly offering to help her. Malone suggested that she prepare an action plan over the weekend. Ty Richardson, head of IAD, would be in town on Monday to meet with Malone and the two group managers, Hackert and Bill Davies. McCaskey could present her plan for completing the Silicon 6 project at that meeting. Malone made it clear that the group would be primed to hear her ideas. Silicon 6 was turning out to be a crucial project. The client currently accounted for close to 20% of the division's revenues. In a meeting earlier that day, the marketing manager representing the client had offered to double the fee for the Silicon 6 project. He had also promised that if they could come through on Silicon 6 , equally lucrative projects would follow. By Saturday afternoon, McCaskey had worked up several approaches for finishing the Silicon 6 project. With additional funds now available from the client, she could simply have Devon provide analyses of several alternatives for manufacturing state-of-the-art chips, including the one used at the competitor's Silicon 6 plant. While the extra analyses would be expensive and time consuming, Devon most likely would not suspect what she was after. Another option was to hand the project over to Chuck Kaufmann, another senior associate. Kaufmann handled many of the division's projects that required getting information that a competitor, if asked, would consider proprietary. McCaskey felt, however, that no matter which option she chose, completing the Silicon 6 project would compromise her values. "Where do you draw the line on proprietary information?" she wondered. Was she about to engage in what one of her friends at another consulting firm referred to as "gentleman's industrial espionage"? McCaskey reflected on how well things had gone since she joined IAD. She had been an exemplary performer and, until the Silicon 6 project, she felt that she had always been able to maintain a high degree of integrity in her work. Now, McCaskey wondered, would the next step to success require playing the game the way everyone else did? Seleris Associates Seleris was a medium-sized consulting firm based in Chicago, with offices in New York, Los Angeles, and San Franciseo. Founded in 1962 by three professors who taught accounting in Chicagoarea universities, the firm had grown to nearly 500 employees by 1996 . Throughout its history, Seleris had enjoyed a reputation for high technical and professional standards and had maintained its informal, think-tank atmosphere. Seleris had expanded its practice into four divisions: Management Control and Systems (which had been the original practice of the firm), Financial Services, Ceneral Management, and Industry Analysis. Industry Analysis was the youngest and smallest of Seleris's four divisions, It had been created in 1987 in response to increasing demand for industry and competitive analysis by clients of the firm's Financial Services and General Management divisions. Unlike the other three divisions, IAD was a separate, autonomous unit operating exclusively out of San Francisco. The other divisions were headquartered in Chicago, with branch operations in New York and Los Angeles. IAD had been located in San Francisco for two reasons: (1) much of Seleris's demand for competitive analysis came from clients based in California, and particularly in Silicon Valley; and (2) Ty Richardson, the person hired to start the division, was well connected in northern California and had made staying in San Francisco part of his terms for accepting the job. Richardson reported directly to Seleris's executive committee. Richardson had also insisted on hiring all of his own people. Unlike the rest of Seleris's divisions, which were staffed primarily by people who were developed internally, IAD was staffed entirely with outsiders. The Industry Analysis Division IAD consisted of 15 professionals, 12 analysts (called associates), and 6 support staff. In addition to Richardson (who was a senior vice president), the division had one vice president (who served as Richardson's chief of operations) and two group managers. The remaining 11 professionals formed two groups of senior associates who reported to the two group managers. (See Exhibit 2 for a complete chart showing names and positions of members of both groups.) The two groups of senior associates were distinctly different. The senior associates reporting to Hackert were referred to as the "old guard." Several years earlier, they had all worked for Richardson when he had run his own consulting firm in Los Angeles. The senior associates reporting to Davies all had MBAs from top-tier schools and, not surprisingly, this "new guard" had significantly higher starting salaries. Another difference between the two groups was that while members of the new guard tended to spend their time equally between individual and team projects, the old guard worked strictly on individual projects. Senior associates and group managers received their project assignments from Malone, Richardson's chief of operations. For the most part, however, roles and reporting relationships among the professional staff were loosely defined. Senior associates often discussed the status of their projects directly with Malone or Richardson rather than with the group managers. Both group managers and senior associates served as project leaders. On team projects, it was not unusual for the group manager to be part of a team on which a senior associate was the project leader. The assignment of associates to projects, determined by a process of informal bargaining among associates and project leaders, served to further blur the distinction between senior associates and group managers. Executive Leadership Malone and the two group managers also had previously worked with Richardson. Hackert and Richardson met when Richardson, who had a Ph.D, in business administration, left academia to join the Los Angeles branch of a well-known consulting firm. Richardson left shortly thereafter to start his own firm in Los Angeles, consulting to hightech industries. Malone had managed Richardson's Los Angeles operation. Clients and employees alike described Richardson as an exceptional salesperson. Very sharp in all his dealings, he had a folksy way with people that was both disarming and charismatic. Richardson was also highly driven and rarely slept more than four hours a night. He had taken major risks with personal finances, making and losing several fortunes by age 35 . By the time he turned 40 , the demand of being an entrepreneur and running his own consulting business had wreaked havoc with Richardson's personal life. At his wife's insistence, Richardson switched careers and moved to San Francisco, where his wife started her own business and he accepted a high-level job with a major international consulting firm. But within the year, Richardson had grown restless. When Seleris agreed to let Richardson run his own show in San Francisco, he left the consulting firm, taking Davies and several of the new guard with him. Martha McCaskey Martha McCaskey, 29 years old, had been with Seleris for 18 months, She joined the firm in 1995, shortly after completing her MBA at Harvard. Prior to business school, MoCaskey had worked at a major consumer electronics firm for three years after graduating from CalTech with a degree in electrical engineering. In the summer between her two MBA years, McCaskey worked as a consultant to a fledgling biomedical firm in Massachusetts that specialized in self-administered diagnostic tests. While there, she developed product strategy and implementation plans for a supplement to one of the product lines and assisted in preparation of the firm's second equity offering. MoCaskey thoroughly enjoyed the project orientation of her summer work experience and her role as consultant. The biomedical firm indicated a strong interest in hiring her upon completion of the MBA. McCaskey, however, had decided to pursue a career in consulting, In addition, she had grown up in the Bay area and wanted to retum there if possible. Seleris was one of several consulting firms with which McCaskey interviewed. Her first interview at the San Francisco branch was with Malone, the division's vice president. Malone told her that IAD was a wonderful place to work, especially emphasizing the collegial, think-tank environment. He said that they were experiencing tremendous growth. He also said they were just beginning to get involved in some very exciting projects. The interview ended before MoCaskey could push him on specifics, but she was not sure if such questions would have been appropriate. Malone had impressed her as very dynamic and engaging, Instead of interrogating her, as she expected, he had made her feel like she could be a major contributor to the team, McCaskey commented later, and that felt good. The rest of her interviews were similar. Although she grilled the other people she met, they all told her what a terrific place IAD was. In one of the interviews, McCaskey was also surprised to see Jeff McCollum, an acquaintance who was a former classmate at CalTech. Upon returning to Boston, McCaskey had a message from Richardson, who had called to say he would be in town the following night and was wondering if she could meet him. Over dinner at one of Boston's most expensive restaurants, Richardson told her he was quite impressed with what he had heard about her. They were looking for people like her to help the business grow and to handle their exciting new projects. He also said that, for the right candidates, IAD offered rapid advancement-more so than she would likely find at the other firms with which she was interviewing. The next day Richardson called McCaskey with a generous offer. Later that afternoon she received a call from McCollum, who once again told her what a great place Seleris was, citing as an example of the firm's culture, how Richardson often would take everybody out for drinks Friday afternoon when he was around. After weighing the Seleris offer, McCaskey called Richardson early the next week to accept. Working in the Industry Analysis Division McCaskey's First Assignment McCaskey's first day at work started with a visit from Malone. He explained that the division was experiencing a bit of a crunch just then, and they needed her help on a competitive analysis study. In fact, she would have to do the project by herself. It was unusual to give a new person his or her own project, Malone continued, but he had arranged for Davies, her group manager, to provide backup support if she needed it. McCaskey reflected on her first project: It was relatively easy and I was lucky; it was a good industry to interview in. Some industries are tough to interview in because they tend to be very closemouthed. Some industries are easier. The consumer electronics industry, for example, is pretty easy. Other industries, like the electronic chemicals areas, can be really tough. People making chips are very secretive. Although it was her first assignment, McCaskey gave the client presentation and wrote a formal report detailing her analysis and recommendations. A few days later, Richardson dropped in on a working lunch among Davies's group to compliment McCaskey on her handling of the project. He went so far as to say that both he and Malone felt that her analysis was the best they had yet seen by anyone in the division. McCaskey's Second Assignment Two weeks later, McCaskey was assigned to a major project involving competitive analysis for a company that made printed circuit boards. As with her first assignment, she was to work alone on the study, consulting Davies if and when she needed help. It was during this period that Malone began suggesting that she talk with two members of the old guard, Dan Rendall and Chuck Kaufmann, about sources of information. The project involved gathering some fairly detailed information about a number of competitors, including one Japanese and two European firms. The old guard handled many of the projects that involved gathering sensitive information on target firms (i.e., the client's competitors). This was always information that was not publicly availableinformation that a target firm would consider proprietary, It appeared to McCaskey that Rendall and Kaufmann were the real producers in this group, often taking on projects when other members of the old guard had difficulty obtaining sensitive information. Rendall was the recognized leader of the old guard. He could often be seen coming and going from Richardson's office on the infrequent occasions that Richardson was in town. Recently, Richardson had been spending about 80% of his time on the road. When McCaskey approached Rendall, however, she found him to be difficult and uncooperative. Subsequent attempts to talk with Rendall proved equally unproductive. Kaufmann was out of town on assignment for two weeks and thus was unable to meet with McCaskey. Given her difficulty in following through on Malone's recommendation to work with the old guard, McCaskey developed her own approach to the printed circuit board project. The project turned out to be extremely difficult. Over a period of six months, McCaskey conducted nearly 300 telephone interviews; attended trade shows in the United States, Japan, and Europe; and personally interviewed consultants, distributors, and industry representatives in all three places. Toward the end, McCaskey remembered working seven days a week, 10 to 15 hours a day. Her European contacts finally came through with all the necessary information just three days before the client presentation. Despite the positive results that her efforts produced, McCaskey felt that Richardson and Malone disapproved of how she handled the project - that it could have been completed with less time and effort: The presentation went really well. Towards the end, I began to relax and feel really good. I was presenting to a bunch of guys who had been in the business for 30 years. There were a few minor follow-up questions, but mostly a lot of compliments. I was really looking forward to taking a break. I had been with the company at this point for nine months and had never taken a day of vacation, and I was exhausted. And then, Richardson got up and promised the client a written report in two weeks. Davies was very good about it. We got in the car to go back to the airport, and he asked me, wasn't I planning to take a vacation in the near future? But it went right by Richardson. Davies did not press it, of course. Even though he had an MBA from Stanford, he was a really laid-back California type. That sometimes made for problems when you needed direction on projects or firm policy. The next day, I was a basket case, I should have called in sick, I really should have. I managed to dictate about one page. Richardson came by at the end of the day and said, "Well, what's the delay?" 1 was so livid that 1 finished the report in 10 days. The rate at which McCaskey wrote the report was held up as an example by Malone as a new standard for IAD projects. McCaskey's handling of the written report on her next project led to an even tighter standard for the division's projects. Seeking to avoid a similar bind on the project, McCaskey planned to write the report before the client presentation. Malone had told her that she would not have any other responsibilities while on the project because the deadline was so tight. Two weeks later, however, Richardson asked her to join a major project involving the rest of Davies's group. McCaskey explained: He kind of shuffled into my office and said something like, "You know, Martha, we really admire you. I'd really like to have you on this team. We're a little behind schedule and we could really use your expertise. I've also asked Chuck Kaufmann to join the team, and I'd like the two of you to work on a particularly challenging piece of the project." Despite the dual assignment, MoCaskey managed to complete the report on her original project before the client presentation. That also became a standard within the division. The Environment at IAD By mid-1996, several senior associates had left the firm. Bill Whiting and Cory Williamson joined competing firms. Doug Forrest was planning to take a job with one of Seleris's clients. McCollum left, complaining that he was burnt out and that he planned to take several months off to travel before looking for work. Over the previous six months there had also been high turnover among the associates. It had become a running joke that Tuesday's edition of The Wall Stred loumal, which carried the job advertisements, should be included in the set of industry journals that were circulated around the office. While some of the turnover could be attributed to the increasing workload and performance expectations, a number of people had also been upset over the previous year's bonuses. Richardson and Malone had met with each senior associate prior to Christmas and explained that the division was going through a growth phase and was not the cash generator everybody seemed to think it was. They were all then given the same bonus and told how valuable they were to the firm, regardless of the length of time they had been with the firm or what they had accomplished. But, as McCaskey recalled, what really got to people was when Richardson and Malone showed up at the New Year's office party, each in a brand new Mercedes. Kaufmann had gone to see Malone about the personnel situation. He warned Malone that unless something was done to improve the situation, more people would leave. Malone responded that he could put an ad in the paper and get 10 new people anytime he wanted. Kaufmann was shocked. McCaskey, however, was not surprised. In the lighter moments of working on team projects, conversation among members of the new guard had naturally drifted to views on Richardson and Malone and on what made them so successful: Malone was married with two kids and usually drove his Ferrari instead of the Mercedes. He looked the part of a consultant. He was very aggressive. You could hear this man all over the building when he was on the phone. We decided he was just really driven by money. That's all there was ... he'd go whip someone and tell them to get work out by the end of the month so we could bill for it-and have no qualms about doing it because he's counting his bucks. He was also a very smart man. If you spent a couple of hours with him in the car or on a plane explaining a business to him, he'd have it. The man had amazing retention. Both he and Richardson were great salesmen. Malone could be an incredible talker. At times, though, you wondered how much credibility you could put in these people. They kept saying they wanted you to be part of the management team. But then they'd turn around and wouldn't even tell us where or when they would go on a client call, so you really couldn't make a contribution. Kaufmann's shock at Malone's response to the personnel question was also typical. McCaskey had worked with Kaufmann on a number of team projects and found him to be different from most of the old guard. He was working on his MBA in the evening program at Berkeley and really seemed to enjoy being with the new guard. McCaskey knew that Kaufmann also had a reputation for working on what were referred to as the "sleaze" projects in the office: projects that involved questionable practices in contacting and interviewing people who could provide very detailed information about target companies. Even so, McCaskey felt that he did this work mainly out of a sense of loyalty to Richardson and Malone: Kaufmann was always torn between doing the job and feeling, "These guys need me to help them run their business, because l'm going to be a group manager someday, and they really need me." He was torn between that and trying to be objective about his situation, saying, "They're paying me less than anybody else, but look what these guys are asking me to do." He wanted to do good in the eyes of people he looked up to, whether it's Richardson and Malone or peers like Dan or myself, because he has that personal attachment and can't step back and say, "They're taking advantage of me." He just could not make that distinction. Kaufmann had been fun to work with, though. MeCaskey had observed that many of their team projects had required increasingly detailed information about a client's competitors. These projects had given rise to discussions between MeCaskey and her colleagues about what constituted proprietary information and what, if anything, they should do if they found they had to obtain such information. While there was some discussion about the appropriateness of such projects, MeCaskey recalled a particular conversation that characterized how the issue was typically handled: We were on a quick coffee break, and Linda Shepherd said she really needed to get psyched up for her next call. Linda was a member of the new guard whom 1 liked and respected. She had an MBA from Berkeley and had been at IAD approximately a year longer than I had. We became good friends soon after I arrived and ended up working together on many team projects. I said, "I know what you mean. I tried to get some discounting information from a marketing manager this moming and all he would give me was the list price. As usual, 1 started out with general questions, but as soon as I tried to get specific he was all over me. Like pulling teeth. Invariably, they slap it back at you. What information do you have? You know, and you don't want to give away the pot because then he'd know what you're doing." Kaufmann's advice was pretty funny. He said that he was working on a project that was so slimy he had to take a shower every time he got off the phone, and maybe that's what we ought to do, too. As was the norm on most of the division's projects, McCaskey usually identified herself as a representative of a newly formed trade journal for the particular industry in which she was interviewing. To McCaskey, that was not nearly as dishonest as visiting a target company on the pretense of interviewing for a job, as a friend of hers who worked for another consulting firm had done. All in all, McCaskey felt that she had been given the freedom to do her work with integrity. It was also clear that her performance was recognized by Richardson. Of the senior associates, Richardson spent the most time with Rendall, McCaskey, and Kaufmann. While Rendall often could be seen in Richardson's office, Richardson seemed to make a point of dropping in on Kaufmann and McCaskey. At the end of 1996, McCaskey received a substantial increase in pay. She also received a $25,000 bonus. Most of the other senior associates had received much smaller bonuses-in many cases equivalent to what they had received the previous year. The Silicon 6 Project In January 1997, both Richardson and Malone met with McCaskey to talk about a new assignment. The project was for one of Seleris's oldest clients in the high-tech electronics field. Since its inception, IAD had done a lot of work for this client. The project involved a new type of computer chip being produced by one of the client's prime competitors-a company that had also once been one of Seleris's major clients. The project had originally been assigned to Lee Rogoff, a senior associate who reported to Hackert. The client was interested in obtaining detailed information about manufacturing processes and costs associated with the new computer chip. Although Rogoff had made numerous calls to the target company's clients and distributors, he had been largely unsuccessful in obtaining any of the required information. Normally, Rendall would have been asked to take over the project if it had previously been handled by a member of the old guard. Instead, Malone explained, he and Richardson had decided to approach McCaskey because of her background in electrical engineering. (McCaskey had in fact done some coursework on chip design at CalTech.) Malone also told her that they had been impressed with her creativity and success in obtaining difficult, detailed information on previous projects. Malone added that there was one constraint on the project: the client had insisted that Seleris not contact the target company, to avoid potential allegations of price fixing. The project was code-named Silicon 6 after the plant where the chip was produced-the sixth building of an industrial cluster in Silicon Valley. McCaskey began by contacting the Silicon 6 plant's equipment manufacturers. They were unusually closemouthed. She was unable to get them even to say what equipment the plant had ordered, never mind its operating characteristics. McCaskey also contacted raw materials suppliers to semiconductor manufacturers. Again, she faced an impasse. She held meetings nearly every day with Malone (standard operating procedure for problem projects). For McCaskey, the meetings soon became monotonous, following the same pattern: "How's it going? Well, OK. Let's retrench. Did you try this tack? Did you try that tack? Did you try this customer base? Did you try this group of calls?" Malone was especially interested in whether she was having any luck identifying ex-employees. For several of the projects on which McCaskey had worked, particularly those requiring detailed data, the best source of information had been ex-employees of target companies. McCaskey had generally found these people quite willing to talk, sometimes out of vengeance, but also at times because there was a sympathetic, willing listener available. People love to talk about their "expertise," she often thought. Industry consultants had been another good source of detailed information. It was not unusual for LAD to hire consultants for $4,000 or $5,000 a day on specific projects. McCaskey felt that some of the senior associates had been rather creative in their use of this practice. Several months earlier, Kaufmann had confided to her that he had hired an ex-employee of a target company as a "consultant" to provide him with a list of software contracts for that target company. He said that this was something that Rendall had done regularly on his projects. In one case, Rendall had paid an ex-employee of a target company a "consulting" fee of $5,000 for a business plan and spreadsheets of the target company's upcoming new product information. Hackert was there when Kaufmann had asked Rendall if such information was proprietary. Hackert had a reputation as a tough, no-nonsense manager who prided himself on running a tight shop and on his ability to get the job done, no matter what it took. Hackert said that if someone was willing to talk about it, then it was not proprietary. McCaskey had mentioned this incident to Shepherd. They both agreed that Rendall's behavior, and Hackert's response, only confirmed what they had suspected all along about members of the old guard: they routinely paid ex-employees of target companies to obtain highly sensitive information for Seleris's clients. Shepherd ended the conversation with a comment that, given such behavior, the old guard would not last long when the division really took off and headquarters became more interested in the San Francisco operation. Many consulting firms had formal, written policies regarding the solicitation and performance of contracts. For example, some consulting firms required that their employees identify themselves as working for the firm before beginning an interview. LAD did not have any such written, formal policies. Richardson occasionally had given lunchtime talks concerning the division's policies, but, as McCaskey recalled, these tended to be quite vague and general. For example, for McCaskey, the bottom line in Richardson's "ethics" talk was quite simply, we do not do anything unethical. Besides, McCaskey knew from her friends at highly reputable firms that people occasionally broke the rules even when formal, written policies existed. After her discussion with Shepherd, McCaskey considered raising the old guard's use of ex-employees with Richardson, but he was out of the office for a couple of weeks. By the time he returned, she was in the middle of several large projects and had all but forgotten about it. McCaskey's only lead on the Silicon 6 project occurred through a seemingly random set of events. Working through a list of academics involved in semiconductor research, she found a profecsor at a small East Coast engineering school who actively consulted with several European manufacturers of semiconductors. When she called him, McCaskey found that he could not provide her with any of the information on the list. Malone had suggested, however, that she fly out and interview him because he might have some gossip on the new chip. The interview served to clarify McCaskey's understanding of the manufacturing processes involved but, as she had suspected, did not provide her with any new information. The professor did suggest, however, that she get in touch with Phil Devon, a consultant in southern California. He did not know Devon personally but knew that Devon recently had been involved in the design and start-up of a plant for one of the European firms. Upon returning to San Francisco, McCaskey called Devon to set up an interview. During the call she learned that he had been a vice president at the target company some 12 years earlier. When she told Malone about Devon, he was ecstatic. He congratulated her on once again coming through for the division, letting her know that both he and Richardson felt she was the one person they could always count on. McCaskey Meets with Devon McCaskey met with Devon the following Friday. He was in his mid-40s, distinguished looking, and relaxed in his manner. McCaskey's first impression of Devon was that he was both professional and warm. Even before getting into the interview, she began to have qualms about asking him for detailed information on the Silicon 6 plant. Feeling uneasy, McCaskey opened the interview by saying that she represented an international concern that was interested in building a semiconductor manufacturing plant in the United States. Devon responded by saying that he could not understand why anybody would want to build another plant, given the current global overcapacity of semiconductor production. He added, however, that he was willing to help her in whatever way he could. Mchaskey then suggested that they talk about the cost structure for a plant that would be employing state-of-the-art technology. Devon responded that he would need more information to work with if he was going to be of help to her. He explained that there were several new technologies available or under development, and it would make a difference which one they chose. It briefly crossed McCaskey's mind that this was an opportunity to talk about the Silicon 6 plant. Instead, she suggested that they might try to cover each of the options. Devon responded that it would involve an awful lot of work and that it would be helpful if she could narrow things down. He then asked what kind of chips they intended to produce and whether there would be several products or just a single line. He added that if he knew whom she was representing, it would help him to determine what type of facility they might be interested in. McCaskey felt increasingly uncomfortable as the interview progressed. She felt that Devon was earnestly trying to help her. He seemed to have an excellent technical background and knew what he was doing. It was clear that Devon took pride in doing what he did and in doing it well. By midmorning, McCaskey began to feel nauseated with herself and the prospect of asking Devon to give her proprietary information on the Silicon 6 plant. As she talked with him, she could not help thinking, "This is a guy who's trying to do good in the world. How can I be doing this? I have an EE degree from CalTech, an MBA from Harvard, and here I am trying to sleaze this guy." At this point, McCaskey settled on a scheme to end the interview but keep open the option of a second interview with Devon. From the moming's discussion, she was convinced that he had access to the information she needed to complete the Silicon 6 project. Instead of probing for the information, she told Devon that her client had not supplied her with adequately detailed information to focus on a specific technology and plant cost structure. She added that his questions had helped her leam a lot about what she needed to find out from her client before she came back to him. She suggested, however, that if they could put together a representative plant cost structure, it would be useful in going back to her client. Once again, Devon said that he was willing to help her in whatever way he could. He said he had recently helped set up a state-of-the-art facility in Europe that might be similar to the type of plant her client was considering. At this point, McCaskey began to feel that perhaps Devon was being too helpful. She wondered if he might be leading her on to find out whom she was working for. As the morning progressed, Devon provided her with background on the European plant, including general information about its cost structure and other items on McCaskey's list. McCaskey was so uncomfortable about deceiving him about the purpose of her visit that she barely made it through lunch, even though she had contracted with him for the full day. After lunch, she paid Devon the full day's fee and thanked him. McCaskey said that she would get in touch with him after meeting with her client to see if they could focus on a particular plant design. Devon thanked her, said that he wished he could have been more helpful, and that he looked forward to seeing her again. McCaskey Meets with Malone A meeting on the Silicon 6 project was scheduled with the client for the following Friday. McCaskey worked over the weekend and through the early part of the next week putting together her slides and presentation. As she worked, she continued to reflect on her meeting with Devon. He had seemed so professional. She was not really sure how he would have responded to specific questions about the Silicon 6 plant, but she felt sure he could have provided her with all the information they needed. On the other hand, although it sounded farfetched, it seemed just possible that Devon was so straight he might have called the police had she asked him for the information. Or, given his prior employment at the target company, Devon might have called someone there about McCaskey's interest in the Silicon 6 plant. On Wednesday, McCaskey met with Malone to update him on her meeting with Devon and to review her presentation. She told Malone that she was unable to get the information they needed. To her surprise, Malone did not press her to try to get more information from Devon. Instead, he asked McCaskey to go through her presentation. When she came to a slide titled "Representative Plant Cost Structure," Malone stopped her, saying that the title should read "Plant Cost Structure." When McCaskey asked him what he meant, Malone told her to cross out the word "Representative." They would conduct the presentation as if these were data they had gathered on the actual Silicon 6 plant. When McCaskey objected, Malone pointed out that the analysis was general enough that no one would know the difference. McCaskey Meets with the Client's Plant Managers Going into the presentation Friday morning, McCaskey had only 30 slides. On other projects she typically had used in excess of 100 slides. To McCaskey's surprise, all of the client's senior plant managers were present for the presentation. She had been under the impression that the meeting was to be a dry run for a more formal presentation later on. The plant managers were courteous but stopped her 15 minutes into the presentation to say that she was not telling them anything new. If this was all she had, they said, it would be pointless to meet with senior management on the Silicon 6 project, although such a meeting was scheduled for the following month. They then asked her to identify all the sources she had contacted. McCaskey did not mention Devon, but the plant managers seemed satisfied with her efforts. Malone then explained that the lack of detailed information was due to the constraint of not being able to contact the target company. The marketing manager in charge of the Silicon 6 project then asked his secretary to take McCaskey and Malone to his office while he held a brief meeting with the plant managers. Upon joining McCaskey and Malone, the marketing manager expressed his disappointment with Seleris's handling of the Silicon 6 project. Specifically, he said that his firm had never had any trouble getting such information before. Further, he pointed out how much business they provided for IAD and that he had hoped the relationship could continue. Given the progress made by Seleris on the Silicon 6 project, however, he had doubts. Malone then brought up the possibility of still being able to successfully complete the project. Without mentioning Devon's name, he said that they had just made contact with an ex-employee who could provide them with the necessary information if provided with the proper incentives. McCaskey was struck by how the marketing manager immediately brightened and told them that he did not care how they got the information, as long as they got it. He then doubled the original fee that the LAD would be paid upon completion of the project, adding that the additional funds should provide their source with an adequate incentive. He also told them that if they could come through on Silicon 6 , he had 10 more projects just like it for them that would be equally as lucrative. As they climbed into Malone's Ferrari for the ride back to the office, McCaskey felt stunned by the turn of events. First, there had been the unexpected importance of the presentation; then, the marketing manager's proposition; and, now, Malone's enthusiasm for it. Malone could barely contain himself, delighting in how Richardson would react upon hearing how things had worked out. McCaskey just looked at him, shook her head and said, "You're amazing!" Malone agreed with her, complimented McCaskey in return, and promised her she would be promoted to group manager as soon as she completed Silicon 6 . When they got back, Malone called Hackert into his office with McCaskey and briefed him on the meeting. Hackert's response was that it would be a "piece of cake." All they would have to do is figure out how to handle Devon. Hackert then suggested that, given the importance of the project, Devon be offered a per diem consulting fee of $7,000 instead of the standard $4,000. Malone responded that he was unsure if that was how they should approach it, but he did agree that they should make it worthwhile to Devon to provide the necessary information. He then turned to McCaskey and suggested she think about how to proceed with Devon. He also told her not to overlook the option of having someone else, such as Kaufmann, meet with Devon. She could still manage the overall project. He said it would be good training for her upcoming promotion. Martha McCaskey felt both elated and uneasy after her late Friday meeting with Tom Malone and Bud Hackert, two of the top managers in Seleris Associates' Industry Analysis Division (IAD). Malone, the division's de facto chief operating officer (COO), had assured her that upon successful completion of the Silicon 6 study, for which McCaskey was project leader, she would be promoted to group manager. The promotion would mean both a substantial increase in pay and a reprieve from the tedious fieldwork typical of Seleris's consulting projects. However, completing the Silicon 6 project would not be easy. It would mean a second session with Phil Devon, the one person who could provide her with the vital information required by Seleris's client. Now, McCaskey reflected, finishing the project would likely mean following the course of action proposed by Hackert and seconded by Malone: to pay Devon off. Seleris's client, a semiconductor manufacturer based in California, was trying to identify the cost structure and manufacturing technologies of a new chip produced by one of its competitors. McCaskey and the others felt certain that Devon, a semiconductor industry consultant who had worked in the competitor's West Coast operation some 12 years earlier, could provide the detailed information on manufacturing costs and processes required by their client (see Exhibit 1 for a summary of the necessary information). Her first interview with Devon had caused McCaskey to have serious doubts about both the propriety of asking for such information and Devon's motivation in so eagerly offering to help her. Malone suggested that she prepare an action plan over the weekend. Ty Richardson, head of IAD, would be in town on Monday to meet with Malone and the two group managers, Hackert and Bill Davies. McCaskey could present her plan for completing the Silicon 6 project at that meeting. Malone made it clear that the group would be primed to hear her ideas. Silicon 6 was turning out to be a crucial project. The client currently accounted for close to 20% of the division's revenues. In a meeting earlier that day, the marketing manager representing the client had offered to double the fee for the Silicon 6 project. He had also promised that if they could come through on Silicon 6 , equally lucrative projects would follow. By Saturday afternoon, McCaskey had worked up several approaches for finishing the Silicon 6 project. With additional funds now available from the client, she could simply have Devon provide analyses of several alternatives for manufacturing state-of-the-art chips, including the one used at the competitor's Silicon 6 plant. While the extra analyses would be expensive and time consuming, Devon most likely would not suspect what she was after. Another option was to hand the project over to Chuck Kaufmann, another senior associate. Kaufmann handled many of the division's projects that required getting information that a competitor, if asked, would consider proprietary. McCaskey felt, however, that no matter which option she chose, completing the Silicon 6 project would compromise her values. "Where do you draw the line on proprietary information?" she wondered. Was she about to engage in what one of her friends at another consulting firm referred to as "gentleman's industrial espionage"? McCaskey reflected on how well things had gone since she joined IAD. She had been an exemplary performer and, until the Silicon 6 project, she felt that she had always been able to maintain a high degree of integrity in her work. Now, McCaskey wondered, would the next step to success require playing the game the way everyone else did? Seleris Associates Seleris was a medium-sized consulting firm based in Chicago, with offices in New York, Los Angeles, and San Franciseo. Founded in 1962 by three professors who taught accounting in Chicagoarea universities, the firm had grown to nearly 500 employees by 1996 . Throughout its history, Seleris had enjoyed a reputation for high technical and professional standards and had maintained its informal, think-tank atmosphere. Seleris had expanded its practice into four divisions: Management Control and Systems (which had been the original practice of the firm), Financial Services, Ceneral Management, and Industry Analysis. Industry Analysis was the youngest and smallest of Seleris's four divisions, It had been created in 1987 in response to increasing demand for industry and competitive analysis by clients of the firm's Financial Services and General Management divisions. Unlike the other three divisions, IAD was a separate, autonomous unit operating exclusively out of San Francisco. The other divisions were headquartered in Chicago, with branch operations in New York and Los Angeles. IAD had been located in San Francisco for two reasons: (1) much of Seleris's demand for competitive analysis came from clients based in California, and particularly in Silicon Valley; and (2) Ty Richardson, the person hired to start the division, was well connected in northern California and had made staying in San Francisco part of his terms for accepting the job. Richardson reported directly to Seleris's executive committee. Richardson had also insisted on hiring all of his own people. Unlike the rest of Seleris's divisions, which were staffed primarily by people who were developed internally, IAD was staffed entirely with outsiders. The Industry Analysis Division IAD consisted of 15 professionals, 12 analysts (called associates), and 6 support staff. In addition to Richardson (who was a senior vice president), the division had one vice president (who served as Richardson's chief of operations) and two group managers. The remaining 11 professionals formed two groups of senior associates who reported to the two group managers. (See Exhibit 2 for a complete chart showing names and positions of members of both groups.) The two groups of senior associates were distinctly different. The senior associates reporting to Hackert were referred to as the "old guard." Several years earlier, they had all worked for Richardson when he had run his own consulting firm in Los Angeles. The senior associates reporting to Davies all had MBAs from top-tier schools and, not surprisingly, this "new guard" had significantly higher starting salaries. Another difference between the two groups was that while members of the new guard tended to spend their time equally between individual and team projects, the old guard worked strictly on individual projects. Senior associates and group managers received their project assignments from Malone, Richardson's chief of operations. For the most part, however, roles and reporting relationships among the professional staff were loosely defined. Senior associates often discussed the status of their projects directly with Malone or Richardson rather than with the group managers. Both group managers and senior associates served as project leaders. On team projects, it was not unusual for the group manager to be part of a team on which a senior associate was the project leader. The assignment of associates to projects, determined by a process of informal bargaining among associates and project leaders, served to further blur the distinction between senior associates and group managers. Executive Leadership Malone and the two group managers also had previously worked with Richardson. Hackert and Richardson met when Richardson, who had a Ph.D, in business administration, left academia to join the Los Angeles branch of a well-known consulting firm. Richardson left shortly thereafter to start his own firm in Los Angeles, consulting to hightech industries. Malone had managed Richardson's Los Angeles operation. Clients and employees alike described Richardson as an exceptional salesperson. Very sharp in all his dealings, he had a folksy way with people that was both disarming and charismatic. Richardson was also highly driven and rarely slept more than four hours a night. He had taken major risks with personal finances, making and losing several fortunes by age 35 . By the time he turned 40 , the demand of being an entrepreneur and running his own consulting business had wreaked havoc with Richardson's personal life. At his wife's insistence, Richardson switched careers and moved to San Francisco, where his wife started her own business and he accepted a high-level job with a major international consulting firm. But within the year, Richardson had grown restless. When Seleris agreed to let Richardson run his own show in San Francisco, he left the consulting firm, taking Davies and several of the new guard with him. Martha McCaskey Martha McCaskey, 29 years old, had been with Seleris for 18 months, She joined the firm in 1995, shortly after completing her MBA at Harvard. Prior to business school, MoCaskey had worked at a major consumer electronics firm for three years after graduating from CalTech with a degree in electrical engineering. In the summer between her two MBA years, McCaskey worked as a consultant to a fledgling biomedical firm in Massachusetts that specialized in self-administered diagnostic tests. While there, she developed product strategy and implementation plans for a supplement to one of the product lines and assisted in preparation of the firm's second equity offering. MoCaskey thoroughly enjoyed the project orientation of her summer work experience and her role as consultant. The biomedical firm indicated a strong interest in hiring her upon completion of the MBA. McCaskey, however, had decided to pursue a career in consulting, In addition, she had grown up in the Bay area and wanted to retum there if possible. Seleris was one of several consulting firms with which McCaskey interviewed. Her first interview at the San Francisco branch was with Malone, the division's vice president. Malone told her that IAD was a wonderful place to work, especially emphasizing the collegial, think-tank environment. He said that they were experiencing tremendous growth. He also said they were just beginning to get involved in some very exciting projects. The interview ended before MoCaskey could push him on specifics, but she was not sure if such questions would have been appropriate. Malone had impressed her as very dynamic and engaging, Instead of interrogating her, as she expected, he had made her feel like she could be a major contributor to the team, McCaskey commented later, and that felt good. The rest of her interviews were similar. Although she grilled the other people she met, they all told her what a terrific place IAD was. In one of the interviews, McCaskey was also surprised to see Jeff McCollum, an acquaintance who was a former classmate at CalTech. Upon returning to Boston, McCaskey had a message from Richardson, who had called to say he would be in town the following night and was wondering if she could meet him. Over dinner at one of Boston's most expensive restaurants, Richardson told her he was quite impressed with what he had heard about her. They were looking for people like her to help the business grow and to handle their exciting new projects. He also said that, for the right candidates, IAD offered rapid advancement-more so than she would likely find at the other firms with which she was interviewing. The next day Richardson called McCaskey with a generous offer. Later that afternoon she received a call from McCollum, who once again told her what a great place Seleris was, citing as an example of the firm's culture, how Richardson often would take everybody out for drinks Friday afternoon when he was around. After weighing the Seleris offer, McCaskey called Richardson early the next week to accept. Working in the Industry Analysis Division McCaskey's First Assignment McCaskey's first day at work started with a visit from Malone. He explained that the division was experiencing a bit of a crunch just then, and they needed her help on a competitive analysis study. In fact, she would have to do the project by herself. It was unusual to give a new person his or her own project, Malone continued, but he had arranged for Davies, her group manager, to provide backup support if she needed it. McCaskey reflected on her first project: It was relatively easy and I was lucky; it was a good industry to interview in. Some industries are tough to interview in because they tend to be very closemouthed. Some industries are easier. The consumer electronics industry, for example, is pretty easy. Other industries, like the electronic chemicals areas, can be really tough. People making chips are very secretive. Although it was her first assignment, McCaskey gave the client presentation and wrote a formal report detailing her analysis and recommendations. A few days later, Richardson dropped in on a working lunch among Davies's group to compliment McCaskey on her handling of the project. He went so far as to say that both he and Malone felt that her analysis was the best they had yet seen by anyone in the division. McCaskey's Second Assignment Two weeks later, McCaskey was assigned to a major project involving competitive analysis for a company that made printed circuit boards. As with her first assignment, she was to work alone on the study, consulting Davies if and when she needed help. It was during this period that Malone began suggesting that she talk with two members of the old guard, Dan Rendall and Chuck Kaufmann, about sources of information. The project involved gathering some fairly detailed information about a number of competitors, including one Japanese and two European firms. The old guard handled many of the projects that involved gathering sensitive information on target firms (i.e., the client's competitors). This was always information that was not publicly availableinformation that a target firm would consider proprietary, It appeared to McCaskey that Rendall and Kaufmann were the real producers in this group, often taking on projects when other members of the old guard had difficulty obtaining sensitive information. Rendall was the recognized leader of the old guard. He could often be seen coming and going from Richardson's office on the infrequent occasions that Richardson was in town. Recently, Richardson had been spending about 80% of his time on the road. When McCaskey approached Rendall, however, she found him to be difficult and uncooperative. Subsequent attempts to talk with Rendall proved equally unproductive. Kaufmann was out of town on assignment for two weeks and thus was unable to meet with McCaskey. Given her difficulty in following through on Malone's recommendation to work with the old guard, McCaskey developed her own approach to the printed circuit board project. The project turned out to be extremely difficult. Over a period of six months, McCaskey conducted nearly 300 telephone interviews; attended trade shows in the United States, Japan, and Europe; and personally interviewed consultants, distributors, and industry representatives in all three places. Toward the end, McCaskey remembered working seven days a week, 10 to 15 hours a day. Her European contacts finally came through with all the necessary information just three days before the client presentation. Despite the positive results that her efforts produced, McCaskey felt that Richardson and Malone disapproved of how she handled the project - that it could have been completed with less time and effort: The presentation went really well. Towards the end, I began to relax and feel really good. I was presenting to a bunch of guys who had been in the business for 30 years. There were a few minor follow-up questions, but mostly a lot of compliments. I was really looking forward to taking a break. I had been with the company at this point for nine months and had never taken a day of vacation, and I was exhausted. And then, Richardson got up and promised the client a written report in two weeks. Davies was very good about it. We got in the car to go back to the airport, and he asked me, wasn't I planning to take a vacation in the near future? But it went right by Richardson. Davies did not press it, of course. Even though he had an MBA from Stanford, he was a really laid-back California type. That sometimes made for problems when you needed direction on projects or firm policy. The next day, I was a basket case, I should have called in sick, I really should have. I managed to dictate about one page. Richardson came by at the end of the day and said, "Well, what's the delay?" 1 was so livid that 1 finished the report in 10 days. The rate at which McCaskey wrote the report was held up as an example by Malone as a new standard for IAD projects. McCaskey's handling of the written report on her next project led to an even tighter standard for the division's projects. Seeking to avoid a similar bind on the project, McCaskey planned to write the report before the client presentation. Malone had told her that she would not have any other responsibilities while on the project because the deadline was so tight. Two weeks later, however, Richardson asked her to join a major project involving the rest of Davies's group. McCaskey explained: He kind of shuffled into my office and said something like, "You know, Martha, we really admire you. I'd really like to have you on this team. We're a little behind schedule and we could really use your expertise. I've also asked Chuck Kaufmann to join the team, and I'd like the two of you to work on a particularly challenging piece of the project." Despite the dual assignment, MoCaskey managed to complete the report on her original project before the client presentation. That also became a standard within the division. The Environment at IAD By mid-1996, several senior associates had left the firm. Bill Whiting and Cory Williamson joined competing firms. Doug Forrest was planning to take a job with one of Seleris's clients. McCollum left, complaining that he was burnt out and that he planned to take several months off to travel before looking for work. Over the previous six months there had also been high turnover among the associates. It had become a running joke that Tuesday's edition of The Wall Stred loumal, which carried the job advertisements, should be included in the set of industry journals that were circulated around the office. While some of the turnover could be attributed to the increasing workload and performance expectations, a number of people had also been upset over the previous year's bonuses. Richardson and Malone had met with each senior associate prior to Christmas and explained that the division was going through a growth phase and was not the cash generator everybody seemed to think it was. They were all then given the same bonus and told how valuable they were to the firm, regardless of the length of time they had been with the firm or what they had accomplished. But, as McCaskey recalled, what really got to people was when Richardson and Malone showed up at the New Year's office party, each in a brand new Mercedes. Kaufmann had gone to see Malone about the personnel situation. He warned Malone that unless something was done to improve the situation, more people would leave. Malone responded that he could put an ad in the paper and get 10 new people anytime he wanted. Kaufmann was shocked. McCaskey, however, was not surprised. In the lighter moments of working on team projects, conversation among members of the new guard had naturally drifted to views on Richardson and Malone and on what made them so successful: Malone was married with two kids and usually drove his Ferrari instead of the Mercedes. He looked the part of a consultant. He was very aggressive. You could hear this man all over the building when he was on the phone. We decided he was just really driven by money. That's all there was ... he'd go whip someone and tell them to get work out by the end of the month so we could bill for it-and have no qualms about doing it because he's counting his bucks. He was also a very smart man. If you spent a couple of hours with him in the car or on a plane explaining a business to him, he'd have it. The man had amazing retention. Both he and Richardson were great salesmen. Malone could be an incredible talker. At times, though, you wondered how much credibility you could put in these people. They kept saying they wanted you to be part of the management team. But then they'd turn around and wouldn't even tell us where or when they would go on a client call, so you really couldn't make a contribution. Kaufmann's shock at Malone's response to the personnel question was also typical. McCaskey had worked with Kaufmann on a number of team projects and found him to be different from most of the old guard. He was working on his MBA in the evening program at Berkeley and really seemed to enjoy being with the new guard. McCaskey knew that Kaufmann also had a reputation for working on what were referred to as the "sleaze" projects in the office: projects that involved questionable practices in contacting and interviewing people who could provide very detailed information about target companies. Even so, McCaskey felt that he did this work mainly out of a sense of loyalty to Richardson and Malone: Kaufmann was always torn between doing the job and feeling, "These guys need me to help them run their business, because l'm going to be a group manager someday, and they really need me." He was torn between that and trying to be objective about his situation, saying, "They're paying me less than anybody else, but look what these guys are asking me to do." He wanted to do good in the eyes of people he looked up to, whether it's Richardson and Malone or peers like Dan or myself, because he has that personal attachment and can't step back and say, "They're taking advantage of me." He just could not make that distinction. Kaufmann had been fun to work with, though. MeCaskey had observed that many of their team projects had required increasingly detailed information about a client's competitors. These projects had given rise to discussions between MeCaskey and her colleagues about what constituted proprietary information and what, if anything, they should do if they found they had to obtain such informati