A senior project manager from a 28-year-old family-run drywall and painting business recently brought a dilemma to Dave Ramsey on the “EntreLeadership” podcast. His company, which earns around $13 million a year and employs 30 people, has always earned work from general contractors based on speed, quality and reliability.
When Business Relationships Get Competitive
“Lately, our competition is spending money taking the general contractors on hunting trips, fishing trips, golf trips, and stuff like that,” the manager said. “We have never had to do that.”
His question to Ramsey: Where’s the line between building relationships and crossing into bribery?
Don't Miss:
- The same firms that backed Uber, Venmo and eBay are investing in this pre-IPO company disrupting a $1.8T market — and you can too at just $2.90/share.
- Kevin O'Leary Loves ‘Wonderful Recurring Cash Flows' — These Small Industrial Assets Deliver Just That
“Well, it’s not unethical,” Ramsey replied. “And the way you play the game is you take them on hunting and fishing trips.”
But Ramsey made clear that intent and outcome are what define whether something is ethical or not.
“The purpose of the trip is not to bribe someone if it’s done ethically. It’s just to build relationships,” he said. “And it’s standard practice in the subcontract world with commercial contractors.”
Ramsey shared how his own organization has handled this: “We’ve taken advertisers that have spent millions of dollars with us to a World Series game. We’ve done it as thank-yous. We’ve taken people to baseball games, football games, stuff like that. But when we get home, the advertising still has to work for them and we still have to get paid for it.”
Trending: 7 Million Gamers Already Trust Gameflip With Their Digital Assets — Now You Can Own a Stake in the Platform
He emphasized the importance of value and performance remaining at the core of any deal. “If the only reason you got business was because of the trip, then that’s just bribery and that’s where the ethics break down,” he said.
For the manager’s specific case, Ramsey suggested allocating a budget to build stronger client relationships. “You probably need to add that to your line item in your budget to take some of your biggest customers and do some nice things for them,” he said.
But again, Ramsey warned against expecting favors in return. “You’re not doing it with any expectation that they owe you the next job. You’ve still got to earn it with pricing and with service. That’s ethical,” he said.
See Also: Kevin O'Leary Says Real Estate's Been a Smart Bet for 200 Years — This Platform Lets Anyone Tap Into It
In large-scale corporate settings, Ramsey noted, rules are stricter. For example, he said some purchasing agents at major retailers like Walmart (NYSE:WMT) aren’t even allowed to accept gifts like pizza, just to avoid any gray areas.
“If the intent is just to say thank you for a quality relationship, that’s ethical,” Ramsey concluded. “If the result is you get a bid you shouldn’t have gotten without the hunting trip, then that’s bribery and that’s unethical.”
Read Next: From Chipotle to Red Bull, Top Brands Are Already Building With Modern Mill's Tree-Free Wood Alternative — Here's How You Can Invest Too
Image: Shutterstock
