Growth Insights for CEOs

Quid Pro Quo? Or Quid Pro NO? Discounting Can Be Dangerous!

Posted by The Chief Outsider



What is "Quid Pro Quo? Wikipedia defines it as an exchange of goods or services, where oneShould companies barter for good and services? CEOs share their experiences.
transfer is contingent upon the other. P
hrases with similar meaning include: "give and take", "tit for tat", and "you scratch my back, and I'll scratch yours." Recently, I have been involved in several discussions with CEOs on charging for their goods and services. The discussions weren’t concerning the actual price for the services, but the ultimate cost between the buyer and the seller. Let’s share some examples. (with the names changed to protect the innocent or, in some of these cases, guilty parties)

The Stories

One CEO—I will call him Joe—runs an executive consulting firm. He had a problem with a leak in his house. He needed immediate help and called one of his clients Sam, who is the owner of a construction company. Sam immediately sent someone out to fix the leak but didn’t send Joe a bill. When Joe asked him about it, Sam responded, “No problem. You’re a friend. Don’t worry about it.”

Adele owns a restaurant in town. Bill, an influential colleague held several events there but has been ignoring the bills Adele has sent. The amounts are significant. Adele is worried about pressing Bill too hard as he could possibly react strongly and hurt her restaurant business. Bill has been referring business to her.

Tim is the CEO of a local accounting firm. The firm needed a new website. He contacted Rachel who owns a website design firm, and they discussed a cost-effective approach to building the site. They decided to exchange professional services rather than money, so he is now taking care of her accounting and she is taking care of his website.

Any of these sound familiar? Have you encountered any similar situations? For a another perspective on this, read this legal blog. 

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What happens when professionals who are friends and colleagues give each other “Special Deals”? What are the upsides and downsides of these approaches?

The upsides are apparent:

Joe got his leak fixed quickly and without a charge. He in turn recommended Sam to other homeowners.

Adele has gotten several referrals from Bill resulting in other events from Bill’s large network of acquaintances.

Tim has a nice new website. Rachel’s accounting is up-to-date.

What about the cons?

Will Joe call Sam again for construction work? Or will he feel too guilty to call since he got the work done for free and doesn’t want to take further advantage? On the other hand, what if he does want to take advantage of the great work for free and keeps on calling Sam.  How will Sam feel if he doesn’t call? Or if he does?

Will Adele have to write off the charges from the events Bill held at her restaurant? Will he expect her to continue the special treatment? If she does ask him for payment,  what will the impact on the relationship be? If she doesn’t, what is the impact?

What if Tim’s business grows and Rachel’s firm isn’t big enough to handle it? What if the accounting work Rachel needs is more of a time/resource allotment than the website work Tim needs?

These are all tough questions and there is no universally correct answer. However, in my personal experience, these situations generally turn out to be more negative than positive.  

I can remember years ago lending money to a colleague who was in a difficult situation. Even though the situation quickly improved, the payback didn’t. After several reminders, I finally wrote it off, thinking it wasn’t worth further hurting the relationship. But the relationship never improved. It was poisoned. I guess I forgave but didn’t forget. In reciprocal service agreements, over time, someone generally feels like they are giving more. And when we feel taken advantage of, we get hostile, defensive or passive-aggressive. And if someone senses they are getting more, they often have feelings of shame, defensiveness and guilt. These feelings also poison a relationship.

These are not universal truths. Sometimes it can all work out. But reciprocity in a relationship is essential. It can come in different ways. But it must be present for the relationship to prosper.

What do you think? Have you had situations that worked out well? Badly? Please share your comments below.

Topics: CEO Marketing Strategy, CEO Perspectives, Corporate Strategy