E-Bay Case Study: Transparency in Business
Question
Under Meg Whitman’s leadership, eBay has changed the way the world buys and sells secondhand goods. Before eBay, individual owners of antiques, family heirlooms, used equipment, collector’s curios, etc., would take their items for sale to antique dealers, pawn shops, etc., and hope to get a fair deal. They depended on the dealers to assess their item and tell them what a fair price would be. Unless you were an expert, you would have little idea how much that silver teapot you inherited from your grandmother might be worth. Even the dealers might be uncertain – how much would someone pay for a picture of Elvis made with dried beans? As Meg Whitman pointed out in her book (with Joan Hamilton, 2010), The Power of Many: Values for Success in Business and Life, eBay added transparency to the buying and selling process. Potential buyers, including professional dealers as well as hobbyists and other nonprofessionals, would have to compete with each other to buy the products. Thus, sellers could be assured that their items would be sold at fair market price regardless of their own knowledge. At the same time, sellers had to be transparent and ethical as well: eBay set up chat rooms where hobbyists could comment on sellers who inaccurately described their products.
Pierre Omidyar founded eBay and came up with the basic idea to sell used goods over the Internet. Pierre knew he needed someone with administrative experience to grow eBay from a small start-up with 30 employees to a major corporation. Meg Whitman had experience as a consultant and as a business executive at major corporations like Disney and Hasbro. Meg left her secure, high-paying executive job to join eBay in part because she liked Pierre’s sense of ethics. Meg stated that it’s a myth that leaders have to be unethical to win and “that great success demands that we give up, or at least fudge, our relationship to what most of us recognize as decent, commonsense values. Honesty. Family. Community. Integrity. Generosity. Courage. Empathy” (Whitman & Hamilton, 2010, p. 5). Meg believed that if they had treated eBay community members (i.e., users) as a resource to be exploited, eBay would never have grown and prospered.
Interestingly, Pierre and Meg assumed that “most people are basically good” (Whitman & Hamilton, 2010, p. 28). In other words, they believed that most eBay community members would describe their secondhand products in a fairly accurate and transparent manner and in general would treat each other ethically. Notice that Pierre and Meg didn’t say that all people are always good. They realized that fraud and theft over the internet occurs, so they created eBay’s Trust & Safety division to monitor the transactions to prevent the selling of counterfeit goods, devious bidding tactics, or other inappropriate behavior. But Meg argued that eBay works because most of their customers are basically honest. She recommended that business leaders be realistic but not cynical.
1. How important is transparency to your interactions with your leaders?
2. Is transparency good for business? Why or why not?
3. Can leaders trust most of their employees and customers to be basically good? Why or why not?
4. How is trust related to leadership?
Answer
Transparency is critical in the business world and allows leaders with similar minds to work together, guided by the same values and ethical codes. Transparency also assists managers to identify other business heads with a strong sense of morals and incorporate them into their teams. Example, Pierre Omidyar, the founder of e-Bay invited Meg Whitman to help the organization to grow. The two leaders identified each other because they shared a common sense of ethics and believed that a leader did not have to be dishonest to succeed. The philosophy helped build a marketplace where buyers and sellers interacted transparently and each party got a fair deal.
Transparency has a significant value for business because businesses have a positive public image and no underhand practices such as tax evasion, low-quality products, and fraud. The increase in the competition gives consumers more purchasing power, and customers are likely to prefer companies with a pellucid and responsible business model including corporate social responsibility, employee, and customer treatment.
Furthermore, leaders can trust most of their clients and workers to be reliable. Business directors are responsible for setting the organization’s culture which guides the behavior of both customers and employees. The institution’s norms are based on the code of ethics. For example, e-bay established the Trust and safety division to monitor sales, prevent counterfeits, and inappropriate behavior. By creating the department, the leaders made a strong statement that e-bay could not tolerate illegal market practices to all stakeholders.
It should also be mentioned that trust is related to leadership because it is a founding principle of every business and a trait that customers seek before engaging. Business leaders must build a reputation that can be trusted. If the clients have confidence in the leaders, then they trust the products and services offered by them. To build trust, managers must practice workplace ethics and ensure that the enterprise model reflects transparency and accountability.
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