Professionals' Quandaries
Harvard Business School XXXXXXXXXX
April 18, 2000
Dean’s Research Fellow Scot Landry prepared this case with the assistance of Doctoral Student Boris Groysberg and unde
the supervision of Professors Ashish Nanda and Thomas DeLong as the basis for class discussion rather than to illustrate
either effective or ineffective handling of an administrative situation.
Copyright © 2000 by the President and Fellows of Harvard College. To order copies or request permission to
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Professionals' Quandaries
Spaulding v. Zimmerman1
In 1956, David Spaulding was badly injured in an accident while he was a passenger in a ca
driven by John Zimmerman. Spaulding sued Zimmerman for medical expenses and other damages.
During the legal proceedings, a medical specialist appointed by Zimmerman’s insure
examined Spaulding. The doctor found a previously undetected aortic aneurysm, which might have
een caused by the accident. The doctor did not inform Spaulding of this diagnosis. The insurance
company and Zimmerman’s attorney also chose not to inform Spaulding of this dangerous condition.
Soon after, Spaulding accepted a $6,500 settlement.
Spaulding’s own doctor eventually discovered the aneurysm during a routine examination,
and Spaulding underwent immediate surgery. Spaulding sued, arguing that vital information had
een improperly withheld from him.
Stacey Duquette
Stacey Duquette’s first 18 months at the strategy unit of Barker Consulting (BC), a technology
integration consulting firm, had gone extremely well. She really liked the firm and the people and
felt that she had made the co
ect decision upon graduating from Harvard Business School (HBS) to
choose BC over offers from other leading strategy firms. The partners on her first four engagements
in the Energy & Resources practice had given her stellar feedback and the firm graded her “at the top
of the top tier” in her first annual review.
After returning from a three-month maternity leave in January 2000, Duquette requested and
gained permission to work on internal projects out of the firm’s Houston office so that she could be
with her young daughter and husband each night. BC asked Duquette to conduct a review of all the
1 Adapted from L.R. Patterson, Legal Ethics, 1982; based on Spaulding v. Zimmerman, 116 N.W. 2d 704 (Minn.
1962).
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XXXXXXXXXXProfessionals' Quandaries
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118 Enterprise Resource Planning (ERP) projects that the firm’s strategy practice had recommended
to, and business integration practice had implemented for, clients. When in late Fe
uary she
presented her findings, based on project reports and client surveys, to 60 strategy partners at thei
annual meetings, Duquette was praised for her “tremendous insights and recommendations.”
A week after her presentation, Duquette was approached by Phil Hollis, a partner from he
home office. Hollis told her that the following Monday he would be recommending to his client
Nelson Industries, a large multi-business conglomerate, an ERP project that could generate $10
million consulting revenue for the firm.
Hollis asked Duquette to accompany him on the presentation “just in case Nelson has a few
questions too data-specific for [Hollis] to answer.” At the presentation, Hollis never called on
Duquette to answer Nelson executive’s queries, responding instead to their questions, she recalled,
with statements such as, “As Stacey has studied, the average Barker ERP project has improved
operating income by 18%, with the best seeing over 35% improvement and no client seeing less than
10%.” Duquette sat silently during the presentation, stunned that “not only was Phil not refe
ing to
me when addressing questions about actual performance results of ERP projects, which were much
lower than his figures, but also he was exaggerating past results.” As they traveled back to the
airport, Hollis turned to Duquette and said that he thought “the presentation went extremely well”
and that he was confident that “Nelson’s gonna choose us.” He thanked her for her presence and
support.
Immediately upon returning to the Houston office that afternoon, Duquette went to see he
peer-mentor, Vicki Wish. Also an HBS graduate, Wish had joined BC a year prior to Duquette and
had recently been promoted to Engagement Manager, a year earlier than the norm. Duquette late
ecalled their conversation.
I told Vicki that I was very concerned about something Phil had done and
needed her immediate advice. (Vicki had worked with Phil on two projects.) I told
her that I believed that Phil, in an attempt to win the business, had intentionally
misled a client on how much benefit it could expect from an ERP project. Vicki
literally laughed in my face. She asked me to “grow up.” She told me, “Everyone
oversells in this business. It is a fact of life in the profession. If BC doesn’t oversell,
we will lose business to all the other firms that continually oversell thei
performance. Clients know we’re giving them the ideal case. They’re smart enough
to apply a discount factor to our, and everyone else’s, claims.”
Phil’s actions earlier in the day had unnerved me. Vicki’s advice was even
more unsettling. As I got up, disappointed and disheartened, she gave me a hug and
said, “Don’t be naïve, Stacey. It’s a tough world. If you want to succeed in this firm
and in this business, you have to become comfortable overselling yourself and you
firm.”
Lisa Jordan
In 1995 Lisa Jordan graduated from Harvard Business School (HBS) and joined the well-
known investment bank TLG as a sell-side analyst following the software sector. Sell-side analysts
were considered Wall Street's “financial detectives,” its “wizards of odds.”2 Institutional and retail
2 N.R. Kleinfield, “The many faces of the Wall Street Analyst,” The New York Times, October 27, 1985, S. 3, p. 1.
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Professionals' Quandaries XXXXXXXXXX
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investors based their investment decisions partly on the recommendations contained in the reports
prepared by the analysts.
In October 1999 Institutional Investor magazine named Jordan as a third teamer on the All
America Research Team in software and data services sector. The magazine annually named in its
“All-America Research Team” the top four or five security analysts covering various sectors.
Refe
ed to as the analysts’ Oscars, rankings were very valuable to the investment banks.
Client companies liked their stocks to be followed by ranked analysts, since that gave visibility to
their stocks. Investment banks with in-house ranked analysts often had an advantage in landing
deals. Although a “Chinese wall” separated research analysts from investment bankers, there often
was an unspoken understanding that the banks’ analysts would follow investment banking client
firms. Some observers also argued that “the analyst today is an investment banker in sheep’s
clothing,” because they rarely gave negative evaluations to firms that were investment banking
clients.3 Typically, analysts’ year-end bonuses were determined partly by the investment banking
activities in their sectors. Ranked analysts were rewarded handsomely by their firms. Whereas senio
unranked analysts earned $ 250,000 to $ 400,000 annually, first-team analysts earned $2 million to $5
million.
At age 31, Jordan had become one of the youngest recipients of star honors at her firm. He
esearch reports had come to be highly respected for carefully addressing industry fundamentals and
acking assertions with detailed financial and valuation analyses. Many retail investors closely
followed her recommendations. Her 1999 accomplishment was especially significant since she had
taken time off from her job to try and earn a spot on the U.S. Olympics speed-skating squad in
Fe
uary of that year. She had come tantalizingly close to representing her country.
At the firm’s Christmas party that year, Jordan met one of her colleagues from the corporate
finance department, Brian Tovar. Tovar and Jordan had been section-mates at HBS, had joined TLG
in the same cohort, and had stayed in touch over the years. Six months previously, Tovar had taken
charge of the group within the corporate finance department servicing software firms.
Conversation at the Christmas party turned to how Tovar was adjusting to his new
esponsibilities. Tovar was particularly excited about the prospects of TLG underwriting a highly
anticipated equity issue of a software firm. The software firm would be choosing its underwriter from
among TLG and three other banks within the next four days.
Jordan almost bit her lips. Although Tovar had not mentioned the name of the software firm,
Jordan knew from her research that Tetrasoft was actively considering issuing equity. And she was in
the midst of putting finishing touches to a report, in which she had opined that several software
companies, including Tetrasoft, were overpriced. She knew that a negative research report would
infuriate Tetrasoft’s executives and put TLG’s investment banking team at a disadvantage.
Jordan left the party pondering what, if anything, she should do. Should she postpone
eleasing her report by a week? A number of her reports had come out late the previous year because
she had been travelling or had needed additional information.
3 Jeffrey M. Laderman, “Who Can You Trust?” Business Week, October 5, 1998, p. 148.
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