Can an Organization's Relentless Quest for Market Share Drive Employees to Break the Law?

According to articles in The Wall Street Journal, a former Hewlett-Packard Co. vice president pled guilty earlier this month to stealing trade secrets after passing a confidential email from his previous employer, International Business Machines Corp., to senior H-P executives. According to an indictment filed June 27 in U.S. District Court in San Jose, Calif., Atul Malhotra was a director of sales and business development in IBM's printing-services division in March 2006 when he requested confidential pricing information about IBM services. In May 2006, the indictment says, Mr. Malhotra became a vice president of H-P's printing division. That July, the indictment alleges, he "sent an e-mail to an H-P senior vice president with the subject 'for your eyes only'" with an attachment including the confidential information. He allegedly followed it up with a similar email to a second senior vice president. Malhotra, 42 years old, faces a maximum of 10 years in prison, a $250,000 fine and three years of supervised release. A spokesman for the U.S. Attorney's office in San Francisco declined to say what penalties prosecutors would seek. A sentencing hearing is set for Oct. 29.

My first take on this incident was that it was the latest in a string of senior executives acting unethically in the false belief that doing so would afford competitive advantage. However, deeper inspection illustrates another more interesting explanation -- that ethical foul-ups are a symptom of companies’ misguided efforts to increase market share.

It has long been argued by strategists and economists alike that prudent corporations would be wise to compete on dimensions other than price. Because it is possible to segment out individuals, groups, and clusters of groups that share similar beliefs, goals, aspirations, needs, and desires, it is desirable for competing companies to target slightly different customer clusters and position their respective products accordingly, allowing multiple competitors to exist peaceably with each other. Look at Apple Inc., whose products are designed and positioned, not as commodities, but more as genuine appeals to a lifestyle. Apple’s reward? The company remains one of the only PC manufacturers able to sell every computer it produces at a profit.

If this is the case, why then, do so many companies destroy industry value by engaging in direct, head-to-head competition? One answer is likely found in the antiquated notion that market share is a legitimate measure of organizational success. In reality,  market share is such a malleable, perspectivist metric (it is entirely dependent upon how one defines their market) that it is practically useless as a gauge of organizational performance, despite the emphasis organizations put on as a metric of their performance.  Regrettably, to gain market share, firms often do what comes natural: they slash prices, a nasty side-effect of which is often the commoditization of their products, which, remember, the theorists argue is unnecessary.

The problem, of course, is systemic in many industries (particularly IT), which brings us back to our friend at HP. It could be argued that the pressure to gain market share is so indelibly entrenched in the consciousness of some organizations, that their employees are compelled to take the low road in an effort to gain incremental share.  Was the desire to help his organization achieve a stated goal what compelled Malhotra? Was it simply poor judgment or the prospect of personal advancement? Perhaps. But what if it was something more insidious. What if blind adherence to an antiquated metric created an environment so unrestrained in its single-mindedness that it prompted individuals to act without regard to creed, convention, or code of ethics. What if Malhotra is guilty of nothing more than toeing the party line? And if you can entertain this thought, then think of this: is your organization doing the same thing?