The case we want to talk about today is that of a Stanford MBA graduate who approached us to see if he (let’s assume it is he and let’s call him Sam) could join our case interview coaching program, given he had been fired with cause from a prestigious investment bank.

Sam wanted to join our coaching program with the intention to pursue McKinsey, BCG and Bain.

I will talk you through how we made the decision on whether or not this candidate could be in our program.

What it means to be ethical

The easiest thing in this situation would be to say, “Well, the candidate was fired with cause and, therefore, we should never engage with this person”. And in my opinion this is unethical behavior.

Ethical behavior is thinking through the consequences of your actions. If we choose to alienate this potential client, we are basically making a decision to leave him out in a cold, and by making that decision we are essentially limiting his options in life. We have a 74% success rate so to leave him out means his odds for success drop pretty dramatically.

Being ethical means you think about how your actions impact other people. We have to think about how our decision, either to let this Stanford MBA into the program or not, is going to impact the choices this candidate will have in life.

Candidate’s profile

A few facts about this applicant. Stanford undergraduate. Stanford MBA. An astonishingly outstanding resume. When I looked at this person’s resume I was a little bit surprised because when you have a resume like that you pretty much have a golden ticket to change the world. With a resume like that you are going to be a CEO one day.

And this Stanford MBA goes out there and he makes a mistake at one of the most prestigious investment banks in the world in their London office. He messes up so badly that the bank basically says, “We have to let you go”.

The mistake this Stanford MBA made was common for investment bankers – insider trading. He invested in stocks of a company the bank was representing. He should not have done that because he had access to insider information. The bank sent out email guidelines about this, not targeting him at all. Sam responded to email guidelines and admitted that he had done it and the bank let him go. He volunteered the information.

When I received the email I was a little bit surprised, to be honest, because in over four years of running the Firmsconsulting we never had to deal with a situation like this. So I had to think very carefully about this.

First question we asked: should this Stanford MBA go through our assessment process?

The first decision we had to make is whether or not we would put him through the application process for our case interview coaching program.

The one thing that I disagree with in the US and the West in general is when someone commits a crime we tend to punish them in perpetuity. They commit one crime, they do the “time”, whatever the punishment may be, and then for the rest of their lives we continue to informally punish them.

I think that if someone does something wrong and shoulders the burden of the crime, they should be forgiven and they should go on and earn their way into whatever life they create for themselves.

Therefore, I made the decision that we will look at this candidate’s profile. I wanted to understand if the circumstances are such that we could never trust Sam for the rest of our lives or is it something that we can forgive him for and that the candidate deserves a second chance.

If we let Sam in, I am confident that we could help him. And I will explain to you why I am confident enough after knowing all the facts. But if we don’t let this Stanford MBA in, the person’s circumstances are so unique that he most likely will never be able to get the right kind of guidance to reboot his career.

Therefore, it is a very big decision we had to make and there is an opportunity cost as well. If we let this Stanford MBA in and we are wrong about him, it means we denied another, potentially more worthy, candidate a spot in the program, since we take between 5-8% of all applicants. We cap it. If we let Sam in, someone else will not get in.

The 5-part decision making process we deployed

We ultimately decided we would look at his application because we made the decision that we don’t know all of the facts. Therefore, it is possible that once we know the facts we will decide that we have came to a different conclusion from the bank and that this Stanford MBA has not done something unforgivably wrong.

Now lets look at a 5-part decision making process we applied here. Each part consists of a test that applicant had to pass to move to the next stage of the process.

Test 1: can we trust this Stanford MBA?

The first thing we had to determine is whether or not we could trust this candidate. There is nothing else to consider if we cannot trust Sam. If we don’t trust him there is no way we are going to allow this Stanford MBA into the program.

The initial screening calls we had were brutal. The way we handle things at Firmsconsulting is we borrow a lot of techniques from the law firms: the way we analyze issues, the way we look at liability and the way we examine an event from multiple angles.

And I can assure you those screening calls with the applicant were not pleasant. We wanted Sam to run through the sequence of events multiple times. We wanted to see if there is consistency in the story.

Every time Sam would tell us things like, “Well, there is two ways to answer this question”, I would say, “Actually, I don’t want to know the two ways to answer this question. Just tell me the facts. Remove the interpretation”.

For example, if Sam did not do something because he was tired, I asked to leave out the tired part. That is subjective. I can’t know if he was tired or not. Instead I asked him to tell me, “Michael, I was working from 3am to 1am every day for 4 days” and I will determine if he was tired based on the facts alone.

What I was trying to do is zone in on the sequence of events that led to this mistake and I wanted to understand what happened. I was trying to figure out if this Stanford MBA did it on purpose or not.

Sam would go into discussion telling me, “Well, I think”. And I would stop him and say, “I am not interested in what you think. Tell me what happened. Just tell me the sequence: did this at 2am, did this at 2.15am etc”. Sam would tell me the story once and then I would have to go back and ask him to strip out more emotions so I can get the facts.

Once I got the facts on the table, I could then attach a time period. Once I could attach a time period I was trying to figure out if the event that happened occurred before this Stanford MBA was told he could not trade stocks that the bank represented or after.

And then what I was trying to do is zone in on those few moments when Sam made the decision to go ahead with the investment. I wanted to understand why he made that decision.

I would ask Sam the question in multiple formats to see if the story is consistent. So I would ask him the questions like, “Tell me what happened from your viewpoint”, “Tell me what happened from the viewpoint of legal counsel for the bank” and “Tell me what happened from the viewpoint of your friend who was advising you”. And eventually, when you get the multiple viewpoints, time periods, and you superimposed them, there needs to be consistency.

Realistically there not going to be a perfect consistency because memories are not perfect. But you expect reasonable consistency. Once I see that, and it is a result of a painful process, trust is generally established.

After going through this process, I concluded I could reasonably trust that what Sam was telling me is the truth. I am not saying that I can trust he has done the right thing, but I am trusting that the facts are correct even if he is admitting to having done something wrong.

Test 2: is it malice or negligence?

After allowing Sam to go through the selection process, the first test was, “Can I trust him?”. I wanted to see whether there is a consistency and whether the facts meet and mesh from multiple angles. And that is generally the way I establish trust.

Next I asked myself, “Did this Stanford MBA commit this act due to malice or due to negligence?”.

As you know, malice is when you do something to hurt someone or you doing something and you know its wrong. Negligence is when you are doing something wrong but you just don’t realize its wrong.

That is what I was trying to determine next. Did this Stanford MBA know he was doing the wrong thing or did he just get swept up in the moment, and forget, because he was under pressure and didn’t realized what he was doing.

The way I established this is twofold.

Firstly, I looked at the times he had done things correctly and I looked at the way he made decisions when he had done things correctly. Then I looked at the time he made this mistake and I looked at the way he made that decision. Then I asked myself, “Is the thought process the same?”.

If the thought process was always the same when he had done things correctly and diverted when he made this investment, then I can reasonably conclude that the thought process that was used when he had done things correctly allowed him to filter out things that were unethical or in this case criminal.

And I can reasonably assume that if he applied that same correct thought process when he was making a mistake, that thought process would basically raise a red flag that he was making a mistake.

I was looking for a deviation in the decision making process. Because if there is no deviation and the decision making process worked before, there is no reason it would not work in this case.

I will give you an example of a deviation in the decision making process. The deviation in thought process for Sam was that he was buying and selling stocks and, while he had a process for vetting stocks very carefully, it became very clear to me that when he made the mistake of purchasing the forbidden stock, he failed into what is known as trap of hubris.

He initially applied his vetting process to few stocks very carefully and he just ramped it up and started buying a lot of stocks. At one point trading 100-150 different equity investments. That is the deviation.

The decision making process was working very well when he had the time to vet a few stocks. But he was working long hours, with no time to sleep, it is reasonable for me to conclude that he was not applying the due diligence that is required, which most likely led to this mistake.

Secondly, it was unlikely that Sam benefited from insider knowledge. Sam did a due diligence assessment for this company few months prior to buying the stock, he worked on it for just 2 hours and no deal went ahead.

To me this looked like negligence. And if it is negligence then we go to the next step of the assessment process.

Test 3: if it is negligence, is it an acceptable negligence?

Lets recap the thought process up to now. First we looked at whether we could trust the candidate. Then we looked at deviation in the thought process. The deviation in the thought process allowed us to determine if it was a negligence or malice.

This brings us to the next step. If it was not malice, an intention to deceive, then we ask, “Is it acceptable or unacceptable negligence?”. Would a reasonable person consider this to be an acceptable negligence?

An example of an acceptable negligence is when I used to travel as a consultant and forgot that the hotel charges a 50% premium when you ask them to do your dry-cleaning. I sent it off and the client got over-billed.

An example of unacceptable negligence is when you are not thinking about the amount of alcohol you had and you get behind the wheel even though you could kill someone.

Next I asked myself, “Is this the kind of person who should be in management consulting?”. This Stanford MBA worked in the banking industry where, from what I heard, they have constant reminders about compliance. Yet he still forgets and makes this mistake.

The central tenet of investment banking is that you get access to client information and you don’t do anything with it, especially after the financial crisis. The core tenet of management consulting is that you don’t abuse your clients’ trust. They are roughly similar. If this Stanford MBA made this mistake in a field that is more aggressive about compliance, what would happen in management consulting where we are not as aggressive about compliance and we basically give people the benefit of the doubt?

Yet this Stanford MBA never benefited from this trade. He came forward and admitted this happened when he realized he made the mistake. He also made no excuses and volunteered the information. If he was trying to make money from this he probably would have made money, he would probably tried to hide it, he would not have come forward. It is not as if the bank knew what he was doing. This Stanford MBA volunteered information about the mistake he made.

Overall, to me this seemed like an acceptable negligence.

Test 4: if it is acceptable negligence, is there a pattern of negligence?

Do you punish someone for making a mistake and coming forward of their own free will as much as you punish someone for making a mistake and hiding it?

In Sam’s case there was no pattern. We all make mistakes. If there was a pattern, if there was more than one deal done, if we could see that throughout his life Sam pushed the limits then we could say it is unacceptable negligence because it basically reinforces a pattern of negligence. But we could not see that.

Test 5: is it manageable and could we manage it?

This Stanford MBA passed the trust test, he showed a deviation in his decision making process which allowed us to conclude that it was negligence and we could say it is acceptable and there was no pattern. The fact that he made no money from it, the fact that he came forward of his own free will was a big decision factor for us.

But we are not done with this analysis. The next question we have to ask ourselves is whether it is manageable and, if so, could we manage it?

Yes we can reasonably assume that it was a mistake, but it does not mean it can now be managed. There are a lot of times when you make an honest mistake but your reputation is completely damaged. The question we have to ask ourselves is that now that we are concluded that he deserves a second chance, can he actually get a second chance?

There are 4 factors to consider here.

We understand the reference checking system at McKinsey, BCG and Bain pretty well. So we know how they will check his background. And we have to ask ourselves, are we helping Sam to game the system? Is it ethical for us to do that? Are we encouraging him to lie? Should we be doing that? We also have to talk about collateral damage or liabilities that he has created in the process. And finally, what I call the ivy league envy effect.

Lets examine each in turn.

Gaming of the system

When McKinsey, BCG and Bain do a background check, they don’t call your boss and ask him a bunch of questions about you because the firms think that their partners are so brilliant that the opinion of someone outside McKinsey, BCG or Bain should not matter.

Therefore, when background check is done, it is usually a credit check, whether you have the degree you claim to have and whether you worked at a certain places. But that is about it. In fact there are quite a few offices now that don’t even check whether you worked where you claimed to have worked. But if they did, they definitely do not interview your former boss. That is a policy.

The McKinsey implementation group is trying to change this because they feel they need to know this about someone. But it is certainly not McKinsey, BCG and Bain policy. I know this sounds bizarre, since these firms handle so much crucial information about their clients yet they do such limited background check for new hires.

That is an example of hubris. They just think they are so brilliant at assessing you in the interviews that they will be able to pick out problems and don’t have to ask anyone about you. I think it is a flaw but it is the process so we are not going to game the system here because we are not altering the process.

We will be simply explaining to Sam the process and explaining to him that he does not have to worry too much about his past mistake because when McKinsey does the check on you they are going to not know this happened because their check does not allow them to find this out.

And we are comfortable with that because we are not assisting him to game the system. We are not actually doing anything.

Encouraging to lie

Now lets talk about lying. This is a big one.

We are not going to allow him to lie if we admit him into the program. That is the prerequisite. We are going to find a way to explain this to McKinsey and BCG when it comes up in such a way that he does not lie but he explains the logic in a way that is perfectly acceptable and we believe we can do that. So we are not going to allow him to do anything unethical anymore and we think this can be explained.

When we first got this email from this Stanford MBA and when we first spoke to him, Sam was a little bit of a panicked person. He had overreacted and he had explained the incident incorrectly. But once we went through all the details and understood it a lot better, we think that this is a mistake that can be explained.

As long as we are comfortable we are not encouraging the candidate to lie, or omit important information about his profile, we are comfortable with this.

People deserve a second chance if they made a mistake. We are not trying to misrepresent him. We are going to present him in the best possible light and if he can convince a partner, and we feel reasonably confident he can, he will have a second chance and he deserves it. We simply going to have to think about how to explain what happened and we think we can do it. So it passes that test.

Liabilities created through the event

The next test we looking for is a post-event liabilities test. This is one test I am most concerned about. Sam created liabilities as a result of this event because when this happened he went and told quite a few people about it and that is I think the big mistake he made. The biggest mistake.

When you get into a lot of trouble, it is human nature to ask many people for advice. I always tell people, when you get into trouble you keep your mouth shut until you get proper legal counsel. You should not tell anyone anything because you don’t know who your friends are. And even if you can recognize your true friends, they can still be pretty dumb.

Based on the way he communicated what happened to us it is clear he is not good at communicating what happened because he made it sound a lot worse than it really was. Yes he was fired with cause but when you lay the facts on the table it can be reasonably concluded that it was just a mistake.

When he explained to other people what happened, to get advice, my worry is that he painted a very negative picture or misrepresented what happened and he has left a misrepresented impression in the minds of all those people. And there is no guarantee he can trust those people. They basically know a story about this Stanford MBA that can destroy his career in the future and they can tell anyone about it because there is no NDA in place.

Even if he got into McKinsey, even if McKinsey knows what happened and they agree to hire him, somewhere down the line in his future someone could come forward and say, “You know this guy I did Stanford MBA with? I heard what happened. How can he be such a senior person now at McKinsey?”.

And the issue is not whether or not Sam did the right or wrong thing. The issue is that once there is a rumor around your profile, it is human nature to cut off all the links with you, whether the rumor is right or wrong. To err on the side of caution.

I think that is a big issue for us here. Do we go through this entire process of getting Sam in, being completely ethical, explaining what happened, getting the offer. But in the future when, at the apex of Sam’s career, it breaks out in the newspapers, it does not matter how ethical Sam was in explaining this during the interviews. Many people will still say, “He made a mistake, he is a criminal forever and why did McKinsey or BCG hire him”.

So that liability for us is a big thing and we don’t know how many people he has told. We made it very clear to Sam, “The first thing you have to do is stop talking to people about this because you don’t know what you are saying and you make a situation that is actually not that bad, once you explain it to us, sound a lot worse”.

Ivy league envy effect

The last factor to consider is, what I call, the Ivy league envy effect.

Getting into an outstanding Stanford undergraduate computer science program, working with some of the most amazing professors who worked at Google and created all kinds of exceptional things, having the privilege of interning at one of the most distinguished hedge funds in the world, accepting an offer from one of the most prestigious investment banks in the world which then pays for you to go through Stanford MBA program, the most selective business program in the world, and then you go to the London office which is arguably the most prestigious office for that bank in the world, do very well, get promoted rapidly, work on key energy accounts and you get fired.

There is a lot of envy from people who want you to be punished because they are envious of the life you had and they can’t punish every other Stanford MBA or graduates of other prestigious programs so they will take it out on you. That is the problem our Stanford MBA faces.

He told some people what happened, while painting a very dark picture. And even though those people are his friends now, he does not know if they will be his friends in the future. I can assure you that people who seem to have an easy life receive brutal punishment when tables turn.

That is the Ivy-League envy effect. There is no pity for those graduates who stumble since the world assumes they have an unfair advantage.

Our decision to admit this Stanford MBA and how it is related to ethics

Going through this entire thought process, which was not easy, we made the decision to admit Sam into the program. And if you look at my thought process you will understand the amount of thinking that went into this decision. It was not an easy decision to make. We could have just as easily have denied this Stanford MBA a place and given it to some safe candidate. And our decision could still be wrong.

But it comes down to what is the definition of ethics. Being ethical does not mean you do what is popular. Being ethical does not mean you overreact. In fact, people who overreact to ethical problems are typically the ones who are not ethical.

Being ethical means that you look at the facts and it is reasonable to conclude based on those facts that the candidate actually did not do anything unforgivably wrong. He just made a mistake and all of us make mistakes. And it does not matter what the bank may have said. We think the bank overreacted or it was badly presented. Companies do overreact at times. Companies are run by people and people tend to protect their jobs and reputations. And firing someone who made a mistake is the easiest way out in this type of situation.

We thought that, at the end of the day, do we deny someone a chance to reinvent their lives, assuming they deserve a chance to reinvent their lives, just to play it safe or do we do the ethical thing and practice what we preach? We always say that people deserve a second chance. We always say look at the facts and make a decision. And Sam passed all the tests.

The final question we asked was, “Could we manage this?”, and we thought we could. We felt we could manage this because it passes two out of four other tests for us. It passes the test where we are not being forced to game the system. We are not forced to manipulate McKinsey, BCG and Bain interview process because we don’t want to do that. We understand the process and we will talk the candidate through it, how to put his best foot forward, but we are not going to game the system.

We also not going to ask this Stanford MBA to lie but we definitely will have to find the way to explain what happened.

The liability test and ivy league envy effect are my biggest concerns. I don’t think we have that under our control but I feel that we can find the way to control it. It may take us some time but we will get there.

And that is why we admitted Sam. At a later stage, once the dust has settled a little bit, we will tell you where he ended up. What happened to him.

If you have blemishes on your resume, apply the same tests to your profile

A very difficult topic. I think everyone can agree. But I like sharing this type of information because everyone is unique and there are people reading this right now who have blemishes on their resume and think, “Oh my God, this is going to torpedo me”.

If you do, go through the same test:

Can I be trusted again? Was it malice or negligence? If it was negligence, is there a pattern of negligence? If there is no pattern of negligence, was the event acceptable? If the event was acceptable, can it be managed? If the event can be managed, could I manage it?

Think about this very carefully as you examine your profile. You have to pass all of these tests if you want to get a second chance in a corporate world. You could have done something quite reckless in your career but you still have a chance to join an elite consulting firm and reinvent your career if you can pass these tests.

The positive note here is that a lot of people are too hard on themselves for very simple mistakes. And the point I want to make here is that it is ok to make mistakes provided the mistakes fall within the boundaries of the filters we set up here and they pass these filters.

As always, I will be happy to answer questions because I think it is a very interesting topic.

QUESTION(S) OF THE DAY: Does Sam deserve a second chance at McKinsey? Please let us know in the comments.

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