Why Didn’t Gap Fall into the Gap?

November 1, 2007 at 2:12 pm Leave a comment

A role model lesson in ethics, openness, transparency, and responsible documentation occurred this week.    The Observer reported that an unauthorized sub-contractor of a contractor of Gap was using child labor to manufacture garments for an upcoming fashion season.    Early media speculation centered on the potential black eye to Gap’s ethical image.

The story broke on Sunday, October 28.   It has a hook that appeals to the web news cycle — Global company oppressing third world masses.  This story should have legs and criticism of Gap should mount.   Yet, by Wednesday, October 31, the story was off the internet.  How was Gap able to pull this off?    

Gap successfully mitigated the potential damage through a history of openness, transparency, and documentation that allowed them to address the potential criticism head on.  Gap already had reports publicly documenting its 90 “Vendor Compliance Officers.”   It was already a matter of public record that these officers had performed 4,438 inspections of 2118 factories in 2006.   Its spokespeople could quickly recount that 23 contracts had been terminated based on noncompliance.    

By Monday, Gap had terminated relations with the contractor, seized the inventory, and committed not to sell the child-made goods.  

Gap understood two concepts that our health care customers and prospects miss occasionally.   Public trust requires compliance management even more than the law does, and vendor management and compliance is not a passive practice.   Compliance takes some effort.   Gap could easily have limited its compliance efforts to having its suppliers sign a pledge of good behavior.   Surely that would have limited its legal exposure.   But Gap understood that public trust required a more active effort.   By naming “Vendor Compliance Officers”, by actively investigating vendors, and by acting on the information from those investigators, Gap has protected its public image.   Much of the resulting web commentary is pro-Gap, just like this post.         

Our Take:   Too often we hear health care systems looking for solutions that address the letter of today’s laws and regulations.   “Keep it simple, and keep the effort off our already burdened back,” they cry.  We understand that.  No one looks for more work to do.   

Yet regulations are often created as protections for the consumer.   As U.S. health care shifts to a consumer-driven model, the consumer will hold the provider accountable, not for the letter of the law, but for the spirit of public interest.    

Leading health care providers look for vendor management and compliance solutions that are more than just a “sign here to acknowledge that you read this” file.  They are balancing the letter of regulatory compliance requirements with active vendor management, such as integrating score cards to track the intangibles of vendor performance as well as the pass/fail of expired certifications.   They want to know their business partners are exemplary, not just acceptable.    

Gap initially instituted its ethics policies to address criticism of previous child labor use.   From this experience, I believe its program has been successful, both from financial and ethical perspectives.  Health care providers shouldn’t wait for a well-publicized complaint to move from passive to active vendor compliance management.  

Sidebar:  Interestingly, the Delhi police were slower to act than Gap.   They did not raid the factory and recover the child workers until Tuesday.  

Entry filed under: Know Your Vendor, vendor compliance, vendor management.

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