Case Study On Sears, Roebuck, And Company: The Auto Center Scandal

Question 1

The case demonstrates how financial pressures, as well as changes to policies, can cause ethical issues to arise in the organization. The ethical issues, in this case, can be identified from both the deontological and consequentialist viewpoints. The deontological ethics also referred to as duty-based ethics is mainly concerned with what individuals do rather than the consequences of their actions. Regardless of consequences, certain moral principles according to some deontological perspectives, are binding (Treviño & Nelson, 2011). For this reason, the ethical issues involved in the case from a deontological perspective include honesty, fairness, and obligation of the company to provide its clients with only required service. On the other hand, consequentialist ethics is concerned with the wrongness or rightness of one’s actions based on the consequences that such actions have. Thus, from this perspective, the ethical issue in the case study is the costs to the society of many customers paying for the unnecessary service. Ideally, the company’s action of providing the unnecessary service lead to monetary loss, as well as customers losing trust in it.

Question 2

There management issues that are involved, in this case, can be described in terms of obedience to authority, norms, reward system, multiple ethical selves, and diffusion of responsibility perspectives. In terms of obedience to authority, the workers understood that the company’s management expected them to sell more service at whichever cost and exactly did that. In terms of norms, dishonesty became the way things were done within the company. The leading management issue, in this case, is the reward system. It is clear that the management pays the employees for being dishonest. In addition, the reward system within the company does not focus on means, but it focuses on ends instead. Moreover, the company’s reward system punishes the employees who are honest. In essence, the reward system generated issues with customer trust, which is the most important thing in any company. In terms of roles, there are role conflicts for the employees who sell service to the clients and those who diagnose problems. From the multiple ethical selves, the upstanding individuals, who consider themselves as honest and good were the ones who were dishonest. Finally, the new reward system in the company facilitated the diffusion of responsibilities such as the responsibility for bad advice between the service advisors and mechanics.

Question 3

Sear’s reaction to the allegations was weak. In essence, Brennan ought to have fully accepted the responsibility for making a faulty reward system and offer apologies. In addition, as the company’s CEO and Chairman, he ought to have also warned the employees to desist from dishonesty in the future. Concerning the changes that were made, I think that some of the implemented ideas were suitable. For instance, the company’s management can get useful information concerning the service that the clients are receiving from the shopping audits. Nevertheless, the company has not resolved the problem since it continued maintaining the compensation system for the mechanics. As a result, the mechanics might keep overselling more repair work than is required.

Question 4

The scandal might tarnish the name of the company. The clients would most probably doubt the quality and services offered by the company after hearing about the scandal. However, the company invested in a corporate ethics program to help rebuild its name.

Question 5

The ways that the company selected to measure performance were inappropriate. The company’s incentives that are based on sales might promote overselling. The company should do away with its current reward system and implement a straight salary system that encourages its employees to act ethically. In essence, the straight salary system should provide bonuses for referrals, customer satisfaction, and quality. For this reason, it is important for the management to provide the employees with strong ethics training and harshly punish those who would engage in dishonest activities. Additionally, it is important for the company to encourage the mechanics meet the clients and discuss the problem with them.

Question 6

It is not good for the company to punish the employees because the problem was with its reward system. Thus, the management ought to take responsibility for poorly designing a reward system that encouraged unethical behavior in employees. Rather than disciplining anyone, the company should make it clear to its employees that things are changing. It should change the reward system first and inform the employees the harsh measures it would be forced to take in the future if they engage themselves in unethical behaviors.

Question 7

The company could have increased auto center sales without giving incentives to staffs to sell particular products by improving customer service, proving training to the employees, offering discounts, and changing the remuneration system.

References

Treviño, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. Hoboken, NJ: Wiley.