The Main Management Issues - Essay Example

Its good intentions were soon engulfed in the unethical behaviours by both the service advisors and the mechanics because they tend to mislead customers by recommending repairs that were really unnecessary, just to meet their sales quotas of certain product item-specific parts and thereby earn commissions as well. The factors contributing to this unethical situation were its incentive plan which stokes the greed of employees to earn commissions and also the pressure of meeting the sales quotas imposed by the management of Sears to increase its profits.

The ethical approach taken by Sears, Roebuck & Co. was the consequentialist approach because they did not mind how the sales quotas are met or attained by their employees as long as their objective of raising their profits is attained in a highly-competitive environment of auto repairs. Management was desperate to reverse its sales decline and therefore did not mind how to attain a better profit picture as long as it is achieved. In this regard, it is like the saying “the end justifies the means” which is actually quite Machiavellian in its nature already (Falco, 2004, p. 384).

Sears' response to the allegations was inadequate because it did not even issue apologies to its customers. Instead, it did was justify its actions by claiming the repairs were done for purposes of preventive maintenance, especially on older cars. Further, it claimed some errors had been committed but only in rare instances, that the allegations of fraud were not widespread in its store chain. More damaging perhaps was it retained and merely re-designed its incentive plan by excluding the service advisors from commissions but the mechanics are still on the same plan as before the allegations came out by using a different term for it as incentive pay or piecework. Its net effect over the long term was it damaged the trust of its customers, with the end result of it not having increased sales revenues of its auto centres by end of 1992 (Trevino & Nelson, 2010, p. 288). People were now suspicious of bringing their cars to Sears for fear of being overcharged.

Key facts of the case are sales and profits were declining, and management implemented its new incentive plan based on commissions which caused some employees to commit an unethical act by recommending unnecessary repairs due to pressure to meet their target quotas as well as to earn higher commissions by overcharging. The stakeholders affected by such a new arrangement were the employees who had to meet their quotas and the customers who end up paying higher. One consequence of the scandal was that customers were now reluctant to bring their cars to the Sears auto centres for repairs because of the fraud allegations. Its response to retain the mechanic on a commission basis did not eliminate the problem because it is precisely the same mechanics who perform the inspections, diagnoses and recommendations for repairs so the motive is there. The relevant obligation to solve the dilemma is to eliminate the greed motive of the mechanics so they will perform only needed repairs.

Ethics should be embedded in its organizational culture in a way by requiring managers to emphasize customer satisfaction first and foremost. This ethical corporate culture can serve as guidance to auto centre managers (ibid. p. 150). Integrity will earn repeat business deals from loyal customers and build trust over a long-term relationship (Lawfer, 2004, p. 198). All satisfied customers are the best advertisers who spread the good word about how excellent a company's product or service is and recommends it to their friends as well. The order of priority should be customers first, employees second and company investors or owners third. A possible creative alternative action was for the company to issue a public apology, in addition to its settlement with the state of California admitting its mistakes, as with all the other 41 states. This action would have restored consumer confidence in Sears, Roebuck & Co. and indicated to them it is serious about correcting its mistake and that it will not happen again. My “gut” tells me the best way was to offer aggrieved customers a refund (Barlow, 2009, p. 205) in order to be fair.