Ethically Questionable Behavior in Business - Coursework Example

Business ethics: Discussion of the case study Ethically questionable behavior is that behavior which is legally allowed, but is ethically incorrect. Concern over the unprofessional, ethically questionable and rude behavior of managers, and employees in many companies is fast becoming a matter to ponder upon. The profession for which this is felt the most is the sales profession. A tight economy and sales quotas put the sales people under pressure to perform, and then they are most likely to exhibit only the positive features of the products they sell. In most organizations the sales environment is a war type one, which is becoming worse by the day. This case study aims to explain the ethically questionable behavior of sales representatives in the pharmaceutical industry. Medical Representatives of the Taiwanese pharmaceutical industry that deals in all kinds of biomedical medicines, and prescribed drugs have formed the sample of the study. Sales Representatives working at hospitals, and not pharmacies or clinics, were considered. 24 sales representatives are informed of the questionnaire, and then of the 16 scenarios, only one version was exposed to each respondent. In total, 328 respondents were analyzed (Hsu, Fang and Lee, 159). In this case study, the differences in the ethically questionable behavior are examined using four variables: “Frame Pattern”, “Commission Structure”, “Behavior Control Type”, and “Marketing Norm Perceptions.” The Medical Representatives are given a scenario, the background information, and the treatments. They now have to get into the character’s shoes, and arrive at a decision that if they were in that situation what they would have done. The background information given to them is as follows: In the pharmaceutical industry, sales personnel should invite clients to banquets in order to make the sales. The price should not exceed 3500 dollars in Taiwanese currency, but your client has chosen a restaurant that exceeds the bill of 3500 dollars in Taiwanese currency. The treatments are: (Hsu, Fang and Lee, 159). 1. “The sales representative’s profits (have already reached/are only at) 50%, and the probability of (receiving/failing to receive) the client’s deal, which will achieve the quota, (will increase considerably/is minimal)” (Hsu, Fang and Lee. p. 159). 2. “The base salary of the sales representative is (600/400) thousand dollars. If he achieves the annual quota, a bonus of (200/400) thousand dollars will be awarded to him. The ratio of this award to his base salary is (only 33%/ 100%)” (Hsu, Fang and Lee, 159). 3. “The company extends (strict/loose) behavioral control to sales representatives, and (is able/unable) to closely monitor whether the representative honestly reports the costs.” 4. “The representative has a (high/low) perception of marketing norms, and (understands/fails to understand) that inviting the client to the restaurant is an ethically questionable action.” If the respondent’s frame pattern is ‘‘have already reached, receiving, will increase considerably”, the situation is deemed ‘‘gain.’’ On the other hand, if the respondent’s frame pattern is “are only at, failing to receive, is minimal,’’ the situation is deemed ‘‘loss.’’ If the respondent feels, ‘‘600 thousand, 200 thousand, only 33%,’’ the situation is a ‘‘low commission structure’’ situation. But if the respondent feels ‘‘400 thousand, 400 thousand, 100%”, the situation is a ‘‘high commission structure’’ situation. In terms of behavior control, if the representative feels “strict, is able”, the situation is that of “strict behavior control.’’ The other case of “loose behavior control’’ would be when the representative feels “loose, unable”. If the respondent thinks “High, understands”, then the respondent is said to possess ‘‘a high perception of marketing norms.’’ If he feels “‘‘low, fails to understand’’, then he has “a low perception of marketing norm’’ (Hsu, Fang, and Lee, 158). The result of this questionnaire, and sample study was that 39% of the respondents chose ethical behavior, while the rest chose ethically questionable behavior (Hsu, Fang, Lee, 159). A regression model was run on the variables to test the hypothesis of the studies carried out on the four variables. The model revealed that ethically questionable behavior is much easier and alluring to take up. Overall, the research results show that sales representatives choose to engage in unethical behavior 1.5 times more often than the ethical alternative (Hsu, Fang, and Lee, 163). This ethically incorrect behavior results in customer complaints, loss of goodwill and company reputation. From the case study, one learns that managers must take appropriate actions like training and development to foster well being, and to promote ethicality. The relevance of the four variables used by Hsu et al Results suggest that a person in a “gain frame” (in comparison to a “loss frame”), in a “low commission structure” (compared with a “high commission structure”), in “strict behavior control” (in comparison to “loose behavior control”), and in a “high perception of marketing norm” (compared with a “low perception of marketing norm”), is more likely to make an ethically correct choice. The Frame Pattern variable has been explained by the “Prospect Theory”. The judgment bias a person carries is the framing effect. When under pressure, some sales people may still be in a positive frame of mind, energizing their work. There are other sales people who are always pessimist and negative. These people invariably invite more pressure. The Frame Pattern offers the following Hypothesis: “A sales representative who has a loss frame pattern (compared to a gain frame pattern) is more likely to choose the ethically questionable option.” The Commission Structure suggests that the love for money may lead to ethically wrong behavior. People who wish to get rich quickly, without any hard work, become tempted, have foolish and harmful desires, and ruin themselves, and other people in the society. The lucrative commissions and incentives offered to sales people upon reaching or exceeding their targets may influence choosing unethical means to do so. The higher the commission structure, the higher the probability of adopting unethical means. The Commission Structure study offers the following Hypothesis: “A sales representative who has a high commission structure (compared to a low commission structure) is more likely to choose the ethically questionable option.” The Behavior Control Type study states that managers can direct and control the sales people based upon their behavior only. This is because sales people travel all over and meet so many different people that their company cannot monitor each and every action of theirs. In such a scenario, there are some common frameworks, mechanisms, and methods for understanding whether the sales person is adopting ethical behavior or unethical behavior. Sales people must provide detailed reports of their meetings with the client, the number of clients visited everyday, and the responses of clients. These detailed reports allow managers to evaluate the performance of the sales people, and also forces them to adhere to certain standards and ethical behavior. Strict behavioral control measures help regulate the actions of sales representatives into doing what they should be doing. These measures are limited work areas, or domains and adopting organized work plans and operating plans. The Hypothesis that follows this study is: “A sales representative whose company implements loose behavior control (compared to strict control) is more likely to choose the ethically questionable option.” Marketing Norm Perceptions proposes certain norms, rules, guidelines according to which sales people must act when they encounter different situations. These norms are so designed so as to enable the sales representatives to take decisions that are ethically correct. Every sales representative will have different perceptions of these norms. Someone who has a low perception will engage himself in wrong doings, and those who have a high perception of the norms will create the highest profits and goodwill for the organization. The hypothesis offered by the study is: “A sales representative who has a low perception of the marketing norm (compared to a high perception of the marketing norm) is more likely to choose the ethically questionable option.” These four variables are the most important variables that influences a person’s choice regarding the means and methods he adopts to achieve a target or goal. An understanding of these four variables would enable companies to encourage and promote ethical behavior among its sales force, and thus reap greater benefits in terms of profits and goodwill. There are other variables as well that influences one’s choice, and they are employee personality traits, corporate culture, corporate governance, environmental influences and industry competitiveness. The organization’s structure, culture, corporate governance, the industry in which the organization operates, and the external economic and legal environment etc determine an employee’s act. The economical and the legal issues pertaining to the sales profession inspire them to undertake immoral actions in order to make the sale. The urgency of a particular situation also influences an employee’s choice (Factors that pressurize Ethical Behavior). The various aspects of a sales transaction Ethics is “the set of rules or standards that govern the conduct of a person or members of a profession.” It consists of an individual’s belief system and consists of knowing what is right and what is not. Which aspects of sales transactions are considered ethical, and what action is unethical is a very important question (Sales & Distribution Management). The most important ethical aspect of sales is telling the truth to the customers about the product or service which includes the defects as well, and not hiding any important fact. Another important aspect for a sales representative is to speak the truth or be accountable to his employer, and be loyal to his company. He should not spoil the goodwill of the company because he is the representative of the company to the outside world (Sales & Distribution Management). Lying has become the only way of selling: when a sales person cold calls a client, he usually begins the conversation by saying that his company is conducting a survey to find out if their products really meet the needs of the market. He lies to the client in order to engage him on the phone. This is not ethical. But why does the sales person need to lie, when he should be saying the truth. This is traditional selling which makes use of every technique to make the deal and to lie. This approach of selling is embedded so deep in their minds that they cannot make out the differences between right and wrong (Galper). Sales people belonging to different industries have to adhere to different legal rules or laws, and specific economic conditions. Different countries have also different rules regarding the sales profession. They have to operate within the boundaries of their economies. Mostly all sales people require a license, and need to follow proper and correct documentation. When selling financial products like insurance, credit cards etc sales personnel must explain all the policies, returns, refunds, claims etc. For example, sales people are not allowed to sell cigarettes and alcohol in most countries. One of the traits of successful sales people is that they take responsibility. If they fail to meet their sales quotas, they do not blame internal problems, the economy, or tough competitors. Instead they try to find out where they lacked (Robertson). The economic environment affects the day to day operations of the sales force; any downturn would adversely affect the sale of every unit, and vice versa. The economical environment poses both threats and opportunities that technological and legal evolutions would bring about. The labor market also does affect sales people and sales mangers – when the economy faces a recession, sales jobs becomes abundant, and vice versa (Darmon). If the country’s economy is experiencing a downturn, then consumers won’t be having much money to buy goods, and vice versa, so sales personnel need to understand that as well. The steps that should be taken by HR and Marketing directors to promote ethical behavior in their sales force In order to promote ethicality, top level managers need to write a separate code of ethics for the sales and marketing department. This needs to be communicated to the sales force. Thereafter, the management should decide the parameters or boundaries within which they can take actions. Managers have to balance ethics, economical and legal decisions. The managers must provide ethics training to them. Managers should take the suggestions of sales people while designing campaigns which would stimulate creative thinking. The managers have to create positive energy, brotherhood feeling, and honesty amongst its sales force (Turner). HR managers can organize contests and picnics for the sales force. The top level managers need to focus on the “Mindset Approach” that enables one to build trusting relationships with the client by trying and solving the client’s problems and always speaking the truth. Companies need to move away from the traditional methods of selling (Galper). Companies must move their focus from product portfolios to customer portfolios. They must provide effective and efficient customer relationship services (Kotler, Jain, and Maesincee). Sales people must think that if they were the customers, how they would feel. Corporate Social Responsibility (CSR) is the new mantra whereby which companies commit itself towards economic development. This promotes ethical practices. The managers must address every problem personally which the sales people face with customers, other sales people etc. He must be fair in assigning territories, in hiring and evaluating sales people and in rewarding and providing recognition to sales people upon their achievements (Sales & Distribution Management). Last of all, managers must monitor and evaluate their sales force closely, from time to time. Hence, it is in the hands of the senior management to ensure adoption of ethical practices. Works Cited 1. Hsu, Ya-Hui, Fang, Wenchang, Lee, Yuanchung. Ethically Questionable Behavior in Sales Representatives – An Example from the Taiwanese Pharmaceutical Industry. 2009. (Accessed on July 2, 2009) 2. Galper, Ari. Sales Ethics: When Did It Become Okay to Lie? Principled Profit. n.d. Available at: http://www.principledprofit.com/sales-ethics.html (Accessed on July 3, 2009) 3. Sales & Distribution Management. ICMR Case Studies and Management Resources. n.d. Available at: http://www.icmrindia.org/courseware/Sales%20and%20Distribution%20Management1/SDMC26.html (Accessed on July 3, 2009) 4. Kotler, Philip, Jain, Dipak, Maesincee, Suvit. Marketing moves: a new approach to profits, growth, and renewal. Boston: Harvard Business Press. 2002. Available at: http://books.google.co.in/books?id=UEzRNYRI_TwC&printsec=frontcover&source=gbs_v2_summary_r&cad=0 (Accessed on July 3, 2009) 5. Factors that pressurize Ethical Behavior. Brighter Way. June 16, 2009. Available at: http://www.brighterway.co.in/factors-that-pressure-ethical-behavior/ (Accessed on July 3, 2009) 6. Turner, Willis. Ethics in Sales and Marketing. Evan CarMichael. n.d. Available at: http://www.evancarmichael.com/Sales/437/Ethics-in-Sales-and-Marketing.html (Accessed on July 3, 2009) 7. Robertson, Kelly. Advertising, Sales and Marketing - 10 Characteristics of Successful Salespeople. Business Know-how. n.d. Available at: http://www.businessknowhow.com/marketing/successful-salesperson.html (Accessed on July 6, 2009) 8. Darmon, René Y. Leading the sales force: a dynamic management process. Cambridge: Cambridge University Press. 2007. Available at: http://books.google.co.in/books?id=cVhPULxW8lwC&pg=PT170&lpg=PT170&dq=economic+conditions+under+which+sales+operate&source=bl&ots=nddeB8DjQ4&sig=OjgTvGu5lId4__d4nBaWNxPuBnY&hl=en&ei=AcVRSp27A6Xs6gOL3YH8Aw&sa=X&oi=book_result&ct=result&resnum=3 (Accessed on July 6, 2009) Read More