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Consequentialist and Deontological Ethical Issues.
Consequentialism states that the morality of an action is determined by the specific results of that action. Deontology, on the other hand, states that the morality of an action is determined by duty or adherence to given rules. (Theodore Roosevelt)
Consequentialism is based on the consequences of actions. According to consequentialism, actions are right or wrong depending on whether their consequences further the goal. The goal or "the good," can be something like the happiness of all people or the spreading of peace and safety. Anything which contributes to that goal is right and anything which does not is wrong. Actions are thought to have no moral value in themselves, but only get moral value from whether or not they lead to the goal.
Deontology comes from the Greek word deon, meaning duty. According to this theory, it is your duty to do actions which are right and not do those which are wrong. Actions are thought to be right or wrong in themselves. (Karen Mundrasi)
The ethical issues within the Sears and Roebuck case should be evaluated within the consequentialist framework. All of the decisions implemented by Sears were based on the fact that they wanted to increase profitability and recapture market share from Walmart and other discount retailers. So the goal or "good" of the company was the basis on which they made unethical decisions.
The main issue involved the change in the pay scale of mechanics and sales associates in the Auto Division. This idea of paying employees a sales commission opposed to a base salary or wage is often debated.
Some managers believe that paying only salaries and hourly wages can assure customers that sales professionals are trustworthy and will make sound decisions. Columnist Norm Brodsky, has argued that sales commissions can hurt teams. High commissions paid to sales professionals can draw the ire of salaried workers in other areas of a company, while high commissions can tempt employees into unethical behavior. (Joe Taylor) Sales employees and Auto center repairmen were supported by new company policies, to charge more and oversell. In his open letter, former repairmen Chuck Fabbri clearly stated that service advisors, mechanics, and inspectors were colluding to charge customers for more repairs. Undercover auditors detected that repairmen were diagnosing brake repairs that did not exist, merely to increase commissions. Employees were conducting themselves this way because it was what Sears and Roebuck defined as a standard.
Management's Role in Unethical Behavior.
A definitive reward system and a strict mandate for obedience to authority guided the unethical practices implemented by Sears Management. Employees had no choice but to adhere to the ground rules laid by their organization. Any other alternative could have resulted in a separation from the company.
Rewards Systems consist of the following: (1) Base Salary, (2) Pay Incentives, and (3) Employee Benefits. Reward Systems should also key drivers of HR Strategy, Business Strategy, and Organization Culture. When corporations lose money and market share consistently, they operate in desperation mode. This was evident by the sudden change in pay in conjunction with cutting salaries and benefits. Sears sent a message to their employees by switching to a commission-based structure: "Sell as much as humanly possible, and you will be rewarded. Don't sell and you will be penalized."
Managers must realize the power they hold as authority figures in work organizations. Even today in most team-oriented environments, most people will do what they are told. Authority figures must therefore, exhibit ethical behavior and they must send signals that high ethical standards are expected from everyone. This message should begin at the top of the organization and move its way down through every level. Moreover, when unethical behavior is uncovered, the investigation must consider the implicit and explicit messages sent by authority figures. The tendency is to try and isolate the problem or find the one "culprit." But the culprit may have been encouraged implicitly or explicitly by a superior. Most employees are apprehensive about questioning authority in large organizations, no matter what the condition of the economy is. Sears employees were no different. Most likely, there were several mechanics like Chuck Fabbri but no one else came forward.
Sears & Roebuck Managers Diffused Responsibility for their Actions.
The idea of diffusing corporate responsibility was expressed best by whistleblower Sherron Watkins, with only about five minutes left to go in the Enron documentary. Watickins said: "Enron should not be viewed as an aberration, something that can't happen anywhere else. Because it's all about the rationalization that you're not doing anything wrong. We've involved [accountants] Arthur Andersen, we've involved the lawyers, the bankers know what we're doing. There's a sense -- the diffusion of responsibility.
Everyone was on the bandwagon. And it can happen again." (Alex Gibney)
This was a diffusion of corporate responsibility. CEO Edward Brennan remarked the same way by immediately denying allegations of unethical behavior and citing all the "right things" that Sears was doing. In other words, the message was look at all of the things were doing right. We can't possibly be doing something wrong. Similar to the Enron case, there was a preponderance of evidence to convict Sears of its actions.
The state of California reported that a number of undercover investigations had revealed such behavior. Yet, Brennan was still denying any wrong doing. Even after Chuck Fabbri came forward with his testimony, Sears still did not own up to the ethical crimes they were committing.
The Sears Reputation Takes a Hit on Quality.
By and large, corporations have done good things for America. They have provided jobs for millions of people. They provide a viable presence within their communities. But corporations have also been touched by scandals. It seems like scandals have exploded over recent years, with corporate executives becoming more greedy and corrupt. But the reality is corporate scandal has been around as long as corporations.
Financial scandals tend to follow periods of financial booms. When the economy is going well, everybody, not just corporate leaders, ignore precautions and try to ride on the coattails of the good time. When the downturn eventually comes, corporate leaders do what they can to save themselves, and when they use inscrutable methods, scandal is sure to follow.
With the economic boom of the 1980s and 1990s and the shift from manufacturing to financial and computer businesses, the corporate scandals of the 21st century were able to happen within some shroud of secrecy. Money itself was more liquid. Employees were offered mutual funds, stocks, and other assets over which they had no control, as opposed to the days when bonuses were offered in cash and placed in savings accounts. (Corporatehx.com)
Unfortunately, the Sears scandal had a long-lasting impact on the company's quality reputation. Consumers viewed the retail giant as dishonest in the area of auto repair. Mechanics already receive a lot of scrutiny based on their reputation of overcharging and under-delivering, so it was no surprise that Sears took a detour from the auto repair businesses for a while after the scandal.
The Performance Excellence Framework is a Great Metric for Sears.
The Performance Excellence model supports objective evaluation and equitable pay. At the crux of the Performance Excellence Model is this statement: "If you don't do it first, your competition will." Achieving excellence is the result of high performance throughout the entire organization. Every process performed in the organization has an external or internal customer as its end result. If only one process fails to deliver high performance results, a customer will be affected. More and more organizations, both in the public and private sector, are committing to quality practices and focusing on competing against or collaborating with the very best in their field. This search for excellence is driven by several factors:
To win back some of the ground given to fierce competition.
Dwindling staff and resources.
Increasing demands from customers who want higher standards at a fair price.
A driving desire to be number one.
Performance Excellence was founded in 1988 by 14 major European companies, with the endorsement of the European Commission. Membership comprises over 600 companies from most Western European countries and across many business sectors. There are nine criteria of excellence in the model. The first five are classified as enablers, that is, you must perform them first, in order to be on the right track to achieve excellence. The last four are the results of achieving excellence. The enablers categories include: Leadership, Policy and Strategy, People Management, Resources, and Processes. The last four categories are: Customer Satisfaction, People Satisfaction, Impact on Society, and Business Results. (NWLink.com)
In addition to a yearly salary, the employees at Sears should have been assigned a merit increase target percentage. For example, for employees who completed the bare minimum job responsibilities, they would get the lowest merit increase. On the other hand, for employees who surpass expectations, they receive the highest level merit increase.
Upper Management Deserved to Be Disciplined.
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