Change Management and Ethical Decision-Making at Scout Mortgage

The 21st-Century Work Environment

The nature of change in the work environment in the 21st century is oriented towards the increasing use of technology. At Scout Mortgage, this was reflected in the software packages and marketing strategies, both based on new technologies, that transformed the role of the mortgage broker. The position became significantly less dependent on skill than it had in the past, as much of the skill component of the role was now automated. The work environment is therefore becoming more oriented towards technology and automation, and less focused on an emphasis on individual ability.

Work in the 21st century is also characterized by at-will employment. The work environment has become more mercenary for both employees and employers. The relationship is not expected to be personal, nor is it expected to be employment for life. Employers and employees typically have a strictly professional relationship with one another, serving as a form of barrier that allows both parties to make strategic moves, such as the decisions that Walsh and Mangel made.

Employee Resistance to Organizational Change

The typical reaction of employees to change is resistance. Even if the change is good for the employee, it represents the threat of the unknown. As such, change is always viewed with skepticism. In particular, the type of change that occurred at Scout Mortgage—with an emphasis on increased automation—is almost always viewed negatively by employees. The employees developed a sense of fear when new employees were hired, which led to a relatively toxic atmosphere at the company, necessitating the dismissal of all commission sales staff.

Employees can have their attitude to change softened, however, using a number of techniques. Management in this case attempted to hint at changes a couple of times, which would have reduced the temporal immediacy of the change and, in turn, reduced resistance. However, a lack of communication on the part of management only served to increase potential resistance because the employees knew there was a problem but did not understand how that problem was to be resolved. This meant that for Scout, the reaction was likely shock, due to the nature of the changes. The one-on-one meetings may have reduced resistance for the remaining employees, who were given a chance to see the change as an opportunity to build the business.

Ethical Intensity of the Decision

The changes proposed by Walsh and Mangel had a high level of ethical intensity. The first factor contributing to the high level of ethical intensity was that the sales representatives had their livelihoods eliminated. This represents a high magnitude of consequences, especially in light of the reality that few of these representatives would ever be able to secure employment as well-paying in their field again. The near-certain probability of this financial distress and negative impact on career prospects also increases the ethical intensity.

Additional factors contributing to the ethical intensity include temporal immediacy—although the representatives had known changes were coming, the firings were immediate. The proximity level was high, since the changes had direct impacts on the sales representatives and their staff, with a ripple effect throughout the organization. The concentration of the impact was high as well; many others in the company had their jobs spared and may even have benefited, while the sales representatives themselves were directly targeted. Each of these factors contributes to a high degree of ethical intensity that management had to consider.

Decision-Making Approaches

Walsh and Mangel arrived at their decision in part through trial-and-error and in part by developing a strategy. Their first decision—to transition with both salaried representatives and commissioned ones—was the trial-and-error component. While there was forethought, there was no research and no concrete decision-making process that led to that decision. As a result, the decision was not a success.

The second decision—to fire all of the commissioned sales representatives—was in part a response to the failure of the first decision, but it was also part of an overarching strategy. The company had its mission change, and firing the representatives was a necessary step in the fulfillment of that new mission. The decision to make the change, therefore, was simply a reflection of the strategy that Scout was undertaking in response to a multitude of changes in its operating environment.