Sears Auto Center Scandal: Ethics and Management Analysis

Introduction

For a long time, Sears took pride in operating its auto center service and offering quality services to consumers. The eight-step model proposed by Trevino and Nelson (2014) is a tool that can be employed to assist individuals in making ethical decisions. By following these eight steps, one becomes better equipped and well-versed with regard to ethical dilemmas that may exist, as well as more capable of successfully developing solutions to such dilemmas (Trevino et al., 1998). This paper analyzes the case of Sears, Roebuck, and Co.: The Auto Center Scandal with the purpose of assessing the management issues encompassed in the case. Specifically, it considers the factors contributing to the alleged unethical conduct, the ethical approach undertaken by the company, and the responses made with regard to those allegations.

Factors Contributing to the Alleged Unethical Conduct

Several factors contributed to the alleged unethical conduct at Sears. One clear issue is the reward system. Sears management designed a reward system that concentrated on ends rather than means — placing emphasis on quantity over quality and, instead of encouraging honesty with consumers, indirectly rewarding fraudulent and deceitful behavior. The system penalized those who were honest, where honesty meant performing only relevant and necessary repair services. For a corporation that had taken pride in consumer service for decades, this reward system posed a serious threat to consumer trust and confidence — trust that takes considerable time to rebuild. This flawed reward system is the most significant contributing factor to the unethical conduct (Hoffman & Siguaw, 1994).

Another contributing factor is the diffusion and dissemination of responsibility, particularly under the new reward system that provided commissions to mechanics. For instance, if a mechanic is performing the diagnosis, he or she might list more problems than actually exist simply because of the incentive structure. This outcome is made more likely by the fact that the mechanic may perceive himself or herself not as the one directly advising the consumer, but merely as the one identifying problems and passing them along to the service advisor. As a result, responsibility for providing misleading advice becomes diffused between the service advisor and the mechanic, and either or both parties can deflect blame onto the other. An important element in this dynamic is the psychological distance between the two parties. When a mechanic rarely interacts with the service advisor directly, it becomes easier to deceive the consumer indirectly than it would be to do so face-to-face.

A further contributing factor is compliance with perceived authority. In the case study, no specific individual or instruction explicitly directed employees to be dishonest. However, in the absence of clear guidance, employees attempted to infer what upper management wanted them to do. In this case, employees concluded that management wanted higher retail sales at any cost, and they acted accordingly (Hoffman & Siguaw, 1994). Additionally, role definition plays a role as a contributing factor. Making quality a meaningful component of the service advisor's and mechanic's roles — through mechanisms such as Quality Control — is important to consider, though it is not a complete solution on its own.

One element of the ethical decision-making model involves defining the ethical issues at stake. This step considers the benefits and drawbacks of revealing or withholding certain facts, examines which facts in a given situation could be harmful to an individual, group, or society, and addresses the decisions made and those affected by them.

Conclusion

The Sears Auto Center scandal illustrates how a poorly designed incentive system can systematically produce unethical behavior, even in the absence of explicit instructions to deceive. By prioritizing revenue targets over honest service, and by diffusing accountability across multiple employee roles, management created conditions in which misconduct became the rational choice for employees. While some corrective measures were appropriate, the retention of the commission structure for mechanics meant that the core structural problem remained unaddressed.