1. Ethics in the Workplace
Georgie Beemer
Anita Keeler-Brown
Christy Rodriguez
Alison Vesper
Celeste Williams

2. Sears, Roebuck, and Co.: The Auto Center Scandal
Identify and analyze key ethical issues.
Unethical situation for Sears’ automotive employees.
Defrauded customers and scarred the company’s reputation.
Evaluate the company’s response to allegations.
How they resolved issues.
Alison
Societal changes have broad reaching affects on businesses as well as consumers. This paper will identify and analyze the ethical issues behind the Sears Auto Center Scandal from a variety of perspectives. In this case, management created an unethical situation for Sears’ automotive employees that pressured them into making unethical choices which defrauded customers and scarred the company’s reputation for quality and service. We will evaluate the company’s response to allegations of inappropriate actions and how they resolved those issues.

3. Intro continued… Who to discipline and how.
Alternative measures to considered to increase auto center sales without compromised ethics or fraud.
Proposal for alternative management plan.
Alison
We will also consider who should be disciplined if disciplinary actions should be taken and offer some alternative measures that Sears’ management could have considered to increase auto center sales without causing their employees to compromise their own ethics or defraud the customers. In addition, we will propose an alternative management plan that would relieve the pressures on employees to behave unethically and promote more appropriate behavior by focusing on rewards for customer satisfaction and reaching safety goals rather than increasing sales. Every business should learn a lesson from this case and take into consideration the broad consequences of not thinking about all of the effects of their decisions.

4. System of Inquiry Agenda
Determine the Facts
symptoms of problems
root problems
unresolved issues
roles of key players
ethical issues involved
Analyze and evaluate alternatives
Make recommendations
Georgie

5. Sears, Roebuck, and Co.: The Auto Center Scandal
Georgie
We will now distribute a copy of the case we used for this presentation for each of you to follow along if you choose.

6. Ethical Issues Involved
Consequentialist
Pros vs. Cons
All the facts?
Broad thinking
Rights forsaken
Georgie
Focus on the results of the decisions. The cause and effect of situations has been studied on numerous occasions. Most case studies are based on the cause and effect of the situation, but sometimes there is more to a situation than the events. The underling “why” is what has to be discovered. People who make ethical decisions have to follow a system of thinking to ease the pressure. Most choose a logical path seeking to incur the least amount of harm and or the greater good for society. These people think about all the possible options and what effect those options will have for all involved. It would be natural for people to ask themselves: What will be the consequence of an action plan? Will the benefits out weigh the drawbacks? What are all the options? A consequentialist seeks to find the answers to these questions. This perspective calls for the thinker to have a broad sense of self when considering consequences and further action.
In 1991, Sears changed how the employees in the auto center were paid by implementing an incentive plan to increase profits. The new compensation plan was based on commission for the mechanics and the guest service representatives at the front counter of the auto service department of Sears. The employees would receive a base hourly pay and have to meet hourly and daily sales quotas to earn commission on certain parts or services. The employees were pressured to make the sales to keep their jobs. Edward A. Brennan, Sears’ CEO and Chairman did not weigh the consequences of those actions (Nelson, & Trevino, 2004). He did not consider the harm that he would cause to his company by pressuring his employees to make part and service specific sales. Mr. Brennan publicly apologized and accepted personal responsibility for creating the hostile, competitive work environment (Nelson, & Trevino, 2004).

7. Ethical Issues Involved
Deontological
Duty
Obligations
Principles
Anita
The deontological perspective is relating to philosophical theories that state that the moral content of an action is not wholly dependent on its consequences. It was the rights of the company to seek profits but they did not consider the rights of employees or the customers.
Managers did not focus on the consequences of their decisions. They did not consider what was universally correct based on virtue or what was socially acceptable. Their actions were wrong even though consequences of those actions were good for the company in the beginning. Their focus was on staying in business and being successful without regard for how their unethical selfishness would affect the consumers or the market place. After realizing their fault they did not focus on the duties of the employees and how it would affect their performance. When Sears was accused and fined for violating the state’s Auto Repair Act, the violation should have been enough of a warning. Instead, Sears CEO and Chairman Edward A. Brennan denied any fraud and defended Sears’ focus on preventive maintenance for older cars. Sears representatives admitted to isolated errors, and accepted personal responsibility for creating an environment where “mistakes” had occurred, and outlined actions Sears planned to take to resolve the issue. These plans included eliminating the incentive compensation program for service advisors, substituting commissions based on customer’s satisfaction, eliminating sales quotas for specific parts and repairs, and substituting sales volume quotas.
Sears was sued by the state of California and 41 other states, plus had to settle a number of cases of consumer class action suits against them. Everyone has personal rights, even when working for a large company. When employees are pressured into doing what is unethical for the public this is a problem for everyone. The rights of the employees take precedence over their duty to Sears because this plan was causing violation of employees and consumer rights through unfairness, cheating, lying, and manipulation inflicting a lot more suffering on employees and customers than needed. If every company is allowed to function this way there would be no reason for vision or mission statements. Allowing this kind of behavior would make it clear that doing business is unethical.

8. Management Issues Wrong type of incentive Greed based
From selling to not telling
Christy
I think that the management issues involved in the case are largely based on the commission the employees were promised. This gave employees the desire to sell things to the customers that were not needed. There are a great many things that were overlooked on the part of management. One for example, was the fact that their employees were motivated by greed to get the job done with a higher pay. They were cheating the people who honestly did pay their bills. There was a loss of trust because promises were made by Sears and none were kept. Certain employees were still working on commission and it ultimately still affected how the automotive department of Sears was run. There was the hourly compensation of $3.25 plus the employee’s base rate that changed the motivation from selling to just not telling. There were a great number of problems that were overlooked because of the new need to get the cars in and out faster. If they hurried they could do more cars resulting in more money, which in turn meant looking the other way when it came to certain automotive issues with cars. This ultimately cost Sears everything because of the lack of attention paid to the problem and by the money that was paid to their employees. This cost the company billions of dollars and the hardest thing to ever refund, the American publics trust.

9. Responding to the Problem
Only admitted to small infractions
Cover up cost them millions
The ethical issue cost them Americans trust
Christy
I think that Sears did the best cover up job it could do. It severely passed the buck when it came to taking responsibility. There was never any true admittance of fault anywhere just lies on top of more lies. The only things that Sears ever owned up to were minor infractions. Sears as a whole tried to minimize the problem that the American public was being ripped off. Then when the solution was presented, and supposed to be handled accordingly, the solution only put a band aid on an open wound that eventually turned onto a gaping sore for Sears. Instead of possibly saving the name of Sears, this mistake made Sears a company of deceit. This ultimately forced Sears to have to sell off almost everything to survive. I think that now Sears has made an adjustment to the problem, but I do not think that Sears will ever be the company it once was. These are the direct results of unethical decisions made by management and the individual employees.

10. Impact of the scandal on Sears’ reputation.
Trusted for a Century
Employees Lost Respect
Celeste
From the late 1800’s through 1991 Sears, Roebuck, and Co. enjoyed a reputation of credible quality service. Customers trusted the retail business to the point they allowed Sears to deceive and mislead them. I believe that the Sears scandal had a negative affect on the company’s reputation for service. Sears had a reputation of quality service for at least a hundred years. The business was respected for good service not only in their automotive service centers, but also in their other divisions. The effects of this scandal have damaged the automotive division’s reputation considerably. This opened the door of opportunity for other auto service providers to compete for the consumer’s business more successfully, in effect decreasing profits for Sears even further.
I believe that Sears, Roebuck, and Co. did not only lose respect from their consumers, they also disappointed their employees who felt forced to participate in this unethical scandal. Today Sears is still a major retail store, although, their automotive service center is not as popular as it was in the past.

11. Disciplinary Action? Loss of job or position Who – CEO, Others
What - Jail Why Not
Celeste
Sears CEO and Chairman Edward Brennan, spokeswoman Peggy Palter, and others who were spokespeople for Sears, Roebuck, and Company, should be disciplined for their actions in this scandal. These people put the workers of the company and consumers in unethical environments. Their punishments should be more than a slap on the wrist. Possibly even loss of their job or position. There should at least be monetary consequences and possibly some jail time. These people covered up a lot of fraudulent charges that constituted a large amount of their services. When investigations were complete, the state of California found that 90% of sears services in the automotive department was from repairs that were unnecessary.
Sears Chairman Brennan should be disciplined for the scandal that he caused Sears employees to take part in. The mechanics and service advisors that were actually misleading customers and charging them for unnecessary repairs were only doing what they felt management expected of them in their job duties. According to the Bureau of Automotive Repair, employees who did not meet their sales requirements were punished by management. The employees were either transferred to other departments or had their work hours cut for not selling a specified number of parts during their eight-hour shift. Therefore, the employees felt pressured to mislead consumers in order to keep their jobs.
When Chairman Brennan was confronted in a press conference he took minimal responsibility. He acknowledged that the aggressive selling tactics did lead to mistakes. Peggy Palter should also be disciplined. She was a spokeswoman for the company and she did not own up to any responsibility in the scandal either. When Ms. Palter was confronted about the 350 violations of the Consumer Fraud Act, she said "I can assure there is no corporate policy regarding performing unnecessary services." Although, customers were being charged for unnecessary repairs ranging from $300 to $500 per car, Chairman Brennan believed that the service advisors were just doing their jobs and following company practice by recommending the replacements of worn parts before they actually failed. Both Brennan and Palter sound as if they have made excuses to legitimize how Sears, Roebuck, and Company committed fraud against customers.
CEO E. Brennan

12. Alternatives and Recommendations
Incentive award system does not work for just one department
Managers can control their own revenues and profits
Profits and Loss
Rewards
Recognition for performance
Options for increasing auto center sales without providing incentives to employees to sell specific products.
The commission and incentive award system does not work for just one department of a huge store. Unfortunately, this caused problems because the employees began to behave in ways that were rewarded by the company and less likely punished. An incentive pay plan based on the profitability of the automotive division adversely affected the company's bottom line. A growing trend in corporate pay-for-performance plans is to have divisions or branches tie their incentive pay to division rather than overall company profitability. The theory behind such plans is that they create incentives for better division performance and a sense of "having your own shop," because managers can control their own revenues and profits much as an entrepreneur would do. The division-based incentive plan is usually built by creating a profit-and-loss statement for each division. Incentives are then tied to improving division results through increased revenues, cost cuts or both. Prioritize employee recognition to ensure a positive, productive, organizational climate.
Every person has different reasons for working. The reasons for working are as individual as the person. But, we all work because we obtain something that we need from work. The something obtained from work impacts morale, employee motivation, and the quality of life. To create positive employee motivation, treat employees as if they matter - because employees matter. These ideas will help you fulfill what people want from work and create employee motivation. This tip about reward and recognition will help you create a profitable business and develop the talented workforce you need for progress, resiliency and agility. You need solid criteria in place before providing recognition that involves money and rewards. Everyday recognition that shows appreciation needs nothing but your commitment to providing recognition. People who feel appreciated are more positive about themselves and their ability to contribute.

13. Proposed Management Plan
Rewards
Satisfaction not Speed
System of Checks and Balances
Georgie
Brennan was still concerned about productivity and profit when he said, “We have to have some way to measure performance.” (Nelson, K., & Trevino, L., 2004). I propose that instead of a commission based incentive plan for the employees, a reward system would be as much as an incentive to perform. Many people are motivated in different ways. Competition is a good tool to motivate if used correctly and with the people involved in the right mind set. A system of rewards would be a bonus to the base salary for managers and hourly employees of a predetermined amount each week. Different goals can be set by the manager such as, safety or customer satisfaction surveys. The customer satisfaction surveys would be to measure of productivity. The customer would be able to fill the survey while they waited for their car. If the customer wanted to complete the survey later then they could mail or fax it back. Customers would receive a small percentage off the bill for the next service for completing the survey. A policy for an outside company to evaluate service and report back to the company for feedback or suggestions on how to improve customer service satisfaction would keep the employees acting ethically responsible.

14. In Conclusion… Identify and analyze key ethical issues.
Unethical situation for Sears’ automotive employees.
Defrauded customers and scarred the company’s reputation.
Evaluate the company’s response to allegations.
How they resolved issues.
Who to discipline and how.
Alternative measures to considered to increase auto center sales without compromised ethics or fraud.
Proposal for alternative management plan.
It is evident that societal changes have broad reaching affects on businesses as well as consumers. This paper has highlighted and analyzed the ethical issues involved in the Sears Auto Center Scandal. We have shown how management pressured automotive employees into making unethical choices that defrauded Sears’ customers and damaged the company’s reputation for quality and service by creating an unethical work environment. We have evaluated the company’s response to allegations of inappropriate actions and how they resolved those issues. We have also suggested who should be disciplined if disciplinary actions should be taken and what type of discipline might be suitable. We have also offered some alternative measures that Sears’ management could have considered to increase auto center sales without causing their employees to compromise their own ethics or defraud the customers. In addition, we proposed an alternative management plan that could relieve the pressures on employees to behave unethically and promote more appropriate behavior by focusing on rewards for customer satisfaction and reaching safety goals rather than increasing sales. Every business should learn a lesson from this case and take into consideration the broad consequences of not thinking about all of the effects of their decisions.

15. Questions?
Any questions?

16. Reference
Nelson, K., & Trevino, L. (2004). Managing business ethics: Straight talk about how to do it right (3rd ed.). New York: Wiley.