Law Management Assignment Case Study writing help Online: Ethical dilemma & Situation of Opti Motors and McDowell

Introduction

            The case presents a predicament of Bob Carlton, CEO of OptiMotors Industries, about the means of customer entertainment deployed by his sales manager Galen McDowell. Optimotors , known for its high quality custom parts for motors, was the most sought after by the customers in spite of the long waiting list. Bob had an edge for producing high quality products but lacked the marketing skills needed to grow at the speed at which the industry and the competitors were growing. He hired Galen McDowell who excelled at closing deals and driving a team. However, over a span of time, the means he used to entertain clients became a cause of concern for Bob. He found it ethically questionable to take clients to strip clubs to influence the decision about the deal. The matters worsened when one of the female employees, Joan threatened to sue the company on the grounds of discrimination when she was refused to take her clients to strip club by her sales manager. She did not find it incorrect to take her potential clients to the strip club but was furious that she was refused by her sales manager to accompany the clients hinting that the situation would be different because she was a woman. The current scenario not only made Bob think of the consequences if Joan sued the company but also made him rethink his decision to allow Galen to deploy the means of customer entertainment which he himself didn’t completely approve of.  This case study analyses the situation using STAR and provides fair recommendations at the end.

Ethical Dilemma

            Ethical decision making is one of the most important job requirements for managers in any organization. Though ethics in business is an expansion of one’s personal ethics, these have a larger bearing than personal decisions because it affects a large number of people in and out of the company. History has witnessed large organizations being subject to public outrage and long term effect on the reputation of the company because of unethical business practices.

            Customer satisfaction and ethical decisions have always been in a tug of war. While some managers prioritize customer satisfaction and revenues, there are managers who question the means of acquiring them. Having sound personal ethics is not enough to drive a positive ethical behavior at an organization. The person in charge should be able to translate these ethics into decisions and practices beneficial for the organization as a whole and avoid conflicting with the mission of the company. Since these decisions affect all areas in business viz. production, sales and marketing, finance, HR and will involve people with varied opinions and cultural values, one has to derive a collective concurrence on organizational ethics.

            There are many opinions about correct and responsible business practices. In recent years, increasing costs of production and operations along with global competition have shrunk the profit margins of the companies tremendously. The pressure on the sales team to achieve almost unreal targets has lead to new means and ways of acquiring and retaining customers. High tea parties, tickets to premium sports, paid vacations and expensive gifts have become common in many industries. Though many companies have laid down codes of conduct about ethical dealing with customers, the urge to achieve revenues usually takes over these principles. Though gifts and entertainment of clients is an accepted practice in businesses, they usually create a sense of obligation in the potential customers and they think of ways to respond in some ways, mostly by accepting the business deals. Such acts are harmless as long as they do not create a conflict of interests. Hence, understanding where to draw the line is a challenge for many managers in contemporary businesses.

Situation at OptiMotors

            Bob Carlton at OptiMotors was facing an ethical dilemma between fat revenues and unacceptable means of customer entertainment. He knew that taking clients to adult entertainment places was not socially or ethically acceptable but he was blinded by the revenues generated by such favors. He was manipulated by his sales manager who showed him lucrative cheques of high value accounts. The graveness of the situation dawned upon him when he lost one of his key team members, April due to unethical practices she found in her team. What made the matters worse was the fact that the other members of the sales team considered it acceptable to use such practices to influence clients. He had realized his mistake and started considering corrective measures in retrospect.

Situational Analyses

            Bob’s situation can be analyzed in the light of effects of ethical behavior on all aspects of an organization. Bob overlooked the fact that sound ethics imbibed in the organizational culture will result in long term benefits in terms of customer loyalty and employee satisfaction. When Bob hired Galen McDowell, he was impressed by his achievements but ignored the means to such successful figures. He also gave Galen complete authority to run the show without getting involved in the team. This gave a signal to the team that what Galen was the in charge and whatever he did was approved by the CEO. This was a major blow against a sound ethical organizational foundation. Lack of code of conduct for business dealings gave an opportunity to the employees to bend the rules conveniently to suit a situation. The absence of parameters to judge behavior also made it difficult for the CEO to object to this situation. Disguising expenses was also an unacceptable step which should have been shunned as soon as it came to light. Bob failed to realize the ill-effects of using unacceptable forms of customer entertainment on the employees. There were employees like April who decided to quit instead of being a part of this gamut of customer service and also like Joan who held the organization at ransom on more than one grounds.

            Many businesses view out-of-office rendezvous as a tactic to build and strengthen relationships. Some organizations also have an expenses account which officially gives a budget to spend on clients. However, like OptiMotors, how to entertain is not clearly defined in most of the organizations. In such cases the verbal approval of the seniors is taken as green signal to overrule the barriers of socially acceptable practices. For example, when Galen initially suggested taking the people from Kinan Motors to Red Ruby, Bob did not object verbally thus suggesting that he approved of this kind of customer service. Bob failed immensely in Seeing(S) the ethical dimensions of these sales processes and thus faltered in the first step towards sound professional decisions.

OptiMotors was Bob’s company from the scratch and Galen was supposed to inculcate the organization culture and policies. As a policy, all new recruits should undergo training about acceptable sales practices and organization culture. Galen or any other team member did not experience any such induction and were allowed to make individual decisions to back their sales targets. The news of taking clients to the strip club percolated in the hierarchy and Bob’s total silence about the issue made it apparent that the management did not see such demeanors as unacceptable. Thus, not Talking (T) about the expected ethical behavior landed up Bob in thick waters.

            This situation demanded extra-ordinary leadership with regards to correct organizational behavior. Bob failed to show such command and was manipulated by his juniors. Bob did not question Galen about his exceptional performance and took his success on its face value. This boosted Galen’s belief that ends justify the means. When April brought to his notice that these incidents were affecting employee morale and causing turmoil in some areas, Bob did not take the command in his hands. Not only did he fail to Act (A) ethically in the first place giving out a positive message, he also failed to take corrective action even when he sensed damage to the employee morale and organization as a whole.

            Since there is no rigid rulebook to ethical behavior, it needs constant review and corrections. Reflection is concerned with consciously looking at and thinking about our experiences, actions, feelings and responses and then interpreting or analyzing them in order to learn from them¹. In layman terms, this is simply reviewing our experiences and learning from them. Schon (1991)² suggested two ways of reviewing viz., reflection-in-action and reflection-on-action. Reflection-in-action is an ongoing process and decisions are ad-hoc for the expected results. It essentially means critically analyzing situations keeping all aspects in mind and deriving a best possible solution. Reflection-on-action suggests revisiting the action after it has happened and analyzing it for flaws and successes. Bob had a chance to reflect on his actions more than once. While he could make decisions instantly using his expertise of running the organization, corrective actions could have been right after the first instance of Galen using adult entertainment to woo the clients.

            Since reflection in action needs some level of knowledge and expertise, Bob was slightly at a loss in this case as he considered himself less competent in marketing and sales. However, as a team leader, he did not analyze the happenings for long term consequences and failed to provide a sound managerial decision regarding the same.

Conclusions and Recommendations

            Gifts and means of customer entertainment are vital to building a long term relationship with the clients. It becomes necessary in industries where the purchase cycle in long and high end customized products. For example a company might not spend heavily on gifts and perks in FMCG sector but in high end products such as industrial machinery or high end lifestyle products, some additional benefits ease the process of closing the deal. Spending heavily on client entertainment and gifts is rampant in high value corporate deals. However, the amount spend is not questionable but spent in what kind of activities is debatable.

            In this case, April expenditure on taking the client to a home and garden show was also a part of business and was acceptable by all means. It was a gesture to show the client that OptiMotors took interests in her hobbies and likes. However, using strip club to influence the clients is not justifiable by any means. And the CEO’s stand to turn a blind eye towards such behavior made the matters worse. Though the revenues coming in were very attractive, the dent in the reputation of the organization internally and externally would be a very high cost to pay in the long term. The situation is very critical and a taking fair course of action keeping in mind all aspects of business is very complicated. However, the following recommendations can be used to handle the problem tactfully:

• Building a sound ethical culture in the organization- Bob needs to devote some time to lay down the code of conduct with regards to his company and the industry. Then he needs to drill it down to every employee that this code is to be practiced in true spirit of the word. Bob, as the CEO, should not hesitate to take some sort of punitive action if an employee falters on any of the written rules. This will clearly send a message amongst the workforce that policies are meant to be followed and any deterrence will not be tolerated.
• Transparency in customer dealings- In a highly competitive market, sharing all the data or information about the client may not seem feasible. But some amount of transparency especially in financial transactions and amount spent on customer delight should be mandated. Gifts and other perks should be in accordance with the industry and should reflect the company’s principles and beliefs. For example, OptiMotors could gift season tickets of premium car racing events to its clients.
• Encouraging upward feedback from employees- To avoid drastic steps by seasoned employees such as resignation by April, the management should encourage upward communication with the employees. This will inculcate a feeling of belongingness and responsibility amongst the workforce. Policies such as whistle blower enhance an employee’s belief in organization’s culture and commitment.

            Some of the employees not hesitating to take the low road have certainly shattered the organization’s internal reputation to some extent. However, it’s not too late to take corrective measures and take the situation in control. Bob needs to take charge and balance for the loss of image and employee confidence.

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