A Manager's Ethical Dilemma

Sears, Roebuck, and Company, had continuous growth since the 1800s until experiencing hard times in the 1980s. This had a lot to do with the rising discount retail store chain, Wal-Mart. Wal-Mart was pulling ahead in market share with a business model that allowed for low pricing.

In 1990 Sears reported a 40 percent decline in their earnings and their merchandising group dropped by 60%. (Trevino & Nelson, 2007) In order to combat against their finacial losses, Sears’ corporate managers got together to come up with a way to turn things around. They came up with decisions to cut costs at every corner possible. This also included cutting down their task force. Another decision was made to focus on making profit. This applied to all of Sears divisions, to include their Auto Center Stores.

Instead of paying traditional hourly wages as done in the past, Sears placed their mechanics and auto service advisors on a salary plus commission basis. If mechanics and the service advisors made their quota they would earn additional monies. To top it off, Sears managers were taking aggressive action to make sure that quotas were being met by threatening employee jobs.

This led to allegations made by consumers, and many U.S. states, that complained of misleading consumers and the making of unnecessary repairs. Edward Brennan, CEO of Sears, denied of any wrong doing, however, he did change the compensation plan of their employees. This included eliminating incentive compensation for service advisors and eliminating quotas for specific parts and repairs. Compensation for mechanics was not changed.

Not long after changes were made, a Sears mechanic from California wrote a letter to U.S. Senator Richard Bryan. The letter stated Sears mechanics were still performing work under commission based programs. Soon after Sears was flooded with lawsuits and agreed to many settlements.

The factors that led to the unethical actions of mechanics and auto service advisors derived from management. Pressures are placed on mid to lower level managers to perform well. Performing well, in this environment, means to having their store or section to financially perform. These pressures are then forced upon the manager’s employees.

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