Tom Klem is the controller of Watson Manufacturing, Inc. He estimates that the company’s break-even point in sales dollars is $2 million. However, he recently told all of the regional sales managers that sales of $3 million were needed to break even. He also told them that if the company failed to break even, the sales force would be reduced in size by 40 percent. Klem believes that his tactics will motivate the sales force to generate record profits for the upcoming year.
Is his approach to motivating employees ethical? What other approaches might he use?