CASE 2 The Conundrum: Sears Auto Centers The field of business ethics is particularly intriguing. On...

 

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CASE 2 The Conundrum: Sears Auto Centers The field of business ethics is particularly intriguing. On one hand, businesses must make a profit in order to survive. The survival of the firm provides employees' salaries with which employees feed their families and educate their children, thereby leading to the betterment of society. In addition, company profits and employee salaries are taxed, the funds from which furnish the support for various governmental programs. On the other hand, business profits should not be obtained by any means necessary. A tradeoff must exist between the firm's desire for profits and what is good for individuals and society. Sears Auto Centers found themselves in a controversial position as they pondered such tradeoffs. It is generally agreed that the marketing concept states that the goal of most for-profit organizations is to recognize and satisfy customer needs while making a profit. Such was the goal of Edward Brennan, chairman of Sears, Roebuck and Company. Under his leadership, market research studies were conducted on customer automotive repair needs. Subsequently, Sears established a preventive maintenance program that in- structed the auto repair centers to recommend repair/replacement of parts based on the mileage indicated on the odometer. Concurrently, sales quotas were established for Sears' 850 auto repair centers. Meeting or exceeding these quotas earned bonus money for the service personnel and provided management with an objective means of evaluating em- ployee performance. The new sales incentive program required the sale of a certain number of repairs or services, including alignments, springs, and brake jobs, every eight hours. Service em- ployees were also able to qualify for bonus money by selling a specified number of shock absorbers or struts for every hour worked. The objective of this program was to meet customer needs while increasing the profits of the auto service centers. After the program was put into place, the automotive unit became the fastest-growing and most profitable unit in recent Sears history. However, a growing number of consumer complaints were lodged against Sears. These complaints sparked investigations by the states of California, New Jersey, and Florida into practices at Sears auto service centers. The state of California alleged that Sears consistently overcharged its customers an average of $223 for unnecessary repairs or work that was never done. Sears contends that its auto centers were merely servicing vehicles based on the manufacturer's suggested mainte- nance schedule. Moreover, Sears maintains that its failure to make these suggestions for improvements would neglect the safety of the consumer. Consequently, the Source: Lawrence M. Fisher, "Sears Auto Centers Halt Commissions After Flap," The New York Times, 1992, pp. D1, D2; Gregory A. Patterson, "Sears' Brennan Accepts Blame for Auto Flap, The Wall Street Journal, 1992, p. B1; "Systematic Looting." Time, June 22, 1992, pp. 27, 30; and Tung Yin, "Sears Is Accused of Billing Fraud at Auto Centers," The Wall Street Journal, June 12, 1992, pp. B1, B5. Part I: An Overview of Services Marketing dilemma for Sears employees concerning what is good for customers and what is good for the company becomes muddled. Discussion Questions 1. What properties inherent in auto repair services contribute to consumer vulnerability? 2. What types of ethical issues are involved with this case? 3. Describe the consequences of Sears Auto Center's behavior? 4. What strategies would you suggest to help control future problems? CASE 2 The Conundrum: Sears Auto Centers The field of business ethics is particularly intriguing. On one hand, businesses must make a profit in order to survive. The survival of the firm provides employees' salaries with which employees feed their families and educate their children, thereby leading to the betterment of society. In addition, company profits and employee salaries are taxed, the funds from which furnish the support for various governmental programs. On the other hand, business profits should not be obtained by any means necessary. A tradeoff must exist between the firm's desire for profits and what is good for individuals and society. Sears Auto Centers found themselves in a controversial position as they pondered such tradeoffs. It is generally agreed that the marketing concept states that the goal of most for-profit organizations is to recognize and satisfy customer needs while making a profit. Such was the goal of Edward Brennan, chairman of Sears, Roebuck and Company. Under his leadership, market research studies were conducted on customer automotive repair needs. Subsequently, Sears established a preventive maintenance program that in- structed the auto repair centers to recommend repair/replacement of parts based on the mileage indicated on the odometer. Concurrently, sales quotas were established for Sears' 850 auto repair centers. Meeting or exceeding these quotas earned bonus money for the service personnel and provided management with an objective means of evaluating em- ployee performance. The new sales incentive program required the sale of a certain number of repairs or services, including alignments, springs, and brake jobs, every eight hours. Service em- ployees were also able to qualify for bonus money by selling a specified number of shock absorbers or struts for every hour worked. The objective of this program was to meet customer needs while increasing the profits of the auto service centers. After the program was put into place, the automotive unit became the fastest-growing and most profitable unit in recent Sears history. However, a growing number of consumer complaints were lodged against Sears. These complaints sparked investigations by the states of California, New Jersey, and Florida into practices at Sears auto service centers. The state of California alleged that Sears consistently overcharged its customers an average of $223 for unnecessary repairs or work that was never done. Sears contends that its auto centers were merely servicing vehicles based on the manufacturer's suggested mainte- nance schedule. Moreover, Sears maintains that its failure to make these suggestions for improvements would neglect the safety of the consumer. Consequently, the Source: Lawrence M. Fisher, "Sears Auto Centers Halt Commissions After Flap," The New York Times, 1992, pp. D1, D2; Gregory A. Patterson, "Sears' Brennan Accepts Blame for Auto Flap, The Wall Street Journal, 1992, p. B1; "Systematic Looting." Time, June 22, 1992, pp. 27, 30; and Tung Yin, "Sears Is Accused of Billing Fraud at Auto Centers," The Wall Street Journal, June 12, 1992, pp. B1, B5. Part I: An Overview of Services Marketing dilemma for Sears employees concerning what is good for customers and what is good for the company becomes muddled. Discussion Questions 1. What properties inherent in auto repair services contribute to consumer vulnerability? 2. What types of ethical issues are involved with this case? 3. Describe the consequences of Sears Auto Center's behavior? 4. What strategies would you suggest to help control future problems?