Sales Management Shaping Future Sales Leaders Ethics the

Sales Management: Shaping Future Sales Leaders Ethics, the Law, and Sales Leadership Chapter 4 4 -1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Learning Objectives § Identify the more common ethical dilemmas § Distinguish between organizational policies and practices that support ethical behavior and those that enable unethical behavior § Explain how principled leadership can foster ethical principles and corporate culture § Develop an appropriate course of action when you’re personally faced with an ethical dilemma 4 -2 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Who Exaggerates Least? § Professional salespeople? § Preachers? § Politicians? § Professors? In a study where people were asked about their own knowledge, skills, and abilities 4 -3 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Approaches to Ethics Approach Summary Pros and Cons Golden Rule Treat others as you would like to be treated § Personalizes ethical decisions, making it easy to determine what to do Conventionalist Acts are OK as long as its legal or if everyone is doing it § Fails to account for gray areas, in which acts are not specified as either “legal” or “illegal” Protestant Ethic Do what you can, defend to a committee of peers § What’s “ethical” is based on the intended, not actual, outcome Market Imperative Approach The market will determine what is right § Provides clear responsibilities for individuals Libertine Ethic Do what you want, as long as no one gets hurt § Outcomes are important, and a responsibility for others is assumed Do what has the best outcome for all involved § Outcomes, and honorable intent, are important; requires taking responsibility for others Utilitarian Ethic § Fails to account for situations in which “others” are in conflict § Can lead to more concern about doing what can be defended than what is right § Can devolve into “might is right” scenario § Can lead to problems when others are harmed indirectly or harm is not obvious § It’s unclear who gets to decide what outcomes are “best” 4 -4 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Golden Rule § Do unto others as you would have them do unto you § Challenge: there are multiple “others, ” and their needs or wants conflict § Weakness: assumes that the way you want to be treated is the way others want to be treated 4 -5 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Self-Assessment Library § Go to http: //www. prenhall. com/sal/ § Access code came with your book § Click the following § Assessments I. What About Me D. Decision Making Insights 3. How Do My Ethics Rate? 4 -6 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Conventionalist Approach § Suggests that people should take any and all actions allowed by law or by convention § Everybody’s doing it, so it must be okay § Do it until they say you can’t § It is easier to ask forgiveness than permission § Weakness: doesn’t consider what’s ethical and not ethical 4 -7 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Protestant Ethic § Could I satisfactorily explain this choice to a committee of my peers? § Weakness: pick the right committee, and you can probably explain away anything § Weakness: intent is more important than actions § Providing evidence of honorable intent can be difficult 4 -8 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Market Imperative § The market requires a person to act in his or her own best interest § Based on Adam Smith’s classical economics approach to capitalism § The salesperson works for the organization, and the organization’s needs come first § Counter-argument: corporation is an entity granted the right to exist by society, so the corporation must be governed by what is best for society in addition to maximizing shareholder wealth § What is best for society must balance the interests of the different people within it, shareholders, employees, and customers alike § Smith might say these groups should fight it out 4 -9 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Libertine Ethic § Individual freedom: one should be free to do whatever one wants, as long as no one else gets hurt § Customers should be free to make their own decisions § Weakness: identifies only the two parties in the transaction as being important; conflicts among other groups are rarely considered or resolved 4 -10 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Utilitarian Ethic § Do the positive consequences outweigh the negative consequences? § Weakness: who gets to decide the value of the positive and negative outcomes? 4 -11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Salesperson as a Boundary Spanner § Boundary spanner: operates both outside of and within an organization’s boundaries § Work within their company but also work with customers outside the company § Because salespeople are boundary spanners, they encounter ethical dilemmas externally with customers and internally with other employees 4 -12 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Who Does the Salesperson Represent? The Company The Salesperson 4 -13 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. The Customer

Ethics in Sales Management: Done Right § Salesperson Dave made it clear that while Laura worked for Travelocity, he worked for both her and the company § Collaboration and respect made them a successful team § When sales is done right, friendships can develop and great things can be accomplished 4 -14 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Common Ethical Issues between Customers and Their Salespeople § Salesperson exaggerates benefits or minimizes problems, leading a customer to draw erroneous Misrepresentation conclusions Bribery § Salesperson attempts to influence a buyer unfairly by offering a gift or money Privacy § Salesperson fails to protect the privacy of another customer by giving the customer’s confidential information to another customer § Salesperson invades the customer’s privacy with spam or unwanted calls 4 -15 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Ethical Issues Associated with the Salesperson’s Company Stealing § Salesperson fails to work a full day, stealing time § Salesperson pads expense accounts Claiming Credit § Salesperson steals other people’s leads § Salespeople misrepresent location of customer to receive credit for an order belonging to someone else Sexual Harassment § Salesperson experiences unwanted sexual offers or inappropriate physical contact 4 -16 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Creating an Ethical Sales Climate Code of Ethics Provides § Salespeople and other employees with guidelines and standards for conduct Helps § Salespeople inform others that they intend to conduct business in an ethical manner Supports § Salespeople’s intentions to remain ethical, offering salespeople an “out” when under pressure Attracts § High-quality salespeople 4 -17 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

US Federal Sentencing Guidelines (FSG) § Enacted in 1987, updated in 2007 § Response to an increase in white-collar crime, specifically crime committed by businesses § Set of suggested guidelines for sales organizations developing programs for preventing, detecting, and halting unethical or illegal misconduct by their employees § Company that follows the guidelines can avoid severe penalties § Sales leaders § Must clearly and regularly remind salespeople of what is considered ethical and what is not § Monitor behavior § Can’t say one thing and do another 4 -18 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

US Federal Sentencing Guidelines (FSG) FSG include § Developing clear and complete code of ethics capable of reducing misconduct § Securing top management’s support for high ethical standards and charging executive-level officer with responsibility for establishing and managing compliance program § Establishing and managing compliance program that includes mandatory training and regular communication § Creating internal auditing systems to monitor behavior and detect misconduct § Enforcing standards and punishing violations consistently § Reviewing and modifying the compliance program on regular basis to demonstrate a focus on continuous improvement 4 -19 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Global Sales Management: The Caux Round Table (CRT) § Provides guidance for companies operating globally § Founded in 1986 § Primary purpose: reduce trade tensions between countries § 1994 CRT principles: codified most comprehensive set of responsible business practices § The value of a business to society is the wealth it creates for shareholders and employees, as well as the marketable products and services it provides to consumers at a price commensurate with quality § Businesses should respect international and domestic rules, and avoid behavior that, even if legal, has adverse consequences to society Source: www. cauxroundtable. org 4 -20 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Identifying and Responding to Ethical Breaches Encourage Whistle-Blowing 4 -21 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. Use Technology to Identify Questionable Activities

Due Process Systems for Responding to Ethical Breaches Investigation & Punishment Grievance & Arbitration § Upper manager investigates potential violations, determines guilt, and assesses punishment to the guilty § Guilt and punishment investigated and discussed by progressively higher levels of management and labor Mediator/ Counselor § Manager investigates, leads discussions, builds consensus about potential guilt of accused person and need for changes in organization’s practices or policies Employee. Board § Mediator/Counselor role taken on by board of accused employee’s peers 4 -22 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Are Managers equally lenient or strict? § When a sales rep acts unethically § § § High performers tend to be treated leniently Even when they have acted unethically before Even when policy does not allow for different treatment Even when the breach is serious But the act is the key to the punishment, not the excuse or reason for the act Sources: Joe Bellizi 2008, “Honoring Accounts of Top Sales Performers and Poor Sales Performers Who Have Engaged in Unethical Selling Behavior, ” Journal of Global Issues and his work from 1997 to 2003 § How can a sales leader avoid variety in punishment? 4 -23 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Dealing Personally with Ethical Breaches Quit Take a Stand Negotiate an Alternative Appear to Agree 4 -24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Sales-Related Laws Law Comments Uniform Commercial Code Defines key elements of a sale, such as what is a “sale” and a “warranty” State laws that govern what businesses can say about competitors Business Defamation Gramm-Leach-Bliley Act Federal law regarding privacy policies Foreign Corrupt Practices Act Federal law prohibiting spam and governing how companies can contact customers; related is the Do. Not-Call registry US law that makes bribery and other activities illegal in other countries for US companies Civil Rights Act Governs hiring practices for sales managers Robinson-Patman Act Federal law regarding fair pricing Can-SPAM act 4 -25 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Uniform Commercial Code (UCC) § One of the most important set of laws salespeople must follow § Legal guide to commercial practices § Determines who is an agent § Defines “sale” § Defines “warranty” 4 -26 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Other Important Laws § Business defamation involves false public statements about a firm’s products, salespeople, or other employees, service levels, and any other actions § Gramm-Leach-Bliley Act requires companies to notify customers regarding privacy policies § CAN-SPAM Act requires companies to clean up e-mail lists and only contact those with whom they have an ongoing relationship 4 -27 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. § Do Not Call (DNC) list maintained by FTC allows individuals to make phone numbers off-limits to telemarketers § Foreign Corrupt Practices (FCP) Act requires salespeople to obey US law § Antitrust laws (Sherman Act of 1890) prevent tying agreements § Cooling-off periods when buyer may cancel purchase without penalty

Laws for Sales Managers Labor Laws § Fair pay issues, appropriate employee selection and retention issues § Reporting processes and legal requirements for sexual harassment claims Market Laws to Promote Fair Competition § Foreign Corrupt Practices Act § Robinson-Patman Act and antitrust acts that forbid price discrimination and noncompeting agreements § Whistle-blower laws 4 -28 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Discussion Question (#7) § Which of the following are legal practices and which might be considered illegal? If you determine that not enough information is provided, what would make the practice legal or illegal? a) A salesperson offers a discount to a small drugstore if the store will set up a special display of his product at its entrance b) A salesperson sends two bottles of wine, valued at $100 each, to a customer as a thank-you gift after making a large sale c) The buyer asks the salesperson out for drinks after work d) A buyer provides a salesperson with a competitor’s proposal, including pricing information 4 -29 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Discussion Question (#8) § As a sales manager, you find yourself faced with the following situations. Identify the ethical or legal issue in each and discuss how you would handle the problem. (All of these were experienced by former students. ) a) The regional sales manager, your boss, forwards several ethnic jokes and lewd e-mails to you and your entire sales and support staff. Two of your salespeople complain to you b) A customer has called and asked you to send someone else to his office as he does not want to be called on by his currently assigned salesperson. When you ask why, it is because he doesn’t want someone of that sexual orientation calling on him 4 -30 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Discussion Question (#8 continued) c) You’ve asked a salesperson to create a training session for the entire sales team, a task that will require the salesperson to spend about $60 on materials that company policy expressly prohibits salespeople from charging on their expense report. She agrees and then submits an expense report with the $60 down as entertainment of a client, an acceptable expense. You notice it on the expense report; she hasn’t said anything about it but you know she was conducting a training session on the day in question and couldn’t have entertained the client that day. d) The company has introduced a new product and requires all salespeople to memorize a demonstration script. To encourage salespeople to learn it, a contest was developed by your boss to award a new HDTV to the best presentation of the demonstration. Two salespeople come to you and say, “Let’s just let Beverly represent our team. We don’t have time for this. We need to be out selling. ” 4 -31 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Role Play: Magnum Performance § You’re an account manager for salesperson headhunter Magnum § Shoshiba wants to hire 500 sales reps; 20 from your office § Shoshiba VP just wants warm bodies, will figure out who can sell later § If a rep doesn’t stay for 6 mos, Magnum doesn’t get paid § You have 8 qualified candidates, 30 unqualified § Your manager’s (Jackie) $10, 000 bonus is on the line 4 -32 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Role Play (continued): Action Steps § Break into groups of 3 § 1 person plays Jackie, your manager / office general manager § 1 person plays salesperson responsible for Shoshiba account § Discuss strategies for handling client Arnold Jackson and how to respond to Magnum’s Regional VP § 1 person plays devil’s advocate § Call timeout and whisper unethical strategies to each person, who must propose that suggestion § The other 2 people should respond to the unethical suggestions in terms of their implications and present ethical alternatives 4 -33 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 4. 1: Patman Paper Company § Jared is a salesperson for Patman Paper Company § At 6 months, he’s at 80% of his quota § He should be at 100% at this time § Needs to step it up or find a new job § Calls on account, gets small order § Account purchasing director makes a pass 4 -34 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 4. 1 (continued): What Would You Do? § Jared declined § However, entertaining clients is not unusual and he needs the sale § What should he have done? 4 -35 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 4. 2: Callahan Car Parts § Tommy Callahan takes over after his father dies § Mfg firm with 12 regional salespeople + 2 account execs who handle big parts retailers § 3 US mfg plants are union § Competitor has been hit with multimillion-dollar fine for resale price maintenance (setting minimum prices its distributors could charge for its products) § Lack of policies prohibiting this led to large fine § Tommy asked 3 senior salespeople, VP of HR, and attorney to create policies and procedures § Sales staff revolted 4 -36 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 4. 2 (continued): What Would You Do? § What type of approach to monitoring, investigating, punishing, and improving ethics policies should Tommy suggest to the committee? § What should he do to get salespeople to support the need for clear ethics policies? 4 -37 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.