Part V SALES FORCE LEADERSHIP

1. Part VSALES FORCE LEADERSHIP Chapter 10: Sales Force Ethics

2. TO LOOK OR NOT TO LOOK Assume you are taking a make-up final exam in a separate room and you need an A to pass the course, otherwise you might have to go to summer school and delay graduation for three months. You are 99% certain that your professor will not check in on you while you are taking the test and you have your textbook and notes in your book bag, which is sitting next to you on the floor. You are stumped on a few questions (enough so that you probably won’t get your A). If you looked in your notes and text, you would answer them correctly. Do you look?

3. TO LOOK OR NOT TO LOOK Assume the same situation, but that if you got your A on the test you would receive $5,000 (in addition to graduating). Now would you lookin your notes?

4. “Former employees have alleged the company induced doctors to use Infuse and other spine products by sending them on lavish trips to resorts, paying them undeserved royalties, and handing out lucrative consulting contracts that required little work.” (David Armstrong, Wall Street Journal, Oct. 3, 2008)

5. Greg Norman, left, talks with CVS President Tom Ryan, second from right, as others look on during the 6th Annual CVS Charity Classic in 2004. The company’s ethics policy is supposed to keep vendors from using fancy gifts to win favor with CVS execs. But the rules don’t apply to the company’s annual charity golf tournament, where vendors pay big bucks for trips with key CVS executives,

6. Examples of Pressures Facing Sales Managers • Incentives to provide favorable earnings reports • High rewards for short –term profits at expense of long-term growth • Greed • Reputation • Other?

7. Case – Defining Moment • You are the regional sales manager of a technology-based firm. • Stacy, one of your branch managers, wants to fire Kathy, a salesperson you hired last year, for underperformance (lack of territory development). • While there are no formal quotas, the other salespeople have had double-digit revenue growth recently, while Kathy has experienced 8% growth. • Kathy works 40 hour weeks, however, everyone else puts in about 50-60 hours per week. • Kathy is devoted mother with full custody of her 5-year-old daughter and no child support or other assistance from her ex-husband.

8. Case – Defining Moment • Stacy, a single woman in her 20’s, believes that Kathy’s responsibilities at home have been keeping her from fully realizing her territory’s potential. • Because the other salespeople were unmarried and in their early 20’s, the long hours had not raised work-family issues. • Company executives believe in creating a “family-friendly” organization.

9. Case – Defining Moment • Do you allow Stacy to fire Kathy because everyone else has been working longer hours, experienced double-digit growth, and future competitive pressures on the company would be intensifying? • Or do you say “no” because the company executives believe in creating a “family-friendly” organization and you now have a chance to do something tangible to support this culture?

10. Influences in Ethical Decision Making Workplace Coworkers Managers Ethical Policies Family Community Ethical norms Culture Self Religion Profession Legal System Law Punishment

11. Purchasing Agent’s Ratings of Sales Activities and Correlations With Career Impact and Supplier Choice Ethicality Ethicality Ethicality Salesperson Behavior Mean Career Supplier Choice Gifts to Current Customers: 1. Give purchaser who was one of best customers a gift worth $50 at Christmas 1.87 .33 .53 2. Gave one of best customers a $25 Christmas gift. 2.26 .57 .65 3. Buys lunch for a purchasing agent 3.77 .34 .25 4. Gives every customer a present worth $10 at Christmas 2.77 .57 .55 5. Provides entertainment for purchasing agent such as tickets to sporting events. 2.63 .59 .55 Puts Own Interest First: 1. Quotes higher than normal price for product during temporary shortage situation 1.75 .12 .52 2. Lets it be know he has information about a competitor if purchasing agent is interested. 1.90 .38 .61 3. Hints if order is placed, price might be lower on next order, when it is not so. 1.29 .19 .22

12. Purchasing Agent’s Ratings of Sales Activities and Correlations With Career Impact and Supplier Choice Ethicality Ethicality Ethicality Salesperson Behavior Mean Career Supplier Choice 4. Only stresses positive aspects of product, omitting possible problem purchasing agent’s firm might have with it. 1.97 .16 .43 5. Grants price concession to purchasing agent of company he owns stock in. 1.80 .36 .64 6. Attempts to sell product to purchasing agent that has little or no value to buyer’s company. 2.06 .38 .40 7. Uses “back-door”selling instead of going through purchasing department. 1.67 .21 .44 Gifts to Prospects: 1. Gave purchaser who had not done business before Christmas present worth $10 2.13 .53 .54 2. Gave purchase who had not bought from the firm a Christmas gift worth $25 1.72 .47 .61 3. A $50 Christmas gift sent to purchaser who has been called on but had not placed an order. 1.63 .38 .41

13. Purchasing Agent’s Ratings of Sales Activities and Correlations With Career Impact and Supplier Choice Ethicality Ethicality Ethicality Salesperson Behavior Mean Career Supplier Choice Pressure or Coercion: 1. In reciprocal buying situation, salesperson hints unless order is forthcoming, prospect’s sales to firm might suffer. 1.61 .19 .50 2. Attempts to use economic power of firm to obtain concessions from the buyer. 1.99 .29 .57 3. Attempts to get purchasing agent to divulge competitor’s bid in low bid buying situation. 1.64 .26 .36 4. Exaggerated how quickly order will be delivered to get the sale. 1.68 .33 .51 Preferential Treatment: 1. In shortage situation allocates product shipments to purchasing agent he personally liked. 1.91 .40 .67 2. Grants concessions to purchasing manager depending on how much he likes manager. 2.24 .35 .55 3. Give preferential treatment to customers who are also good suppliers. 2.97 .67 .68 Note: 5 = very unethical; 1 = very ethical. Correlations over.25 are significant at 0.01 level.

14. Ethical Checklist Recognize the Dilemma Get the Facts List the Options Make Your Decision

15. Common Sales Ethics Issues • Hiring and Firing • House Accounts • Expense Accounts • Gifts for Buyers • Bribes • Entertainment

16. Is it a Gift or a Bribe? * Have you or your colleagues ever offered potential clients personal gifts valued at more than $100 in exchange for their business?

17. Is it a Gift or a Bribe? In your opinion, would a personal gift valued at $100 - $500 given to a potential client by a salesperson constitutes a bribe?

18. Consumer Protection Laws • Clayton Antitrust Act • Prohibits price discrimination, certain exclusive dealing arrangements, and mergers which may substantially reduce competition or create a monopoly. • Magnuson-Moss Warranty Act • Illegal for salespeople to coerce customers into purchasing replacement components at higher prices than a third party could provide by threatening the buyer that such action would void the product’s warranty. • Federal Sentencing Commission for Organizations • Holds both the employee and the employee’s company responsible for compliance with federal regulations. • Fair Packaging and Labeling Act • Standard package sizes and disclosure of the manufacturer’s or distributor’s name. • Consumer Credit Protection Act • Illegal for loan companies and retailers to avoid misleading consumers.

19. Eight Ways to Keep You Sales Force Honest • Get support from top management showing that they expect you to follow the spirit and letter of the law. • Develop and distribute a sales ethics policy. • Establish the proper moral climate. If the bosses follow the rules, then the troops are apt to do likewise. • Assign realistic sales goals. People who try to meet an unfair quota are more likely to rationalize their way to a kickback scheme. • Set up controls when needed. Watch people who live above their income. • Suggest that salespeople call for help when they face unethical demands. • Get together with your competition if payoffs are an industry problem. • Blow the whistle if necessary.

20. Honesty • “The reputation of a thousand yearsis determined by the conduct of one hour.”Japanese Proverb • “There is no pillow as softas a clear conscience.” • Blanchard and Peale • “When in doubt, tell the truth.It will confound your enemiesand astound your friends.” • Mark Twain