Managing Business Ethics Straight Talk

about How to Do It Right 7th Edition

Trevino Solutions Manual
Visit to Download in Full: https://testbankdeal.com/download/managing-business-ethi
cs-straight-talk-about-how-to-do-it-right-7th-edition-trevino-solutions-manual/
 Chapter 7

Managing for Ethical Conduct

Contents: (Please note: The Instructor Guide for every chapter will follow this structure.)
1. Chapter Outline
2. Teaching Notes
3. In-Class Exercises
4. Homework Assignments
5. Additional Resources

Chapter Outline

I Introduction

II In Business, Ethics Is about Behavior

A. Practical Advice for Managers: Ethical Behavior

III Our Multiple Ethical Selves

A. The Kenneth Lay Example

B. The Dennis Levine Example
C. Practical Advice for Managers” Multiple Ethical Selves

IV Rewards and Discipline

A. People Do What’s Rewarded and Avoid Doing What’s Punished

B. People Will Go the Extra Mile to Achieve Goals Set by Managers
C. How Goals Combined with Rewards Can Encourage Unethical Behavior
D. Practical Advice for Managers: Goals, Rewards, and Discipline
E. Recognize the Power of Indirect Rewards and Punishments
F. Can Managers Really Reward Ethical Behavior?
G. What about the Role of Discipline?
H. Practical Advice for Managers: Discipline

V People Follow Group Norms

A. “Everybody’s Doing It”

B. Rationalizing Unethical Behavior
C. Pressure to Go Along
D. Practical Advice for Managers: Group Norms

VI People Fulfill Assigned Roles

A. The Zimbardo Prison Experiment

B. Roles at Work
C. Conflicting Roles Can Lead to Unethical Behavior
D. Roles Can Also Support Ethical Behavior

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

 E. Practical Advice for Managers: Roles

VI People Do What They’re Told

A. The Milgram Experiments

B. Obedience to Authority at Work
C. Practical Advice for Managers: Obedience to Authority

VII Responsibility Is Diffused in Organizations

A. “Don’t Worry – We’re Taking Care of Everything”

B. Diffusing Responsibility in Groups
C. Diffusing Responsibility by Dividing Responsibility
D. Diffusing Responsibility by Creating Psychological Distance
E. Practical Advice for Managers: Personal Responsibility

VIII Stressed-Out Employees Are More Unethical

A. Practical Advice for Managers: Stress

IX Conclusion

A. Am I Walking My Ethical Talk?

X Discussion Questions

XI Case: Sears, Roebuck and Co.: The Auto Center Scandal

XII Short Case

Teaching Notes - Discussion Questions

1. Have you ever been in a situation, especially a work situation, where the norms
supported a particular behavior, ethical or unethical, where you felt pressured to go
along? Explain.

Undergraduate students have limited work experience. But, they will often cite examples from
summer jobs such as working in a fast food restaurant where the rules said you couldn't eat the
food, but everyone did. Or, they may have had a job where they worked hard at first, but after
being charged with "rate-busting," slowed down to match the work levels of regular workers.

Graduate students with work experience will have lots of examples - some good and some bad.
It's good to solicit both. That way the message is clear that organizations and managers vary
and perhaps one should attempt to learn about the ethical values of an organization or manager
before accepting a job.

Probes to Stimulate Discussion

With examples of pressure toward unethical behavior, ask:

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

• "What was the nature of the pressure? Why did you feel you should go along? What
options did you think you had if you didn't go along?"

With examples of pressure toward ethical behavior, ask:

• "How did you feel about the pressure?" Often the reaction is quite positive. Rather than
pressure, they may experience it as "support" for doing the right thing. Discuss the
difference.

• "Do you think it's okay to pressure people to do 'the right thing,' such as supporting a blood
drive or the United Way?"

2. Have you ever been in a situation where the rewards explicitly or implicitly supported
unethical conduct? Explain.

Again, the discussion will depend upon examples generated by the students. The most
frequent examples will probably be the sales job that rewards on commission and provides no
guidance regarding how the goal is reached.

3. Can you think of situations in which unethical behavior was dealt with appropriately
(punished justly) or inappropriately? What were the reactions of others in the
organization?

Generally, students will speak positively about situations where "bad guys" were punished, and
negatively about situations where people "got away with" misconduct. This reaction supports
the idea that people want to work in “just” environments where reasonable rules are enforced.

Probes to Stimulate Discussion

• "How would you feel if someone cheated on a test and was not disciplined?"

• “Would you feel differently if the test was curved?”

This is the time to discuss the important social effects of rewards and punishments. As a
manager, you need to think about not only the person you're rewarding or punishing, but also
the reactions of others who are aware of the situation. They will judge your behavior primarily in
terms of its fairness to everyone. The situation with cheating is similar to a work situation where
there is a fixed pie of benefits (e.g., bonus money) and one salesperson who is using unethical
sales tactics is likely to get the money while the honest salespeople will be left with nothing (but
their integrity).

4. What do you think would be appropriate punishment for those found guilty of assault
or indecent exposure in the Tailhook situation? Why?

This question will probably generate a lively discussion. You may want to see if the answers
differ for females versus males, those with military experience versus those without military
experience. One point that is important to make, however, is that management of the Navy
needs to take responsibility for whatever role it played in allowing this behavior to continue year
after year. It was obviously considered a "rewarding" experience for many of the men involved,
and we know that people do what's rewarded. So, it might be most appropriate to discipline
individuals at the highest levels who were responsible for tacitly condoning the behavior.

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

On Nov. 14, 1994, Newsweek ran an article entitled "The Military Fights the Gender
Wars," p. 35. They discussed sex-related scandals in the Navy and at West Point.
At West Point, women cadets complained that they were fondled by army football players during
an Oct. pep rally. Citing that they'd learned the lesson of Tailhook,
Lt. Gen. Howard Graves (superintendent of the academy) notified the Pentagon, launched an
immediate investigation, and talked to the New York Times openly.

Paula Coughlin, the Tailhook navy lieutenant, won a $6.7 million jury award from
the Las Vegas hotel where the convention occurred.

In 1996, (2/5) Newsweek reported that, in the four years since Tailhook, the Navy had received
more than 1,000 sexual harassment complaints and more than 3,500 charges of indecent
assault.

There have been other sex-related scandals in the military more recently, including students at
the Air Force Academy who claimed that they were raped by fellow students and that school
officials either ignored their complaints or punished the accusers for complaining. Students can
be asked to do research to bring the Tailhook discussion up to date. You can also discuss how
the military’s experience relates to the experiences of other work organizations with sexual
harassment.

In another example of how this issue continues to grow, an Air Force general in early 2013
overturned an officer’s sexual assault conviction based on the general’s belief that the officer
was a “long-serving officer who loved his wife and child.” A firestorm erupted in the press as a
result, with the U.S. Congress hosting competing bills to combat the power of commanding
officers to overturn the results of an authorized, legitimate court martial. Students can search for
descriptions of the struggle in the U.S. Senate between Sen. Claire McCaskill (Missouri) and
Se. Kirsten Gillibrand (New York), which is a fascinating case of how the military handles such
cases and how Congress is trying to change that.

Just in case you thought things had changed, please note that in 2017, the U.S. Marine Corps is
struggling with various online sites where Marines or Marine veterans have posted photos of
their female colleagues, sometimes in various stages of undress or even nude and without their
permission. This scandal is unfolding as this instructor’s manual is going to press. See the
following which speculates that the scandal may involve other branches of the military as well:
http://www.npr.org/sections/thetwo-way/2017/03/10/519682039/nude-photo-scandal-may-
expand-beyond-marines-united-facebook-group

Probes to Stimulate Discussion

• "What do the women/men in the class think?" (Note that sexual harassment and abuse are
not limited to women – men are victims too).

• "What do those with military experience think?"

• "How should punishment be distributed to participants and high ranking officers who didn't
participate, but tacitly 'allowed' such behavior to occur?"

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

5. Have you ever felt obligated to do something you felt was wrong because a person in
a position of authority told you to do it?

Discussion related to this question will rely upon students' experience. Expect to hear stories
about experience in sales positions where students are told to be dishonest with customers in
order to sell their wares -- telling someone the shoes fit when they don't, or that buying a coat in
July is really a good idea!

6. Think about how you might design work to maximize workers' taking responsibility for
the consequences of their actions.

Possible Answers

• Make employees responsible for a whole, identifiable piece of work. The more it is
chopped up into pieces, the less aware they are likely to be of the consequences.

• Create opportunities for employees to interact with the people who might be affected by
their behavior or decisions.

Both answers relate to the job design literature, which suggests that jobs designed along these
lines would also be more motivating.

7. Evaluate yourself or a manager you know using the "do you walk your talk" questions
above.

Probes to Stimulate Discussion

• “Are these the right questions to ask?”

• “Are there others we should be asking?”

In-Class Exercises

Case #1: Sears, Roebuck, and Company: The Auto Center Scandal

Case-based Questions and Answers

1. Identify the ethical issues involved in the case from a consequentialist and
deontological perspective (refer to Chapter 2).

Deontological approaches seem most useful here. For example, fairness, honesty, and the
obligation to provide customers with only needed service are the most obvious ethical issues in
the case.

Consequentialist approaches would point one toward the costs to society of thousands of
people paying for unnecessary service. The primary harm seems to be monetary and the loss
of trust.

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

A virtue ethics approach begs the question, what is the relevant community here?
Mechanics and service advisors are not professionals with established codes to guide their
conduct. However, they would probably agree that people of integrity don't lie. And, doing so
certainly wouldn’t look very good on the front page of the local newspaper.

2. Identify the management issues involved in the case. For example, think about the
case in terms of multiple ethical selves, norms, reward systems, diffusion of
responsibility, and obedience to authority. What factors contributed the most to the
alleged unethical conduct on the part of service advisors and mechanics?

Multiple ethical selves. Most of the people who were dishonest to customers are probably
upstanding members of the community who think of themselves as good, honest people. It is
likely that this view of themselves didn't change because of their behavior at work.

Norms. It seems that dishonesty became the norm in this environment. It became the way
things were done.

Roles Consider making quality an important part of the mechanic and service advisor roles.
Another possibility is to create a new role - quality control person. But, this is not an ideal
solution. Why check up after the fact if you can avoid problems from the start? This case also
suggests that there are role conflicts for those who diagnose problems and sell service to
customers. These roles should be separate.

Reward System. Clearly the reward system is the biggest problem in this case.
Management has designed a reward system that focuses on ends (quantity, not quality), but not
means (honesty with customers). It also rewards people not only for selling more service, but
implicitly rewards them for being dishonest. It also punishes those who are honest, if by being
honest you will do less repair work. For a company that has prided itself on customer service
over the years, this new reward system created problems with consumer trust that take years to
rectify. The reward system contributed the most to the unethical conduct. The reward system
can be changed to focus goals on quality, customer satisfaction, and/or repeat customers rather
than amount of service sold. A great exercise - have students design this new reward system.

Diffusion of responsibility. Diffusion of responsibility is a factor in this case, especially with the
new reward system that maintains commission for mechanics. For example, if a mechanic is
the one diagnosing the problem, s/he may list more problems (or bigger problems) than really
exist because of the reward system. But, this is even more possible because s/he might think,
"I'm not the one really advising the customer."
"I'm just making a list of problems and handing it to the service advisor." So, the responsibility
for the bad advice is diffused between the mechanic and the service advisor. And, it's possible
for either or both to point to the other as "really responsible." Psychological distance comes into
play here as well. If the mechanic never sees the customer, it's probably easier to be dishonest
than if s/he has to lie to the customer face-to-face.

Obedience to authority. Nobody was openly telling these people to be dishonest.

But, in the absence of clear statements, employees will try to figure out what authority figures
want them to do. In this case, employees figured out that management wanted them to sell
more service at any cost - and they did.

3. How would you evaluate Sears' response to the allegations and the changes they
made? Has Sears resolved its problem? Why or why not?

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

Brennan's response was weak. He should have apologized and fully accepted management's
responsibility for creating a faulty reward system. He should also send a strong message to
employees about future expectations.

Some of the ideas that were implemented are okay. For example, commissions based upon
customer satisfaction should turn attention to satisfying the customer rather than selling a
certain number of brake jobs. And, shopping audits can provide management with useful
information about the kind of service customers are really getting. However, Sears has
definitely not resolved the problem. The fact they the company maintained the compensation
system for mechanics is a huge problem. As the letter from Chuck Fabbri stated so well,
mechanics are frequently the ones who provide the diagnosis. This system encourages them to
oversell or recommend more repair work than is needed.

4. What do you think is the impact of the scandal on Sears' reputation for quality and
service?

There is no good way to know, but thousands of business school students are studying this
case every year through versions published in this book and elsewhere. It might be interesting
to conduct a brief survey of students in the class to find out whether they would take their car to
Sears, or what they would advise their parents to do.

It might be interesting to note that, since the scandal, Sears has invested heavily in a corporate
ethics program. They even won an award for it. So, they seem to be aware of the importance
of ethics and their reputation.

5. Respond to Brennan's comment, "We have to have some way to measure

performance." What can management do to prevent "overselling?" Propose a
management plan (including a compensation system) that allows management to
measure performance and encourages auto center employees to behave ethically. Be
specific.

Certainly, management needs some way to measure performance, but they selected
inappropriate ways to do it. Again, any goals or incentives based on sales run the risk of
promoting the sale of unnecessary service, or overselling. At the very least, if they insist on
sales quotas, they must counterbalance these with strong ethics training and harsh and
enforced penalties for dishonesty. They certainly shouldn't punish people for being honest.

The company might think about implementing a straight salary system, with bonuses for quality,
customer satisfaction (based on surveys), and referrals. Some of these could be team-based
which would encourage mechanics to work together, consult each other for ideas on how to
solve problems, etc.

It would probably also help to have the mechanic meet the customer and talk with him or her
about the problem (reducing psychological distance). Midas muffler mechanics work in glassed-
in shops so that customers can watch them work. They also bring customers into the shop to
show them what's wrong - the hole in the muffler, for example. Obviously, that's easier with
mufflers, but it could probably be done with other problems, and would do a lot to inspire trust.

An important part of any new reward system will be making it clear that any future dishonesty
will be harshly disciplined, and then following through.

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

The current system focuses only on selling more service to current customers. How about
looking beyond these customers to think about ways to bring more customers in? They might
consider getting service employees involved in coming up with creative ideas to attract new
customers. If they're successful, they should share in the profits. Goals or incentives based on
quality, new customers, referrals, or customer satisfaction focus on satisfying customers.
Service managers and mechanics would then be motivated to satisfy customers over the long
term rather than to make short-term sales. Sears might also consider implementing some kind
of simple code to guide mechanics, like, "Would I recommend this service if this were my
mother's car?"

You can have students work in teams to design a reward system. They can present their ideas
to the other teams who can play the role of devil’s advocate. Given the reward system, what is
the behavior that is rewarded, punished? Hopefully, students will learn what an important
management role designing reward systems is.

6. Should anyone be disciplined? If so, who and when? What should the discipline be?

Take care when discussing this question. Students (especially undergraduates) will often want
to harshly discipline the "unethical" workers - to make an example of them. But, discipline must
be perceived to be fair (by observers and by those punished) if it is going to be effective. So,
first, management must take responsibility for its role in tacitly encouraging the unethical
behavior through the poorly designed reward system. The best answer here is for management
to acknowledge its role, to make clear that things are changing, to change the reward system to
one that doesn't encourage unethical behavior, to state clearly that unethical behavior will be
harshly punished in the future, and then to follow through at the first opportunity. Under these
circumstances, discipline will be very appropriate and necessary.

7. Think more generally about Sears management’s response to the firm’s financial
problems. How else could they have increased auto center sales without providing
incentives to employees to sell specific products?

There are many possible responses to this question. They could offer discounts in an attempt
to increase volume, improve customer service so that people are more likely to come back for
service when they need it, etc.

An addition resource for the Sears case:

Rucci, A.J., Kirn, S.P. & Quinn, R.T. 1998. The employee-customer-profit chain at Sears.
Harvard Business Review, 76(1): 82-97. A good teaching note to accompany the case.
(Thanks to Stu Youngblood at Texas Christian University for bringing this to our attention).

Case #2: Another Short Case for Discussion

1. What are the ethical issues in this case?

Fairness is a prominent issue in this case. What is the fairest allocation of resources given the
three regions’ size and needs? The fairest approach is to support all three regions, not just
Bill’s. The golden rule would certainly support that position, as would Kant’s categorical
imperative. Fairness comes up again when Bill says he’ll recommend you and your people for

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

every award, AND give you a monetary bonus out of his own pocket. That begins to feel like
bribery and undue influence and should be avoided at all costs.

2. What are some reasons the decision maker in this case might be inclined to go
along? Not go along?

Obedience to authority may come into play here. Bill does represent the largest region and the
biggest money maker. Depending upon the company’s values, Bill may have more power than
the other regional directors, and that puts pressure on the decision maker in this case. But, the
decision maker’s gut should be screaming as well about the fairness and bribery issues which
would make him or her think more than twice about the situation.

3. If you were the decision maker, how would you handle the situation?

This probably depends a lot on the organization’s culture. In some organizations, Bill would be
allowed to get away with these shenanigans because of his region’s financial success. The
best approach is to first have a frank conversation with Bill about the situation and your fairness
concerns. You can explain that your approach will be to work with each regional director with
equal enthusiasm and provide the best service possible to all of them. You also need to be
clear that you cannot accept the monetary bonus. If he continues to insist on preferential
treatment, you might suggest that you and all of the regional directors have a problem-solving
meeting with their manager to discuss the situation. If you take a problem-solving approach,
you may be able to come up with a creative solution. For example, if Bill’s area is clearly the
most important to the company, maybe you can designate a particular person or persons to
work closely with Bill. The organization might even pay for additional staff. But, whatever you
do, it needs to be out in the open and not some side deal.

Would you report the conversation to your manager? Why or why not?

You could certainly solicit advice and support from your manager on this sticky situation. That’s
what managers are there for. Your manager may have information about Bill and the others
that could be helpful in working the situation out. You may also gain insight into what the
organization’s stance is likely to be by talking with your manager.

Homework Assignment

Please note that either of the in-class discussion cases would make excellent homework
assignments.

Additional Resources:

1. Video: “Obedience”
A 45-minute, classic film about Milgram's experiments is entitled "Obedience." Although the film
is old, it makes an extremely powerful statement about the notion that "people do what they're
told." We recommend that you preview the film and then prepare students for what is to come.
Students typically react to the "worst" obedience scenes with nervous laughter. If you explain to
them that they are likely to react that way, they'll understand their own discomfort better. Advise
them to feel free to laugh, but to think about why they’re laughing and be prepared to discuss
that. Be sure that you leave enough time for discussion. Students will often argue that "people

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

are different now" and that they would never comply as those in the film did. The major point to
be made here is that the research overwhelmingly supports that idea that people do what
they're told. This wasn’t just one study, but many studies that are documented in Milgram’s
book. Therefore, managers/leaders have a great deal of influence on most people's conduct
and that responsibility must be taken seriously.

Another important point to be made is that experiments such as Milgram's could not be done
today because of the Human Subjects Committees at universities that protect the rights of
research subjects.

2. Video: “Quiet Rage”

A newer, 50-minute video entitled, Quiet Rage; the Stanford Prison Study, is similarly powerful.
It is narrated by Zimbardo and includes scenes from the actual experiment. It’s highly
recommended for discussion on the power of roles to mold behavior. Reading about the
experiment just doesn't do it.

3. Video: “Invitation to Social Psychology”

A shorter film/video, entitled "Invitation to Social Psychology" has very brief vignettes from both
Milgram's and Zimbardo's studies.

Both the full-length Milgram film and the Zimbardo film are highly recommended for students at
any level. Students report that they are thought provoking and memorable. The important
lessons about the power of obedience and roles won’t soon be forgotten.

Some websites devoted to Stanley Milgram and his work can be found by putting Stanley
Milgram into the Google search engine.

4. Primetime Live – a recent “Obedience” experiment

In November, 2005, Primetime Live ran a powerful segment about a situation that occurred in a
number of McDonald’s restaurants. Much of the segment was from video recorded on a
McDonald’s surveillance camera. A man, saying he was a policeman, called. He claimed to
have a McDonald’s manager with him. He requested to talk to the restaurant manager and told
this manager that a young female employee who he described had stolen something and should
be called into the private office. The caller proceeded to make requests that involved requiring
the 18-year old woman to take off her clothes so that she can be searched, and worse. The
young woman in the segment ended up being physically abused by a man (the restaurant
manager’s boyfriend who was called in to watch the young woman while the manager went
back to work). The restaurant manager, a middle-aged woman, came across as not evil, but
simply following orders from an authority figure (a policeman). She never questioned him about
his requests. The segment was not available to purchase when we last checked, but it has
been rerun. So, you may want to look for it. We tell you about it because sometimes students
say, “Oh, this couldn’t happen today.” This story clearly counters that belief.
P.S. The perpetrator was caught (by tracking down his calling card).
For more information and the script of the segment, see
http://abcnews.go.com/Primetime/story?id=1297922&page=1

You can also purchase a DVD that ABC created. It’s available on Amazon.com as part of a
series ABC News Primetime called “Basic Instincts” – it’s number 5 in the series and is entitled
“The Milgram Experiment Re-Visited,” It demonstrates how a University of Santa Clara
psychologist replicated the Milgram experiment (with some serious tweaks to reflect today’s
ethical standards). It shows variations on the Milgram experiment as well as a very short

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition

segment on the McDonald’s story. If you use it (especially the part about what happened at
McDonald’s) you may want to warn the class. We have had students get upset (one young man
who had daughters found it very difficult to watch; a young woman who had been sexually
abused also had a negative reaction – so when we use this video we warn students about it and
give them the opportunity to leave if they wish – of course with no repercussions at all). But, the
large majority of students find this to be an extraordinarily educational video.

5 Experimenter (2015)

The movie, starring Peter Sarsgaard as Stanly Milgram, explores not only the experiments
themselves, but also the reaction afterward. It’s available on DVD and could be used to spark a
discussion on those reactions and what students think about how people reacted at the time.

Managing Business Ethics, by L. Treviño & K. Nelson, 7th Edition