Part V

SALES FORCE LEADERSHIP

Chapter 10:

Sales Force Ethics

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?
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 look

in your notes?
 “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)

 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,
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?
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.
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.
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?
Influences in Ethical Decision Making

Workplace
Coworkers
Managers
Ethical Policies

Community
Ethical norms Family
Culture

Self

Profession Religion

Legal
System
Law
Punishment
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
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
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.
Ethical Checklist

Recognize the Dilemma

Get the Facts

List the Options

Make Your Decision

Common Sales Ethics
Issues
 Hiring and Firing
 House Accounts
 Expense Accounts
 Gifts for Buyers
 Bribes
 Entertainment
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?

100%
88.60%
90%
80%
70%
60%
Yes
50%
No
40%
30%
20% 11.40%
10%
0%
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?

100% 94.00%
90%
80%
70%
60%
Questionable/Bribe
50%
Acceptable
40%
30%
20%
10% 6.00%
0%
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.
Eight Ways to Keep You Sales Force Honest

1. Get support from top management showing that they

expect you to follow the spirit and letter of the law.
2. Develop and distribute a sales ethics policy.
3. Establish the proper moral climate. If the bosses follow the
rules, then the troops are apt to do likewise.
4. Assign realistic sales goals. People who try to meet an
unfair quota are more likely to rationalize their way to a
kickback scheme.
5. Set up controls when needed. Watch people who live above
their income.
6. Suggest that salespeople call for help when they face
unethical demands.
7. Get together with your competition if payoffs are an
industry problem.
8. Blow the whistle if necessary.
Honesty

“The reputation of a thousand years

is determined by the conduct of one hour.”
Japanese Proverb

“There is no pillow as soft

as a clear conscience.”
Blanchard and Peale

“When in doubt, tell the truth.

It will confound your enemies
and astound your friends.”
Mark Twain