The interest in the ethical behavior of the workforce has gone far beyond the theoretical discussion of moral standards and social responsibility. In the light of the reason for many recent failures of enterprises, it is clear today that organizations that develop and maintain superior ethical standards reduce their own risk thus increase shareholders’ wealth.
1.1 The Growing Interest in Ethical Conduct of Sales Personnel
Among the main reasons behind this assumption, which has brought about a significant concern to business ethics, are influential factors such as greater legislation, enforcement and control (in particular among OECD member states); increased awareness of the media and the public; the unambiguous link between poor corporate governance and management risk; and the greater concern for customer relationship management (CRM), especially among business-to-business markets. Therefore, in the seek for better ethical behavior, the business community is keen to develop clear and reliable measurements of ethical behavior, as well as to establish predicting mechanisms, which may indicate managements and boards about possible failures in this field.
In almost every company, the sales force is typically more prone to engage in unethical behavior than others. This is due to the nature of the selling process, which is based on personal interaction, negotiation and some degree of persuasion and manipulation. Moreover, as sales people are measured by their selling volumes, they may try to “press on the borders” of the codes of conduct or even cross the borders to facilitate a sell.
Phenomena of unethical behavior among sales personnel may include deeds such as false promises (regarding e.g. the product or the service), bribery of procurement executives (in companies) or officials (in the public sector) and invasion of decision-makers privacy.
1.2 Research Objectives
The aim of this paper is twofold. First, it will critically analyze a four-factor model proposed by Hsu, Fang and Lee, who suggest a correlation between unethical behavior of sales representatives in the pharmaceutical industry and four variables from the field of HRM. Second, several more related variables will be offered, all of which may relate to ethical behavior. Finally, the paper will present a set of tools that may help executives to notice unethical behavior of the sales workforce earlier than today’s generally accepted measurement methods.
2 Four Possible Organizational Culture Variables and their Pertinence to Ethically Questionable Behaviour
In their study, Hsu, Fang and Lee hypothesized that there are links between unethical conduct of sales representatives and four HR variables: frame pattern, commission structure, behavior control type, and marketing norm perceptions. This section will deal with each of the four separately, focusing on the conceptual and contextual reasoning to use them as a predictor of unethical behavior.
In HRM and other social sciences, the concept of framing (aka frame pattern of framing effect) refers to the manner in which, when describing a problem or a situation, “a speaker’s emphasis on a subset of potentially relevant considerations causes individuals to focus on these considerations when constructing their opinions” (Druckman, 1042). More specifically, the same situation, opinion or policy can be described in two statements, which are logically identical but differ in their wording and thereby cause completely different choices.
Hsu et al. (156) define two types of framing patterns in regard to sales quotas, namely loss frame and gain frame. That is, loss framing will cause an individual to see, for example, 70% completion of the quota as 30% loss/failure, whereas the gain framing will perceive more significantly the sales that were achieved. The authors suggest that, when facing potential loss, salespersons who work in loss framing culture will feel a greater pressure to increase their sales and therefore are more likely to take unethical choices.
Perhaps the most significant implication of this finding is the immense implication of framing, a semantic means, on other rules, policies and codes of conduct that are expected from the employee. It is therefore imperative not only to avoid loss framing, but also to adopt in an ethics-supportive frame.
2.2 Commission Structure
The perceived probability of gain and loss has a direct influence on one’s propensity to take risks, such as the risk of getting caught in a violation of ethical standards. It follows that at a constant probability of getting caught, the higher the commission element of the salesperson’s remuneration, the higher her likelihood to commit immoral actions. Hsu et al (163) argue that the bonus structures in pharmaceutical companies should be reduced in order to avoid possible penalties on the company as a result of salespersons’ response to the commission structure.
2.3 Behavior control
There is a general tradeoff between management’s wish to guide and monitor its salespersons (whose tasks are typically field jobs) and the latter’s natural tendency to set their own priorities and schedules (Piercy et al., 247). Without getting into the dilemmas and solutions of behavior control, it is clear that the looser the control on a single salesperson, the more likely he will favor his own interests on those of the company. Moreover, a weak enforcement of ethical standards can be related to a lower keen to follow those rules, which may reduce one’s compensation and thus must be controlled just as much as sales volumes.
2.3.1 Marketing Norm Perception
Hsu et al. (157) postulate that marketing norms, which defines clear expectations from the salespersons as regard to their behavior, are effective means to reduce the hazard on ethically questionable conduct of the workforce. However, the norms should be clearly conveyed and the managers must make sure a strong perception of these codes of conduct among the workforce, otherwise the norms are obsolete. Furthermore, it must be measured in some way what weight the norms have in contrast to other factors of influence, such as remuneration, competition (both in and outside the organization) and the salesperson’s personal and cultural set of values.
2.4 Other Related Variables
Ethical conduct is heavily related to organizational behavior, in particular to several factors of organizational culture, motivation and control. This section will present several variables from these three dimensions.
2.4.1 Variables of Organizational Culture
As ethical behavior, organizational culture is derived from the individual’s or the group’s set of values and attitudes. As values create attitudes, which in turn bring about decisions and actions (Kerns, n.p.a), it is imperative to examine several values within the framework of an organization’s culture that may indicate potentially unethical conduct. Some of these cultural variables might be:
- High level of aggressiveness
- High level of task orientation
- Low level of attention to detail
- Positive orientation towards ethically questionable incidents in the organization’s narrative.
2.4.2 Variables of Motivation
The sources of motivation can be decisive in an individuals’ decision-making process. Among sales personnel, the traditional goal setting is concerned with achievements in actual and tends to neglect other factors of performance. Hence, it is possible that the components of one’s motivation may indicate his behavior. One may ask, for example:
- How important is it for the salesperson to represent the company and to convey its values?
- How developed is the salesperson’s concern for fairness and equity in his working environment?
2.4.3 Variables of Control
As there is a negative relation between strict control and ethically questionable behavior (Hsu et al., 163), it is necessary not only to examine the intensity of control but also the matters on which the control is focused. That is, in a comprehensive control mechanism, the interest should be expanded to areas such as reliability of reports and customers’ perceptions towards the specific salesman and the company.
Sales departments are essential components of almost every company. As their work involves an array of methods to influence and convince client to cooperate, sales representatives may be relatively more prone to conduct acts that bring about ethical dilemmas, and may be unacceptable in the moral perspective. Based on the findings described in this paper, it is possible to identify several main ways in which a manager can control ethical behavior among the sales force:
- Managers should pay attention to the narrative of their organizations, in particular to wording decisions that contrast the need to increase sales with the company’s ethical codes.
- It should be clear and practiced, that every violation of moral codes will be answered strictly and powerfully.
- When writing marketing plans and conveying orders to their sales personnel, marketing managers should relate to business ethics in the same manner they highlight budgets, sales goals and promotional strategies.
- The control process should be modified to give a higher weight to ethical behavior as a desired factor of performance. Ethics control should be expanded into outside of the company, e.g. by speaking with customers and peers, in order to locate ethical discrepancies early enough.
- Druckman, James N. “On the Limits of Framing Effects: Who Can Frame?” The Journal of Politics 63.4 (2001): 1041-1066. 2 July 2009 http://faculty.wcas.northwestern.edu/~jnd260/lfe.pdf
- Hsu, Ya-Hui, Wenchang Fang, and Yuanchung Lee. “Ethically Questionable Behavior in Sales Representatives – An Example from the Taiwanese Pharmaceutical Industry.” Journal of Business Ethics 88 (2009):155–166.
- Kerns, Charles D. “Creating and Sustaining an Ethical Workplace Culture.” Graziadio Business Report. 6.3 (2003). 2 July 2009 http://gbr.pepperdine.edu/033/ethics.html
- Piercy et al. “Driving Organizational Citizenship Behaviors and Salesperson In-Role Behavior Performance: The Role of Management Control and Perceived Organizational Support.” Journal of the Academy of Marketing Science 34.2 (2006): 244-262. 2 July 2009 http://www.springerlink.com/content/6722614546003418/fulltext.pdf