XYZ corporation produces circuit boards for cell phones and related communication products. Its fabrication plants exist in two U.S. locations – Phoenix, Arizona, and Harrisburg, Pennsylvania – but its supply chain extends to three continents. At this point XYZ has 835 employees at its fabrication locations, and 35 additional sales and purchasing staff supervised from an office in Chicago. The 23 members of the sales staff are dispersed across three continents, while purchasing staff reside in Chicago. Most of those in overseas locations are home country nationals, the majority in China and India.
In recent years the company has confronted a number of problems involving “over selling’”. Sales staff, working on individual commissions that often result in $300,000 incomes frequently promise product to customers that is outside the company’s ability to provide. In a recent case two sales staff teamed to sell 750,000 units to a customer in Europe. It was clear to them at the time that the company would not be able to fulfill the contract in the time frame the customer demanded; however, when questioned by the VP the staff said that, “In the past we have always operated this way, in fact we were told to operate this way, and the company would either find a way to make it happen or negotiate different terms with the customer at the point when it was clear we couldn’t make it happen.”
In truth, their assertion was correct. The company had frequently played this game with production staff and customers. The result was certainly discomforting to production employees, who found that production schedules placed significant burdens on their personal lives given the involuntary overtime required by the promises. In addition, customers seldom could find other alternative sources for the product given the patents XYZ had created and will maintain for the next 15 years. Consequently, the company had lost little business over the long run by allowing these sales practices, which everyone understood to be dishonest.
Company profits have always been above average for comparable firms in the industry, and shareholder satisfaction with company management – measured by an independent research firm – is at an historic high.
There is no “ethics function” within management at this point. The CEO has decided to consider creating such a function. You are the HR Director. You have been asked to create a set of recommendations to deliver to the C-Suite concerning the following issues.
- Should there be a discrete “Ethics Officer” and, if so, to whom should the office report? Alternatively, should the ethics function be established within an existing department (such as Finance, HR or Legal)?
- What process should XYZ use to create a code of ethics related to the types of issues represented by the sales problems created by “over promising” to customers?
In both cases explain your answers. Also support your recommendations based on material from the required readings in this Lesson. In supporting your recommendations, use appropriate APA citations. Your submission should be between 750 and 1000 words.