- Is the salesperson acting unethically? Why or why not?
Ethics pertain to standards that an individual considers as right or wrong. It came from the Greek word "ethos", which means outlook and disposition. It refers to behaviors, values, and guidelines that individuals follow and that which make up their ethical culture. In sales, it is often said that customers' needs and interests must come above anything else. As long as the salesperson is truthful, protects consumer rights, does not engage in corrupt sales practices, and maintains the highest standards when it comes to conducting one's professional work, among others, then the salesperson can be considered ethical and professional.
However, in this sample problem, the salesperson used deceitful acts in pushing customers to buy items that they do not really need, thus, the salesperson may be considered unethical. According to the International Code of Ethics for Sales and Marketing (SMEI), persons involved in sales and marketing must "not knowingly participate in actions, agreements, or marketing practices which may be detrimental to customers, competitors, or established social or economic policies or standards" (SMEI). Although there was no physical harm that occurred, the salesperson acted in deceit by willfully coercing customers to purchase additional financial services that they no longer needed just because of the commissions salespersons are bound to receive after reaching their quota.
While there is truth to the salesperson's argument that selling additional financial services to the clients benefitted both the client and the company, the point is it is not what the client needs. While salespersons are trained to offer other products in the hope that clients would find them interesting or worthy, salespeople should not impose to the point of misleading the client about their need for a specific product or service. Otherwise, it becomes an example of deliberate deception using manipulation techniques.
- Should your company's compensation plan be changed? Why or why not?
I think a few adjustments are possible, but there is no need to overhaul the whole compensation scheme. Giving salespeople commissions on top of their regular salary motivates them to perform better, which would prove to be beneficial for the company they work for, as employees strive to improve their productivity as well as other people's efficiency. In addition, it would make employees want to stay with the company, resulting to loyalty to the company.
As in the given case, salespeople are given a specific quota before receiving sales commissions. The compensation scheme is salary plus commission, which guarantees higher income capacity for employees. This is more than enough motivation for salespeople to ensure that they push themselves to close a sale so that they get a commission out of it. What makes this an ideal set up is that commissions are based on measurable goals, that is, the individual's productivity through sales. Thus, those who are high-achievers and high-performers receive bigger salaries (Paling) than those who do not exert effort at work. If one wants a higher salary during payday, all the individual has to do is to convince clients to purchase more products and services that the client needs.
While this is a good compensation plan, the drawback is if the salesperson's drive for selling the product or service is just to get a commission, the individual could end up selling more products that customers do not need. This will result to customer deception just to claim a commission for the sale. When this happens, the company stands to lose more clients when word gets out that it is how salespeople are trained in the company (Duff).
- How would you revise the compensation plan?
First of all, I do agree that giving employees a basic salary and commissions on top of the salary is a good way to motivate employees to increase their productivity. I like the idea that employees' hard work will be compensated because not only does it help improve the lives of the employees and their families, it also helps increase the level of confidence that an individual has, especially after meeting personal and company goals.
What I would probably do is to add some other measures that would strengthen and tighten the compensation plan, so that the company, the employee, and the customer will all benefit from the sale and service. For one, I would tie employee productivity with retention, which means the amount of financial rewards will be given based on the productivity of the salesperson, including the number of years of service. For me, the purpose of such is so that I will be able to retain the good employees and attract new ones (Paling).
I will also include a customer satisfaction compensation plan, which will drive employees to perform better on the act of selling – focusing on the quality of the product or service, the benefits one gets from it, and how product or service fares against competitor brands, among others. With this method, a salesperson will focus more on quality selling rather than selling for commissions. Thus, with a happy customer, a salesperson receives commission, the customer receives products or services one needs, and a positive long-term relationship between the company and the client (Bucaro).
References
Bucaro, F. (2009). Sales ethics: Oxymoron or opportunity. Eyes On Sales. Retrieved from http://www.eyesonsales.com/content/article/sales_ethics_oxymoron_or_opportunity/
Duff, V. (n.d.). Examples of unethical behavior in the workplace. Chron. Retrieved from http://smallbusiness.chron.com/examples-unethical-behavior-workplace-10092.html
Paling, S. (2010). Three tips to design a sales compensation plan. Entrepreneur. Retrieved from http://www.entrepreneur.com/article/217692
SMEI. (n.d.). Sales & marketing creed: The International code of ethics for sales and marketing. SMEI. Retrieved from http://www.smei.org/displaycommon.cfm?an=1&subarticlenbr=16
