Ethical considerations of business making are neither a solely theoretical issue nor a general recommendation for managers. As corporate history tells us, companies who fail to behave ethically pose a significant risk to most stakeholders, especially in the long run. It is partially due to the general interest of the media and the general public in the ethical aspects of businesses, and more significantly since moral weaknesses were previously shown as one of the primary reasons for corporate defaults.
The fields of sales and marketing have always been one of the major areas of ethical misconduct. It is because the marketing function of a company is the link between the business and the more significant economy, and thus it has a fundamental position to control the company’s conduct with customers, competitors and other demand-side stakeholders (e.g., intermediaries). Moreover, as discussed below, several marketing tasks, especially these of sales departments, show an inherent conflict between ethics and a superior performance of functions.
This paper analyzes a recent study by Hsu, Fang, and Lee, which examines conditions that may enhance the ethically questionable behavior of sales personnel in the pharmaceuticals sector. The analysis comprises three parts:
- First, it provides an overview of the study by Hsu et al., including its objectives, methods, and findings, while emphasizing the application of the work to the field of healthcare marketing.
- Second, it takes an inductive approach to suggest a way of applying the authors’ conclusions in the broader sense of business ethics.
- Finally, the concluding section of this paper critically analyzes the article and its underlying concepts and provides a set of several suggestions based on a dialectical analysis of the study’s findings and other conventions from the field of the ethics of marketing.
A Study by Hsu et al. on Ethically Questionable Behavior in Sales Representatives
Background, Objectives and Research Methods
The classification of marketing and sales as an extremely problematic area regarding ethical decision-making has the unique meaning in the field of pharmaceuticals. The reasons for that are many and include, among others, the large number of decision-makers who serve as intermediaries (the FDA, insurance companies, physicians, pharmacists and others), the time limitations on the sole marketing of patented drugs and the inconsistency of product safety regulations among countries. Examples of the ethically questionable behavior of pharmaceutical companies’ sales personnel are many, and range from bribery of physicians and FDA officials (Braithwaite 11-2) to giving false information regarding drugs’ efficacy (Thomson, sec 1).
The study by Hsu aimed to find variables of organizational culture, which may induce ethically questionable behavior of individual salespersons. The study included a sample of 328 Taiwanese medical sales representatives, whose ethical decision-making was tested by using scenario questionnaires. Finally, the collected data was used to conduct a regression analysis, which showed statistically significant correlations between the respondents’ propensity to engage in ethically questionable behavior in their work and four constructs of organizational culture: frame pattern, commission structure, behavior control type and marketing norm perceptions.
Significant Findings and Recommendations for the Pharmaceutical Industry
Noting that “sales representatives choose to engage in ethically questionable [behavior] 1.5 times more often than the alternative” (163), Hsu et al. find some features in sales personnel’s working environment, most notably sales quotas, as major contributors to this phenomenon. They also discuss demand and supply pressures (such as lowering medical spending budgets and growing competitiveness on the market) that may lead companies to “keep a blind eye” from the ethical conduct of their sales force. The following four sections provide a brief discussion of the four variables mentioned above.
An organization’s frame pattern (aka “framing effect”) is the manner in which managers and employees give more weight to a specific event compared to its opposite. For example, the term “loss frame” refers to cultural tendency to mourn a $100 worth loss of sales more than to celebrate a $100 worth successful sales. Obviously, “gain frame” is the exact opposite.
As indicated by Hsu et al. (160), loss framing drive salespersons to neglect ethics in the virtue of facilitating sales. Hence, the industry should refine framing-related aspects of organizational culture (e.g., by revising the narratives and corporate rituals) in a way that retains the motivation to increase sales, but discourages unethical conduct. One predominant way to do so is by adopting gain frames.
Salespersons’ compensation is traditionally set as fixed base plus commissions on sales. Since following ethical standards is not rewarded in such structures, it is sound to assume that the higher the commission part of a salesperson’s salary, the higher the risk that she will engage in ethically questionable behavior (ibid.). Hence, Hsu et al. (163) suggest that bonus ratios should be decreased.
Behavioral control type
Control is one of the cornerstones of management. One of the problems with sales personnel in this context is the fact that salespersons usually work in relative isolation, under considerable time pressure, and must behave as servers of the clients (Laczniak 1341). Thus, standard types of control such as submitting performance reports and schedules are often hard to execute and to confirm.
When behavior control is slightly loose (compared to strict control), salespersons may be more prone to behave unethically (Hsu et al. 155). However, more stringent measures of power must take into consideration salespersons’ need to be independent and respect their professional autonomy when applicable.
Marketing norm perceptions
Marketing norms are all those rules, policies and guidelines that determine managers’ expectations from the workforce. In ethically comprehensive departments, those norms should include guidelines for the ethical code of conduct. Consequently, when there is a high perception of the marketing norm (compared to low perception), salespersons are assumed to better comply with the organization’s ethical standards.
If pharmaceutical companies wish to enhance the ethical decision-making of their sales personnel, they should set clear ethical policies, including ethics-related goals, objectives, and penalties. The norms should be enforced just like any other issue. Finally, ethics should be included in every report all along the chain of command, so that upper management will have the ability to supervise the weight of ethics in their marketing and sales divisions.
Towards better Ethical Awareness of Marketing Managers
Ethically questionable marketing practices can take many forms and occur at all level of the organization. As opposed to the general image of corporate scandals, many cases of unethical conduct of companies occurred on lower levels of the organization. Thus, assuming that corporations have strict policies on business ethics, it is imperative that the scope of control will be expanded to notice and handle ethical problems before they develop any further.
Ethical responsibility starts at the managerial level and goes all the way down to the last sales representative. Unlike other aspects of management, which are easier to control, ethical conduct does not entail on only rules, regulations, and policies, but also a considerable behavioral factor. One of the main responsibilities of marketing managers is to incline organizational behavior (especially culture) with the ethical “spirit” of their organizations.
Finally, lower-level managers should adopt ethical appraisal systems to assess potential problems with their workforce. This set of evaluation methods, which described in the next section, must be included in all the aspect of personnel management, from hiring to leading and controlling. It should be clear that a “good” salesman who occasionally steals from the company is not worse than someone who behaves unethically; both cases cannot be allowed in any organization.
Conclusion and Recommendations
Regardless of its importance to its importance to the growing body of research on the issue of ethics in marketing, Hsu et al. present a rather limited set of recommendations. In addition to the set of recommendations discussed above, marketing managers should note several key theoretical and practical aspects, which strengthen their ability to protect themselves from ethical misconduct:
First, regarding the appraisal approach mentioned earlier, prior research indicates several key questions that may point out the possibility of ethical weaknesses of the individual:
- The degree to which an employee shares views, emotions, and indecisions with colleagues and supervisors
- Excessive response to failures and success
- Unexplained variability in performance of salespersons
- Aggressive and manipulative behavior
- Inaccuracy of reports, particular regarding mistakes
- Low moral perceptions, e.g., regarding social values, as well as intolerant behavior
Second, salespersons are often the display window through which customers, competitors and other stakeholders see the company. They are typically extroverted, talkative and people-oriented, and thus can sell themselves pretty well to their managers. The latter should work on their interviewing skills to be able to locate possible problems.
Finally, marketing managers tend to forget that competitors are not enemies and the marketplace is not a war zone. If a company is violent or aggressive, either internally or externally, it may face a market backlash at some point. Ethics are not a burden on marketing operations; it is a protection mechanism and a key prerequisite for doing business today.
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