Reference no: EM131816712

Dialing for Dollars

Suppose you are a salesperson, and your company's CRM forecasts that your quarterly sales will be substantially under quota. You call your best customers to increase sales, but no one is willing to buy more.

Your boss says that it has been a bad quarter for all of the salespeople. It's so bad, in fact, that the vice president of sales has authorized a 20- percent discount on new orders. The only stipulation is that customers must take delivery prior to the end of the quarter so that accounting can book the order. "Start dialing for dollars," she says, "and get what you can. Be creative."

Using your CRM, you identify your top customers and present the discount offer to them. The first customer balks at increasing her inventory, "I just don't think we can sell that much." "Well," you respond, "how about if we agree to take back any inventory you don't sell next quarter?" (By doing this, you increase your current sales and commission, and you also help your company make its quarterly sales projections.

The additional product is likely to come back next quarter, but you think, "Hey, that's then and this is now.") "OK," she says, "but I want you to stipulate the return option on the purchase order." You know that you cannot write that on the purchase order because accounting won't book all of the order if you do.

So you tell her that you'll send her an email with that stipulation. She increases her order, and accounting books the full amount. With another customer, you try a second strategy. Instead of offering the discount, you offer the product at full price, but agree to pay a 20-percent credit in the next quarter. That way you can book the full price now.

You pitch this offer as follows: "Our marketing department analyzed past sales using our fancy new computer system, and we know that increasing advertising will cause additional sales. So, if you order more product now, next quarter we'll give you 20 percent of the order back to pay for advertising." In truth, you doubt the customer will spend the money on advertising. Instead, they'll just take the credit and sit on a bigger inventory. That will kill your sales to them next quarter, but you'll solve that problem then.

Even with these additional orders, you're still under quota. In desperation, you decide to sell product to a fictitious company that is "owned" by your brother-in-law. You set up a new account, and when accounting calls your brother-in-law for a credit check he cooperates with your scheme.

You then sell $40,000 of product to the fictitious company and ship the product to your brother-in-law's garage. Accounting books the revenue in the quarter, and you have finally made quota. A week into the next quarter, your brotherin-law returns the merchandise. Meanwhile, unknown to you, your company's ERP system is scheduling production.

The program that creates the production schedule reads the sales from your activities (and those of the other salespeople) and finds a sharp increase in product demand. Accordingly, it generates a schedule that calls for substantial production increases and schedules workers for the production runs. The production system, in turn, schedules the material requirements with the inventory application, which increases raw materials purchases to meet the increased production schedule.

Discussion Questions

1. Is it ethical for you to write the email agreeing to take the product back? If that email comes to light later, what do you think your boss will say?

2. Is it ethical for you to offer the "advertising" discount? What effect does that discount have on your company's balance sheet?

3. Is it ethical for you to ship to the fictitious company? Is it legal?

4. Describe the impact of your activities on next quarter's inventories.

5. Setting aside the ethical issues, would you say the enterprise system is more a help or a hindrance in this example?