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Compensation System Creates Conflict of Interest

DILEMMA:

I work as a furnace technician for a heating and air conditioning company. I like my job and believe I am good at it. That includes relating well to the customers. One of the major assignments I have is to do annual service inspections for customers who sign up for this.

Because of the economic downturn (I think, no one really explained it), we recently had our compensation changed, moving us from salary to primarily commission. We have been told that financially we can do better than we did before, but to do this we must sell services or repairs to customers whether they need them or not. This makes me very uncomfortable, since I have always tried to build an honest relationship with my customers, and know a great deal more about their furnace than they do. Can you see any options I might have other than to quit, a very tough choice in this economy?

A West Coast Repair Technician

RESPONSE:

Dear West Coast,
Thanks for writing. Poorly designed compensation systems often create conflicts of interest for sales people. Examples of some fairly recent cases in which employees had to choose between honesty and higher compensation or losing their jobs include financial services (i.e., mortgage banking), auto repair (Sears), and telephone services (Qwest).

Instead of quitting, have you tried to speak with the leaders of your company? You can first appeal to their sense of ethics. Perhaps they are not aware of the pressures to oversell. If this doesn’t work, you can try to persuade them on the long-term value of a good name, using the examples above of what happens when dishonest overselling becomes public knowledge. If they are receptive to your suggestions, then the commission systems needs to be modified. Perhaps the quotas or target levels that trigger bonuses could be lowered. In addition, an ethics code and some strong guidelines concerning when to recommend replacement or repair need to be put in place are needed.

If you have an ethical dilemma at your workplace, email Ethics at Work (eaw@ethix.org), or post your dilemma here. We will publish some of these on Ethix along with our diagnosis.

Kenman Wong
Professor of Ethics, School of Business and Economics
Seattle Pacific University

If you have an ethical dilemma at your workplace,
email Ethics at Work (eaw@ethix.org).
We will publish some of these in
Ethix along with our diagnosis.

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