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Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
Edition 5ISBN: 9780077515522Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
Edition 5ISBN: 9780077515522 Exercise 12
CAN INCENTIVES PROMOTE ETHICS?
Pharmaceutical company GlaxoSmithKline (GSK) has recently been in legal hot water related to its marketing practices. In 2011, the company spent billions of dollars to settle a lawsuit in which the U.S. government charged GSK with using illegal marketing practices and defrauding the Medicaid program. The marketing allegations included claims that GSK's sales reps had been promoting certain drugs, such as Paxil and Wellbutrin, for uses that had not been approved by the Food and Drug Administration and that they had downplayed certain side effects.
GSK's top management concluded that this trouble arose not simply because sales reps violated legal requirements, but rather because the company had lost its focus on what should have been its fundamental values. To provide a clearer direction for the future, GSK defined and published four core values, stated in terms of how to put the values into practice: (1) focus on the patient; (2) be transparent about working relationships; (3) operate with integrity; and (4) respect those whom the company works with and serves.
So that its sales representatives would see a connection between their conduct and the core values, GSK revised the way it pays them. Instead of paying bonuses based on sales volume in each representative's territory, the company will use several measures for assessing eligibility for a bonus. These measures include the reps' scientific and business knowledge (including adherence to company values), the results of surveys from physicians (the reps' customers), and the sales performance of the reps' business unit as a whole. The goal is to improve the sales force so that when representatives call on doctors, they are focused more on helping the doctors improve the health of their patients and less on meeting sales quotas.
How could basing bonuses on an individual salesperson's sales volume promote unethical conduct?
Pharmaceutical company GlaxoSmithKline (GSK) has recently been in legal hot water related to its marketing practices. In 2011, the company spent billions of dollars to settle a lawsuit in which the U.S. government charged GSK with using illegal marketing practices and defrauding the Medicaid program. The marketing allegations included claims that GSK's sales reps had been promoting certain drugs, such as Paxil and Wellbutrin, for uses that had not been approved by the Food and Drug Administration and that they had downplayed certain side effects.
GSK's top management concluded that this trouble arose not simply because sales reps violated legal requirements, but rather because the company had lost its focus on what should have been its fundamental values. To provide a clearer direction for the future, GSK defined and published four core values, stated in terms of how to put the values into practice: (1) focus on the patient; (2) be transparent about working relationships; (3) operate with integrity; and (4) respect those whom the company works with and serves.
So that its sales representatives would see a connection between their conduct and the core values, GSK revised the way it pays them. Instead of paying bonuses based on sales volume in each representative's territory, the company will use several measures for assessing eligibility for a bonus. These measures include the reps' scientific and business knowledge (including adherence to company values), the results of surveys from physicians (the reps' customers), and the sales performance of the reps' business unit as a whole. The goal is to improve the sales force so that when representatives call on doctors, they are focused more on helping the doctors improve the health of their patients and less on meeting sales quotas.
How could basing bonuses on an individual salesperson's sales volume promote unethical conduct?
Explanation
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Bonuses on sales volume of the sales rep...
Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
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