Sears Roebuck, And Co. The Auto Center Scandal Essay
SEARS, ROEBUCK, AND CO.: THE AUTO CENTER SCANDAL
Sears, Roebuck, and Co. began in the late 1800s as a mail-order company that sold farm supplies and other consumer items. Its first retail store opened in the mid-1920s.
Responding to changes in American society, such as the move from farms to factories and the presence of the automobile in many homes, hundreds of retail stores opened over the years. The company expanded rapidly, and eventually it diversified to include other businesses: insurance (Allstate Insurance), real estate (Coldwell
Banker), securities (Dean Witter Reynolds), and credit cards (Discover). Each of these other businesses became its own division, in addition to the merchandising group which included retail stores, appliances, …show more content…
Discount retailers such as Wal-Mart were pulling ahead in market share, leaving
Sears lagging. Sears responded by adding non-Sears name brands and an “everyday low price” policy. But despite these efforts, in 1990 Sears reported a 40 percent decline in earnings, with the merchandising group dropping a whopping 60 percent!
Cost-cutting measures were planned, including the elimination of jobs and a focus on profits at every level.41
In 1991, Sears unveiled a productivity incentive plan to increase profits in its auto centers nationwide. Auto mechanics had traditionally been paid an hourly wage and were expected to meet production quotas. In 1991, the compensation plan was changed to include a commission component. Mechanics were paid a base salary plus a fixed dollar amount for meeting hourly production quotas. Auto service advisors
186 PART III ETHICS AND THE MANAGER
(the counter people who take orders, consult with mechanics, and advise customers) had traditionally been paid a salary. In order to increase sales, however, commissions and product-specific sales quotas were introduced for them as well. For example,
Sears, Roebuck, and Co. began in the late 1800s as a mail-order company that sold farm supplies and other consumer items. Its first retail store opened in the mid-1920s.
Responding to changes in American society, such as the move from farms to factories and the presence of the automobile in many homes, hundreds of retail stores opened over the years. The company expanded rapidly, and eventually it diversified to include other businesses: insurance (Allstate Insurance), real estate (Coldwell
Banker), securities (Dean Witter Reynolds), and credit cards (Discover). Each of these other businesses became its own division, in addition to the merchandising group which included retail stores, appliances, …show more content…
Discount retailers such as Wal-Mart were pulling ahead in market share, leaving
Sears lagging. Sears responded by adding non-Sears name brands and an “everyday low price” policy. But despite these efforts, in 1990 Sears reported a 40 percent decline in earnings, with the merchandising group dropping a whopping 60 percent!
Cost-cutting measures were planned, including the elimination of jobs and a focus on profits at every level.41
In 1991, Sears unveiled a productivity incentive plan to increase profits in its auto centers nationwide. Auto mechanics had traditionally been paid an hourly wage and were expected to meet production quotas. In 1991, the compensation plan was changed to include a commission component. Mechanics were paid a base salary plus a fixed dollar amount for meeting hourly production quotas. Auto service advisors
186 PART III ETHICS AND THE MANAGER
(the counter people who take orders, consult with mechanics, and advise customers) had traditionally been paid a salary. In order to increase sales, however, commissions and product-specific sales quotas were introduced for them as well. For example,