CASE SEARS, ROEBUCK, AND CO.: THE AUTO CENTER SCANDAL Sears, Roebuck, and Co. be

Question

CASE 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-19s Responding to changes in American society, such as the move from farms to facto and the presence of the automobi ries ie in many homes, hundreds of retail stores opened ly it diversified to include real estate (Coldwell Banker), r the years. The company expanded rapidly, and eventual ove er businesses: insurance (Allstate Insurance), securities (Dean Witter Reynolds), and credit cards (Discover). E businesses became its own division, in addition to the included retail stores, appliances, and auto service centers. By t company was reporting revenues and earnings in the billions of dollars. ach of these other that merchandising group he early 1990s, the history of high earnings and its penetration into the U.S. market, ess began to experience serious financial difficulties in the 1980s the Sears retail busin

Explanation / Answer

3.

My evaluation of Sear’s response to the allegations and the changes the company has made is that Sear’s has not adequately addressed the issue. Even though it has eliminated the incentive compensation program for service advisors, substituted commissions based on customer satisfaction, substituted sales volume quotas, and eliminated sales quotas for specific parts and repairs, it has not addressed the problem adequately. Sears continued with its policy of compensating mechanics based on the number of tasks performed and parts replaced. It continued with its policy of having inspections at their auto centers being performed by employees who were paid on commission. The service advisors who sell the repair work to the customer are based on the recommendations of mechanics who are on commission. The new compensation plan of Sears still pays incentives on incentive pay or piecework. There is pressure on a mechanic to complete the repair correction or eliminate procedures required to complete repair correction. In addition, the mechanic has the incentive to inspect or perform diagnosis, he is under pressure to oversell or recommend more repair work that is needed. The situation after Sears took corrective action is that it still creates an unethical situation. There is high pressure to meet quotas by Sear’s management. The mechanics and inspectors are under pressure to meet minimum quotas.

The key problem of Sears was that it is facing declining profits. It has attempted to address this problem by forcing its employees to make unethical decisions. This trend continues and Sears has failed to address this problem.

I think there is a strong negative impact of the scandal on Sear’s reputation for quality and service. Not only has the quality of service suffered because mechanics are compelled to reduce the quality of repairing because of time pressure to meet a minimum quota, the impact of the scandal has also negatively impacted the reputation of Sears. The customers do not trust Sears mechanics and their recommendations for repair. They might look elsewhere for better and more reliable service. Any customer of Sear’s auto centers will be apprehensive that he will either be overcharged or he might be persuaded to buy unnecessary repairs.

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