“We’re in trouble” Your boss t
“We’re in trouble” Your boss tells you one day. “End of thequarter is coming and there is no way we’re going to make our salesbudget,” he adds. “You know what that means?” he asks. Then heanswers his own question saying, “no bonus for you, for me or forour department’s head; he’s going to be very upset!” Your boss thenproceeds to tell you his plan for saving everyone’s bonus andmeeting the quarter’s budget. He will send an email to some majorcustomers informing them of a 10% price increase effective on thestart of next quarter. The customers will then place next quarter’sorders by the end of this quarter to beat the price increase andyou’ll be able to meet your sales budget. After the end of thequarter, your boss plans to send a memo rescinding the announced“price increase.”
Please comment on the following:
1. What shortcomings of the budgeting process do you see in thisstory and how would you address them?
2. In your opinion does the plan go against any rules orregulations? Is the plan ethical?
3. What short and long term impact will your boss’ plan have forthe company’s employees, its shareholders and its customers?
4. What would you advise your boss regarding his plan andwhy?
5. What alternate course of action would you suggest?
Answer:
1. Shortcoming is probably the target for sales budget has beenvery high which wasn’t achievable. Budgets have to be set in amanner that they are difficult but achievable at the same time.
2. Yes the plan goes out against the rules of sending outcompany’s private information to third parties for private gain.Also, because the boss plans to rescind this information. It meanshe is also cheating his customers which is an unethicalpractice.
3. In short term employees will gain bonus as they are likely toachieve the budget due to customers making early purchase.
Customers will feel cheated once the boss rescind the priceincrease memo and might stop further purchases. Shareholders mightgain this quarter due to higher sales but would loose this wealthin next as customers have made early purchase and might not do thesame next month.
In long term employees again won’t be able to complete targetsas the targets are set high and customers might not purchase in thesame quantity as they got cheated in the first place. The bossaction might be detrimental to the company image and shareholderswould loose their wealth.
4. The advice to boss will be regarding the short term and longterm impact of this plan. The plan wll get more negative results tothe company than the short term benefits. In short term this mightgive good results but in long term customer will feel cheated andmay not be involved in repeat purchases. This plan is a one timething and cannot be repeated ever again as customer next time willbe aware of these tactics.
5. Alternative course of action is boss should check the salesbudgets with the past performance and achievements. The budgetshould be set not too high or low. It should motivate the salesteam rather than demotivate them. There should be different bonusesand returns to the sales team at different levels of sales ratherthan keeping it at a unique level. The bonus plan should beprogressive and not a particular level. With the increase in salesachievement, there should be a next level of bonus that motivatesthe sales team.
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