Question

R.M. Lilly Security, Inc. offers security services to professional athletes and entertainers. Each type of service offered is considered to be a separate department. Anita Lilly, the vice president of operations and daughter of the owner, is compensated partially on the basis of departmental performance. Performance is measured by whether the departments are able to operate within their respective budgets. She often revises operations in order to allow the departments to stay within budget. Says Anita, "I will not go over budget even if it means slightly compromising the level and quality of service we provide. These are minor compromises that don't significantly affect the safety of my clients, at least not in the short term.

" Write a summary explaining the following:

1. Is there an ethical concern in this case? If so, explain the concern.

2. What parties are affected by these "minor compromises"?

3. Can Anita Lilly take action to eliminate any ethical concerns? Explain.

4. What is R.M. Lilly Securities, Inc.'s ethical responsibility in offering professional security services?

Answer 1

1. I would not go so far as to say that Anita Lilly is acting unethically.The responsibility for setting the tone for ethical responsibility lies with the company, its values and its policies.The ethical concern in this situation is that quality and level of service may be sacrificed in order to control costs. The parties most affected by lower levels of quality and service are the clients.R.M. Lilly Security, Inc. appears to be primarily using a responsibility accounting system to measure manager performance. As such, Anita Lilly is evaluated by her ability to operate within a responsibility accounting budget that sets objectives based on costs that are controllable by the manager.Responsibility accounting systems focus on the goals of individual organizational units. Meeting these goals does not guarantee any level or quality of service. Meanwhile, a process-oriented accounting system measures the outputs of cross-departmental work processes relative to quality and level of service .If performance is based solely on a responsibility accounting system with no other “balanced scorecard ” types of objectives, Anita Lilly is not ethically or in any other way bound to ensure any quality or level of service. While it may be unfortunate that service level and quality are sacrificed to meet operating budgets,
2. Naturally, the parties which are being affected here are Clients/Customer who are taking these security services from the R.M. Lilly Securities, Inc.

3. First thing we can do is to have a code of conduct,staff will have an easier time handling ethical issues if they have guidelines to follow.

• Secondly, come up with an alternative that meets the Client's objective at a reduced cost but while still remaining ethical.This can be done by increasing the budget or using effective and efficient methods of services.

4.One way for the company to promote ethical responsibility (or any non-financial goal, for that matter) is to include a “balanced scorecard” approach to measure management performance . Quality and level of service would correlate with the customer perspective of the “balanced scorecard.”