Question

Ethical Issues question Chain Co. is major consulting firm located in three cities in the USA. In its NYC office, Dan Sutherland is a senior manager, reporting to a partner who is in charge of a major project. Dan Sutherland has been with the firm for seven years and believes that he is in line for a promotion to partner based on his excellent performance over the past two years as a manager. One very significant performance measure for managers is their ability to bring projects to a conclusion on time and within budget. In the very competitive consulting field, firms have a great deal of difficulty receiving payment from their clients for any amounts incurred for services above and beyond the amount quoted for the job, even though the quotes are clearly marked as being estimates. As a result, most firms are forced to absorb any cost overruns on jobs rather than billing and collecting from their clients. In evaluating performance of individuals, most firms look very closely at the recovery rate of the amount of costs incurred and the amount recovered from the client. Dan Sutherland believes that he has an advantage over all other managers in the firm since he ensures that his budget overruns are minimized on every job because he insists that his team does not report any excess hours that they have to work to complete the job over and above the estimated number of hours. This has resulted in his being able to report excellent performance, but his team has become very disgruntled because they receive neither pay nor recognition for the extra hours that they work. Since Dan Sutherland is a very hands-on manager, he has been able to intimidate them to remain silent about his management style. Required: Discuss the ethical implications and the potential performance implications of the approach that Dan Sutherland is using to make himself look good to his superiors.

Answer 1

This is case where company profits are inflated and the salaries of the employees are not reorded properly as compared to what should be paid to them and what should be booked.

in this case the extra cost that is absorbed from the salaries of employees are reducing the companay cost that should be on the P&L and increasing the profit of company.

the approach that Dan is following is wrong. The extra hours that are spent by the workers should ablso be billed back to the client instead of just ignoring the pay for these hours.

In this case the employees are underpaid and the P&L cost is not shown properly as the salaries are not recorded and paid to the workers. '

this is not ethical posting of the company profits and cost.

below are the negative impact of this approach.

1-- The employees may change the company and this will increase the employee Turnover ration

2--- This is creating bad reputation of the employer.

3--- The profits are inflated as the actual cost for the extra hours is not recorded.

4---Performance and efficiencly of the employees that are reported are also not correct .