Reference no: EM131881133

Problem: Reexamining a Proposal

After working 10 years as the only minority manager in a large printing company, David Jones decided he wanted to set out on his own. Because of his experience and prior connections, David was confident he could survive in the printing business, but he wondered whether he should buy an existing business or start a new one. As part of his planning, David contacted a professional employer organization (PEO), which had a sterling reputation, to obtain an estimate for human resource services for a startup company. The estimate was to include costs for payroll, benefits, workers' compensation, and other traditional human resource services. Because David had not yet started his business, the PEO generated a generic quote applicable to a small company in the printing industry. In addition, because the PEO had nothing tangible to quote, it gave David a quote for human resource services that was unusually high. In the meantime, David found an existing small company that he liked, and he bought it. Then he contacted the PEO to sign a contract for human resource services at the previously quoted price. David was ready to take ownership and begin his new venture. He signed the original contract as presented. After David signed the contract, the PEO reviewed the earlier proposal in light of the actual figures of the company he had purchased. This review raised many concerns for management.

Although the goals of the PEO were to provide high-quality service, be competitive in the marketplace, and make a reasonable profit, the quote it had provided David appeared to be much too high. It was not comparable in any way with the other service contracts the PEO had with other companies of similar size and function. During the review, it became apparent that several concerns had to be addressed. First, the original estimate made the PEO appear as if it was gouging the client. Although the client had signed the original contract, was it fair to charge such a high price for the proposed services? Would charging such high fees mean that the PEO would lose this client or similar clients in the future? Another concern was related to the PEO's support of minority businesses. For years, the PEO had prided itself on having strong values about affirmative action and fairness in the workplace, but this contract appeared to actually hurt and to be somewhat unfair to a minority client. Finally, the PEO was concerned with the implications of the contract for the salesperson who drew up the proposal for David. Changing the estimated costs in the proposal would have a significant impact on the salesperson's commission, which would negatively affect the morale of others in the PEO's sales area. After a reexamination of the original proposal, a new contract was drawn up for David's company with lower estimated costs. Though lower than the original proposal, the new contract remained much higher than the average contract in the printing industry. David willingly signed the new contract.

Questions: 1. What role should ethics play in the writing of a proposal such as this? Did the PEO do the ethical thing for David? How much money should the PEO have tried to make? What would you have done if you were part of management at the PEO?

2. From a deontological (duty) perspective and a teleological (consequences) perspective, how would you describe the ethics of the PEO?

3. Based on what the PEO did for David, how would you evaluate the PEO on the ethical principles of respect, service, justice, honesty, and community?

4. How would you assess the ethics of the PEO if you were David? If you were among the PEO management? If you were the salesperson? If you were a member of the printing community?