Sunshine Fashion: Fraud, Theft and Misbehaviour among Employees (OCB and CPWB)
What are the root causes – individual and contextual -- for the employee misbehaviour at Sunshine?
At Sunshine Fashion, the main manifestations of employees’ misbehaviour are fraud and theft by branch managers at the local Chinese market. The root causes of these misbehaviours are both individual and contextual:
Weak sense of belonging and loyalty to Sunshine (high yearly turnover of branch managers of 20%): Branch managers use Sunshine stores to build personal relationships with department stores and to promote their own brands. -
Need to get be better rewarded: theft is a symptom that managers are not well remunerated. Pocketing the difference between price tag, ongoing promotion and cash sales. -
Involuntary rotation might not be good for the moral of the employees, lowering their loyalty and increasing their turnover
Managers are hired mostly on “relationships of mutual favour”, and not based on managerial ability or integrity. o
Long term personal goals for these people are mainly to flourish their relationships, because that increases their personal value in that market. The goals of the company do not fit managers’ personal goals. -
Organizational justice (OB, p. 256) was taken to extremes : o
Uniform reward for branch managers did not take into account location and the standard of living of the particular branch/region. o
Bonuses were determined to sole discretion of the general manager. The process and criteria were not transparent to branch managers. -
Lack of vertical control:
Decentralization of local promotions, discounts and stock. o
Inconsistent data entered manually into ERP system.
Nonexistent auditing structure to unravel fraudulent practices: the president of Sunshine has to personally visit department stores to ensure personal relationship. This should not be his main job occupation. -
Lack of charismatic leadership:
Branch managers have no close relationship with their corporate superiors. o
Performance evaluation is based on lowering theft percentage, not personal goals to achieve. Those factors result in poor perceived organizational support (OB, p. 110). This perception has a direct effect on employees’ engagement and organizational citizenship behavior towards the goals of the company. Branch employees are not fully committed to the organization (OB, p. 108) therefore the turnover is very high. To what degree might the counter-productive work behaviors of one employee at Sunshine affect the behavior of other workers? How might this contagion effect occur?
Many deviant workplace behaviors can be traced to negative emotions (OB, p. 153) Negative emotions such as anger or envy bring elements of aggression of other employees, that is return get those negative emotions and propagate them to others.
The main emotions that drive branch managers at Sunshine resulted in deviant behavior of greed and opportunism. The fraudulent practices that were implemented by those managers were observed by employees of lower level of responsibility. The fraudulent schemes were probably understood by all people involved (erroneous information entry into ERP, price tag changes, etc.) When employees observe that managers are only concerned about their own good, before the good of the company, they tend to behave in the same manner, because they don’t have to fear those managers. The group influence dictates the behavior on all levels at the branch offices (see Rotundo case “Group Influence”)
In the case of Sunshine Fashion, where a very rapid production cycle of 20 days is in effect, negative escalation can take some serious impacts in an exponential manner. Coworkers who witnessed unpunished fraudulent behaviors can repeat them into the next production cycle, amplifying the effects of deviant behaviors and aggravating damages caused to the firm’s profits....
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