Changes at Scout Mortgage

Without having to charge customers as much they can

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would be saving money on payroll and being able to pass those savings on to the customers. Without having to charge customers as much, they can build market share by being the company that offers the lowest rates in the business. This will help create revenue and make Scout’s
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shareholders happy. The negative outcomes of this decision are losing quality employees, either by firing them or by their choice to leave the company at will. Without these employees, Scout could lose some valuable clients and take an initial loss after this decision is implemented. Some conditions that also made this decision difficult were the fact that the positive and negative outcomes were fairly close. The loan officers were making good money for the company, but without them the company would be saving a lot from their commission-based salaries. There is also the issue of relationships. These employees were important to Mangels and Walsh and they felt like families and friends, not just co-workers and subordinates. Mangels said it best when he stated, “How do you tell someone they’re overpaid and no longer needed?” (Hellriegel and Slocum, 2009, page 533). The amount of intrapersonal conflict that Mangels and Walsh faced affected the ethical intensity of their final decision. There are six determinants of ethical intensity: magnitude of consequences, probability of effect, social consensus, temporal immediacy, proximity, and concentration of effect. In this case, all six of these determinants are in effect. First, the magnitude of intensity for this decision is based on how the lowering of salaries affects Scout Mortgage’s employees. Due to the amount of money they would be losing with this pay-cut, the magnitude of intensity is pretty high. This loss of pay can affect their ability to pay for their homes, put food on the table, and other necessary every day expenses. Due to their current salary, they are accustomed to a certain standard of living and that would drastically change. The probability of effect is very high. Mangels and Walsh tried another strategy first, hoping for effective results, but hiring the new salaried workers proved only to create a further problem. Also, the pay-change decision will more than likely bring harm to the employees losing their jobs and those taking a major cut. The social consensus among employees will more than likely be that it is a bad decision, mainly
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because they want to keep their current salaries or, in the case of the salaried employees, want to be switched to a commission-based salary. The temporal immediacy was short. They fired five loan officers and three salaried workers right away and others left soon after due to their lack of pay. John and Steve’s proximity to their subordinates was quite close. They were considered friends and family. Lastly, the concentration of effect was low. Firing/losing their employees allowed Scout Mortgage to save more money, thereby passing the savings onto their customers.
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