Case Study
ABC Ltd is an independent software house employing 250 staff. Its business involves the production and on-going maintenance of specialised software which is used by car dealerships for stock control and accounting purposes. New versions of its core products are developed every 18 to 24 months. The business is fiercely competitive, ABC being relatively small players in a large international market. They survive by maintaining their 800-strong customer base, serving these businesses well and involving them in ongoing developmental and maintenance issues through a 'user group' which meets each month.
ABC employs a twelve-strong sales team who are seen by senior managers as being central to the organisation's success and future survival. Their role is to maintain good relationships with established customers, to seek out new business wherever possible, to ensure that clients are happy to invest in new versions of software packages as they come on stream and to liaise with the 'user group'. The latter involves running formal meetings which are always followed by social events at which ABC managers entertain their clients late into the night in pubs, clubs and restaurants.
Steve Brown has been the Sales Director at ABC for as long as anyone can remember. He is widely considered to have managed the sales team very effectively, while also maintaining excellent relations with major clients. Despite attempts to persuade him otherwise he has now decided to take early retirement. He and his wife plan to use the substantial commission he has earned over the years to travel the world in some style. A replacement thus needs to be found.
It is decided that an exclusively internal recruitment exercise will take place, that Steve's job will not be advertised outside ABC, and that a relatively informal selection procedure will be used to install a replacement quickly. No formal advertisement is drawn up. Instead a meeting of the twelve sales staff is called at which Steve Brown’s retirement is announced by the Chief Executive, Paul MacBarrel. At the same time he states that while Steve is working his notice a replacement will be appointed to work alongside him for a few weeks before he leaves. “If any of you are interested in being considered for the position” he says “drop me an email”. Later that day he receives four emails from long-standing members of the sales team putting themselves forward. The next day Paul meets with his Finance Director, his Company Secretary and Steve to make a decision about who should be promoted to the vital role of Sales Director.
The first candidate they consider is Joan Keenan. Joan is a very good recent recruit and one of only two women currently employed as sales people at ABC. The senior managers quickly decide to reject her application. She is a good deal younger than most of the team she would be managing and they doubt that a predominantly older male team would take at all kindly to being managed by a young woman. They are also concerned about the impact Joan's appointment would have on the mainly older, male customers who make up the user group
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PH311-A17-FIRST SIT
and who are used to being entertained by others of a similar ilk after the 'user group' meetings.
The second candidate is Aldo Viscida. He is in his early forties and is a brilliant salesman. He has been employed at ABC for some years, having emigrated from Milan in the 1980s. He regularly tops the monthly table for sales commission, having won many bonuses and prizes over the years. He is respected by the other employees on his team. However, his written English is poor and the Sales Director's role involves writing regular reports as well as much more written communication with clients than is required of the sales team. Aldo's application is thus also rejected.
The third candidate is David Constant. He is the longest-serving member of the sales team after Steve, and is generally considered to be his deputy in all but name. He is well-liked among the user group members and would do a competent job in the Sales Director's role. On the downside, from the panel's point of view, is the fact that David is now 61 and so can be expected to retire soon. He has also recently told them in confidence that his wife has been diagnosed with multiple-sclerosis and they fear that he will have to devote himself to her care sooner than he thinks. This would inevitably mean that he has less energy to put into the more senior role.
It is thus decided that the fourth candidate, Mike Replica, will be appointed to succeed Steve. Mike is 40 years old, very professional and has long been considered a possible future senior manager. He has plenty of interesting ideas about how to develop both the role and the team. The fact that he is married to the Finance Director's niece and regularly plays golf with Paul MacBarrel is not considered to be problematic. After all, why should he be prevented from being promoted simply because of these relationships? It would be unfair to bar him on that account, particularly when he has the innovative ideas required to take the sales team forward and improve its performance.
Among Mike Replica's ideas are the following:
Move to a payment arrangement that is wholly commission-based. At present the sales team add, on average, 20% or so to their monthly salaries in commission payments. Mike would like all pay to be at risk so that 100% of earnings were dependant on sales targets being met. Mike plans to introduce this new system with immediate effect.
Dismiss, as a matter of policy, the poorest performing members of the sales team each year and replace them. The identity of the leavers should be determined purely on the basis of the value of new sales achieved (or not achieved). Not only should this policy result in poorer performers being replaced over time with stronger ones, it should also boost energy-levels generally and increase the hours the team puts in.
To require all members of the sales team to undergo regular medicals with the company doctor with a view to establishing their fitness levels. Those who are overweight would then be required to diet until they reach a target weight, while smokers would be required to attend classes aimed at persuading them to give up.
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PH311-A17-FIRST SIT
Using the relevant case laws, answer the following questions in no more than 2500 words (assignment)
a) Critically examine the legal risks that ABC Ltd face in taking the course of action outlined in this case?
b) Critically discuss the defences available for ABC Ltd to deploy should an aggrieved employee or would-be employee decide to bring a tribunal case? How strong a case could be mounted?
c) Evaluate the employment relations issues that could result within the organisation if the senior management team were to proceed with the course of action as described in the case study?