Unge Swenson is the top salesperson for Jiffy Paper Company. She also leads the sales team that supports Jiffy's largest client, Acme Office Supplies. Acme is an international office supply chain that is growing rapidly. During the month of May, Unge and her team members, Andreas Gonzo and Janice Joplin, underwent intense negotiations with Acme's purchasing agent, John Bly and Acme's CEO to restructure the current sales contracts. The new contracts spell out Acme's yearly paper requirements (contracted sales amounts) as well as payment and credit terms. The negotiations had been particularly hard for a few reasons:
Acme's sales had increased internationally causing shipping and custom duties to increase the cost to Jiffy and an increase in sales price to Acme.
The volume of sales to Acme required Jiffy to offer a volume sales discount to remain competitive with other paper companies.
Acme also wanted a longer time to pay on the purchases. Acme wanted 60 days to pay on orders invoiced rather than the current 30 days.
Acme also wanted Jiffy to extend its current credit line from $850,000 to $1,250,000.
Jiffy's CEO was reluctant to tie so much of its cash flow to the success of Acme. The concern was heightened because in the last six months Acme was paying down the credit line every 60 days rather than the 30 days that they had agreed to in current contract. Acme did not appear to have credit issues but Jiffy is in no position to give interest free loans for 60 days.
This week just in time for the Memorial Day holiday vacation the final agreement had been reached. Acme would contract to purchase $1,750,000 of paper products from Jiffy. Payments on invoices would be made every 45 days, with a .03% interest on invoices paid later than 45 days. The credit limit would be extended to $1,000,000. Acme would not pay interest on late payments. Unge was not totally happy with the contract as she felt Jiffy was not protected enough from cash flow damage should Acme not pay timely, not to mention the large line of credit. Still the parties agreed, including her boss who was skeptical for the same reason as Unge. The parties were due to sign the contracts on Tuesday after the Memorial Day holiday.
On Friday evening Unge was packing up belongings reading to leave the office for her Memorial Day holiday when her cell phone pings. The caller is John Bly, the Purchasing Agent for Acme. It appears that a recent deal on Acme's end with UMUC has tripled its need for copy paper from Jiffy. This deal would raise the total contract sales to $2.5 million. Bly makes it clear that he wants to change the credit limit to $1.5 million and to extend the payment terms from 45 days to 50 days. Acme would not pay interest on late invoices until after 60 days. Bly also makes it clear to Unge that if the new terms were not agreed to by the end of Friday evening he is prepared to look at an offer supplied to him by Acme's biggest competitor King Paper. Bly further states that while they are pleased with Jiffy's work, money is always the most important factor in purchasing. Acme's President wants an immediate answer so he can go on vacation with a clear mind. Unge is aware that most of this is negotiating technique but does not doubt that there is competition waiting in the background. Images of the last month's team work run through Unge's mind as she listens to Bly talk.
Unge winced at the memory of her team mate Gonzo's constant posturing in front of Bly and the Acme's CEO. She had hoped to be able to pick her own team when she was promoted to leader but that was not to be. Andreas Gonzo is a problem on this team. All month long he challenged her ideas in front of Acme's CEO. Unge knows that she was promoted over Gonzo because her sales record was 20% higher than his and she could close a deal better than he could. Gonzo resents her promotion and reminds Unge, as often as possible, that he brought in the Acme account and that he and Acme's CEO have a great relationship. They play golf together and often go to dinner together with their wives. Unge thinks Gonzo is a good [good what?] but should not be on this team. The tension is at times very thick especially during the negotiations this month. Gonzo just seemed to want to give away the store.
Unfortunately, Janice Joplin seemed to be sitting on the fence when it came to the negotiations. Unge had expected that Janice would support her negotiation position with the client rather than Gonzo's because it protected Jiffy. Since Janice was the niece of Jiffy's owner and CEO, Unge thought she should be more supportive of protecting the company's money. Still, it was Janice who came up with the idea of paying interest on the late invoices It just seemed to Unge that one-day Janice was agreeing with Gonzo and on another day with her. Unge supposed that it was Joplin's new position at the company that made her want to please everyone including Gonzo. Pleasing people is nice but it does not add to the efficiency of the team's decision making. She just seemed to be looking for the general thoughts of the group so she could be seen to agree to with the group.
Overall, the month's negotiation process had been long and hard. The thought of going over all that again to make the change seemed mind-numbing to Unge. Still, making the decision on her own means obligating the company to an even greater cash flow commitment. Her boss would not be happy with this obligation because he specifically warned her when they started that there was nothing to prevent Acme from continuing to pay its bills every 60 days despite the new contract agreement. Acme knows we are not likely to cut them off easily. They are too big a customer to us. However, the extra sales volume should offset the money lost not collected for the interest due for ten days on late invoices, Unge rationalized. She told Bly that he could tell the CEO that she would agree to the terms. When Unge hung up the phone, she said out loud to nobody "I supposed I should have consulted the group but it was worth the risk of not having to make another team decision."
Help Please with the questions below?
Question is group think an issue for Unge? Explain in detail why or why not?
Explain how bias entered into Unge's choice by Identifying the type(s) of bias.