The Wolverine Fastener Co. was founded 20 years ago by Roger Gordon and Edwin Andrews in Detroit. Wolverine’s early years were relatively unstable, and the company was on the verge of bankruptcy on more than one occasion. By 1983, however, Wolverine has blossomed into one of Michigan’s most prosperous manufacturers’ representative firms; in addition to many smaller product lines, Wolverine represented a major fastener corporation based in Chicago.
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The majority of Wolverine’s annual orders of $10 Million come from Detroit’s auto industry, where the manufacture of every automobile requires hundreds of fasteners (screws, bolts, clips, latches, and customized metal and/or plastic connectors). Both Roger Gordon and Edwin Andrews came from well-to-do Michigan families. Each had attended a Big Ten university, from which he graduated with honors. Soon after their graduation, both men were married in the same year to women who were sisters. Thus, their relationship began as brothers-in-law.
About a year later, the two men, both manufacturers’ representatives, decided to form a partnership, which they called the Wolverine Fastener Co. Roger Gordon gave the impression of being a dynamic businessman. Always in a hurry, he consistently tried to squeeze 14 hours of work out of his 10 hour days. This often created a frantic sense of disorganization in the office. He had an uncanny ability to get things done “just under the wire”. He was what is often called a “doer”, never refusing a potential money-making venture because he lacked the time to give it attention it deserved.
Somehow, he managed to get everything done. Edwin Andrews was Roger’s working partner, and they shared equally in its annual profits. The two men made all corporate decisions together, yet each was responsible for his own accounts. Thus, in their day-to-day work, they went their own way and seemed quite independent of each other. Just as the company reached its most prosperous point in 1976, the automobile market began to drop off rapidly. Wolverine soon followed the downward track.
After about two years of steadily declining profits, Roger Gordon realized that he must somehow get an edge on the many other vendors competing for the automotive industry’s limited business if his company was to survive. Because one the Big Three automakers (which we will call Genchryfor or GCF) accounted for most of the company’s orders, he decided to concentrate on gaining an advantage with them. Roger examined the process by which he obtained orders from the individual fastener buyer at GCF, Robert Jacobs.
It had long been GCF’s practice to accept only closed quotations (i. e. , all quotes were privately submitted and the lowest group got a percentage of the order for that part. ) Roger knew that if he could find out the exact price, or even the range of the quotations, he would have the advantage he desired. He was sure that the fastener buyer himself would not disclose this type of information. However, Jacob’s secretary, Mary Swoboda, who was responsible for opening all the quotes, seemed a possible source of help.
During 1979, Roger began to get to know her better. Mary Swoboda was a pleasant woman in her mid 20’s, unmarried, but with a steady boyfriend. She was very sharp and always eager to take care of any problems that might arise in her area. She was rather plain in appearance, very quiet, and seemed somewhat awed by the size and reputation of GCF. She was from a lower middle class suburb of Detroit. Roger Gordon began an extensive but subtle implementation of his “plan”, as he told it to me. He started by taking Mary to lunch at frequent intervals.
After this became an accepted practice, Roger began to take her out to dinner at posh Detroit establishments. Next he offered her various presents such as paintings and plane rides. (Roger flew his own plane. ) The relationship, however, remained purely platonic to the best of my knowledge. Roger told me that whenever he took Mary out to dinner, he invariably included his wife. The Gordons were obviously a happily married couple. Once during the summer of 1983, Roger took me to dinner with Mary and Mrs. Gordon at the Grosse Pointe Country Club, and we all had a cordial time.
The results of this process were remarkable. After a short time, Mary began to tell Roger if his quotes were “warm or cold”. That helped, but Roger realized that to maximize his profits he had to know the exact price he must beat. As his program to “win over” Mary Swoboda continued, he eventually realized his goal. Roger could be observed calling Mary late in the afternoon when a quote was due, to get the lowest price of the quotes she had to date. Then he would call Chicago to determine if he could undercut that price.
If he found that he could, he would type his quotation and take it over to the GCF for submission. Two weeks later, he could receive an order for that part, which could amount to as much as $750,000. It is important to note that not every quote he submitted was the lowest because often Wolverine was not able to supply a particular product at a competitive price. As a result, no suspicion ever arose from Roger’s practices, as far as I could tell. I had intended to work for a Citicorp in New York between my two MBA years at Tuck School, but a family illness required me to be at home for the summer.
So in June 1983, I came to Wolverine Fastener as an assistant to Roger Gordon, who was a close friend of our family and a good friend of mine. My primary responsibility was to handle a number of the company’s smaller product accounts, allowing Roger to devote more time and energy to his larger customers, the Big Three automakers. Within a few days of arriving at Wolverine, I realized there was a special relationship between Roger and Mary Swoboda and I understood its importance. During my summer at Wolverine, the number of part orders from GCf more than doubled.
Edwin Andrews, Roger’s partner, seemed to well aware of the tremendous help Roger was getting from Mary, and although he never sought her aid himself, he never expressed any concern or objected to what Roger was doing either. Edwin’s “mind-your-own-business” approach to Roger’s tactics surely played a major role in the company’s – and his personal – success. One Friday afternoon late in August, I returned from lunch to find a memo from roger on my desk. The gist of it was that he was unable to return to the office for the rest of the day and he wanted me to submit a very important quote (“in the rough neighborhood of $125,000”) to GCF by four ’clock.
As I read on, I discovered that he also expected me to do what he himself did so often before submitting a major quotation: “Call Mary, find out the lowest quote she has received, call Chicago to get their OK for a slightly lower price, then type our quote and deliver it to Mary’s office. ” When I finished reading the memo, I sat back in my chair and looked out the window. Many different thoughts ran through my head. Was what I had been instructed to do ethical? Fair? I thought about the other vendors that were going to suffer because of the advantage we had. What we were doing, in effect, was cheating the system.
If I did carry out my orders, could I be responsible for unethical conduct? I wondered why our system never seemed so bad in the past, but now . . . I also tried to diagnose why Mary Swoboda had chosen to supply Roger Gordon with this important information. Surely other vendors must have tried to get this kind of help from her. Perhaps she was up against it financially and appreciated his many gifts. Maybe she just liked him; after all, he was an extremely likeable man. In addition, Roger did not come across as a cutthroat vendor, the way many others did, and Mary seemed to appreciate his manners.
I also thought of what Roger had told me about his arrangement with Mary – that it was not uncommon in business, that it broke no laws even if it violated GCF standard practice, and that if he hadn’t “gotten the edge”, a competitor would have. “After all,” he told me one day, “I have had a lot of experience, and I really worked to get this advantage in bidding. The system owed that to me. ” There I was, an MBA candidate who thought of himself as a responsible, professional person, and I was unsure what to do in a fairly simple summer job. The irony was that I felt confident discussing much more ethical cases in my MBA courses.
Yet I was really paralyzed by the dilemma before me. What should I do? I didn’t have much time to think. What are the managerial issues in this case? 2. Why is ethics important in the day-to-day management of organizations? 3. What is the relationship between a company like Wolverine and the auto industry? 4. What should the casewriter do? Source: This case was written by Lance Edson while he was a student at the Amos Tuck School of Business Administrations, Dartmouth College, based on a summer employment experience with the Wolverine Fastener Co.