ETHICS & HRM (BLOG 4)

 

Figure 1: ETHICS & HRM

Ethics in Human Resource Management

Human resource management deals with manpower planning and development related activities in an organization. Arguably it is that branch of management where ethics really matter, since it concerns human issues specially those of compensation, development, industrial relations and health and safety issues. There is however sufficient disagreement from various quarters.

There are different schools of thought that differ in their viewpoint on role of ethics or ethics in human resource development. One group of thought leaders believes that since in business, markets govern the organizational interests and these interests are met through people, the latter are therefore at the highest risk. They believe that markets claim profits in the name of stakeholders and unless we have protocols, standards and procedures the same will develop into a demon monopolizing markets and crushing human capital; HR ethics are become mandatory.

There is another group of ethicists inspired by neo-liberalism who believe that there are no business ethics apart from realization of higher profits through utilization of human resources. They argue that by utilizing human resources optimally, there is more value creation for the shareholders, organization and the society and since employees are part of the society or organization, they are indirectly benefited. Nevertheless ethics in human resource management has become a perennial debate of late!

Discussions in ethics in HRD stem from employee relationships and whether or not there can be a standard for the same. Employee rights and duties and freedom and discrimination at the workplace are issues discussed and covered by most texts on the topic. Some argue that there are certain things in employment relationship that are constant others disagree with the same. For example, right to privacy, right to be paid in accordance with the work (fair compensation) and right to privacy are some areas that cannot be compromised upon.

 

Ethics and Market System

The kind of market system affects business and HR ethics; the latter thus becomes negotiable. In occupations where the market conditions do not favor the employees it is necessary to have government and labor union interventions in order to control the possible exploitation. In free market system, employees and the employer are almost equally empowered, negotiation create win win situations for both the parties. Government or labor union interventions become harmful.

Globalization has brought about the concept of globalizing labor, trade unions have started to decline and the role of HR as such in issues like employee policies and practices has become a debatable topic. In fact many people are of the opinion that HR is nothing but an arm of the stakeholders through which major strategic and policy decisions are divulged geared towards profit making!

Thought there can be no single opinion on ethics in HR that is convincing. Market in itself is neither an ethical institution nor unethical and no policies and procedures alone cannot govern and align markets to human well being. However the requirement of such policies and procedures can also not be denied. In lieu of this HR ethics should take care of things like discrimination (sexual, religion, age etc), compensation, union and labor laws, whistle blowing, health and safety of the employees etc.

Ethical Issues in HR

Of all the organizational issues or problems, ethical issues are the most difficult ones to handle or deal with. Issues arise in employment, remuneration and benefits, industrial relations and health and safety.

Figure 2: Diagrammatic representation of HR Ethical Issues

·         Cash and Compensation Plans

There are ethical issues pertaining to the salaries, executive perquisites and the annual incentive plans etc. The HR manager is often under pressure to raise the band of base salaries. There is increased pressure upon the HR function to pay out more incentives to the top management and the justification for the same is put as the need to retain the latter.

Further ethical issues crop in HR when long term compensation and incentive plans are designed in consultation with the CEO or an external consultant. While deciding upon the payout there is pressure on favoring the interests of the top management in comparison to that of other employees and stakeholders.

·         Race, gender and Disability

In many organizations till recently the employees were differentiated on the basis of their race, gender, origin and their disability. Not anymore ever since the evolution of laws and a regulatory framework that has standardized employee behaviors towards each other.

In good organizations the only differentiating factor is performance! In addition the power of filing litigation has made put organizations on the back foot. Managers are trained for aligning behavior and avoiding discriminatory practices.

·         Employment Issues

Human resource practitioners face bigger dilemmas in employee hiring. One dilemma stems from the pressure of hiring someone who has been recommended by a friend, someone from your family or a top executive.

Yet another dilemma arises when you have already hired someone and he/she is later found to have presented fake documents. Two cases may arise and both are critical. In the first case the person has been trained and the position is critical. In the second case the person has been highly appreciated for his work during his short stint or he/she has a unique blend of skills with the right kind of attitude. Both the situations are sufficiently dilemmatic to leave even a seasoned HR campaigner in a fix.

·         Privacy Issues

Any person working with any organization is an individual and has a personal side to his existence which he demands should be respected and not intruded. The employee wants the organization to protect his/her personal life.

This personal life may encompass things like his/her religious, political and social beliefs etc. However certain situations may arise that mandate snooping behaviors on the part of the employer.

For example, mail scanning is one of the activities used to track the activities of an employee who is believed to be engaged in activities that are not in the larger benefit of the organization.

Similarly there are ethical issues in HR that pertain to health and safety, restructuring and layoffs and employee responsibilities. There is still a debate going on whether such activities are ethically permitted or not. Layoffs, for example, are no more considered as unethical as they were thought of in the past.

 

Myths of Business Ethics

Practically business ethics at the workplace connotes an alignment between what the organization values and how to go about it. It means that the all the day to day operations or activities carried out by employees are in tandem with the organizational policies without any deviations. There are however lots of myths that surround business ethics and their relevance and effectiveness.

Figure 2: MYTHS VS FACTS

Many management thinkers and philosophers believe that business ethics alters people’s values. They cease to be what they are, which comes in way of realization of their full potential. Instead business ethics should be about managing values and conflict resolution. Conflict management is what they stress the most upon.

There is a continuous tension between individual and organizational ethics. Many organizations believe that most of their human resources are ethical already and need not be trained upon. When such an ethical dilemma arises, it arises because there is a clash of principles that differ in their result priorities. Again there ethics to counter that are equally reasonable! So what do you choose?

One more myth that surrounds business ethics is that it is well managed and the prerogative of philosophers and theologians. They say that there is no such term as business ethics that can decide how organizations go about their day to day activities. Most of this may be attributed to lack of participation of business leaders in ethical decision making process and their interest in the same.

Business ethics is also criticized as being nothing new. It is believed to something that only avows what is good and which is logical and known to everyone. But when we look at the same from the perspective of stakeholders, the society and employees who work at the bottom of the pyramid, it safeguards the interests of all these groups. Organizations cannot function in a programmed manner ensuring there is no breach of a certain code in the absence of ethics and values.

Business ethics in the context of corporations is recent, but it is fairly old if we talk of general business transactions. Cicero wrote about business ethics in his book ‘On Duties’. It looks recent because of the corporate social responsibility movement that started in early 1970’s.

Yet another myth that surrounds business ethics is that business ethics cannot be managed which is totally wrong. In reality business ethics is managed or exercised indirectly in some way. Organizations priorities can also be reflective of the ethics followed in the organizations. For example a sales driven organization is bound to be aggressive naturally, whereas one that is into the business of hospitality is bound to be different.

Certain other sections of people in management believe that business ethics and social responsibility are the same. They are not! In fact corporate social responsibility is only a small part of it. Corporate social responsibility concerns itself with managing business dealings and the interface with the society; it does not deal with ethics at the workplace. However both fall under the continuum of business ethics.

Resolving an Ethical Dilemma

In a business setting mangers are put to test when they face the challenge of resolving an ethical dilemma. Often certain situations do not fall in the ambit of procedures or the official code of conduct and this is when the managers feel the heat.

The problem with ethical decision making is that a decision in itself cannot be taken in a vacuum; one single decision affects lots of other decisions and the key is to strike a balance to ensure a win-win situation is arrived upon.

Though there are no golden rules to resolve ethical issues but managers can take a number of initiatives to resolve ethical issues. A brief description is given below.

·         Know the Principles

In ethical decision making there are three basic principles that can be used for resolution of problem. These three principles are that of intuitionism, moral idealism and utilitarianism.

The principle of intuition works on the assumption that the HR person or the manager is competent enough to understand the seriousness of the situation and act accordingly, such that the final decision does not bring any harm to any person involved directly or indirectly.

The principle of moral idealism on the other hand states that there is a clear distinction between good and bad, between what is acceptable and what is not and that the same is true for all situations. It therefore asks to abide by the rule of law without any exception.

Utilitarianism concerns itself with the results or the implications. There is no clear distinction between what is good and what is bad; the focus is on the situation and the outcome. What may be acceptable in a certain situation can be unacceptable at some other place. It underlines that if the net result of the decision is an increase in the happiness of the organization, the decision is the right one.

·         Debate Moral Choices

Before taking a decision, moral decisions need to be thought upon and not just accepted blindly. It is a good idea to make hypothetical situations, develop case studies and then engage others in brainstorming upon the same. This throws some light into the unknown aspects and widens the horizon of understanding and rational decision making.

·         Balance Sheet Approach

In balance sheet approach, the manager writes down the pros and cons of the decision. This helps arrive at a clear picture of things and by organizing things in a better way.

·         Engage People Up and Down the Hierarchy

One good practice is to announce ones stand on various ethical issues loudly such that a clear message to every member of the organization and to those who are at the greater risk of falling prey to unethical practices. This will prevent the employees from resorting to unethical means.

·         Integrating Ethical Decision Making into Strategic Management

Morality and ethical make up for a perennial debate and ethical perfection is almost impossible. A better way to deal with this is to integrate ethical decision making into strategic management of the organization. The way the HR manager gains an alternate perspective rather than the traditional employee oriented or stakeholder oriented view.

All these steps can bring better clarity into resolving ethical dilemmas. The choice lies with the manager and his own and the organization value clarity.

 

Ethics Management Programs

Ethics Management Programs are designed by an organization or an employer as an attempt to have formalized structures for ensuring the organisation is perceived as fair, honest, responsible and just.

Ethical programs globally are designed keeping four things in mind:

·         Considering oneself and the organisation as part of the larger social framework.

·         Considering the development and welfare of others (internal and external customers) to the extent possible.

·         Respecting the traditions/rituals (organizational diversity) of others.

·         Evaluating a situation objectively and the consequences thereof.

Many of you may ask why we need ethics management programs when you already have policies and procedures in place that define behavioral standards. Ethics programs are designed to ensure that there is no deviation from the standards laid down and also to ensure that employees are fair and honest in their conduct to the organisation.

The benefits of ethics programs include decreased misconduct and additional defense to the organisation against complaints from the employees, when the latter perceives that the organisation is being unjust to him/her. However in order for the ethics programs to be successful managerial support and role modelling is very important. In fact there is a whole body of research that proves that organizations are increasingly documenting their ethics programs to align behaviors within the organisation and also going ahead to develop systems for implementation of the same.

Implementation of ethics programs is a clear example of organizations being very clear in communicating what they expect of the employee relationships. Many organizations have adopted innovative ways of communicating and continuously reminding employees what is expected. Lockheed Martin, for example, distributes a calendar and a computer screen saver outlining the organizations 12 building blocks of trust! Texas instruments, similarly uses training programs and distributes a 14 page booklet to convey the standards for ethical behavior.

We thus see that honesty, fairness and ethics programs are prerequisites to the employment relationship. There are other actions also that help better the employment relationships. Certain actions are possible at the time of entry like flexible work arrangements (flextime, job sharing, compressed work weeks), induction and orientation that are very convenient means of conveying the ethical policies.

Ethics programs thus benefit organizations in many ways, one they help lay down standards of behavior and second they help in clear communication of the same. This prevents the employee plead on condition of ignorance, which is not the case with the manual containing policies and procedures that are hardly known to any of the employees.

Organizations have now realized the importance of having ethics management programs. Unlike the belief held earlier that it only helps the employee, the belief is gaining more ground that ethics programs are equally beneficial to the organizations. No wonder more and more number of organizations are implementing these programs for the greater benefit of their own, the employees and most importantly the employee relationship.

 

Difficulties in Ethical Decision Making

Decision making involves a great degree of value clarity, ethical decision making involves more! Unlike certain financial, inventory and production decisions, ethical decisions cannot be coded into digital machines. They require critical thinking and evaluation.

What makes ethical decision making so difficult? Why cannot ethical decisions be programmed like other decisions? What leads to dilemmas in ethical decision making? In the coming paragraphs we try to answer all these questions. We also try to understand basic difficulties involved in ethical decision making.

An organization is an amalgamation of various individuals and there is a conflict of interest at the personal level between these members, each one is concerned about his benefits and neutral or opposing to the benefits or good of others. This conflict of interest leads to situations that are morally challenging to the manager who wants to be moral and righteous to his own conscience and serve the interests of the organization. Here the dilemma arises on deciding upon the course of action.

In the second case a conflict arises when there is a distinction to be made about facts and values. This implies a situation where a manager confronts ‘what is’ and weighs the same against ‘what ought to be’. For example an organization may spend lots of resources upon developing, researching or upgrading a certain product and service, which gets reflected in the final price of the latter. This increase in price may be looked upon as exploitative by the end users!

Yet another difficulty arises in cases when there is a fine line dividing the good from the bad or the evil and in situations when there is a difference of opinion on what is morally permissible and what is not. Undoubtedly, in our society the good and the evil exist side by side. Example in case, Nestle infant formula lead to many deaths in Kenya because the formula was prepared in contaminated water. The same formula proved lifesaving in other countries. The challenge lies in minimizing the evil and trying to arrive upon a consensus.

In an era of uncertainty, it is almost impossible to predict the outcomes of decision making. One of the principles of ethical decision making assumes that the outcome of a decision is known and that the decision that results in greatest good for greater number of people is the best. Practically, anticipating the exact outcome of a course of action is impossible. This uncertainty is at the root of all difficulties in ethical decision making.

Lastly we may say that ethical stand points of organization and their critics are opposite and based on an entirely different set of reasons; here the ethical arguments made to justify intentions are by and large incompatible. For example an environment protection foundation may criticize the operations of an organization on grounds of the latter polluting the environment. The organization may justify itself by saying that it is adding more value to the society and to individual lives, making it more comfortable by its products and services. (www.managementstudyguide.com, 2023)

Conclusion

Further, the other ways and means to curb insider trading would be for companies to restrict the number of people with access to privileged information and at the same time, monitoring the activities of those who they suspect could be indulging in insider trading.

Finally, many companies are now asking their employees not to trade in the stocks of their companies without prior permission from the compliance department and this is seen as a move to have control over insider trading by employees. It is hoped that these moves along with other strategies would restrict if not eliminate the menace of insider trading.

References

twitter.com. (2023, 4 30). Contextual determinants of HR professionals' self-perceptions of unethical HRM practices' is comp. Retrieved from twitter.com: https://twitter.com/EmeraldHRM/status/1092361143262294016

www.managementstudyguide.com. (2023, 4 30). Ethics in Human Resource Management. Retrieved from www.managementstudyguide.com: https://www.managementstudyguide.com/insider-trading-and-strategies-to-combat-it.htm