35 Managing Ethical Issues in Human Resource Management
Pragya Dheer
Learning Outcomes:
35.1. Introduction:
Value based management, which means behaviour based on ethical principles & values, is a good formula for the long term health & success of every organisation. In fact, the practicing of ethical values in management is an essential prerequisite for both individual success & organisational efficiency. However, when individual practice ethical values within an organisation, it does not mean that the entire organisation is ethical. Only when the entire organisation practices fairness & justice in systematic way can it be called an ethical organisation. The foundation of the ethical organisation is mutual trust & respect. Employees are any organisation work hard not only for economic benefits but also for social & psychological will-being. A Violation of ethical principles is decision making by an organisation can have a deep impact on the employee’s life & character.
https://www.acfe.com/ethics-and-compliance.aspx
A written statement of the policies & principles that guides the behaviour of all persons is called the code of conduct. But the fact is that no amount of written rules can achieve ethical behaviour among the employees unless the organisational leaders conduct themselves in a fair, moral & legal manner. Ethical leadership is essential for creating an ethical workforce. The employees of an organisation view then leadership as role models to determine their own behaviour. Indeed, those organisations where employees reported fair treatment by management showed proportionately less unethical behaviour.
35.2 Meaning and Definition:
Ethics refers to “the principles of conduct governing an individual or a group” and specifically to the standards you use to decide what your conduct should be. Ethical decisions are always characterized by two things; First, they are always involve normative judgement. A normative judgement implies that something is good or bad, right or wrong, better or worse.
Ethical decisions also involve morality, which is society’s accepted standard of behaviour. Moral standards differ from other standards in several ways. Moral judgements tend to trigger strong emotions. Violating moral standards may make individual a feel ashamed or remorseful.
Managing human resource often requires making decisions in which fairness plays a big role. Fairness is an integral part of what most people think of as “justice”. A company that is just, among other things, equitable, fair, impartial & unbiased in the ways it does things. With respect to employee relations, experts generally define organizational justice in terms of three components- distributive justice (refer to the fairness & justice of the decision’s result), procedural justice (refer to the fairness of the process)& interpersonal or interactive justice (refers to “the manner in which mangers conduct their interpersonal dealings with employees”, & in particular to the degree to which they treat employees with dignity as opposed to abuse or disrecpect.
35.2.1. Definition:
According to Manuel velasquez, “Ethics are the principles of conduct governing an individual or a group.”
R.C.Appleby states “Ethics is a set of moral principles that govern the action of an individual or group.
R.Wayne Mondy states “Ethics is the discipline dealing with what is good or bad, or right & wrong, or with moral duty & obligation.”
According to P.S. Bajaj & Raj Agarwal, Ethics is a set of standards or a code or a value system worked out from human reason & experience by which free human actions are determined as ultimately right or wrong, good or evil. If an action agrees with these standards, it is ethical. If it is does not agree, it is unethical.
According to George A. steiner & John F. steiner, “Business Ethics is a study of good & evil, right & wrong & just & unjust actions of businessmen.”
Thus, Human resource management plays an important role in building an ethical environment in an organisation. To create the appropriate atmosphere, every action taken by the HR people must comply with the ethical standards of the organisation strictly. The alleged violations of the ethical norms by the HR people can vitiate the whole ethical environment of the organisation.
The specific role of the human resource management is to deal with those ethical issues that define the employer- employee relationship, namely the rights & duties of employers & employees. The issue of ethics normally arises in situations where there is a conflict between one or more of the parties on issues like fairness of the employment contract, balance of power between employer & employee, implementation of power law, employee & employer privacy, among the others . The key role of the ethics in an organisation is the coordination & resolution of conflicting interests in a just & fair manner. It is responsibility of the HR managers to ensure that every action taken by the organisation conforms to the ethical standards. The function of the HR manager is to preserve the ethical standards of an organisation & reserving the slip, if any in ethical standards.
35.3 Need for Ethical Policies & Codes:-
Business ethics is the mainly concerned with the relationship between business goals & execution techniques. Its focus is on the manner of execution of these business goals towards an antiapated results: Following are the need for ethics in organisation.
1. A code of ethics in place will enable an organisation to create an ethical workplace. Each employee will understand clearly the standard of behaviour & his/her role in carrying out the principles & values of the organisation.
2. The growing presence of knowledge workers in organisation have necessitated the introduction of strong ethical policies as they are more likely to violate laws & the code of ethics as compared to the earlier generation of workers.
3. Organisations have fewer levels of management & are pushing decision making down to line managers. As a result, any decision by an immediate superior can be viewed as personal & subjective by the subordinates & this situation may call for code of ethics.
4. Visible ethical policies & code can send a clear signal to the employees that the organisation is serious about ethics & that it will make no compromise when it comes to dealing with ethical standards & violation.
5. Ethical policies will enable employees to evaluate quickly their proposed actions with the company’s code of conduct to determine whether these fit the existing ethical standards.
6. Generally, the policies image for companies that practice ethical values will be high in the society. As a result these companies can attract the best candidate in the labour market with ease.
Thus, it is imperative for each organisation to have a strong code of ethics that focuses on business practices & specific issues such as conflict of interest, accuracy of information, prevention of harassment, safety, environmental compliance & rules & regulation.
35.4. Importance of Ethics in Human Resource:
Ethics is important to business in general & HR in particular for several reasons:
1. Ethics corresponds to basic human needs. It is man’s basic nature that he desires to be ethical, not only in his private life but also in his business affairs where, being a manager, he know that his decisions may affect the lives of thousands of employees. Moreover, most people want to be a part of an organisation which they can respect & be proud of, because they perceive its purpose & activities to be honest & beneficial to the society.
2. Values create credibility with the public. A company perceived by the public to be ethically & socially responsive will be honoured & respected even by those who have no intimate knowledge of its actual working.
3. Values give the management credibility with its employees. Values are supposed to be a common language to bring the leadership & its people together. Organisational ethics, when perceived by employees as genuine, create common goals, value & language.
4. Values help better decision making. Another point of great importance is that an ethical attitude helps the management make better decisions, that is decisions which are in the interest of the public, their employees & the company’s own long term good, even though the decision making is slower.
5. Ethics & profit go together. A company which is inspired by ethical conduct is also profitable. Value driven companies are most likely to be successful in the long run, though in the short run, they may lose money.
6. Law cannot protect the society, ethics can. Ethics is important because the government laws & lawyers cannot do everything to protect the society. Technology develops faster than the government can regulate.
35.5. Ethical Issues in Human Resource:-
Of all the organisational issues or problems, ethical issues are the most difficult ones to handle or deal with issues arise in employment, remuneration & benefits, industrial relations & health and safety.
35.5.1. Cash & Compensation Plans:-
There are ethical issues pertaining to the salaries, executive perquisites & the annual incentives plan 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 & the justification for the same is put as the need to retain the latter. Further ethical issues crop in HR when long term compensation & incentive plans are designed in consultation with the CEO or an external consultant. While deciding upon the payout there is pressure on favouring the interests of the top management in comparison to that of other employees & stakeholders.
The Compensation plan includes base salaries, annual incentive plans, long term incentive plans, executive perquisites & separation agreements.
35.5.1.1. Base Salaries:
The HR function is often presumed to justify a higher level of base salaries, or a higher percentage increase than what competitive practice calls for. In some cases, pressure is exerted to rer-evaluate the position to higher grade for the purpose of justifying a larger than normal increase.
35.5.1.2 Annual Incentive Plan:
The HR manager is often forced to design & administer top management incentive plans, at higher rates than what the individual deserve. A common rationale presented to the HR executive for bending the rules is the fear of losing the outstanding executives, if higher incentives are not paid.
35.5.1.3 Long term incentive plan:
Just aswithannualincentive plan, many HR executives have the responsibility of designing & administering the firm’s long term incentive plans, but in consultation with CEO & an internal consultant. Ethical issues arise when the HR executive is put to pressure to favour top management interests over those of other employees as investors.
35.5.1.4 Executive Perquisites:
Executive perquisites make the ethical standard of the HR executive difficult because their cost is often out of proportion to the value added.
35.5.2 Performance Appraisal:
Performance appraisal lends itself to ethical issues. Assessment of an individual’s performance is based on observation & judgement. HR manager are expected to observe the performance in order to judge its effectiveness.
Ethics should be the cornerstone of performance evaluation, & the overall objective of high ethical performance reviews should to provide an honest assessment of the performance & mutually develops a plan improve the rate’s effectiveness.
35.5.3. Privacy Issues:
Any person working with any organisation is an individual & has a personal side to his existence which he demands should be respected & not intruded. The employee wants the organisation to protect his/ her personal life. This personal life may encompass things like his religious, political, & social benefits etc. However certain situations may arise that mandate snooping behaviour on the part of the employer. For example mail scanning is one of the activities used to track the activities of an organisational employee who is believed to be engaged in activities that are not in the larger benefits of the organisation.
35.5.4 Race, Gender & Disability:
In many organisations till recently the employees were differentiated on the basis of their race, gender, origin & their disability. Not anymore ever since the evolution of laws & a regulatory framework that has standardized employee behaviour towards each other. In good organisation the only differentiating factor is performance. In addition the power of filing litigation had made put organisation on the back foot. Managers are trained for aligning behaviour & avoiding discriminatory practices. The practice of treatment of employees according to their race, ethnic origin, sex or disability has largely been stopped. No enterprise today done to publicly state it denies minorities, women, & the disable opportunities for employment, remuneration & growth prospects different from those given to others.
In this, the role of the HR function is to:
(i) Monitor the principles & norms of the enterprise to ensure that they reflect the values of the society as expressed in its law,
(ii) Monitor Selection, Rewards, development & the appraisal system to ensure that they are consistent with the principles & norms.
(iii) Vigorously pursue violations & when necessary, vigorously work to defend the enterprise against unfounded allegations.
35.5.5 Safety & health:
Much of the industrial work is hazardous. This is because of the extensive use of high speed & noisy machinery, production processes requiring high temperature, an increasing reliance on chemical compounds. Accident, injuries, & illnesses are likely to occur under these circumstances. Over past decade, new categories of accident & illness have emerged, including the fast growing job safety problem of office.
35.5.6 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 & he/ she is later found to have presented fake documents. Two cases may arise & both are critical. In the 1st case the person has been trained & the position is critical. In the 2nd case the person has been highly appreciated for his work during his short stunt or he/she has a unique blend of skills with the right kind of attitude .Both situation are sufficiently dilemmatic to leave even a seasoned HR campaigner in a fix.
35.5.7 Restructuring & Layoffs:
Restructuring & consequent layoffs have become relevant because of poor management, but incompetence does not become unethical. There are ethical implications in the process by which termination decisions are made & actions taken. For example, if restructuring requires closing a plant, the process by which that plant is chosen, how the news will be communicated, & the time frame for completing the layoffs are ethically important. If conducted in an atmosphere of fairness & equity with dignity of the affected individual in mind, the action is ethical.
35.6 Approaches to Ethical Issues in Organisation:
Though many supervisors are interested in acting in an ethical manner, they often face a dilemma in determining what constitutes ethical actions.
35.6.1. Utilitarian Approach:
In this approach, the HR policy is based on the philosophy of the utmost good for the greatest number of people. It evaluates the ethical quality of policies & practices in term of their effects on the general well- bring. For instance, decisions like lay-offs in a difficult situation for the organisation are justified on the grounds that they benefit the majority of the employees.
35.6.2. Approach based on Rights:
This approach is based on the principle that an organisation should respect an individual’s dignity & rights. Each employee is entitled to be treated with due respect & to be provided with safe working conditions, a reasonable & equitable pay system & relevant & unbiased performance evaluation. An individual’s privacy & integrity also be respected by the organisation.
35.6.3 Approach based on Justice:
The focus of this approach is on equal treatment, adoption, & consistency in application of policies & rules. The focal point of this point is on the fairness in ensuring a balance between the benefits & the burdens of the job, like compensation & performance, compensation & job attendance. Similarly, HR policies should lay down a proper procedure for dealing with the employee’s discipline problems such as rule violation, absenteeism & employee insubordination. To make the HR policy strong in ethical content, an organisation should consider these approaches while framing the policies as well as in their implementation.
35.7. Factors influencing Ethical Behaviour at work:
Ethics represent values cherished by the member of an organisation. It is essential for the HR managers to first understand the factors that shape the ethical behaviour of the employees in an organisation.
35.7.1. Individual factors:
The personal character & outlook of individuals can have a greater influence in determining their ethical choice. Independent of organisational environment, each employee has some notion about the do’s and don’ts of life. This ethical attitude is shaped by one’s own personal experience, education & awareness.
35.7.2. Organisational Factors:
Sometimes, the employee’s ethical or unethical acts are determined by the organisational consideration. For instance, an employee may indulge in a window dressing of financial results or a filing of false statements with the government agencies, in the hope of protecting the interests of the company. In such cases, ethical lapse occur in the organisation just because the employees feel pressured to do what they think is best to help their companies.
35.7.3. The Supervisor’s Behaviour:-
The notion of “boss is always right” may become a clinching factor in determining ethical or unethical acts of the employees of an organisation. By his words or deeds, the supervisor may transmit the signal to his staff about what is morally right or wrong in the organisation. More than the written rules, it is the conduct of the supervisors that often influences the employee’s own behaviour.
35.7.4. Organisational Culture:-
The organisational culture reflects the total characteristics, values, traditions & behaviors of the employees of the organisation. It is capable of guiding the ethical behaviour of the employees closely. This is because the values of the people often mirror their belief about good or bad, right or wrong, do’s and don’ts in a situation. In managing the employees & fine tuning their activities, the values promoted by an organisation can play a role as a behavioral guide.
35.7.5. Code of Conduct:
A code of ethics is a written statement of ethical principles & policies adopted by an organisation governing the ethical behaviour of its members. It can act as a standard for the employees to compare their behaviour with the available code to check whether their act are right or wrong from an ethical point of view. It can also guide them when they face an ethical dilemmas in the decision making process.
35.8. Role of Human Resource Management in the Development of Ethical Behaviour:
The HR managers can perform the process of building an ethical environment through the management, the workers & the system. They should create a kind of environment where employees work to reduce ethical lapses throughout the organization.
HR managers play a unique role in introducing ethical practices in an organisation since they are an intermediary between the management & workers.
35.8.1. Recruitment & Selection:
The organisation can adopt a two pronged approach in recruitment & selection to promote ethical behaviour in the organisation. The first time is to recruit more ethical people for the organisation. The Next one is to discourage unethical people from applying for the job in the organisation.
The selection process can also be used effectively to inform applicants about the ethical practices of a company. The selection tool itself can speak about the fairness of the organisation in hiring employees. To overcome this problem, organisation can seek to identify & employ those selection tool that are normally viewed by the employees or others as unbiased. However, the amendment of selection tools to ensure equal opportunities for the deprived persons of the society cannot be constructed as an unfair practice.
35.8.2. Training & Development:
In today’s business environment, employees, in general & managers, in particular, are often faced with a situation that requires decision-making intertwined with ethical dilemmas. Ethical training in organisations plays a significant role in helping the employees understand & resolve such ethical dilemmas successfully. The primary goal of these training programmes is to enable employees to recognize the situation posing ethical dilemmas & make a judicious use of the code of ethics to solve such problems while establishing an ethics training programme, it is necessary to first set standards for ethical behaviour in the organisation & then the training goals to be accomplished in the programme. An ethics training programme can focus on matter like the code of the ethics of an organisation or an ethical decision making model.
35.8.3. Performance Appraisal:
It is one of the sensitive HR functions prone to ethical slippages. Employees often view performance appraisal with distrust & suspicion. To gain the confidence & the cooperation of the employees, the management should, as far as possible, ensure transparency in the development & administration of the evaluation standards. This is important since it proves that the firm adopts high ethical standards not only in assessing its employees but also in rewarding them objectively. Moreover, an organisation can actually use performance appraisal as one more opportunity to prove its seriousness about upholding its ethical standards by ensuring objectively & fairness in the performance evaluation process.
35.8.4 Compensation:
Compensation management is another area where organisation often find ethical dilemmas due to the complexity involved in the pay – fixation process. In this regard, organisations can depend more on scientific tools like job analysis, job specification and work measurement to base their wage administration policies on & to avoid ethical conflicts. Besides, while framing HR policies pertaining to compensation package, the HR managers must make adequate provision for recognizing & rewarding those employees who exhibit high ethical values like honesty & integrity.
35.8.5. Discipline & Disciplinary Procedure:
The HR managers should ensure that the disciplinary procedure of the organisation provides for equal protection & fair treatment to its entire erring member while dealing with matters involving indiscipline. This can make employees feel confident about the fairness of the system & the rights of the employees. A strong code of ethics will enable employees to evaluate the ethical dimensions of their own behaviour without any externally imposed procedure.
35.9. Ethical Dilemmas:-
Several ethicaldilemmascomfort an HR manager. The ethical dilemmas arise from three sources:
35.9.1. Face to Face Ethics:
These arise mainly because there is a human element is most business transactions. Business is composed of this human transaction; it should not be surprising that face to face ethical dilemmas arise often. It is likely that the quality assurance man overlooks minor defects & approves a lot delivered by a supplier because of the personal relationship that the two enjoy.
www.slideshare.net/htulungenaram/ethical-dilemma-46703573
35.9.2. Corporate Policy Ethics:
Companies are often faced with ethical dilemmas that affect their operation across all departments & divisions. The consequences of employment contraction are labour intensive basic industries because of the improved methods of production. Modern technology has replaced older methods of production which has in turn resulted in hundreds being jobless. The ethical burden of deciding corporate policy matters normally rests upon a company’s HR management. The HR managers & directors are responsible for making policies & implementing them too. The ethical content of their policies can have enormous impact throughout the company. It can set an ethical tone & send right signals to all employees as well as external stakeholder.
Summary:
International Human resource management is defined as a process of procuring, developing, compensating and retaining people in organization operating beyond national boundaries at the global level. The factor distinguishing international HRM from domestic HRM are additional HR activities, an international perspective on HR functions, greater attention to expatriate employees’ needs, gradual shift in focus from the expatriates to the local employees.
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