33 Human Values in Management

Pooja Malhotra

1. Learning Outcome:

After completing this module the students will be able to:

• Understand the concept of Human Values

• Understand the importance of Human Values.

• Explain the implications of Human Values in Management by describing the implications of ethical and unethical decision making.

2. Introduction

The concept of value has been of interest by those who have the quest for knowledge ever since the evolution of humanity. It seems that all delibrate and planned human conduct, whether personal or collective, is influenced by estimates of value or worth of ends to be attained. The problem of valuation is closely associated with the problem of structure of the sciences of human activities and human relation. In the present day market-led economy, material well-being seems to be overtaking all other measures of human performance. In the blind pursuit for economic progress, there are instances when the managers compromise with the human values. This, if not checked at this stage, can lead to lot of social imbalances. Therefore, there is a need to study and understand them, particularly those aspiring to gaining knowledge in the field of business. This lesson explains the concept of values and their applications in the discipline of management.

3. Concept of Value

Human behaviour seems to be influenced largely, if not controlled, by consideration expressed in words such as ‘good-bad’, right-wrong’, ‘admirable-hideous’ etc., which show the process of valuation in human activity. It is this fundamental nature of valuation activity, associated with choice based on goodness or worthiness, that makes the study of value in diverse disciplines. ‘Value’ has been explored in a wide range of realms such as morality, religion, Sociology, art, science, economics, politics, law and customs. The concept of value has evolved from philosophical study of goodness during the time of Plato and Aristotle to a pragmatic analysis in economics since Adam Smith. In business applications, the concept of value has been retooled from the macro or gross study as in philosophy and economics to micro level, aiming at studying its implications at the level of individual firms. Irrespective of the perspective in which the concept of value is studied, it is largely associated with the process of choosing the best amongst the alternatives on the basis of goodness or worthiness. In modern business, characterized with intensified competition, firms strive to deliver the best value to their stakeholders comprising of customers, shareholders, publics and even employees.

4. Importance of Human Values

The present age is the age of knowledge, where every section of the society is becoming more and more aware of its rights, responsibilities and the implications of other’s actions on them. Gone are the days of colonialism when business could do anything to increase its profits. The society had no say in the corporate affairs. The socio-legal system of those times did little to protect the rights of the stakeholders. The newly proposed principles of free-economy were interpreted as being free of all the social obligations. As early as 1926, it was argued that the concept of limited liability of business ultimately translated to limited responsibility. It was in the middle of twentieth century that the need for socially responsible and ethical behaviour of the corporate was being talked about. There was an increasing realization that business owes a lot to the society and the managers must be ethical in their behaviour. They must abide by certain values while taking decisions that influence others.

The organisations viewed as broad and boundary less entities with extended suppliers and customers. These extended participants of organisations connoted as stakeholders demand a reasonable share of value generated as a result of business operations, thus forcing the organisations to increased accountability to them (Exhibit 1.1)

In the competitive environment, organisations that deliver higher value to the stakeholders are likely to achieve higher competitiveness. Hence, value delivery has assumed a centric position and has become the sole objective of strategies aimed at achieving sustained competitiveness.

5. Value perspective in Management

The philosophical framework defining value as the study of goodness or worthiness guides the concept of value when extrapolated to management and decision making.

The implications of ethical decision making are well understood. Owing to diversity of situations and differences in the perception on values, there can be differences in the normative behaviour as well. Adherence or non-adherence to values can have both positive as well as negative implications. In the following discussion, both these implications are discussed.

5.1 Negative Implications of unethical decision making

Every action has both benefits as well as costs and the same is true for ethical decision making as well. The major reasons to improve ethical decision making, both positive and negative, can be stated as under:

• Cost of unethical conduct

• Lack of awareness on ethical role

• Widespread erosion of integrity

• Exposure to unethical risk

• Global corruption

• Threat to organisational reputation

5.1.1 Cost of unethical conduct

The most recent example of unethical behaviour that can be cited is the reaction of the soft drink manufacturers – Coke & Pepsi, over the reports of the presence of pesticides in their products. The two cola majors did nothing to restore the consumer confidence, but acted in an opportunistic manner and tried to confuse the consumers by way of increased marketing campaign. The result was the erosion of consumer confidence and a steep fall of sales in India. Worldwide, the brands suffered a very negative effect and their stock prices fell by over 10% within a few weeks. Similarly, Enron had to shut down its operations because of the unethical conduct of its managers. Arthur Anderson lost their business because of loss of credibility. Karvy Consultants, India Bulls, Motilal Oswal etc. had a tough time in restoring the investor confidence after the reports on the scam on opening multiple demat accounts. The textile mills in Ahmedabad had to be closed down because the management did not care to protect the interests of the employees. These are some of the examples where the reputation of the firms suffered very badly because the managers acted in haste, to prove their smart capability. They did not care to study the implications of such behaviour. The result was a huge loss, both tangible and intangible. While the tangible loss was in terms of loss of earnings, the intangible loss occurs in terms of loss of confidence of the stakeholders. There is loss of productivity, loss of morale, conflicts, distrust etc. Therefore, the performance of the organization suffers very badly. It needs a lot of investment and hardwork to restore the organizations back to their original positions. Therefore, it is much more economically prudent to act in an ethical manner.

5.1.2 Lack of awareness on ethical role

The mangers perform a variety of roles, which can lead to unethical conduct, knowingly as well as unknowingly. The managers can perform certain actions against the firm itself, which lead to the managerial role failure. This happens when the personal interest of the managers takes supremacy over their professional conduct. They may perform wrong performance appraisal to benefit a personal friend, at the cost of the organisational interests. There can be situations where managers can perpetuate legal, but harmful environment practices. Such a role is termed as managerial role overexertion. For example, taking benefit of loopholes of law, the cola majors are not accepting the presence of pesticides in their products. This is an unethical conduct. Similarly, the fund managers of UTI made unauthorized investments in high risk securities putting investors at loss. Such actions, which might seem to be in line with the prevalent practices, can lead to undesirable consequences. Therefore, it is very important that the managers need to be aware about the ethical dimensions of their decisions.

5.1.3 Widespread erosion of integrity

The managers who intent to improve their ethical performance need to attend to the erosion on integrity and manage ethical risk, as it pertains to individuals, groups and organizations. There are great tempting situations which can lead to unethical behaviour. People can find several reasons to compromise on integrity elated issues as the rewards of such an act can be direct and immediate while the disadvantages might seem distant and overt. Possibly, it is this behaviour that is making ethical behaviour less common. It is important to note that the loss of integrity can be both intention as well as unintentional. Intentional loss of integrity can occur when a manager compromises on his conduct for selfish gains. However, there can be situations of culpable ignorance where it is expected that the manager could have, or should have, known the better course of action. Ethical actions by way of undeterred integrity is not to be performed only by a God-fearing manager, but even by the one, who intends to lead his corporate to excellence.

5.1.4 Exposure to unethical risk

Ethical risk is the exposure to the possibility of loss of integrity or the presence of harmful dangers. Although the individuals may take private ethical risks, as managers, they take public risks that may impose burden on others. Others can suffer several costs of harm, as is being suffered by those who were exposed during the Bhopal gas tragedy. People can also suffer because of the costs that they have to incur to avoid loss. For example, they might have to be secure of the pollution; health hazards etc. and might have to pay for medical insurance or equipment to safeguard them. The process of maintaining integrity and offsetting ethical risk entails a lot of moral alignment of words and actions on the managers. They need to understand and analyse situations and their repercussions on the stakeholders and then decide upon the boundaries of moral and ethical conduct.

5.1.5 Global corruption

Corruption is more widespread than what seems. There are several compromises on value that the managers make while dealing with corruption. Rather, most managers encourage corruption because it is the easiest way of getting the things done. Several multinationals are under question because of their approach towards corruption. In many countries, there are scams and reports of underhand dealings between government and business leading to protests and even change of governments. There are several businesses, where the risk of corruption is inherent. However, the managers must find ways to halt such a trend as this would lead to the loss of their reputation. The general public image comes under scanner, as it had happened in case of Reliance SEZ in Haryana and many other states, Ludhiana city centre case, Cargill case and many such mega projects where the nexus between the business and those in power seemed more than obvious. Ethical managers would always devise means to come avoid such situations and come out of such allegations. The multinational companies have a greater responsibility as they operate in several underdeveloped countries where unscrupulous government officials can ask for benefits. The gains from such acts can be petty, but the loss of reputation and consumer confidence can be immeasurable.

5.1.6 Threat to organisational reputation

As stated earlier, the biggest loss of unethical behaviour is the loss of reputation, which is too difficult to be built. There is a general feeling of distrust among the stakeholders of the organization. This can be detrimental to the organisational performance. Therefore, the managers must not do anything to harm the hard earned corporate reputation by engaging in any kind of unethical behaviour.

5.2 Positive Implications of Ethical Decision Making

By following ethics in the conduct, the managers reap several benefits, which can be stated as under:

• Increased profitability

• Desirable organisational order

• Greater customer confidence

• Sound community relations

• Participative management

• Better competitiveness

4.2.1 Increased profitability

Ethical decision making invariably involves lesser problems for the managers, which can be translated in terms of lesser costs of unethical behaviour, better productivity of managers and employees, lesser conflicts between the stakeholders and hence better profitability. The organizations, which behave responsibly leads to better pay-off. Research has shown that the organizations that are sensitive towards their environment show better profitability as well. They outperform the polluters in over 80% of the situations. Ethical decision making is an indicator of superior management practices and hence better financial performance as well.

4.2.2 Desirable organisational order

The ethical decision making indicates the presence of proper management systems, which ensures systematic working of the organizations. Such organizations have better employee welfare programmes, fair performance evaluation and an environment of trust. Therefore, the organization is much more orderly and a friendly environment to work. For example, Tata group has very well developed systems that ensure employee welfare. There are very few instances of strike and conflict. So, employees feel motivated and give in their best.

4.2.3 Greater customer confidence

Although there is a lack of conclusive evidence that the customers purchase the products if a company is more ethically managed, but extrapolating the argument that ethical behaviour leads to better goodwill for an organization, the customers are expected to exhibit a favourable behaviour towards the products of ethically managed organizations. Another argument that supports this is the success of the social marketing programmes. Hindustan Lever Ltd. Came up with an advertising campaign in which it promoted its brand Ariel on the punchline that it saved two buckets of water per wash. This appeal clicked well among the customers and Ariel is a big success. Similarly, Maruti’s campaign on safe driving is lso well taken by the customers. The customers get a feeling of reassurance and like to make relations with such organizations. However, it may be added that the customers are not likely to compromise on product quality for being ethically driven. So, ethical management has to be an added quality of management and not a substitute for offering good quality of products and services.

4.2.4 Sound community relations

There are many organizations that have developed very sound community relations, which helps them to tide over several problems by itself. Sound public relations do not develop on their own. They need a lot of investment of time and effort and a sincere goodwill, only then do the members of the public trust it. For example, in the stock market, people have developed a lot of confidence in Reliance group of companies. The result is that their products are a big hit in the market. Even in difficult times, people remain with the organization and help it to come out of the crisis. Better community relations foster better employee productivity, better loyalty of customers, lesser conflict with the local groups and a more harmonious working.

4.2.5 Participative management

Participation of employees in the management of an organization help I securing a greater understanding of its mission and a better compliance of the rules and regulations. Once the employees are taken in confidence at the stage of formulating the objectives, they give in their best in the implementation of the plans as well. Participation is a tested method of conflict resolution and establishing better coordination among the various levels of the employees. Such a practice is more important in bigger multinational organizations as the employees are from diverse socio-cultural background and may not understand a firm’s style of working. If they are a part and parcel of the management of the firm, they are better equipped to give in their best in its working. These facts have been tested by the research as well, where it has been found that the organizations with participative management grow 6 to 11 times faster that its competitors if it combines employee ownership with a participatory management style. Several companies has Employee Stock Option Programmes (ESOP), which help in long-term commitment of the employees.

4.2.6 Better competitiveness

Competitive advantage if a function of several variables and ethical practices is one of them. Organizations with better management practice, fewer conflicts, loyal customers, better community relations have a much smoother passage to success than the ones which do not have such qualities. In the competitive times, firms have scarce resources and they cannot afford to waste them on resolving conflicts or such activities that can be prevented. They would prefer to invest their resources in brand building or improving their infrastructure. Therefore, ethical behaviour can lead to such intangible gains, which can improve the corporate performance in the marketplace.

5. Summary

Values are the guidelines for the human behaviour and are more important in the organizations, where the actions of the managers have their ramifications on large number of people. The negative implications of unethical behaviour include high cost of unethical conduct. There can be lack of awareness on ethical role and widespread erosion of integrity. The organizations are also confronted with high exposure to unethical risk and have to deal with global corruption which can lead to threat to their organisational reputation. Within these conflicting situations, there is a need to have a sound strategy for having ethical behaviour. The benefits of ethical behaviour include increased profitability, desirable organisational order and greater customer confidence. Ethical organizations develop sound community relations. They follow participative management and have better competitiveness.

References:

• Petrick, J.A. and Quinn, J. F. (1997) Management Ethics – Integrity at Work, Sage Series on Business Ethics.
• Fredrick, W.C., (1995) Values, nature and culture in American Corporation, Oxford University Press, New York.
• Green, D.M., (1994) The ethical Manager, Macmillan, New York.
• Velasquez, M.G., (2002) Business Ethics- Concepts and Cases, Pearson, Delhi, Fifth Edition
• Boatright, J.R. (1997) Ethics and Conduct of Business, Prentice Hall, Upper Saddle, New Jersey, 2n d Edition.