People and Organizations : Principles and Practice in Global Contexts - MN7181 - The Ethical Context of HRM - Blog # 9

People and Organizations: Principles and Practice in Global Contexts – MN7181 – The Ethical Context of HRM – Blog # 9

What are Ethics?

As Boxall et al (2007: 5) pointed out: ‘While HRM does need to support commercial outcomes (often called “the business case”), it also exists to serve organizational needs for social legitimacy.’ This means exercising social responsibility, ie being concerned for the interests (well-being) of employees and acting ethically with regard to the needs of people in the organization and the community. To grasp this ethical dimension it is necessary to understand the nature and principles of ethics, the ethical role of HR and the ethical guidelines they can use. It is also necessary to know about approaches to resolving ethical dilemmas.

There has been an increasing concern about the prevalence of unethical behaviors within business organizations. Increased media attention has exposed numerous instances of abuses, scandals, fraud and corruption (Bartels et al, 1998). Hence, it is the main concern of all professionals and disciplines to explore all possible ways of creating and sustaining ethical behavior and activities within the business organizations.

Changing the unethical behavior of organizational members through ethical culture and climate may have significant effect on organizational performance and reputation. Ethical climate has been defined as the shared perceptions of what ethically correct behavior is and how ethical issues should be handled (Victor and Cullen, 1987). 

According to Olson (1995) and Schluter et al (2008), organizational ethical climate represents the organization’s policies, procedures and practices on ethical issues, and it influences employees‟ attitudes and behavior and serves as a reference for employee behavior. In 1998, Olson defined ethical climate as individuals‟ perception of how ethical issues in their work environment are handled. According to Johnson (2008), ethical climate means how an organization responds to ethical issues. He also stated that ethical climate determines right or wrong of what members believe and shapes their ethical decision making and behavior. 

According to Victor and Cullen (1987), ethical climate has three primary dimensions:  egoism, benevolence (utilitarianism) and principle (deontology) in terms of theories or ethical criterion. Similarly, with respect to every primary dimension, they also identified another three dimensions in terms of locus of analysis (levels of analysis). They are individual level, local level (organization itself) and cosmopolitan level (community or society at large). Alternatively, they defined the sets of primary dimensions and locus of analysis dimensions as two intersecting dimensions of ethical climate. Based on Victor and Cullen (1987), Arnaud (2010) has developed four dimensions of ethical climate of work: (1) “collective moral sensitivity” (moral awareness and empathetic concern), (2) “collective moral judgment” (focus on self and focus on others), (3) “collective moral motivation” and (4) “collective moral character”. However, these two approaches by Victor and Cullen (1987) and Arnaud (2010) do not have significant differences or contradictions. Notably, Victor and Cullen (1987) framework has gained most popularity among the researchers.

Many scholars have stressed over time the importance of HRM in creating and sustaining ethical culture and climate in organisations (Smith and Carroll, 1984; Hosmer, 1987; Raelin, 1987; Koys, 1988; Lawler, 1988; Pocock, 1989; Johns, 1995; Flynn, 1995; Pickard, 1995; Arkin, 1996; Wehrmeyer, 1996; Caudron, 1997; Losey, 1997; Greengard, 1997; Compton, 1997; Bartels, Harrick, Martell and Strickland, 1998; Driscoll and Hoffman, 1998; Wiley, 1998; Grensing-Pophal, 1998; Hatcher, 2002; Shultz and Brender-Ilan, 2004; Wright and Snell, 2005; Vuuren and Eiselen, 2006; Sloan and Gavin, 2010; Thite, 2013; Parboteeaha, et al, 2014). However, the clarity is needed in how functional dimensions of HRM can play an active role in this process. Therefore, the main objective of this review is to fill this gap in, and attempt to add knowledge to, the existing literature. 

In 1991, Society for Human Resource Management (SHRM) conducted a survey on “Ethical Issues in Human Resources Management”. As an extension, another survey conducted with 847 employment professionals and managers by Wiley (1993) has revealed five most serious unethical events: (1) hiring, training or promotion based on favoritism, (2) sexual harassment, (3) using discipline for managerial and non-managerial personnel inconsistently, (4) nonperformance factors used in appraisals, and (5) allowing differences in pay, discipline, promotion, etc. due to friendships with top management. 

On the other hand, research by Vuuren and Eiselen (2006) showed that human resource (HR) practitioners on average believe that they indeed have an ethics management competence and should involve in ethics management. Progressively, HR managers take the lead in recognizing the need for the programs of ethics and making them happened (Driscoll and Hoffman, 1998). The reasons they pointed out that those who are in the leadership positions in HRM are highly respected within their organizations for integrity. All and above, they have the capacity to solve complex ethical dilemmas, understand the organization’s culture and communicate it at all levels in the organization. 

HR is increasingly seen more as a strategic business partner than ethical steward in the strategic HRM (Sloan and Gavin, 2010). The role of HRM in promoting ethics and ethical behaviors in organizations is undeniable (Caldwell, Truong, Linh and Tuan, 2011). Parboteeaha et al (2014) indicate that from the HRM perspective, ethical climates represent an important window to understand the ethical orientation in an organization. Understanding the existence of ethical climate in an organization can therefore be very much helpful as a basis for developing HRM practices to foster an ethical culture. 

Thite (2013) shows that how the human resource development (HRD) or HRM can play a pro-active role in embedding ethics and values throughout the organizational and HR architecture. Wright and Snell (2005) noted that the ethical climate raises a real challenge for HR in balancing business and ethical values. According to Thite (2013), studies on ethics in HRM and HRD are still limited, thus urging for further empirical investigations. Many scholars agree that HRM plays a critical role in promoting ethics.

Ethical Guidelines for HRM

The guidelines set out below relate to how employees are treated in general and to the major HRM activities of organization development, recruitment and selection, learning and development, performance management, reward management and employee relations. They also relate to employment practices concerning the work environment, employee well being, equal opportunities, managing diversity, handling disciplinary matters and grievances, job security and redundancy.

General guidelines

 ● Recognize that the strategic goals of the organization should embrace the rights and needs of employees as well as those of the business.

● Recognize that employees are entitled to be treated as full human beings with personal needs, hopes and anxieties.

● Do not treat employees simply as means to an end or mere factors of production.

● Relate to employees generally in ways that recognize their natural rights to be treated justly, equitably and with respect.

Ethical Dilemmas

‘Ethics will be enacted in situations of ambiguity where dilemmas and problems will be dealt with without the comfort of consensus or certitude’ (Clegg et al, 2007: 109). Bauman, quoted in Bauman and Tester (2001: 44), commented that: ‘Morality concerns choice first of all – it is the predicament human beings encounter when they must make a selection among-st various possibilities.’ And Derrida (1992) observed that ethical responsibility can exceed rational calculation.

Resolving Ethical Dilemmas

As Adam Smith (1759) wrote in The Theory of Modern Sentiments (quoted by Harrison, 2009: 246): ‘when ethically perplexed, the question we should always ask is: would a disinterested observer, in full possession of the relevant facts, approve or disapprove of our actions?’ This guidance is just as compelling and relevant today. Woodall and Winstanley (2000: 285) suggested that ‘being ethical is not so much about finding  one universal principle to govern all action, but more about knowing how to recognize and mediate  between often unacknowledged differences of view’. By definition, an ethical dilemma is one that will be difficult to resolve. There may be all sorts of issues surrounding the situation, some of which will be unclear or contentious. The extent to which people react or behave rationally may be limited by their capacity to understand the complexities of the situation they are in and affected by their emotional reactions to it (the concept of bounded rationality).

As Harrison (2009: 331) explained:

Some of the factors that militate against a purely ‘rational’ approach include confused, excessive, incomplete or unreliable data, incompetent processing or communicating of information, pressures of time, human emotions, and differences in individuals’ cognitive processes, mental maps and reasoning capacity.

Faced with factors such as these the process of ethical dilemma resolution can be hard going. There is no ‘one right way’ to deal with an ethical issue, but an approach based on systematic questioning, analysis and diagnosis to get at the facts and establish the issues involved is more likely to produce a reasonably satisfactory outcome than one relying purely on ‘gut feeling’. The following checklist – used judiciously and selectively according to the circumstances – can provide a basis for such questioning and analysis.

The following check list will be helpful when dealing with dilemmas and be able to help solve them.

1. ·        What are the known facts about the situation and is it possible that there are facts or circumstances that have not come to light, and if so what can be done to uncover them?
2. ·        In disciplinary or conduct cases, to what extent does the conduct contravene the organization’s code of ethical conduct (if one exists) or any other relevant organizational policy guidelines and rules?
3. ·         In disciplinary cases, are there any mitigating circumstances?
4. ·         Have different versions or interpretations of the facts and circumstances been offered and, if so, what steps can be taken to obtain the true and full picture?
5. ·         Do the facts as established and confirmed justify the proposed action?
6. ·         Is the proposed action in line with both the letter and the spirit of the law?
7. ·         Are the proposed action and any investigations leading to it consistent with the principles of natural, procedural or distributive justice?
8. ·         Will the proposed action benefit the organization and if so how?
9. ·         Is there any risk of the proposed action doing harm to the organization’s reputation for fair dealing?  

The Ethical Role of HRM

Legge (1998: 20–21) commented that: ‘In very general terms I would suggest that the experience of HRM is more likely (but not necessarily) to  be viewed positively if its underlying principles are ethical.’ 

HR professionals have a special responsibility for guarding and promoting core values in the organization on how people should be managed and treated. They need to take action to achieve fair dealing. This means treating people according to the principles of procedural, distributive, social and natural justice, and seeing that decisions or policies that affect them are transparent in the sense that they are known, understood, and clear and applied consistently.

 Kochan (2007: 600) suggested that: ‘HR derives its social legitimacy from its ability to serve as an effective steward of a social contract in employment relationships capable of balancing and integrating the interests and needs of employers, employees and the society in which these relationships are embedded.’ But he also noted that most HR professionals have ‘lost any semblance of credibility as stewards of the social contract because most HR professionals have lost their ability to seriously challenge or offer an independent perspective on the policies and practices of the firm’ (ibid: 604). 

And, Parkes and Davis (2013: 2427) pointed out the risk that the HR role can become ‘rather passive, favoring communicating standards rather than actively promoting ethical behavior’. To overcome this problem and thus fulfill an ethical role Winstanley and Woodall (2000b: 7) remarked that: ‘HR professionals have to raise awareness of ethical issues, promote ethical behavior, disseminate ethical practices widely among line managers, communicate codes of ethical conduct, ensure people learn about what constitutes ethical behaviors, manage compliance and monitor arrangements.’ There are three approaches that HR can adopt. 

The first is to ensure that HR policies and the actions taken to implement them meet acceptable ethical standards. HR can press for the production of a value statement that sets out how the organization intends to treat its employees. Value statements may be set out under such headings as care and consideration for people, belief that people should be treated justly and equitably and belief that the views of employees about matters that concern them should be listened to. This requires advocacy skills to persuade management to adopt and act on these policies and the courage and determination to make out the ethical case even when management favors a conflicting business case. But value statements are meaningless until the values are put into practice; the ethical role of HR involves helping to ensure that this takes place.

Second, HR practitioners can act as role models, leading by example and living and breathing good ethical behavior. As a respondent to the survey conducted by Parkes and Davis (2013: 2426) commented: ‘If HR does not act ethically, how can it expect employees to do so?’ 

The third approach, and the hardest, is to challenge unethical behavior on the part of management. Such behavior can take many forms, including management tolerance for exploitation and bullying; the lack of a whistle-blowing policy, which provides routes for reporting malpractice and performance management criteria that emphasize organizational gain over all else. 

The latter was the case at the Royal Bank of Scotland (RBS) before the financial crisis, where the performance management concentrated on target achievement, ignoring behavior. The courage to challenge is less likely to be forthcoming in organizations where the culture is one of command and control – and obedience is expected to whatever is dictated by management (features of the pre-crash RBS culture). Power, politics and culture shape norms of behavior and, as Herb Kelleher (the CEO of Southwest Airlines) put it, culture is ‘what people do when no one is looking’ (reported by Lee, 1994). 

One respondent to the Parkes and Davis survey (2013: 2425) commented: ‘It can be difficult on a personal level to be speaking out – HR does not have the power’. Another said: ‘Speaking out can be career suicide’. It is too easy in these circumstances for HR to be mere bystanders. Neil Roden, former head of HR at RBS, explained HR’s position in relation to the financial debacle at the bank as follows: ‘I’m not absolving myself totally... (But) I can’t see what HR could have done... I wasn’t running the bank... the CEO makes the decisions, not me.

 HR is a support function, no more, no less important than sales or IT.’ An HR director who is a member of an executive board can question decisions from an ethical viewpoint but if the comments are not heeded then the director will either have to accept the decision or resign. It is important to challenge – and the courage to do so is listed by the CIPD as one of the qualities required by an HR professional. But it is difficult and there may be limits to what HR can do.

 If HR professionals cannot do anything about the way their organization does things they either have to carry on and do whatever they can in other less confrontational ways, or they must leave.

References

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