MASTER OF INTERNATIONAL BUSINESS (MIB)

1. MASTER OF INTERNATIONAL BUSINESS (MIB) HUMAN RESOURCE MANAGEMENT (TPM516M) Topic 9 Ethical Issues and Human Resource Management

2. Ethical Issues and Human Resource Management I) ETHICS IN ORGANISATIONS II) CATEGORIES OF ETHICAL CONCERN III) KOHLBERG’S MODEL OF MORAL REASONING IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE VI) ETHICAL DECISION MAKING FRAMEWORKS VII) THE EMERGING ROLE OF HR PROFESSIONALS IN THE OPERATIONALISATION OF CORPORATE ETHICS PROGRAMMES

3. I) ETHICS IN ORGANISATIONS • INTRODUCTION • Ethical issues in HRM can be seen as multifaceted involving personal, professional and organizational considerations. • Promulgate an ethical culture in that ethics pervade selection and staffing, performance appraisal, compensation and employee retention. • DEFINITION • Ethics is defined as concerns with moral judgement and standards of conduct. • WHAT IS ETHICS • Ethics focuses on shared value systems that serve to guide, channel, shape and direct the behaviour of individuals in organizations. • Ethics serve the same general function as laws and accountability systems in society. • Ethics is about what is right.

4. I) ETHICS IN ORGANISATIONS (cont.) • ETHICS AND HRM • Ethics is the formal responsibility of people in the HRM function. • HR Practitioners must sustain ethical leadership through its training and development function. • Ethics is promoted through mission statements, ethical audits and codes of conduct. • Employees are required to think about and act on ethical issues that are supported by an organizational culture that encourages ethical awareness and debate. • ETHICAL DIFFICULTIES • Ethical difficulties are, inter alia, experienced when companies opt for overly aggressive financial objectives. • E.g. overly aggressive profit making can be as bad as too little; therefore get the appropriate balance between the two extremes. • Another example is bringing about immediate product loyalty by adding a highly addictive substance to your coffee.

5. II) CATEGORIES OF ETHICAL CONCERN • Perceptions of ethical issues • When managers are faced with an ethical issue they seek to categorise it as a particular kind of issue. • People need to be able to place events into categories to deal with the overwhelming mass of information. • Categorisation is a tool for thinking that helps us deal with complex moral issues. • How people think about ethical issues is effected by how they categorise issues. • Categories of ethical concern define how a person reacts to a moral issue. • Something might be ethical to one but at the same time unethical to another.

6. II) CATEGORIES OF ETHICAL CONCERN (cont.) • Eight (8) categories of ethical concern are discussed below. • Ethical neutrality • Person refuses to accept that there is a moral dimension to an issue. • The issue doesn’t bother his / her conscience. • E.g. values that are seen by public officials as a source of irritation and consequently they try to avoid them. • Ethical awareness and action • Person feels uncomfortable because an issue at hand offends against their own values. • Ethical Convention • In this case an ethical issue is best resolved by applying conventional rules and norms such as organizational policies or professional codes of ethics. • The person wants to know what is the policy or procedure to deal with an issue such as redundancy. • E.g. last in, first out may be a conventional rule to apply whenever you deal with employee redundancy.

7. II) CATEGORIES OF ETHICAL CONCERN (cont.) • Eight (8) categories of ethical concern are discussed below (cont.) • Ethical Puzzle • Person seeks to obtain a technically correct or best answer to an issue. • It involves much hard work and thought but there is little argument about the values appropriate to resolving a particular issue. • E.g. calling community meetings to finance medical priorities, without recourse to political arguments. • Ethical Problems • In this case a person may take action on a problem, but the action will not resolve the difficulty – the problem may be ameliorated or modified, but it is unlikely to be abolished. • An issue is a problem when it involves many different values and principles which, when taken in isolation make perfect sense, but which when taken together fall into conflict. • E.g. the need for downsizing and empowerment of staff. • Ethical Dilemma • Person has to make a difficult or unpleasant choice between conventions (social constructs). • Person decides to act according to one set of conventional rules / norms, and at the same time breaks another set of expectations. • E.g. choosing to support one group, by accepting their rules and values, but annoying another by offending against theirs.

8. II) CATEGORIES OF ETHICAL CONCERN (cont.) • Eight (8) categories of ethical concern are discussed below (cont.) • Ethical cynicism • Person believes that all ethical issues will be resolved in ways that primarily meet the private and personal interests of those involved. • Person thinks it would be better to leave matters to capricious chance than to try and improve things. • Person puts blame on those who are trying to deal with an issue. • E.g. tell the chairman you have nothing to say when asked to give your opinion. After the meeting, tell everyone how things should be done. • Ethical negotiation • Person searches for consensus or compromise between differing ethical positions. • It is not concerned with the rightness of a decision but with the correctness of the process used to arrive at that decision. • E.g. in the case of redundancy decisions, persons take great care to find the views of all the parties and assess their capacity to create problems for themselves. They will then do what those with the greatest weight require them to do while keeping their own views private.

9. III) KOHLBERG’S MODEL OF MORAL REASONING • Kohlberg argues that a person can develop robust ways of thinking about moral issues, but can also (on occasion) regress to earlier and cruder forms of thought. • This model helps people to understand the varieties of moral reasoning available to them. • The model has three (3) broad stages, pre-conventional, conventional and post-conventional. Each one of them has got 2 substages.

10. III) KOHLBERG’S MODEL OF MORAL REASONING (cont.) • Pre-conventional • Punishment avoidance form of moral reasoning • Person avoids punishment and retribution from those more powerful themselves. • Person does what the boss wants him / her to do out of fear to upset the boss. • This form of reasoning relates to the category of ethical negotiation. • Psychological egotism form of moral reasoning • Person thinks about his / her own immediate self-interest, and is not concerned about others or about the long-term. • This form of thinking relates to the category of ethical neutrality.

11. III) KOHLBERG’S MODEL OF MORAL REASONING (cont.) • Conventional • Social Affiliation form of moral reasoning • Person considers the expectations placed on him /her by friends, family, colleagues and neighbours. • E.g. attending church on a Sunday morning because that is what is expected in your neighbourhood. • This form of thinking relates to the category of ethical awareness and action. • Institutional form of moral reasoning • Person adheres to the rules, regulations and laws of the society, associations and institutions of which he / she is a member. • Ethical issues are resolved by following the rules. • This form of reasoning relates to the category of ethical convention.

12. III) KOHLBERG’S MODEL OF MORAL REASONING (cont.) • Post-conventional • Principled form of moral reasoning • The person thinks through and determines for him- / herself a set of principles that will guide his / her actions. • These principles are set within a social context and often take the form of an implied social contract. • This form of thinking relates to the category of ethical puzzles, because the person determines which value from a set of competing values should be chosen to use as basis for solving a problem. • Philosophical form of moral reasoning • Person develops universal principles based on notions of justice. • Person may challenge conventional rules that break the higher requirements of justice. • This form of reasoning relates to the category of ethical problems.

13. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM • The transformation of HRM from a traditional welfare, administrative and service role to a more strategic role presents dual loyalties to the field. • HR professionals have to balance their dual membership in terms of their role of (i) fair and efficient management of people, and (ii) focussing on the economic rationalism of a company.

14. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM (cont.) • Problem of Dual Loyalties • HR professionals see conflict between their role as (i) friends of the workers, and (ii) management’s instruments of competitive advantage. • Unitarist / managerialist view of HR – The interests of employees and their employers are the same; therefore a proper employee-employer relationship is one of partnership. • Pluralist view of HR – Recognises the possibility of diverse interest groups and sources of loyalty.

15. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM (cont.) • HR Professional Codes of Conduct • A Professional Code of Conduct for HR practitioners in a given country can help with alternative courses of action when these practitioners are confronted with conflicts of dual loyalties. • It embodies the professions values, serves as moral anchors and helps to establish an ethical climate.’ • Professional Codes of Conduct provide stakeholders (the public, employees, managers and shareholders) with a benchmark by which to evaluate the ethical performance of a profession. • The South African Board for Personnel Practice (SABPP) is a professional body for managers, practitioners, consultants, academics and students in the field of HRM, but does not directly recognise the problem of conflicting dual loyalties. • The Australian Human Resources Institute’s (AHRI’s) Charter of Professional Standards addresses the primary responsibility of HR professionals (i.e. the employer, although there are obligations toward the employee, socially, legally and otherwise).

16. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM (cont.) • HR Professional Codes of Conduct (cont.) • The Society for Human Resource Management’s (SHRM – representing HR professionals and students) Code of Ethics gives primacy to the fair and equal treatment of employees and the public interest. • Many professional codes generally recognise that loyalty is owed to affected stakeholders in the following order of priority: the public (including employees and consumers), the profession, the client / employer, and the individual professional. • There are a variety of codes in existence for different professions, e.g. accountants, architects, engineers, journalists, medical practitioners, etc. • Professional Codes of Conduct are important vehicles for providing direction and counsel to the HR profession as it addresses local and global contemporary challenges and the demands of a strategic HRM paradigm.

17. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM (cont.) • An integrity-orientated approach to a strategic business partnership • The current practice by HR professionals in workplace ethical issues is that of monitoring for policy and legal compliance, whilst the least dominant are the roles of educator and questioning the ethical dimensions of managerial decisions. • Ethics involves more than minimum legal compliance, although the latter is also important. • The emphasis on just legal compliance frustrates the transformation of the HR function from an administrative-service role to a strategic dimension. • A strategic HRM paradigm calls for HR professionals to be trained and educated on, and show an understanding of ethical principles. • HR executives should integrate ethics into strategic decision making – i.e., they should also embrace the role of integrity-based business partners.

18. IV) ETHICAL DIMENSIONS OF A STRATEGIC HRM PARADIGM (cont.) • An integrity-orientated approach to a strategic business partnership (cont.) • Integrity-based business partners call for qualities such as ethical consciousness, competency, and commitment. • That means, they must have the ability to perceive ethical issues; the ability to engage principled reasoning and problem-solving strategies; and a personal resolve to act ethically. • Also, integrity-based business partners must develop the roles of questioner and educator in ethical matters. • For instance, they would question the exploitation of workers in any strategic plan which suggests the payment of below-subsistence wages. • “Without an integrity-orientated approach to business partnership, there is the danger that HR professionals may continue in the administrative-service role under the guise of being a strategic player” (p.254).

19. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE • HRM POLICIES AND PROCEDURES • HRM polices and procedures have moral relevance as they structure employee relationships with the organisation. • Enterprises have responsibilities beyond economic and legal ones for the following reasons: • Business enterprises not only function within an economic system, but also serve human and societal needs. • The economic element is not critical for the public and voluntary sectors. • Enterprises that act ethically towards customers, suppliers, communities and employees, will reap the benefits of improved loyalty and motivation from these stakeholder groups. • There are ethical issues that arise within the traditional activities of employee selection, compensation, performance management, promotion and termination. • It is through the fair implementation of these HR activities that enterprises are able to attract and retain a superior workforce for sustained competitive advantage. • HRM cannot be strategic unless it is ethical.

20. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • SELECTION • Effective and fair selection practices for the strategic deployment of highly motivated and competent employees are an important vehicle for enterprises to gain a competitive advantage (p. 257). • When selecting employees, HR Practitioners must ensure that all job applicants are treated fairly. • Selection includes strategic tools supporting the business strategy such as screening, the employment interview and psychometric testing. • A successful screening process is one that ensures there is a pool of suitable candidates who have all been treated fairly with regard to their right to equal employment opportunity.

21. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • SELECTION (cont.) • Screening must be done on the basis of inherent job requirements (job description / specifications) to protect individuals against discrimination. • Structured interviews are considered to be fair since each candidate has the same opportunity and interviewer bias is minimised. • Job competency interviewing is essential for HR Practitioners who seek to interview ethically. • When conducting psychometric testing, HR professionals must safeguard the interests of enterprises and candidates by upholding the rights of those tested. • In Sweden employee representatives are present when psychologists’ reports are considered, candidates are informed of their results before they are made available to the hiring organisation and candidates can have their results destroyed should they wish to withdraw their application (p258).

22. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • COMPENSATION • Procedural and distributive justice and the absence of economic and psychological harm are critical factors for compensation strategies to be considered fair, equitable and ethical. • Compensation strategies that are perceived to be fair, equitable and ethical are central to employee motivation and self-esteem.

23. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • PERFORMANCE MANAGEMENT • Performance Management systems are ethically sound if they reflect the principles of respect for the individual, procedural fairness and transparency of decision-making.

24. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • PROMOTION • Fairness is a key ethical issue in managing the promotion of employees. • Promotion should be based on job-related criteria, especially performance, and employees should not be discriminated against on the basis of inappropriate criteria such as gender, race and religion.

25. V) ETHICAL ISSUES AND CHALLENGES IN THE WORKPLACE (cont.) • HRM POLICIES AND PROCEDURES (cont.) • DISCIPLINE AND DISMISSAL • The principles of Just Cause and Due Process are important ethical factors in matters of discipline and dismissal. • Just Cause requires that reasons for discipline or dismissal be directly related to job performance. • Just cause or fair dismissal includes issues of wrongdoing such as theft, bribery, criminal behaviour, inadequate performance following training and support, etc. • Due process is related to the concept of ‘procedural justice’ as they refer to the fairness of the procedures an enterprise uses to discipline employees, e.g., impartial hearings and grievance procedures. • In cases where there is good cause for the dismissal of employees, companies are morally obliged to do so in ways that minimise the economic and psychological effects of dismissal on employees and their families.

26. VI) ETHICAL DECISION MAKING FRAMEWORKS • In this section we attend to ethical competency, which is the ability to engage in ethical reasoning to explore and resolve issues and dilemmas. • Two widely accepted normative theories of ethics, namely teleology and deontology, can be used by HR Practitioners to engage in ethical reasoning.

27. VI) ETHICAL DECISION MAKING FRAMEWORKS (cont.) • Teleology (Consequentialism) • Teleological theory stresses the consequences which result from an action – it is concerned with understanding the consequences of our actions for the common good of all involved (p.263). • The most widely accepted form of consequentialist reasoning is utilitarianism i.e., to decide right and wrong on the basis of the consequences of an action. • Utilitarianism means the right thing to do is that which maximises the greatest good for the greatest number of people. • The greatest good is determined by weighing all the good consequences against all the bad consequences for all those affected by the action directly or indirectly. • Utilitarianism must be distinguished from egoism although both are forms of consequentialism. • Egoism has to do with the right action which is about that which maximises self-interest, e.g. an enterprise appealing only to its need to cut costs. • Utilitarianism requires HR Practitioners to implement policies and practices which produce the greatest benefit for society and not those which produce only the greatest benefit to the enterprise, i.e., it requires consideration of collective as well as individual interests.

28. VI) ETHICAL DECISION MAKING FRAMEWORKS (cont.) • Deontology • Deontology stresses an individual’s duty toward others, rather than consequences – it challenges management to treat everyone with respect and integrity rather than viewing them instrumentally for the collective good (p.265). • The concepts of ‘justice’ and ‘human rights’ are based on deontology.

29. VI) ETHICAL DECISION MAKING FRAMEWORKS (cont.) • Deontology (cont.) • Justice • The notion of justice is often expressed in terms of fairness and equality, while issues involving questions of justice are divided into four categories: distributive, procedural, retributive, and compensatory. • Distributive justice (focussing on outcomes) is concerned with the fair distribution of society’s benefits and burdens through its major institutions which include business and government institutions, e.g., use of cheap labour. • Procedural justice looks at the processes used to make decisions and implement workplace controls, e.g. in relation to selection, compensation, promotion (written performance appraisal standards), dismissal and dispute resolution. • Retributive justice is concerned with the imposition of penalties and punishment upon individuals and enterprises, i.e., the punishment must fit the crime, e.g., misappropriation of bank funds vis-à-vis taking home office supplies for personal use. • Compensatory justice involves compensating people for any harm or loss they have suffered, e.g. affirmative action programmes that attempt to remedy past injustices.

30. VI) ETHICAL DECISION MAKING FRAMEWORKS (cont.) • Deontology (cont.) • Individual rights • To claim a right is to claim that one is entitled to something – employee rights in the workplace include: • The right to a fair wage; • The right not to be dismissed without just cause; • The right to due process; • The right to privacy; • The right to a safe workplace; • The right to be informed of risks and harm; • The right to organise and strike; • The right to free speech; and • The right to equal employment opportunity. • Although some of these rights are non-negotiable, some of them need to be balanced against the rights of employers.

31. VII) THE EMERGING ROLE OF HR PROFESSIONALS IN THE OPERATIONALISATION OF CORPORATE ETHICS PROGRAMMES • HR has a special role to play in the formulation, communication, monitoring and enforcement of an enterprise’s ethics programme – however, responsibility for ethical leadership should cut across all functions and managerial levels.