Items Description of Module

Subject Name Management

Paper Name HUMAN RESOURCE MANAGEMENT
Module Title ETHICAL BEHAVIOUR IN L HUMAN RESOURCE MANAGEMENT
Module ID Module 7
Pre-Requisites Understanding the concept of ethical behaviour
Objectives To study the models, sources, standards of ethical behaviour
Keywords Ethics, Culture, Norms, Standard, Behaviour
 QUADRANT –I

Module : 6; ETHICAL BEHAVIOUR IN HUMAN

RESOURCE MANAGEMENT
1. Learning Outcome
2. Meaning of business ethics
3. A model of ethics
4. Importance of ethics in HRM
5. Sources of business ethics
6. Ethics in HRM
7. Standards for ethical behavior
8. Ethics and the HR manager
Summary

1. Module 1: ETHICAL BEHAVIOUR IN HUMAN RESOURCE MANAGEMENT

2. Learning Outcomes:
After studying this module, you shall be able to
 Know the concept of business ethics
 Understand the importance of ethics in HRM
 Comprehend the sources of business ethics
 Understand the ethics in HRM
 Become aware of the standards of ethical behavior
 Understand the ethics and the HR manager

3. Introduction
Ethics denotes a philosophy dealing with morality differentiates between good and evil in
the universe, right and wrong human actions, and virtuous and non-virtuous
characteristics of people.
Ethics is the field of study that deals with good or not good, right or erroneous, duty with
right conduct and obligation. It is about deciding whether an action is good or bad. If it is
bad what is to done about it. Ethics is a philosophical discipline that describes and
directs moral conduct. Persons in HR make ethical (or unethical) decisions every day.
Do you send the best qualified person, who is a minority to be interviewed knowing that
the person making the selection does not want minorities in the department? Do you
forget to tall a prospect about the dangerous aspects of a certain job? Some ethical
decisions are major and some are minor. But decisions in small matters set a pattern for
the more important decisions. The basic concepts and fundamental principles of decent
human conduct include study of universal values such as the essential equality of all
men and women, human or natural rights, observance of the law of nation, of importance
for health and safety and, increasingly.
4. A Model of Ethics
A model of ethics is presented in Fig.7.1

(Source : R.Wagne Mondy and Shane R.Premaux, Management Concepts,Practices and Skills,
the 7th ed. (Upper Saddle River, NJ,Prentice Hall, 1995), p.91)

Ethics comprises primarily of two relationships- the place from which ethical guidance
comes up and our belief about right or wrong. In case these relationships are strong and
positive a person or an organization is considered to be ethical. A variety of sources
including the conscience, the behavior and advice of the significant others might be used
to determine the right or wrong, good or bad, moral or immoral. Significant others include
our parents, friends, role models and members of churches club and associations. There
are also codes of ethics that proscribe certain behavior.
Laws also give guidance to ethical behavior prohibiting acts that can be especially
harmful to others. Certain behaviors, if they are illegal, majority of persons would
consider it to be unethical as well with certain exceptions. For example, through the
1990s laws in most southern consigned black persons to inferior positions to the backs
of buses and otherwise assigned them inferior status.
The sources of ethical guidance lead us to our beliefs or convictions about right or wrong
and people have a responsibility to take advantage themselves of these sources of
ethical guidance. Individuals should worry about right or wrong and not just be related
with what is proper under the circumstances. The strong point of the relationship
between what an individual or an organization believes to be moral and correct and what
ready for use sources of ethical guidance suggest is morally correct is type I Ethics. For
example, suppose an HR manager believes it is worthy of being accepted to not hire
minorities, in spite of the fact that almost everyone disapproves this practice. This
person is branded as unethical, but perhaps only in a Type I sense.
Similarly having strong beliefs about right and wrong and basing them on the proper
sources may have little relationship to one’s actions.
Fig. 1 illustrates that type II ethics is the strength of the relationship between what one
believes and how one behaves. For example, if an HR manager is being unethical in a
type II sense. If the board of directors considers it wrong to pay unusual salaries to the
CEO, yet pays salaries that are beyond proper limits, this behavior is unethical also.
Commonly, an individual is not thought ethical unless the person owns both kinds of
ethics.
5. Importance of Ethics in HRM
People admit that it is ethics in practice that matters something. All of us desire that
businesses be fair, transparent and beneficial to the society. If the organizations keep
ethics, observe law, engage in fair practices and compete honestly the consumer, the
society and organization will be benefited. Basically the individual, the consumer, the
employee or the society as a whole benefits from ethics. Ethics is important for the
following reasons:

5.1 Satisfaction of Basic Human Needs:

Being fair, honest and ethical is a basic human need. Every employee desires to be
ethical and work for an organization which is fair and ethical in its practices.

5.2 Creating Credibility:

An organization driven by moral values is viewed with respect in the society even by
those who may not have information about the working and the businesses of such
an organization. For example Infosys, is seen as an organization for exemplary
corporate governance and social responsibility initiatives. The understanding is held
widely even by those who do not even know what business the organization is in.

5.3 Uniting People and Leadership: A value drive organization is held high in repute by
its employees who bring the employees and the decision makers on a common
footing. This helps greatly in aligning behaviors within the organization towards
achievement of common goal or mission

5.4 Improving Decision Making: A man’s destiny is the aggregate of all the decisions
taken in his/her course of life. The same is true for organizations. The course of
decisions is directed by values. For example, an organization that does not regard
competition valuable will be wild in its operations directed to eliminate competition
and create a monopoly in the market.

5.5 Long Term Gains: Organizations guided by ethics and values earn profit in the long
run, though in the short run they may seem loss-making. Tata group, one of the
largest business Indian conglomerates was on the verge of decline at the beginning
of 1990’s, but early turned out to be different. Tata NANO car was foretold as a
failure, but the same is recovering fast.

5.6 Securing the Society: Often ethics follows law in protecting the society. The law
machinery is often seen as a silent spectator, lacking the ability to protect the society
and the environment. Technology, for example is growing at such a fast rate that by
the time law brings a regulation a newer technology arrives with new threats
replacing the previous one. Lawyers and public interest litigations are unable help a
great deal but ethics can.

6. Sources of Business Ethics

Primarily culture, religion and laws of the state affect ethics in business. For this reason
uniform or completely similar standards throughout the world are not found. These three
factors influence to varying degrees on humans that finally get reflected in the ethics of
 the organization. For example, ethics Infosys follows is different from Reliance Industries
or Tata group follow on a certain issue. Again ethical procedures vary across different
countries.

6.1 Religion
Religion provides one of the oldest foundations of ethical standards. Religion wields
differing influence across various religions. People believe that ethics is a
manifestation of the divine and so it draws a distinction between the good or the bad
in the society. Depending upon the degree of religious influence there are different
sects of people - orthodox or fundamentalist or as moderate. The extent of influence
religion exerts is to a greater degree among the orthodox than the moderates.
Fundamentally, all the religions operate on the principle of reciprocity towards ones’
fellow beings.

6.2 Culture
Culture consists of norms and values transferred from one generation to another
considered as ideal or within the acceptable limits that predominantly determines
right or wrong and defines certain behavior as acceptable or unacceptable. Human
civilization in fact has passed through various cultures, wherein the moral code was
redrafted depending upon the epoch. What was immoral or unacceptable in one
culture became acceptable later in another culture
During the early periods of human development the strongest survived. Violence,
hostility and ferocity were thus the acceptable norms. When the human civilization
entered the settlement phase, hard work, patience and peace were seen as virtues
which are still practiced by the managers. Further, when human civilization entered
the industrial revolution, the laws pertaining to technology and property rights
replaced the ethics of agrarian economy. Ever since, there has been a tussle
between the norms and values of the agrarian as well as the industrial economy.

6.3 Law
Laws are procedures and code of conduct laid down by the legal system of the state
meant to guide human behavior within the social framework. The major issue with
the law is that the law cannot include all the ethical expectations and specially the
law goes on changing with ever changing environment and often fails to keep pace
with. In business to comply the law is considered as ethical behavior, but
organizations often break laws by evading taxes, compromising on quality and
service norms.

7. Ethics in Human Resource Management

Whenever actions of people affect one another, ethical issues emerge, and there is no
exception in business decisions. Business decisions including decisions about human
resource management need to be ethical. Recent survey demonstrates that the general
public and managers do not possess positive perceptions of the ethical conduct of
businesses. For example, in a Wall Street Journal survey, 4 out of 10 executives
reported they had been suggested to behave in an unethical manner. Many ethical
issues in the workplace involve human resource management
Of all the organizational matters, ethical issues are the most difficult ones to deal with.
Such issues are common in employment, remuneration and benefits, labor relations and
health and safety. Fig.5.1 illustrates the HR ethical issues.

HR Ethical Issues

7.1 Job Design

Job design options consist of work simplification, job rotation, job enlargement, job
enrichment, autonomous and high performance work teams, de-jobbing and job
empowerment. Unethical issues involved are oversimplification of job, jobs that do
not improve from innovative perspective and workers may feel alienated, making
task more boring. Job enrichment appear to be more ethical than other options as it
results in increased motivation, reduced absenteeism and enables the employees to
fulfill their psychological needs. Autonomous work teams increase employees’
participation in decision-making, execution of plans, coordination of tasks and
controlling the implementation process fully and enable the workers to use their skills
and talents to the maximum extent and benefits the organization. Hence, designing
the jobs on the basis of autonomous work teams is ethical. High performance work
design provides complete freedom to the workers and encourages them to be
innovative and creative. Empowerment develops the employee in acquiring skills and
knowledge in addition to enabling him to do the jobs in which he has an aptitude.
De-jobbing environment is more suitable for the competitive markets in checking the
companies from overstaffing in addition to preparing the committed employees. It is
more ethical to design the jobs on the basis of empowerment and de-jobbing as the
organizations under the liberalized and global environment turned more competitive.

7.2 Human Resource Planning

Human resource planning is an integrated approach to perform the planning aspects

of the personnel function to have a sufficient supply of sufficiently developed and
 motivated workforce to perform the duties and tasks, needed to achieve
organizational objectives and satisfy the needs and goals of the individuals. It is
ethical if the human resource manager plans for human resources for the future, so
that the company will have required people with adequately developed skills to carry
out the activities. If not, the act of the human resource management is considered
unethical.

7.3 Recruitment and Selection

Recruitment is the process of looking for prospective employees and encouraging

them to apply for jobs in an organization from the internal members of organization
and external sources. The competition in industry requires highly skilled and talented
candidates. If such candidates are not available internally the company searches for
the candidates from outside. This practice makes the organization to discharge its
duty towards itself rather than towards the existing employees. Such practices
reduce the promotional avenues for the internal candidates. Nevertheless, it should
be more ethical on the part of the organization, if it recruits the internal candidates, if
they meet the organizational requirements after training and development. However,
it would be unethical, if the organization recruits internal candidates, who are not
suitable for the job requirements. Selecting the unsuitable candidates may be due to
recommendations, and, or pressure, and selecting the number of candidates more
than that of required due to pressures. Similarly, adjusting the job specifications
based on the candidate’s qualifications and skills involves ethical dilemma. If the job
specifications are modified to select the candidates due to influence from pressure
groups, it would be treated as an unethical practice. Sometimes money also plays a
dominant role in the selections. Such acts are unethical practices.

7.4 Training and Development

Training imparts knowledge and job skill to an employee performing a particular job.
Implementation of the training function based on the concepts on the part of the
management is coming ethical. But, management and employees at different levels
deviate from the principles including identifying the training needs on the basis of
single factor, selecting the trainees on the preferences of the trainees or influence of
the trade unions, trainees not taking the training program seriously but treating as a
means of entertainment, making the training program less interesting, selecting
trainees on the basis of favoritism and nepotism. These deviations may be called as
unethical practices on the part of both the management and the employees.

7.5 Career Planning and Development

Career planning and development of employees are the responsibilities of both

management and employees. To fulfill one’s own responsibility amounts to ethical
act. Similarly, shrinking from one’s own responsibility is thought unethical.
Employee’s In promotion an employee moves upward in an organization’s hierarchy,
along with enhanced responsibilities, higher status and usually the increased
income. Though the basis of merit-cum-seniority balances the limitations of both
merit and seniority, it cannot completely match the employee skills with the job
specifications. Promoting an employee out of turn not based on merit amounts to
unethical practice. Transfer is the lateral movement within an organization which
 helps the company in meeting its goals is viewed ethical. Similarly, employee
initiated transfers which help the employees to achieve their goals without harming
the company’s interest can be viewed ethical.

7.6 Employee Turnover

Organizations believe that the stability of an employee with one organization

enhances his skills and the organization receives the benefit of increased employee
loyalty and commitment. The loyal and committed employee contributes significantly
to the company. Further, organizations usually prefer employee stability as they
invest in people on their training and development. Employees also believe that the
rolling stone gathers no mass and as such they stay with one organization.

In the new millennium change has become the order of the day. The technologies,
systems and structures are changing at a faster rate, employees choose to join the
fast growing organizations, learn the latest technologies and experience managerial
practices. These shifts help the employees to enhance their knowledge, skills and
add value to their existing human resources. Thus, employees learn new jobs and
organizational knowledge by moving from one organization to another. HR strategies
for retaining the employees for a long period cannot be considered as ethical.

7.7 Wage and Salary Administration

A number of questions come up regarding the ethical issues in the payment of

wage/salary/bonus. It is not ethical to pay equal salary to the employee who
performs least as to one who performs best. Is it ethical to legally compel a loss-
bearing company to pay 8.33 percent bonus? Is it ethical to pay bonus @ 8.33
percent equally to all employees without any consideration of the contribution they
make? These issues appear to be unethical if the survival and development of the
company and the significant contribution of the employee are taken into account.

Such ethical issues need to be addressed specifically in the new millennium and in
the market economy. However, the capitalistic economy ignores the basic human
welfare.

7.8 Employee Rights

HR managers must visualize employees as having basic rights while considering

ethical human resource management. Such a view reflects ethical principles
contained in the constitution of the country. In a moral sphere, every person has
definite fundamental rights including the right of free consent, privacy, freedom of
conscience, freedom of speech.
People have the right to carry out as they desire in their private lives. They have the
right to control they reveal about their private activities. Employees have the right not
to perform the job that infringes their moral faiths, as long as they reflect commonly
recognized norms. A supervisor asking an employee do something unsafe or
environmentally harmful may be violating this right if it is in conflict with the
employee’s values.
 People have the right to criticize ethics of an organization, if they do so in good faith.
If people believe their rights are not protected, they have every right to be heard. A
way to consider about ethics in business is that the morally correct action is the one
that reduces encroachments on and prevents violations of these rights of employees.
Organizations often encounter situations where the rights of employees are affected,
in particular, the right of privacy. Use of computers for record keeping and computer
networks in a great manner increased the ways people can gain access to records of
employees. Records of human resources can be of particular importance. HRM
responsibilities therefore include the every-growing challenge of maintaining
confidentiality.

8. Standards for Ethical Behavior

Ethical, successful companies act in accordance to certain principles.

 Companies lay stress on mutual benefits in their interactions with customers,

vendors and clients.
 Employees take responsibility for the actions of the company.
 Such companies have a sense of purpose or vision those employees’ value and use
in their day-to-day work.
 They emphasize fairness i.e. another persons’ interests count as much as their own
organization.

United Parcel Service has made a commitment to ensure that every employee assumes
responsibility to behave ethically. UPS’s chief executive officers emphasize that
employees who acquire results by breaking laws or perform unethically damage the
company by insidious activities its customer relationships and ability to grow. The
company has developed a set of ethics-related processes and procedures, embodied in
a Code of Business Conduct. All employees must agree to follow the code, which
prescribes the kinds of behavior needed in different business conditions. UPS also hired
a company to provide a hotline to employees who can call if they feel concerned that
ethical standards have been broken. All information hotline receives is moved forward to
UPS’s compliance department for investigation and appropriate action. Managers of
enterprises get assessed on the basis of ethical as well as financial yardsticks. Each
year, managers appraise their employees in terms of ethical issues.

For human resource practices to be ethical, they must fulfill the three basic standards.

o HRM practices must result in the greatest good for the largest.
o Basic human rights of privacy, due process, consent, and free speech are respected
in employment practices.
o Employees and customers are treated equitably and fairly.

These standards are most cumbersome when none of the standards in a situation fulfills
all three of them. For instance, most employers hesitate to get involved in the personal
affairs of employees, and this attitude is in keeping with employees’ right to privacy. But,
when personal matters include domestic violence, employees’ safety may be in
jeopardy, both at home and in the workplace. For Barabara Marlowe of the Boston law
firm Mintz Levin Cohn Ferris Glovsky and Popeo, the choice is clear. Helping employees
 protect themselves does good for employees and also help employees do better on the
job, she says. Mintz Levin set up a group called Employers Against Domestic Violence.
Companies that join the group take measures such as posting the phone number of a
victim help line, allowing employees to keep flexible hours ( to shake off stalkers), and
removing victims’ names from dial-by-name directories (so harassers can’t easily call
and disturb them at work.

9. Ethics and the HR Manager

In recent times there have been several occurrences of corporate scandals where the
role of human resource professionals seemed to have been almost absent. People
believe that HR could have done much more to lessen corporate misdeeds and bring
improvements in the corporate image. People also rely on that it is at present the duty of
the HR professional to assist restore confidence in organizations. In fact one of the core
principles of the SHRM Code of Ethical and Professional Standards in HR Management
states that ‘” As HR professional, we have responsibility for creating value to the
organizations we serve and contribute to the ethical success of those organizations”.
The HR manager nourishes an ethical culture by doing more than just doing the formality
of having the code of conduct. Instead HR professionals must help to infuse ethical
practices into the corporate culture. They should build an environment where employees
everywhere in the organization make efforts to reduce ethical deviance. The ethical
impact of persons in HR does a lot in affirming the trust of the whole organization. A
recent study of companies where employees believe that the HR department is effective,
majority of workers also believe that the organization is trustworthy. However, in
companies where HR was deemed ineffective, employees reported that management
could not be trusted. Definitely, top management must be the point of focus for creating
trust, but HR has an important role to play in keeping trust. Evidently, there has been a
shift involving HR executives. A survey of HR executives found that a majority reported
that they would give a warning over a legal infringement at their company and would
take strong action if they come to know of a transgression of professional or ethical
standards.
HR professionals can exert a significant influence on ethics and therefore corporate
culture in two major areas i.e. corporate governance and executive compensation. HR
should have a critique and compel obedience to organizational governance policies and
implementation to assure that executives adhere to moral and ethical principles and
create an effect on others. All employees should be able to distinguish between ethical
and unethical in their particular area of operation. It is not enough to say that everyone
needs to be ethical. Conversation among employees in different areas should take place
to make them aware of ethics. For example, ethical questions confronting a sales person
is faced with will be different from research or production employee is encountered with.
Another area HR should concentrate on and the HR executives could have the greatest
impact on corporate behavior is executive compensation. If top level HR professionals
know the strategic nature of the organization and know the company thoroughly they can
play a major supporting role in establishing and adjusting compensation for the CEO and
other top manages. It is, therefore, obvious that the current ways of establishing
executive compensation is under close public scrutiny including employees’ stock
options, success to reward equations and equity of severance pay.
HR can ensure that the committee for determining executive compensation has
pertinent, fair and correct information for taking decisions while collaborating with
consultants and management. HR executive must be accepted in their organizations as
capable to contribute to careful strategic considerations. The HR executive can give the
needed direction and information so that informed compensation decisions can be taken.
HR professionals should promote ethical compensation practices in the organization.

Summary

 Ethics is the field of study that deals with good and bad, or right and
wrong, or with moral duty and obligation
 Ethics comprises primarily of two relationships- the place from which
ethical guidance comes up and our belief about right or wrong.
 Basically the individual, the consumer, the employee or the society as a whole
benefits from ethics. Ethics is important for the satisfaction of basic human
needs, creating credibility, uniting people and leadership, improving decision
making, achieving securing the society.
 Culture, religion and laws of the state are the three main sources of ethics.
 Job design, human resource planning, recruitment and selection, training and
development, career planning and development, employee turnover, wage and
salary administration and employee rights are the ethical issues in human
resource management.
 HR professionals can exert a significant influence on ethics and therefore
corporate culture in two major areas i.e. corporate governance and executive
compensation