Introduction Welcome to Week 4: Ethics, Diversity, and Inclusion. This week, you will read the following topics: Topic 5: Ethics Topic 6: Developing a Culture of Inclusion This week’s readings will delve into the role of HR in organizational ethics, the situations that create a conflict of interest, and the requirements of the SarbanesOxley Act. You will learn the importance of an organization code of ethics and the elements of an effective ethics training program. Then the text will outline the steps for developing a culture of inclusion. You will read about various diversity and inclusion initiatives and the benefits of promoting diversity and inclusion in an organization. 5.1Learning Objectives: Ethics This video can be viewed online. Ethics (00:41) This download can be found online. LEARNING OBJECTIVES Explain the inducements-contributions balance. 1 Describe the role of HR in an organization with regard to ethics. 2 Describe situations that would be considered a conflict of interest. 3 Explain the requirements of the Sarbanes-Oxley Act. 4 Explain the importance of an organizational code of ethics. 5 Describe an effective ethics training program. 6 Explain how to use systems and policies to encourage ethical behavior. 7 5.2Defining Morality Although morality is a complex concept, it can be simply defined in terms of both means and ends—by the consequences of those processes. Moral actions are basically just and fair; they respect the autonomy and dignity of people, and they are perceived by rational people as being right and proper. If a process is dishonest or unfair, it is immoral. But fair does not mean equal. Compensation, for example, can be distributed unequally and still be fair if it is based on reasonable criteria, such as performance or seniority. This definition of morality, called deontology, is based on the fundamental fairness of an action or the means used to achieve the result. In terms of consequences, morality is defined as that which helps people and makes their lives better. Actions are moral if they contribute to the social, emotional, and intellectual development of people. Actions are immoral if they unnecessarily harm people. Behavior that hurts people, behavior that contributes to mental, emotional, or physical distress, and behavior that disrupts the general welfare is immoral (unless it contributes to an important higher good as determined by a higher-level moral analysis). This definition of morality, called teleology, focuses on the end state or consequences of an action. The foundation for deciding whether human resource practices are fair and just is based on an examination of the relationship between the person and the organization. Human resource management serves both the organization and the individual. The organization is expected to treat people morally, while employees have duties of loyalty, obedience, and confidentiality, which are called “role morality.” Role Morality 1 Employment Exchange When people decide to work for an organization, they enter into a voluntary agreement called an employment exchange: they agree to work in exchange for the wages, benefits, and other rewards the employer provides. The voluntary nature of this employment exchange and the expectations of each party serve as the foundation for evaluating the morality of human resource activities and other management actions. An employment exchange occurs when individuals are willing to trade their labor for rewards and when an organization is willing to exchange rewards for labor. In this employment exchange, called an inducements-contributions balance, the inducements individuals receive for working must be balanced with the contributions they make to the organization. Inducements are the rewards people receive from working, especially wages, salaries, and benefits. Contributions are the things individuals offer the organization, such as effort, skill, knowledge, and ideas. A state of equilibrium, or balance, is achieved if the inducements are essentially equal to the contributions. Inducements-Contributions Balance 2 5.3Ethical Issues This video can be viewed online. Ethical Issues (00:50) This download can be found online. Human resource managers are expected to monitor the ethical practices in their companies and protect the interests of employees. Many organizational practices can harm employees, such as divulging personal information, conflicts of interest, payoffs, and bribes. HR managers often play a central role in creating a code of ethics and ethics centers to protect employees. The prevalence of technology allows employers to monitor the performance of employees and collect extensive performance data. Some companies monitor the telephone calls with customers to determine the quality of customer service provided by employees and then use this information to implement incentive programs to motivate employees. Monitoring through video display terminals (VDTs) enables employers to know how many tasks are completed by each employee, the amount of time spent on each task, the time spent between tasks, and the time each employee spent away from the terminal. Some groups, including some labor unions and labor associations, are opposed to electronic monitoring. They claim that monitoring violates the employees’ rights of privacy and creates stressful working conditions that can lead to health problems. Human resource managers and executives defend the practice of monitoring because it helps to ensure that employees are doing an adequate job and the information provides valuable performance data. Groups opposed to monitoring have asked Congress to pass regulations to protect employees, such as requiring an audible beep whenever a call is being monitored. The central ethical issue is not whether electronic monitors should be used to measure performance, but how the information will be used. Excessive pressure in the form of sizable rewards or punishments that are tied to performance measures could be physically and mentally harmful to workers whose Privacy in the Workplace 1 performance is closely monitored. But it could be beneficial if it is used informally to coach and encourage workers. Personnel testing has also been criticized as a wanton invasion of an individual’s private thoughts. Some personality tests have been challenged in court because they contain items that ask extremely sensitive questions about religious beliefs or sexual orientations. In one case, applicants for a job as store security officer won a court injunction against these tests because they were an invasion of privacy and not job related. Interviews and application blanks also threaten the privacy of the individual when they request information about an applicant’s private life. Throughout the employment process, both the applicant and the interviewer are engaged in a process of mutual assessment, and therefore, the possibility of an invasion of privacy is always present. However, there is a general rule governing this situation: it is a clear invasion of privacy for an applicant to be asked to reveal details of thought or emotion that are not relevant to performance on the job. Ethically, personnel tests and interviews should not be used to satisfy the curiosity of a personnel specialist; they should only be used to make predictions about future performance. Embarrassing questions and personal inquiries into a person’s private life that are not relevant to job performance should not be included in interviews or on personnel tests. A conflict of interest is defined as a situation where a person who has a responsibility to act in the best interests of a company may receive direct personal benefit from his or her actions at the expense of or to the detriment of the company. The following are examples of conflict of interest situations. 2 Conflicts of Interest Engaging, during one’s working hours, in non-company business activities that are not part of one’s assigned duties. However, consulting and other professional activities may be appropriate in some organizations, such as universities and research institutes, when they are properly approved. Using company personnel or company-owned facilities, equipment, supplies, or vehicles for personal financial gain. Using one’s employment status with a company to inappropriately further a personal interest. Divulging improper information or interfering with the contracting, bidding, or negotiating process being conducted by vendors or company employees. Exerting influence on, or being a part of, any business transaction involving the company from which a relative or family member could receive benefit or gain of any kind. Forming business relationships or obligations that compromise one’s objectivity when performing assigned duties. Traveling at vendor expense or accepting gifts, services, or favors from those doing business with the company. Accepting items of nominal value may be appropriate when reasonable conditions dictate, such as accepting refreshments during a break on a vendor’s premises. Conflict of interest situations are inherent in every organization–employee relationship, except possibly for those who operate their own companies. Some conflict situations are customary and acceptable when they are not excessive, such as receiving phone calls from family members during work hours. Other conflicts of interest are serious and should be totally avoided or tolerated only with full disclosure and impartial monitoring. To prevent conflict of interest problems, companies require employees to read and sign disclosure statements. An effective disclosure policy helps to prevent 3 situations where employees become involved in activities that could compromise, or appear to compromise, their ability to perform their duties or to make decisions that are in the best interests of the company. In some situations, however, disclosures are not adequate. When the conflict of interest involves a subtle interpersonal relationship, such as the case of a realtor helping a buyer or a dentist advising a patient, disclosing the conflict of interest has the perverse effect of increasing one’s confidence in the biased information rather than questioning it. When advisors admit that they have a conflict of interest, others seem to think that “Since they are being honest with me, I should trust what they say.” Along with the benefits of technological advances come a host of problems, including ethical questions about the proper use of technology in the workplace. Human resource managers grapple with how to best utilize the available technology to increase the efficiency of work processes and improve the quality of work life for employees, while at the same time limiting the negative and unproductive uses of technology. Access to the internet is ubiquitous; it is available at individual workstations, on desktop and laptop computers, via company provided Wi-Fi, and on individuals’ mobile devices. While much of the useful work employees do involves the internet, there is also tremendous potential for abuse. Pornography on the internet is an obvious ethical problem that is almost universally condemned at work, but other issues are not as clear. Should employees be allowed to use work time to shop online, follow NCAA tournaments, send or receive personal email messages, play fantasy sports, make travel arrangements, play online games, access social media, or search for another job? Cell phones present additional potential ethical issues, including making personal calls during work, using cell4 Ethics of Technology phone cameras inappropriately, sending personal text messages, or updating social media. Electronic communication can be rapid and efficient, but it also has the potential for unethical side effects, including a lack of civility that seems to result from the anonymity of electronic communication, the capability of sending or receiving inappropriate or offensive messages, and the bullying and harassment that can occur through digital messages. As a general rule, the availability and use of technology does nothing to change the morality of how information is used; unethical behavior is still unethical whether it concerns posting an obscene picture on a bulletin board or sending it via email. Hacking into a computer is comparable to breaking into someone’s office. Sending demeaning messages via text or social media is the same as saying disparaging comments directly to a person’s face. The medium is different, but the result is the same. Social norms regarding the appropriate use of technological devices are still evolving. Consequently, some employees fail to see the ethical issues involved with misusing technology and wasting time on the job. One survey shows that 24 percent of employees say they spend at least an hour each day at work using technology for personal activities. Fifty percent of respondents admit to using their mobile phone for personal calls and texting during work. Thirty-nine percent say they spend time on the internet, 38 percent use social media, and 23 percent waste time on email. Employers who want to control the misuse of technology need to establish clear standards regarding what is acceptable and to inform employees about these expectations. Making employees aware of the company’s policies regarding technology misuse is an important role for HR managers. Court decisions and arbitrator rulings have quite consistently upheld the right of employers to set and enforce strict guidelines regulating the use of email and the internet provided 5 that they have established clear standards and fairly enforced them according to their normal disciplinary procedures. Employees need to also know what their companies are already doing to monitor their behavior. Surveys indicate that about three out of four companies regularly track which websites their employees visit and more than half use surveillance software to scour office email for hot-button keywords like sex in the subject line or body of messages. More than a third of companies monitor how much time workers spend at the computer by recording their keystrokes or logging their downloads. One in four companies reports firing someone for improper email use. In addition, most employers have a large quantity of electronic data regarding their employees stored on company computers and in the cloud. While this technology makes dealing with many human resource issues more efficient, it also creates ethical questions regarding the proper use of this information. Some organizations collect additional data about their employees through the use of biometric access devices and wearable fitness and movement trackers. Employers need to have clear policies regarding the privacy of employee information, where this information is stored, how it is used, how it is protected, and with whom it is shared. Most of the gifts exchanged in business settings are intended to influence or manipulate others. Numerous labels are attached to this behavior including advertising, marketing, bribes, payoffs, payola, extortion, and influence peddling. Gifts that are given for manipulative reasons may or may not be immoral. When recipients act for themselves, such as purchasing products for their own personal use after accepting a free sample, the gift giving is viewed as an effective marketing strategy. But when the recipient represents an organization and has a responsibility to make objective decisions, accepting a 6 7 Bribes, Payoffs, and Kickbacks personal gift is wrong. Likewise, it is wrong to give gifts that place recipients in a position where they feel pressured to act favorably toward the giver in decisions that should be objectively decided. Gift giving is immoral when it amounts to extortion or influence buying. Anytime a person who is expected to render an impartial decision accepts anything of value from an involved party, it is unrealistic to expect that person to be truly objective. Even when the gift is small, one’s objectivity may be compromised by several factors, especially the expectation of additional gifts in the future. In international transactions, bribes, payoffs, and kickbacks are often justified as an accepted cultural practice. Managers often feel justified paying bribes to foreign government officials as a way to receive faster service or to obtain necessary licenses or approvals. These payments are often called çfacilitating payments” or √service fees” rather than bribes or payoffs. Regardless of what they are called, they still violate generally accepted moral criteria, according to the definition of morality described earlier. Bribes and payoffs are also illegal according to the U.S. Foreign Corrupt Practices Act of 1977, and they contribute to distrust of government officials and political instability in the countries where such practices occur. Whistle blowing consists of informing people outside the company about corporate misconduct. Because of the embarrassment that typically accompanies whistle blowing, it is considered a highly controversial act. On one hand, whistle blowers are praised for their courage to stand up for what they think is right and defend society from corporate misdeeds. On the other hand, they are criticized for being disloyal to the company and failing to work cooperatively within the Whistle Blowing normal complaint procedure to correct the problems. Whistle blowers are usually forced to leave a company as a result of their disclosures. Even if they are not forced to leave, and even if their disclosure was for the good of society, they generally have to find new employment. Their relationship with the company is so seriously damaged by their efforts to publicize the wrongdoing that continuing to work in the same environment is far too unpleasant. Whistle blowers often experience other adverse consequences in their personal lives, such divorce, family conflicts, severe stress, and other health problems. Researchers who interviewed whistle blowers in the healthcare industry concluded that the prevailing sentiment was that the payoff had not been worth the cost. Multiple federal laws have been passed to protect the rights of employees who report wrongdoing. In addition, most states have some type of whistle-blower protection, such as false claims acts and statutory or common-law protections. Most of the federal laws protect employees in specific industries, such as the Aviation Investment and Reform Act (2000), which protects whistle blowers in the airline industry, and the Patient Protection and Affordable Care Act (2009), which protects whistle blowers in the healthcare industry. Most of these laws only offer whistle blowers reinstatement and back pay if they are terminated; however, some laws provide financial rewards for reporting fraud, including the Dodd-Frank Act, the False Claims Act, and an IRS statute. Sizeable bounties for helping the government recover stolen money, in some cases exceeding a million dollars, have been highly effective in motivating people to report wrongdoing. Although large bounties may discourage employees from reporting misconduct internally, the SEC has issued a rule that encourages whistle blowers to first report misconduct internally without compromising their ability to receive an award. As long as employees provide the same information to the SEC within 8 9 120 days, the employees retain the possibility of receiving an award from the SEC. Surveys indicate that over ninety percent of employees initially try to correct problems by reporting them internally to supervisors, higher management, or other responsible people; only four percent went outside the organization. These surveys suggest that companies need to encourage employees to report errors and make certain that people listen to their complaints. Companies that have a culture of integrity tend to encourage employees to report misconduct without fear of retaliation. Organizations make a serious mistake when they retaliate against whistle blowers even though managers find it very difficult to continue treating them as if nothing had happened. Some of the most common forms of retaliation against whistle blowers are excluding them from decisions, failing to keep them informed, changing their work assignments, giving them the cold shoulder, verbally abusing them, failing to promote them or to give them raises, relocating or reassigning them, and demoting them. Even small things, such as not inviting someone who has criticized the company to go with the group to lunch, can be perceived as retaliation and lead to legal charges. Organizational conduct is considered immoral anytime it involves dishonest or deceptive practices. Elements of deceit have occurred so often in advertising commercials, however, that they are not actually considered dishonest unless they exceed what is considered the “customary hyperbole.” Nevertheless, false and misleading advertising is deceptive and deceitful even though it is commonplace. Deceit can also be found in communications with employees and the general public about product quality, environmental pollution, compliance with agency regulations, and vendor relations. 10 Deceptive Practices Immoral behavior can be the result of individuals abusing the organization or of the organization abusing individuals. This abuse may be intentional (on either side), but it also may occur by happenstance. Abusive actions toward an organization may take the form of employee theft or fraud. Abuse occurs when employees are paid for work that is not performed, such as loafing on the job, coming late to work, taking extra personal time or lengthy breaks, abusing sick leave, and performing careless or sloppy work. Employees often get away with these types of careless performance because of poor supervision or because the organization has not developed adequate human resource procedures for evaluating and correcting such problems. On the other side, organizations abuse their employees when they are guilty of wage theft. Low-wage workers are particularly vulnerable to not being paid for all of the work they perform. Some of the common wage theft offenses involve failing to record all of the hours employees work, making unfair wage deductions for damages, paying insufficient overtime, failing to include bonus pay in overtime calculations, misclassifying workers as exempt instead of nonexempt, and misclassifying workers as independent contractors to avoid overtime pay. Employees who work off-the-clock by answering emails or completing job-related projects should be paid for this as time worked; however, it has been suggested that millions of workers are not getting paid what they deserve. As a general rule, the consequences of abuse are much more harmful for individuals than for organizations. Organizations also have the power to abuse people. In power struggles over wages, benefits, and working conditions, the Forms of Organizational Abuse: Unintentional Injury to Employees 11 12 odds are clearly on the side of the organization. Although discontented individuals are free to leave an organization, the consequences of termination are clearly more costly to the individual than to the organization. The loss of a job to an employee is more catastrophic than the loss of an employee to an organization. Most employers can legally dismiss employees for good reasons, for bad reasons, or even for immoral reasons. Although the Bill of Rights guarantees freedom of speech, this right is sometimes constrained by company regulations that prohibit employees from complaining to people outside the company. Employees who violate these regulations can be fired, even if their criticisms are legitimate. The rights of privacy and security guaranteed by the Bill of Rights are often not extended to employees at work. Although employees’ homes are protected from arbitrary search and seizure, their lockers, desks, and files at work can be inspected without a search warrant. In some situations employees are faced with moral dilemmas because their jobs require them to perform unethical or illegal acts, such as falsifying safety reports, hiding toxic wastes, and destroying internal memos that show evidence of corporate misconduct. Even relatively minor episodes—such as a secretary having to tell people that a manager is out when the manager is really in—can create an uncomfortable situation for the secretary, who may feel forced to compromise his or her personal integrity. Organizational abuse may also be unintentional. Organizations do not have a heart, a soul, or memory, and the devotion and sacrifices of employees under one administration may be ignored and forgotten by new leaders. An emotionally hazardous situation occurs when employees transfer 13 responsibility for their actions and decisions to the organization. For example, employees in large and powerful organizations are sometimes seduced into believing that the organization’s goals are inherently right, that “someone” in top management is looking after them, and that they should just quietly serve the organization. As employees respond to real or imagined job pressures, marriages are broken, family relationships are destroyed, physical health deteriorates, and emotional health is threatened. Although human resource activities are expected to help people, sometimes they unintentionally create harm, such as 1. when job assignments create either too much or too little stimulation and workers suffer from either mind-numbing boredom or excessive stress 2. when career development programs cause people to forget that they need to manage their own careers 3. when a promotion disrupts family stability or a spouse’s career 4. when performance evaluations destroy the self-esteem of average performers who are sincerely trying 5. when employees who thought they had job guarantees are terminated 6. when the private lives of employees are exposed during a background investigation or as part of an employee assistance program A partial solution to organizational abuse is to change the human resource policies and programs of organizations in order to eliminate improper and unfair treatment. But more practically, individuals should be taught how to protect themselves from organizational influences. While human resource practices can be improved to make them safer for people, the major efforts of human resource managers should be directed toward helping people learn to protect themselves from both intentional and unintentional organizational abuse. Protecting employees and helping them grow and achieve fulfillment is a basic ethical 14 concern in human resource management. 5.4Establishing Ethical Behavior in the Organization In an effort to restore investor confidence following a series of massive corporate frauds, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) of 2002. This law requires publicly traded companies and their independent auditors to demonstrate to the Securities and Exchange Commission that their numbers are accurate and that they have processes in place to ensure accurate reporting. Although the focus of this law is to ensure the accuracy of a company’s financial reports, it also has a significant impact on human resource functions. And, although it only applies to publicly traded companies, its standards for collecting and reporting data serve as a model for other companies. Titles III and IV of SOX contain several sections that have important implications for human resource activities in these firms. Section 301: Requires the board of directors audit committee to establish and maintain a complaint system and an anti-retaliation statement that need to be communicated to employees and other interested parties, such as former employees and customers. Section 306: Contains two provisions related to blackout periods: one that prohibits insider trading, and another that requires at least 30 days advance notice to employees of blackout periods. A blackout period refers to a temporary time when stock trading is suspended, usually due to a change in benefits providers. This section owes its origin to the inability of Enron employees to sell their company stock during the time it was plummeting due to a blackout period as that company was changing benefits providers. Sarbanes-Oxley Act, 2002 1 Section 402: Bans personal loans to members of the board of directors and executive officers, including company presidents and vice presidents of principal business units, divisions, or functions such as sales, finance, and administration. This ban includes loans for home purchases or college tuition, loans to exercise stock options, and loans for split-dollar life insurance policies. The ban does not apply to loans from an executive’s 401(k) account or business travel advances. Section 404: Requires each annual report to contain an internal control report, “which shall– (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (2) contain an assessment . . . of the effectiveness of the internal control structure and procedures” for financial reporting. Section 406: Requires firms to have a code of ethics for their executive officers that is designed to deter fraud and promote financial integrity. The code of ethics should endorse honest and ethical conduct, the avoidance of conflicts of interest, the full and accurate disclosure of financial reports and documents, and compliance with all applicable laws and regulations. Section 806: Protects whistle blowers from retaliation when they reveal information about unethical or wrongful actions that they sincerely believe could have a negative effect on the company’s share value to an appropriate company official, government agency, or member of Congress (but not the press). Even though section 404 is one of the shortest sections in the act, human resource practices are generally impacted more by this section’s internal control requirements than any other section. In addition to the obvious need for sound financial controls, companies also need to establish internal controls for pay, benefits, and operations. Controls for payroll might include validation and reconciliation of proper payroll amounts, proper approvals for new hires and wage increases to spot potential fraud, verification of accurate timekeeping, and verification that payroll records are current and properly reported. Benefits controls might include verification that employee benefits contributions are accurate, review of workers’ compensation claims, verification that stock options are accurately calculated and disclosed, and validation of pension expense accruals and liabilities. Controls for operations might include verification that new employees are adequately screened to avoid hiring risks, review of the propriety and consistency of employee termination processes, and a review of whistle blowing complaints. Section 404 does not prescribe specific internal control systems; consequently, companies have informally developed a collection of best practice benchmarks known as COSO standards. Many companies have utilized the services of outside vendors to help them establish internet-based systems to verify their internal controls. These systems are generally more sophisticated and more difficult to subvert than informal internally-developed systems, but they are also more bureaucratic and slow. For organizations to have a positive influence on the morality of their members, they need to have clear moral standards. People are more inclined to develop an internalized commitment to moral behaviors when such actions are endorsed by the organization. One of the best ways to establish an ethical climate is to develop a written code of ethics. The benefit of a code of ethics depends on what it contains and how it is developed. A code of ethics should identify the values that members of the organization, and especially its leaders, consider to be important. These are the values that are shared by members of the organization and recognized by people outside the company. They provide an understanding of what is valuable and important and 2 3 Organizational Code of Ethics how the organization relates to its stakeholders. They are derived from a foundation of moral reasoning, and they ought to contain the goals, norms, and beliefs that most people agree are right and fair. Organizational values cannot be stated in absolute terms that are precise, exact, and complete. A code of ethics needs to be stated in general terms that can be applied to many specific situations as they arise. Consequently, precise measures cannot be used to show how well the organization is adhering to its code of ethics. How a code of ethics is developed is usually more important than what it contains. The way it is developed often determines whether members will be aware of it and committed to following it. The best procedure for developing a code of ethics is to involve the maximum number of members in its development. Members ought to be asked to provide illustrations of the kinds of moral dilemmas and ethical challenges they face in their normal working day. These illustrations can serve as the basis for an outline of a code. A good code of ethics should provide general guidance that helps members respond to actual daily challenges. After the code of ethics is written, members ought to be asked to read it and sign it. Their signature should signify that they have read it and that they agree to abide by it. A code of ethics that is strongly endorsed by leaders and widely disseminated through the organization becomes part of the organization’s culture. To the extent that it is widely recognized, it can be expected to influence the thinking and actions of members. The value of a code of ethics has been especially demonstrated during times of turmoil and emergency. In a crisis, members are required to make quick decisions without having time to coordinate their decisions or obtain approval from top leaders. If they understand the culture of the organization as expressed by a code of ethics, this understanding can serve as a foundation for making good decisions. The code of ethics provides a foundation for many members to simultaneously make moral decisions that benefit the organization and its stakeholders. Any profession should have a code of ethics defining the moral conduct of its members. A code of ethics is especially important for the human resource profession since it focuses on how people are treated on the job. People expect to be treated fairly and with dignity and respect. Individuals do not exist solely to serve organizations; organizations are created for the benefit of people. Many professional associations, including the Society for Human Resource Management and the American Society for Training and Development, have developed formal codes of ethics to help their members make moral decisions. Behavior that violates a written code of ethics is considered unethical. Behavior may also be considered unethical if it violates a general social standard of morality, even if it is not specifically forbidden by a code of ethics. Although some ethicists make a distinction between immoral and unethical behavior, most people think certain immoral behaviors, such as lying and stealing, are so generally condemned that they are also considered unethical. In an effort to improve the ethical conduct of employees, many companies have established ethics centers that offer a variety of services. Some provide a hotline for reporting violations of the company’s code of ethics. Experience has found that hotlines are not used very frequently, but they are nice to have for the few times they are needed. Ethics Training Programs The greatest benefit of an ethics center is that it provides a designated place for people to call when they face a moral dilemma and want advice. Often, people simply need to talk through their dilemmas and confirm their initial feelings. Occasionally, employees are required to do something unethical, and they contact the ethics center for advice on how to resolve the problem. Some companies also sponsor ethics training courses. The value of ethics training programs has not been very impressive. Most programs are either case discussions or presentations about ethics, and neither is very effective in increasing ethical conduct. Knowing about ethical principles does not directly cause people to internalize a commitment to behave more ethically. Most case discussions also fail to stimulate a personal commitment. Case discussions are usually interesting for the participants, and they often teach valuable standards of behavior, especially when they relate to the specific issues the participants face. But case discussions may or may not lead to a greater commitment to behave morally. Case discussions can actually decrease moral commitment when they simply teach more sophisticated justifications for doing what the person already wants to do. Effective ethics training needs to teach correct principles of ethical behavior and help participants internalize a commitment to follow them. This involves presenting ideas to them, allowing them to think about them and discuss them with their peers, and then decide to follow them. This is facilitated by a conducive moral climate and the communication of clear organizational expectations. The idea that corporations should be involved in programs that contribute to the 4 Corporate Social Responsibility well-being of its stakeholders, such as helping the poor, improving the environment, and contributing to charities, is called corporate social responsibility. Corporate social responsibility (CSR) is not a new concept; questions about the propriety of diverting corporate profits into social causes were frequently raised throughout the industrial revolution. The development of human resource management as a profession has often been attributed to the growth of corporate social responsibility. As corporate leaders realized that profit maximization was not their only objective, increasing concern was shown to employee issues such as the need to improve wages and benefits, to maintain better standards of health and safety for workers, and to adopt more familyfriendly work schedules. HR professionals are increasingly responsible for implementing CSR programs in their organization even though they are less likely to be involved in creating the programs or developing the overall CSR strategy for their companies. For many years it was generally assumed that corporate social responsibility was a cost to the company; money that was used for social services and employee benefits reduced the profits of the company. While donating to social causes is one form of corporate social responsibility, many companies have found creative ways to pursue socially responsible activities while at the same time pursuing their competitive advantage. Some examples are car companies that have engineered energy efficient cars that reduce harmful emissions and cell-phone companies that have made mobile communications available to developing nations while opening potentially vast new customer markets in the process. The key idea is that corporations cannot pursue sustainable environmental and social initiatives without being economically sustainable; like balancing a threelegged stool of people, profits, and the planet—without one leg the rest fail. For many years, managers and human resource professionals have debated the relationship between ethics and profits; do companies that do the “right thing” 5 6 7 suffer a loss in profits relative to companies that cut corners and engage in unethical behaviors? On a societal level, there appears to be good reason to question the importance of ethical conduct; while the number of formal ethics programs and ethical training has increased, there has been an increase in observed misconduct and a decline in reporting it. Until recently, there has been little research on the possible link between ethical behavior and superior financial results. Gradually, however, the evidence of a positive relationship is mounting along with explanations of the reasons why. One study reviewed 80 studies that examined the relationship between corporate social responsibility (inclusive of ethics) and profits and found that 42 demonstrated a positive impact, 19 found no link, 15 produced mixed results, and only four showed a negative impact. Another study examined the persistent myth that the financial performance of ethical companies lags behind traditional investment benchmarks. This study showed even more convincing evidence that, to the contrary, responsible corporations generate significantly larger long-term wealth (two to four times more) for their shareholders than the mean for the remaining S&P 500 corporations. A study in England examined between 41 and 86 companies from the FTSE 350 with data for a four-year period and showed that companies with a clear commitment to ethical conduct outperformed those that did not have that commitment on measures of both economic value added and market value added. Furthermore, on price/earning ratio, the more ethical companies showed far less volatility than the remainder. The Caux Round Table is an international organization of experienced senior business executives aiming to promote ethical business practices and a principled approach to global capitalism. In an effort to encourage corporate social responsibility, they promote these Principles for Responsible Business. Principle 1 – Respect Stakeholders Beyond Shareholders. This includes 8 9 10 11 12 contributing value to society and respecting the interests of all stakeholders, including customers, employees, suppliers, competitors, and the broader community. Principle 2 – Contribute To Economic, Social, And Environmental Development. This includes contributing to communities in which the organization operates and enhancing society through effective and prudent use of resources, free and fair competition, and innovation in technology and business practices. Principle 3 – Build Trust By Going Beyond The Letter Of The Law. This includes adhering to the spirit and intent behind the law, as well as the letter of the law, operating with candor, truthfulness, and transparency, and keeping its promises. Principle 4 – Respect Rules And Conventions. This includes respecting the local cultures and traditions in the communities in which it operates, and obeying all applicable national and international laws, regulations, and conventions. Principle 5 – Support Responsible Globalization. This includes supporting open and fair multilateral trade and supporting reform of domestic rules and regulations where they unreasonably hinder global commerce. Principle 6 – Respect The Environment. This includes protecting and improving the environment, avoiding wasteful use of resources, and ensuring that its operations comply with the best environmental management practices. Principle 7 – Avoid Illicit Activities. This includes refusing to participate in or condone corrupt practices, bribery, money laundering, or other illicit activities. The Caux Round Table also provides Guidelines For Management and Employees based on the informing values for Caux Round Table principles and management guidelines : Human Dignity, Kyosei, and Stewardship. The standard of Human Dignity encourages managers to support aspects of employee well-being that go beyond financial compensation. Examples include objective conditions of work (respect, freedom from coercion and harassment) stability and security (stable employment, assistance with finding alternative employment where economically necessary, retirement planning) The standard of Kyosei (a Japanese word that means “living and working together for the common good”) encourages managers and employees to recognize their shared responsibility to contribute to the organization’s success. Examples include opportunity for personal development (training, skill development) compensation (both financial and non-financial) transparent communication (performance reviews) The standard of Stewardship encourages organizations to seek finance and market opportunities that promote social well-being. Examples include productivity (necessity of work for social ends; sustainable financial performance) mission and vision (organizational purpose that tangibly promotes social well-being) 13 Practices, Policies, and Systems to Support and Encourage Ethical Behavior Organizational leaders need to review all of the organization’s policies and programs to make certain they are not injuring people or creating unintended pressures on members to act immorally. Policies and programs should be designed so people are rewarded for acting morally rather than immorally. Leaders share the responsibility for the immoral conduct of members who are following orders or responding to the conditions created by their leaders. Leaders should conduct a thorough review of the organization and ask difficult questions to assess the organization’s influence. Company Culture: The ethical conduct of all employees is strongly influenced by the culture of an organization. Companies are more likely to have a culture of integrity when they encourage employees to report misconduct and make it comfortable for them to do so, and when company officials demonstrate by their own behavior that unethical behavior is unacceptable. A survey of about 500,000 employees in more than 85 countries by The Corporate Executive Board, found that companies with weak ethical cultures experience ten times more misconduct than companies with strong ethical cultures. Ethical cultures also contribute to the bottom line; companies whose leaders strongly encourage open communication deliver higher shareholder returns that average five percent higher than their competitor’s returns. Internal Controls: Companies that have a good system of internal financial controls reduce the temptations for employees to steal from the company, whereas careless controls tend to induce employees to be dishonest. Internal controls, however, can always be circumvented by employees. Therefore, companies should have good internal controls, but they should not depend on them to prevent all fraud. Ethics Audit: To reduce the probability of ethical lapses, some organizations conduct ethics audits on either a regular or as-needed basis. These audits are 14 typically conducted by an ethics committee consisting of the top legal, finance, human resource, and operational executives. HR executives frequently chair these committees since HR is often viewed as the exemplar of the company’s ethical standards. Ethics audits, like financial audits, involve interviews with employees and managers, reviews of records and other information, and observations of the company’s processes and practices. A typical audit examines issues regarding conflicts of interest, access to company information, bidding and award practices, giving and receiving gifts, and employee discrimination. Programs: Are the various programs and activities in the organization intended to produce a meaningful and ethical product or service for society? Does the organization merit the loyalties of its members? Do the products benefit society? Are the programs worthy of the time and effort employees are required to devote to them? Budgets: Are the budgets realistic or do they create excessive pressure for departments and employees to achieve results that are beyond their control? Resource allocations: Are resources allocated fairly within the organization so that people have an equitable opportunity to demonstrate their performance? Are the resource requirements justified and renewable, or are they extravagant and wasteful? Are the by-products safe or hazardous? Performance evaluations: Are performance expectations realistic? Are people evaluated for ethical behavior or only for achieving results at any cost? Pay incentives: Are the rewards for achieving results so great that they encourage employees to make unethical decisions? Are employees seduced into immoral conduct by the offer of large financial gains? Promotion standards: When promotion decisions are made, how important is the candidate’s reputation for ethical behavior? Are people recognized for their moral conduct as much as for their financial success? Organizational stories: What kinds of stories are told about people who have acted unethically? Are they praised or condemned? Does wrongdoing ever get rewarded? What happens when someone acts immorally? Topic 5 Quick Check This assessment can be taken online. 6.1Learning Objectives This video can be viewed online. Developing a Culture of Inclusion (00:37) This download can be found online. LEARNING OBJECTIVES: DEVELOPING A CULTURE OF INCLUSION According to a recent study, organizational goals for diversity, which are often established in response to claims of discrimination or as part of an affirmative action program, can actually be destructive to the very individuals these goals are intended to help. Diversity programs seek to improve the representation of groups that are currently underrepresented in the organization. The programs may include training opportunities, targeted recruiting, and preferential treatment for these groups. While these programs may improve the representation of women and minorities in the organization, they can also have unintended consequences. Other employees may infer that women and minorities are less Explain the steps for creating and carrying out a diversity and inclusion initiative. 1 List and describe the various diversity and inclusion initiatives. 2 Describe the benefits of promoting diversity and inclusion in an organization. 3 1 qualified for positions that they hold and that they represent unfair competition for positions and promotions. As a result, minorities and women may feel excluded, disliked, or unwanted. In the absence of a culture of inclusion, employee groups targeted by diversity initiatives may fail to fully integrate into the organization, which can prove counterproductive. Studies show that when diversity is sought for the sake of diversity, with no regard for inclusion, companies have lower revenue, lower performance, poorer employee morale, increased conflict, and higher levels of absenteeism. But when diversity initiatives are combined with a culture of inclusion, diversity leads to higher performance, lower absenteeism, better customer satisfaction, and higher levels of innovation. That said, inclusion is often a difficult goal. While diversity, or the lack thereof, can be measured, and deficiencies can be addressed by policy changes at a departmental or organizational level, a culture of inclusion is difficult to quantify and often requires changes in individual attitudes and behaviors. Many diversity initiatives include training that focuses on teaching employees to avoid overt discrimination, actions that are illegal, or behaviors that may be considered offensive. While these are important issues, this type of training can lead to behavior that feels mechanical, forced, or inauthentic, where the focus is on avoiding offense rather than behaving in a way that makes others feel wanted and valued. Diversity and inclusion interventions that focus on self-awareness help employees recognize their own biases and their behaviors that may be perceived as exclusive rather than inclusive. The Equality and Human Rights Commission describes the characteristics of an inclusive workplace. There is a welcoming workplace culture where everyone is treated with respect and dignity and everyone feels valued. 2 3 Policies are in place concerning equality and human rights, working conditions, dignity at work, employee welfare, and fair recruitment and procurement practices. Members of staff at all levels are aware of the inclusive values of the organization and are actively consulted and involved in policy development. The workforce is representative of the local community or customers (or if not, under-represented groups are encouraged to apply). All employees are encouraged to develop and progress, and any barriers faced by specific groups are identified and action taken to address them. Unnecessary hierarchies and occupational segregation, where groups of employees are congregated into certain areas, are discouraged. The organization is aware of any potential tensions within the workplace, and takes action to anticipate and address them. Inclusive strategies are fully supported and promoted by senior staff. 6.2Diversity and Inclusion Diversity programs seek to improve the representation of groups that are currently underrepresented in the organization. These programs may include targeted recruiting, training opportunities, and preferential treatment for underrepresented groups. They are often established in response to claims of discrimination or as part of an affirmative action program. Unfortunately, these programs can actually be harmful to the very individuals they are intended to help. In the absence of a culture of inclusion, employee groups targeted by diversity initiatives may fail to fully integrate into the organization, which can prove counterproductive. When diversity is sought for the sake of diversity, with no regard for inclusion, organizations have lower performance, increased conflict, and poorer employee morale. On the other hand, when diversity initiatives are combined with a culture of inclusion, diversity leads to better performance and higher levels of innovation. Inclusion, however, is often an elusive goal. While diversity, or the lack thereof, can be measured, and deficiencies can be addressed by policy changes at a departmental or organizational level, a culture of inclusion is difficult to quantify and often requires changes in individual attitudes and behaviors. 6.3Improving Diversity and Inclusion Initiatives to improve diversity and inclusion in an organization should be tied to the organization’s core mission and objectives, with clearly stated goals and preestablished metrics for measuring success. Programs that are implemented as a knee-jerk reaction or in a haphazard manner will not create the lasting organizational and cultural change that is required. Organizations may follow these or similar steps in creating and carrying out their diversity and inclusion initiatives. 1. Start diversity and inclusion initiatives at the top of the organizational chart. In order to effectively develop diversity and inclusion in an organization, there must be buy-in from top-level executives. Leaders must insist upon accountability at all levels of the organization, where individuals are held accountable for their own behaviors, and where metrics relating to diversity and inclusion carry equal weight in evaluating managers’ performance along with productivity and profitability. Some large organizations have a chief diversity officer; others assign responsibility for diversity and inclusion to another top level executive. Many organizations form diversity and inclusion teams with the executive at the head to oversee initiatives, drawing employees from various departments throughout the organization. 2. Define organizational objectives relative to diversity and inclusion. Top executives determine what the organization should ideally look like and define the organization’s objectives in developing a more diverse workforce and a culture of inclusion. These objectives should include the business case for investing resources in diversity and inclusion. 3. Compile available demographic data. Any diversity initiative must start with an assessment of where the organization’s demographics stand relative to the labor market. Most organizations have data readily available in their HRIS for EEO reporting or affirmative action programs. Employee records should help define the organization’s current demographics regarding race, ethnicity, national origin, age, and sex. 4. Collect survey data. In addition to the traditional demographic information, other diversity data can be helpful in understanding the current organizational landscape and creating a diversity and inclusion initiative. For example, employees could be asked to voluntarily provide information regarding their religion, family situation, sexual orientation, languages, life experiences, socio-economic background, disabilities, and veteran status. Employers may also conduct personality trait testing to assess the organization’s diversity in thinking styles. Also, since having a clear picture of the organization’s current culture is essential in developing initiatives, surveys should be used to assess attitudes regarding diversity and inclusion. 5. Identify problem areas. Using the data compiled and collected in steps three and four, organizations can pinpoint the gaps between their objectives (identified in step two) and the organization’s current situation. This could reveal deficiencies relating to demographics (such as underrepresentation) or problems relating to the organization’s culture (such as a non-inclusive environment). 6. Plan diversity and inclusion initiatives to address problem areas. After problem areas are identified, the organization determines what is necessary to get from the current situation to the level of diversity and inclusion envisioned in step two. This could include policy changes to address a compliance issue, events designed to promote awareness, or training to help managers develop new skills. The plan should include metrics that will be used to assess initiatives and evaluate their success in achieving organizational objectives. These metrics may include turnover or retention rates, representation statistics, and survey findings. Various diversity and inclusion initiatives are explained in the next section. 7. Implement the initiatives. The success of a diversity and inclusion initiative will often depend on how it is rolled out at an organizational level. A senior-level executive can take a lead role in launching the initiative by visibly providing support and articulating the organization’s objectives. As diversity and inclusion initiatives are carried out, managers and supervisors at all levels should be involved. They should be trained so they appreciate the organization’s objectives, are aware of their responsibilities, know what is expected of their subordinates, and understand that they will be held accountable for their own behaviors as well as the outcomes in their areas of responsibility. Leaders can keep the initiative in the forefront by providing updates and encouragement via newsletters, social media, email, and other avenues of communication. 8. Measure outcomes and provide feedback. While a diversity and inclusion initiative is being carried out and as it is completed, the outcomes must be assessed using the established metrics. This could include measuring improvements in representation of underrepresented groups or an assessment of changes in employees’ attitudes or in the organization’s culture. Executives should provide feedback to managers, supervisors, and employees on how the initiative is going and what improvements have been made. 9. Adjust objectives and plans as needed to make ongoing improvement. As diversity and inclusion initiatives are assessed, objectives can be scrutinized and adjusted, plans can be tweaked, and new initiatives can be launched. Improving diversity and inclusion is an ongoing process. 6.4Diversity and Inclusion Initiatives This video can be viewed online. Diversity and Inclusion Initiatives (00:57) This download can be found online. In order to meet diversity and inclusion objectives, organizations may need to make changes to the way they conduct human resource functions. To address problems with representation in various areas of their workforce, organizations may need to change recruiting practices and recruit prospective employees from different, more diverse sources. Organizations may need to modify “promotion-from-within” policies that perpetuate the current lack of diversity. To deal with intolerance, organizations can establish anti-discrimination and antiharassment policies, with clear guidelines regarding acceptable behavior. To address problems with bias in the selection process, organizations may strip personally identifying information from resumes or applications that might reveal a candidate’s ethnicity, age, national origin, physical ability, and sex. Changes to Policies and Practices In order to improve the diversity of their workforce, organizations often must change the way they attract potential job candidates. This often begins by networking within diverse communities from which potential employees may be found. This could include establishing relationships with professional organizations that represent diverse groups, or by connecting with schools, colleges, and universities that serve underrepresented populations. Where possible, job descriptions and job postings should focus on the skills and experiences required for a job, rather than on academic degrees or professional certifications, which may limit the diversity of the applicant pool. Organizations could also express a preference for a specialized skill, such as bilingual ability, that may attract members of underrepresented groups. Many diversity and inclusion initiatives begin with experiential activities designed to increase awareness. These activities often push participants to challenge their assumptions about people from different demographics through group projects, games, or discussions. These activities are generally designed to demonstrate that people are alike in more ways that they are different. Diversity and inclusion training often includes videos that educate employees about discrimination, bias (both conscious and unconscious), and marginalization. The purpose of these videos is often to promote awareness and to start conversations, based on the assumption that change is unlikely if people do not recognize that change is needed or expected. For example, Accenture, a global management consulting firm with more than 400,000 employees, launched an inclusion initiative with a video, “Inclusion Starts With I,” that Targeted Recruiting Employee Training showed a series of employees holding a poster board with a message about bias they had experienced in the workplace. It concluded with messages regarding how people can contribute to a more inclusive environment. Diversity and inclusion initiatives often include training specifically for managers and supervisors. Inclusive leadership training typically focuses on recognizing and overcoming biases and stereotypes developing cross-culture awareness and sensitivity communicating effectively and inclusively treating people as individuals instead of as members of a classification valuing and utilizing the unique characteristics of each individual leveraging the diversity of a workgroup to generate a wider range of ideas and make better decisions Many diversity initiatives include training that focuses on teaching employees to avoid overt discrimination, actions that are illegal, or behaviors that may be considered offensive. While these are important issues, this type of training can lead to behavior that feels mechanical, forced, or inauthentic, where the focus is on avoiding offense rather than behaving in a way that makes others feel wanted and valued. Diversity and inclusion interventions that focus on self-awareness help employees recognize their own biases and their behaviors that may be perceived as exclusive rather than inclusive. An employee resource group (ERG) is a group of employees in an organization that joins together based on shared life experiences or personal characteristics. Also known as affinity groups and business network groups, ERGs are typically employee-run groups that provide mutual support, leadership development, 1 Employee Resource Groups networking, and career and personal development opportunities. Organizations may have a variety of ERGs, including the following. people of the same race, color, or national origin those who share a similar culture individuals with disabilities employees who share religious affiliation military veterans LGBT employees women employees of the same age or generation those of the same political affiliation people with similar family situations (single, working parent, single parent, etc.) Employees do not necessarily need to be part to the group’s demographic to join; those who want to learn more or become allies are generally welcome. Some organizations also have ERGs that are “interest-based” groups, where employees gather because of a shared interest in a particular topic or activity. For example, employees may join with others in an ERG around a shared interest in community service, employee wellness, volunteerism, or issue advocacy. ERGs should be based on the needs and strategic objectives of the organization. They should have clearly stated roles and responsibilities. For example, an ERG may be asked to provide insight into how a new product would be perceived by individuals in their demographic or how best to reach out to members of an underrepresented group. By making work more flexible, organizations can help employees who have difficulty with traditional schedules. Employees who care for children or aging parents, for example, may need flexible work schedules to accommodate the needs of those in their care. Those with health concerns may appreciate the opportunity to sometimes work from home. Organizations may also choose to provide floating holidays to help accommodate employees’ religious observances or cultural celebrations. By getting involved in the community, organizations can build relationships with diverse groups and people. Some companies, for example, adopt a school that serves an underrepresented population and send employees to help with reading programs or STEM activities. Some sponsor community events or participate in cultural activities. For example, one company purchased booth space at a local Latino festival to advertise job opportunities to the participants. Organizations can build interest in specific topics or fields where representation is low. For example, to ameliorate low representation rates of women in their companies, some high-tech firms hold technology and science events especially for young girls. These events increase both brand awareness and recognition that women can work and succeed in fields that have been predominately male. Flexible Work Schedules and Arrangements Community Outreach 6.5Benefits of Diversity and Inclusion There is a strong business case for promoting diversity and inclusion in an organization. Research shows that diverse and inclusive organizations 1 are more innovative are more engaged are more creative have higher revenue are more profitable Diverse and inclusive organizations perform better because a diverse workforce provides a greater variety of viewpoints and experiences. Ideas are more likely to be challenged and improved. Organizations can better stay in touch with a diverse customer base when the demographics of their employees mirror the diversity of their customers. Inclusive organizations also better engage and retain employees because all employees feel valued and respected
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