Chapter 12: Ethics and Fair Treatment in HR Management Lecturer: Human Resource Management, Arab World Edition Gary Dessler, Akram Al Ariss Chapter 12: Ethics and Fair Treatment in HR Management Lecturer:

After studying this chapter, you should be able to: Explain what is meant by ethical behavior at work. Discuss important factors that shape ethical behavior at work. Describe ways in which HR management can influence ethical behavior at work. Employ fair disciplinary practices. List at least four important factors in managing dismissals effectively.

Ethics and Fair Treatment at Work The Meaning of Ethics The principles of conduct governing an individual or a group. The standards used to decide what your conduct should be. Behavior that depends on a person’s frame of reference. Ethical Decisions Normative judgments Morality

TABLE 12-1 Business Ethics Quiz For business owners/managers For employees From the top down, your business is run with honesty, integrity and respect for others. You occasionally take home small supply items from the office like pencils and staples. You receive a duplicate payment from a customer who doesn't realize he made a double payment. You cash the second check thinking he probably won't notice. If he asks for the money back, you'll just feign ignorance and issue a refund. You would never add to your company expense account unnecessarily. Your product prices are going up January 1. You purposely schedule a customer's automatic shipment for January 1 that should have been in December just so you can charge the higher rates. You surf the internet for non-work related matters during work time. Everyone does it. Due to unforeseen circumstances, customer orders become backlogged and customers are demanding their products. You explain to the customers the reason for the backlog, what you are doing to rectify the problem and when the products will be available. You offer customers a full refund if they cannot wait until the products are available. Calling in ‘sick’ is okay as long as it's not super-busy at work. A customer makes a complaint about a service provided by one of your agents. This customer is a tiny account and the monies received negligible. When the customer complains a second time and cancels her account, you don't apologize or care because you don't need her money anyway. When your chatty coworker gossips about everyone and anyone in the office, you simply say nothing. Source: Patricia Schaefer, “Business Ethics Survey: How Ethical Are You?,” copyright 2008, Attard Communications, Inc., from http://www.businessknowhow.com/growth/ethics-survey.htm, accessed January 16, 2012. Note: Answer the questions with Agree, Disagree or Not Sure, then go to http://www.businessknowhow.com/growth/ethics-answers.htm for answers and explanations.

TABLE 12-1 Business Ethics Quiz (cont) For business owners/managers For employees The same priority is given to customers' needs after you have gotten ‘the sale’ as before. You make an error and another employee gets blamed. No one would be able to trace the error back to you, but you immediately come forward to take responsibility. You're about to close a big sale. The potential customer asks you a question, and if you don't fib, you know you'll lose the sale. You tell the fib and save the sale. A company supplier gives you a holiday gift of your favorite gourmet chocolates valued at $50. You accept the gift and enjoy the chocolates. You pretend to have a prior relationship with a potential client in order to get your foot in the door. What they don't remember won't hurt them. A coworker's paycheck in an unsealed envelope is placed on your desk by mistake. No one is around. You resist the temptation to take a look, and deliver the paycheck to its rightful recipient. Business is suffering, and employees are leaving your sinking ship. You hold a meeting with existing employees and assure them that business is fine and their jobs are secure even though they're not. You certainly don't want to lose anyone else while you're still struggling to stay afloat. You go to the restroom and find a $50-dollar bill. You keep the bill—finders keepers, losers weepers. You haven't gotten around to removing some discontinued products, listed as available online. Customers’ are being charged for these discontinued items, and you take your time letting them know the products are discontinued. You suggest the monies already charged can be used for other product items on your shopping cart. The boss is away, and your coworker uses the time to make personal phone calls and play computer games at her workstation. Taking the opposite stance, you "give an honest day's work for an honest day's pay." Source: Patricia Schaefer, “Business Ethics Survey: How Ethical Are You?,” copyright 2008, Attard Communications, Inc., from http://www.businessknowhow.com/growth/ethics-survey.htm, accessed January 16, 2012. Note: Answer the questions with Agree, Disagree or Not Sure, then go to http://www.businessknowhow.com/growth/ethics-answers.htm for answers and explanations. 6

BOX 12-1 Percentage of Employees Who Observed Specific Unethical Behaviors Abusive or intimidating behavior toward employees 21% Lying to employees, customers, vendors, or to the public 19% A situation that places employee interests over organizational interests 18% Violations of safety regulations 16% Misreporting of actual time worked 16% E-mail and internet abuse 13% Discrimination on the basis of race, color, gender, age, or similar categories 12% Stealing or theft 11% Sexual harassment 9% Provision of goods or services that fail to meet specifications 8% Misuse of confidential information 7% Alteration of documents 6% Falsification or misrepresentation of financial records or reports 5% Improper use of competitors’ inside information 4% Price fixing 3% Giving or accepting bribes, kickbacks, or inappropriate gifts 3% Source: From 2005 National Business Ethics Survey: How Employees Perceive Ethics at Work, 2005, p. 25. Copyright © 2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave., N.W., Suite 400, Washington, DC 2006, www.ethics.org. Reprinted in O.C. Ferrell, John Fraedrich, and Linog Ferrell, Business Ethics, Boston: Houghton Mifflin, 2008, p. 61. 7

Ethics and Fair Treatment at Work (cont) A behavior may be legal but unethical A behavior may be illegal but ethical A behavior may be both legal and ethical A behavior may be both illegal and unethical Ethics and the Law

Ethics, Fair Treatment, and Justice Distributive Justice Interactional (Interpersonal) Justice Components of Organizational Justice Procedural Justice

FIGURE 12-2 How Do My Ethics Rate? Source: Adapted from A. Reichel and Y. Neumann, Journal of Instructional Psychology, March 1988, pp. 25–53. Survey of Kuwaiti students conducted in 2011 by Dr. Dmytro Roman Kulchitsky, Ph.D., with the help of Ms. Ascia K. Farraj, the American University of Kuwait.

What Shapes Ethical Behavior at Work? Individual Factors Cultural Factors The Organization’s Culture Organizational Factors Ethical Behavior At Work Ethical Policies and Codes The Boss’s Influence

TABLE 12-2 Principle Causes of Ethical Compromises Senior Mgmt. Middle Mgmt. Front-Line Supv. Prof. Non-Mgmt. Admin. Salaried Hourly Meeting schedule pressure 1 Meeting overly aggressive financial or business objectives 3 2 Helping the company survive 4 Advancing the career interests of my boss 5 Feeling peer pressure 7 6 Resisting competitive threats Saving jobs 9 Advancing my own career or financial interests 8 Other Source: O. C. Ferrell and John Fraedrich, Business Ethics, 3rd ed. (New York: Houghton Mifflin, 1997), p. 28; adapted from Rebecca Goodell, Ethics in American Business: Policies, Programs, and Perceptions, 1994, p. 54. Permission provided courtesy of the Ethics Resource Center, 1120 6th Street NW, Washington, DC, 2005. Note: 1 is high, 9 is low.

Employees and Ethical Dilemmas Questions employees should ask when faced with ethical dilemmas: Is the action legal? Is it right? Who will be affected? How will it ‘feel’ afterwards? How will it look in the newspaper? Will it reflect poorly on the company?

What Is Organizational Culture? The characteristic values, traditions, and behaviors a company’s employees share How is culture revealed? Patterns of behavior Ceremonial events Written rules and spoken commands Physical manifestations Written rules Office layout Organizational structure Ethics codes

The Manager’s Role in Creating Culture Clarify Expectations Use Signs and Symbols Use Stories Provide Physical Support Organize Rites and Ceremonies

The Role of Human Resource Management in Promoting Ethics and Fair Treatment Ethics Training Reward and Disciplinary Systems Selection Performance Appraisal Workplace Aggression and Violence HRM-Related Ethics Activities

HRM-Related Ethics Activities Selection Fostering the perception of fairness in the processes of recruitment and hiring of people Formal procedures Interpersonal treatment Providing explanations Selection tools Two-way communication Training How to recognize ethical dilemmas How to use ethical frameworks to resolve problems How to use HR functions in ethical ways

HRM-Related Ethics Activities (cont) Performance Appraisal Appraisals that make it clear that the company adheres to high ethical standards by measuring and rewarding employees who follow those standards Reward and Disciplinary Systems Systems in which the organization swiftly and harshly punishes unethical conduct Workplace Aggression and Violence Taking care that HR actions do not foster perceptions of inequities that translate into dysfunctional behaviors by employees

Building Two-Way Communications Engagement Expectation Clarity Perceptions of fair treatment depend on: Explanation

Employee Discipline and Privacy Clear Rules and Regulations An Appeals Process Fair and Just Discipline Process A System of Progressive Penalties

FIGURE 12-4 Disciplinary Action Form Source: Reprinted from www. hr.blr.com, Business and Legal Reports, Inc., 141 Mill Rock Road East, Old Saybrook CT © 2004. 21 21

Guidelines for Fair Discipline Does evidence support the charge of employee wrongdoing? Were the employee’s due process rights protected? Was the employee warned of disciplinary consequences? Was a rule violated and was it ‘reasonably related’ to the efficient and safe operation of the work environment? Was the matter fairly and adequately investigated before administering discipline?

Guidelines for Fair Discipline (cont) Did the investigation produce substantial evidence of misconduct? Have rules, orders, or penalties been applied even-handedly? Was the penalty reasonably related to the misconduct and to the employee’s past work history? Did anger, hearsay, or personal impression affect the decision?

Discipline Without Punishment (Non-Punitive Discipline) Issue an oral reminder. Should another incident arise within six weeks, issue a formal written reminder, a copy of which is placed in the employee’s personnel file. Give a day’s paid ‘decision-making leave’. If no further incidents occur in the next year, then purge the one-day paid suspension from the person’s file. If the behavior is repeated, the next step could be dismissal.

Employee Privacy Employee privacy violations include: Background checks Monitoring off-duty conduct and lifestyle Workplace searches Monitoring of workplace activities

Managing Dismissals Dismissal Involuntary termination of an employee’s employment with the firm. Wrongful discharge Refers to a dismissal that violates the law or fails to comply with contractual arrangements stated or implied by the employer.

Grounds for Dismissal Bases for Dismissal Unsatisfactory Performance Misconduct Lack of Qualifications Changed Requirements of (or Elimination of) the Job Bases for Dismissal

Insubordination Repeated direct disregard of the boss’s authority. Repeated direct disobedience of, or refusal to obey, the boss’s orders, particularly in front of others. Repeated deliberate defiance of clearly stated company policies, rules, regulations, and procedures. Repeated contemptuous display of disrespect, such as making insolent comments. Repeated disregard for the chain of command.

Managing Dismissals (cont) Fostering Perceptions of Fairness in Dismissals Have a supervising manager give full explanations of why and how termination decisions were made. Institute a formal multi-step procedure (including warning). Establish a neutral appeal process. Security Measures Collect all company property and keys. Accompany the employee out of their offices and building. Disable internet-related passwords and accounts. The employee must return company’s laptops and handhelds.

Avoiding Wrongful Discharge Suits To reduce exposure to wrongful discharge suits, ask: Is the employee’s employment covered by any type of written agreement, including a collective bargaining agreement? Have written or oral representations been made to form a contract? Is a defamation (bad-mouthing or discrediting) claim likely? Is there any workers’ compensation involvement? Have reasonable rules and regulations been communicated and enforced? Has the employee been given an opportunity to explain any rule violations or to correct poor performance?

The Termination Interview Guidelines for the Termination Interview 1 2 3 Plan the interview carefully. 4 Get to the point. 5 Describe the situation. 6 Listen to the employee. Review all elements of the severance package. Identify the next step.

Interviewing Departing Employees Exit Interview Its aim is to elicit information about the job or related matters that might give the employer a better insight into what is right – or wrong – about the company. The assumption is that because the employee is leaving, he or she will be candid. The knowledge can be used to improve conditions that may be leading to other employees leaving the company.

FIGURE 12-5 Employee Exit Interview Questionnaire Source: “Exit Interview Questionnaire,” Qatar National Project Management, from http://www.pmonline.gov.qa/english/resources/8%20Human%20Resource%20Management/Exit%20Interview%20Questionnaire.doc, accessed October 10, 2011. 33 33 33

Adjusting to Downsizings and Mergers Downsizing/Layoff Guidelines Identify objectives and constraints. Form a downsizing team. Address legal issues. Plan post-implementation actions. Address security concerns.

Adjusting to Downsizings and Mergers (cont) Guidelines for treatment of departing employees during a merger: Avoid the appearance of power and domination. Avoid win–lose behavior. Remain businesslike and professional in all dealings. Maintain a positive feeling about the acquired company. Remember that the degree to which the organization treats the acquired group will affect those who remain.

FIGURE 12-6 HR Scorecard for KAMCO: Ethics and Fair Treatment Source: Prepared by Dr. Dmytro Roman Kulchitsky, Ph.D., the American University of Kuwait. 36 36 36 36

Key Terms dismissal distributive justice downsize Emiratization ethics ethics code exit interviews insubordination interactional or interpersonal justice misconduct non-punitive discipline organizational culture procedural justice termination interview unsatisfactory performance wrongful discharge