Creating an ethical organisation
Creating an ethical organisation

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Creating an ethical organisation

1.2 The relationship between stakeholders and the organisation

Public and voluntary sector organisations do not have the same shareholder obligations as those in the private sector. However, as the distinction between public and private sector organisations becomes blurred, there are concerns that the ethical role of public service organisations – defined as acting in the public interest through a public service ethos – is being undermined. As public service and non-profit organisations are increasingly expected to achieve targets and become more ‘businesslike’, there are worries that short cuts are being taken and dubious practices are emerging, particularly at the boundary between the public and private sectors.

An ethical approach would normally incorporate a range of stakeholders. Accounts of which groups and individuals may be considered to be stakeholders vary, but most would agree with Wood's categorisation of core stakeholders as:

  • (a) constituents on whose behalf the organization exists and operates, e.g., business owners or voluntary association members;

  • (b) employees who conduct the organization's affairs;

  • (c) customers who receive the goods or services the organization produces;

  • (d) suppliers who provide the input materials for the organization's activities; and

  • (e) government that guarantees an organization's rights and privileges, enforces its responsibilities, and regulates its behaviors through political processes.

In addition, some scholars are now adding the natural environment as a core organizational stakeholder.

Organizations have many other stakeholders, including local communities, competitors, media, financial analysts and markets, financial institutions, voluntary organizations, environmental and consumer protection groups, religious organizations, military groups, political parties or factions, etc.

(Wood, 1995: 529)

We noted above the ethical dimension to processes of decision making, or procedural justice, as it is sometimes called. Research evidence tends to suggest that employees’ perceptions of procedural justice have a stronger effect on attitudes toward the organisation than their perceptions of distributive justice, although both seem equally important as predictors of intention to leave the organisation. In other words, there is some evidence that employee attitudes towards their organisation depend more on the fairness of policies and processes than on their outcomes. But on the other hand, the perceived fairness of outcomes (particularly pay and promotion outcomes) is equally important as the fairness of processes when forming intentions to stay with or leave an organisation.

Apart from the purposes of organisations being subject to ethical scrutiny, there are also issues concerning how these purposes are to be achieved. Successful strategy is determined through implementation; that is, what an organisation seeks to achieve cannot be divorced from how it seeks to achieve its goals. If organisations are downsizing, de-layering or adopting short-term contracts, and at the same time expect loyalty from a committed workforce, we should not be too surprised to find low morale and demotivation. In other words, strategic fit is the link between the ‘what’ and the ‘how’. What Woodall and Winstanley argue for, and we would accept, is an ‘ethical literacy’ which recognises that the discussion of human resource issues must go beyond strategic fit and other aspects of the business case, and ‘needs to be refreshed by adopting a more human-centred perspective and by addressing the ethical dimension to HR policy and practice’ (2001: 53). The further argument is that this can best be done within a framework of SHRM, with its consideration of individuals in relation to overall organisational policy.

The focus here is how the organisation's strategy is linked to the treatment of individuals within it. A further issue is the relationship between the individual and the organisation and how that relationship is shaped by the organisation's culture. We are concerned with what the organisation can legitimately demand of the individual: with the rights and responsibilities of individuals towards the organisation. The relationship has to be two-way, or even three-way to include other stakeholders such as clients, customers or the public generally. Our concern is to examine the congruence between individual and organisational goals.

Organisations in both the public and private sectors have changed their configurations, their structures and the employer-employee relationship. Many organisations now have different kinds of employees on different kinds of contracts. Hutton (1995) has defined the 30:30:40 society, which consists of the disadvantaged; the marginalised and insecure; the privileged. Hutton argues that it is only the privileged 40 per cent who have some security in the job market. He argues that two-thirds of all new jobs offered to the unemployed are part-time or temporary. You may be familiar with the concept of the ‘shamrock’ organisation, which is concerned with the relationship between a strategic core and operating ‘leaves’ which may or may not be inside the organisation. This will have an effect on the relationship between the organisation and its employees. Will the same kind of commitment be generated among those on short-term contracts? What is the responsibility of the firm for the employment practices of sub-contractors? What kind of an association is the organisation?

Activity 1

Click on the 'View document' link below to open and complete a questionnaire which explores ethical issues in organisations.

Click 'View document' to open the questionnaire in a separate window.

B824 Activity 1 [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)]

The issues explored in the above activity are concerned with the relationship between you and your organisation and the expectations that are generated. Regrettably, these are frequently in conflict. We illustrate some of the possible tensions by examining a MORI poll carried out on behalf of the Association of First Division Civil Servants, the trade union representing the interests of senior managers in the UK civil service, between July and September 1996. The poll was directed at those in the Crown Prosecution Service, which is the independent prosecuting body in criminal cases in England and Wales. 1,347 questionnaires were distributed and the response was 786 (58 per cent). The overwhelming number of respondents were lawyers, who reported that their dedication to public service and their professionalism were under threat. A certain level of cynicism was expressed about the way the organisation treated its staff. We report some of the findings in Table 1. Respondents were asked to state which characteristics they felt would ideally be displayed by those worthy of promotion, and which characteristics they felt those people who succeeded in the organisation actually possessed.

Table 1 Attributes which might apply to the kind of person who gets on in the Crown Prosecution Service

Opinions of respondents (%)
Characteristic Seen as ideal Believed to be actual
Has high level of professional skills 99 18
Is open and frank 90 5
Is prepared to raise issues concerning professional principles 74 4
Is committed to the public service 72 19
Actively looks for promotion 13 73
Toes the line 1 92
Uses intimidation 1 43
Is secretive 0 57
Is dishonest 0 24
Source: adapted from MORI, 1996

The respondents offered a number of explanations for the level of disillusionment, including:

  • they had too much work to do

  • their legal expertise was not sufficiently recognised

  • too much time was spent on administration and not enough on legal work

  • career expectations were not fulfilled

  • they felt poorly informed

  • they did not believe that senior management responded to staff views or took them seriously

  • they believed that the service was being run down for political reasons.

Given these findings, how successful do you think the Crown Prosecution Service is likely to be in achieving its objectives?

The findings raise disturbing questions concerning employer-employee relations. What kind of employment contract is entered into? What kinds of organisations do we work for? One view is to see the organisation as a community through which relationships are played out and which has a common purpose. Another view sees the organisation at the centre of a web of contract relationships, buying in expertise when required. Clearly, different relationships will apply according to how those relationships are perceived and mirrored in terms of organisational goals and structures. Not only that, but the demands placed upon individuals by their organisations will have ethical implications.


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