Creating an ethical organisation
Creating an ethical organisation

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Creating an ethical organisation

2 The ‘business sense’ of an ethical approach

Sternberg (1995: 125) argues that treating employees ethically is not an optional extra but an essential ingredient in maximising long-term value:

Treating employees ethically simply means treating them with ordinary decency and distributive justice. The ethical business rewards contributions to the business objective, and is honest and fair to its staff; it avoids lying, cheating and stealing, coercion, physical violence and illegality. And crucially, since trust is so dependent upon expectations, the ethical business is extremely careful about the expectations it engenders.

Ethical business, according to this argument, is built on relationships. Ethical activity is concerned with human activity and so is business. From this perspective bad ethics is bad business – customers, suppliers and employees ultimately all leave. However, are there special moral rights accruing to employees in their own right? Sternberg argues not. She suggests that what constitutes ethical conduct in business depends on business's definitive purpose. Business is, for Sternberg, about maximising long-term owner value through selling goods and services. It may do other things, but this is its core activity and using business resources for non-business purposes constitutes theft, according to Sternberg. She argues (1995: 96) that:

An organisation which pursued moral goodness simply because it was good, would simply be not acting as a business.

Sternberg argues that moral principles are appropriate in so far as business presupposes a context where lying, cheating, stealing and so on are absent. Honesty and fairness, refraining from coercion and physical violence and respecting the law are its guiding principles, termed ‘ordinary decency’. Sternberg goes on to argue the virtues of distributive justice such that he or she who contributes most to owner value should be rewarded accordingly. This is not as straightforward as is assumed, since who owns performance is often unclear. Sternberg treats individuals basically as productive units in terms of what they contribute to long-term owner value. In other words, Sternberg's view of the ethical organisation is determined by the ends of the organisation. For her, ethics has a place as long as it contributes to long-term value. She does accept that individuals should only be measured on things that are within their control and not determined by external events (1995: 154):

Fairness demands that people should only be held accountable for those things that are under their control.

In contrast to Sternberg's approach, Miller (1996) takes the view that ethics is concerned with means rather than ends, with ‘how’ as much as ‘what’.

In the HR context, Miller describes a number of ‘deliverables’ to employees and these are ‘indivisible’. He also argues that for these employment conditions to be met the organisation must pursue a ‘good’ strategy. Intuitively, this does seem to make sense and is congruent with theories of motivation.

We do tend to compare ourselves with others who have similar jobs, backgrounds, education and so on. We also use the core elements of distributive justice, explicitly and implicitly, even where there are no absolute standards for making judgements. In discussing rewards, for example, we may use criteria of merit, effort, contribution and so on to judge ourselves against others. Miller argues that we can identify unethical employment practices from these perspectives.

Miller concludes by arguing that there must be a fit between the organisation's strategy and its HR strategy for it to be ethical. Individual and organisational goals need to be harmonised. This requires a two-way relationship between the individual and the organisation, expressed through a combination of rights, duties, obligations and loyalty. Rights at work might include:

  • the right to be treated fairly and honestly

  • the right to be treated as an individual, with roles recognised and adequate training provided

    the right to be given feedback on performance at work and the opportunity to improve skills

  • the right to be paid a fair and equitable rate in relation to skills, the labour market and the financial position of the firm

  • no restrictions on rights as a citizen

  • the right to have health and safety protected

  • the right to a personal life outside work

  • the right to take part in activities which are of benefit to society

  • the rights to work, and to free association and to strike.

Some of these rights may be enshrined in law (health and safety), while others may have the status of aspirations (the right to adequate training). At the same time organisations may have certain duties towards their employees which correspond to rights outlined above and may include the duty to inform and consult workers, to accept criticism without holding a grudge, and so on.

However, the relationship cannot be all one way. In return for certain rights we would expect employees to fulfil certain duties, which might include:

  • the duty of loyalty

  • the duty to give ‘a fair day's work for a fair day's pay’

  • the duty to strike only as a measure of last resort

  • a duty to contribute to the best of their ability to the organisation's goals

  • a duty to work flexibly, using their skills to the full

  • a duty to accept personal responsibility for developing skills to increase their effectiveness.

Duties, rights and obligations are not givens. No doubt you will agree with some of those listed above but not others. Also, individuals will have other loyalties which may come into conflict with those to the organisation. For example, professionals may perceive their duty to be to their patient, client or student rather than to the organisation. They may also believe that they have professional duties to colleagues and to the profession as a whole rather than to the specific organisation that they happen to be working for. Conflicts of loyalties can cause real dilemmas.

The issue of employees' commitment to perform for the organisation is a key one, and it has a number of components:

  1. the extent to which the individual has internalised the values of the organisation which, in turn, will depend on how congruent individual values are with organisational values

  2. the extent to which organisational objectives reflect individual objectives

  3. the extent of individuals' involvement and psychological immersion in their work

  4. the extent to which individuals value the organisation as a place to spend their time.

We have outlined above two opposing views of ethics and strategic SHRM. The first view, associated with Sternberg, sees ethics as a means to an end. The second view, discussed by Miller, sees ethics and strategy as inseparable and based on the relationships between key stakeholders. This view accords with the concept of strategic fit: the ethical organisation consists of a mutual interrelationship between purposes and the implementation of those purposes. Means and ends are inextricably interwoven and exist in a dynamic tension.


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