Ethical Issues in Human Resource Management
Martin N. Davidson
Human resource management (HRM) is the science of managing people systematically in organizations. The unique individual actor in the organization – a given executive, manager, line worker – is not the focus of HRM, per se. Rather, human resources practices and policies concerning recurring cycles of staffing, reward and compensation, and performance management inform how any person or group of people is introduced into the organization, managed while there, and exited from the organization. When these three overarching aspects of human resource management are designed effectively, the organization benefits from a management system that enhances the sustained competitive advantage of the organization. A critical part of designing these aspects effectively requires consideration of ethical concerns at each stage.
Staffing is comprised of systems designed to recruit and select employees to undertake required roles in the organization. The purpose of recruiting is to provide the organization with a group of candidates large enough for the organization to select the qualified employees that it needs. Needs are formalized by (1) job or position descriptions, which are written statements of content and organizational level of the job; and (2) hiring specification, which details background, experience, and skills requirements.
Selection is the mutual process in which the organization decides whether to make an offer of employment and, if offered, the candidate decides whether or not to accept. Typically, selection procedures follow several steps. The applicant completes a formal job application, participates in a screening interview, takes tests, submits to a background check, participates in a more in depth interview, and receives a job offer. Of course, different employers may only use a subset of these steps.
Ethical dilemmas emerge at a number of junctures within the staffing process. Within recruiting, organizations distribute descriptions and specifications to labor pools – the sites within the population in which the organization believes it is likely to find qualified candidates. However, the determination of what pools are tapped is often subjective and systematically biased. For example, when an organization finds a rich pool that yields a number of success fulhires, the organization will tend to return to that pool, to the exclusion of other options. The result of this seemingly rational pattern has been that other rich pools are overlooked (Williams, Labig, and Stone, 1993). This is bad practice from a human resource perspective: organizations do not want to miss opportunities to find highly qualified employees, especially when there are labor market shortages. But the problem is compounded when underutilized pools correlate with race, ethnicity, gender, or other demographic characteristics of individuals that are unrelated to job performance (Hardin, Reding, and Stocks, 2002).
This dilemma reaches even greater proportions as more global commerce leads many organizations to staff in other countries. For example, when executive recruiting choices are made among whether employees will be from the parent country (e.g., a US company operating in India), the home country (e.g., India), or a third country (e.g., Canada), there is a danger that parent country employees will be preferred because the organization knows how to recruit them. In addition to being a potentially sub optimal business decision, such a choice also neglects the possibility that host country talent could be infused in the organization. Moreover, it creates a scenario in which important social, cultural, and political nuances in leading a work force in the host country may be misunderstood, ignored, or abused.
Parallel dilemmas emerge in the selection process. A great deal of research focuses on selection bias, including bias in screening applications, interview methods, and test development (Bertrand and Mullainathan, 2002). The objective of the multiple methods in the selection process is to predict who will be effective in the job. How ever, at virtually every step in the process, the capacity to make sound judgment is potentially undermined by human and systemic factors that introduce uncertainty into the assessment. In the midst of this bias induced uncertainty, organizations are challenged to maintain rigorously commitments to fairness in the selection process.
Reward and compensation systems in organizations can be thought of as tools to attract, motivate, and retain employees. Choices managers make about reward systems can affect an organization’s ability to hire and keep desirable employees in a competitive labor market, and of course, rewards can affect people’s attitudes, feelings, and behaviors at work. There is a range of rewards that are distributed in organizations, both tangible and intangible. Tangible rewards include pay and its variants (e.g., base salaries, hourly wages, commissions, bonuses, profit sharing, deferred compensation, stock options), as well as non monetary rewards such as promotions, private offices, company cars, benefits, and other perquisites. Examples of intangible rewards include recognition, personal satisfaction, pride, camaraderie, team spirit, and self actualization (Harder, 1999).
Among the many challenges raised in reward and compensation, none is more prevalent than equity – the extent to which employees are compensated fairly. The simplest expression of the equilibrium that needs to be established to constitute fairness is equity theory (Adams, 1965). Equity theory says that people evaluate the ratio of what they are getting from a particular situation (outcomes) with what they are contributing to a situation (inputs), and compare this ratio to the outcome/input ratio for a comparative referent. If the ratio of someone’s outcomes to inputs is equal to that of his or her comparative referent, equity exists. But if not, inequity exists, and the theory suggests that people are motivated to reduce this in some way. Put another way, Person A’s Outcomes/Person A’s Inputs should equal Person B’s Outcomes/Person B’s Inputs in the eyes of both A and B. If A believes she is working as hard as B (inputs are equal), but that she is receiving fewer outcomes than B, A will seek to equalize the equation by (1) trying to increase A’s outcomes (e.g., pushing for a raise for herself); (2) trying to reduce B’s outcomes (e.g., getting B’s perquisites revoked); (3) reducing A’s inputs (working less vigorously); or (4) increasing B’s inputs (e.g., offloading more work to B).
Each of these four situations includes an ethical challenge in how A affects her view of the equation. She can increase her outcomes by seeking a raise, but she can also increase her outcomes by taking office supplies home. People who feel underpaid or underappreciated commonly justify unethical acts by appealing to a larger sense of equity: ‘‘If I can’t get my due through the company’s bureaucratic procedures, then it’s OK for me to get what I deserve my own way.’’ It behooves an organization to tend to its equity issues, both because it is wrong to knowingly compensate people inequitably when standards of equity should apply, and because the consequences of maintaining an inequitable system of compensation can be very costly in other ways.
Interestingly, the basic process of assessing fairness becomes even more complicated when personal and social factors are introduced. For example, research demonstrates that the race or ethnicity of A can influence what is viewed as fair. When a white employee sees any colleague denied a raise (regardless of the race of the col league), the employee is angered, but once a reasonable explanation for the treatment is offered, the employee is appeased. When a black employee sees a white colleague denied a raise, the employee is likewise appeased by a plausible explanation. But when the mistreated colleague is also black, the black employee is not so easily appeased. Even though he or she may understand and acknowledge the validity of the explanation, the black employee remains out raged by the injustice and motivated to prevent similar perceived mistreatment in the future (Davidson and Friedman, 1998). This example demonstrates the power that group identity and capacity to empathize with a mistreated other can have on one’s assessment of fairness and on one’s reaction to that assessment.
Performance management includes the policies, processes, and behaviors the organization utilizes as a means of creating a work development relationship between the employee and the organization. Performance management includes socialization, training and development, performance appraisal, and positional movement such as promotion, demotion, transfer, and firings. Socialization is commonly thought of as the early experiences an employee has once she or he enters the organization. Here, the employee is ‘‘shown the ropes’’ using formal presentations about organizational history, daily work routine, and general organizational policies. In addition, the employee is introduced to colleagues who can educate the employee on the informal norms that operate in the work place. For example, the formal orientation may explain that personal phone calls are not to be made from office phones, but the informal norm may be that everyone, including management, makes personal calls as long as they are local calls.
There are always potential ethical dilemmas as new employees seek to discern the difference between the formal and the informal conventions of work behavior. There often is no easy rule to help determine which formalities must be followed and which are flexible. As a result, new employees, who are already eager and anxious to understand their new environment, tend to be conservative and follow the formal guidelines. In addition, new employees are challenged to determine who is able and willing to serve the role as the ‘‘informant’’ who will orient the employee. The employee must determine who is trustworthy and, at a basic level, will behave in the employee’s best interest. Unfortunately, it is sometimes difficult to select a helpful informant. The basic relational challenges (e.g., is the informant knowledgeable, likeable, etc.) are often exacerbated by group identity or cultural differences of individuals. If a new employee is from a different country, more experienced employees may shy from serving as an informant because they feel less comfortable dealing with the new employee. As a result, that employee fails to receive competent guidance and enters at a disadvantage, relative to a native newcomer.
Training and development are terms that capture two aspects of the professional learning process. Training programs are designed to maintain and improve current job performance. If an employee is a telemarketer, he may train to speak more clearly or to learn to operate the telephony. In contrast, developmental programs are designed to hone skills for future job assignments in the organization. Training can occur through on the job training methods such as job rotation, internship, or apprenticeships. Off job training takes place in technologically equipped simulation spaces, in the classroom, or offsite. Employees may learn through a variety of pedagogies, including computer assisted learning or behavioral training including role playing.
In contrast, management development pro grams take a broader perspective on the individual employee. Training programs are often ‘‘cookie cutter’’ in design – they are developed for a person holding a particular job and whoever cycles through that job can take the identical training. Developmental programs are increasingly shaped to take into account the unique competencies and weaknesses of an employee and help that employee improve through a more personalized educational approach. These programs tend to incur greater investments per person and tend to be focused on employees at the managerial and executive level. They may be structured as on the job or off job learning experiences.
Developmental programs often include developmental relationships as core elements of the learning process. Whereas training may tend to be more short term and may not even heavily use human instructors, developmental programs are often framed as longer term learning opportunities requiring the input of more senior individuals who can mentor the employee. These mentors educate their prote´ge´s on the intricacies of the kinds of positions they may attain in the future. Since such information is often unique to the organization and more difficult to obtain, these developmental relationships are invaluable. No executive succeeds without a robust set of developmental relationships.
Performance appraisal is the process of feeding back information to employees on how well they are doing their work. This feedback can occur in two ways: informally on a more regular basis, and formally on a semi annual or annual basis. Informal appraisal occurs on a daily basis ideally and is a regular process of offering feedback to alter undesirable behavior, or to reinforce desirable behavior. Informal appraisal relies on inter personal skill in giving and receiving feedback and focuses on behaviors that are observable and that can be changed.
Formal performance appraisal has two purposes: evaluation and development. Formal appraisals include detailed performance data such as numerical ratings and written qualitative data. Based on those data, raises or other rewards, as well as pay cuts and other punishments, are prescribed. This constitutes the evaluative aspect of formal appraisal. The appraisal also includes suggestions for additional training to compensate for shortcomings or to bolster strengths. This constitutes the developmental aspect of appraisal.
Appraisal is typically one of the more difficult tasks in a manager’s duties because it involves giving others information that often disconfirms their positive images of themselves and of their performance. Such disconfirming information breeds emotional upset for most employees and makes the task even more aversive for most managers. However, honest and accurate feed back is extremely valuable to employees and is the basis for advancement and professional success. Interestingly, managers who were reluctant to offer effective feedback were derailed from success in their own professional aspirations because they were perceived to lack integrity (Van Velsor and Leslie, 1995). In essence, these managers were not truthful in giving performance information, and even though the managers may not have been malicious in intent, the impact of their behavior hindered the ability of their subordinates to perform effectively. In turn, those subordinates felt betrayed.
These examples of interpersonal challenges in effectively appraising individuals take on greater importance when viewing appraisal accuracy from a more systemic perspective. A good deal of research demonstrates systematic bias in feed back frequency and accuracy based on individual characteristics such as gender and race. Some times the bias leads to unrealistically negative feedback based on a given characteristic (Chinander and Schweitzer, 2003), and sometimes to unrealistically positive feedback (Harber, 1998). In either case, the lack of true feedback is harmful.
The last step of the performance management stage is positional movement – promotion, trans fer, and firing. If recruiting and selection represents input into the organization, positional movement represents output. Promotion is clearly a reward for effective performance and provides most employees with a sense of accomplishment and a tangible positive outcome. This movement creates higher levels of motivation for the employee promoted, but can serve as either an impetus for greater effort or a disincentive to try for colleagues who are passed over for pro motion. Transfers can serve multiple purposes, from development to avoidance. High potential employees may be transferred to give them a greater breadth of experience. Poor performing employees may be transferred because her or his manager wishes to avoid the difficulty of disciplining or firing the individual. Firing results when an employee simply does not perform to required standards, or when the employee violates critical rules or regulations.
Though there are certainly ethical challenges in managing the decisions that lead to, and the practices that execute, these movements, another dilemma emerges for those left behind in these movements. As mentioned above, those not promoted may have encouraged or discouraged reactions to a colleague’s promotion. In the case of transfers, the employee’s former col leagues may have a range of reactions, from sadness to relief that the individual has moved on. In the developmental transfer, those left behind may respond as they would if the employee had been promoted – it would be seen as reward for effective performance. In the avoidance transfer, though, colleagues could question the integrity of the manager who made the transfer or of the organization for tolerating the practice of holding on to a poor performer. Finally, firing or layoffs can leave survivors frightened and demoralized because they experience the harshest possibility of the conclusion of a relationship with the organization.
At every aspect of the human resources cycle – staffing, reward and compensation, and performance management – a wide range of ethical issues and dilemmas may surface. This entry introduces a few important ones.
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