Strategy and the Ethical Management of Human Resources

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<ul><li><p>STRATEGY AND THE ETHICAL MANAGEMENT OF HUMAN RESOURCES </p><p>Paul Miller, University of Newcastle </p><p>INTRODUCTION </p><p>There is a hotel not too far from where I work; it is a member of a group, itself a subsidiary of a much larger, publicly quoted, corporation. In that hotel the waiters are paid approximately 3.00 per hour until midnight. Of course, not too many people eat after midnight, but some do, in which case the waiters have to serve them and, once the last diners have left, they clear away and set the tables for breakfast. For hours that are worked after midnight, waiters are paid nothing. This needs clarifying. The job of waiting in this hotel involves being in attendance until the last diner has left, clearing away and setting breakfast. Management assumes that these tasks will be complete by midnight, if they are not, the duties of a waiter are performed free of charge. Furthermore, if public transport is not available, (which it is not after midnight) waiters are expected to get home at their own expense and return by 7.00 am to serve breakfast. </p><p>This hotel has a human resource manager. She reports to another at group level. This article is about the ethics of human resource management (HRM). It is embedded in </p><p>the literature on strategic human resource management because issues associated with the behaviour of corporations are clearly strategic ones. My purpose is to place a range of relatively well known HRM developments and issues in an ethical context. The reasons for &amp;us are simply stated. The first is that the ethical issues surrounding business are becoming of increasing interest to most sections of the community - fuelled by a range of high profile cases in the United Kingdom. The second is that the employment of people gives rise to unique and important ethical considerations which have been largely ignored, while those attachng ,for example, to the environment have been well discussed, if not addressed. A glance at the indices of a range of current texts in HRM will testify to the absence of considerations of ethics, morals, standards and so on. And reference to material on policies and procedure are similarly bereft of ethical content (see, for example, Sisson, 1994; Storey, 1995; Armstrong, 1992; Hendry, 1995). </p><p>SYSTEMS, PROCEDURES AND OUTCOMES </p><p>What is wrong with the employment situation enjoyed by the waiter described above? In order to identify the concerning factors, we must separate three issues. We call these system, procedure and outcome issues (Sheppard, Lewiscki and Minton, 1992). A discussion of each will illuminate the broad reasons why many will feel concerned at the waiters plight and relieved (if employed) that his or her own employment conditions are rather better. </p><p>System justice %s set of issues is concerned with fairness. It is the issue on which all others hinge, so I propose to consider it in some detail. The notion of fairness at work has a long history and an evolving one. What used to be considered fair no longer is. However, that is not to say that judgments </p><p>HUMAN RESOURCE MANAGEMENT JOURNAL VOL 6 NO 1 5 </p></li><li><p>PAUL MKLER. UNIVERSITY OF NEWCASTLE </p><p>about fairness are difficult to make. They are extremely easy and this must be so because we make them all the time and very often. When we do, we are applying two broad principles. The first principle requires some notion of balance - the comparison of an action with some other action. The most common example is the rule of law and the scales of justice - the punishment must fit the crime. </p><p>In the example, the application of this principle suggests a comparison between the waiters conditions of employment and those of other people. There are at least three things that tip the scales. The first is that the waiter is getting no reward at all for effort after midnight. There is no balance in other words. The second is that we have become used to a situation in which the majority of those working after a certain hour should in fact get more pay and not less; and the third feature that appears to tip the scales is that the employer makes no provision for the employee to get home, if the latter, at the insistence of the former, has to work after public transport has closed. Again, this conflicts with our understanding of what happens in other employment situations. Or does it? </p><p>As I have argued, the notion of balance requires a comparative judgment. This judgment changes over time and we have become used to the standards we apply becoming ever higher. We do not, for example, expect a horsethief to be hanged any longer; we do not expect an employee to be fined a weeks wages for not saluting the boss. However, it is possible that the standards to which I referred earlier are no longer becoming higher in the context of employment and may indeed be lowering. </p><p>The second principle which we apply to help us reach a conclusion as to the fairness of something is that of correctness. Whether an action is correct encompasses aspects of consistency, clarity, procedural thoroughness and compatability with the morals and values of the times. The first three features are, of course, meat and drink to the human resource manager; the last is perhaps a little more unusual. </p><p>Moral problems are concerned with the harms caused or brought to others, and particularly with (those that) are outside their own control. </p><p>Hosmer, 1994 </p><p>Moral problems in management are often complex because harm to some groups is often accompanied by benefits to others; for instance, the decision to transfer production from a high wage economy to a low wage one. In the case of our waiter, our judgment as to the correctness of his conditions of employment returns us to the question of whether the (employment) morals and values of our times are somehow eroding. Thus, the debate for our waiter might revolve around the choice between employment and unemployment; for the company, it might be said to revolve around the nature of the competitive environment. In other words, the dialogue in a modern economy has evolved in the last decade so that the boundaries of right and wrong in an employment context have been changed in ways that appear to do harm to employees. For example, the market has been used often to justify drastic reductions in salaries - a phenomenon almost unheard of a decade ago and yet now so commonplace, it makes the news only when the directors of the same company award themselves significant increases at the same time! </p><p>Procedural justice This is the second of the three issues, an understanding of which informs our decision as to the rightness or wrongness of the employment conditions faced by our waiter. </p><p>6 HUMAN RESOURCE MANAGEMENT JOURNAL VOL 6 NO 1 </p></li><li><p>STRATEGY AND THE ETHICAL MANAGEMENT OF HUMAN RESOURCES </p><p>The issue in the definition of procedural justice is the presence of checks and balances against biased decisions and the unintended consequences of decision processes. Traditionally, the presence of strong, representative trades unions ensured a measure of procedural justice, but as has been well recorded (Clark and Winchester, 1994), this role has substantially eroded. Without other appropriate substitutes, there is little prospect of procedural justice in the employment relationship. This suggests that other ways must be found in the search for procedural justice. </p><p>As in system justice, the search for procedural justice requires correctness as well as balance. In traditional systems for the management of employees, organisations relied substantially on the procedural balance conferred by trades unions. In a trade union free environment, those concerned to display procedural justice must rely much more on the search for correctness. In our example, it is unlikely that the waiter is represented by a trade union (or at least one strong enough to have influence) and this means that the employer must use alternative ways to show procedural fairness. He does this by emphasising the correctness of decisions. How is this done? </p><p>There are three standards of procedural correctness - neutrality, trust and standing (Lind and Tyler, 1988). Neutrality suggests a thorough information search which focuses on securing accurate data and permits monitoring and review. Trustworthiness suggests a procedure which is followed consistently and, finally, standing suggests that individuals are treated in a manner consistent with their status. There is some limited empirical evidence for these principles (Sheppard, Lewicki and Minton, 1992) and for the related principle of correctability in which the capacity to appeal a decision causes a related procedure to be perceived as more fair (Sheppard, 1985). </p><p>An obvious example of these principles is the system for the determination of teachers pay in the UK. Here is a situation in which trade unions were barred from the pay determination process (denying procedural balance) and in which the government tried to replace it with procedural correctness. However, the system for procedural correctness does not meet the h e criteria of neutrality, trust and standing. The party most affected (the teachers) are suspicious of the process and doubt its neutrality. The teachers do not trust the process, partly because they do not believe it to be neutral (their representatives are absent from it), partly because they do not believe it is consistently applied (for example to others in the public sector) and finally because the teachers do not believe it recognises their status. </p><p>However, it is not difficult to imagine how a procedure that meets the needs of procedural correctness might be introduced. In a single organisation, it is possible to imagine the human resource manager being pivotal in its design and instrumental in its maintenance. None of this is to deny the fact that systems for procedural balance are no longer important; it is merely to recognise the reality of the declining influence of collective representation for employees - whatever the reason might be. I will return to this HRM role. </p><p>Outcome justice The notion of outcome justice will perhaps be most familiar to HRM practitioners. Traditionally, judgments about outcomes (and by this we mean reward, punishment and allocation) are based on comparisons with those of others. Our choice of other is based on: </p><p>1. Similarity - we tend to compare ourselves with others who have similar jobs, backgrounds, education and so on. </p><p>HUMAN RESOURCE MANAGEMENT JOURNAL VOL 6 NO 1 7 </p></li><li><p>PAUL MILLER, UNIVERSITY OF NEWCASTLE </p><p>2. Proximity - we compare ourselves with neighbours, people we work with and so on. 3. Salience - we compare ourselves with people who come to mind quickly, either because </p><p>we know them personally or they are notable. Festinger (1954) suggested that the need to compare ourselves with others is especially </p><p>important in the absence of an absolute standard for making judgments, such as a yardstick for measuring length or a clock for measuring time. </p><p>It is perhaps not a surprising thing to say to an audience of HRM professionals that there is no such absolute standard in the determination of outcome justice. However, we should recognise that others have made the attempt. Here we delve into the debate on distributive justice. Because the HRM professional is concerned (perhaps above all) with the distribution of the organisations product, it is important to disentangle the elements of this organisational justice. </p><p>The core elements of distributive justice There are some things on which we can all agree when considering issues of distributive justice. For example, race, sex, IQ and rank m not grounds for just difference in the distribution of wealth and income. Part of the reason many of us agree about this is that people, by their own voluntary choices, cannot determine their own sex, IQ and so on. Properties can be the grounds for just discrimination between people, only if they have had afuir opportunity to acquire or avoid them (Feinberg, 1973, italics in the original). This leaves us with five possible reasons for justifying difference in the distribution of the organisations added value. These five are: </p><p>the principle of perfect equality; the principle of need; the principle of merit and achievement; the principle of contribution; and the principle of effort. </p><p>The first two principles are fundamentally similar and different from the last three. The former are concerned with need, the latter are concerned with desert. The argument here is that, on the assumption that basic needs are met by the organisation, the human resource manager should be concerned only with the distribution of added value based on contribution and effort. </p><p>Although I do not intend to argue it here, the principle of perfect equality is a difficult one to sustain beyond the fact that most of us would agree that all human beings have certain basic rights (to food, shelter and so on). Although there is no way to refute the principle, those who argue it usually base their argument on need or desert. The problem with basing an argument for equality on need is that, beyond the satisfaction of the basics, need is extremely elastic. It follows that the HRM manager would do well to avoid discussion of distribution based on need and concentrate on issues of desert. It follows that for most organisations, a minimum wage (an appropriate one) would mean the avoidance of discussion of distribution based on need. </p><p>Distribution of added value based on merit focuses not on what a person has done, but rather on what kind of person he or she is. This being so, we should recognise that the posession of native skill is ruled out as a basis for distributing reward because it is an inherited characteristic, like race and IQ. It should not be rewarded, therefore, any more than the racial characteristics of someone should be penalised. Of course, people may enhance the characteristics they </p><p>8 HUMAN RESOURCE MANAGEMENT JOURNAL VOL 6 NO 1 </p></li><li><p>STRATEGY AND THE ETHICAL MANAGEMENT OF HUMAN RESOURCES </p><p>inherit, but we should be clear that what we reward here is effort. This principle can be seen at work in the considerable rewards that accrue to world class performers in sport or music. We know that behind the success of these men and women lies determined practice to enhance (possibly) inherited characteristics. It is the effort which produces the results and the attendant rewards. </p><p>The principle of reward to contribution is a well established one. It is stated in the form -A's share of X is to B's share of X as A's contribution to X is to Bs contribution to X. This appears to be a very strong and plausible principle of distributive justice, but the difficulties of measuring contribution are severe; for instance, separating out luck, the Contribution of demographics, of people now dead and so on. </p><p>The principle of effort is perhaps the one that meets most of our criteria most easily. Although we do not escape entirely the fact that people may be endowed with...</p></li></ul>

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