Debates about the Ethical Basis of Human Resource Management

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Table of Contents

Introduction
Analysis of the case study
Ethical Issues
Cash and Compensation Plans
High trust – mutual respect organizational setting
Findings
Recommendations
Conclusion
References

Introduction

Human resource management in the last decade has evolved into technical, strategic and measurement-oriented field. It is concerned with the management of relations between groups of people and individuals in their capacity as employers, employees and managers.

Inevitably, the process of managing all the stakeholders raise questions regarding what the respective rights and responsibilities of each player are in this relationship (Winstanley, 1996).

Another concern is about what constitutes fair treatment. These concerns are ethical in nature. This report will focus on debates about the ethical basis of human resource management as well as the treatment of employees as the internal consumers of business establishments.

Analysis of the case study

The case study at hand is titled ‘Star Industries super trouble’. The case involved dissatisfied employee holding the position of senior marketing manager and the human resource manager of Star Industries. Stan Vines was the most dissatisfied employee whereas Linda Chang was the human resources manager.

Vines became more concerned about his superannuation. He complains that the fund managers of his superannuation are ripping off their customers. He states that the funds managers deducts four percent (4%) of his total contribution and further charges two percent (2%) in order to manage the contribution.

From the case study, it can be noted that the human resource department was directly involved in the employees getting incorporated in the financial institution in question as Vines wonder how the human resource department could get them into such dealings.

Vines raise the issue that the human resource department is totally not concerned with the welfare of its employees. He also highlights the issue of trust regarding the fund institution. In fact, as an employee, he has lost all his trust for the superannuation managers.

Whether superannuation is calculated out of ignorance or knowingly, the human resource manager is naive and unknowledgeable about the extortion the employees undergo under the current superannuation institution. This raises the concern as to whether the biding contract was entered on behalf of the employee to create loopholes for rip-off.

Being one of the employees, the human resource manager must also be contributing to her own superannuation fund. Based on this, the human resource manager’s competence is deemed questionable. Her interest in the fund structure is questionable although the information available does not explicitly link her to it.

In any organization, individuals can practice and hold core values but that does not translate into an ethical institution as a whole. In order to cultivate and build an ethical institution, the leadership must establish, model and uphold core values (Gravett, 2000).

Organizations should establish their own ethical framework based on mutual trust and respect in order to realize ethical organizations. The financial organization in the case study has lost these two fundamental cornerstones. The realization and disclosure by Vines not only puts Star Industries on the firing line from the rest of its employees but also the human resource manager’s career and character.

Ethical Issues

The names of the most recent corporate villains could take the rest of this presentation. The questioning of the actions involved could easily fill a library. These actions not only imperil the organizations involved but also the employees to a large extent. In most scenarios, the employees suffer from the actions and inactions of the senior managers. The case at Star industries is a clear indication. It involves a senior manager as the complainant. It would be interesting to uncover what the regular employee has to contend with.

Business ethics in relation to employee has often generated heated debates. One common consensus is that ethics are interpreted to mean the standards, rules and codes that govern an individual. The moral principles are developed over a life time. It is also about what is right and what is wrong in specific situations and telling the truth (McAfee and Anderson, 1995).

Cash and Compensation Plans

A research conducted by Irvin Lewis outlined ethics relating to employees as compensation ethics. He stated that compensation ethics are the standards, rules and principles that present guidelines for the correct moral behavior. These behaviors include truthfulness in the reward and remuneration of employees.

From this perspective the ethical concept expands beyond compliance with regulations and law. Ethics involve more than just compliance to law. This concept is derived from the fact that some managers opt to act more than what the law requires in the sphere of compensation from the sense of fairness and when there is economic sense in doing so.

This puts the human resource manager at Star Industries in the limelight. Does the inaction by the manager whose employees are being overcharged and surcharged by the superannuation trustee make economic sense?

Whereas individual employees have the right to choose their superannuation trustees, it would only be fair for the human resource manager to ensure the national economy is not burdened in the long run. She is in a position to advise the employees on the appropriate financial institution for their superannuation.

This means that the retirees will not depend on taxpayers to provide for their retirement. This is in the interest of multiple parties including the community and the employees. The law merely provides for the minimum ethical level that organizations should not fall below.

There are several ethical issues pertaining to the executive perquisites, salaries, and the annual incentive plans. It is common for human resource manager to be under pressure to raise the band of basic salaries.

Increasingly, pressure builds upon the human resource function to pay out more incentives to the top management. The justification for higher incentives is put as the need to retain the top managers. Unfortunately, the regular employees are not as influential on the subject and only depend on human resource managers to consider their plight.

Further ethical issues emerge in the human resource function when long-term incentive and compensation plans are designed in consultation with the chief executive officer or an external consultant. While making decisions regarding the payout, there is intense pressure on favoring the interests of the top managers in comparison to that of other employees.

Competent human resource professionals are ethically responsible in fostering and promoting justice and fairness (actual and perceived) for all employees and their organizations (Hart, 1993).

High trust – mutual respect organizational setting

In any organization that trust is prevalent, information is always complete, accurate and timely. Human resource professionals are expected to exhibit individual leadership as a role model for maintaining the highest standards of ethical behavior.

When the managers practice this concept, all people at all levels acknowledge suggestions brought forth on the ways to improve work and performance (Gravett, 2000). In such an organizational setting, coworkers share their concerns and ideas. Alternative ways and methods are discussed freely which in turn lead to concrete and clear goals being developed and shared with all the stakeholders across the organization.

Findings

Human resource professionals consider and protect the rights of employees as individuals, particularly in the acquisition and dissemination of information. This process should ensure truthful communications. The case at hand does not seem to endorse and uphold this perspective.

Superannuation is a sensitive issue as it deals with personal earning and retirement benefits. Retirees are not in a position to work and their productive days should be reflected in old age. It is therefore imperative for human resource managers to facilitate informed decision making to avoid situations that Vines is about to experience.

Whereas an employee may perform their duties with competence and due diligence, human resource managers can be a source of their financial dilemmas. Vines situation has been caused by the human resource function of Star Industries.

The current human resource manager might not have been present when the employees’ superannuation contract was signed. However, Linda should have played her role in ensuring that the workforce’s concerns are addressed professionally.

Star Industry case presents conflicting stakeholder interests. Vines as an employee is concerned with his life in retirement. He does not complain about current remuneration but is worried about the charges placed on his contribution.

However, he indirectly says that he does not earn as much as the amount of remuneration earned by financial institution employees. In this context, employees are entitled to fair pay. He feels that the human resource manager is not doing enough to protect the stakeholders from the exorbitant charges.

The interest of the fund management agency is to earn as much as possible from its clients. It does this by charging management fee on client contributions. Employees’ interest in the fund is to ensure that they have a financially stable retirement. Vines appear not to be convinced that they are getting a fair deal.

Basically, the human resource professionals must maintain a high level of trust with stakeholders. They must protect the interests of stakeholders as well as professional integrity. This implies that, they are not expected to engage in activities that create apparent, potential or actual conflicts of interests.

Recommendations

Vines revelation that he is aware of the superannuation’s dealings came as a surprise to Linda. Assuming that Linda was not aware of the situation, her capacity as the human resources manager presents her with many options on how to approach this issue. One of the options is to withdraw the contract with the extortionist superannuation agency.

From Vine’s conversation with Linda, it appears that the human resource department was responsible for the involvement of employees with the superannuation agency. Similarly, the department with the leadership of Linda should commit to terminate the contract. As a professional manager, she must strive to meet the highest standards of competence in dealing with the issue at hand.

Linda suggests to Vines that he could pull out of the extortionist superannuation agency based on his personal decision. This is a good advice as the situation requires, but terribly leaves the rest of the employees exposed to continued rip-off. Linda should consider converging a meeting with the rest of the employees not only to re-evaluate dealing with the superannuation agency, but also to save face and career.

As human resource professionals, we are bestowed with the responsibility for adding value to the organizations we serve in view of employees, employers and the stakeholders. We are also expected to actively contribute to the ethical success of these organizations. Signing the employment contract translates to accepting professional responsibility for our individual decisions, actions and inactions.

We should hence be advocates for the profession by engaging in activities that develop its value and credibility. An action that one would feel uncomfortable with when reported on the front page of the newspapers should not be contemplated in the first place. Ethical actions are defensible in the public forum because the underlying values that precipitated the action are clear.

Conclusion

We should commit to strengthen our competencies on a continuous basis. The human resource function in an organization is concerned with the management of relationships that exist between groups of people and individuals in their capacity as employers, employees and managers.

Organizations should establish their own ethical framework based on mutual trust and respect in order to realize ethical organizations. Compensation ethics are the standards, rules and principles that present guidelines for the correct moral behavior. The law merely provides for the minimum ethical level that organizations should not fall below.

Human resource professionals are expected to exhibit individual leadership as a role model for maintaining the highest standards of ethical behavior (Greenwood, 2002). Crucial ethical issues emerge in the human resource function when long-term incentives and compensation plans are designed in consultation with the chief executive officer or an external consultant.

In such situations, human resource managers usually compromise their moral principles in order to play along with the employer. Alternative ways and methods are discussed freely which lead to concrete and clear goals being developed and shared with all the stakeholders across the organization if there is mutual respect and trust.

References

Gravett, L. (2000). How human resources can help build an ethical organization. Web.

Greenwood, M., R. (2002). Ethics and HRM: a review and conceptual analysis. Journal of Business Ethics, 36(3): 261–278.

Hart, T., J. (1993). Human resource management: time to exercise the militant tendency. Employee Relations, 15(3): 29–36.

Lewis, I. (1985). Defining Business Ethics: Like Nailing Jello to a Wall. Journal of Business Ethics, 4: 377-383.

McAfee, R., B. & Anderson, C., J. (1995). Compensation Dilemmas: An Exercise in Ethical Decision-making. Developments in Business Simulation & Experimental Exercises, 22.

Stone, R. (2010). Human resource management. Milton, QLD: John Wiley & Sons Australia, Ltd.

Winstanley, D. & Woodall, J. (1996). Business ethics and human resource Management. Personnel Review, 25(6): 5–12.

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