Importance of Ethical Management Practices - Example

Name: Tutor: Title: Contemporary Organizational and HRM Studies Course: Date: Table of Contents Title: Contemporary Organizational and HRM Studies 1 2.0 Ethics and Corporate Social Responsibility as critical factors for sustainable business 4 2.1 Corporate Social Responsibility and Sustainable Business 5 2.2 Recognizing ethical issues in business 6 2.3 Importance of ethical management practices 9 3.0 Key strategic issues to address, in preparing HR policies and plans especially in the field of Ethics, Corporate Social Responsibility (CSR), Values and Sustainability 10 3.1 Strategic ethics issues to address in preparing HR policies and plans 10 3.2 Strategic Corporate Social Responsibility (CSR) issues to address in preparing HR policies and plans 12 3.3 Strategic Values and Sustainability issues to address in preparing HR policies and plans 13 4.0 Conclusion 13 5.0 Recommendations 14 Executive Summary Organizations are sustainably working in a more responsible manner to ensure that their operations cause a positive impact on the society as well as the natural environment. As a result, contemporary organizations are struggling to effectively apply sustainability principles in their process of business operation. The report provides a detailed discussion on the two major sections namely, ways through which Ethics and Corporate Social Responsibility is considered critical factors for sustainable business. In this section, Corporate Social Responsibility is evaluated in relation to Sustainable Business, ways of recognizing ethical issues in business and the importance of ethical management practices are discussed in detail. The second section provides a discussion on the key strategic issues to address, in preparing HR policies and plans particularly in the field of Ethics, Corporate Social Responsibility (CSR), Values and Sustainability. A conclusion is made on the two major sections and recommendations are on how the Human Resource (HR) should address the key strategic issues in their process of formulating policies and plans to achieve sustainable advantage. 1.0 Introduction Organizations are required to take responsibility for the manner in which their operations impact societies as well as the natural environment. As a result, contemporary organizations are called upon to effectively apply sustainability principles to the process through which they operate their businesses (Roome & Bergin 2006). In line with this view, it can be noted that incorporating ethics into business strategies involves formulating and implementing sustainable business models. It is relevant to argue for the idea that being ethical and socially responsible is not only the best way for organizations to do, but also considered a critical factor for the success of businesses while ensuring their sustainability. Therefore, ethics are critical when determining either the success or failure of organizations because they affect their reputations as well as enable such companies’ to define their business models that succeed even in adversity. In this report, arguments have been made on how being ethical and socially responsible is a critical factor for the success of businesses in ensuring their sustainability. It also discusses the key strategic issues to be addressed when preparing HR policies and plans in the field of Corporate Social Responsibility, Ethics, Values and Sustainability. 2.0 Ethics and Corporate Social Responsibility as critical factors for sustainable business Major ethical policies that work beyond the normal upholding of the law increase a company’s brand value, while a failure to rightfully implement such policies leads to social, economic as well as environmental damage. This destabilizes the company’s long-term prospects in its business processes. However, companies that adopt ethical approaches in their business process often discover the bottom line benefits associated with demonstrating the utmost ethical standards. It is quite clear that ethics are critical to the success of organizations and must be well embedded in the business models, organizational strategies as well as decision-making processes (Ferrell & Fraedrich 2005). Leadership is a major factor that determines if a company is well-prepared and can effectively integrate ethics into strategy. This implies that only effective and highly dynamic leadership proved to have the ability to develop a corporate culture that works beyond the normal averting of reputational damages caused by unethical behaviors. Furthermore, leadership can transform the risks caused by ethical challenges through the commercial opportunities, and thus ensuring that organizations are well-prepared for the future challenges (Van de Loo 2006) 2.1 Corporate Social Responsibility and Sustainable Business Corporate responsibility is considered as sustainability because it is a prominent aspect of a business as well as society. It also addresses issues on business ethics, global business citizenship, stakeholder management and corporate social performance. Arguably, responsible leaders are people who demonstrate the highest integrity in addition to deep understanding of hard relationships with others (Roome & Bergin, 2006). According to Jones (2000) organizations adopt some effective CSR models that support the simultaneous transformational and creative leadership styles to achieve transparency. The intellectual stimulation of CEOs is significantly associated with the objective of a company to involve in strategic CSR and the connected activities that foster corporate and the business-level strategies. On the other hand, McGaw (2005) argued that the biggest challenge in the implementation of CSR is developing leaders for sustainable international society. This poses a challenge in the contemporary management on the kind of leaders required to build sustainable and global society. McGaw points out that the main task and challenge is to develop leaders who are competent for sustainable global societies through fostering a culture of imagination and implementation of positive changes in the organizations. Contemporary organizations, therefore, have a strong business case to operate their businesses in an ethically responsible manner. It is apparent that a socially and environmentally approach to ethical issues ensures the organization’s capability to thrive sustainably. This can only be achieved if such companies protect their reputations, supply chains and licenses to operate their businesses, secure their partnership relationships as well as their capability to recruit highly-talented people. As a result, companies will successfully avoid corporate collapse caused by litigation (McGaw 2005). Although some firms have consistently failed to take the ethical factors into consideration, others achieve competitive edge by developing strong credentials within this field of ethics. For example, Toyota has become the largest car maker in the world due its ability to boost its global standing through its pioneering work since nineties because of its hybrid Prius model. On the other hand, Macdonald a hotel and resort company in the hotel and hospitality industry invests largely in activities that associate it with both ethical and environmental awareness. This enables the organization to rebuild its global brand whilst attempting to overcome the yearly negative publicity. It is relevant to argue that with ethics now put globally at the centre, there are various opportunities to establish a win-win situation through which companies can successfully discover how sustainable approaches contributes to the bottom-line benefits, and thus convincing investors with most profit hungry minds (Utting 2005). 2.2 Recognizing ethical issues in business An ethical issue is a clear problem, situation or a given opportunity that calls for a person’s attention to make choice among the several actions that could be evaluated as the most appropriate or not, ethical or unethical. Such choices in business involve the ability to weigh monetary value against what an individual considers to be appropriate conduct. However, the most fundamental way to determine the ethics of a decision is to examine a situation from either the competitor’s or customer’s point of view. For example, should the manufacturers of liquid-diet produce unsubstantiated claims on their products? Such a question calls for a decision-maker to evaluate his or her current ethics choices. The basic ethical and social responsibility issues are codified as laws and regulations which encourage most businesses to conform to the standards, values and attitudes of a society. Therefore, social responsibility, business ethics and the law together work as compliance system that calls upon businesses and employees to act responsibly within the society (Utting 2005). The ability to learn how to recognize as well as resolve the emerging ethical issue is critical to the evaluation of ethical decisions in the operation of businesses. It is important to note that business ethics work beyond the legal issues. This is because ethical conduct inculcates trust among people and in business relationships, which in turn validates and increases confidence in the business relationships. From this view, it can be argued that building trust and confidence is hardly achieved in organizations that have developed reputations for acting in unethical manner. Today, there are well-publicized cases of unethical activity that ranges from healthcare frauds to the use of the Internet to obtain personal information from young people to incidences of deceptive advertising of diet product to competitive practices that are not fair within the computer software industry. This promotes the public’s view that ethical standards as well as the level of trust in the business practices must be raised. It is worthy to mention that not all the problems related to business ethics are global within their scope because many of them affect people directly and immediately. Most of business issues seem to be uncomplicated and easy to resolve. This is not the case since a person may take time and experience in business in order understands the acceptable or ethical practices (Ferrell & Fraedrich 2005). A number of ethical issues within the business operations are categorized based on the context of their relations to fairness and honesty, business associations, communications and conflict interest. For example, to avoid conflicts of interest, employees are advised to detach their personal interests on finances from their normal business dealings. Fairness and honesty are considered to be at the heart of many business ethics since they are linked to the general values featured in decision-makers. Competition is an aspect more related to fairness and honesty because various laws have been implemented to foster competition as well as change monopolistic practices to illegal. However, companies are gaining control over the global markets through the use of questionable practices which eliminates competition. For example, the rivals of Microsoft have accused it as a software giant of working through unfair and monopolistic practices so as to sustain the market dominance with the Microsoft Network or web browser. Communications that lead to false and products misleading advertising and unreliable personal-selling tactics discourage consumers, and thus cause failure of businesses. However, truthfulness on the safety and quality of products helps to retain consumers. Lastly, business relationships such as the behavioral acts of businessperson to the customers and suppliers in the workplace can also cause ethical concerns. It is quite clear that ethical behavior in a business arise as a result of keeping an organization’s secrets, executing the assigned obligations and responsibilities as well as controlling undue pressure that lead others to act unethically (Ferrell & Fraedrich 2005). 2.3 Importance of ethical management practices Business ethics are considered catalyst that practically influences managers to take the most socially responsible actions. A number of people question themselves why ethics has become a vital component of the management practice. Companies that are not ethical, hardly become competitive both at national and international levels. However, ethical management practices improve the overall corporate health. This is particularly in three main aspects namely, productivity where employees of a corporation are considered as stakeholders affected by the management practices. Organizational practices that take ethics into their actions as away to manage their stakeholders, affect employees in a positive manner. Today, many corporations have developed Employee Advisory Programs (EAPs) to assist employees with legal, family, health, work and financial problems. Such programs enhance the productivity levels for corporations. The capability for the organization to positively affect the outside stakeholders is also an area where ethical management practices foster corporate health. It is important to argue that a positive public image attracts customers. Additionally, minimizing government agencies’ regulation enhances corporate health. Companies that act unethically, forces the public to put pressure on government officials or legislators to effectively regulate such businesses (Linda Klebe & Katherine 2007). In order to create an ethical workplace business managers strive to promote ethical practices not only instill moral conduct, but also to achieve business advantage if the employees and customers perceive the company as being ethical. Therefore, continuous development, distribution and improvement of the organization’s code of ethics are a fundamental step by the managers toward the achievement of an ethical workplace. A code of ethics is basically a formal statement that works as a guide through which individuals in a particular organization are required to act as well as make decisions within an ethical way. Codes of ethics ought to be monitored continually so as to evaluate if they are comprehensive and appropriate guidelines for establishing ethical business decisions. This implies that managers need to consider codes of ethics as their tools that have to be evaluated and refined so as to increasingly promote ethical practices. Recent survey indicates that the creation and distribution of code of ethics organizations is an effective and efficient means to foster ethical practices such organizations (McHugh 2009). 3.0 Key strategic issues to address, in preparing HR policies and plans especially in the field of Ethics, Corporate Social Responsibility (CSR), Values and Sustainability Human resource management deals with activities related to manpower planning within the organization. It becomes necessary to argue that it is branch of management in which the aspect of ethics matter most since human issues such as compensation, industrial relations and development as well as health and safety issues are dealt with. 3.1 Strategic ethics issues to address in preparing HR policies and plans HR managers, therefore, must be prepared to address ethical issues that arise within the workplaces prior to their escalation into crises. Most of the ethical issues at the workplace are related to finances, employees’ relations and discrimination, biases on religious activities as well as considerations on who to promote and how to allocate a company’s resources effectively. Employees win the admiration of their co-workers when they promptly and fairly deal with ethical issues. Organizational ethics are standards, rules and regulations that determine and guide the workplace behaviors as well as moral principles of an organization (Vosburgh 2007). HR personnel are tasked with the responsible of setting standards that effectively inculcates ethical behavior within the workplace. In their process of preparing human resource policies and plans, HR personnel are expected to address strategic issues of employee relations where they are required to maintain objectivity in their role of hiring, training, retaining, promoting, compensating and terminating employees. It is the obligation of HR to ensure that organizational policies are implemented in accordance with the ant-discrimination legislature and the principles of integrity performance review. This is simply to ensure that appraisal process for like jobs is critiqued fairly and equally. HR professionals have the obligation to ensure that organizations maintain their compliance with the anti-discrimination and harassment laws (Vosburgh 2007). Privacy is also a strategic issue that must be addressed by HR personnel because such professionals involve in critical tasks of employee relations such as hiring, compensation, benefits and leaves, firing. This means that HR representatives deal with extremely sensitive information that requires utmost security, and thus keeping the information private is such an ethical matter that HR must address whilst formulating policies and plans. Employee safety is equally a strategic issue that human resources personnel must address. HRM as a department has the role to prevent and resolve potentially dangerous or risk situations. This implies that HR personnel are obligated to promptly act on the hazardous conditions that hinder safety concerns within the workplace. In addition, the HRM department has the role of identifying the potential dangerous employees as well as ensuring such employees do not jeopardize themselves or other people in the organization. Diversity is also an important strategic issue that must be addressed in preparing HR policies and plans in the field of ethics. Workplace diversity includes the various qualities and experience that differentiates workers such as race, gender, social status and age which make people unique. Human resource personnel throughout their roles ensure that handling a person differently on basis of such characteristics causes an ethical issue that calls for the attention of HR in their process of formulating policies and plans (Ferrell & Fraedrich 2005). 3.2 Strategic Corporate Social Responsibility (CSR) issues to address in preparing HR policies and plans Corporate Social Responsibility is increasing becoming a critical concern for Human Resource due to the growing recognition that a people issues is an area considered of great risk, but also of value to business. High staff turnovers, increased cost of staff recruitment and training are the risk factors that entirely cripple businesses. Such factors in addition to the reputational risks that lead to poor staff decision-making has made the “people” to be well-placed at the heart of corporate social responsibility. The core CSR strategic issues that HR must address as they formulate policies and plans include employee attraction, retention and development as well as employee productivity and motivation (Werther & Chandler 2006). HR personnel are required to develop a process through which the business objectives are evaluated and values re-aligned so as to match them meet the staff expectations. Furthermore, the HR should effectively play its role as the gatekeeper in formulating and monitoring of the staff policies and management practices. The HRMs must at all costs ask themselves whether if their businesses have social responsibility policies or the environmental policies? How do their businesses ensure that such policies as well as the companies’ values work collaboratively? This implies that HR need to ensure that such values are reflected within the staffing issues such as recruiting and training, compensating and appraising in addition to other processes that involve procurement (Vosburgh 2007). 3.3 Strategic Values and Sustainability issues to address in preparing HR policies and plans Succession planning is a strategic issue of value and sustainability, though not addressed in a systematic way. Organizations need to put succession planning at the centre of their operations because they rely on staff in meeting their missions, deliver their services as well as meet their organizational goals. Therefore, it is of strategic value for the HR to remain concerned with what would take place to the services they deliver or to their capability to fulfill their missions in cases where the key staff members left the organization. HR also needs to address strategic issue of succession planning because of the need to change the realities of the workplaces. This implies that HR in their process formulating policies and plans take into consideration the impending retirement of baby boomers, this would create a major impact on the capacity of the workforce (Tebo 2005). 4.0 Conclusion Ethics are critical when determining either the success or failure of organizations since they affect their reputations and enable such companies’ to define their business models that succeed even in adversity. Companies that adopt ethical approaches in their business process often discover the bottom line benefits related to demonstrating the utmost ethical standards. Corporate responsibility is sustainability because it is an important aspect of both the business and society. Contemporary organizations have a strong business case to operate their businesses in an ethically responsible way. Corporate Social Responsibility has become a critical concern for Human Resource due to the growing recognition that a “people issues” is an area of great risk, but also of value to business. 5.0 Recommendations HR must ensure that organizational policies are implemented in accordance with the ant-discrimination legislature and the principles of integrity performance review. HR personnel must implement policies that foster diversity within the workplace as well as accept the differences of the entire organizational workforce. It is important for HR to realize that successful implementation of CSR effectively delivers benefits to the core strategic issues of human resource function. It is quite clear that the capability to attracting the right people and creating a positive working environment can effectively help to address the strategic issues. In order to effectively address strategic values and sustainability issues, HR needs to address strategic issue of succession planning so as to change the realities of the workplaces. 6.0 Bibliography Ferrell, O. C & Fraedrich, J., (2005), Business Ethics: Ethical Decision Making and Cases, 6th ed. Boston: Houghton, Mifflin, p. 63. Jones, D. R., (2000), Leadership strategies for sustainable development, Business Strategy & the Environment, 9(6), 378–389. Linda Klebe, T & Katherine, A., (2007), Managing Business Ethics, Fourth Edition, Chapter 2 ‐Why Be Ethical? Retrieved August 27, 2012 from, McGaw, N., (2005), Developing leaders for a sustainable global society, Strategic HR Review, 4(6), 32–35. McHugh,J.P., (2009), Business Ethics and Sustainability Scolds Hide Real Agenda: Politics, Mackinac Center for Public Policy, Retrieved August 27, 2012 from, Utting, P., (2005), Corporate responsibility and the movement of business, Development in Practice, 14(3), 375–388. Roome, N. J., & Bergin, R., (2006), Sustainable development in an industrial enterprise: The case of Ontario Hydro, Business Process Management, 12(6), 696–721. Tebo, P. V., (2005), Building business value through sustainable growth. Research Technology Management, 48(5), 28–32. Werther, W. B & Chandler, D. A., (2006), Strategic corporate social responsibility, New York: Sage Publications. Van de Loo, E., (2006), Responsible leadership. In T. Maak & N. M. Pless (Eds.), Responsible leadership (pp. 68–92), Abingdon, Oxon: Routledge. Vosburgh, R. M., (2007), Special edition articles, Human Resource Planning, 30(1), 7–8. Read More