Ethical issues in Human Resource (HR) can be an interesting topic to be written about. From many HR Systems, some areas probably have ethical issues which are not handled well. In this paper we would like to bring up the ethical issues in the HR system. We can start to understand the corporate culture especially in Indonesia that probably affects the Ethical issues. Then we will talk more about Ethical or unethical practice in the HR System including if any justification in ethical culture.
The popular question is probably why we should understand about Ethical Issues in the HR System. Some HR Practitioners will do it for the good of the company without further thought about whether it is Ethical or not. As long as it's for the good of the company then there's always a justification to justify the action. Or probably they don't realize that it's an unethical action of HR practitioners.
Understanding of Ethic in Organization
Most definitions characterize ethics as concerns with moral judgement and standards of conduct (Angeles,1981; Lacey,1990). Ethics is a traditional area of philosophical inquiry that delves into normative rules of behavior. If we argue more about Ethical then it will lead us to the understanding of law and accountability in where the organization stands and runs their activities. The definition of Ethical in Organization should depend and lead by local law. It should be complied with the government regulation to create a standard of Ethic in Organization. A debate can be raised if we relate the ethical issue just related to the law of the state, because every state has a different law and perspective.
If we look to the theory of Ethical relativism then the perspective is less normative then other theoretical. According to Ethical Relativism right and wrong are determined by the ethics of some relevant groups. For example if a group of society believes that killing people in a fight is ethical then there's no way we can argue or try to say it's wrong. We can't even try to convince them to change their belief because for them it's the right thing to do. Most of the philosophers reject the theory of Ethical Relativism and I believe most of the readers of this article also reject it. But we can't avoid the reality that the theory exists and is still relatable in some group of society.
Another view that might be taken by researchers is John Stuart Mill's utilitarianism. According to utilitarianism theory, we have to calculate how much happiness various courses of action will generate, and to choose the course of action that generates the most happiness. By this ethical theory, then the ethical action will choose where to take the most for the happiness.
Why ethics become an important issue in HRM? Perhaps a focus on ethics may be a response to disenchantment, lack of commitment, dissatisfaction, or growing cynicism in the workforce (Bateman, Sakano & Fujita, 1992; Kanter & Mirvis, 1989). And sometimes we put lack of attention in Ethics because we think the unethical as ethical. So many aspects in the HR System can be a threat for unethical issues. We can say it in recruitment, performance appraisal, compensation, reward system, and organizational exit. These parts of the HR System can be potentially misconduct by unethical issues.
Ethical Consideration in Recruitment/Staffing
When we are doing a recruitment process, which contains some tests and interviews then the candidates should be treated fair and equal. If the candidate is successful and hired then it should be by fair and equal judgement. We can't let a biased perspective come in and ignore the facts of the candidate. Same thing for the unsuccessful candidate. In some companies, the recruitment process is sometimes already set up to hire a specific candidate. The other process is just a formality of the recruitment process. The unethical issue arises when we treat 1 candidate in a special way. The process of selecting people should be based on job qualifications, fit with organization's values, fit with organization needs and fit with organization's culture. These values can be communicated throughout the selecting process. Â So the candidate can get clarity on the organization values.
Ethical Consideration in Performance Appraisal
There is much literature concerning the performance appraisal process, which indicates that managers are less committed to accuracy and honesty and will oftentimes use the process for political purposes (Banner & Cooke, 1984; Longenecker, Sims & Gioia, 1987). The performance appraisal sometimes becomes a way of the manager if they want to put out their subordinates. In fact, Performance Appraisal is where the ethical issues may be the most important and ethical behavior may be severely tested. We have to be fair and objective in every point of the appraisal. We can't put down the performance appraisal based on like or dislike. That's an unethical issue and absolutely not professional. There should be two ways of communication between the manager and their subordinates to define the target in their performance appraisal. Both sides should agree related to individual performance appraisal. And when the time to score the performance appraisal comes, then the evidence should be presented by both sides.
Ethical Consideration in Compensation
Compensation is confidential information and should be kept very well. Unethical issues can arise when the compensation details leak to others. As an HR, we should make sure that the compensation information does not leak from the HR side. The other issue is how to determine employee salary. The HR should try not to manipulate the amount of salary that the candidate can get from the company. In the other way, HR should consider the manpower budget and internal comparison as well. The unethical issue when we give new joiner compensation without proper consideration and evidence of previous earnings. The HR should make sure that the compensation that employees receive is suitable and match with their skills and contribution to the company.
Ethical Consideration in Reward System
Organizations have a bad habit of developing reward systems that run counter to the behavioral outcome which they desire. Organization may hope for ethical behaviors, but they may have a tendency to reward individual for unethical acts, and actually develop reward contingencies that facilitate unethical behavior (e.g Janson & Van Glinow, 1985). The reward system should be fair and objective to everyone. Sometimes the reward is given to someone who is not worthed to get. But the reward is given to increasing someone's confidence or to retain employees. Others can debate that it's justified and the right thing to do. But it's not fair to someone who really showed their best performance to the organization. Or probably we give the reward just because of a short period of achievement without seeing the entire time period of performance. The ethical practice is when we give the reward to someone who really shows their performance in the entire time period of the reward and with all the achievements.
Ethical Consideration in Organizational Exit/Downsizing
According to Ferris, Bergin and Howard (1996) downsizing has not proven to be consistently related to future increases in profitability and productivity. From an ethical decision-making perspective, one needs to ask how these downsizing decisions are made. Look back when the Covid19 pandemic hit the global market, there were many companies downsizing. Some of the downsizing practice that can be unethical is when they decide to cut off the employees without a measurement and objectively. They just cut off employees with high cost or high salary to reduce the fixed cost from salary. They don't even think about future productivity. Before we do the downsizing, we have to talk to the employees related to the current issue and the reason why we take this decision. On the other hand, we have to give a time at least 30 days before the termination.
Consequences of Unethical Cultures
Unethical culture can be a crisis in the organization. Unethical culture will ruin the organization from inside out. Successful organizations are generally based on a network of trust which binds managers, employees, shareholders, suppliers and customers. In unethical culture it will ruin the trust among the internal members. Employees with high personal integrity may become disenchanted and go elsewhere. Cynicism will arise among the employees because of the unethical culture. This cynicism is cultivated by companies that embody expedient, self-serving values, that support managers who engage in deceptive and exploitative practices, and that communicate in a one-sided, hype up and disingenuous fashion to their employees (Kanter & Mirvis, 1989, pg.19). Thus, we would argue that this phenomenon is at least partially caused by lack of trust, lack of faith and lack of belief in self-interest and oftentimes in unethical management.
Another thing is destructive politics. Whereas politics are prevalent in all businesses, they range from being useful and productive to being quite dysfunctional and destructive. In an unethical business environment, people may just "get the job done" without any concern for how this objective is achieved.
In unethical organizations, the workplace can be aggressive and violence. This is because the culture forces them to be self-centered. They will just think about themselves and lack teamwork in the workplace. Â Other events create perceived inequities, such as being laid off, passed over for promotion, terminated and pushed too hard on the job will result in a high level of job stress.
Benefit of Ethical Culture
There's some benefit from building and maintaining an ethical culture. The benefit can be greater accountability, Increase firm valuation and increase cultural diversity. Of course there are more benefits from ethical culture but in this paper I just write about these 3 benefits.
Ethics can be defined in terms of shared expectation, accountabilities and standards become more clearly defined when supported by an ethical culture. People have a better understanding of what is expected of them, and the mechanisms that transmit and support the culture are less encumbered by ambiguity, uncertainty and dysfunctional malleability.
Firm with a strong ethical culture can increase firm valuation. It can be a strong signal to the market that they have a healthy culture and harmony in their internal relationship. Â Firm with a strong ethical culture will make the investors, employees and customers put high trust and safety.
Conclusion
We believe that an ethical culture will bring a healthy environment for the organization or firm. The HR System has many aspects to look after to make sure the ethical culture can be implemented well. Human Resource Management practice should be a key point to support the ethical culture in the organization and become a pioneer to highly put an ethical culture in the organization. We have to put ethical behavior in our daily professional life and personal life. With ethical behavior in our daily activities, we can avoid bad things to our organization. Trying to avoid unethical behavior becomes ethical by putting it in our daily life.
Author is MM Candidate from Trilogi University. Under mentoring of Dr. Kabul Wahyu Utomo, S.E., M.Si.
