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Knowing the governance of a firm is important in understanding how it functions. In an organization such as a C corporation, decision rights are allocated between those internal to the firm such as shareholders, boards of directors, senior managers, and those external to the firm such as outside auditors, regulatory agencies, analysts, and other stakeholders. Organizations are designed to create jobs that address certain tasks which must be accomplished, and these jobs include varying levels of authority to decide how to best complete those tasks.
Think about this concept in regard to a convenience store that sells refined fuels such as gasoline and diesel fuel, a limited selection of grocery products, convenience foods, and similar products. This store has two cash registers. Consider point A, where there are few tasks to accomplish and limited authority to make decisions. This job might be a clerk who is contracted to run the cash register and has limited authority to make decisions. Point B has more tasks to perform but limited decision-making authority. An example might be a shift leader who runs the cash register, is the supervisor for the other clerk, and may do certain jobs within the store such as stock shelves, but who has limited authority to make other
decisions. Point C involves more tasks and more authority. This would be the store manager who has supervisory responsibilities for all employees in the store and is responsible for inventory control. Point D involves many tasks and more authority to make decisions. The store owner or franchise owner who owns this store and perhaps other stores has the responsibility to make decisions regarding pricing, but is subject to the franchise contract with regard to brand selection, services being offered, and choice of suppliers.
Organizations are complex as they grow in size. Managers with more and more responsibility thus find that the tradeoff between the authority to make decisions (decision rights) and the required tasks is complex, because now the manager is responsible for many employees who are themselves assigned tasks and decision rights. Achieving the right alignment between tasks and decision rights is difficult in larger organizations.
The authority to make decisions can be broken down into a series of steps. An organization 1) seeks proposals to use resources such as capital, labor, and structure contracts to assign the resources to the appropriate user, 2) makes a decision to choose the appropriate proposal, 3) implements the decision, and 4) monitors the performance of the implemented decision, and rewards accordingly. Steps 1 and 2 are often called decision management while steps 3 and 4 are called decision control.
The design of a corporation’s governance is crucial, and it is good practice to separate decision management from decision control. Otherwise, those making the decisions may choose what is best for themselves rather than for the organization. Many organizations have a board of directors that is responsible for monitoring the performance of the individual managing the firm, such as the Chief Executive Officer (CEO). The board has decision control, while the CEO has decision management. This separation of decision management from decision control leads to a hierarchical structure, as managers have decision management responsibilities in their job and decision control responsibilities over others below them who themselves have decision management responsibilities.
Organizations are evaluated on their governance system through three different methods: 1) the motivation of value-maximizing decisions, 2) protection of assets from unauthorized use, and 3) financial statements that comply with legal requirements. Because much of the ownership of publicly-traded corporations is by institutional investors who own a small amount of stock in the firm, there is separation of ownership and control. This is in contrast to a small business, where the manager owns and controls the business and has direct incentives to be very efficient with the use of assets.
There are many benefits to organizing a firm as a corporation. Access to equity capital can occur through sales of stock to investors. The cost of equity is less because these investors own diversified portfolios, so the premium paid to them for the risk associated with uncertainty in the corporation’s cash flows is less. The corporation serves as the center of many contracts and is always one party to these contracts signed with buyers, suppliers, employees, lenders, and other entities. These contracts specify the decision rights to each party. The corporate charter, which includes the articles of incorporation and bylaws, specifies the rights of shareholders.
The top-level authority in a corporation is divided between shareholders, the board of directors, and senior management. The decision authority of shareholders includes the right to elect directors to a board, ratify the choice of an independent auditor, and be involved in other issues specified in the charter or bylaws including mergers, issuance of additional shares of stock, or changes in legal structure. Before an annual meeting, shareholders are sent information from the corporation that describes various proposals that require their vote, such as elections of directors to the board. Management, subject to board approval, makes recommendations to the shareholders regarding these issues. Shareholders are the residual claimants to the corporation in the event of dissolution. Thus, their voting control is often linked proportionally to their ownership interest.
The primary legal authority for managing a corporation lies with its board, although it may delegate much of this to professional managers hired for that purpose. The board has top-level decision control to oversee the corporation and ratify important decisions. These decisions include recruiting, interviewing, hiring, evaluating, and compensating the CEO. Large capital expenditures require board approval. Boards have legal indemnification from lawsuits provided it can be shown that they were
acting prudently. Corporate boards generally have 9–12 directors, and usually include several members of senior management. A committee structure is used to handle nominating, compensation, audit, and other issues that are under the purview of the board. The CEO is the senior most individual in the corporation. The job of the CEO is to focus on the broad issues affecting the firm and develop, implement, and monitor its strategy. The CEO delegates decision rights among senior level managers. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/02%3A_Cooperatives_and_Mutuals_are_Firms/2.03%3A_Corporate_Governance.txt |
Thus far, the discussion has focused on investor-benefit firms whose stock is traded on exchanges. However, there are other forms of corporations whose stock is not publicly-traded. Family-owned firms account for a large number of corporations in the food economy. There are non-family owned
firms that are also privately held but whose shareholders are venture capital funds or similar entities whose members include management. In addition, there are many families who control the governance of a company through different classes of common stock with differing control rights.
In a broad sense, firms can be thought of in three ways. A non-profit firm is organized to benefit the public. Its governance is volunteer-based with no ownership by anyone since it rarely has any assets. It is not taxed on its income, since non-profits are not designed to maximize profits. In a mutual-benefit firm—the subject of this book—income distribution is tied to members’ participation through use of the cooperative. Owners generally have one vote per member on governance issues, and the income from these types of organizations is either taxed once at the cooperative or mutual level or the income distributed to its members is taxed. Investor benefit firms link income distribution and governance with the proportion of ownership investment, are taxed on their income, and owners are taxed again on any dividend income.
2.05: Summary
Cooperatives are firms with the same structure and property rights as corporations or other types of firms. It is necessary to understand why firms exist to understand why cooperatives exist and why they are a special case of a corporation. Because the organizational structure of a cooperative is different with regards to the two property rights of control and residual claimant on earnings, it is important to understand these concepts. The
survival of the cooperative depends upon its ability to achieve an economic purpose. Thus, it is crucial to understand how ownership and management of the firm are important aspects of corporate governance. The next chapter discusses why cooperatives have a formal governance structure just like other organizations, and describe the origins of that structure.
2.06: References
The discussion on the design of organizations and corporate governance builds upon concepts presented in Managerial Economics and Organizational Architecture, by James Brickley, Clifford Smith, and Jerold Zimmerman, and upon Henry Hansmann’s The Ownership of Enterprise. The Make or Buy Decision Tree is adapted from David Besanko, David Dranove, Mark Shanley, and Scott Schaefer, Economics of Strategy. The Make-or-Buy decision was first raised by Ronald Coase and published in “The Nature of the Firm,” Economica 4, 16(Nov. 1937):386–405. The Coase Theorem was published in “The Problem of Social Cost” Journal of Law and Economics 3,1(1960):1–44. Others, most notably Oliver Williamson, have further studied and written about this concept. Two papers by Williamson that are accessible to a lay reader are “The Theory of the Firm as Governance Structure: From Choice to Contract,” Journal of Economic Perspectives 16, 3(2002): 171–195, and “The Economics of Governance,” The American Economic Review 95,2(2005):1–18. Both Coase and Williamson have been recognized with the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their work in this area. Information about Coase and Williamson and summaries of these articles can be found at http://tinyurl.com/yaa7n3h9 and http://tinyurl.com/ybq272yu.
The exhibit on job design is modified from Managerial Economics and Organizational Architecture by James Brickley, Clifford Smith, and Jerold Zimmerman.
Exhibit 1.5 is based on an earlier figure done by Tom Pierson.
Eugene Fama and Michael Jensen’s work is used as basis for the discussion on decision management and rights in “Agency Problems and Residual Claims,” Journal of Law and Economics 26(1983): 327–349. Fama was recognized with the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel; information about him can be found at http://tinyurl.com/y7zyxb9y
The discussion on articles and bylaws comes from a variety of conversations with cooperative attorneys over the years, but my colleague, attorney David Swanson, has had the most impact on me in this discussion.
Information on legal statutes on cooperatives can be found at tinyurl.com/y8e8crw2
There are a number of sources for roles and responsibilities for directors. Probably the most succinct can be found at tinyurl.com/y74c86x2.
A broad introduction to cooperatives is available at tinyurl.com/y8lyhgw8. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/02%3A_Cooperatives_and_Mutuals_are_Firms/2.04%3A_Cooperatives_are_an_Example_of_a_Closely-Held_Firm.txt |
The U.S. Department of Agriculture defines cooperatives as “user-owned and controlled business from which benefits are derived and distributed equitably on the basis of use.” This definition implies that cooperatives are owned by users who are customers. These users are also members, in general, and because they derive the benefits of membership, they are also called patrons because the economic benefits derived from the business done by them as a customer of the cooperative—referred to as patronage—are distributed proportionately based on that patronage. This gets complicated! Being a customer implies that you are also a patron (participate in economic benefits), owner (participate with equity investment), and member (participate in setting policies and governance). The overall purpose of a cooperative, which is often embedded in its mission statement, is to meet the needs of the customer using the cooperative. Patronage, ownership, and control are means to the end. The International Cooperative Alliance (ICA) defines cooperatives as, “an autonomous association of persons
united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.” This definition is wider than the U.S. Department of Agriculture definition in that it encapsulates social and cultural purposes for cooperatives. Another way to think about the relationships implied in this definition is to consider how members participate in the cooperative. Cooperatives and mutuals are participatory organizations.
03: Cooperatives and Mutuals are Participatory Organizations
A principle is described as a governing law of conduct, a general or fundamental truth, or a comprehensive or fundamental law. Many state cooperative incorporation statutes reflect principles. Many laws are based on a state’s view of appropriate principles. For example, one widely supported principle is democratic control. In some people’s views and according to some state laws this means “one member, one vote” with regard to control. For other people and state laws it means voting by members where voting power per member may include voting proportional to use of patronage
Substantial flexibility exists in following practices that help achieve the objectives of the business while simultaneously remaining compatible with the cooperative definition, principles, and policies, and recognizing the need to achieve an economic purpose. However, guidelines that are called cooperative principles are generally applicable to all cooperatives and are compatible with the definition of a cooperative and its ability to provide the benefits desired by members who are customers. Many of these principles have their roots in early cooperatives formed in the United Kingdom in the early 19th century.
HEALTH CARE COOPERATIVES are a lot like mutual insurance firms in that their objective is to pool risk across its members and provide health care with lower fees. Examples of health care cooperatives include HealthPartners and Group Health Cooperative.
3.02: Participation in Benefits
Customers who use the cooperative or mutual are expected to share in the economic benefits derived from their business with it. These benefits may include an overall cost effi-
ciency or bargaining power through the vertical extension of a farming operation or household through the cooperative; the opportunity to buy from the closed supply channel or sell to the closed marketing channel; and the benefits of competitive markets arising through the role of the cooperative’s competitive yardstick. Many of these reasons are embedded in business strategies designed to improve a farmer’s income by lowering production and transactions costs to improve market power and lower the variability of annual net farm income. The move to closer supply chains built on market or production contracts has resulted in greater differentiation by cooperatives which are using business strategies to add value to a farmer’s products.
For most consumers and producers, however, the most tangible economic benefit is the opportunity to share in any distributions of income from the cooperative based on the proportional share of business done as a member of the cooperative. These are commonly referred to as patronage refunds or per unit retains, which is why customers using the cooperative are often called patrons. Doing business on a patronage level with customers implies that the supply or marketing channel is closed because cooperatives are, respectively, supplying products and services to only customers using the cooperative or only marketing the products and services of these users. A cooperative may have customers who may not have a membership in the cooperative because they do not legally qualify (e.g., a government entity) or because they do not wish to have a membership
A WORKER COOPERATIVE is a business entity owned and controlled by members who are laborers and work in the business. The number of workers is defined and linked with a physical measure such as hours worked. The cooperative may have laborers who are not members, and the CEO is not a member. An upfront equity investment is needed before a worker can become a member, and patronage refunds are based on hours worked. Probably the oldest and most studied worker cooperative is the Mondragón Corporation in Spain, which is a cooperative whose members are other worker cooperatives.
(e.g., a customer from another geographic region who makes a purchase at a food cooperative). | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/03%3A_Cooperatives_and_Mutuals_are_Participatory_Organizations/3.01%3A_Cooperative_Principles_and_Policies.txt |
As members, customers who use the cooperative are expected to have ownership in the cooperative. In economic terms, this means that the equity of the cooperative is owned by the members. The easiest way to think about equity investment is direct investment through purchase of equity shares. As discussed in the next chapter, most members accumulate equity investment through the retention of patronage refunds or per unit retains in a year, which may be redeemed in the future subject to policies set by the board of directors. This is why customers are often called equity holders. The equity can only be properly valued upon liquidation, an outcome the cooperative members do not intend to have happen as long as the cooperative is achieving its economic purpose and satisfying its customers.
3.04: Participation in Control
Customers participate in control by setting policies, including the governance structure of the cooperative. These policies are embedded in the bylaws of the organization, which include 1) classes of membership and their qualifications, 2) the governance system, including the role and responsibilities of the board of directors and how they are elected, and 3) rules for certain
A number of dairy cooperatives manufacture cheese, butter and powdered milk. All sugar beets are processed through sugar beet cooperatives such as American Crystal Sugar. Nor-Pac processes vegetables into canned and frozen packages. Minnesota Soybean Processors crushes soybeans into co-products such as oil and meal and manufactures soy-diesel.
actions such as annual meetings, bylaw amendments, or dissolution. Members who are eligible to vote are called voting members. Membership in a cooperative implies that a customer has applied and been accepted by the board of directors as a member of the cooperative. Different cooperatives have different rules on membership but, in general,
Ace Hardware and True Value Hardware are WHOLESALING COOPERATIVES which are independently-owned hardware stores. They are able to negotiate better prices, purchase much larger volumes of hardware and related products, and distribute them to their members, who could not obtain these savings on their own. A number of fast-food restaurant franchise owners have formed purchasing cooperatives, including United Foodservice Purchasing Cooperative, which is owned by Yum! Brands franchise operators, and Independent Purchasing Co-operative, which is owned by Subway franchisees. Independent grocers have formed purchasing cooperatives such as Associated Wholesale Grocers and Wakefern Foods.
cooperatives tend to have a low threshold on membership qualifications. In many cases, cooperatives use a one member, one vote principle, which is often called democratic control. Control is typically evidenced by the ownership of a share of common stock in the case of a stock cooperative, or by a certificate of membership in the case of membership or non-stock cooperatives. Cooperatives thus use a voting process to select directors for the board or make changes in their articles or bylaws; this differs from a non-cooperative corporation, which is based on investment ownership (as described in Chapter One).
3.05: Principles of Cooperation
The U.S. Department of Agriculture defines the three principles of cooperation as user-owner, user-control, and user-benefits. Users must own and finance the cooperative and are responsible for the control of the cooperative, and benefit from their use of the cooperative. Note that these are all joint decisions, That is, becoming a member of a cooperative to participate in the benefits also means participation in ownership and control.
Some customers of a cooperative do not participate in these three roles, but do business with the cooperative as a non-member. The percentage of
non-member business is quite small in most cooperatives because boards of directors recognize that these members are free riders in the sense that they benefit from the cooperative’s presence in the market place but are not members. Thus, cooperatives tend to use pricing strategies that discourage producers from not being members. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/03%3A_Cooperatives_and_Mutuals_are_Participatory_Organizations/3.03%3A_Participation_in_Ownership.txt |
Firms such as cooperatives are formed through collective action by individuals to solve a common problem. Cooperatives work best when the solution created by collective action leads to benefits being provided only to members, and when these benefits are unique. In doing so, the cooperative is often formed because the costs of the Make or Buy decision are lowest if the rights of ownership are assigned to those who use the cooperative as a customer. Some cooperatives may be examples of social entrepreneurship in that they help solve social, cultural, or economic issues. Most cooperatives are formed to address an economic objective or purpose. Because cooperatives are composed of members, however, there is often a social purpose many members desire in being a member of a cooperative. This is no different from the reason why people join social clubs such as country clubs or professional trade associations.
A MARKETING AGENCY-IN-COMMON is a cooperative whose members are other cooperatives who have joined to jointly market the products of all members. The rationale for doing so is that the costs of each co-op individually developing and marketing an industrial or consumer product can be significant. Typical marketing agencies-in-common exist for products such as sugar beet co-products or dairy products.
This social and sometimes cultural purpose is often linked with the formation of a cooperative. Examples of these social purposes might be ethnicity, geography, or religion. Rural utility cooperatives were formed based on geography. Credit unions were formed around a common bond such as geography, and fraternal benefit societies often had a common bond of religion or ethnicity. Food cooperatives often include members who want to patronize locally-owned businesses and have a desire to be part of something in their community. All of these are mechanisms to collectively organize for mutual benefit. Cooperatives are a means to an end, which is meeting the needs of users. The social purpose of cooperatives can best be met by ensuring that the cooperative understands and succeeds in its economic purpose.
BARGAINING COOPERATIVES negotiate with processors and other first handlers for a collective price and terms of trade for their members. These cooperatives represent contract growers selling to processors, or growers performing production management functions for corporate integrators. Examples include many dairy cooperatives who bargain in milk marketing orders. Other bargaining cooperatives include the California Canning Peach Association, Prune Bargaining Association, Walnut Bargaining Association, Olive Council Growers Council of California, California Tomato Growers Association, and Raisin Bargaining Association.
Cooperatives that quickly understand their commonality of purpose (based on an economic purpose for their members) and position themselves on that purpose are able to create long-lasting value to their members.
Cooperatives are often formed by a desire to improve something. For example, many farm input supply or marketing cooperatives were formed by individuals who wanted to see reform in agrarian economy and were associated with the Populist, Farm Bureau, Farmers Union, Grange, or Equity movements
Cooperatives that supply products to consumers, farmers, and businesses are often formed to obtain the economic advantages of purchasing supplies or providing services in bulk and passing along the volume discounts to their members. In doing so, the members are vertically integrated “backwards” through the cooperative. For example, farmers may not be able to finance agronomy equipment that is needed to apply crop protectants seasonally or purchase crop nutrients at a favorable price because their individual volumes are too small. Forming a cooperative that can obtain the economic benefits of purchasing size and scale has value to these farmers. Similarly, consumers may wish to purchase certain types of food products such as organic or locally-grown, and do so through a food cooperative. Services such as electricity or credit are more cost effective for a cooperative to provide than for a consumer or producer to obtain on their own.
ELECTRIC UTILITY COOPERATIVES exist in most rural areas as, to a lesser extent, do telephone cooperatives. Electric utility cooperatives were developed in the 1930s to provide electricity. In the 21st century, many are providing internet capability through satellites or broadband. Cooperatives have been formed to provide recordkeeping services and testing of milk through dairy herd improvements associations.
Marketing the output of a consumer, farmer, or business enables a cooperative to obtain premiums associated with volume, and members are integrated “forward” from the cooperative. The same is true for services. In addition to volume premiums, cooperatives can provide services such as constructing storage for a farmer’s feed grain or oilseeds. Members may also integrate forward by forming a corn-ethanol cooperative to market their corn or a soybean crushing plant to process soybeans into oil and meal products.
A HOUSING COOPERATIVE owns the land, facility, and common areas such as indoor or outdoor recreational equipment and common meeting space. Members buy a share in the cooperative, which is an ownership interest in a unit within the housing cooperative. There are many different types of housing cooperatives. Members pay a monthly fee for budgeted expenses such as operating costs and capital investments to maintain the cooperative’s assets.
The same is true for marketing information such as supply variables (including the bearing age of trees and vineyards, rate of tree pull outs and replantings, and varietal selection of fruits and nuts) and adoption rates for mechanization technologies; these are useful for bargaining cooperatives that negotiate a price for a crop such as peaches.
As discussed earlier, this integration decision is called the “Make-orBuy Decision.” Strictly speaking, members of cooperatives are not vertically integrated through a cooperative because there is no common ownership of the farm or household by the cooperative. Nevertheless, there is collective ownership of the cooperative and alignment of the cooperative business model with the consumer or farmer.
Many agricultural marketing cooperatives were formed to help pool risk from all producers and manage this risk within the cooperative. In the northern hemisphere, for example, a marketing year generally starts September 1 or October 1 in one year and is finished 12 months later, on August 31 or September 30. The crop is harvested in September or October, and over the course of the year the value of the crop becomes known as the cooperative discovers its value during the marketing year. Because many agricultural products are perishable, the price is always lowest at the beginning of the market year when supplies are greatest and tend to increase over the marketing year as the supply decreases and more information (e.g., quality) is known about the crop. The cooperative bears the price and quality risk by purchasing the farmers output at the beginning of the marketing year, and pays the farmer a competitive price at harvest. The members finance the capital needed by the cooperative to build storage and processing assets to add value to the crop throughout the marketing year.
Most farmers cannot manage this price risk on their own and instead manage it through their membership in a cooperative. In doing so, they also obtain additional marketing margin, and have increased bargaining power to countervail the bargaining power held by buyers who could buy the crop at its lowest price at harvest when supplies are greatest, and to manage the crop inventory throughout the year to obtain more favorable prices. As consumers or farmers integrate backwards or forwards, the cooperative becomes the competitive yardstick in an industry. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/03%3A_Cooperatives_and_Mutuals_are_Participatory_Organizations/3.06%3A_Formation_of_Cooperatives.txt |
Cooperatives are participatory organizations in that customers participate in ownership, control, and benefits. As such, a cooperative is a closed marketing channel. Each of these participatory roles carries responsibilities. Membership in a cooperative has implications for benefits and responsibilities, use of the cooperative, and the transactions undertaken with it. Thus, cooperatives are uniquely structured to: 1) distribute benefits such as patronage in proportion to use, 2) align their business strategy on their customers who are selected to the board of directors to control the cooperative, and 3) make decisions based on the long-term goals of their members who own the cooperative.
The cooperative business model exists in many industries around the world. Cooperatives have unique common bonds that underlie their formation and often have an economic and social purpose. Principles of cooperation are embedded in state incorporation statutes that underlie the charter of a cooperative, which includes its articles of incorporation and bylaws, which are based on historical use. The benefits of participating with a cooperative and its social purpose are likely the easiest to explain relative to the benefits of participating in ownership. Thus, constant education is needed with members who are customers. Cooperatives were formed because there were economic reasons why it was easier to vertically integrate forward or backwards for all of the cooperative’s members. There are many reasons why cooperatives form but, in a broad sense, the cooperative is able to obtain volume discounts and pass those discounts back to members, or to obtain volume premiums and market members’ products throughout the marketing year to obtain better prices for larger volumes of similar quality. The concept of a marketing year is crucial in understanding the operations of agricultural cooperatives.
3.08: References
The discussion of cooperative formation begins with concepts from Mancur Olson’s classic book The Logic of Collective Action.
Additional information on cooperatives as participatory organizations can be found at tinyurl.com/ycvp2wnz.
The notion that a cooperative acts as a “competitive yardstick” is associated with Edwin Nourse, and is described in “The Place of the Cooperative in Our National Economy,” available at http://tinyurl.com/yazt5377. The discussion on principles and policies is adapted from David Barton’s chapter in Cooperatives in Agriculture, David Cobia, ed., 1989.
The fraternal benefit society’s discussion is taken from Jim White, a former doctoral student of mine, and can be found in “Fraternal Benefit Societies,” Journal of Cooperatives 31(2016):1-31, available at http://tinyurl.com/yaxpx237. I have benefited immensely from conversations with Chris Kopka on this topic.
There is a great deal of information on the “Rochdale Pioneers;” my discussion comes from Weavers of Dreams by David Thompson, which can be found at http://tinyurl.com/yb7xb2sk and Brett Fairbairn’s The Meaning of Rochdale, available at tinyurl.com/y7hampak.
Much of my exposure to worker and housing cooperatives come from Tom Pierson, who has researched and studied worker cooperatives in depth.
The history of loyalty programs and clubs comes from a variety of sources and there is no one single reference piece that I am aware of now.
The USDA definition of a cooperative and of the three principles of cooperation were created in the early 1980s by a national task force of cooperative scholars, and have been widely disseminated. One place to find them is the USDA Cooperative Information Report 11 entitled “Co-op Essentials: What They Are and the Role of Members, Directors, Managers, and Employees,” which can be found at http://tinyurl.com/ycvp2wnz. The ICA principles in relation to these principles can be found at tinyurl.com/y93j4zg2.
The marketing year has been well studied. My earliest exposure to it was through publications read in graduate school and authored by agricultural economists associated with the Giannni Foundation of Agricultural Economics and based at the University of California campuses at Berkeley and Davis. Much of this work was later summarized in a chapter by Richard Sexton and Julian Alston entitled “The Giannni Foundation and the Economics of Collective Action in the Marketing of California Farm Products,” which was published in 2009 in Foundation Contributions to California Agriculture, and is available at http://tinyurl.com/ybonm6wp.
The information on commonality of purpose is presented in many previous textbooks on cooperatives. The examples cited are ones used by my colleagues Chris Kopka, Tom Pierson, David Swanson, and myself in a class we teach in the University of Minnesota Law School.
Very little has been formally written about mutualism within the context of mutual insurance. The information presented here comes from discussions with my colleague Chris Kopka as well as work done with Jim White. One of his essays on a certain type of mutual can be found in a joint publication in “Minnesota Township Mutual Fire Insurance: Determinants of Survival, 1974–2010,” Journal of Cooperatives, 28(2014):1-26, available at http://tinyurl.com/ydg9q3ft.
There appears to be no one who has articulated the neoclassical economic theory of mutualism; it would be a good research topic for a graduate student | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/03%3A_Cooperatives_and_Mutuals_are_Participatory_Organizations/3.07%3A_Summary.txt |
The first chapter described the features shared by cooperatives and mutual and non-cooperative corporations, while Chapter Two discussed features that are unique with regard to how members participate in benefits, control, and ownership. This chapter focuses on participation in benefits and how cooperatives distribute income, because that is how most members think about their membership in a cooperative. Cooperatives and mutuals must be competitive like any business and aligned on customer needs. They must be managed as businesses that can compete in a capitalistic and highly competitive market economy. Many cooperatives operate simply to allow producers to achieve economies of scale and increased bargaining power in purchasing inputs and marketing their commodities. The same can be said about consumer cooperatives and mutual insurance firms.
Irrespective of its purpose and role, a cooperative should strive to be as profitable as possible and then distribute those profits to its patrons. A core principle of the cooperative and mutual business model is service or operation at cost. This does not imply that the cooperative or mutual should set prices to eliminate the opportunity for a profit. Instead, a cooperative should implement this principle by being competitive in the market place, making as much profit as possible, and then distributing profits and residual cash to patron-owners. Profits should be distributed in a way that maximizes the long-run benefits to members, keeping in mind that members have heterogeneous interests due to their unique places in their business and personal life cycles. This distribution of patronage refunds or per unit retains implements the service at cost principle of cooperatives. Patron-owners get what is left over through a combination of cash patronage payments (e.g., immediate redemption), cash equity redemption payments, and cash payments of net marketing proceeds. A member’s life cycle encompasses their use as a customer of the cooperative, which differs as they age and begin, expand, or contract their business or household.
As mentioned in Chapter Two, cooperatives are participatory organizations. Two of the three ways that members participate include benefits and ownership. The easiest way to understand these concepts is to observe their impact on the income statement and balance sheet. The three ways in which members participate in a cooperative comprise an interrelated set of decisions that influence each member and provide unique challenges for boards of directors and management to develop a business strategy that takes into account the impacts on a cooperative’s balance sheet.
04: Income Distribution and Equity Decisions
Cooperative firms are unique in that they create equity when they pay patronage refunds in the form of common stock, and they destroy equity when they redeem previously issued equity for cash. Cooperatives should actively manage their balance sheet when making decisions on income distribution and equity redemption. A cooperative must position and protect the business for short-run and long-run sustainability by adhering to a balance sheet management philosophy that manages both liquidity and solvency. Adequate risk capital must be provided by retaining and managing equity as an element in the overall business strategy. Then the cooperative should pay out to patron-owners any residual cash as cash patronage refunds and equity redemptions. As discussed in Chapter One, owners, as residual claimants, get what is left over in any business.
The evaluation and choice of alternative strategies must be done within an integrated and comprehensive finance, strategy, and risk management framework. For cooperatives, this should include both the patron-producer or patron-consumer perspective and the cooperative business perspective. In other words, a cooperative can be viewed as an extension of the patron’s business, such as a farm or house, or as an independent firm that attempts to prosper in a market economy. Both perspectives are important.
Most members of agricultural cooperatives are unique in that they seek to remain farmers in their own geography. That is, a member will not typically sell their farm and move to a geographic region or country to begin farming again. With that in mind, a member utilizes a cooperative to receive goods and services at a lower cost than they could by doing it themselves. Thus, a cooperative should align itself on the needs of its customers who are its members and owners, and help make them profitable and cost efficient so they can achieve the goal of remaining farmers in that geography. Many remain in multi-generational farming families and patronize the cooperative over generations.
Generally accepted accounting principles (GAAP), and the basic structure and rationale of income, cash flow, statement of changes in equity, and balance sheets look the same for cooperatives as for other business
entities. However, cooperative principles are embedded in these statements just like in legal statutes. They reflect the nature of transactions being done with members. It is important to have an understanding of accounting and finance to fully understand how a member participates in benefits and ownership. A good way to do this is to understand the impact of the economic transaction a member does with the cooperative as a customer, and observe its impact on the income statement and balance sheet. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/04%3A_Income_Distribution_and_Equity_Decisions/4.01%3A_Introduction.txt |
The income statement begins with gross receipts which, for a farm supply or consumer food cooperative or service cooperative, are the sum of all products or services sold by the cooperative multiplied by their respective prices. In the case of a marketing or pooling cooperative, this is the sum of all products bought from the members and sold at the competitive market price. For a processing cooperative, this is the total sales from, for example, selling corn-ethanol and its co-products or soybean meal and its co-products. Gross receipts was traditionally used because it denoted receipt of value of sales done with members. Many cooperatives have moved to a more traditional language, referring to these as gross revenues or total sales. Costs of Goods Sold or Costs of Sales are variable costs and subtracted from these gross receipts.
For a farm supply cooperative these variable expenses include the costs of buying raw material products such as crop nutrients, seed, and crop protectants; energy products such as refined fuels and propane; raw material inputs such as corn to manufacture animal nutrition products; and the technology and labor needed to provide services associated with these products. An electrical utility cooperative has similar costs in purchasing electricity and supplying that electricity, whereas a consumer food cooperative has variable costs in purchasing food products and merchandising that food to members. Note that the conversion of these raw material inputs into a product purchased by producers and consumers is a production function or technology.
The difference between the gross receipts and these variable costs is often called Gross Margin or Gross Profit Margin. Virtually all cooperatives develop a pricing strategy based on operating at a fixed margin per unit because they are “price takers,” so the Gross Margin is an important measure to understand, and it does not change regardless of changes in input or output prices, which change the value of total sales. Operating costs, which are fixed in nature, must be subtracted from this margin. These costs are typically selling and administrative costs, which are typically salaried employees(with benefits) whose wages cannot be attributed directly to the product or technology sold by the cooperative. These costs also include purchase of new assets such as equipment.
The difference between Gross Margin and Operating Expenses is Operating Income, which includes interest income received by the cooperative, finance charges from operating loans made to members (Patron Finance Charges), and any other expenses or revenues received by the cooperative. Cooperatives often do business with other cooperatives and receive Patronage Refunds as income. The difference between these items and Operating Income is called Patronage Refunds. Sometimes the phrase net savings, net margin, net proceeds, or net surplus is used to denote any income left over after the cooperative has received all of its revenues in that year and paid all of its costs in that year. The correct terminology, however, is Patronage Refunds, also called patronage dividends, which are amounts paid to patrons from the net income of the cooperative on the basis of quantity or value of business done with these members. These refunds can be made in cash or retained as equity in the cooperative. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/04%3A_Income_Distribution_and_Equity_Decisions/4.02%3A_Income_Statement.txt |
A balance sheet summarizes the book value of the assets of a corporation; its liabilities, which are debts that must be repaid; and the member or owners’ equity or net worth. The accounting identity is that the assets must equal or be balanced by the sum of liabilities and owners’ equities. The assets on the cooperative’s balance sheet looks much the same as for a non-cooperative corporation, but there is one key difference: Investments in Other Cooperatives reflects any equity a cooperative has in another cooperative. For example, a cooperative that borrows from a cooperative lender such as CoBank has equity in CoBank. This equity comes from the patronage refunds retained by CoBank as equity. It is an asset on the balance sheet for the cooperative and equity on the balance sheet for CoBank. Patron Refunds Payable is a liability a cooperative must document to account for the cash portion of patronage refunds that are being paid to members. This term is Dividends Payable in a non-cooperative corporation.
The members’ equity section of a cooperative’s balance sheet is the biggest difference in terminology relative to the non-cooperative corporation. Common Stock or Membership Fees is the value of the membership fee paid by each member. These are fees for a share of purchased common stock in a stock cooperative or the value of membership certificates in the case of a non-stock cooperative. Allocated Equity, sometimes called Patronage Ledger Credits, Retained Refunds, Capital Retains, or Revolving Capital, is the value of the patronage refunds retained by the cooperative equity. The word allocated is used to denote that this is equity, which has been allocated to the member on the basis of patronage. Unallocated Equity, which can be thought of as unallocated, retained earnings, or Unallocated Reserves or Surplus, is equity not allocated to the member based on patronage. For most cooperatives, this is non-patronage income or any other income on which the cooperative has paid corporate income tax. In a worker cooperative, this is called Collective Account. All of this is Retained Earnings in a non-cooperative corporation. Some food and farm supply cooperatives issue purchased stock, which is Preferred Stock, but this is an uncommon practice.
Organizations such as school districts or similar government organizations may not be eligible for membership in a cooperative. Similarly, some agricultural cooperatives may not be able to extend membership to non-farmers. The cooperative, however, can provide patronage refunds based on their patronage levels. This is common in cooperatives with an energy business unit.
4.04: Choices on Distribution of Patronage and Non-Patronage Income
A board of directors hires an auditing firm to conduct an audit. As part of the audit process, the board is informed as to the dollar value of income derived from business done with members on a patronage basis and the dollar value of income derived from business that was not done on a patronage basis. The board, with input from management, has to decide how to distribute these two types of income, and has many options from which to choose.
The easiest decision is the distribution of business that is not derived from patronage done with members. An example of this might be purchases done at a convenience store, such as fuel or in-store purchases. The cooperative owns the convenience store and members may do business there on a patronage basis, but it would be expected that nonmembers do business there as well. This income from nonmembers is not derived from
patronage and is consequently the same as income of a non-cooperative corporation. Thus, the tax treatment is the same. The cooperative pays corporate taxes on this income and retains it as equity in the form of retained earnings in the same way as a non-cooperative corporation. In this case, the cooperative retains it as Unallocated Equity. A board could choose to distribute this income to its members as dividends just like a non-cooperative corporation would do. In that case, the income would be taxed twice—as corporate income and as individual income. A common practice by boards of directors is not to allocate this nonmember income and to retain it as equity.
The board has many choices on how to distribute income derived from members on a patronage basis. The goal is to implement the service at cost principle because that is how the member participates in the benefits from the cooperative. These Patronage Refunds are allocated distributions of net income to members in proportion to the value or quantity of their patronage. The distribution process is often referred to as the allocation decision. Allocating income to members as patronage refunds is especially compelling for income that arises from patronage business with members. The board must make a decision on how to allocate this income in the form of Patronage Refunds.
UNALLOCATED EQUITY is sometimes referred to as permanent capital and is similar to retained earnings in a non-cooperative corporation because it is permanently on the balance sheet as equity until the corporation is dissolved. It is equity which will never be subject to redemption by the board of directors, while their allocated equity may be redeemed. The amount of unallocated equity, as a percentage of total equity, has been increasing in most cooperatives in recent years for a number of reasons, which include advice from cooperative lenders who are required because of financial regulations to have additional permanent capital and are requiring the same of their members. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/04%3A_Income_Distribution_and_Equity_Decisions/4.03%3A_Balance_Sheet.txt |
A board’s choice must take into account the business units of the cooperative. Consider a cooperative that has one line of business, which is buying milk from its members and manufacturing it into liquid milk and some butter or cheese products for consumer consumption. Member are vertically aligned with the cooperative in one way through milk from their cows. The cooperative is using one raw material product, milk, to create several types of products. As such, it is reasonable to assume that the cooperative agrees to pool all of the income derived from the sale of these products into one patronage pool. All dairy producers share equally, despite the fact that milk from different members might have different end uses. This is equitable from the members’ perspective because the overall operation of the plant has similar costs of processing the raw material product into different end uses. Each member thus participates equally because of the similar costs of manufacturing the milk into processed products.
The physical unit of raw material, pounds of milk, is easy to measure, and the cooperative would link the patronage refund with the quantity of milk each member sold to the cooperative.
Many cooperatives have just one line of business and it is relatively easy to treat each member equitably by pooling income from all products into one patronage pool and, thus, into one level of allocation. Some cooperatives, however, particularly in the farm supply business, have multiple lines of business including supply of products such as crop nutrients, crop protectants, animal nutrition, refined fuels and related energy products, and various services associated with agronomy, grain and oilseeds, and energy.
Each of these products and services has differing costs and net margins, and there are different risk profiles associated with each product based on the tools available to the cooperative. In addition, not every member needs or purchases all of these products and services, and many supply cooperatives also market a members’ feed grains and oilseeds. It thus makes sense to create multiple patronage pools in order to be equitable with each member in allocating income from that line of business to the member
In this example, the physical units are different. Crop nutrients are sold and measured in tons, crop protectants and refined fuels are measured in gallons or liters, and grain and oilseeds might be measured in bushels or tons. Furthermore, services are often bundled with the sale of the product. A cooperative might have one price for nitrogen fertilizer and application services and a different price for the purchase of that fertilizer alone. All of these products likely have different costs and different net margins per physical unit, and there is likely sharing of variable costs such as labor and fixed costs such as management. A members’ participation in the benefits from each product may thus be difficult to determine. Some products may not have physical units such as a farm equipment tires or credit (in the case of a financial services cooperative). In such a case, the board would typically create a patronage pool based on total value rather than physical units, and patronage allocated to the member could be linked with the members’ proportion of the total value of these types of products. The board may elect to allocate some of the income derived from members’ patronage into unallocated equity. In doing so, the cooperative must pay corporate taxes on that income. This choice is not common, but may be used if the board decides it needs that equity on its balance sheet.
In summary, the board of directors, based on input from management, makes a decision on the distribution of income. In doing so, it has several choices on handling patronage-sourced and non-patronage sourced income. Virtually all cooperatives choose to pay corporate taxes on the non-patronage sourced income and retain it as unallocated equity. On patronage-sourced income, the board decides how many patronage pools to operate and how to distribute income from those pools to members. These choices can be thought of as dividing the income into corporate taxes, patronage refunds, and retention as unallocated equity. The board should do what is in the best interest of the member which is to maximize the after-tax income available as patronage refunds. Operationally, what boards tend to do is retain the non-patronage sourced income as unallocated equity by paying corporate taxes upon it and distribute the patronage-sourced income as patronage refunds. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/04%3A_Income_Distribution_and_Equity_Decisions/4.05%3A_Patronage_Income_Distribution_Choices_and_Cooperative_Business_Units.txt |
When patronage refunds are properly made in accordance with U.S. Internal Revenue Service tax regulations, they are referred to as qualified and are deductible for corporate income tax purposes. Thus, cooperatives do not pay corporate taxes which are based on income on qualified patronage refunds. As described earlier, a non-cooperative corporation is taxed twice—at both the corporate and individual level—upon distribution of dividends. The majority of boards of directors choose to allocate patronage-sourced income as a qualified distribution.
A board of directors may choose to allocate the patronage-sourced income as nonqualified patronage refunds. This is the reverse of distributing patronage refunds as a qualified distribution in that the cooperative pays the corporate income tax on a nonqualified patronage refund. The member does not pay income tax on this patronage refund until it is received in cash from the cooperative. Single taxation continues to exist with nonqualified refunds.
The patronage-sourced income not paid in cash is called a retained patronage refund, which is the noncash portion of qualified or nonqualified patronage refunds. These patronage refunds are placed on the balance sheet as allocated equity and members are notified in writing of the value
of these patronage refunds allocated but not paid in cash. Remember that the accounting identity states that equity is equivalent to the difference between assets and liabilities. Thus, these retained patronage refunds represent investments in new assets or reinvestment in existing assets to maintain them in good condition to provide the products and services desired by members to satisfy them as customers. Remember also that total equity is the sum of allocated equity and unallocated equity. Historically, boards of directors have chosen to have as much of their equity as possible in allocated equity relative to unallocated equity, although in recent years boards have chosen to increase their unallocated equity.
4.07: Equity Redemption Program Choice Has Implications for the Balance Sheet
Patronage refunds retained by a board of directors may be redeemed in the future if the board decides it no longer needs that equity. Allocated equity is created through retention of patronage refunds, while redemption of retained patronage refunds can be thought of as destroying allocated equity. This has implications for a cooperative’s balance sheet.
There are two situations in which a board must have a policy to handle retained patronage refunds. The first is when a member stops being a member. Cooperatives universally operate on the philosophy that if a member stops being a member, any equity that member has in the form of retained patronage refunds should be redeemed. In general, consumers are no longer members of a cooperative if they move geographically from the community or some period of time elapses in which they no longer patronize the cooperative. Farmers are no longer members of an agricultural cooperative if they retire or exit their farming operation. Obviously, consumers and farmers are no longer members when they die. The second situation is a determination of much equity is needed by the cooperative. If a cooperative continues to create allocated equity each year by retaining patronage refunds, the cooperative may have excess allocated equity that may not be needed for asset investment or replacement of existing assets.
Boards of directors have set up various practices to handle these situations. First, a board must determine whether it has the ability to redeem this allocated equity without disrupting its existing loan covenants or asset expenditures. If a member dies, the board of directors typically redeems the allocated equity, which is that member’s retained patronage refund. This might be done monthly or annually. For a member who is alive but no longer a member, the board creates a policy to redeem that equity. A common policy is to redeem a portion of the allocated equity over a period of time, which could be four or five years in the future.
The second situation is where the board considers redeeming retained patronage refunds for a member who is still an active member. Once the board makes the determination that it does not need additional equity, boards must create a policy to handle this situation. The universal practice is to redeem the allocated equity based on the birth year of the patronage refund, with the oldest equity being redeemed first. This practice is fair since there is no dividend being paid on the allocated equity which was created when the patronage refund was retained. There is no trigger to redeem the equity, but in practice, many boards of directors try to manage member expectations by redeeming the retained patronage refunds in a timely manner with a pattern of behavior. For cooperatives that operate on a pooling basis where the deduction of a per capita retain is analogous to the retained patronage refund, these deductions may be significant, and the board seeks to have a rapid redemption period in perhaps five to ten years. In cooperatives where the retained patronage refund may not be as high, a redemption period may be longer. For example, a member of an electrical utility cooperative may have a redemption period of decades, since the member uses electricity for the span of their lifetime. In general, however, boards of directors try to redeem these retained patronage refunds as quickly as possible without compromising the balance sheet.
4.08: Summary
Two of the three ways members participate in a cooperative or mutual are through benefits received and physical ownership. The impacts of
these on an individual member can be seen by observing the impact of the economic transaction between the member and the cooperative or mutual. These impacts can be traced through the income statement and balance sheet, and the decisions of the board of directors who are elected by the members and management are observable. Boards of directors create policies regarding income distribution and equity generation, which are embedded in principles contained in legal statutes and accounting standards. It is important for members to understand these concepts to fully understand the role of their membership in a cooperative or mutual and their impact on the decision-making by the board and management. Members participate in the control of the cooperative by electing directors who make these decisions on ownership and benefits on their behalf.
4.09: References
Some of the material in this chapter is taken from a publication of mine entitled “Cooperative Finance and Equity Management,” which is available at tinyurl.com/y88n2k4e.
I am indebted to David Barton for an introduction to cooperative accounting and finance as I began my academic career. In addition, I have benefited from conversations with Phil Kenkel on various accounting and finance issues. A number of people have written on this topic over the years, and a literature review can be found in “Overview of Research on Cooperative Finance,” Journal of Cooperatives 27(2013):1–14, which is written by David Barton and myself and available at tinyurl.com/yc7xunzl. Jim Baarda, David Barton, David Cobia, Don Frederick, and Phil Kenkel have written widely about equity management and finance decisions by a board.
While the relationship of cooperative principles to legal and tax statutes has been widely discussed by many cooperative thought leaders, Jim Baarda and Don Frederick have written the most in this area. An example of tax treatment summary may be found in Don Frederick’s “Income Tax Treatment of Treatment of Cooperatives,” U.S. Department of Agriculture Rural Business Services Cooperative Information Report 44, Part I, which can be found at tinyurl.com/y8peseg6.
Thanks to Dan Sumner and Jeremy Murdock at the University of California, Davis, for clarifying which types of olives were alternate bearing. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/04%3A_Income_Distribution_and_Equity_Decisions/4.06%3A_Choices_on_Tax_Liability_of_Patronage_Refunds.txt |
The previous chapters discuss cooperatives as firms, member participation in cooperatives or mutuals, and how participation is carried out through a cooperative’s financial statements and board decisions. This chapter introduces a number of current topics in cooperation and mutualism.
05: Special Topics in Cooperatives and Mutualism
Communal ownership of agricultural land exists in different places in the world. One well-known example is the kibbutzim in Israel, which collectively owned agricultural land and were governed much like a cooperative. Hutterite colonies in North America follow a similar process, with the exception that women have no role in governance. Communal ownership of land did exist in Eastern Europe and the former Soviet Union with the collectives and communes. Members, however, did not participate in governance, so strategic decisions such as what to plant and what machinery to purchase were not made by the board in a manner associated with democratic control. Furthermore, the development of these structures was not voluntary. Other countries with communist or socialist governments experimented with similar type structures during the 20th century.
5.02: Economic Impact of Cooperatives and Mutuals
The University of Wisconsin at Madison conducted a multi-year research project to document the economic impact of cooperatives, including mutuals, in the U.S. economy. This extensive and well-done research has resulted in greater understanding of the role cooperatives play in the U.S. economy. For the year 2013, they report that nearly 30,000 U.S. cooperatives operated at 73,000 places of business throughout the country, with more than \$3 trillion in assets generating over \$500 billion in gross revenues. The study reported almost 340 million consumer co-op memberships and another 10 million agricultural cooperative memberships.v
5.03: The Role of Faith in Cooperative Development
Religious neutrality has been a hallmark of cooperative principles regarding membership. Despite that, various faith-based organizations have played key roles in several countries with the development of cooperatives and mutuals. For example, the Catholic Worker Movement helped form manufacturing type worker cooperatives in the greater Mondragón region in Spain. Similarly, in the Emilia-Romagna region in Italy, the Catholic Worker Movement helped form a broad collection of consumer cooperatives engaged in various retail businesses. The Knights of Columbus is based in Catholic parishes and provides a strong set of community-based volunteer efforts. Thrivent Financial was formerly a fraternal benefit mutual insurance with membership limited to Lutherans. It has since broadened its membership to a broader set of Christians and is active in community volunteerism, especially Habitat for Humanity.
5.04: Summary
Cooperatives and mutual continue to thrive globally. These forms of collective action are not the solution to every economic or social problem. Changes in how various forms of collective action utilize these models is to be expected and, as discussed earlier, cooperatives that move from strictly a social purpose to an economic purpose tend to succeed over time. It is important to maintain some social purpose within the collection action to help members understand their membership roles and responsibilities. Periodically, some academics and practitioners become concerned that cooperatives and mutuals are outdated or have lost their way. The measurable evidence is quite clear that this is not the case. Legal business forms change over time as policy and legislation change often in response to tax treatment of income. Mutual benefit organizational forms such as cooperatives and mutuals continue to play an important role in the global economy.
5.05: References
Michael Cook has helped inform many educators and researchers, including myself, by introducing concepts from the organizational economics literature and applying them to the cooperative business model. The discussion on demutualization and reasons cooperatives might fail can be found in his paper entitled “The Future of U.S. Agricultural Cooperatives: A Neo-Institutional Approach,” American Journal of Agricultural Economics 77,5(1995):1153–1159.
Additional information about new generation cooperatives can be found at tinyurl. com/y7akyd8c.
Information on Capper-Volstead is available at tinyurl.com/y8mrz56h
Elinor Ostrom has written widely about common pool resources and how they can be used to solve problems such as collective ownership of forests, irrigation systems, and other similar resources. Her Nobel Prize in Economic Sciences address can be found at tinyurl.com/ybjkd7va.
The University of Wisconsin Center for Cooperative economic impact studies, led by Brent Hueth, can be found at tinyurl.com/yddmon88 | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/05%3A_Special_Topics_in_Cooperatives_and_Mutualism/5.01%3A_Collective_Farming_Movements.txt |
Many countries with market economies have laws designed to ensure certain fair business practices are followed. One practice is to prohibit restraints or attempts to monopolize trade or commerce by businesses. This includes investigation of mergers that might lead to restraints or possible monopolies of trade or commerce. Price fixing is one practice that is illegal. Because farmers are individual businesses, the formation of a cooperative to collectively set a price at which the cooperative might sell the members agricultural products was considered price fixing. Legislation such as the Capper-Volstead Act in the U.S. was created to enable cooperatives to engage in certain practices—to collectively market and bargain, set prices, cooperate with other cooperatives, create contracts with buyers and suppliers, or limit membership. Cooperatives have this exemption only if they have members who are agricultural producers, cannot engage in predatory pricing, and cannot attempt to create a vertical supply curve by engaging in practices to limit the supply of members’ products. These laws are unique to cooperatives. Baseball has a limited exemption from antitrust, and other industries have legal protections for manufacturer-imposed dealings or requirements contracts.
5.07: Use in Agricultural and Community Development Programs
Many international development programs that operate in agriculture and rural development promote the cooperative structure of business. The rationale is that, because of its foundations in principles associated with democracy and collective decision-making, the structure is appealing to economic development at a grass roots level. It has been widely used to create food marketing cooperatives in such products as cocoa, coffee, dairy, and certain types of vegetables, and in many African, Southeast Asian, Oceania, and Latin American countries. Many countries have adopted favorable practices to encourage the development of cooperatives, including public investments in applied research, technical assistance, and studies on the economic impact of cooperatives and mutual insurance firms.
5.08: Pricing Strategies
The cooperative principle of “service at cost” was widely used as an idea of how cooperatives should operate. While it sounds reasonable, its application as a management strategy has problems if taken literally. Some members interpret it to mean that cooperatives should operate as non-profits, with zero or close to zero patronage refunds each year. Others see it as a requirement to follow an average cost or uniform pricing strategy and set the price the same for all of their members, regardless of size or volume.
When cooperatives are first formed, often times the members are considered homogeneous in that the farms are of similar size or scale and with a similar social purpose. Neither of these practices, however, will lead to a cooperative achieving an economic purpose and surviving. In the first case, there will never be any income to reinvest in the cooperative’s assets. In the second case, there is a better and more equitable pricing strategy, which is equal margin pricing, which recognizes that there are differences in providing a product or service and as long as the cooperative charges the same margin per member, volume discounts or premiums are justifiable.
5.09: Why is the Number of Agricultural Cooperatives Declining Worldwide
Much has been written about the declining number of cooperatives and membership in cooperatives, especially in agricultural cooperatives in the U.S. and Western Europe. However, when compared to the number of agricultural producers, data suggest that the number of producers has declined more rapidly than the number of cooperatives. Public data on cooperatives in the U.S. suggests that by far the most common reason for the decline in numbers is mergers or unifications between cooperatives, and this consolidation is expected to continue. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/05%3A_Special_Topics_in_Cooperatives_and_Mutualism/5.06%3A_Limited_exemption_from_antitrust_laws.txt |
Globally, cooperatives have organized themselves in one of three types of membership structures: centralized, federated, and a combination of centralized and federated. There is no right or wrong structure. A centralized structure is one in which members are individuals. This model works well when members are in close geographical proximity to the cooperative, and has the advantage of communication about the cooperative’s purpose and ability to operate as a true democratic form of governance system. Directors are elected from the membership based on geographical districts or chosen at large. Some wholesaling cooperatives have centralized their structure entirely by merging some or all individual cooperative members into one cooperative. In federated cooperatives, each member is a cooperative. This resembles a republican form of government such as the U.S. and its 50 states. Directors are chosen from among the members of the cooperative, can include managers, farmers, or consumers, and often reflect proportional voting based on business volume.
Some wholesaling type cooperatives have a combination of the two structures. There is no right or wrong answer, but members should choose the structure that best fits and communicates the cooperative’s economic purpose, and consider its impact on the three ways members participate in the cooperative: 1) governance (which structure provides the best qualified directors), 2) benefits (which structure creates the best customer transaction and after-tax cash flow to the members), and 3) ownership (which structure creates the best equity structure that takes into account the member’s life cycle and ensures that they are invested proportional to their use in the cooperative).
5.11: Hybrid Cooperative Organizational Forms
Some cooperatives have organized themselves into so-called hybrids by retaining their cooperative governance as much as possible but allowing outside investors to invest in the cooperative. In the U.S., these blend elements of mutual-benefit companies and investor-benefit firms, especially limited liability companies. These are rare in the U.S. relative to traditional cooperatives. In all cases, members control the board of directors with a supermajority and retain the board chairmanship; non-members are allowed on the board of directors. In certain countries in the European Union, legislation states that members of employee unions or management may be on the board of directors.
5.12: The New Generation Cooperative Phenomenon in the United States
The so-called “new generation cooperatives” began occurring in the U.S. in the late 1990s, with producers vertically integrating into processing cooperatives such as corn-ethanol, durum wheat for pasta, sugar beets for sugar and co-products, and other commodities. These cooperatives were referred to as “new-generation” because they differed from previous types of cooperative formation. The membership was defined and linked explicitly through contractual marketing agreements with the capacity of the processing plant. For example, a 50 million gallon corn-ethanol plant might require 18 million bushels of corn. Thus, the cooperative would sell 18 million delivery rights linked with physical units such as bushels, and commit members to physically deliver 18 million bushels of corn.
These delivery rights might require a minimum investment such as 10,000 bushels, in which case the membership would be defined as no more than 1,800 members (18 million bushels divided by 10,000 bushels). The total cost of the processing plant would be determined through a business plan and members would be required to invest up to a certain amount, which might be 70% of the total cost. If this corn-ethanol plant had a cost of \$35 million, then \$24.5 million would be required before the business plan would be implemented. The upfront cost per producer would be \$1.36 per bushel (\$24.5 million divided by 18 million bushels) or a minimum investment of \$13,611 (\$1.36 multiplied by 10,000 bushels). Thus, a member would be entitled to a patronage refund obtained from the processing of corn into ethanol and its co-products.
This patronage refund would be expressed in dollars per bushel and would be the value obtained above and beyond the market price of corn received when the cooperative purchased the corn from the member. A new generation cooperative had a defined membership with defined responsibilities of each member, including a contractual delivery right and corresponding share in control through participation in governance. Data from the U.S. Department of Agriculture suggests that more than 200 business plans were written for investments in processing assets, with less than half actually conducting membership drives for investment and perhaps 75 actually building a processing plant. Sugar beet processing and corn-ethanol plants had government policies, which helped their formation and economic viability. Several others had great success, including U.S. Premium Beef and Dakota Growers Pasta, but they demutualized and were acquired by outside investors. Others, such as South Dakota Soybean Processors and a number of corn-ethanol cooperatives, converted to different forms of closely held organizations. In 2017, there are estimated to be less than 30 cooperatives who have maintained their “new generation” cooperative status.
5.13: Demutualization- A Rare but Often Studied Event in Cooperatives and Mutuals
When members of a cooperative or mutual insurance company decide to sell their cooperative or convert to a publicly-held company, which is referred to as demutualization, it gets a lot of attention. Historically, this is a very rare event, with less than 0.01% of the cooperatives tracked over time by the U.S. Department of Agriculture voting to be acquired by a non-cooperative corporation or to demutualize. Cooperatives that were acquired by other firms include Birds Eye Foods, U.S. Premium Beef, and Dakota Growers Pasta. Examples of demutualization include Diamond Walnut Growers, California Avocado Cooperative, FCStone, and Goldkist. A number of processing cooperatives formed in the late 1990s and early 2000s converted from cooperatives to limited liability partnerships because of tax issues; these are not demutualizations since they are still held by members. Common reasons why cooperatives may experience internal conflict among their membership include free ridership, differing time horizons among members with regard to investments in long-term assets, differing tolerance for risk among asset investments, issues in control with regards to information between management and members, and influence costs as the complexity grows in an organization with more lines of business units. These problems are more likely as a cooperative becomes larger and more complex. Despite these issues, cooperatives have flourished in the U.S. and worldwide. The fact that most cooperative members come from multi-generational farming families is likely a reason why there are so few bankruptcies or demutualizations in U.S. agricultural cooperatives. The very few that have happened can trace the reasons to one or more of the issues above; many were wholesaling type cooperatives.
Oilseed Marketing Coopera
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5.14: The Current Restructuring of Mixed or Multi-Purpose Farm Supply and Grain
Farm supply and grain marketing cooperatives in the U.S. have made billions of dollars in asset investments since 2004. This is the biggest change in this particular cooperative sector since these cooperatives were first formed. There are various reasons for this level of investment. Crop volumes have increased in the U.S. as crop yields in corn and soybeans have increased through improvements in seed varieties and planting technologies (such as narrower rows resulting in increased seed densities per acre). In addition, cropping patterns have changed as corn and soybean seed varieties have been developed for geographic regions that historically could produce only small grains such as wheat and barley. Finally, reductions in the average planting and harvesting times, which have almost been halved due to greater horsepower being used by farmers, have placed a strain on logistics. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/05%3A_Special_Topics_in_Cooperatives_and_Mutualism/5.10%3A_Organizing_the_Governance_of_Cooperatives.txt |
Cooperatives and mutuals are firms. The choice of organizational form is based on a number of issues. As discussed in these chapters, these choices depend on the economic costs of the Make or Buy Decision and the ownership structure desired, which may include consumers, investors, producers, suppliers, and workers. Cooperation and mutualism are based on the desire to Make something which is owned by consumers, producers, suppliers, and workers, but not by investors. These owners have chosen to vertically integrate their business or household through a cooperative or mutual. Social reasons may underlie why they decide to do so but ultimately, in a market economy, the economic transaction by a customer will determine the success of the cooperative or mutual.
A number of thought leaders, including Nobel Prize Laureates, have been recognized for their contributions into understanding this Make or Buy decision. A cooperative or mutual is collectively owned, in most cases, by a large group of consumers, producers, suppliers, and workers. A large ownership structure helps create an equity structure on a balance sheet that enables the cooperative or mutual to survive business shocks and cycles. For example, in an agricultural cooperative with highly perishable perennial crops, the concept of a marketing year is important. Building an ownership structure that enables the cooperative to simultaneously help its owners survive each year and add value to their agricultural commodities over the coming marketing year when the full value is not known until 12 months after harvest is crucial. Similarly, a mutual insurance firm must have an ownership structure that enables it to insure the risk profile of its members, which may not be fully understood but yet allow it to offer competitive premiums to purchase the insurance.
This decision to Make something must be understood within the context that ownership structure also includes those who patronize the cooperative or mutual and share in its economic success based on the volume of business transacted with the cooperative or mutual. These owners participate in the control of the cooperative or mutual through their election of directors who monitor their ownership and through their direct participation in certain activities as presented in their articles of incorporation and bylaws. This control function, which is part of corporate governance, may be accomplished through democratic voting (onemember-one-vote), proportional voting based on business volume, or a combination of the two.
Members in a cooperative and mutual thus participate in the economic benefits, ownership, and control of the firm. Because of this participation, an important function of cooperatives and mutuals is education of their members. This education includes knowledge on the three ways of participation and the roles of responsibilities of membership. As a closed buying or supply channel, cooperatives function best when the majority of their business is done with members. The financial decisions of a cooperative are probably hardest for any member to understand due to economic and social issues.
There is no evidence to suggest that the cooperative or mutual form of business is no longer a viable business model. Indeed, many examples of successful cooperatives and mutuals exist globally. Certainly industry conditions may change, and if a cooperative or mutual does not change its strategy to reflect changing industry conditions, the economic viability of the business may be called into question. Furthermore, if issues of property rights are not clarified, members may become dissatisfied with remaining a member of the cooperative or mutual and may seek to demutualize. Such incidences are rare but widely studied by academics.
06: Summary and Conclusions
These Nobel Prize laureate thought leaders include Ronald Coase, Oliver Hart, Bengt Holmström, Douglass North, Elinor Ostrom, and Oliver Williamson. Information about Hart, Holmström, and North can be found at http://tinyurl.com/y9tlpkmh, http:// tinyurl.com/ybkzq25t, and http://tinyurl.com/ybuljxxu. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/06%3A_Summary_and_Conclusions/6.01%3A_1._References.txt |
The accounting identity states that Total Assets is equal to the sum of Total Liabilities and Total Equity.
Allocated equity is sometimes called Patronage Ledger Credits, Retained Refunds, Capital Retains, or Revolving Capital, and is the value of the patronage refunds retained by the cooperative equity. The word allocated is used to denote that this is equity, which has been allocated to the member based on patronage.
Articles of incorporation for a cooperative describe the type of organization, purpose, number of shares of common stock and any preferred stock, number of directors and how a member votes on those directors, legal definition of membership, location of the headquarters (the legal address for the cooperative), and asset disposal upon liquidation.
Bargaining cooperatives negotiate with processors and other first handlers for a collective price and terms of trade for their members.
Bylaws are the rules or policies that explain how any organization, including cooperatives, operates. The bylaws of a cooperative define the purpose of the cooperative and its geographical location, who a member is and what rights are associated with membership, how disputes are addressed, how membership may be terminated, how the organization can change its rules and policies, how a meeting of the membership is to be held, and what can occur at that meeting.
The cooperative as a competitive yardstick is a well-known analogy for justifying why cooperatives are often thought of as promoting competition because they allow members to join together to obtain marketing power to negotiate on behalf of their members.
Cooperation refers to businesses formed for mutual benefit, controlled by users who are customers, and operated principally to provide benefits to users. The benefits are provided to users based on participation, not ownership, and include the purchasing or selling business transactions customers have with the cooperative and the profits earned by the cooperative on those transactions that are returned to the users.
In a consumer cooperative, the goods and services provided by the cooperative are consumed by the members.
Electric utility cooperatives were developed in the 1930s to provide electricity. In the 21st century, many are providing internet capability through satellites or broadband.
Free rider problem exists when the value of membership is diluted because nonmembers can share in benefits without having to be a member.
Health care cooperatives are a lot like mutual insurance firms in that their objective is to pool risk across members and provide health care with lower fees.
A housing cooperative owns the land, facility, and common areas such as indoor or outdoor recreational equipment and common meeting space. Members buy a share in the cooperative, which is an ownership interest in a unit within the housing cooperative. There are many types of housing cooperatives. Members pay a monthly fee for budgeted expenses such as operating costs and capital investments to maintain the cooperative’s assets.
Governance is a system of system of processes by which a company is directed and controlled. Governance of cooperatives involves balancing the interests of the members with the goals of the cooperative as a business.
Make-or-buy decision refers to a decision by a producer or consumer to make a choice of vertically integrating through their membership in the cooperative to produce a product or simply buying it from the market.
A marketing agency-in-common is a cooperative whose members are other cooperatives who have joined together to jointly market the products of all members.
Marketing year For many agricultural crops that are processed as ingredients into other food products or processed into a consumer product, the value of the crop grown by the producer as a raw material for these ingredient and consumer products is not known at harvest but becomes known over the next 12 months as the supply of the crop is processed and before the new harvest occurs. This 12-month period is known as the marketing year and in the northern hemisphere typically begins September 1 or October 1 in the current year, which is harvest when the supply of the crop is greatest, and ends August 31 or September 30 of the next year.
Mutualism is often linked with mutual insurance firms which are owned by their policyholders, and income is retained to reduce future insurance premiums.
Participation describes how a member uses the cooperative to share in its benefits. Investor-benefit businesses do not require participation in the business as a customer.
Patronage refund is analogous to net income, but is income from doing business with members which is linked with a members’ participation in the cooperative. It is the patronage income derived from the operation of the cooperative on a cooperative basis.
In a producer cooperative the cooperative markets products supplied by members.
A property right is a legally enforced right to select the uses of an economic good produced by a firm
Unallocated equity, which can be thought of as unallocated, retained earnings, or Unallocated Reserves or Surplus, is equity not allocated to the member based on their patronage. For most cooperatives, this is non-patronage income or any other income on which the cooperative has paid corporate income tax.
A worker cooperative is a business entity that is owned and controlled by the members who are laborers and work in the business.
6.03: 3. About the Author
Michael Boland ([email protected])
Koller Professor and Director, University of Minnesota
Michael Boland (Mike) holds the Koller-endowed Professorship in Agribusiness Management and Information Technology at the University of Minnesota. He teaches classes on agricultural and consumer cooperatives, credit unions, and mutual insurance firms; an MBA course on agribusiness and food policy issues in the Carson School of Management; and a graduate course on food policy for students in public affairs, public health, law, veterinary medicine, and agricultural sciences. He is an adjunct professor in the Mondale School of Law and the Carlson School of Management. The Koller Professorship was funded by agricultural cooperatives (CHS, Land O’Lakes, CoBank, and Country Financial) and Koller friends, family, and colleagues.
Prior to this new position, Mike worked at Kansas State University in the Arthur Capper Cooperative Center. He serves on the planning committee for the annual Farmer Cooperatives program, the National Council on Farmer Cooperatives director education programs, the Kansas State CEO Roundtable, and the California Center for Cooperative Development education program. He has worked with more than 45 master’s and doctoral students. Mike teaches educational modules on finance, governance, and strategic thinking in boards of director leadership programs for cooperatives, credit unions, and mutual insurance firms. These programs have been taught in 14 states to more than 4,000 senior employees and directors.
Mike has worked with agribusinesses and cooperatives in Latin America, China, South Africa, Australia, and Europe. He is a member of Harvard’s Private and Public, Scientific, Academic, and Consumer Food Policy Group. Mike’s Ph.D. in agricultural economics is from Purdue University, where he worked on programs in the Center for Food and Agricultural Business. He is the oldest of 12 children and grew up in Minnesota. His work experience includes a farm supply cooperative, a regional cooperative, and a cooperative state council. | textbooks/biz/Management/An_Introduction_to_Cooperation_and_Mutualism_(Boland)/06%3A_Summary_and_Conclusions/6.02%3A_2._Glossary.txt |
Human Resource Management Day to Day
You have just been hired to work in the human resource department of a small company. You heard about the job through a conference you attended, put on by the Society for Human Resource Management (SHRM). Previously, the owner of the company, Jennifer, had been doing everything related to human resource management (HRM). You can tell she is a bit critical about paying a good salary for something she was able to juggle all on her own. On your first day, you meet the ten employees and spend several hours with the company owner, hoping to get a handle on which human resource processes are already set up.
Shortly after the meeting begins, you see she has a completely different perspective of what HRM is, and you realize it will be your job to educate her on the value of a human resource manager. You look at it as a personal challenge—both to educate her and also to show her the value of this role in the organization.
First, you tell her that HRM is a strategic process having to do with the staffing, compensation, retention, training, and employment law and policies side of the business. In other words, your job as human resources (HR) manager will be not only to write policy and procedures and to hire people (the administrative role) but also to use strategic plans to ensure the right people are hired and trained for the right job at the right time. For example, you ask her if she knows what the revenue will be in six months, and Jennifer answers, “Of course. We expect it to increase by 20 percent.” You ask, “Have you thought about how many people you will need due to this increase?” Jennifer looks a bit sheepish and says, “No, I guess I haven’t gotten that far.” Then you ask her about the training programs the company offers, the software used to allow employees to access pay information online, and the compensation policies. She responds, “It looks like we have some work to do. I didn’t know that human resources involved all of that.” You smile at her and start discussing some of the specifics of the business, so you can get started right away writing the strategic human resource management plan.
1.02: What Is Human Resources
Learning Objectives
1. Explain the role of HRM in organizations.
2. Define and discuss some of the major HRM activities.
Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities.
What Is HRM?
Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times” (Frasch, et. al., 2010).
It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.
Human Resource Recall
Have you ever had to work with a human resource department at your job? What was the interaction like? What was the department’s role in that specific organization?
The Role of HRM
Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.
Staffing
You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:
1. Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations.
2. Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.
3. Recruitment. This involves finding people to fill the open positions.
4. Selection. In this stage, people will be interviewed and selected, and a proper compensation package will be negotiated. This step is followed by training, retention, and motivation.
Development of Workplace Policies
Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following:
• Discipline process policy
• Vacation time policy
• Dress code
• Ethics policy
• Internet usage policy
These topics are addressed further in Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and Motivation”, Chapter 8 “Training and Development”, and Chapter 9 “Successful Employee Communication”.
Compensation and Benefits Administration
HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:
• Pay
• Health benefits
• 401(k) (retirement plans)
• Stock purchase plans
• Vacation time
• Sick leave
• Bonuses
• Tuition reimbursement
Since this is not an exhaustive list, compensation is discussed further in Chapter 6 “Compensation and Benefits”.
Retention
Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons:
1. Issues around the job they are performing
2. Challenges with their manager
3. Poor fit with organizational culture
4. Poor workplace environment
Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010). As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment” discuss some strategies to retain the best employees based on these four factors.
Training and Development
Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following:
• Job skills training, such as how to run a particular computer program
• Training on communication
• Team-building activities
• Policy and legal training, such as sexual harassment training and ethics training
We address each of these types of training and more in detail in Chapter 8 “Training and Development”.
Dealing with Laws Affecting Employment
Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:
• Discrimination laws
• Health-care requirements
• Compensation requirements such as the minimum wage
• Worker safety laws
• Labor laws
The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter.
Worker Protection
Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection requirements and ensure the workplace is meeting both federal and union standards. Worker protection issues might include the following:
• Chemical hazards
• Heating and ventilation requirements
• Use of “no fragrance” zones
• Protection of private employee information
We take a closer look at these issues in Chapter 12 “Working with Labor Unions” and Chapter 13 “Safety and Health at Work”.
Figure 1.1
Caption: Knowing the law regarding worker protection is generally the job of human resources. In some industries it is extremely important; in fact, it can mean life or death.
ReSurge International – Tom Davenport Operating On A Patient – CC BY-NC-ND 2.0.
Communication
Besides these major roles, good communication skills and excellent management skills are key to successful human resource management as well as general management. We discuss these issues in Chapter 9 “Successful Employee Communication”.
Awareness of External Factors
In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may affect the organization. Outside forces, or external factors, are those things the company has no direct control over; however, they may be things that could positively or negatively impact human resources. External factors might include the following:
1. Globalization and offshoring
2. Changes to employment law
3. Health-care costs
4. Employee expectations
5. Diversity of the workforce
6. Changing demographics of the workforce
7. A more highly educated workforce
8. Layoffs and downsizing
9. Technology used, such as HR databases
10. Increased use of social networking to distribute information to employees
For example, the recent trend in flexible work schedules (allowing employees to set their own schedules) and telecommuting (allowing employees to work from home or a remote location for a specified period of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues, so they can develop policies that meet not only the needs of the company but also the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with this bill has huge implications for HR. For example, a company with more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care insurance to their employees (Cappelli, 2010). Because health-care insurance will be mandatory, cost concerns as well as using health benefits as a recruitment strategy are big external challenges. Any manager operating without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also mean breaking the law, which has a concerning set of implications as well.
Figure 1.2
An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make strategic decisions based on changes in the external environment. To develop this understanding, reading various publications is necessary.
One way managers can be aware of the outside forces is to attend conferences and read various articles on the web. For example, the website of the Society for Human Resource Management, SHRM Online1, not only has job postings in the field but discusses many contemporary human resource issues that may help the manager make better decisions when it comes to people management. In Section 1.3 “Today’s HRM Challenges”, we go into more depth about some recent external issues that are affecting human resource management roles. In Section 1.1.2 “The Role of HRM”, we discuss some of the skills needed to be successful in HRM.
Figure 1.3
Most professionals agree that there are seven main tasks HRM professionals perform. All these need to be considered in relation to external and outside forces.
Key Takeaways
• Capital includes all resources a company uses to generate revenue. Human resources or the people working in the organization are the most important resource.
• Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees.
• There are seven main responsibilities of HRM managers: staffing, setting policies, compensation and benefits, retention, training, employment laws, and worker protection. In this book, each of these major areas will be included in a chapter or two.
• In addition to being concerned with the seven internal aspects, HRM managers must keep up to date with changes in the external environment that may impact their employees. The trends toward flexible schedules and telecommuting are examples of external aspects.
• To effectively understand how the external forces might affect human resources, it is important for the HR manager to read the HR literature, attend conferences, and utilize other ways to stay up to date with new laws, trends, and policies.
Exercises
1. State arguments for and against the following statement: there are other things more valuable in an organization besides the people who work there.
2. Of the seven tasks an HR manager does, which do you think is the most challenging? Why?
1Society for Human Resource Management, accessed August 18, 2011, http://www.shrm.org/Pages/default.aspx. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/01%3A_The_Role_of_Human_Resources/1.01%3A_Introduction.txt |
Learning Objectives
1. Explain the professional and personal skills needed to be successful in HRM.
1. Be able to define human resource management and the certifications that can be achieved in this profession.
One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource department.
The first skill needed is organization. The need for this skill makes sense, given that you are managing people’s pay, benefits, and careers. Having organized files on your computer and good time-management skills are crucial for success in any job, but especially if you take on a role in human resources.
Like most jobs, being able to multitask—that is, work on more than one task at a time—is important in managing human resources. A typical person managing human resources may have to deal with an employee issue one minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task or one part of the business, human resources focuses on all areas of the business, where multitasking is a must.
As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most important skills for achieving success at any job. Being able to manage a variety of personalities, deal with conflict, and coach others are all in the realm of people management. The ability to communicate goes along with people skills. The ability to communicate good news (hiring a new employee), bad news (layoffs), and everything in between, such as changes to policy, makes for an excellent manager and human resource management (HRM) professional.
Keys to a successful career in HRM or management include understanding specific job areas, such as managing the employee database, understanding employment laws, and knowing how to write and develop a strategic plan that aligns with the business. All these skills will be discussed in this book.
A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far in advance and look at trends that could affect the environment in which the business is operating. Too often, managers focus on their own area and not enough on the business as a whole. The strategic HR professional is able to not only work within his or her area but also understand how HR fits into the bigger picture of the business.
Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that examines the moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics standards within the organization. Many HR managers are required to work with highly confidential information, such as salary information, so a sense of ethics when managing this information is essential. We discuss ethics from the organizational perspective in Section 1.1.2 “The Role of HRM”.
Dilbert and the Evil HR Director
" href="http://www.youtube.com/watch?v=sCKOpJQI6Iw" class="replaced-iframe">(click to see video)
Ethics is perhaps one of the most important aspects to being a great HR professional. This humorous video shows how unethical behavior can undermine motivation at work.
Human Resource Recall
Think of your current skills. Are there personal or professional skills you would like to work on?
Finally, while we can list a few skills that are important, understanding the particular business, knowing the business strategy, and being able to think critically about how HR can align itself with the strategy are ways to ensure HR departments are critical parts of the business. HR is a specialized area, much like accounting or finance. However, many individuals are placed in HR roles without having the specific knowledge to do the job. Oftentimes people with excellent skills are promoted to management and then expected (if the company is small) to perform recruiting, hiring, and compensation tasks. This is the reason we will refer to management and HR management interchangeably throughout the chapters. In addition, these skills are important for HRM professionals and managers alike.
Having said that, for those of you wanting a career in HRM, there are three exams you can take to show your mastery of HRM material:
1. Professional in Human Resources (PHR). To take this exam, an HR professional must have at least two years’ experience. The exam is four hours long and consists of 225 multiple-choice questions in a variety of areas. Twelve percent of the test focuses on strategic management, 26 percent on workforce planning, 17 percent on human resource development, 16 percent on rewards, 22 percent on employee and labor relations, and 7 percent on risk management. The application process for taking the exam is given on the Human Resource Certification Institute website at http://www.hrci.org.
2. Senior Professional in Human Resources (SPHR). This exam is designed for HR professionals who focus on designing and planning, rather than actual implementation. It is recommended that the person taking this exam has six to eight years of experience and oversees and manages an HR department. In this test, the greater focus is on the strategic aspect of HRM.
3. Global Professional in Human Resources (GPHR). This exam is for HR professionals who perform many of their tasks on a global level and whose companies often work across borders. This exam is three hours long, with 165 multiple-choice questions. A person with two years of professional experience can take the certification test. However, because the test has the international aspect, someone who designs HR-related programs and processes to achieve business goals would be best suited to earn this certification.
The benefits of achieving certifications are great. In addition to demonstrating the abilities of the HR professional, certification allows the professional to be more marketable in a very competitive field.
Figure 1.4
Caption: Perhaps one of the most important skills in any kind of management is the ability to communicate.
Baltic Development Forum – Kristovskis-meeting-41.jpg – CC BY 2.0.
Most companies need a human resource department or a manager with HR skills. The industries and job titles are so varied that it is possible only to list general job titles in human resources:
1. Recruiter
2. Compensation analyst
3. Human resources assistant
4. Employee relations manager
5. Benefits manager
6. Work-life coordinator
7. Training and development manager
8. Human resources manager
9. Vice president for human resources
This is not an exhaustive list, but it can be a starting point for research on this career path.
People Skills in HR
" href="http://www.youtube.com/watch?v=L1Jfo0Iym94" class="replaced-iframe">(click to see video)
This chapter makes the point that communication and people skills, or “soft skills,” are necessary to be successful in any job. This video addresses the importance of these skills.
Key Takeaways
• There are a number of skills crucial to human resource management. First, being able to organize and multitask is necessary. In this job, files must be managed, and an HR manager is constantly working in different areas of the business.
• Communication skills are necessary in HRM as well. The ability to present good and bad news, work with a variety of personalities, and coach employees is important in HRM.
• Specific job skills, such as computer skills, knowledge of employment law, writing and developing strategic plans, and general critical-thinking skills are important in any type of management, but especially in human resource management.
• A sense of fairness and strong ethics will make for the best HR manager. Because HR works with a variety of departments to manage conflict and negotiate union contracts and salary, the HR professional needs ethics skills and the ability to maintain confidentiality.
• Since one of the major responsibilities of an HR department is to align the HR strategic plan with the business strategic plan, critical and creative thinking, as well as writing, are skills that will benefit the HR manager as well.
• Many people find themselves in the role of HR manager, so we will use the term HR manager throughout this book. However, many other types of managers also perform the tasks of recruiting, selecting, and compensating, making this book and the skills listed in this section applicable to all majors.
• Certification exams can be taken to make you more marketable in the field of HRM. These certifications are offered by the HR Certification Institute (HRCI).
Exercise
1. What are your perceptions of what an HR manager does on a day-to-day basis? Research this job title and describe your findings. Is this the type of job you expected? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/01%3A_The_Role_of_Human_Resources/1.03%3A_Skills_Needed_for_HRM.txt |
If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well.
Consider the expenses that involve the people part of any business:
1. Health-care benefits
2. Training costs
3. Hiring process costs
4. And many more…
These costs cut into the bottom line of any business. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. Containment of costs, therefore, is a balancing act. An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. We will discuss ways to alleviate this concern throughout this book.
For example, there are three ways to cut costs associated with health care:
1. Shift more of the cost of health care to employees
2. Reduce the benefits offered to cut costs
3. Change or better negotiate the plan to reduce health-care costs
Health care costs companies approximately \$4,003 per year for a single employee and \$9,764 for families. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families1, respectively. One possible strategy for containment for health-care plans is to implement a cafeteria plan. Cafeteria plans started becoming popular in the 1980s and have become standard in many organizations (Allen, 2010). This type of plan gives all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. For example, a mother of two may choose to spend her flexible benefits on health care for her children, while a single, childless female may opt for more vacation days. In other words, these plans offer flexibility, while saving money, too. Cost containment strategies around benefits will be discussed in Chapter 6 “Compensation and Benefits”.
Another way to contain costs is by offering training. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy women who worked there, and it was found that a manager at one of the stores subjected the victims to inappropriate touching and comments. This lawsuit cost the organization \$2 million2. Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. In Chapter 8 “Training and Development”, we will further discuss how to organize, set up, and measure the success of a training program.
The hiring process and the cost of turnover in an organization can be very expensive. Turnover refers to the number of employees who leave a company in a particular period of time. By creating a recruiting and selection process with cost containment in mind, HR can contribute directly to cost-containment strategies company wide. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as \$9,777 for a position that pays \$60,000 (Del Monte, 2010). By hiring smart the first time, HR managers can contain costs for their organization. This will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”. Reducing turnover includes employee motivational strategies. This will be addressed in Chapter 7 “Retention and Motivation”.
In a survey reported on by the Sales and Marketing Management newsletter3, 85 percent of managers say that ineffective communication is the cause of lost revenue. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. An understanding of communication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. In HRM, we can help ensure our people have the tools to communicate better, and contain costs and save dollars in doing so. Some of these tools for better communication will be addressed in Chapter 9 “Successful Employee Communication”.
One cost-containment strategy for US businesses has been offshoring. Offshoring refers to the movement of jobs overseas to contain costs. It is estimated that 3.3 million US jobs will be moved overseas by 2015 (Agrawal & Farrell, 2003). According to the US Census Bureau, most of these jobs are Information Technology (IT) jobs as well as manufacturing jobs. This issue is unique to HR, as the responsibility for developing training for new workers and laying off domestic workers will often fall under the realm of HRM. Offshoring will be discussed in Chapter 14 “International HRM”, and training for new workers will be discussed in Chapter 8 “Training and Development”.
Figure 1.5
Caption: One of the biggest contemporary challenges in HRM is figuring out the balance between what benefits to offer versus the impact those benefits have on employee motivation.
winnifredxoxo – balance scale – CC BY 2.0.
Of course, cost containment isn’t only up to HRM and managers, but as organizations look at various ways to contain costs, human resources can certainly provide solutions.
Technology
Technology has greatly impacted human resources and will continue to do so as new technology is developed. Through use of technology, many companies have virtual workforces that perform tasks from nearly all corners of the world. When employees are not located just down the hall, management of these human resources creates some unique challenges. For example, technology creates an even greater need to have multicultural or diversity understanding. Since many people will work with individuals from across the globe, cultural sensitivity and understanding is the only way to ensure the use of technology results in increased productivity rather than decreased productivity due to miscommunications. Chapter 3 “Diversity and Multiculturalism” and Chapter 14 “International HRM” will discuss some specific diversity issues surrounding a global workforce.
Technology also creates a workforce that expects to be mobile. Because of the ability to work from home or anywhere else, many employees may request and even demand a flexible schedule to meet their own family and personal needs. Productivity can be a concern for all managers in the area of flextime, and another challenge is the fairness to other workers when one person is offered a flexible schedule. Chapter 6 “Compensation and Benefits” and Chapter 7 “Retention and Motivation” will discuss flextime as a way to reward employees. Many companies, however, are going a step further and creating virtual organizations, which don’t have a physical location (cost containment) and allow all employees to work from home or the location of their choice. As you can imagine, this creates concerns over productivity and communication within the organization.
The use of smartphones and social networking has impacted human resources, as many companies now disseminate information to employees via these methods. Of course, technology changes constantly, so the methods used today will likely be different one year or even six months from now.
The large variety of databases available to perform HR tasks is mind boggling. For example, databases are used to track employee data, compensation, and training. There are also databases available to track the recruiting and hiring processes. We will discuss more about technology in HR in Chapter 4 “Recruitment” through Chapter 8 “Training and Development”.
Of course, the major challenge with technology is its constantly changing nature, which can impact all practices in HRM.
How Would You Handle This?
Too Many Friends
You are the HR manager for a small company, consisting of twenty-three people plus the two owners, Steve and Corey. Every time you go into Steve’s office, you see he is on Facebook. Because he is Facebook friends with several people in the organization, you have also heard he constantly updates his status and uploads pictures during work time. Then, at meetings, Steve will ask employees if they saw the pictures he recently uploaded from his vacation, weekend, or backpacking trip. One employee, Sam, comes to you with a concern about this. “I am just trying to do my job, but I feel if I don’t look at his photos, he may not think I am a good employee,” she says. How would you handle this?
Cyberloafing, a term used to describe lost productivity as a result of an employee using a work computer for personal reasons, is another concern created by technology. One study performed by Nucleus Research found that the average worker uses Facebook for fifteen minutes per day, which results in an average loss of 1.5 percent of productivity4. Some workers, in fact, use Facebook over two hours per day during working hours. Restricting or blocking access to the Internet, however, can result in angry employees and impact motivation at work. Motivational factors will be discussed in Chapter 7 “Retention and Motivation”.
Technology can create additional stress for workers. Increased job demands, constant change, constant e-mailing and texting, and the physical aspects of sitting in front of a computer can be not only stressful but also physically harmful to employees. Chapter 13 “Safety and Health at Work” will deal with some of these stress issues, as well as safety issues such as carpal tunnel, which can occur as a result of technology in the workplace. More on health and safety will be covered in Chapter 10 “Managing Employee Performance”.
The Economy
Tough economic times in a country usually results in tough times for business, too. High unemployment and layoffs are clearly HRM and managerial issues. If a human resource manager works for a unionized company, union contracts are the guiding source when having to downsize owing to a tough economy. We will discuss union contracts in greater detail in Chapter 12 “Working with Labor Unions”. Besides union restrictions, legal restrictions on who is let go and the process followed to let someone go should be on the forefront of any manager’s mind when he or she is required to lay off people because of a poor economy. Dealing with performance issues and measuring performance can be considerations when it is necessary to lay off employees. These issues will be discussed in Chapter 10 “Managing Employee Performance” and Chapter 11 “Employee Assessment”.
Likewise, in a growth economy, the HR manager may experience a different kind of stress. Massive hiring to meet demand might occur if the economy is doing well. For example, McDonald’s restaurants had to fill six hundred positions throughout Las Vegas and held hiring day events in 20105. Imagine the process of hiring this many people in a short period of time The same recruiting and selection processes used under normal circumstances will be helpful in mass hiring situations. Recruiting and selection will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”.
The Changing and Diverse Workforce
Human resources should be aware that the workforce is constantly changing. For example, in the 2010 census, the national population was 308,745,538, with 99,531,000 in 2010 working full time, down from 2008 when 106,648,000 were working full time6. For full-time workers, the average weekly salary was higher the more educated the worker. See Figure 1.6 for details.
Fortune 500 Focus
Multigenerational is here to stay, and Xerox is the leader in recruiting of Generation Y talent. This age group has been moving into the labor market over the last six years, and this major demographic change, along with the retirement of baby boomers, has many companies thinking. Fortune 500 companies know they must find out where their new stars are coming from. In recruiting this new talent, Xerox isn’t looking to old methods, because they know each generation is different. For example, Xerox developed the “Express Yourself” recruiting campaign, which is geared around a core value of this generation, to develop solutions and change. Joe Hammill, the director of talent acquisition, says, “Gen Y is very important. Xerox and other companies view this emerging workforce as the future of our organization” (Armour, 2005). Besides the new recruiting campaign, recruiters are working at what they term “core colleges”—that is, those that produce the kind of talent they need. For example, they developed recruitment campaigns with specific institutions such as the Rochester Institute of Technology because of its strong engineering and printing science programs. On their company website, they have a specific tab for the recent college graduate, emphasizing core values of this generation, including the ability to contribute, support, and build skills. With its understanding of multicultural generations, Xerox has created a talent pool for years to come.
It is expected that over the next ten years, over 40 percent of the workforce will retire, and there will not be enough younger workers to take the jobs once held by the retiring workforce (Fernandez, 2007). In fact, the American Society of Training and Development says that in the next twenty years, seventy-six million Americans will retire, and only forty-six million will replace them. As you can imagine, this will create a unique staffing obstacle for human resources and managers alike, as they try to find talented people in a pool that doesn’t have enough people to perform necessary jobs. The reason for this increase in retirement is the aging baby boomers. Baby boomers can be defined as those born between the years 1946 and 1964, according to the Census Bureau. They are called the baby boomers because there was a large increase of babies born after soldiers came back from World War II. Baby boomers account for seventy-six million people in the United States in 2011, the same year in which the first of the baby boomers have started to retire.
The impact of the baby boomer generation on our country and on human resource management is huge. First, the retirement of baby boomers results in a loss of a major part of the working population, and there are not enough people to fill those jobs that are left vacant. Second, the baby boomers’ knowledge is lost upon their retirement. Much of this knowledge isn’t formalized or written down, but it contributes to the success of business. Third, elderly people are living longer, and this results in higher health-care costs for all currently in the workforce. It is estimated that three out of five baby boomers do not have enough money saved for retirement (Weisenthal, 2010), meaning that many of them will depend on Social Security payments to meet basic needs. However, since the Social Security system is a pay-as-you-go system (i.e., those paying into the system now are paying for current retirees), there may not be enough current workers to cover the current Social Security needs. In fact, in 1950 there were 16 workers to support each Social Security beneficiary, but today there are only 3.3 workers supporting each beneficiary (Wenning, 2010). The implications can mean that more will be paid by current workers to support retirees.
As a result of the aging workforce, human resources should keep abreast of changes in Social Security legislation and health-care costs, which will be discussed in Chapter 6 “Compensation and Benefits”. In addition, human resource managers should review current workers’ skill levels and monitor retirements and skills lost upon those retirements, which is part of strategic planning. This will be discussed in Chapter 2 “Developing and Implementing Strategic HRM Plans”. Having knowledge about current workers and skills, as well as predicting future workforce needs, will be necessary to deal with the challenges of an aging workforce.
Figure 1.7
Developing an HR strategy around retirement of workers is a key factor in working with a multigenerational workforce. In addition, HR must understand the various psychologies of varying ages of workers and develop benefits and compensation that meet the needs of all generations.
Human Resource Recall
Have you ever worked in a multigenerational organization? What were some of the challenges in working with people who may have grown up in a different era?
Another challenge, besides lack of workers, is the multigenerational workforce. Employees between the ages of seventeen and sixty-eight have different values and different expectations of their jobs. Any manager who tries to manage these workers from varying generations will likely have some challenges. Even compensation preferences are different among generations. For example, the traditional baby boomer built a career during a time of pensions and strongly held values of longevity and loyalty to a company. Compare the benefit needs of this person to someone who is younger and expects to save through a 401(k) plan, and it is clear that the needs and expectations are different(Capezza, 2010). Throughout this book, we will discuss compensation and motivational strategies for the multigenerational workforce.
Awareness of the diversity of the workforce will be discussed in Chapter 3 “Diversity and Multiculturalism”, but laws regarding diversity will be discussed throughout the book. Diversity refers to age, disability, race, sex, national origin, and religion. Each of these components makes up the productive workforce, and each employee has different needs, wants, and goals. This is why it is imperative for the HRM professional to understand how to motivate the workforce, while ensuring that no laws are broken. We will discuss laws regarding diversity (and the components of diversity, such as disabilities) in Chapter 3 “Diversity and Multiculturalism”, Chapter 4 “Recruitment”, Chapter 5 “Selection”, Chapter 6 “Compensation and Benefits”, and Chapter 7 “Retention and Motivation”.
Figure 1.8 Demographic Data for the United States by Race
Ethics
A discussion of ethics is necessary when considering challenges of human resources. Much of the discussion surrounding ethics happened after the early to mid-2000s, when several companies were found to have engaged in gross unethical and illegal conduct, resulting in the loss of billions of dollars from shareholders. Consider the statistics: only 25 percent of employees trusted their CEO to tell the truth, and 80 percent of people said that employers have a moral responsibility to society7. Based on these numbers, an ethical workplace is important not only for shareholder satisfaction but for employee satisfaction as well. Companies are seeing the value of implementing ethics codes within the business.
Many human resource departments have the responsibility of designing codes of ethics and developing policies for ethical decision making. Some organizations hire ethics officers to specifically focus on this area of the business. Out of four hundred companies surveyed, 48 percent had an ethics officer, who reported to either the CEO or the HR executive (McGraw, 2011). According to Steve Miranda, chief human resources officer for the Society for Human Resource Management (SHRM), “[the presence of an ethics officer] provides a high-level individual with positional authority who can ensure that policies, practices, and guidelines are effectively communicated across the organization” (McGraw, 2011).
For example, the insurance company Allstate recently hired a chief ethics and compliance officer (CECO) who offers a series of workshops geared toward leaders in the organization, because they believe that maintaining high ethical standards starts at the top of an organization. In addition, the CECO monitors reports of ethics complaints within the organization and trains employees on the code of ethics or code of conduct (McGraw, 2011). A code of ethics is an outline that explains the expected ethical behavior of employees. For example, General Electric (GE) has a sixty-four-page code of conduct that outlines the expected ethics, defines them, and provides information on penalties for not adhering to the code. The code of conduct is presented below. Of course, simply having a written code of ethics does little to encourage positive behavior, so many organizations (such as GE) offer stiff penalties for ethics violations. Developing policies, monitoring behavior, and informing people of ethics are necessary to ensure a fair and legal business.
The following is an outline of GE’s code of conduct8:
• Obey the applicable laws and regulations governing our business conduct worldwide.
• Be honest, fair, and trustworthy in all your GE activities and relationships.
• Avoid all conflicts of interest between work and personal affairs.
• Foster an atmosphere in which fair employment practices extend to every member of the diverse GE community.
• Strive to create a safe workplace and to protect the environment.
• Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees.
Key Takeaways
• One of the most important aspects to productive HRM is to ensure the department adds value to the rest of the organization, based on the organization’s strategic plan.
• One of the major challenges of HRM is containment of costs. This can be done in several ways, for example, in the way health care and benefits are offered. Many companies are developing cafeteria plans that satisfy the employee and help contain costs.
• HRM can also contain costs by developing and managing training programs and ensuring employees are well trained to be productive in the job.
• Hiring is a very expensive part of human resources, and therefore HRM should take steps to ensure they are hiring the right people for the job the first time. Turnover is a term used to describe the departure of an employee.
• Poor communication results in wasting time and resources. We can communicate better by understanding communication channels, personalities, and styles.
• Technology is also a challenge to be met by human resources. For example, employees may request alternative work schedules because they can use technology at home to get their work done.
• Because technology is part of our work life, cyberloafing, or employees spending too much time on the Internet, creates new challenges for managers. Technology can also create challenges such as workplace stress and lack of work-life balance.
• The economy is a major factor in human resource management. HR managers, no matter what the state of the economy, must plan effectively to make sure they have the right number of workers at the right time. When we deal with a down economy, the legal and union implications of layoffs must be considered, and in an up economy, hiring of workers to meet the internal demand is necessary.
• The retirement of baby boomers is creating a gap in the workplace, related to not only the number of people available but also the skills people have. Multigenerational companies, or companies with workers of a variety of ages, must find ways to motivate employees, even though those employees may have different needs. HR must be aware of this and continually plan for the challenge of a changing workforce. Diversity in the workplace is an important challenge in human resource management. Diversity will be discussed in Chapter 3 “Diversity and Multiculturalism”.
• Ethics and monitoring of ethical behavior are also challenges in HRM. Setting ethical standards and monitoring ethical behavior, including developing a code of conduct, is a must for any successful business.
Exercises
1. Research the various generations: baby boomers, Generation X, and the Y Generation (millennials). Compare and contrast five differences between the generations. How might these differences impact HRM?
2. Review news articles on the current state of the economy. Which aspects of these articles do you think can relate to HRM?
1“Use Three Strategies to Cut Health Care Costs,” Business Management Daily, September 9, 2010, accessed October 10, 2010, www.businessmanagementdaily.com/articles/23381/1/Use-3-strategies-to-cut-health-care-costs/Page1.html.
2“LL Sonic Settles EEOC Lawsuit for \$2 Million,” Valencia County News Bulletin, June 23, 2011.
3“The Cost of Poor Communications,” Sales and Marketing, December 22, 2006, accessed October 1, 2010, www.allbusiness.com/marketing-advertising/4278862-1.html.
4“Facebook Use Cuts Productivity at Work,” Economic Times, July 25, 2009, accessed October 4, 2010, http://economictimes.indiatimes.com/tech/internet/Facebook-use-cuts-productivity-at-work-Study/articleshow/4818848.cms.
5“McDonald’s Readies for Massive Hiring Spree,” Fox 5 News, Las Vegas, May 2010, accessed October 5, 2010, www.fox5vegas.com/news/23661640/detail.html (site discontinued).
6Bureau of Labor Statistics, Current Population Survey Report, accessed July 7, 2011, www.bls.gov/cps/earnings.htm#education.
7Strategic Management Partners, “Unethical Statistics Announced At Business Leaders Event,” news release, www.consult-smp.com/archives/2005/02/unethical_stati.html, accessed August 31, 2011.
8“The Spirit and the Letter,” General Electric Company, accessed August 10, 2011, files.gecompany.com/gecom/citizenship/pdfs/TheSpirit&TheLetter.pdf. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/01%3A_The_Role_of_Human_Resources/1.04%3A_Todays_HRM_Challenges.txt |
Chapter Summary
• Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees. Three certification exams, which are offered by the Human Resource Certification Institute, can be taken to show HRM skills and become more marketable.
• Human resource management involves seven main areas: (1) staffing, (2) workplace policies, (3) benefits and compensation, (4) retention, (5) training, (6) employment laws, and (7) employee protection.
• Human resource managers need many different types of skills. Being able to organize, multitask, and communicate effectively, as well as having specific job skills, such as how to run a particular computer program, and a sense of fairness and ethics, is crucial to a successful career in HRM.
• There are many contemporary challenges associated with HRM. First, it is up to everyone in the organization to contain costs. HR managers need to look at their individual departments and demonstrate the necessity and value of their functions to the organization. HR managers can also help contain costs in several ways, such as managing benefits plans and compensation and providing training.
• The fast-changing nature of technology is also a challenge in HRM. As new technologies are developed, employees may be able to implement innovative ways of working such as flextime. HR managers are also responsible for developing policies dealing with cyberloafing and other workplace time wasters revolving around technology. Employee stress and lack of work-life balance are also greatly influenced by technology.
• Awareness of the changes in the economy allows the human resource manager to adequately plan for reductions and additions to the workforce.
• The aging and changing workforce is our final factor. As baby boomers retire, there likely will not be enough people to replace them, and many of the skills the baby boomers have may be lost. In addition, having to work with multiple generations at once can create challenges as different expectations and needs arise from multigenerational workforces.
Chapter Case
Changes, Changes
Jennifer, the owner and manager of a company with ten employees, has hired you to take over the HRM function so she can focus on other areas of her business. During your first two weeks, you find out that the company has been greatly affected by the up economy and is expected to experience overall revenue growth by 10 percent over the next three years, with some quarters seeing growth as high as 30 percent. However, five of the ten workers are expected to retire within three years. These workers have been with the organization since the beginning and provide a unique historical perspective of the company. The other five workers are of diverse ages.
In addition to these changes, Jennifer believes they may be able to save costs by allowing employees to telecommute one to two days per week. She has some concerns about productivity if she allows employees to work from home. Despite these concerns, Jennifer has even considered closing down the physical office and making her company a virtual organization, but she wonders how such a major change will affect the ability to communicate and worker motivation.
Jennifer shares with you her thoughts about the costs of health care on the organization. She has considered cutting benefits entirely and having her employees work for her on a contract basis, instead of being full-time employees. She isn’t sure if this would be a good choice.
Jennifer schedules a meeting with you to discuss some of her thoughts. To prepare for the meeting, you perform research so you can impress your new boss with recommendations on the challenges presented.
1. Point out which changes are occurring in the business that affect HRM.
2. What are some considerations the company and HR should be aware of when making changes related to this case study?
3. What would the initial steps be to start planning for these changes?
4. What would your role be in implementing these changes? What would Jennifer’s role be?
Team Activities
1. In a group of two to three people, research possible career paths in HRM and prepare a PowerPoint presentation to discuss your findings.
2. Interview an HR manager and discuss his or her career path, skills, and daily tasks. Present your findings to your class. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/01%3A_The_Role_of_Human_Resources/1.05%3A_Cases_and_Problems.txt |
The Value of Planning
James stumbled into his position as the human resource manager. He had been working for Techno, Inc. for three years, and when the company grew, James moved from a management position into a human resource management position. Techno, Inc. is a technology and software consulting company for the music industry.
James didn’t have a good handle on how to effectively run a human resources (HR) department, so for much of the time he tried to figure it out as he went. When Techno started seeing rapid growth, he hired thirty people within a one-month period to meet the demand. Proud of his ability to accomplish his task of meeting the business’s current needs, James was rather pleased with himself. He had spent numerous hours mulling over recruitment strategies, putting together excellent compensation plans, and then eventually sifting through résumés as a small part of the hiring process. Now the organization had the right number of people needed to carry out its projects.
Fast forward five months, however, and it turned out the rapid growth was only temporary. James met with the executives of the business who told him the contracts they had acquired were finished, and there wasn’t enough new work coming in to make payroll next month if they didn’t let some people go. James felt frustrated because he had gone through so much effort to hire people, and now they would be laid off. Never mind the costs of hiring and training his department had taken on to make this happen. As James sat with the executives to determine who should be laid off, he felt sad for the people who had given up other jobs just five months before, only to be laid off.
After the meeting, James reflected on this situation and realized that if he had spoken with the executives of the company sooner, they would have shared information on the duration of the contracts, and he likely would have hired people differently, perhaps on a contract basis rather than on a full-time basis. He also considered the fact that the organization could have hired an outsourcing company to recruit workers for him. As Jason mulled this over, he realized that he needed a strategic plan to make sure his department was meeting the needs of the organization. He vowed to work with the company executives to find out more about the company’s strategic plan and then develop a human resource management (HRM) strategic plan to make sure Techno, Inc. has the right number of workers with the right skills, at the right time in the future.
2.02: Strategic Planning
Learning Objectives
1. Explain the differences been HRM and personnel management.
2. Be able to define the steps in HRM strategic planning.
In the past, human resource management (HRM) was called the personnel department. In the past, the personnel department hired people and dealt with the hiring paperwork and processes. It is believed the first human resource department was created in 1901 by the National Cash Register Company (NCR). The company faced a major strike but eventually defeated the union after a lockout. (We address unions in Chapter 12.) After this difficult battle, the company president decided to improve worker relations by organizing a personnel department to handle grievances, discharges, safety concerns, and other employee issues. The department also kept track of new legislation surrounding laws impacting the organization. Many other companies were coming to the same realization that a department was necessary to create employee satisfaction, which resulted in more productivity. In 1913, Henry Ford saw employee turnover at 380 percent and tried to ease the turnover by increasing wages from \$2.50 to \$5.00, even though \$2.50 was fair during this time period (Losey, 2011). Of course, this approach didn’t work for long, and these large companies began to understand they had to do more than hire and fire if they were going to meet customer demand.
More recently, however, the personnel department has divided into human resource management and human resource development, as these functions have evolved over the century. HRM is not only crucial to an organization’s success, but it should be part of the overall company’s strategic plan, because so many businesses today depend on people to earn profits. Strategic planning plays an important role in how productive the organization is.
Table \(1\): Examples of Differences between Personnel Management and HRM
Personnel Management Focus HRM Focus
Administering of policies Helping to achieve strategic goals through people
Stand-alone programs, such as training HRM training programs that are integrated with company’s mission and values
Personnel department responsible for managing people Line managers share joint responsibility in all areas of people hiring and management
Creates a cost within an organization Contributes to the profit objectives of the organization
Most people agree that the following duties normally fall under HRM. Each of these aspects has its own part within the overall strategic plan of the organization:
1. Staffing. Staffing includes the development of a strategic plan to determine how many people you might need to hire. Based on the strategic plan, HRM then performs the hiring process to recruit and select the right people for the right jobs. We discuss staffing in greater detail in Chapter 4, Chapter 5, and Chapter 6.
2. Basic workplace policies. Development of policies to help reach the strategic plan’s goals is the job of HRM. After the policies have been developed, communication of these policies on safety, security, scheduling, vacation times, and flextime schedules should be developed by the HR department. Of course, the HR managers work closely with supervisors in organizations to develop these policies. Workplace policies will be addressed throughout the book.
3. Compensation and benefits. In addition to paychecks, 401(k) plans, health benefits, and other perks are usually the responsibility of an HR manager. Compensation and benefits are discussed in Chapter 6 and Chapter 7.
4. Retention. Assessment of employees and strategizing on how to retain the best employees is a task that HR managers oversee, but other managers in the organization will also provide input. Chapter 9, Chapter 10, and Chapter 11 cover different types of retention strategies, from training to assessment.
5. Training and development. Helping new employees develop skills needed for their jobs and helping current employees grow their skills are also tasks for which the HRM department is responsible. Determination of training needs and development and implementation of training programs are important tasks in any organization. Training is discussed in great detail in Chapter 9, including succession planning. Succession planning includes handling the departure of managers and making current employees ready to take on managerial roles when a manager does leave.
6. Regulatory issues and worker safety. Keeping up to date on new regulations relating to employment, health care, and other issues is generally a responsibility that falls on the HRM department. While various laws are discussed throughout the book, unions and safety and health laws in the workplace are covered in Chapter 12 and Chapter 13.
In smaller organizations, the manager or owner is likely performing the HRM functions (de Kok & Uhlaner, 2001). They hire people, train them, and determine how much they should be paid. Larger companies ultimately perform the same tasks, but because they have more employees, they can afford to employ specialists, or human resource managers, to handle these areas of the business. As a result, it is highly likely that you, as a manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic components of HRM.
HRM vs. Personnel Management
Human resource strategy is an elaborate and systematic plan of action developed by a human resource department. This definition tells us that an HR strategy includes detailed pathways to implement HRM strategic plans and HR plans. Think of the HRM strategic plan as the major objectives the organization wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In other words, the strategic plan may include long-term goals, while the HR plan may include short-term objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, human resource departments in the past were called personnel departments. This term implies that the department provided “support” for the rest of the organization. Companies now understand that the human side of the business is the most important asset in any business (especially in this global economy), and therefore HR has much more importance than it did twenty years ago. While personnel management mostly involved activities surrounding the hiring process and legal compliance, human resources involves much more, including strategic planning, which is the focus of this chapter. The Ulrich HR model, a common way to look at HRM strategic planning, provides an overall view of the role of HRM in the organization. His model is said to have started the movement that changed the view of HR; no longer merely a functional area, HR became more of a partnership within the organization. While his model has changed over the years, the current model looks at alignment of HR activities with the overall global business strategy to form a strategic partnership (Ulrich & Brockbank, 2005). His newly revised model looks at five main areas of HR:
1. Strategic partner. Partnership with the entire organization to ensure alignment of the HR function with the needs of the organization.
2. Change agent. The skill to anticipate and respond to change within the HR function, but as a company as a whole.
3. Administrative expert and functional expert. The ability to understand and implement policies, procedures, and processes that relate to the HR strategic plan.
4. Human capital developer. Means to develop talent that is projected to be needed in the future.
5. Employee advocate. Works for employees currently within the organization.
According to Ulrich (Ulrich, 2011), implementation of this model must happen with an understanding of the overall company objectives, problems, challenges, and opportunities. For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labor markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR can determine how best to meet the needs of the organization within these five main areas.
HRM as a Strategic Component of the Business
• David Ulrich discusses the importance of bringing HR to the table in strategic planning.
Keeping the Ulrich model in mind, consider these four aspects when creating a good HRM strategic plan:
1. Make it applicable. Often people spend an inordinate amount of time developing plans, but the plans sit in a file somewhere and are never actually used. A good strategic plan should be the guiding principles for the HRM function. It should be reviewed and changed as aspects of the business change. Involvement of all members in the HR department (if it’s a larger department) and communication among everyone within the department will make the plan better.
2. Be a strategic partner. Alignment of corporate values in the HRM strategic plan should be a major objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and objectives of the organization as a whole. For example, if the mission of the organization is to promote social responsibility, then the HRM strategic plan should address this in the hiring criteria.
3. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone in the organization. For example, as the plan develops, the HR manager should meet with various people in departments and find out what skills the best employees have. Then the HR manager can make sure the people recruited and interviewed have similar qualities as the best people already doing the job. In addition, the HR manager will likely want to meet with the financial department and executives who do the budgeting, so they can determine human resource needs and recruit the right number of people at the right times. In addition, once the HR department determines what is needed, communicating a plan can gain positive feedback that ensures the plan is aligned with the business objectives.
4. Understand how technology can be used. Organizations oftentimes do not have the money or the inclination to research software and find budget-friendly options for implementation. People are sometimes nervous about new technology. However, the best organizations are those that embrace technology and find the right technology uses for their businesses. There are thousands of HRM software options that can make the HRM processes faster, easier, and more effective. Good strategic plans address this aspect.
HR managers know the business and therefore know the needs of the business and can develop a plan to meet those needs. They also stay on top of current events, so they know what is happening globally that could affect their strategic plan. If they find out, for example, that an economic downturn is looming, they will adjust their strategic plan. In other words, the strategic plan needs to be a living document, one that changes as the business and the world changes.
Human Resource Recall
Have you ever looked at your organization’s strategic plan? What areas does the plan address?
The Steps to Strategic Plan Creation
As we addressed in “The Steps to Strategic Plan Creation”, HRM strategic plans must have several elements to be successful. There should be a distinction made here: the HRM strategic plan is different from the HR plan. Think of the HRM strategic plan as the major objectives the organization wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved. Oftentimes the strategic plan is viewed as just another report that must be written. Rather than jumping in and writing it without much thought, it is best to give the plan careful consideration.
The goal of “Conduct a Strategic Analysis” is to provide you with some basic elements to consider and research before writing any HRM plans.
Conduct a Strategic Analysis
A strategic analysis looks at three aspects of the individual HRM department:
1. Understanding of the company mission and values. It is impossible to plan for HRM if one does not know the values and missions of the organization. As we have already addressed in this chapter, it is imperative for the HR manager to align department objectives with organizational objectives. It is worthwhile to sit down with company executives, management, and supervisors to make sure you have a good understanding of the company mission and values.
2. Another important aspect is the understanding of the organizational life cycle. You may have learned about the life cycle in marketing or other business classes, and this applies to HRM, too. An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. For example, when the organization first begins, it is in the introduction phase, and a different staffing, compensation, training, and labor/employee relations strategy may be necessary to align HRM with the organization’s goals. This might be opposed to an organization that is struggling to stay in business and is in the decline phase. That same organization, however, can create a new product, for example, which might again put the organization in the growth phase. Table \(2\) explains some of the strategies that may be different depending on the organizational life cycle.
3. Understanding of the HRM department mission and values. HRM departments must develop their own departmental mission and values. These guiding principles for the department will change as the company’s overall mission and values change. Often the mission statement is a list of what the department does, which is less of a strategic approach. Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should express how an organization’s human resources help that organization meet the business goals. A poor mission statement might read as follows: “The human resource department at Techno, Inc. provides resources to hiring managers and develops compensation plans and other services to assist the employees of our company.”
4. A strategic statement that expresses how human resources help the organization might read as follows: “HR’s responsibility is to ensure that our human resources are more talented and motivated than our competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates, compensation, and company sales data and comparing that data to our competitors” (Kaufman, 2011). When the mission statement is written in this way, it is easier to take a strategic approach with the HR planning process.
5. Understanding of the challenges facing the department. HRM managers cannot deal with change quickly if they are not able to predict changes. As a result, the HRM manager should know what upcoming challenges may be faced to make plans to deal with those challenges better when they come along. This makes the strategic plan and HRM plan much more usable.
Table \(22\) Lifecycle Stages and HRM Strategy
Life Cycle Stage Staffing Compensation Training and Development Labor / Employee Relations
Introduction Attract best technical and professional talent. Meet or exceed labor market rates to attract needed talent. Define future skill requirements and begin establishing career ladders. Set basic employee-relations philosophy of organization.
Growth Recruit adequate numbers and mix of qualifying workers. Plan management succession. Manage rapid internal labor market movements. Meet external market but consider internal equity effects. Establish formal compensation structures. Mold effective management team through management development and organizational development. Maintain labor peace, employee motivation, and morale.
Maturity Encourage sufficient turnover to minimize layoffs and provide new openings. Encourage mobility as reorganizations shift jobs around. Control compensation costs. Maintain flexibility and skills of an aging workforce. Control labor costs and maintain labor peace. Improve productivity.
Decline Plan and implement workforce reductions and reallocations; downsizing and outplacement may occur during this stage. Implement tighter cost control. Implement retraining and career consulting services. Improve productivity and achieve flexibility in work rules. Negotiate job security and employment-adjustment policies
Identify Strategic HR Issues
In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the department may see that it is not strategically aligned with the company’s mission and values and opt to make changes to its departmental mission and values as a result of this information.
Many organizations and departments will use a strategic planning tool that identifies strengths, weaknesses, opportunities, and threats (SWOT analysis) to determine some of the issues they are facing. Once this analysis is performed for the business, HR can align itself with the needs of the business by understanding the business strategy. See Table \(3\) for an example of how a company’s SWOT analysis can be used to develop a SWOT analysis for the HR department.
Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR manager finds that a department’s strength is its numerous training programs, this is something the organization should continue doing. If a weakness is the organization’s lack of consistent compensation throughout all job titles, then the opportunity to review and revise the compensation policies presents itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the organization, but it can be whittled down to also address issues within the department.
Table \(3\) Sample HR Department SWOT Analysis for Techno, Inc.
Strengths Hiring talented people
Company growth
Technology implementation for business processes
Excellent relationship between HRM and management/executives
Weaknesses No strategic plan for HRM
No planning for up/down cycles
No formal training processes
Lacking of software needed to manage business processes, including go-to-market staffing strategies
Opportunities Development of HRM staffing plan to meet industry growth
HRM software purchase to manage training, staffing, assessment needs for an unpredictable business cycle
Continue development of HRM and executive relationship by attendance and participation in key meetings and decision-making processes
Develop training programs and outside development opportunities to continue development of in-house marketing expertise
Threats Economy
Changing technology
Prioritize Issues and Actions
Based on the data gathered in the last step, the HRM manager should prioritize the goals and then put action plans together to deal with these challenges. For example, if an organization identifies that they lack a comprehensive training program, plans should be developed that address this need. (Training needs are discussed in Chapter 8.) An important aspect of this step is the involvement of the management and executives in the organization. Once you have a list of issues you will address, discuss them with the management and executives, as they may see other issues or other priorities differently than you. Remember, to be effective, HRM must work with the organization and assist the organization in meeting goals. This should be considered in every aspect of HRM planning.
Draw Up an HRM Plan
Once the HRM manager has met with executives and management, and priorities have been agreed upon, the plans are ready to be developed. Detailed development of these plans will be discussed in Section 2.2 . Sometimes companies have great strategic plans, but when the development of the details occurs, it can be difficult to align the strategic plan with the more detailed plans. An HRM manager should always refer to the overall strategic plan before developing the HRM strategic plan and HR plans.
Even if a company does not have an HR department, HRM strategic plans and HR plans should still be developed by management. By developing and monitoring these plans, the organization can ensure the right processes are implemented to meet the ever-changing needs of the organization. The strategic plan looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the HR plan addresses specific issues in the human resource department.
Key Takeaways
• Personnel management and HRM are different ways of looking at the job duties of human resources. Twenty years ago, personnel management focused on administrative aspects. HRM today involves a strategic process, which requires working with other departments, managers, and executives to be effective and meet the needs of the organization.
• In general, HRM focuses on several main areas, which include staffing, policy development, compensation and benefits, retention issues, training and development, and regulatory issues and worker protection.
• To be effective, the HR manager needs to utilize technology and involve others.
• As part of strategic planning, HRM should conduct a strategic analysis, identify HR issues, determine and prioritize actions, and then draw up the HRM plan.
Exercises
1. What is the difference between HR plans and HRM strategic plans? How are they the same? How are they different?
2. Of the areas of focus in HRM, which one do you think is the most important? Rank them and discuss the reasons for your rankings. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/02%3A_Developing_and_Implementing_Strategic_HRM_Plans/2.01%3A_Introduction.txt |
Learning Objectives
1. Describe the steps in the development of an HRM plan.
As addressed in 2.1, the writing of an HRM strategic plan should be based on the strategic plans of the organization and of the department. Once the strategic plan is written, the HR professional can begin work on the HR plan. This is different from the strategic plan in that it is more detailed and more focused on the short term. The six parts described here are addressed in more detail in Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, and Chapter 11.
How Would You Handle This?
Compensation Is a Touchy Subject
As the HR manager, you have access to sensitive data, such as pay information. As you are looking at pay for each employee in the marketing department, you notice that two employees with the same job title and performing the same job are earning different amounts of money. As you dig deeper, you notice the employee who has been with the company for the least amount of time is actually getting paid more than the person with longer tenure. A brief look at the performance evaluations shows they are both star performers. You determine that two different managers hired the employees, and one manager is no longer with the organization. How would you handle this?
The six parts of the HRM plan include the following:
1. Determine human resource needs. This part is heavily involved with the strategic plan. What growth or decline is expected in the organization? How will this impact your workforce? What is the economic situation? What are your forecasted sales for next year?
2. Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a strategy addressing how you will recruit the right people at the right time.
3. Select employees. The selection process consists of the interviewing and hiring process.
4. Develop training. Based on the strategic plan, what training needs are arising? Is there new software that everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR manager should address plans to offer training in the HRM plan.
5. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and other compensation such as health care, bonuses, and other perks.
6. Appraise performance. Sets of standards need to be developed so you know how to rate the performance of your employees and continue with their development.
Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic knowledge of planning for each area.
Determine Human Resource Needs
The first part of an HR plan will consist of determining how many people are needed. This step involves looking at company operations over the last year and asking a lot of questions:
1. Were enough people hired?
2. Did you have to scramble to hire people at the last minute?
3. What are the skills your current employees possess?
4. What skills do your employees need to gain to keep up with technology?
5. Who is retiring soon? Do you have someone to replace them?
6. What are the sales forecasts? How might this affect your hiring?
These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot be done alone. Involvement of other departments, managers, and executives should take place to obtain an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail in Chapter 4.
Many HR managers will prepare an inventory of all current employees, which includes their educational level and abilities. This gives the HR manager the big picture on what current employees can do. It can serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their development. For example, by taking an inventory, you may find out that Richard is going to retire next year, but no one in his department has been identified or trained to take over his role. Keeping the inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is addressed further in Chapter 4.
HR managers will also look closely at all job components and will analyze each job. By doing this analysis, they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR manager has performed the needs assessment and knows exactly how many people, and in what positions and time frame they need to be hired, he or she can get to work on recruiting, which is also called a staffing plan. This is addressed further in Chapter 4.
Recruit
Recruitment is an important job of the HR manager. More detail is provided in Chapter 4. Knowing how many people to hire, what skills they should possess, and hiring them when the time is right are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type of job you are hiring for, you might place traditional advertisements on the web or use social networking sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable and diversity should be considered. We discuss diversity in greater detail in Chapter 3.
Depending on availability and time, some companies may choose to outsource their recruiting processes. For some types of high-level positions, a head hunter will be used to recruit people nationally and internationally. A head hunter is a person who specializes in matching jobs with people, and they usually work only with high-level positions. Another option is to use an agency that specializes in hiring people for a variety of positions, including temporary and permanent positions. Some companies decide to hire temporary employees because they anticipate only a short-term need, and it can be less expensive to hire someone for only a specified period of time.
No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job. In our next step, we review those résumés, interview, and select the best person for the job.
Select
After you have reviewed résumés for a position, now is the time to work toward selecting the right person for the job. Although we discuss selection in great detail in Chapter 6, it is worth a discussion here as well. Numerous studies have been done, and while they have various results, the majority of studies say it costs an average of \$45,000 to hire a new manager (Herman, 1993). While this may seem exaggerated, consider the following items that contribute to the cost:
1. Time to review résumés
2. Time to interview candidates
3. Interview expenses for candidates
4. Possible travel expenses for new hire or recruiter
5. Possible relocation expenses for new hire
6. Additional bookkeeping, payroll, 401(k), and so forth
7. Additional record keeping for government agencies
8. Increased unemployment insurance costs
9. Costs related to lack of productivity while new employee gets up to speed
Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the right skills are selected for interviews. Many organizations perform phone interviews first so they can further narrow the field. The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular candidate. Usually, the more senior the position is, the longer the interview process takes, even up to eight weeks (Crant, 2009). After the interviews are conducted, there may be reference checks, background checks, or testing that will need to be performed before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once the applicant has met all criteria, the HR manager will offer the selected person the position. At this point, salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management.
Determine Compensation
What you decide to pay people is much more difficult than it seems. This issue is covered in greater detail in Chapter 6. Pay systems must be developed that motivate employees and embody fairness to everyone working at the organization. However, organizations cannot offer every benefit and perk because budgets always have constraints. Even governmental agencies need to be concerned with compensation as part of their HR plan. For example, in 2011, Illinois State University gave salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The university president said, “Our employees have had a very good year and hopefully this is a good shot in the arm that will keep our morale high” (Pawlowski, 2011).
The process in determining the right pay for the right job can have many variables, in addition to keeping morale high. First, as we have already discussed, the organization life cycle can determine the pay strategy for the organization. The supply and demand of those skills in the market, economy, region, or area in which the business is located is a determining factor in compensation strategy. For example, a company operating in Seattle may pay higher for the same job than their division in Missoula, Montana, because the cost of living is higher in Seattle. The HR manager is always researching to ensure the pay is fair and at market value. In Chapter 6, we get into greater detail about the variety of pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk. Employees can develop their skills while getting paid for it. Training is the next step in the HR planning process.
Develop Training
Once we have planned our staffing, recruited people, selected employees, and then compensated them, we want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One way we can ensure success is by training our employees in three main areas:
1. Company culture. A company culture is the organization’s way of doing things. Every company does things a bit differently, and by understanding the corporate culture, the employee will be set up for success. Usually this type of training is performed at an orientation, when an employee is first hired. Topics might include how to request time off, dress codes, and processes.
2. Skills needed for the job. If you work for a retail store, your employees need to know how to use the register. If you have sales staff, they need to have product knowledge to do the job. If your company uses particular software, training is needed in this area.
3. Human relations skills. These are non-job-specific skills your employees need not only to do their jobs but also to make them all-around successful employees. Skills needed include communication skills and interviewing potential employees.
Perform a Performance Appraisal
The last thing an HR manager should plan is the performance appraisal. While we discuss performance appraisals in greater detail in Chapter 11, it is definitely worth a mention here, since it is part of the strategic plan. A performance appraisal is a method by which job performance is measured. The performance appraisal can be called many different things, such as the following:
1. Employee appraisal
2. Performance review
3. 360 review
4. Career development review
No matter what the name, these appraisals can be very beneficial in motivating and rewarding employees. The performance evaluation includes metrics on which the employee is measured. These metrics should be based on the job description, both of which the HR manager develops. Various types of rating systems can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms. The HR manager also usually ensures that every manager in the organization is trained on how to fill out the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers letting them know it is almost time to write an evaluation.
Human Resource Recall
Have you ever been given a performance evaluation? What was the process and the outcome?
Communication Is Key in Performance Evaluations
• Communication is imperative in any workplace, but especially when giving and receiving a performance evaluation.
Key Takeaways
• Human resource planning is a process that is part of the strategic plan. It involves addressing specific needs within the organization, based on the company’s strategic direction.
• The first step in HR planning is determining current and future human resource needs. In this step, current employees, available employees in the market, and future needs are all analyzed and developed.
• In the second step of the process, once we know how many people we will need to hire, we can begin to determine the best methods for recruiting the people we need. Sometimes an organization will use head hunters to find the best person for the job.
• After the recruiting process is finished, the HR manager will begin the selection process. This involves setting up interviews and selecting the right person for the job. This can be an expensive process, so we always want to hire the right person from the beginning.
• HR managers also need to work through compensation plans, including salary, bonus, and other benefits, such as health care. This aspect is important, since most organizations want to use compensation to attract and retain the best employees.
• The HR manager also develops training programs to ensure the people hired have the tools to be able to do their jobs successfully.
Exercises
1. Of the parts of HR planning, which do you think is most difficult, and why? Which would you enjoy the most, and why?
2. Why is it important to plan your staffing before you start to hire people?
3. What is the significance of training? Why do we need it in organizations? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/02%3A_Developing_and_Implementing_Strategic_HRM_Plans/2.03%3A_Writing_the_HRM_Plan.txt |
Learning Objectives
1. Explain the aspects needed to create a usable and successful HRM plan.
As you have learned from this chapter, human resource strategic planning involves understanding your company’s strategic plan and HR’s role in the organization. The planning aspect meets the needs of the strategic plan by knowing how many people should be hired, how many people are needed, and what kind of training they need to meet the goals of the organization. This section gives some tips on successful HR strategic planning.
Fortune 500 Focus
Like many Fortune 500 companies throughout the world, IBM in India finds that picking the best prospects for job postings isn’t always easy. By using advanced analytics, however, it aims to connect the strategic plan, staffing needs, and the hiring process using a simple tool. The project was originally developed to assign people to projects internally at IBM, but IBM found this tool able to not only extract essential details like the number of years of experience but also make qualitative judgments, such as how good the person actually is for the job (Chari, 2011). This makes the software unique, as most résumé-scanning software programs can only search for specific keywords and are not able to assess the job fit or tie the criteria directly to the overall strategic plan. The project uses IBM India’s spoken web technology, in which the prospective employee answers a few questions, creating the equivalent of voice résumé. Then using these voice résumés, the hiring manager can easily search for those prospects who meet the needs of the organization and the objectives of the strategic plan.
• Some of the challenges noted with this software include the recognition of language and dialect issues. However, the IBM human resources solution is still one of the most sophisticated of such tools to be developed. “Services is very people-intensive. Today, there is talk of a war for talent, but attracting the right kind of people is a challenge, yet unemployment is very high. Our solution applies sophisticated analytics to workforce management,” says Manish Gupta, director at IBM Research-India (Chari, 2011).
• It is likely that this is only the beginning of the types of technology that allow HR professionals to tie their HR plans directly to a strategic plan with the touch of a few buttons.
Link HRM Strategic Plan to Company Plan
Understanding the nature of the business is key to being successful in creating a strategic plan for HRM. Because every business is different, the needs of the business may change, depending on the economy, the season, and societal changes in our country. HR managers need to understand all these aspects of the business to better predict how many people are needed, what types of training are needed, and how to compensate people, for example. The strategic plan that the HR manager writes should address these issues. To address these issues, the HR manager should develop the departmental goals and HR plans based on the overall goals of the organization. In other words, HR should not operate alone but in tandem with the other parts of the organization. The HRM plan should reflect this.
Monitor the Plan Constantly
Oftentimes a great strategic plan is written, taking lots of time, but isn’t actually put into practice for a variety of reasons, such as the following:
1. The plan wasn’t developed so that it could be useful.
2. The plan wasn’t communicated with management and others in the HRM department.
3. The plan did not meet the budget guidelines of the organization.
4. The plan did not match the strategic outcomes of the organization.
5. There was lack of knowledge on how to actually implement it.
There is no point in developing a plan that isn’t going to be used. Developing the plan and then making changes as necessary are important to making it a valuable asset for the organization. A strategic plan should be a living document, in that it changes as organizational or external factors change. People can get too attached to a specific plan or way of doing things and then find it hard to change. The plan needs to change constantly or it won’t be of value.
Measure It
A good strategic plan and HR plan should discuss the way “success” will be measured. For example, rather than writing, “Meet the hiring needs of the organization,” be more specific: “Based on sales forecasts from our sales department, hire ten people this quarter with the skills to meet our ten job openings.” This is a goal that is specific enough to be measured. These types of quantitative data also make it easier to show the relationship between HR and the organization, and better yet, to show how HR adds value to the bottom line. Likewise, if a company has a strategic objective to be a safe workplace, you might include a goal to “develop training to meet the needs of the organization.” While this is a great goal, how will this be measured? How will you know if you did what you were supposed to do? It might be difficult to measure this with such a general statement. On the other hand, a goal to “develop a safety training workshop and have all employees complete it by the end of the year” is specific and can be measured at the end to determine success.
Human Resource Recall
What are some of your personal goals? Are these goals measureable?
Sometimes Change Is Necessary
It can be difficult to base an entire plan on forecasted numbers. As a result, an HRM department that is willing to change quickly to meet the needs of the organization proves its worthiness. Consider a sales forecast that called for fifteen new hires, but you find out months later the organization is having a hard time making payroll. Upon digging deeper, you find the sales forecasts were overexaggerated, and now you have fifteen people you don’t really need. By monitoring the changes constantly (usually done by asking lots of questions to other departments), you can be sure you are able to change your strategic plan as they come.
Be Aware of Legislative Changes
One of the major challenges in HRM, as we discuss in Chapter 1, is having an awareness of what is happening from a legal perspective. Because most budgets are based on certain current laws, knowing when the law changes and how it will affect department budgets and planning (such as compensation planning) will create a more solid strategic plan. For example, if the minimum wage goes up in your state and you have minimum wage workers, reworking the budget and communicating this change to your accounting team is imperative in providing value to the organization. We will discuss various legislation throughout this book.
Key Takeaways
• As has been the theme throughout this chapter, any HRM plan should be directly linked to the strategic plan of the organization.
• A plan should be constantly updated and revised as things in the organization change.
• A good strategic plan provides tools to determine whether you met the goal. Any plan should have measureable goals so the connection to success is obvious.
• Changes in a strategic plan and in goal setting are necessary as the internal and external environments change. An HR manager should always be aware of changes in forecasts, for example, so the plan can change, too.
• Legislative changes may impact strategic plans and budgets as well. It’s important to make sure HR managers are keeping up on these changes and communicating them.
Exercises
1. What are some ways an HR manager can keep up on legislative changes? Do a web search and list specific publications that may help keep the HR manager aware of changes.
2. Why is it important to be able to measure strategic plans? What might happen if you don’t? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/02%3A_Developing_and_Implementing_Strategic_HRM_Plans/2.04%3A_Tips_in_HRM_Planning.txt |
Chapter Summary
• Human resource management was once called the personnel department. In the past, hiring people and working with hiring paperwork was this department’s job. Today, the HRM department has a much broader role, and as a result, HR managers must align their strategies with the company’s strategies.
• Functions that fall under HRM today include staffing, creation of workplace policies, compensation and benefits, retention, training and development, and working with regulatory issues and worker protection.
• Human resource strategy is a set of elaborate and systematic plans of action. The company objectives and goals should be aligned with the objectives and goals of the individual departments.
• The steps to creating an HRM strategic plan include conducting a strategic analysis. This entails having an understanding of the values and mission of the organization, so you can align your departmental strategy in the same way.
• The second step is to identify any HR issues that might impact the business.
• The third step, based on the information from the first and second steps, is to prioritize issues and take action. Finally, the HRM professional will draw up the HRM plan.
• The HRM plan consists of six steps. The first is to determine the needs of the organization based on sales forecasts, for example. Then the HR professional will recruit and select the right person for the job. HRM develops training and development to help better the skills of existing employees and new employees, too. The HR manager will then determine compensation and appraise performance of employees. Each of these parts of the HRM plan is discussed in its own separate chapter in greater detail.
• As things in the organization change, the strategic plan should also change.
• To make the most from a strategic plan, it’s important to write the goals in a way that makes them measurable.
Chapter Case
We Merged…Now What?
• Earlier this month, your company, a running equipment designer and manufacturer called Runners Paradise, merged with a smaller clothing design company called ActiveLeak. Your company initiated the buyout because of the excellent design team at ActiveLeak and their brand recognition, specifically for their MP3-integrated running shorts. Runners Paradise has thirty-five employees and ActiveLeak has ten employees. At ActiveLeak, the owner, who often was too busy doing other tasks, handled the HRM roles. As a result, ActiveLeak has no strategic plan, and you are wondering if you should develop a strategic plan, given this change. Here are the things you have accomplished so far:
• Reviewed compensation and adjusted salaries for the sake of fairness. Communicated this to all affected employees.
• Developed job requirements for current and new jobs.
• Had each old and new employee fill out a skills inventory Excel document, which has been merged into a database.
From this point, you are not sure what to do to fully integrate the new organization.
1. Why should you develop an HRM strategic plan?
2. Which components of your HR plan will you have to change?
3. What additional information would you need to create an action plan for these changes?
Team Activities
1. Work in a group of three to five people. Choose a company and perform a SWOT analysis on that organization and be prepared to present it to the class.
2. Based on the SWOT analysis you performed in the first question, develop new objectives for the organization. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/02%3A_Developing_and_Implementing_Strategic_HRM_Plans/2.05%3A_Cases_and_Problems.txt |
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03: Diversity and Multiculturalism
Hiring Multicultural
On a Tuesday afternoon, as you are getting ready to go to lunch, you receive an e-mail from your human resources (HR) manager about the need to hire a new project manager, and there is a \$500 bonus for referring a friend who successfully joins the company. Immediately, you e-mail your friend Daniel, because you know he would be great for the job. Daniel is eventually hired for the position, and a few months later a new e-mail goes out asking for friend recommendations for a new position. You and Daniel both recommend someone, and eventually that person gets hired. Over the next year, hiring notices are not advertised externally as the organization has had good luck with this hiring practice. Seems like a great way to recruit new people, doesn’t it? It can be, but it also can be a detriment to the diversity and multiculturalism of the workplace. How, you might wonder?
While not true across the board, people have a tendency to spend time with people who are like themselves, in race, income level, and other aspects of diversity such as sexual orientation. In fact, according to the National Institute of Child Health and Human Development and a study published in the American Journal of Sociology, it is much more likely that someone will name a person in their own race as a friend than someone of a different race (Moody, 2001). Likewise, even from a young age, people tend to choose friends who are of the same race. As a result, when you recommend Daniel for a position, it is highly likely that Daniel is similar, from a diversity perspective, to you. Then, when Daniel recommends someone for a job, it is highly likely that he, too, is recommending someone with similar characteristics as you both. This obviously creates a lack of multicultural diversity in the workplace, which can mean lost profits for companies.
3.02: Diversity and Multiculturalism
Learning Objectives
1. Define, explain, and identify your own power and privilege.
2. Provide reasoning as to why diversity is important to maintain profitability.
Many people use the terms diversity and multiculturalism interchangeably, when in fact, there are major differences between the two. Diversity is defined as the differences between people. These differences can include race, gender, sexual orientation, religion, background, socioeconomic status, and much more. Diversity, when talking about it from the human resource management (HRM) perspective, tends to focus more on a set of policies to meet compliance standards. The Equal Employment Opportunity Commission (EEOC) oversees complaints in this area. We discuss the EEOC in Section 3.3.1 “Equal Employment Opportunity Commission (EEOC)” and in greater detail in Chapter 4 “Recruitment” and Chapter 5 “Selection”.
Multiculturalism goes deeper than diversity by focusing on inclusiveness, understanding, and respect, and also by looking at unequal power in society. In a report called “The 2007 State of Workplace Diversity Management Report1,” most HR managers said that diversity in the workplace is
1. not well defined or understood at work,
2. focuses too much on compliance, and
3. places too much emphasis on gender and ethnicity.
This chapter focuses on the advantages of a diverse workplace and discusses multiculturalism at work and the compliance aspect of diversity.
Power and Privilege
As defined in this chapter, diversity focuses on the “otherness” or differences between individuals and has a goal of making sure, through policies, that everyone is treated the same. While this is the legal and the right thing to do, multiculturalism looks at a system of advantages based on race, gender, and sexual orientation called power and privilege. In this system, the advantages are based on a system in which one race, gender, and sexual orientation is predominant in setting societal rules and norms.
The interesting thing about power and privilege is that if you have it, you may not initially recognize it, which is why we can call it invisible privilege. Here are some examples:
1. Race privilege. Let’s say you (a Caucasian) and your friend (an African American) are having dinner together, and when the bill comes, the server gives the check to you. While this may not seem like a big issue, it assumes you (being Caucasian) are the person paying for the meal. This type of invisible privilege may not seem to matter if you have that privilege, but if you don’t, it can be infuriating.
2. Social class privilege. When Hurricane Katrina hit New Orleans in 2005, many people from outside the storm area wondered why so many people stayed in the city, not even thinking about the fact that some people couldn’t afford the gas to put in their car to leave the city.
3. Gender privilege. This refers to privileges one gender has over another—for example, the assumption that a female will change her name to her husband’s when they get married.
4. Sexual orientation privilege. If I am heterosexual, I can put a picture of my partner on my desk without worrying about what others think. I can talk about our vacations together or experiences we’ve had without worrying what someone might think about my relationship. This is not the case for many gay, lesbian, and transgendered people and their partners.
Oftentimes the privilege we have is considered invisible, because it can be hard to recognize one’s own privilege based on race, gender, or social class. Many people utilize the color-blind approach, which says, “I treat everyone the same” or “I don’t see people’s skin color.” In this case, the person is showing invisible privilege and thus ignoring the privileges he or she receives because of race, gender, or social class. While it appears this approach would value all people equally, it doesn’t, because people’s different needs, assets, and perspectives are disregarded by not acknowledging differences (Plaut, et. al., 2009).
Another important aspect of power and privilege is the fact that we may have privilege in one area and not another. For example, I am a Caucasian female, which certainly gives me race privilege but not gender privilege. Important to note here is that the idea of power and privilege is not about “white male bashing” but understanding our own stereotypes and systems of advantage so we can be more inclusive with our coworkers, employees, and managers.
So what does this all mean in relation to HRM? It means we can combine the understanding of certain systems that allow for power and privilege, and by understanding we may be able to eliminate or at least minimize these issues. Besides this, one of the best things we can do for our organizations is to have a diverse workforce, with people from a variety of perspectives. This diversity leads to profitability and the ability to better serve customers. We discuss the advantages of diversity in Section 3.1.2 “Why Diversity and Multiculturalism?”.
Human Resource Recall
Take this week to examine your own power and privilege as a result of gender, race, or social class. Notice how people treat you because of your skin color, gender, or how you dress and talk.
Why Diversity and Multiculturalism?
When many people look at diversity and multiculturalism, they think that someone’s gender, skin color, or social class shouldn’t matter. So diversity can help us with policies to prevent discrimination, while multiculturalism can help us gain a deeper understanding of the differences between people. Hopefully, over time, rather than look at diversity as attaining numerical goals or complying with the law, we can combine the concepts to create better workplaces. Although many books discuss laws relating to diversity, not many actually describe why diversity is necessary in the workplace. Here are a few main reasons:
1. It is the law.
2. We can better serve customers by offering a broader range of services, such as being able to speak a variety of languages and understanding other cultures.
3. We can better communicate with one another (saving time and money) and customers.
4. With a multicultural perspective, we can create better ideas and solutions.
Fortune 500 Focus
Hilton is one of the most recognized names in the hotel industry. Hilton employs 130,000 people in 3,750 hotels in 84 countries. The hotel chain, with some locations franchised, focuses on diversity and inclusion as part of its operations. First, it has a director of global diversity and inclusion, who plays a key role in executing the Hilton global diversity and inclusion efforts, which are focused on culture, talent, workplace, and marketplace diversity strategies. Each Hilton brand must establish its own diversity performance goals and initiatives, which are monitored by the diversity council. The diversity council is made up of the company board of directors, the CEO, and vice president of human resources. At any given time, Hilton has thirty or more diversity initiatives in place (Forsythe, 2005), which are managed by the diversity council.
Hilton has created several diversity programs within the communities in which the hotels operate. For example, Hilton was one of the first hotel chains to develop an outreach program to educate minority and female entrepreneurs for franchise investments. One part of the program includes invitation-only seminars that discuss what it takes to be a successful hotel owner. Hilton says its diversity seminars are driven by the fact that it wants employees to reflect the diversity of the customers.
In addition to the outreach program, Hilton partners with historically black colleges and universities for recruiting, which creates an effective tie to jobs once students graduate. It has developed a supplier tracking system, so it knows the total number of supplier payments made and how many of those suppliers are female or minorities. William A. Holland, the vice president for workforce planning and analysis says, “It takes leadership to make diversity work, and our diversity initiative comes from the highest levels of our organization” (Forsythe, 2005)
Promoting a multicultural work environment isn’t just the law. Through a diverse work environment and multicultural understanding, organizations can attain greater profitability. A study by Cedric Herring called Does Diversity Pay? (Herring, 2006) reveals that diversity does, in fact, pay. The study found those businesses with greater racial diversity reporter higher sales revenues, more customers, larger market shares, and greater relative profits than those with more homogeneous workforces. Other research on the topic by Scott Page, the author of The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Page, 2007) ended up with similar results. Page found that people from varied backgrounds are more effective at working together than those who are from similar backgrounds, because they offer different approaches and perspectives in the development of solutions. Often people believe that diversity is about checking a box or only providing window dressing to gain more customers, but this isn’t the case. As put by Eric Foss, chairperson and CEO of Pepsi Beverages Company, “It’s not a fad. It’s not an idea of the month. It’s central and it’s linked very directly to business strategy” (Holstein, 2009). A study by the late Roy Adler of Pepperdine University shows similar results. His 19-year study of 215 Fortune 500 companies shows a strong correlation between female executives and high profitability (Adler). Another study, conducted by Project Equality, found that companies that rated low on equal opportunity issues earned 7.9 percent profit, while those who rated highest with more equal opportunities resulted in 18.3 percent profit (Lauber, 2011). These numbers show that diversity and multiculturalism certainly is not a fad, but a way of doing business that better serves customers and results in higher profits.
As managers, we need to recognize this and develop policies that recognize not only the importance of diversity but the importance of nurturing multicultural understanding in the workplace. Many employees, however, may be resistant to a discussion on diversity and multiculturalism. Much of this may have to do with their own power and privilege, but some resistance may be related to the discomfort people may feel when faced with the realization that change is a necessity and the cultural makeup of the workplace is changing. Some people may feel “We’ve always done it this way” and are less willing to change to the new ways of doing things.
Perhaps one of the best diversity statements by a Fortune 500 company was made by Jose Manuel Souto, the CFO for Visa in Latin America. He says, “A diverse workforce is critical to providing the best service to our global clients, supporting our business initiatives, and creating a workplace environment that promotes respect and fairness2.”
Now that you have an understanding of the meaning of diversity, power, and privilege, as well as the importance of diversity, we will discuss specific diversity strategies in Section 3.2 “Diversity Plans”.
Key Takeaways
• Diversity is the real or perceived differences between individuals. This can include race, gender, sexual orientation, size, cultural background, and much more.
• Multiculturalism is a term that is similar to diversity, but it focuses on development of a greater understanding of how power in society can be unequal due to race, gender, sexual orientation, power, and privilege.
• Power and privilege is a system of advantages based on one’s race, gender, and sexual orientation. This system can often be invisible (to those who have it), which results in one race or gender having unequal power in the workplace. Of course, this unequal power results in unfairness, which may be of legal concern.
• Diversity is important to the success of organizations. Many studies have shown a direct link between the amount of diversity in a workplace and the company’s success.
Exercises
1. Perform an Internet search to find a specific diversity policy for an organization. What is the policy? From what you know of the organization, do you believe they follow this policy in reality?
2. Visit the website http://www.diversityinc.com and find their latest “top 50 list.” What criteria are used to appear on this list? What are the top five companies for the current year?
1Society for Human Resource Management, The 2007 State of Workplace Diversity Management Report, March 2008, accessed August 3, 2011, www.shrm.org/Publications/HRNews/Pages/DiversityBusinessImperative.aspx.
2National Latina Business Women Association, “Women and Minorities on Corporate Boards Still Lags Far Behind National Population,” accessed August 24, 2011, http://nlbwa.org/component/content/article/64-nationalnews/137-procon-and-asian-global-sourcing-conference. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/03%3A_Diversity_and_Multiculturalism/3.01%3A_Introduction.txt |
Learning Objectives
1. Be able to apply strategies to create a multicultural work environment and diversity plans.
2. Be able to create an HR plan with diversity considerations.
While state and federal laws must be followed to ensure multiculturalism, the culture of the company and the way the organization operates can contribute to the nurturing of a multicultural environment (or not). Most companies have a formalized and written antidiscrimination and harassment policy. For example, Zappos’s policy states, “The diversity of Zappos’ employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment. Examples of such behavior include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. Please refer to the applicable sections of the Employee Handbook for further guidance1.”
Implementing a policy is an excellent first step, but what is important is how the company acts on those formalized processes and written policies. Let’s say, for example, an organization has a published policy on inclusion of those with physical disabilities, but much “schmoozing” and relationship development with managers takes place on the golf course on Friday afternoons. While the policy states the company doesn’t discriminate, their actions and “traditions” show otherwise and do discriminate against those with disabilities. If this is where the informal work and relationship building take place, an entire group could be left out of this process, likely resulting in lower pay and promotion rates. Likewise, organizations that have a “beer Friday” environment may discriminate against those whose religions do not condone drinking alcohol. While none of these situations are examples of blatant discrimination, a company’s culture can contribute to an environment that is exclusive rather than inclusive.
Many organizations have developed diversity management plans that are tied to the written diversity policy of the organization. In fact, in many larger organizations, such as Hilton, manager- or director-level positions have been created to specifically manage diversity plans and programs. Josh Greenberg, a researcher in the area of workplace diversity, contends that organizations with specific diversity plans tend to be able to facilitate changes more quickly than companies without diversity plans (Greenberg, 2004). He says there are three main steps to creating diversity plans:
1. Assessment of diversity. Employee satisfaction surveys, discussions, and open forums that can provide insight into the challenges and obstacles to diversity. Inclusion of all workers for input is necessary to create a useful plan.
2. Development of the diversity plan. Based on step 1, a series of attainable and measurable goals should be developed regarding workplace diversity.
3. Implementation of the plan. The commitment of executives and management is necessary. Formulating action plans based on the goals developed in step 2 and assignment of implementation and measurement of those plans must follow. The action plan should be the responsibility of the entire organization, not just the director of diversity or human resources.
In Section 3.2.1 “Recruitment and Selection”, we discuss some of the HR plan considerations in company culture and “our way of doing things” that are worth considering when creating a diversity plan.
Recruitment and Selection
As you saw in the opening of Chapter 3 “Diversity and Multiculturalism”, sometimes organizations do not mean to be exclusive or discriminatory, but their practices are discriminatory and illegal. For example, the Equal Employment Opportunity Commission (EEOC) says it is illegal to publish a job advertisement that shows a preference for a particular type of person or discourages someone from applying for a job. For example, a Facebook post that says “recent college graduates wanted” might be inclusive to a younger group and discouraging to a diverse (older) workforce, not making the post multicultural. Another example might be the reliance on word-of-mouth advertisement for job openings. Suppose you have a mostly Hispanic workforce and use word of mouth for recruitment. It is likely that most new hires will also be Hispanic. This is also illegal, but perhaps a consideration is the lack of diversity you will have in your workplace with these recruitment methods.
Make sure that job announcements aren’t posted only for your Facebook friends to see; post them in a variety of places to gain the largest and most diverse response.
We address discrimination in the selection process in Chapter 5 “Selection”. However, a mention of the four-fifths rule here is important to determine how we can quantitatively evaluate discrimination in our selection practices. One way to calculate possible discrimination is by using the four-fifths rule, or 80 percent rule. The rule states that a selection rate for any race, sex, or ethnic group that is less than four-fifths of the rate for the group with the highest rate could be regarded as adverse impact. Adverse impact refers to employment practices that may appear to be neutral but have a discriminatory effect on a protected group. For example, let’s assume 100 women and 500 men applied to be firefighters. Let’s say 20 of those women were hired and 250 men were hired. To determine adverse impact based on the four-fifths rule, calculate the following:
• Selection rate for women: 20 percent
• Selection rate for men: 50 percent
• Then divide the highest selection rate: .20/.50 = .4
Because .4, or 40 percent, is less than four-fifths, there may be adverse impact in the selection process for firefighters.
Testing
If employment tests are required, a test must be in direct relation to the job. For example, an organization that uses a personality test in hiring must be able to show that the personality test results are nondiscriminatory and do not exclude a population.
In addition, if a reasonable accommodation is needed, such as an interpreter, and it does not cause financial difficulty for the organization, this should be granted.
Also consider the type of test and how it might exclude a certain group of people, such as those who don’t speak English as a first language. We will discuss multiculturalism and testing further in Chapter 5 “Selection”.
Pay and Promotion
Development of policies related to pay and promotion is key to fairness in a multicultural situation. It is widely published that women make about 77 percent of what men earn for similar jobs2. Many studies have tried to determine a cause for this pay inequity, and here are some of the possible reasons studied and researched:
1. Hours worked. Studies have said that women tend to work fewer hours because of child-care and housework expectations.
2. Occupational choice. A study performed by Anne York at Meredith College (York, 2008) found that women tend to choose careers that pay less because they are worried about balancing family and career. In addition, numerous studies show that women choose careers on the basis of gender stereotypes (e.g., nurse, teacher) and that this leads to lower pay.
3. Stereotypes. The concept of male bias is a possibility. In many studies, people were more likely to choose male doctors over female doctors, even when experience and education were the same (Hekman, et. al., 2010). There appears to be a perception that men may be more competent in certain types of jobs.
4. Maternity and family leave. Women leaving the workforce for a short or extended period of time may affect the perception of promotability in the workplace.
5. Salary negotiation(Bowles & Babcock, 2008). A study performed by Bowles and Babcock showed that men were eight times more likely to negotiate salary than women. In addition, when women did negotiate, they received lower monetary returns. Consider a study performed by Cornell University, which found that women were often negatively affected in their job when they negotiated salary, as compared to men not being viewed negatively after negotiations.
Whatever the reason for pay difference, all managers should be aware of these differences when hiring and promoting. Allowing managers to determine the pay for their employees can also bring out negative stereotypes—and lead to breaking of the law. Determining a set pay schedule for all new and promoted employees can help remedy this situation.
A factor in promotions can also be the mentor-mentee relationship. Most individuals in organizations will have an informal mentor who helps them “through the ranks.” Traditionally, this informal mentor relationship results in someone “pairing up” with another who has similar physical characteristics, is the same gender, or has a similar mind-set. As a result, if the organization has, for example, mostly men, it is likely the female will not be informally mentored, which can result in lack of promotion. Likewise, if the workforce consists of mostly Caucasian females, it is likely the African American male may not develop an informal mentor relationship with his female counterparts. Development of a formal mentorship program to ensure that everyone has a mentor is one way to alleviate this situation. Mentorship programs are discussed in Chapter 8 “Training and Development”.
Now What?
Now that you have an awareness of the aspects of HR that could be affected by multiculturalism, you may consider what steps you can take to create a more multicultural workplace. The first step would be to create a diversity plan, as discussed earlier in this section. The second step would be to look at the operation of the HR department and to figure out what departmental measures can be taken to promote diversity.
HR, for example, can provide a training series on power and privilege and how it relates to the workplace. Awareness is the first step to creating a truly multicultural environment. Once employees recognize their own power and privilege, the training could be developed to include laws related to diversity, and discussions on bias can take place. Then discussions can be held on how to improve HR plans such as job analysis, recruitment, and selection to create a multicultural work environment. Rather than thinking about this training as one of many objectives that must be accomplished, think about the training from the conversation perspective. Getting the conversation started is the first step in this personal and professional development process for employees.
Some of the aspects to creating a training focused on multiculturalism might include the following:
1. Build a cultural knowledge about customs, religions, and histories.
2. Discuss treatment of people based on them as individuals, rather than as part of a “group,” which can result in stereotyping.
3. Teach employees to listen actively, which can help raise cultural awareness.
4. Train employees to rethink current policies and how those policies might be exclusive to a certain group.
5. Work on resistance to change. Many employees think, “This is the way we have always done it, and now we have to change it because we have a group of ____ working here now.”
6. Does your leadership team have a multiculturalism perspective? Are many ethnic backgrounds and other multicultural traits represented?
While these suggestions may not eliminate power and privilege, the ability to talk about differences and expectations can be a key ingredient to creating a more inclusive environment. Sometimes this type of training can help people evaluate their perceptions. For example, suppose a complaint came through that a woman was making derogatory sexual comments to only one group of men in an organization. When talked to about it, she said she made comments to the “techies” because she thought the comments would provide them a needed confidence boost, but she generally wouldn’t make those types of comments. This is an example of her perception (“techies” need confidence boosts from women) followed by her action (the comments) on this perception. When we assume our perceptions are correct, we are usually wrong. Training can get people to consider their emotions, stereotypes, and expectations. Besides training, asking ourselves a series of important questions can be the start to making diversity and multiculturalism work. The University of California, San Francisco human resource department lists some of these questions, which are shown in the sidebar.
Things to Consider When Creating a Multicultural and Diverse Work Environment
• Do you test your assumptions before acting on them?
• Do you believe there is only one right way of doing things, or that there are a number of valid ways that accomplish the same goal? Do you convey that to staff?
• Do you have honest relationships with each staff member you supervise? Are you comfortable with each of them? Do you know what motivates them, what their goals are, and how they like to be recognized?
• Are you able to give negative feedback to someone who is culturally different from you?
• When you have open positions, do you insist on a diverse screening committee and make additional outreach efforts to ensure that a diverse pool of candidates has applied?
• When you hire a new employee, do you not only explain job responsibilities and expectations clearly but orient the person to the campus and department culture and unwritten rules?
• Do you rigorously examine your unit’s existing policies, practices, and procedures to ensure that they do not differentially impact different groups? When they do, do you change them?
• Are you willing to listen to constructive feedback from your staff about ways to improve the work environment? Do you implement staff suggestions and acknowledge their contribution?
• Do you take immediate action with people you supervise when they behave in ways that show disrespect for others in the workplace, such as inappropriate jokes and offensive terms?
• Do you make good faith efforts to meet your affirmative action goals?
• Do you have a good understanding of institutional isms such as racism and sexism and how they manifest themselves in the workplace?
• Do you ensure that assignments and opportunities for advancement are accessible to everyone?
• What policies, practices, and ways of thinking have differential impact on different groups?
• What organizational changes should be made to meet the needs of a diverse workforce?
Human Resource Recall
Why is multiculturalism important in the workplace? What is your role, as an employee in your organization, to ensure a diverse workforce?
How Would You Handle This?
Refer a Friend
Your manager is very concerned about the cost of hiring the three new people you need. As a result, she doesn’t want to post the advertisement in a variety of places; she thinks it’s best to just use a “refer a friend” recruitment strategy. When she moves forward with this strategy, ten people turn in résumés. Upon looking further, it appears all applicants went to the same private religious college and graduated around the same time. You are concerned that this method of recruitment lacks diversity. How would you handle this with your manager?
Key Takeaways
• Oftentimes there are cultural aspects to an organization that make it resistant to an inclusive environment. These are often not obvious, but it is important to be aware of how your own company culture impacts multiculturalism.
• One way to begin the discussion within your organization is to create diversity action plans, for which the entire company is responsible and for which HR is the change agent. In addition to companywide initiatives, HR can also look within its own HR plans to see where it may be able to change.
• In recruitment, awareness of how and where you post announcements is crucial.
• Testing should be fair and unbiased and shouldn’t negatively impact someone based on race, national origin, gender, social class, or educational level.
• There are many reasons for differences in pay. Development of a set pay scale can alleviate some of the issues surrounding unfair pay, especially between men and women.
• Formal mentorship programs can create multicultural understanding and can ensure people do not stick with their own race or gender when helping someone move up the ranks in an organization.
Exercises
1. What are some things we can do, personally, to be more multiculturally efficient?
2. What are the advantages of having a set pay scale? What are the disadvantages?
1Zappos.com, accessed August 25, 2011, http://about.zappos.com/our-unique-culture/zappos-core-values/build-open-and-honest-relationships-communication.
2National Committee on Pay Equity, accessed August 25, 2011, www.iwpr.org/initiatives/pay-equity-and-discrimination/#publications. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/03%3A_Diversity_and_Multiculturalism/3.03%3A_Diversity_Plans.txt |
Learning Objectives
1. Define the role of the Equal Employment Opportunity Commission (EEOC).
2. Explain the various types of laws covered by the EEOC.
As we already know, it is in an organization’s best interest to hire and promote a multicultural and diverse workforce. Sometimes though, people are still discriminated against at work. As a result, a federal agency has been established to ensure employees have a place to file complaints should they feel discriminated against. This is the topic of Section 3.1 “Diversity and Multiculturalism”. However, please note that each of these topics is discussed in Chapter 4 “Recruitment” as well, but they are also worth mentioning here.
Equal Employment Opportunity Commission (EEOC)
The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with the task of enforcing federal employment discrimination laws. The laws include those that protect people from discrimination in all areas of employment, such as discrimination based on race, color, religion, sex, national origin, age, and disability. People who have filed a discrimination charge are also protected against discrimination under the EEOC. Employers with at least fifteen employees (twenty for age discrimination) are covered under the EEOC. This agency covers not only discrimination in hiring but also discrimination in all types of work situations such as firing, promotions, harassment, training, wages, and benefits. The EEOC has the authority to investigate charges of discrimination against employers. The agency investigates the claims, makes a finding, and then tries to settle the charge. If they are unsuccessful in settling the charge, the EEOC has the right to file a lawsuit on behalf of the complainants. The EEOC has headquarters in Washington, DC, with fifty-three field offices throughout the United States.
If a company has more than one hundred employees, a form called the EEO-1 must be filled out yearly. This form confirms the demographics of an organization based on different job categories1. An organization that employs more than fifty people and works for the federal government must also file an EEO-1 yearly, with the deadline normally in September. In addition, organizations must post the EEOC notice, which you have probably seen before, perhaps in the company break room. Finally, organizations should keep on file records such as hiring statistics in the event of an EEOC investigation.
It is necessary to mention here that while there is a legal compliance concern, as discussed before, it is in the company’s best interest to hire a diverse workforce. So while we can discuss the legal aspects, remember that the purpose of having a diverse workforce is not just to meet EEOC requirements but to create a better, more profitable workplace that better serves customers.
Table 3.1 How the EEOC Process Works and Requirements for Employers
Requirements by EEOC
Post Federal and State EEOC notices
File yearly report called EEO-1
Keep copies of documents on file
Process for Investigation
1. The EEOC complaint is filed.
2. The EEOC notifies the organization of the charges.
3. The EEOC acts as a mediator between the employee and the employer to find a solution.
4. If step 3 is unsuccessful, the EEOC will initiate an investigation.
5. The EEOC makes a determination, and then the employer has the option of remedying the situation or face a potential lawsuit.
EEOC Federal Legislation
While the EEOC is the larger governing body, many pieces of legislation relating to multicultural practices are part of the EEOC family of laws. Many of these laws began with Title VII of the Civil Rights Act in 1964. This act, enforced by the EEOC, covers several areas in which discrimination was rampant. However, a bona fide occupational qualification (BFOQ) is a quality or attribute employers are allowed to consider when making decisions during the selection process. Examples of BFOQs are a maximum age limit for airline pilots for safety reasons and a Christian college’s requirement that the president of the college be Christian.
EEOC laws relate specifically to the following and are discussed in detail in Chapter 4 “Recruitment” and Chapter 5 “Selection”:
1. Age
2. Disability
3. Equal pay
4. Genetic information
5. National origin
6. Pregnancy
7. Race/color
8. Religion
9. Retaliation
10. Sex
11. Sexual harassment
Age
Age discrimination involves treating someone less favorably because of his or her age. Created in 1967, the Age Discrimination in Employment Act (ADEA) is enforced by the EEOC. This law covers people who are age forty or older. It does not cover favoring an older worker over a younger worker, if the older worker is forty years or older. The law covers any aspect of employment such as hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits, and any other condition or term of employment.
The law also goes deeper by forbidding harassment of someone based on age. While simple teasing or offhand comments are not covered, more serious offensive remarks about age are covered by this EEOC law.
Disability
The Americans with Disabilities Act (ADA) prohibits discrimination against those with disabilities and is enforced by the EEOC. Discrimination based on disability means treating a qualified person unfavorably because of a disability. For example, if someone has AIDS that is controlled, the employee cannot be treated unfavorably. The law requires an employer to provide reasonable accommodation to an employee or applicant with a disability, unless this accommodation would cause significant difficulty or expense for the employer. A reasonable accommodation is defined by the EEOC as any change in the work environment or in the way things are customarily done that enables an individual with a disability to enjoy equal employment opportunities. A reasonable accommodation might include making the workplace accessible for wheelchair use or providing equipment for someone who is hearing or vision impaired.
This law does not mean that organizations are required to hire unqualified people. The law specifically states the person must be qualified for the job and have a disability defined by the law. A disability defined by the law can include the following:
1. Physical or mental condition that limits a major life activity (walking, talking, seeing, hearing, or learning)
2. History of a disability (e.g., cancer that is in remission)
3. Physical or mental impairment that is not transitory (lasting or expected to last less than six months)
The law places limits on employers when it comes to asking job applicants questions about medical history or asking a person to take a medical exam.
Equal Pay/Compensation
The basis of this law is that people are paid the same for the same type of work, and the law specifically addresses gender pay differences. Rather than job title, job content is used to determine if the job is the same work. In addition to covering salary, it deals with overtime pay, bonus, stock options, profit sharing, and other types of bonus plans such as vacation and holiday pay. If inequality in pay is found, the employer cannot reduce the wages of either sex to equalize the pay.
An employee who files an equal pay charge has the option to go directly to court rather than the EEOC.
Genetic Information
This law is one of the newer EEOC laws, which took effect in November 2009. The EEOC’s definition of genetic information includes family medical information or information about the manifestation of a disease or disorder in an individual’s family. For example, an employer cannot discriminate against an employee whose family has a history of diabetes or cancer. This information could be used to discriminate against an employee who has an increased risk of getting a disease and may make health-care costs more expensive for the organization.
In addition, the employer is not allowed to seek out genetic information by requesting, requiring, or purchasing this information. However, there are some situations in which receiving this information would not be illegal:
1. A manager or supervisor overhears an employee talking about a family member’s illness.
2. Information is received based on wellness programs offered on a voluntary basis.
3. If the information is required as documentation to receive benefits for the Family and Medical Leave Act (FMLA). FMLA is discussed in Section 3 “Pregnancy”.
4. If the information is commercial, such as the appearance of information in a newspaper, as long as the employer is not specifically searching those sources for the purpose of finding genetic information.
5. If genetic information is required through a monitoring program that looks at the biological effects of toxic substances in the workplace.
6. For those professions that require DNA testing, such as law enforcement agencies. In this case, the genetic information may only be used for analysis in relation to the specific case at hand.
This law also covers how information about genetics should be kept. For example, genetic information must be kept separate from an employee’s regular file.
National Origin
It is illegal to treat people unfavorably because they are from a particular country or part of the world, because of their accent, or because they appear to be of a particular descent (even if they are not). The law protecting employees based on national origin refers to all aspects of employment: hiring, firing, pay, job assignments, promotions, layoffs, training, and fringe benefits. An employer can require an employee to speak English only if it is necessary to perform the job effectively. An English-only policy is allowed only if it is needed to ensure the safe or efficient operations of the employer’s business. An employer may not base an employment decision on a foreign accent, unless the accent seriously interferes with job performance.
Pregnancy
This section of the EEOC refers to the unfavorable treatment of a woman because of pregnancy, childbirth, or a medical condition related to pregnancy or childbirth. The Pregnancy Discrimination Act of 1978, added to the Civil Rights Act of 1964, is enforced by the EEOC. The female who is unable to perform her job owing to pregnancy must be treated the same as other temporarily disabled employees. For example, modified tasks or alternative assignments should be offered. This law refers not only to hiring but also to firing, pay, job assignments, promotions, layoffs, training, and fringe benefits. In addition to this law against discrimination of pregnant women, the Family and Medical Leave Act (FMLA) is enforced by the US Department of Labor2. The FMLA requires companies with fifty or more employees to provide twelve weeks of unpaid leave for the following:
1. Birth and care of a newborn child
2. Care of an adopted child
3. Care for immediate family members (spouse, child, or parent) with a serious health condition
4. Medical leave for the employee who is unable to work because of a serious health condition
In addition to the company size requirement, the employee must have worked at least 1,250 hours over the past 12 months.
Race/Color
This type of discrimination refers to treating someone unfavorably because he or she is of a certain race or because of certain characteristics associated with race. These characteristics might include hair texture, skin color, or facial features. Discrimination can occur when the person discriminating is the same race or color of the person who is being discriminated against. EEOC law also protects people who are married to or associated with someone of a certain race or color. As with the other types of antidiscrimination laws we have discussed, this law refers not only to the initial hiring but also to firing, pay, job assignments, promotions, layoffs, training, and fringe benefits.
Religion
This part of the EEOC refers to treating a person unfavorably because of their religious beliefs. This law requires a company to reasonably accommodate an employee’s religious beliefs or practices, unless doing so would burden the organization’s operations. For example, allowing flexible scheduling during certain religious periods of time might be considered a reasonable accommodation. This law also covers accommodations in dress and grooming, such as a headscarf, religious dress, or uncut hair and a beard in the case of a Sikh. Ideally, the employee or applicant would notify the employer that he or she needs such an accommodation for religious reasons, and then a discussion of the request would occur. If it wouldn’t pose hardship, the employer should honor the request. If the request might cause a safety issue, decrease efficiency, or infringe on the rights of other employees, it may not be honored.
Sex and Sexual Harassment
Sex discrimination involves treating someone unfavorably because of their sex. As with all EEOC laws, this relates to hiring, firing, pay, job assignments, promotions, layoffs, training, and fringe benefits. This law directly ties into sexual harassment laws, which include unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. The victim can be male or female, and sexual harassment can occur female to female, female to male, male to female, and male to male. We discuss more details of harassment in Chapter 10 “Managing Employee Performance”.
Harassment at Yale?
This 2011 video outlines a sexual harassment lawsuit at Yale University. The video shows that the lawsuit blamed Yale not for the harassment but for not taking a harder stand on this type of harassment.
Retaliation
In all the laws mentioned, the EEOC set of laws makes it illegal to fire, demote, harass, or retaliate against people because they filed a charge of discrimination, complained about discrimination, or participated in employment discrimination proceedings. Perhaps one of the most high-profile sexual harassment and retaliation cases was that of Sanders v. Thomas. Isiah Thomas, then coach of the New York Knicks, fired Anucha Browne Sanders because she hired an attorney to file sexual harassment claims charges. The jury awarded Browne Sanders \$11.6 million in punitive charges because of the hostile work environment Thomas created and another \$5.6 million because Browne Sanders was fired for complaining (Schmidt, 2007). A portion of the lawsuit was to be paid by Madison Square Garden and James Dolan, chairman of Cablevision, the parent company of Madison Square Garden and the Knicks. Browne Sanders’s lawyers successfully argued that the inner workings of Madison Square Garden were hostile and lewd, and that the former marketing executive of the organization subjected her to hostility and sexual advances. Thomas left the organization as coach and president in 2008. As in this case, there are large financial and public relations penalties not only for sexual harassment but for retaliation after a harassment suit has been filed.
All types of discrimination and laws affecting multiculturalism are a key aspect for HR managers and managers to understand. These types of discrimination are discussed in Chapter 4 “Recruitment”, specifically, how they pertain to recruiting and hiring.
Military Service
The Uniformed Services Employment and Reemployment Rights Act (USERR) protects people who serve or have served in the armed forces, Reserves, National Guard, or other uniformed services. The act ensures these individuals are not disadvantaged in their civilian careers because of their service. It also requires they be reemployed in their civilian jobs upon return to service and prohibits discrimination based on past, present, or future military service.
Human Resource Recall
What types of discrimination (under the EEOC) do you think are the most common and why? Have you ever experienced discrimination in the workplace, at school, or in extracurricular activities? Explain.
Key Takeaways
• The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with the development and enforcement of laws relating to multiculturalism and diversity in the workplace.
• The EEOC covers discrimination based on several areas. Companies cannot discriminate based on age; EEOC law covers people who are forty years or older.
• Employers cannot discriminate against people with disabilities and must provide reasonable accommodations, such as the addition of a wheelchair ramp to accommodate those with disabilities.
• Equal pay refers to the fact people should legally be paid the same amount for performing the same type of work, even if the job title is different.
• The newest addition to EEOC law prohibits discrimination based on genetic information, such as a history of cancer in a family.
• Unfavorable treatment of people because they are from a particular country or part of the world or have an accent is covered by the EEOC. An organization cannot require people to speak English, unless it is a requirement for the job or needed for safety and efficient operation of the organization.
• Women can’t be discriminated against because they are pregnant. The inability to perform certain tasks due to pregnancy should be treated as a temporary disability; accommodation can be in the form of modified tasks or alternative assignments.
• The EEOC protects people from discrimination based on their race or color.
• Religion is also an aspect of the EEOC family of laws. The protection of religion doesn’t allow for discrimination; accommodations include modifications of work schedules or dress to be made for religious reasons.
• Discrimination on the basis of sex is illegal and covered by the EEOC. Sexual harassment is also covered by the EEOC and states that all people, regardless of sex, should work in a harassment-free environment.
• Retaliation is also illegal. An organization cannot retaliate against anyone who has filed a complaint with the EEOC or a discrimination lawsuit.
• The US Department of Labor oversees some aspects of EEOC laws, such as the Family and Medical Leave Act (FMLA). This act requires organizations to give twelve weeks of unpaid leave in the event of an adoption, a birth, or a need to provide care to sick family members.
Exercises
1. Visit the EEOC website at http://www.eeoc.gov and explain the methods an employee can use in filing a complaint with the EEOC.
2. If an employer is found to have discriminated, what are some “remedies” listed on the EEOC website?
1Equal Opportunity Employment Commission, 2011 EEO-1 Survey, accessed December 20, 2010, www.eeoc.gov/employers/eeo1survey.
2US Department of Labor, Leave Benefits: Family and Medical Leave, US Department of Labor, accessed December 20, 2010, http://www.dol.gov/dol/topic/benefits-leave/fmla.htm. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/03%3A_Diversity_and_Multiculturalism/3.04%3A_Multiculturalism_and_the_Law.txt |
Chapter Summary
• Diversity is the real or perceived differences between individuals. Diversity can include race, gender, sexual orientation, size, cultural background, and many other differences. Multiculturalism is similar to diversity but focuses on the development of a greater understanding of how power in society can be unequal because of race, gender, sexual orientation, power, and privilege.
• Power and privilege is a system of advantages based on one’s race, gender, and sexual orientation. This system can often be invisible (to those who have it), which results in one race or gender having unequal power in the workplace. Of course, this unequal power results in unfairness, which may be a legal concern.
• Diversity is important to the success of organizations. Many studies have shown a direct link between the amount of diversity in a workplace and the success of the company.
• Oftentimes there are cultural aspects to an organization that make it resistant to an inclusive environment. These are often not obvious, but awareness of how your own company culture impacts multiculturalism is important. Job announcements, testing, and pay differences are company culture components that can create exclusive environments.
• In recruitment, awareness of how and where you post announcements is crucial. Development of a set pay scale can alleviate some of the issues surrounding unfair pay, especially between men and women.
• Formal mentorship programs can create multicultural understanding and ensure people do not stick with their own race or gender when helping someone move up the ranks in an organization.
• The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with development and enforcement of laws relating to multiculturalism and diversity in the workplace.
• The EEOC covers discrimination based on several areas. Companies cannot discriminate based on age—that is, against someone who is forty or older. They also can’t discriminate against people with disabilities or on the basis of race, genetic information, national origin, gender, or religion.
• Retaliation is also illegal, based on EEOC laws. An organization cannot retaliate against anyone who has filed a complaint with the EEOC or a discrimination lawsuit.
• The US Department of Labor oversees some aspects of EEOC laws, such as the Family and Medical Leave Act (FMLA). This act requires organizations to give twelve weeks of unpaid leave in the event of an adoption, birth, or caregiving of sick family members.
Chapter Case
But…It’s Our Company Culture!
You are the HR manager for a fifty-person firm that specializes in the development and marketing of plastics technologies. When you were hired, you felt the company had little idea what you should be paid and just made up a number, which you were able to negotiate to a slightly higher salary. While you have been on the job for three months, you have noticed a few concerning things in the area of multiculturalism, besides the way your salary was offered. The following are some of those items:
1. You know that some of the sales team, including the sales manager, get together once a month to have drinks at a strip club.
2. A Hispanic worker left the organization, and in his exit interview, he complained of not seeing a path toward promotion.
3. The only room available for breast-feeding mothers is the women’s restroom.
4. The organization has a policy of offering \$200 to any employee who refers a friend, as long as the friend is hired and stays at least six months.
5. The manufacturing floor has an English-only policy.
6. You have heard managers refer to those wearing turbans in a derogatory way.
What do you think needs to be done to create a more inclusive environment, without losing the culture of the company? What suggestions would you make to those involved in each of the situations?
Team Activity
1. In groups, research recent high-profile cases involving diversity or multiculturalism. Prepare a five-minute presentation on the case to present to classmates. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/03%3A_Diversity_and_Multiculturalism/3.05%3A_Cases_and_Problems.txt |
Keeping Up with Growth
Over the last two years, the company where Melinda works as HR manager, Dragon Enterprises, has seen plenty of growth. Much of this growth has created a need for a strategic, specific recruiting processes. In the past, Dragon Enterprises recruited simply on the basis of the applications they received, rather than actively searching for the right person for the job. The first thing Melinda did when arriving at the company was to develop a job analysis questionnaire, which she had all employees fill out using the website SurveyMonkey. The goal was to create a job analysis for each position that existed at the company. This happened to be the point where the organization started seeing rapid growth, as a result of increased demand for the types of parts the company sells. Luckily, since Melinda followed the industry closely and worked closely with management, part of her strategic outline planned for the hiring of several new positions, so she was mostly ready for it. Keeping in mind the Equal Employment Opportunity Commission (EEOC) laws and the company’s position on a diverse workforce, Melinda set out to write new job descriptions for the job analysis she had performed. She knew the job analysis should be tied to the job description, and both of these should be tied to the job qualifications. Obviously, to recruit for these positions, she needed to develop a recruitment plan. Over the next year, the organization needed to hire three more floor management positions, three office positions, and fifteen factory floor positions. Next, she needed to determine a time line to recruit candidates and a method by which to accept the applications she would receive. After sharing this time line with her colleague, the chief operating officer, she went to work recruiting. She sent an e-mail to all employees asking them to refer a friend and receive a \$500 bonus. Next, part of her strategy was to try to find very specialized talent in management to fill those positions. For this, she thought working with a recruiting company might be the best way to go. She also used her Twitter and Facebook accounts to broadcast the job openings. After a three-week period, Melinda had 54 applications for the management positions, 78 for the office positions, and 110 for the factory floor positions. Pleased with the way recruiting had gone, she started reviewing the résumés to continue with the selection process.
4.02: The Recruitment Process
Learning Objectives
1. Discuss the need for forecasting human resource needs and techniques for forecasting.
2. Be able to explain the steps to an effective recruitment strategy.
3. Be able to develop a job analysis and job description.
The recruitment process is an important part of human resource management (HRM). It isn’t done without proper strategic planning. Recruitment is defined as a process that provides the organization with a pool of qualified job candidates from which to choose. Before companies recruit, they must implement proper staffing plans and forecasting to determine how many people they will need. The basis of the forecast will be the annual budget of the organization and the short- to long-term plans of the organization—for example, the possibility of expansion. In addition to this, the organizational life cycle will be a factor. Organization life cycle is discussed in Chapter 2. Forecasting is based on both internal and external factors. Internal factors include the following:
1. Budget constraints
2. Expected or trend of employee separations
3. Production levels
4. Sales increases or decreases
5. Global expansion plans
External factors might include the following:
1. Changes in technology
2. Changes in laws
3. Unemployment rates
4. Shifts in population
5. Shifts in urban, suburban, and rural areas
6. Competition
Once the forecasting data are gathered and analyzed, the HR professional can see where gaps exist and then begin to recruit individuals with the right skills, education, and backgrounds. This section will discuss this step in HR planning.
Recruitment Strategy
Although it might seem easy, recruitment of the right talent, at the right place and at the right time, takes skill and practice, but more importantly, it takes strategic planning. In Chapter 2, development of staffing plans is discussed. An understanding of the labor market and the factors determining the relevant aspects of the labor market is key to being strategic about your recruiting processes.
Based on this information, when a job opening occurs, the HRM professional should be ready to fill that position. Here are the aspects of developing a recruitment strategy:
1. Refer to a staffing plan. This is discussed in Chapter 2.
2. Confirm the job analysis is correct through questionnaires.
3. Write the job description and job specifications.
4. Have a bidding system to recruit and review internal candidate qualifications for possible promotions.
5. Determine the best recruitment strategies for the position.
6. Implement a recruiting strategy.
The first step in the recruitment process is acknowledgment of a job opening. At this time, the manager and/or the HRM look at the job description for the job opening (assuming it isn’t a new job). We discuss how to write a job analysis and job description in Section 4.1.2 “Job Analysis and Job Descriptions”.
Assuming the job analysis and job description are ready, an organization may decide to look at internal candidates’ qualifications first. Internal candidates are people who are already working for the company. If an internal candidate meets the qualifications, this person might be encouraged to apply for the job, and the job opening may not be published. Many organizations have formal job posting procedures and bidding systems in place for internal candidates. For example, job postings may be sent to a listserv or other avenue so all employees have access to them. However, the advantage of publishing open positions to everyone in and outside the company is to ensure the organization is diverse. Diversity is discussed in Chapter 3. We discuss more about internal and external candidates and bidding systems in Chapter 5.
Then the best recruiting strategies for the type of position are determined. For example, for a high-level executive position, it may be decided to hire an outside head-hunting firm. For an entry-level position, advertising on social networking websites might be the best strategy. Most organizations will use a variety of methods to obtain the best results. We discuss specific strategies in Section 4.3 “Recruitment Strategies”.
Another consideration is how the recruiting process will be managed under constraining circumstances such as a short deadline or a low number of applications. In addition, establishing a protocol for how applications and résumés will be processed will save time later. For example, some HRM professionals may use software such as Microsoft Excel to communicate the time line of the hiring process to key managers.
Once these tasks are accomplished, the hope is that you will have a diverse group of people to interview (called the selection process). Before this is done, though, it is important to have information to ensure the right people are recruited. This is where the job analysis and job description come in. We discuss this in Section 4.1.2 “Job Analysis and Job Descriptions”.
Job Analysis and Job Descriptions
The job analysis is a formal system developed to determine what tasks people actually perform in their jobs. The purpose of a job analysis is to ensure creation of the right fit between the job and the employee and to determine how employee performance will be assessed. A major part of the job analysis includes research, which may mean reviewing job responsibilities of current employees, researching job descriptions for similar jobs with competitors, and analyzing any new responsibilities that need to be accomplished by the person with the position. According to research by Hackman and Oldham (Hackman & Oldham, 1976), a job diagnostic survey should be used to diagnose job characteristics prior to any redesign of a job. This is discussed in Chapter 7.
To start writing a job analysis, data need to be gathered and analyzed, keeping in mind Hackman and Oldham’s model. Figure 4.1 “Process for Writing the Job Analysis” shows the process of writing a job analysis. Please note, though, that a job analysis is different from a job design. Job design refers to how a job can be modified or changed to be more effective—for example, changing tasks as new technology becomes available. We discuss job design in Chapter 7 and Chapter 11.
The information gathered from the job analysis is used to develop both the job description and the job specifications. A job description is a list of tasks, duties, and responsibilities of a job. Job specifications, on the other hand, discuss the skills and abilities the person must have to perform the job. The two are tied together, as job descriptions are usually written to include job specifications. A job analysis must be performed first, and then based on that data, we can successfully write the job description and job specifications. Think of the analysis as “everything an employee is required and expected to do.”
This questionnaire shows how an HR professional might gather data for a job analysis. Questionnaires can be completed on paper or online.
Two types of job analyses can be performed: a task-based analysis and a competency- or skills-based analysis. A task-based analysis focuses on the duties of the job, as opposed to a competency-based analysis, which focuses on the specific knowledge and abilities an employee must have to perform the job. An example of a task-based analysis might include information on the following:
1. Write performance evaluations for employees.
2. Prepare reports.
3. Answer incoming phone calls.
4. Assist customers with product questions.
5. Cold-call three customers a day.
With task job analysis, the specific tasks are listed and it is clear. With competency based, it is less clear and more objective. However, competency-based analysis might be more appropriate for specific, high-level positions. For example, a competency-based analysis might include the following:
1. Able to utilize data analysis tools
2. Able to work within teams
3. Adaptable
4. Innovative
You can clearly see the difference between the two. The focus of task-based analyses is the job duties required, while the focus of competency-based analyses is on how a person can apply their skills to perform the job. One is not better than the other but is simply used for different purposes and different types of jobs. For example, a task-based analysis might be used for a receptionist, while a competency-based analysis might be used for a vice president of sales position. Consider the legal implications, however, of which job analysis is used. Because a competency-based job analysis is more subjective, it might be more difficult to tell whether someone has met the criteria.
Once you have decided if a competency-based or task-based analysis is more appropriate for the job, you can prepare to write the job analysis. Of course, this isn’t something that should be done alone. Feedback from managers should be taken into consideration to make this task useful in all levels of the organization. Organization is a key component to preparing for your job analysis. For example, will you perform an analysis on all jobs in the organization or just focus on one department? Once you have determined how you will conduct the analysis, a tool to conduct the analysis should be chosen. Most organizations use questionnaires (online or hard copy) to determine the duties of each job title. Some organizations will use face-to-face interviews to perform this task, depending on time constraints and the size of the organization. A job analysis questionnaire usually includes the following types of questions, obviously depending on the type of industry:
1. Employee information such as job title, how long in position, education level, how many years of experience in the industry
2. Key tasks and responsibilities
3. Decision making and problem solving: this section asks employees to list situations in which problems needed to be solved and the types of decisions made or solutions provided.
4. Level of contact with colleagues, managers, outside vendors, and customers
5. Physical demands of the job, such as the amount of heavy lifting or ability to see, hear, or walk
6. Personal abilities required to do the job—that is, personal characteristics needed to perform well in this position
7. Specific skills required to do the job—for example, the ability to run a particular computer program
8. Certifications to perform the job
Once all employees (or the ones you have identified) have completed the questionnaire, you can organize the data, which is helpful in creating job descriptions. If there is more than one person completing a questionnaire for one job title, the data should be combined to create one job analysis for one job title. There are a number of software packages available to help human resources perform this task, such as AutoGOJA.
Once the job analysis has been completed, it is time to write the job description and specifications, using the data you collected. Job descriptions should always include the following components:
1. Job functions (the tasks the employee performs)
2. Knowledge, skills, and abilities (what an employee is expected to know and be able to do, as well as personal attributes)
3. Education and experience required
4. Physical requirements of the job (ability to lift, see, or hear, for example)
Once the job description has been written, obtaining approval from the hiring manager is the next step. Then the HR professional can begin to recruit for the position. Before we discuss specific recruitment strategies, we should address the law and how it relates to hiring. This is the topic of Section 4.2 “The Law and Recruitment”.
Tips to Writing a Good Job Description
• Be sure to include the pertinent information:
• Title
• Department
• Reports to
• Duties and responsibilities
• terms of employment
• qualifications needed
• Think of the job description as a snapshot of the job.
• Communicate clearly and concisely.
• Make sure the job description is interesting to the right candidate applying for the job.
• Avoid acronyms.
• Don’t try to fit all job aspects into the job description.
• Proofread the job description.
Writing a Job Description
A short video on how to write an effective job description, with examples.
Human Resource Recall
Does your current job or past job have a job description? Did it closely match the tasks you actually performed?
Key Takeaways
• The recruitment process provides the organization with a pool of qualified applicants.
• Some companies choose to hire internal candidates—that is, candidates who are already working for the organization. However, diversity is a consideration here as well.
• A job analysis is a systematic approach to determine what a person actually does in his or her job. This process might involve a questionnaire to all employees. Based on this analysis, an accurate job description and job specifications can be written. A job description lists the components of the job, while job specifications list the requirements to perform the job.
Exercises
1. Do an Internet search for “job description.” Review three different job descriptions and then answer the following questions for each of the jobs:
1. What are the job specifications?
2. Are the physical demands mentioned?
3. Is the job description task based or competency based?
4. How might you change this job description to obtain more qualified candidates?
2. Why do the five steps of the recruitment process require input from other parts of the organization? How might you handle a situation in which the employees or management are reluctant to complete a job analysis? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/04%3A_Recruitment/4.01%3A_Introduction.txt |
Learning Objectives
1. Explain the Immigration Reform and Control Act (IRCA), Patriot Act, and equal employment opportunity (EEO) laws and how they relate to recruiting.
One of the most important parts of HRM is to know and apply the law in all activities the HR department handles. Specifically with hiring processes, the law is very clear on a fair hiring that is inclusive to all individuals applying for a job. The laws discussed here are applied specifically to the recruiting of new employees.
Immigration Reform and Control Act
The Immigration Reform and Control Act (IRCA) was adopted by Congress in 19861. This law requires employers to attest to their employees’ immigration status. It also makes it illegal to hire or recruit illegal immigrants. The purpose of this law is to preserve jobs for those who have legal documentation to work in the United States. The implications for human resources lie in the recruitment process, because before entering employees into the selection process (interviewing, for example), it is important to know they are eligible to work in the United States. This is why many application forms ask, “Are you legally able to work in the United States?” Dealing with the IRCA is a balancing act, however, because organizations cannot discriminate against legal aliens seeking work in the United States.
The IRCA relates not only to workers you hire but also to subcontractors. In a subcontractor situation (e.g., your organization hires an outside firm to clean the building after hours), your organization can still be held liable if it is determined your organization exercises control over how and when the subcontractors perform their jobs. In 2005, undocumented janitorial workers sued Walmart, arguing that the contracting company they worked for didn’t pay them a minimum wage2. Because the retailer controlled many of the details of their work, Walmart was considered to be a coemployer, and as a result, Walmart was held responsible not only for back wages but for the fact their subcontractor had hired undocumented workers.
HR professionals must verify both the identity and employment eligibility of all employees, even if they are temporary employees. The INS I-9 form (Employment Eligibility Verification form) is the reporting form that determines the identity and legal work status of a worker.
If an audit is performed on your company, you would be required to show I-9 forms for all your workers. If an employer hires temporary workers, it is important to manage data on when work visas are to expire, to ensure compliance. Organizations that hire illegal workers can be penalized \$100 to \$1,000 per hire. There is a software solution for management of this process, such as HR Data Manager. Once all data about workers are inputted, the manager is sent reminders if work authorization visas are about to expire. Employers are required to have the employee fill out the I-9 form on their first day of work, and the second section must be filled out within three days after the first day of employment. The documentation must be kept on file three years after the date of hire or for one year after termination. Some states, though, require the I-9 form be kept on file for as long as the person is employed with the organization.
In 2010, new rules about the electronic storage of forms were developed. The US Department of Homeland Security said that employees can have these forms electronically signed and stored.
Patriot Act
In response to the September 11, 2001, terrorist attacks against the United States, the Patriot Act was signed, introducing legislative changes to enhance the federal government’s ability to conduct domestic and international investigations and surveillance activities. As a result, employers needed to implement new procedures to maintain employee privacy rights while also creating a system that allowed for release of information requested by the government.
The act also amended the Electronic Communications Privacy Act, allowing the federal government easier access to electronic communications. For example, only a search warrant is required for the government to access voice mail and e-mail messages.
The act also amended the Foreign Intelligence Surveillance Act. The government is allowed to view communications if an employee is suspected of terrorism, and the government does not have to reveal this surveillance to the employer.
It is prudent for HR professionals and managers to let potential employees know of these new requirements, before the hiring process begins.
How Would You Handle This? - Wrong Job Description
Aimee, a highly motivated salesperson, has come to you with a complaint. She states that she had her performance evaluation, but all the items on her evaluation didn’t relate to her actual job. In the past two years, she explains, her job has changed because of the increase of new business development using technology. How would you handle this?
EEO Set of Laws
We discuss Equal Employment Opportunity (EEO) laws in Chapter 3. They are worth mentioning again here in relation to the recruitment process. The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with the task of enforcing federal employment discrimination laws. While there are restrictions on the type of company covered (companies with at least fifteen employees), the EEOC requires collection of data and investigates discrimination claims, again, for organizations with more than fifteen employees.
Under EEO law related to the recruitment process, employers cannot discriminate based on age (forty years or older), disability, genetic information, national origin, sex, pregnancy, race, and religion. In a job announcement, organizations usually have an EEO statement. Here are some examples:
1. (Company name) is fully committed to Equal Employment Opportunity and to attracting, retaining, developing, and promoting the most qualified employees without regard to their race, gender, color, religion, sexual orientation, national origin, age, physical or mental disability, citizenship status, veteran status, or any other characteristic prohibited by state or local law. We are dedicated to providing a work environment free from discrimination and harassment, and where employees are treated with respect and dignity.
2. (Company name) does not unlawfully discriminate on the basis of race, color, religion, national origin, age, height, weight, marital status, familial status, handicap/disability, sexual orientation, or veteran status in employment or the provision of services, and provides, upon request, reasonable accommodation including auxiliary aids and services necessary to afford individuals with disabilities an equal opportunity to participate in all programs and activities.
3. It is the policy of (college name), in full accordance with the law, not to discriminate in employment, student admissions, and student services on the basis of race, color, religion, age, political affiliation or belief, sex, national origin, ancestry, disability, place of birth, general education development certification (GED), marital status, sexual orientation, gender identity or expression, veteran status, or any other legally protected classification. (College name) recognizes its responsibility to promote the principles of equal opportunity for employment, student admissions, and student services taking active steps to recruit minorities and women.
4. (Company name) will not discriminate against or harass any employee or applicant for employment on the basis of race, color, creed, religion, national origin, sex, sexual orientation, disability, age, marital status, or status with regard to public assistance. (Company name) will take affirmative action to ensure that all practices are free of such discrimination. Such employment practices include, but are not limited to, the following: hiring, upgrading, demotion, transfer, recruitment or recruitment advertising, selection, layoff, disciplinary action, termination, rates of pay or other forms of compensation, and selection for training.
In addition to including the EEO policy in the job announcement, HR is required to post notices of EEOC policies in a visible part of the work environment (such as the break room).
Although the EEOC laws in hiring are clear about discrimination, an exception may occur, called the bona fide occupational qualification (BFOQ). BFOQ is a quality or attribute that is reasonably necessary to the normal operation of the business and that can be used when considering applicants. To obtain a BFOQ exception, a company must prove that a particular person could not perform the job duties because of sex, age, religion, disability, and national origin. Examples of BFOQ exceptions might include the following:
1. A private religious school may require a faculty member to be of the same denomination.
2. Mandatory retirement is required for airline pilots at a certain age.
3. A clothing store that sells male clothing is allowed to hire only male models.
4. If an essence of a restaurant relies on one sex versus another (e.g., Hooters), they may not be required to hire male servers.
However, many arguments for BFOQ would not be considered valid. For example, race has never been a BFOQ, nor has customers’ having a preference for a particular gender. Generally speaking, when going through the recruitment process and writing job descriptions, assuming a BFOQ would apply might be a mistake. Seeking legal council before writing a job description would be prudent.
Other aspects to consider in the development of the job description are disparate impact and disparate treatment. These are the two ways to classify employment discrimination cases. Disparate impact occurs when an organization discriminates through the use of a process, affecting a protected group as a whole, rather than consciously intending to discriminate. Some examples of disparate impact might include the following:
1. Requirement of a high school diploma, which may not be important to employment, could discriminate against racial groups
2. A height requirement, which could limit the ability of women or persons of certain races to apply for the position
3. Written tests that do not relate directly to the job
4. Awarding of pay raises on the basis of, say, fewer than five years of experience, which could discriminate against people older than forty
Disparate treatment, when one person is intentionally treated differently than another, does not necessarily impact the larger protected group as a whole, as in disparate impact. The challenge in these cases is to determine if someone was treated differently because of their race or gender or if there was another reason for the different treatment. Here are two examples:
1. Both a male and a female miss work, and the female is fired but the male is not.
2. A company does not hire people of a certain race or gender, without a BFOQ.
Human Resource Recall
Can you think of other examples of disparate impact that might affect a certain protected group of people under EEOC?
The Concept of Disparate Impact
• JM Gordon explains the concept of disparate impact.
Key Takeaways
• IRCA stands for Immigration and Reform Act. This law requires all employers to determine eligibility of an employee to work in the United States. The reporting form is called an I-9 and must be completed and kept on file (paper or electronic) for at least three years, but some states require this documentation to be kept on file for the duration of the employee’s period of employment.
• The Patriot Act allows the government access to data that would normally be considered private—for example, an employee’s records and work voice mails and e-mails (without the company’s consent). The HR professional might consider letting employees know of the compliance with this law.
• The EEOC is a federal agency charged with ensuring discrimination does not occur in the workplace. They oversee the equal employment opportunity (EEO) set of laws. Organizations must post EEO laws in a visible location at their workplace and also include them on job announcements.
• Related to the EEOC, the bona fide occupational qualification (BFOQ) makes it legal to discriminate in hiring based on special circumstances—for example, requiring the retirement of airline pilots at a certain age due to safety concerns.
• Disparate impact refers to a policy that may limit a protected EEO group from receiving fair treatment. Disparate impact might include a test or requirement that negatively impacts someone based on protected group status. An example is requiring a high school diploma, which may not directly impact the job. Disparate treatment refers to discrimination against an individual, such as the hiring of one person over another based on race or gender.
Exercises
1. Describe the difference between disparate treatment and disparate impact.
2. Explain a situation (other than the ones described in this section) in which a BFOQ might be appropriate. Then research to see if in the past this reasoning has been accepted as a BFOQ.
1U.S. Citizenship and Immigration Services website. Accessed January 17, 2011. www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextchannel=b328194d3e88d010VgnVCM10000048f3d6a1RCRD&vgnextoid =04a295c4f635f010VgnVCM1000000ecd190aRCRD.
2Zavala v. Wal-Mart, No. 03-5309, DC NJ (2005). | textbooks/biz/Management/Beginning_Management_of_Human_Resources/04%3A_Recruitment/4.03%3A_The_Law_and_Recruitment.txt |
Learning Objectives
1. Explain the various strategies that can be used in recruitment.
Now that we have discussed development of the job analysis, job description, and job specifications, and you are aware of the laws relating to recruitment, it is time to start recruiting. It is important to mention, though, that a recruitment plan should be in place. This plan can be informal, but you should outline where you plan to recruit and your expected time lines. For example, if one of your methods is to submit an ad to a trade publication website, you should know their deadlines. Also of consideration is to ensure you are recruiting from a variety of sources to ensure diversity. Lastly, consider the economic situation of the country. With high unemployment, you may receive hundreds of applications for one job. In an up economy, you may not receive many applications and should consider using a variety of sources.
Some companies, such as Southwest Airlines, are known for their innovative recruitment methods. Southwest looks for “the right kind of people” and are less focused on the skills than on the personality of the individual (Carey, 2011). When Southwest recruits, it looks for positive team players that match the underdog, quirky company culture. Applicants are observed in group interviews, and those who exhibit encouragement for their fellow applicants are usually those who continue with the recruitment process. This section will discuss some of the ways Southwest and many other Fortune 500 companies find this kind of talent.
Recruitment Videos at Zappos
Zappos has developed and posted a series of YouTube videos called “Why Do I Like Working at Zappos?” The videos show the culture of the organization and provide a great tool for recruitment.
Recruiters
Some organizations choose to have specific individuals working for them who focus solely on the recruiting function of HR. Recruiters use similar sources to recruit individuals, such as professional organizations, websites, and other methods discussed in this chapter. Recruiters are excellent at networking and usually attend many events where possible candidates will be present. Recruiters keep a constant pipeline of possible candidates in case a position should arise that would be a good match. There are three main types of recruiters:
A contingent recruiter is paid only when the recruiter starts working, which is often the case with temporary recruitment or staffing firms. A retained recruiter gets paid up front (in full or a portion of the fee) to perform a specific search for a company.
While the HR professional, when using recruiters, may not be responsible for the details of managing the search process, he or she is still responsible for managing the process and the recruiters. The job analysis, job description, and job specifications still need to be developed and candidates will still need to be interviewed.
Fortune 500 Focus
In 2009, when Amazon purchased Zappos for 10 million shares of Amazon stock (roughly \$900 million in 2009), the strategic move for Amazon didn’t change the hiring and recruiting culture of Zappos. Zappos, again voted one of the best one hundred companies to work for by CNN Money (Sowa, 2011) believes it all starts with the people they hire. The recruiting staff always asks, “On a scale of 1–10, how weird do you think you are?” This question ties directly to the company’s strategic plan and core value number three, which is “create fun and a little weirdness.” Zappos recruits people who not only have the technical abilities for the job but also are a good culture fit for the organization. Once hired, new employees go through two weeks of training. At the end of the training, newly hired employees are given “the offer.” The offer is \$2,000 to quit on the spot. This ensures Zappos has committed people who have the desire to work with the organization, which all begins with the recruiting process.
1. Executive search firm. These companies are focused on high-level positions, such as management and CEO roles. They typically charge 10–20 percent of the first year salary, so they can be quite expensive. However, they do much of the upfront work, sending candidates who meet the qualifications.
2. Temporary recruitment or staffing firm. Suppose your receptionist is going on medical leave and you need to hire somebody to replace him, but you don’t want a long-term hire. You can utilize the services of a temporary recruitment firm to send you qualified candidates who are willing to work shorter contracts. Usually, the firm pays the salary of the employee and the company pays the recruitment firm, so you don’t have to add this person to your payroll. If the person does a good job, there may be opportunities for you to offer him or her a full-time, permanent position. Kelly Services, Manpower, and Snelling Staffing Services are examples of staffing firms.
3. Corporate recruiter. A corporate recruiter is an employee within a company who focuses entirely on recruiting for his or her company. Corporate recruiters are employed by the company for which they are recruiting. This type of recruiter may be focused on a specific area, such as technical recruiting.
Campus Recruiting
Colleges and universities can be excellent sources of new candidates, usually at entry-level positions. Consider technical colleges that teach cooking, automotive technology, or cosmetology. These can be great sources of people with specialized training in a specific area. Universities can provide people that may lack actual experience but have formal training in a specific field. Many organizations use their campus recruiting programs to develop new talent, who will eventually develop into managers.
For this type of program to work, it requires the establishment of relationships with campus communities, such as campus career services departments. It can also require time to attend campus events, such as job fairs. IBM, for example, has an excellent campus recruiting program. For IBM, recruiting out of college ensures a large number of people to grow with the organization1.
Setting up a formal internship program might also be a way to utilize college and university contacts. Walgreens, for example, partners with Apollo College to recruit interns; this can result in full-time employment for the motivated intern and money saved for Walgreens by having a constant flow of talent.
Professional Associations
Professional associations are usually nonprofit organizations whose goal is to further a particular profession. Almost every profession has its own professional organization. For example, in the field of human resources, the Society for Human Resource Management allows companies to post jobs relating to HR. The American Marketing Association, also a professional organization, allows job postings as well. Usually, there is a fee involved, and membership in this association may be required to post jobs. Here are some examples of professional associations:
1. Professional Nursing Association
2. Society of Women Engineers
3. International Federation of Accountants
4. Institute of Management Consultants
5. United Professional Sales Association
6. National Lawyers Guild
7. National Organization of Minority Architects
8. International Federation of Journalists (union)
9. International Metalworkers Federation (union)
10. Association of Flight Attendants (union)
Labor unions can also be excellent sources of candidates, and some unions also allow job postings on their website. We will discuss unions further in Chapter 12. The key to using this as a successful recruitment strategy is to identify the organizations that relate to your business and to develop relationships with members in these organizations. This type of networking can help introduce you to people in your industry who may be looking for a job or know of someone who needs a job.
Human Resource Recall
What do you think is the best way to determine the right set of recruitment methods for your organization? What methods would be best for your current job?
Websites
If you have ever had to look for a job, you know there are numerous websites to help you do that. From the HR perspective, there are many options to place an ad, most of which are inexpensive. The downside to this method is the immense number of résumés you may receive from these websites, all of which may or may not be qualified. Many organizations, to combat this, implement software that searches for keywords in résumés, which can help combat this problem. We discuss more about this in Chapter 5. Some examples of websites might include the following:
• Your own company website
• Yahoo HotJobs
• Monster
• CareerBuilder
• JobCentral
Social Media
Facebook, Twitter, LinkedIn, YouTube, and MySpace are excellent places to obtain a media presence to attract a variety of workers. In 2007, Sodexo, which provides services such as food service and facilities management, started using social media to help spread the word about their company culture. Since then, they have saved \$300,000 on traditional recruiting methods (Sodexo, 2011). Sodexo’s fifty recruiters share updates on Twitter about their excellent company culture. Use of this media has driven traffic to the careers page on Sodexo’s website, from 52,000 to 181,000.
The goal of using social media as a recruiting tool is to create a buzz about your organization, share stories of successful employees, and tout an interesting culture. Even smaller companies can utilize this technology by posting job openings as their status updates. This technique is relatively inexpensive, but there are some things to consider. For example, tweeting about a job opening might spark interest in some candidates, but the trick is to show your personality as an employer early on. According to Bruce Morton of Allegis Group Services, using social media is about getting engaged and having conversations with people before they’re even thinking about you as an employer (Lindow, 2011). Debbie Fisher, an HR manager for a large advertising agency, Campbell Mithun, says that while tweeting may be a good way to recruit people who can be open about their job hunt, using tools such as LinkedIn might be a better way to obtain more seasoned candidates who cannot be open about their search for a new job, because of their current employment situation. She says that LinkedIn has given people permission to put their résumé online without fear of retribution from current employers.
Creativity with a social media campaign also counts. Campbell Mithun hired thirteen interns over the summer using a unique twist on social media. They asked interested candidates to submit thirteen tweets over thirteen days and chose the interns based on their creativity.
Many organizations, including Zappos (Video 4.4), use YouTube videos to promote the company. Within the videos is a link that directs viewers to the company’s website to apply for a position in the company.
Facebook allows free job postings in Facebook Marketplace, and the company Facebook page can also be used as a recruiting tool. Some organizations decide to use Facebook ads, which are paid on a “per click” or per impression (how many people potentially see the ad) basis. Facebook ad technology allows specific regions and Facebook keywords to be targeted (Black, 2011). Some individuals even use their personal Facebook page to post status updates listing job opportunities and asking people to respond privately if they are interested.
Events
Many organizations, such as Microsoft, hold events annually to allow people to network and learn about new technologies. Microsoft’s Professional Developer Conference (PDC), usually held in July, hosts thousands of web developers and other professionals looking to update their skills and meet new people.
Some organizations, such as Choice Career Fairs, host job fairs all over the country; participating in this type of job fair may be an excellent way to meet a large variety of candidates. Other events may not be specifically for recruiting, but attending these events may allow you to meet people who could possibly fill a position or future position. For example, in the world of fashion, Fashion Group International (FGI) hosts events internationally on a weekly basis, which may allow the opportunity to meet qualified candidates.
Special/Specific Interest Groups (SIGs)
Special/specific interest groups (SIGs), which may require membership of individuals, focus on specific topics for members. Often SIGs will have areas for job posting, or a variety of discussion boards where jobs can be posted. For example, the Women in Project Management SIG provides news on project management and also has a place for job advertisements. Other examples of SIGs might include the following:
Recruiting using SIGs can be a great way to target a specific group of people who are trained in a specific area or who have a certain specialty.
• Oracle Developer SIG
• African American Medical Librarians Alliance SIG
• American Marketing Association Global Marketing SIG
• Special Interest Group for Accounting Information Systems (SIG-ASYS)
• Junior Lawyer SIG
Referrals
Most recruiting plans include asking current employees, “Who do you know?” The quality of referred applicants is usually high, since most people would not recommend someone they thought incapable of doing the job. E-mailing a job opening to current employees and offering incentives to refer a friend can be a quick way of recruiting individuals. Due to the success of most formalized referral programs, it is suggested that a program be part of the overall HRM strategic plan and recruitment strategy. However, be wary of using referrals as the only method for recruitment, as this can lead to lack of diversity in a workplace. Nepotism means a preference for hiring relatives of current employees, which can also lead to lack of diversity and management issues in the workplace.
For example, the University of Washington offers \$1,200 any time a current employee successfully refers a friend to work at their medical centers. Usually, most incentives require the new employee to be hired and stay a specified period of time. Some examples of incentives that can be used to refer a friend might include the following:
• A gift card to the employee
• A financial incentive
• Raffles for most referrals
These types of programs are called employee referral programs (ERPs) and tend to generate one of the highest returns on investment per hire (Lefkow, 2002). To make an ERP program effective, some key components should be put into place:
1. Communicate the program to existing employees.
2. Track the success of the program using metrics of successful hires.
3. Be aware of the administrative aspect and the time it takes to implement the program effectively.
4. Set measureable goals up front for a specialized program.
Accenture recently won the ERE Media Award for one of the most innovative ERPs. Its program has increased new hires from referrals from 14 percent to 32 percent, and employee awareness of the program jumped from just 20 percent to 99 percent (Sullivan, 2009). The uniqueness of their program lies with the reward the employee receives. Instead of offering personal financial compensation, Accenture makes a donation to the charity of the employee’s choice, such as a local elementary school. Their program also seeks to decrease casual referrals, so the employee is asked to fill out an online form to explain the skills of the individual they are referring. The company has also developed a website where current employees can go to track the progress of referrals. In addition, employee referral applications are flagged online and fast-tracked through the process—in fact, every referral is acted upon. As you can see, Accenture has made their ERP a success through the use of strategic planning in the recruitment process.
Table \(1\) Advantages and Disadvantages of Recruiting Methods
Recruitment Method Advantages Disadvantages
Outside recruiters, executive search firms, and temporary employment agencies Can be time saving Expensive
Less control over final candidates to be interviewed
Campus recruiting/educational institutions Can hire people to grow with the organization Time consuming
Plentiful source of talent Only appropriate for certain types of experience levels
Professional organizations and associations Industry specific May be a fee to place an ad
Networking May be time-consuming to network
Websites/Internet recruiting Diversity friendly Could be too broad
Low cost Be prepared to deal with hundreds of résumés
Quick
Social media Inexpensive Time consuming
Overwhelming response
Events Access to specific target markets of candidates Can be expensive
May not be the right target market
SIG Industry specific Research required for specific SIGS tied to jobs
Referrals Higher quality people Concern for lack of diversity
Retention Nepotism
Unsolicited résumés and applications Inexpensive, especially with time-saving keyword résumé search software Time consuming
Internet and/or traditional advertisements Can target a specific audience Can be expensive
Employee leasing For smaller organizations, it means someone does not have to administer compensation and benefits, as this is handled by leasing company Possible costs
Can be a good alternative to temporary employment if the job is permanent Less control of who interviews for the position
Public employment agencies The potential ability to recruit a more diverse workforce May receive many résumés, which can be time-consuming
No cost, since it’s a government agency
2,300 points of service nationwide
Labor unions Access to specialized skills May not apply to some jobs or industries
Builds relationship with the union
Costs of Recruitment
Part of recruitment planning includes budgeting the cost of finding applicants. For example, let’s say you have three positions you need to fill, with one being a temporary hire. You have determined your advertising costs will be \$400, and your temporary agency costs will be approximately \$700 for the month. You expect at least one of the two positions will be recruited as a referral, so you will pay a referral bonus of \$500. Here is how you can calculate the cost of recruitment for the month:
cost per hire = advertising costs + recruiter costs + referral costs + social media costs + event costs.
\$400 + \$700 + \$500 = \$1600/3 = \$533 recruitment cost per hire.
In addition, when we look at how effective our recruiting methods are, we can look at a figure called the yield ratio. A yield ratio is the percentage of applicants from one source who make it to the next stage in the selection process (e.g., they get an interview). For example, if you received two hundred résumés from a professional organization ad you placed, and fifty-two of those make it to the interview state, this means a 26 percent yield (52/200). By using these calculations, we can determine the best place to recruit for a particular position. Note, too, that some yield ratios may vary for particular jobs, and a higher yield ratio must also consider the cost of that method, too. For an entry-level job, campus recruiting may yield a better ratio than, say, a corporate recruiter, but the corporate recruiter may have higher cost per hires.
After we have finished the recruiting process, we can begin the selection process. This is the focus of Chapter 5.
Key Takeaways
• HR professionals must have a recruiting plan before posting any job description. The plan should outline where the job announcements will be posted and how the management of candidate materials, such as résumés, will occur. Part of the plan should also include the expected cost of recruitment.
• Many organizations use recruiters. Recruiters can be executive recruiters, which means an outside firm performs the search. For temporary positions, a temporary or staffing firm such as Kelly Services might be used. Corporate recruiters work for the organization and function as a part of the HR team.
• Campus recruiting can be an effective way of recruiting for entry-level positions. This type of recruiting may require considerable effort in developing relationships with college campuses.
• Almost every profession has at least one professional association. Posting announcements on their websites can be an effective way of targeting for a specific job.
• Most companies will also use their own website for job postings, as well as other websites such as Monster and CareerBuilder.
• Social media is also a popular way to recruit. Usage of websites such as Twitter and Facebook can get the word out about a specific job opening, or give information about the company, which can result in more traffic being directed to the company’s website.
• Recruiting at special events such as job fairs is another option. Some organizations have specific job fairs for their company, depending on the size. Others may attend industry or job-specific fairs to recruit specific individuals.
• SIGs, or special/specific interest groups, are usually very specialized. For example, female project managers may have an interest group that includes a discussion board for posting of job announcements.
• Employee referrals can be a great way to get interest for a posted position. Usually, incentives are offered to the employee for referring people they know. However, diversity can be an issue, as can nepotism.
• Our last consideration in the recruitment process is recruitment costs. We can determine this by looking at the total amount we have spent on all recruiting efforts compared to the number of hires. A yield ratio is used to determine how effective recruiting efforts are in one area. For example, we can look at the number of total applicants received from a particular form of media, and divide that by the number of those applicants who make it to the next step in the process (e.g., they receive an interview).
Exercises
1. Perform an Internet search on professional associations for your particular career choice. List at least three associations, and discuss recruiting options listed on their websites (e.g., do they have discussion boards or job advertisements links?).
2. Have you ever experienced nepotism in the workplace? If yes, describe the experience. What do you think are the upsides and downsides to asking current employees to refer someone they know?
1“University Students,” IBM, n.d., accessed January 17, 2011, www-03.ibm.com/employment/start_university.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/04%3A_Recruitment/4.04%3A_Recruitment_Strategies.txt |
Chapter Summary
• The recruitment process provides the organization with a pool of qualified applicants.
• Some companies choose to hire internal candidates—that is, candidates who are already working for the organization. However, diversity is a consideration here as well.
• A job analysis is a systematic approach to determine what a person actually does in his or her job. This process might involve a questionnaire to all employees. Based on this analysis, an accurate job description and job specifications can be written. A job description lists the components of the job, while job specifications list the requirements to perform the job.
• IRCA stands for Immigration and Reform Act. This law requires all employers to determine eligibility of an employee to work in the United States. The reporting form is called an I-9 and must be completed and kept on file (paper or electronic) for at least three years, but some states require this documentation to be kept on file for the duration of the employee’s period of employment.
• The Patriot Act allows the government access to data that would normally be considered private, for example, an employee’s records and work voice mails and e-mails (without the company’s consent). The HR professional might consider letting employees know of the compliance with this law.
• The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with ensuring discrimination does not occur in the workplace. They oversee the EEO set of laws. Organizations must post EEO laws in a visible location at their workplace and also include them on job announcements.
• Related to the EEOC, the bona fide occupational qualification (BFOQ) makes it legal to discriminate in hiring based on special circumstances, for example, requiring the retirement of airline pilots at a certain age due to safety concerns.
• Disparate impact refers to a policy that may limit a protected EEO group from receiving fair treatment. Disparate impact might include a test or requirement that negatively impacts someone based on protected group status. An example is requiring a high school diploma, which may not directly impact the job. Disparate treatment refers to discrimination against an individual, such as the hiring of one person over another based on race or gender.
• HR professionals must have a recruiting plan before posting any job description.
• Many organizations use recruiters. Recruiters can be executive recruiters, which means an outside firm performs the search. For temporary positions, a temporary or staffing firm such as Kelly Services might be used. Corporate recruiters work for the organization and function as a part of the HR team.
• Campus recruiting can be an effective way of recruiting for entry-level positions. This type of recruiting may require considerable effort in developing relationships with college campuses.
• Almost every profession has at least one professional association. Posting announcements on their websites can be an effective way of targeting for a specific job.
• Most companies will also use their own website for job postings, as well as other websites such as Monster and CareerBuilder.
• Social media is also a popular way to recruit. Usage of websites such as Twitter and Facebook can get the word out about a specific job opening, or give information about the company, which can result in more traffic being directed to the company’s website.
• Recruiting at special events such as job fairs is another option. Some organizations have specific job fairs for their company, depending on the size. Others may attend industry or job specific fairs to recruit specific individuals.
• SIGs or special/specific interest groups are usually very specialized. For example, female project managers may have an interest group that includes a discussion board for posting of job announcements.
• Employee referrals can be a great way to get interest for a posted position. Usually, incentives are offered to the employee for referring people they know. However, diversity can be an issue, as can nepotism.
• Our last consideration in the recruitment process is recruitment costs. We can determine this by looking at the total amount we have spent on all recruiting efforts compared to the number of hires. A yield ratio is used to determine how effective recruiting efforts are in one area. For example, we can look at the number of total applicants received from a particular form of media, and divide that by the number of those applicants who make it to the next step in the process (e.g., they receive an interview).
Chapter Case
Recruitment Statistics
• As the assistant to the human resources director at Tally Group, you normally answer phones and set appointments for the director. You are interested in developing skills in HRM, and one day, your HR director presents you with a great opportunity for you to show what you can do. She asks you to analyze last year’s recruitment data to determine which methods have worked best. As you look at the data, you aren’t sure how to start, but you remember something on this from your HRM class in college. After reviewing the data in your book, you feel confident to analyze these numbers. Please go ahead and perform calculations on these numbers, then provide answers to the questions that follow.
Table \(1\) Tally Group Recruiting Numbers, 2012
Method Total Number Recruited Yearly Cost (\$)
Temporary placement firms 8 3,200
Campus recruiting 2 1,500
Professional association ads 10 4,500
Social media/company website 33 300
Job fair 3 500
Referrals 26 26,000
1. Prepare a report summarizing your findings for the recruitment cost per hire and yield ratio for each type of recruiting method.
2. Make a recommendation to your human resource director on where the department should spend more of its time recruiting.
Team Activities
1. Students should be in teams of four or five. Choose a recruitment method from Table 4.2 “Tally Group Recruiting Numbers, 2012” and perform research on additional advantages and disadvantages of that method and then present ideas to the class.
2. Visit the Dictionary of Occupational Titles (http://www.occupationalinfo.org) and view the list of job titles presented on the website. Create a sample job description for a job title of your team’s choice. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/04%3A_Recruitment/4.05%3A_Cases_and_Problems.txt |
The Interview
Many of us have or will sit in a waiting room with our best clothes on awaiting a job (or school) interview. You can feel your palms sweat and thoughts race as you wait for your name to be called. You look around at the office environment and imagine yourself walking through those doors everyday. People walk by and smile, and overall, you have a really good first impression of the organization. You hope they like you. You tell yourself to remember to smile, while recalling all your experience that makes you the perfect person for this job. A moment of self-doubt may occur, as you wonder about the abilities of the other people being interviewed and hope you have more experience and make a better impression than they do. You hear your name, stand up, and give a firm handshake to the HR manager. The interview has begun.
As she walks you back to a conference room, you think you see encouraging smiles as you pass by people. She asks you to take a chair and then tells you what the interview process will be like. She then asks the first question, “Tell me about yourself.” As you start discussing your experience, you feel yourself relax, just a little bit. After the interview finishes, she asks you to take a quick cognitive test, which you feel good about. She tells you she will be doing reference checks and will let you know by early next week.
To get to this point, the hiring manager may have reviewed hundreds of résumés and developed criteria she would use for selection of the right person for the job. She has probably planned a time line for hiring, developed hiring criteria, determined a compensation package for the job, and enlisted help of other managers to interview candidates. She may have even performed a number of phone interviews before bringing only a few of the best candidates in for interviews. It is likely she has certain qualities in mind that she is hoping you or another candidate will possess. Much work goes into the process of hiring someone, with selection being an important step in that process. A hiring process done correctly is time-consuming and precise. The interviewer should already have questions determined and should be ready to sell the organization to the candidate as well. This chapter will discuss the main components to the selection process.
5.02: The Selection Process
Learning Objectives
1. Be able to name and discuss the steps in the selection process.
Once you have developed your recruitment plan, recruited people, and now have plenty of people to choose from, you can begin the selection process. The selection process refers to the steps involved in choosing people who have the right qualifications to fill a current or future job opening. Usually, managers and supervisors will be ultimately responsible for the hiring of individuals, but the role of human resource management (HRM) is to define and guide managers in this process. Similar to the recruitment process discussed in Chapter 4 “Recruitment”, the selection process is expensive. The time for all involved in the hiring process to review résumés, weight the applications, and interview the best candidates takes away time (and costs money) that those individuals could spend on other activities. In addition, there are the costs of testing candidates and bringing them in from out of town for interviews. In fact, the US Department of Labor and Statistics estimates the combined direct and indirect cost of hiring someone new can reach upwards of \$40,000 (Hamm, 2011). Because of the high cost, it is important to hire the right person from the beginning and ensure a fair selection process. For example, the Austin, Texas, fire department calculated it would cost \$150,000 to reinterview candidates, after the interview questions were leaked to the public, giving some candidates possibly unfair advantages in the interview process1.
The selection process consists of five distinct aspects:
1. Criteria development. All individuals involved in the hiring process should be properly trained on the steps for interviewing, including developing criteria, reviewing résumés, developing interview questions, and weighting the candidates.
The first aspect to selection is planning the interview process, which includes criteria development. Criteria development means determining which sources of information will be used and how those sources will be scored during the interview. The criteria should be related directly to the job analysis and the job specifications. This is discussed in Chapter 4 “Recruitment”. In fact, some aspects of the job analysis and job specifications may be the actual criteria. In addition to this, include things like personality or cultural fit, which would also be part of criteria development. This process usually involves discussing which skills, abilities, and personal characteristics are required to be successful at any given job. By developing the criteria before reviewing any résumés, the HR manager or manager can be sure he or she is being fair in selecting people to interview. Some organizations may need to develop an application or a biographical information sheet. Most of these are completed online and should include information about the candidate, education, and previous job experience.
2. Application and résumé review. Once the criteria have been developed (step one), applications can be reviewed. People have different methods of going through this process, but there are also computer programs that can search for keywords in résumés and narrow down the number of résumés that must be looked at and reviewed.
3. Interviewing. After the HR manager and/or manager have determined which applications meet the minimum criteria, he or she must select those people to be interviewed. Most people do not have time to review twenty or thirty candidates, so the field is sometimes narrowed even further with a phone interview. This is discussed in Section 5.3.1 “Types of Interviews”.
4. Test administration. Any number of tests may be administered before a hiring decision is made. These include drug tests, physical tests, personality tests, and cognitive tests. Some organizations also perform reference checks, credit report checks, and background checks. Types of tests are discussed in Section 5.4.1 “Testing”. Once the field of candidates has been narrowed down, tests can be administered.
5. Making the offer. The last step in the selection process is to offer a position to the chosen candidate. Development of an offer via e-mail or letter is sometimes a more formal part of this process. Compensation and benefits will be defined in an offer. We discuss this in Chapter 6 “Compensation and Benefits”.
Figure 5.2 The Selection Process at a Glance
Criteria Development
• Understand KSAOs
• Determine sources of KSAO information such as testing, interviews
• Develop scoring system for each of the sources of information
• Create an interview plan
Application and Resume Review
• Should be based on criteria developed in step one
• Consider internal versus external candidates
Interview
• Determine types of interview(s)
• Write interview questions
• Be aware of interview bias
Test Administration
• Perform testing as outlined in criteria development; could include reviewing work samples, drug testing or written cognitive and personality tests
Selection
• Determine which selection method will be used
• Compare selection method criteria
Making the Offer
• Use negotiation techniques
• Write the offer letter or employment agreement
We will discuss each of these aspects in detail in this chapter.
Fortune 500 Focus
In a 2010 interview (Bryant, 2010), Robert Selander, then CEO of MasterCard, cited presence as one of the most important aspects to acing an interview. He describes how, in any large organization, an employee will be expected to engage with a variety of stakeholders, from a member of Congress to a contractor replacing the carpet in the building. He says that a good employee—at any level of the organization—should be able to communicate well but also be able to communicate to a variety of stakeholders. We discuss communication in Chapter 9 “Successful Employee Communication”. Selander also says he will always ask the candidate about his or her weaknesses, but more importantly, how the candidate plans to address those weaknesses to make sure they do not become a barrier to success. He always asks the question “What can you do for us?” When asked if he could pose only one interview question, what would it be, his answer was, “Share with me two situations, work related that you are proud of, where something was achieved based on your own personal initiative and the other where the achievement was a result of the team getting something done that you could not have done alone.” In other words, Selander is looking for not only personal ability but the ability to work within a team to accomplish tasks. Selander offers advice to new college grads: try to find an organization where you can be involved and see all aspects of the business and be provided training to help you with certain skills that will be needed.
Human Resource Recall
When was the last time you interviewed for a job? Did the process seem to flow smoothly? Why or why not?
Key Takeaways
• The selection process refers to the steps involved in choosing someone who has the right qualifications to fill a current or future job opening.
• There are five main steps in the selection process. First, criteria are developed to determine how the person will be chosen. Second is a review of the applications and résumés, often done via a computer program that can find keywords. Next is interviewing the employee. The last steps involve testing, such as a personality test or drug test, and then finally, making the offer to the right candidate.
Exercise
1. What components are included in the selection process? Which one do you think is the most important?
1KVUE News, “Re-Interview Process to Cost \$150,000,” June 23, 2011, accessed August 2, 2011, www.kvue.com/news/local/AFD–124452379.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.01%3A_Introduction.txt |
Learning Objectives
1. Be able to explain why criteria development is an important part of the selection process.
2. Give examples of types of criteria that can be developed.
3. Describe the advantages and disadvantages of internal and external candidates.
Before we begin to review résumés and applications, we must have a clear idea of the person we want to hire for the position. Obviously, the job specifications will help us know the minimum qualifications, such as education level and years of experience. However, additional criteria might include the attitude of the potential hire, the ability to take initiative, and other important personal characteristics and professional abilities that may not always be demonstrated in an application or résumé. A specific score on a personality test, quality of work samples, and other tools to determine qualifications should be included as part of the criteria. In other words, knowing exactly what you want before you even begin the process of looking through résumés will make this process much easier. In human resources, this is called KSAOs, or knowledge, skills, abilities, and other personal characteristics that make a person successful on the job. Some organizations, such as the United States Department of Veterans Affairs, require applicants to address each one of the KSAOs listed in the job position within their cover letter1.
Criteria Development Considerations
Many HR professionals and managers develop the criteria for hiring, as well as the interview questions, before reviewing any résumés. This allows for a streamlined process with specific guidelines already set before reviewing a résumé. For example, criteria for a project management job might include the following:
1. Two years of experience managing a \$2 million or more project budget
2. A bachelor’s degree in business or closely related field
3. Ability to work on multiple projects at once
4. Problem-solving ability
5. Conflict-management ability
6. Ability to manage a team of five to six diverse workers
7. Score of at least a 70 on cognitive ability test
8. Score of excellent from most recent employer
By setting criteria ahead of time, the hiring team has a clear picture of exactly what qualifications they are looking for. As a result, it is easier to determine who should move forward in the selection process. For example, if someone does not have a bachelor’s degree, given this is a criterion, their application materials can be filed away, perhaps for another job opening. Likewise, the HR manager can include those résumés with two or more years of experience and bachelor’s degree in the interview pile and then develop interview questions that show the candidates’ problem-solving, multitasking, and conflict-management abilities.
Résumé parsing or résumé scanning software is readily available and can make the initial screening easier. For example, Sovren software allows the HR manager to include keywords such as bachelor’s degree or management. This software scans all received résumés and selects the ones that have the keywords. While it still may be necessary to review résumés, this type of software can save time having to look through résumés that obviously do not meet the minimum qualifications.
Validity and Reliablity
The validity refers to how useful the tool is to measure a person’s attributes for a specific job opening. A tool may include any and all of the following:
1. Résumé-scanning software
2. Reference checks
3. Cognitive ability tests
4. Work samples
5. Credit reports
6. Biographical information blanks
7. Weighted application forms
8. Personality tests
9. Interview questions
Biographical information blanks (BIBs) are a useful part of the application process. A BIB is a series of questions about a person’s history that may have shaped his or her behavior. The BIB can be scored in the same way as an interview or a résumé, assuming the organization knows which types of answers are predictable for success in a given job. Similarly, a weighted application form involves selecting an employee characteristic to be measured and then identifying which questions on the application predict the desired behavior. Then scores are assigned to each predictor. Of course, the development of the scoring should be determined before any résumés and application forms have been reviewed. In other words, any tool you use to determine someone’s qualifications for a job should have validity to determine they are the right fit for the job.
Reliability refers to the degree in which other selection techniques yield similar data over time. For example, if you ask the same interview question of every applicant for the project management position, and the “right” answer always yields similar, positive results, such as the hiring of a successful employee every time, the question would be considered reliable. An example of an unreliable test might occur with reference checks. Most candidates would not include a reference on their résumé who might give them a poor review, making this a less reliable method for determining skills and abilities of applicants.
Fit Issues
Fit includes not only the right technical expertise, education, and experience but also fit in company culture and team culture. For example, at Facebook headquarters in Palo Alto, California, engineers are selected based on their willingness to take risks, as risk taking is nurtured at Facebook (McGirt, 2010). In addition to this component of their company culture, the company looks for the “hacker” personality, because a hacker is someone who finds ways around the constraints placed upon a system. At Zappos, profiled in Chapter 4 “Recruitment”, the company culture is one focused on customer service and the willingness of people to provide the best customer service in all aspects of the business. At Amazon, the huge online retailer, a core value in their company culture is a focus on developing leaders to grow with the organization. If a potential candidate is not interested in long-term career growth, he or she might not be deemed an appropriate strategic fit with the organization. In today’s organizations, most people are required to work within teams. As a result, fit within a team is as important as company culture fit. Microsoft, for example, does an immense amount of teamwork. The company is structured so that there are marketers, accountants, developers, and many others working on one product at a time. As a result, Microsoft looks for not only company culture fit but also fit with other team members.
Reviewing Résumés
Once we have developed our criteria for a specific job, we can begin the review process. Everyone prefers to perform this differently. For example, all the hiring decision makers may review all résumés, list the people they would like to meet in person, and then compare the lists. Another method might be to rate each candidate and interview only those above a certain score. This is discussed in Section 5.4.2 “Selection Methods”. Obviously, much of the process will depend on the organization’s size and the type of job. None of this process can be done fairly without first setting criteria for the job.
When looking at résumés to determine whom to interview, a manager should be concerned with the concepts of disparate impact and disparate treatment. This is discussed in Chapter 4 “Recruitment”. Disparate impact is unintended discrimination against a protected group as a whole through the use of a particular requirement. Disparate impact may be present in the interviewing process, as well as other employment-related processes such as pay raises and promotions. For example, a requirement of being able to lift 110 pounds might be considered as having disparate impact on women, unless the job requires this ability. Every criteria developed should be closely considered to see if it might have disparate impact on a protected group of individuals. For example, the requirement of a certain credit score might have a negative impact on immigrants, who may not have a well-developed credit rating. However, if being able to manage money is an important requirement of the job, this requirement might not be discriminatory.
Disparate treatment in hiring might include not interviewing a candidate because of one’s perception about the candidate’s age, race, or gender.
The last consideration is the hiring of internal versus external candidates. An internal candidate is someone who already works within the organization, while an external candidate is someone who works outside the organization. A bidding process may occur to notify internal candidates of open positions. This is discussed in Chapter 4 “Recruitment”. Generally speaking, it is best to go through a formal interview process with all candidates, even if they work within the organization. This way, an HR professional can be assured that disparate treatment does not occur because of favoritism. For example, a senior executive of your organization just left, and you believe the manager in that department is qualified to take over the position. Suppose, though, that the manager has been lobbying you for the job for some time and has even taken you out to lunch to talk about the job. While this person has maintained high visibility and lobbied for the promotion, there may be equally qualified internal candidates who did not use the same lobbying techniques. Automatically offering the position to this internal candidate might undermine others who are equally qualified. So while hiring internally can be a motivator, making assumptions about a particular person may not be a motivator to others. This is why it is best, even if you hire internally, to post a formal job announcement listing the job description and job qualifications, so everyone in the organization can have an equal opportunity to apply for the job.
Once you have completed the criteria for the particular job and narrowed down the field, you can begin the interview process. We discuss this in Section 5.3 “Interviewing”.
Table 5.1 Possible Advantages and Disadvantages of Hiring an Internal versus an External Candidate
Advantages Disadvantages
Internal Candidates Rewards contributions of current staff Can produce “inbreeding,” which may reduce diversity and difference perspectives
Can be cost effective, as opposed to using a traditional recruitment strategy May cause political infighting between people to obtain the promotions
Can improve morale Can create bad feelings if an internal candidate applies for a job and doesn’t get it
Knowing the past performance of the candidate can assist in knowing if they meet the criteria
External Candidates Brings new talent into the company Implementation of recruitment strategy can be expensive
Can help an organization obtain diversity goals Can cause morale problems for internal candidates
New ideas and insight brought into the company Can take longer for training and orientation
How Would You Handle This?
Poor Interviewer
As the assistant to the HR manager, one of your jobs is to help managers get ready to interview candidates. When you offer help to Johnathan, he says he has interviewed hundreds of people and doesn’t need your help in planning the interview process. When you sit in the interview with him, he asks inappropriate questions that you don’t feel really assess the abilities of a candidate. How would you handle this?
Key Takeaways
• The first step in selection is to begin reviewing résumés. Even before you do this, though, it is important to develop criteria that each candidate will be measured against. This can come from the job description as well as the job qualifications.
• Other tools, such as cognitive ability tests, credit checks, and personality tests, can be used to determine qualifications. When developing your criteria for interviewing, determine the level the applicant needs to meet to meet the minimum criteria, for example, a minimum score on a personality test.
• We should be concerned with validity and reliability of measurement tools. Validity refers to how valid the test is, that is, how well a test measures a candidate’s abilities to do a job. Reliability refers to which selection techniques yield similar data or results over time. It is important to choose the right measurement tool used to determine whether the candidate meets the criteria.
• Setting criteria before the interview process starts ensures that disparate impact or disparate treatment does not occur in the interview process.
• When hiring, there is the option of internal and external candidates. Each has its own set of advantages and disadvantages. Internal candidates may be able to “hit the ground running,” but external candidates may come in with new perspectives. Even if an internal candidate seems to be the best hire, it is best to still perform the process of posting the job and interviewing, since other less vocal employees might be qualified internal candidates as well. In other words, don’t assume one person is the obvious choice for the promotion.
Exercises
1. Develop criteria for the position of a retail salesperson working in teams.
2. Describe the advantages and disadvantages of hiring an internal and external candidate. Give an example of when you don’t think an external candidate should be considered for a position.
3. How can development of criteria or minimum standards help in a case of disparate treatment accusations?
1“What Are KSAs?” US Department of Veterans Affairs, accessed August 2, 2011, http://www.va.gov/jobs/hiring/apply/ksa.asp. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.03%3A_Criteria_Development_and_Resume_Review.txt |
Learning Objectives
1. Explain the various types of interviews and interview questions.
2. Discuss interview methods and potential mistakes in interviewing candidates.
3. Explain the interview process.
Interviewing people costs money. As a result, after candidates are selected, good use of time is critical to making sure the interview process allows for selection of the right candidate. In an unstructured interview, questions are changed to match the specific applicant; for example, questions about the candidate’s background in relation to their résumé might be used. In a structured interview, there is a set of standardized questions based on the job analysis, not on individual candidates’ résumés. While a structured interview might seem the best option to find out about a particular candidate, the bigger concern is that the interview revolves around the specific job for which the candidate is interviewing. In a structured interview, the expected or desired answers are determined ahead of time, which allows the interviewer to rate responses as the candidate provides answers. This allows for a fair interview process, according to the US Office of Personnel Management1. For purposes of this section, we will assume that all interviews you perform will be structured, unless otherwise noted.
Types of Interviews
Interview processes can be time-consuming, so it makes sense to choose the right type of interview(s) for the individual job. Some jobs, for example, may necessitate only one interview, while another may necessitate a telephone interview and at least one or two traditional interviews. Keep in mind, though, that there will likely be other methods with which to evaluate a candidate’s potential, such as testing. Testing is discussed in Section 5.4.1 “Testing”. Here are different types of interviews:
1. Traditional interview. This type of interview normally takes place in the office. It consists of the interviewer and the candidate, and a series of questions are asked and answered.
2. Telephone interview. A telephone interview is often used to narrow the list of people receiving a traditional interview. It can be used to determine salary requirements or other data that might automatically rule out giving someone a traditional interview. For example, if you receive two hundred résumés and narrow these down to twenty-five, it is still unrealistic to interview twenty-five people in person. At this point, you may decide to conduct phone interviews of those twenty-five, which could narrow the in-person interviews to a more manageable ten or so people.
3. Panel interview. A panel interview occurs when several people are interviewing one candidate at the same time. While this type of interview can be nerve racking for the candidate, it can also be a more effective use of time. Consider some companies who require three to four people to interview candidates for a job. It would be unrealistic to ask the candidate to come in for three or four interviews, so it makes sense for them to be interviewed by everyone at once.
4. Information interview. Informational interviews are usually used when there is no specific job opening, but the candidate is exploring possibilities in a given career field. The advantage to conducting these types of interviews is the ability to find great people ahead of a job opening.
5. Meal interviews. Many organizations offer to take the candidate to lunch or dinner for the interview. This can allow for a more casual meeting where, as the interviewer, you might be able to gather more information about the person, such as their manners and treatment of waitstaff. This type of interview might be considered an unstructured interview, since it would tend to be more of a conversation as opposed to a session consisting of specific questions and answers.
6. Group interview. In a group interview, two or more candidates interview at the same time. This type of interview can be an excellent source of information if you need to know how they may relate to other people in their job.
7. Video interviews. Video interviews are the same as traditional interviews, except that video technology is used. This can be cost saving if one or more of your candidates are from out of town. Skype, for example, allows free video calls. An interview may not feel the same as a traditional interview, but the same information can be gathered about the candidate.
8. Nondirective interview (sometimes called an unstructured interview). In a nondirective interview, the candidate essentially leads the discussion. Some very general questions that are planned ahead of time may be asked, but the candidate spends more time talking than the interviewer. The questions may be more open ended; for example, instead of asking, “Do you like working with customers?” you may ask, “What did you like best about your last job?” The advantage of this type of interview is that it can give candidates a good chance to show their abilities; however, the downside is that it may be hard to compare potential candidates, since questions are not set in advance. It relies on more of a “gut feeling” approach.
It is likely you may use one or more of these types of interviews. For example, you may conduct phone interviews, then do a meal interview, and follow up with a traditional interview, depending on the type of job.
Interview Questions
Most interviews consist of many types of questions, but they usually lean toward situational interviews or behavior description interviews. A situational interview is one in which the candidate is given a sample situation and is asked how he or she might deal with the situation. In a behavior description interview, the candidate is asked questions about what he or she actually did in a variety of given situations. The assumption in this type of interview is that someone’s past experience or actions are an indicator of future behavior. These types of questions, as opposed to the old “tell me about yourself” questions, tend to assist the interviewer in knowing how a person would handle or has handled situations. These interview styles also use a structured method and provide a better basis for decision making. Examples of situational interview questions might include the following:
1. If you saw someone stealing from the company, what would you do?
2. One of your employees is performing poorly, but you know he has some personal home issues he is dealing with. How would you handle complaints from his colleagues about lack of performance?
3. A coworker has told you she called in sick three days last week because she actually decided to take a vacation. What would you do?
4. You are rolling out a new sales plan on Tuesday, which is really important to ensure success in your organization. When you present it, the team is lukewarm on the plan. What would you do?
5. You disagree with your supervisor on her handling of a situation. What would you do?
Examples of behavior description interview questions might include the following:
1. Tell me about a time you had to make a hard decision. How did you handle this process?
2. Give an example of how you handled an angry customer.
3. Do you show leadership in your current or past job? What would be an example of a situation in which you did this?
4. What accomplishments have given you the most pride and why?
5. What plans have you made to achieve your career goals?
Top 36 Interview Questions and Answers
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Examples of how to answer those difficult interview questions.
As you already know, there are many types of interview questions that would be considered illegal. Here are some examples:
1. National origin. You cannot ask seemingly innocent questions such as “That’s a beautiful name, where is your family from?” This could indicate national origin, which could result in bias. You also cannot ask questions about citizenship, except by asking if a candidate is legally allowed to work in the United States. Questions about the first language of the candidate shouldn’t be asked, either. However, asking “Do you have any language abilities that would be helpful in this job?” or “Are you authorized to work in the United States?” would be acceptable.
2. Age. You cannot ask someone how old they are, and it is best to avoid questions that might indicate age, such as “When did you graduate from high school?” However, asking “Are you over 18?” is acceptable.
3. Marital status. You can’t ask direct questions about marital status or ages of children. An alternative may be to ask, “Do you have any restrictions on your ability to travel, since this job requires 50 percent travel?”
4. Religion. It’s illegal to ask candidates about their religious affiliation or to ask questions that may indicate a religion-affiliated school or university.
5. Disabilities. You may not directly ask if the person has disabilities or recent illnesses. You can ask if the candidate is able to perform the functions of the job with or without reasonable accommodations.
6. Criminal record. While it is fine to perform a criminal record check, asking a candidate if they have ever been arrested is not appropriate; however, questions about convictions and guilty pleadings are acceptable.
7. Personal questions. Avoid asking personal questions, such as questions about social organizations or clubs, unless they relate to the job.
Besides these questions, any specific questions about weight, height, gender, and arrest record (as opposed to allowable questions about criminal convictions) should be avoided.
HR professionals and managers should be aware of their own body language in an interview. Some habits, such as nodding, can make the candidate think they are on the right track when answering a question. Also, be aware of a halo effect or reverse halo effect. This occurs when an interviewer becomes biased because of one positive or negative trait a candidate possesses. Interview bias can occur in almost any interview situation. Interview bias is when an interviewer makes assumptions about the candidate that may not be accurate (Lipschultz, 2010). These assumptions can be detrimental to an interview process. Contrast bias is a type of bias that occurs when comparing one candidate to others. It can result in one person looking particularly strong in an area, when in fact they look strong compared to the other candidates. A gut feeling bias is when an interviewer relies on an intuitive feeling about a candidate. Generalization bias can occur when an interviewer assumes that how someone behaves in an interview is how they always behave. For example, if a candidate is very nervous and stutters while talking, an assumption may be made that he or she always stutters. Another important bias called cultural noise bias occurs when a candidate thinks he or she knows what the interviewer wants to hear and answers the questions based on that assumption. Nonverbal behavior bias occurs when an interviewer likes an answer and smiles and nods, sending the wrong signal to the candidate. A similar to me bias (which could be considered discriminatory) results when an interviewer has a preference for a candidate because he or she views that person as having similar attributes as themselves. Finally, recency bias occurs when the interviewer remembers candidates interviewed most recently more so than the other candidates.
Human Resource Recall
What are the dangers of a reverse halo effect?
Interview Process
Once the criteria have been selected and interview questions developed, it is time to start interviewing people. Your interviewing plan can determine the direction and process that should be followed:
1. Recruit new candidates.
2. Establish criteria for which candidates will be rated.
3. Develop interview questions based on the analysis.
4. Set a time line for interviewing and decision making.
5. Connect schedules with others involved in the interview process.
6. Set up the interviews with candidates and set up any testing procedures.
7. Interview the candidates and perform any necessary testing.
8. Once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria.
9. Put together an offer for the candidate.
As you can see, a large part of the interviewing process is planning. For example, consider the hiring manager who doesn’t know exactly the type of person and skills she is looking to hire but sets up interviews anyway. It is difficult, if not impossible, to determine who should be hired if you don’t know what you are looking for in the first place. In addition, utilizing time lines for interviewing can help keep everyone involved on track and ensure the chosen candidate starts work in a timely manner. Here are some tips to consider when working with the interview process:
1. Make sure everyone is trained on the interviewing process. Allowing someone who has poor interviewing skills to conduct the interview will likely not result in the best candidate. In a worst-case scenario, someone could ask an illegal question, and once hired, the candidate can sue the organization. UCLA researchers (Hanricks, 2011) calculated that plaintiffs win about half of hiring discrimination cases that go to trial, sometimes because of interviewers asking illegal questions. For example, “I see you speak Spanish, where did you study it?” is a seemingly harmless question that could be indirectly asking a candidate his or her ethnic background. To avoid such issues, it’s important to train managers in the proper interviewing process.
2. Listen to the candidate and try to develop a rapport with them. Understand how nervous they must be and try to put them at ease.
3. Be realistic about the job. Do not try to paint a “rosy” picture of all aspects of the job. Being honest up front helps a candidate know exactly what they will be in for when they begin their job.
4. Be aware of your own stereotypes and do not let them affect how you view a potential candidate.
5. Watch your own body language during the interview and that of the candidate. Body language is a powerful tool in seeing if someone is the right fit for a job. For example, Scott Simmons, vice president at Crist|Kolder, interviewed someone for a CFO position. The candidate had a great résumé, but during the interview, he offered a dead-fish handshake, slouched, and fidgeted in his chair. The candidate didn’t make eye contact and mumbled responses, and, of course, he didn’t get the job (Reeves, 2006), because his body language did not portray the expectations for the job position.
6. Stick to your criteria for hiring. Do not ask questions that have not been predetermined in your criteria.
7. Learn to manage disagreement and determine a fair process if not everyone on the interviewing team agrees on who should be hired. Handling these types of disagreements is discussed further in Chapter 9 “Successful Employee Communication”.
Once you have successfully managed the interview process, it is time to make the decision. Section 5.4.1 “Testing” discusses some of the tools we can use to determine the best candidate for the job.
Human Resource Recall
Can you think of a time when the interviewer was not properly trained? What were the results?
Silly Job Interview—Monty Python
" href="http://www.youtube.com/watch?v=zP0sqRMzkwo" class="replaced-iframe">(click to see video)
An exaggerated and funny example of an untrained interviewer.
Key Takeaways
• Traditional, telephone, panel, informational, meal, group, and video are types of interviews. A combination of several of these may be used to determine the best candidate for the job. A structured interview format means the questions are determined ahead of time, and unstructured means the questions are based on the individual applicant. The advantage of a structured interview is that all candidates are rated on the same criteria. Before interviewing occurs, criteria and questions for a structured interview should be developed.
• Interview questions can revolve around situational questions or behavioral questions. Situational questions focus on asking someone what they would do in a given situation, while behavioral questions ask candidates what they have done in certain situations.
• Interview questions about national origin, marital status, age, religion, and disabilities are illegal. To avoid any legal issues, it is important for interviewers to be trained on which questions cannot be asked. The halo effect, which assumes that one desirable trait means all traits are desirable, should also be avoided.
• The process involved in interviewing a person includes the following steps: recruit new candidates; establish criteria for which candidates will be rated; develop interview questions based on the analysis; set a time line for interviewing and decision making; connect schedules with others involved in the interview process; set up interviews with candidates and set up any testing procedures; interview the candidates and perform any necessary testing; and once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria; then finally, put together an offer for the candidate.
• Developing a rapport, being honest, and managing the interview process are tips to having a successful interview.
Exercises
1. With a partner, develop a list of five examples (not already given in the chapter) of situational and behavioral interview questions.
2. Why is it important to determine criteria and interview questions before bringing someone in for an interview?
3. Visit Monster.com and find two examples of job postings that ask those with criminal records not to apply. Do you think, given the type of job, this is a reasonable criteria?
1“Structured Interviews: A Practical Guide,” US Office of Personnel Management, September 2008, accessed January 25, 2011, https://apps.opm.gov/ADT/ContentFiles/SIGuide09.08.08.pdf. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.04%3A_Interviewing.txt |
Learning Objectives
1. Explain the types of tests that can be administered as part of the selection process.
2. Be able to discuss the types of selection models.
Besides the interview, we can also look at several other aspects that may predict success on the job. If any test is to be criteria for measuring a candidate, this should be communicated to each person interviewing, and criteria should be developed on specific test scores and expectations before interviewing and testing begins.
Testing
A variety of tests may be given upon successful completion of an interview. These employment tests can gauge a person’s KSAOs in relation to another candidate. The major categories of tests include the following:
1. Cognitive ability tests
2. Personality tests
3. Physical ability tests
4. Job knowledge tests
5. Work sample
A number of written tests can be administered. A cognitive ability test can measure reasoning skills, math skills, and verbal skills. An aptitude test measures a person’s ability to learn new skills, while an achievement test measures someone’s current knowledge. Depending on the type of job, one or both will be better suited.
A cognitive ability test measures intelligences, such as numerical ability and reasoning. The Scholastic Aptitude Test (SAT) is an example of a cognitive ability test. It is important to note that some cognitive ability tests can have disparate impact. For example, in EEOC v. Ford Motor Co. and United Automobile Workers of America, African Americans were rejected from an apprentice program after taking a cognitive test known as the Apprenticeship Training Selection System (ATSS)1. The test showed significant disparate impact on African Americans, and it was then replaced by a different selection procedure, after costing Ford \$8.55 million. Some sample test categories might include the following:
1. Reasoning questions
2. Mathematical questions and calculations
3. Verbal and/or vocabulary skills
Aptitude tests can measure things such as mechanical aptitude and clerical aptitude (e.g., speed of typing or ability to use a particular computer program). Usually, an aptitude test asks specific questions related to the requirements of the job. To become a New York City police offer, for example, an aptitude test is required before an application will be considered. The written exam is given as a computerized test at a computerized testing center in the city. The test measures cognitive skills and observational skills (aptitude test) required for the job2.
Personality tests such as Meyers-Briggs and the “Big Five” personality factors may be measured and then compared with successful employee scores. For example, The University of Missouri Health Care system recently launched a patient satisfaction initiative as part of its strategic plan. The plan includes training for current employees and personality testing for nursing, managerial, and physician candidates (Silvey, 2011). The goal of the test is to assess talent and to see if the candidate has the potential to meet the expectations of patients. They hired a private company, Talent Plus, who conducts the test via phone interviews. However, many companies administer tests themselves, and some tests are free and can be administered online.
The Big Five personality test looks at extroversion, agreeableness, conscientiousness, neuroticism, and openness. Self-assessment statements might include the following:
1. I have an assertive personality.
2. I am generally trusting.
3. I am not always confident in my abilities.
4. I have a hard time dealing with change.
Some institutions also require physical ability tests; for example, to earn a position in a fire department, you may have to be able to carry one hundred pounds up three flights of stairs. If you use tests in your hiring processes, the key to making them useful is to determine a minimum standard or expectation, specifically related to the requirements of the job. An HR manager should also consider the legality of such tests. In the EEOC v. Dial Corp. case1, women were disproportionately rejected for entry-level positions. Prior to the test, 46 percent of hires were women, but after implementation of the test, only 15 percent of the new hires were women. The Equal Employment Opportunity Commission (EEOC) established that the test was considerably more difficult than the job, resulting in disparate impact. Physical ability tests need to show direct correlation with the job duties.
A job knowledge test measures the candidate’s level of understanding about a particular job. For example, a job knowledge test may require an engineer to write code in a given period of time or may ask candidates to solve a case study problem related to the job.
Work sample tests ask candidates to show examples of work they have already done. In the advertising business, this may include a portfolio of designs, or for a project manager, this can include past project plans or budgets. When applying for a pharmaceutical representative position, a “brag book” might be required (Hansen, 2011). A brag book is a list of recommendation letters, awards, and achievements that the candidate shares with the interviewer. Work sample tests can be a useful way to test for KSAOs. These work samples can often be a good indicator of someone’s abilities in a specific area. As always, before looking at samples, the interviewer should have specific criteria or expectations developed so each candidate can be measured fairly.
Once the interview is completed and testing occurs, other methods of checking KSAOs, including checking references, driving records, and credit history, can be performed. Some companies even use Facebook as a way of gauging the candidate’s professionalism.
Reference checking is essential to verify a candidate’s background. It is an added assurance that the candidate’s abilities are parallel with what you were told in the interview. While employment dates and job titles can be verified with previous employers, many employers will not verify more than what can be verified in the employment record because of privacy laws. However, if you do find someone who is willing to discuss more than just dates and job titles, a list of questions is appropriate. Some of these questions might include the following:
1. What was the title and responsibilities of the position the candidate had while at your company?
2. Do you think the candidate was qualified to assume those responsibilities?
3. Does this person show up on time and have good attendance?
4. Would you consider this person a team player?
5. What are the three strongest and weakest characteristics of this candidate?
6. Would you rehire this person?
If a candidate will be driving a company car or vehicle, such as a UPS truck, driving records may be checked. Criminal background checks may also be used if the position will include interaction with the public. If the position requires handling of money, a credit check may be required, although a written notice is required to be given to the candidate before the credit check is carried out. In addition, written permission must be provided to the credit agency, and the applicants must receive a copy of the report and a copy of their rights under the Consumer Credit Reporting Reform Act (CCRRA). All these types of tests can be used to determine if someone has been honest about their past employment.
Some companies require drug testing, which causes some debate. While some organizations say this is a safety issue (and pay lower insurance premiums), others say it is an invasion of privacy. As long as drug tests are administered for a defensible reason (safety), many organizations will continue to require them. Some organizations will also require physical examinations to ensure the candidate can perform the tasks required. A final form of testing is the honesty test. A number of “what would you do” questions are asked. The challenge with this type of test is that many people know the “right” answer but may not be honest in their responses.
Table 5.2 Reasons Why Employers Acted upon Data Found on Social Networking Sites
Provocative or inappropriate photos or info 53%
Drinking or drug use 44%
Badmouthing previous employer, colleague, or client 35%
Poor communication skills 29%
Discriminatory comments 26%
Lied about qualifications 24%
Leaked confidential information about previous job 20%
Forty-five percent of organizations use social networking such as Facebook, Twitter, or LinkedIn to gather information about potential candidates (Eaton, 2009). See Table 5.2 “Reasons Why Employers Acted upon Data Found on Social Networking Sites” for the types of data found on social networking sites that disqualified candidates, according to an article by Fast Company. This can be an effective method to see the kind of image the candidate portrays in his or her personal time.
Selection Methods
Tell Me about Yourself
How to answer that famous “tell me about yourself” question in an interview.
A clinical selection approach is probably the most common selection method, and it involves all who will be making the decision to hire a candidate. The decision makers review the data and, based on what they learn from the candidate and the information available to them, decide who should be hired for a job. Because interviewers have a different perception about the strengths of a candidate, this method leaves room for error. One consideration is disparate treatment, in which one’s biases may result in not hiring candidates based on their age, race, or gender. One way to handle this and limit the personal stereotypes and perceptions of the interviewers is to use a statistical method in hiring.
In the statistical method, a selection model is developed that assigns scores and gives more weight to specific factors, if necessary. For example, for some jobs, the ability to work in a team might be more important, while in others, knowledge of a specific computer program is more important. In this case, a weight can be assigned to each of the job criteria listed. For example, if the job is a project manager, ability to work with the client might be more important than how someone dresses for the interview. So, in the example shown in Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In”, dress is weighted 1, while being able to give bad news to a client is weighted 5. In the example, the rating is multiplied by the weight to get the score for the particular job criteria. This method allows for a fairer process and can limit disparate treatment, although it may not limit disparate impact. A statistical method may work like this: you and the hiring team review the job analysis and job description and then determine the criteria for the job. You assign weights for each area and score ranges for each aspect of the criteria, rate candidates on each area as they interview, and then score tests or examine work samples. Once each hiring manager has scored each candidate, the hiring team can compare scores in each area and hopefully hire the best person in the best way. A sample candidate selection model is included in Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In”.
With the statistical approach, there is more objectivity than with the clinical approach. Statistical approaches include the compensatory model, multiple cutoff model, and the multiple hurdle model. In the compensatory model, a similar method of scoring is used as the weighted model but permits a high score in an important area to make up for a lower score in another area. In our Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In” example, ability to give bad news to a client might outweigh a test score. These decisions would be made before the interviews happen.
A multiple cutoff model requires that a candidate has a minimum score level on all selection criteria. In our Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In” example, the candidate may be required to have a score of at least 2 out of 5 on each criteria. If this was the case, the candidate in Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In” scored low on “bad news to a client,” meaning he or she wouldn’t get the job in a multiple cutoff model. In the multiple hurdle model, only candidates with high (preset) scores go to the next stages of the selection process. For example, the expectations might be to score a 4 on at least three of the items in Figure 5.4 “Sample Selection Model, with Sample Scores and Weighting Filled In”. If this were the case, this candidate might make it to the next level of the selection process, since he or she scored at least a 4 on three criteria areas.
Once the discussion on whom to hire has occurred and a person has been selected, the final phase of the process is to make an offer to the candidate. This is discussed in Section 5.5 “Making the Offer”.
Figure 5.4 Sample Selection Model, with Sample Scores and Weighting Filled In
Job Criteria Rating* Weight** Total Comments
Dress 4 1 4 Candidate dressed appropriately.
Personality 2 5 10 Did not seem excited about the job.
Interview questions
Give an example of a time you showed leadership. 3 3 9 Descriptive but didn’t seem to have experience required.
Give an example of when you had to give bad news to a client. 0 5 0 Has never had to do this.
Tell us how you have worked well in a team 5 4 20 Great example of teamwork given.
Score on cognitive ability test. 78 5 390 Meets minimum required score of 70
458
*Rating system of 1-5, with 5 being the highest
**Weighting of 1-5, with 5 being the most important
Key Takeaways
• Once the interview process is complete, some companies use other means of measuring candidates. For example, work samples are an excellent way of seeing how someone might perform at your company.
• An aptitude test or achievement test can be given. An aptitude test measures how well someone might be able to do something, while an achievement test measures what the candidate already knows. Tests that measure cognitive ability and personality are examples.
• Some organizations also perform drug tests and physical tests. A physical test might consist of being able to lift a certain amount of weight, if required for the job. Honesty tests are also given; these measure the honesty level of the candidate. However, these tests may not be reliable, since someone can guess the “right” answer.
• Facebook, Twitter, and other social networking websites are also used to gather information about a candidate. Calling references is another option.
• Every person interviewing the candidate should have a selection model; this method utilizes a statistical approach as opposed to a clinical approach. The selection table lists the criteria on the left and asks interviewers to provide a rating for each. This method can allow for a more consistent way of measuring candidates.
Exercises
1. Develop a sample candidate selection for your current job.
2. Visit your or another person’s Facebook page. Consider the content from an interviewer’s point of view. Should anything be removed or changed?
1“Employment Tests and Selection Procedures,” US Equal Employment Opportunity Commission, accessed August 2, 2011, http://www.eeoc.gov/policy/docs/factemployment_procedures.html.
2“Exam Schedule,” New York Police Department, accessed August 2, 2011, www.nypdrecruit.com/exam-center/exam-overview. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.05%3A_Testing_and_Selecting.txt |
Learning Objectives
1. Explain the steps in making the offer to the candidate.
Oftentimes once the decision is made to hire a candidate, HR professionals feel their job is finished. But making the offer to the chosen candidate can be equally as important as the interview process. If the offer is not handled properly, you can lose the candidate, or if the candidates takes the job, he or she could start off on the wrong foot.
According to Paul Falcone, vice president for human resources at the Fortune 500 company Time Warner, detailed information should be asked of the candidate before the offer is even made (Falcone, 2011). He says that as soon as the offer is made, power is shifted to the candidate. To handle this, he suggests asking salary questions in the interview, including the following:
1. “If we were to make a job offer today, when would you be in a position to accept or reject the offer?” If the candidate answers “right now,” this indicates they do not have other job offers on the table or if they do, you are their first choice.
2. “At what point, dollar wise, would you accept our job offer and at what point, dollar wise would you reject the offer?” The advantage of using this strategy is that it gets to the point of understanding the candidate’s expectations. If the interviewee does not respond right away, you can clarify by asking, “I am asking this question because I would like to gauge your interest level. Share with me the ideal salary offer versus at what point you would be willing to walk away from this opportunity.”
Asking these questions can assist in qualifying candidates, based on salary expectations. For example, if a candidate requests 20 percent more than you are able to pay for the job, this discussion can be had before the offer is even made, perhaps making this candidate no longer viable.
Once you have determined in the interview process that the salary expectation is in the range of what you can offer, the first step is to make the offer as soon as the decision is made. In a tight labor market, waiting a week or two may impact your ability to hire your first choice. You probably already have a salary range in mind and can begin to narrow down the offer based on the individual’s KSAOs. Based on the range of salary you can offer, consider the following questions when making the offer to a candidate:
• What is the scarcity of the particular skills set?
• What are the “going” wages in your geographic area?
• What are the current economic conditions?
• What is the current pay for similar positions in your organization?
• What is your organizational compensation strategy?
• What is the fair market value of the job?
• What is the level of the job within the organization?
• What are your budget constraints?
• How soon will the employee be productive in the organization?
• Are there other candidates equally qualified that might have lower salary expectations?
• What are the national and regional unemployment rates?
• If you cannot pay more, can you offer other perks such as a signing bonus or flexible work schedule?
Once the offer has been made, it is reasonable to give the candidate some time to decide, but not too long, as this can result in losing other candidates should this candidate reject the job offer. It is likely the candidate may come back and ask for higher salary or benefits. Some tips to successfully negotiate are included below and in Video 5.4:
1. Be prepared. Know exactly what you can and can’t offer.
2. Explain the career growth the organization can provide.
3. Address the benefits of the candidate’s joining the organization.
4. Discuss the entire offer, including other benefits offered to the employee.
5. View the negotiation as a win-win situation.
6. Be able to provide salary research of similar positions and competitors for the same job title.
7. Use the trading technique. For example, “I cannot offer you the salary you are requesting right now, but what if we were able to review salary at your six-month performance review, assuming ____ objectives are met?”
Once the phone call is made and the candidate accepts the offer, an e-mail or formal letter should follow, outlining details of the employment agreement. The employment agreement or offer letter should include the following:
1. Job title
2. Salary
3. Other compensation, such as bonuses or stock options
4. Benefits, such as health-care coverage, 401(k)
5. Vacation time/paid holidays
6. Start date
7. Noncompete agreement expectations
8. Additional considerations such as relocation expenses
Once the pay and benefits package has been successfully negotiated and the offer letter (or e-mail) sent, you should clarify acceptance details in writing and receive confirmation of the start date. It is not unusual for people in higher-level positions to need a month or even two to transition from their old jobs. During this period, make sure to stay in touch and even complete the new hire paperwork in the meantime.
Pirates of the Caribbean Negotiation Analysis
This lively video, using the movie Pirates of the Caribbean, offers great analysis and tips on how to successfully negotiate just about anything.
Key Takeaways
• The HR professional’s job isn’t finished once the selection is made. The next step is to actually make the offer. This step is important, because if it isn’t done properly, you could lose the candidate or have ill feelings at the onset of the employment relationship.
• Once you have made the decision to hire someone, make the offer to the candidate right away. Normally this is done through a phone call and a follow-up e-mail, outlining the details of the offer.
• It is not unusual for someone to negotiate salary or benefits. Know how far you can negotiate and also be aware of how your current employees will be affected if you offer this person a higher salary.
• If you are having trouble coming to an agreement, be creative in what you can offer; for example, offer flextime instead of higher pay.
Exercise
1. Research “salary negotiation” on the Internet. What tips are provided for job seekers? Do you think these same tips could apply to the HR professional? Why or why not? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.06%3A_Making_the_Offer.txt |
Chapter Summary
• The selection process refers to the steps involved in choosing someone who has the right qualifications to fill a current or future job opening.
• There are five main steps in the selection process. First, criteria should be developed to determine how the person will be chosen. Second, a review of the applications and résumés is conducted, often via a computer program that can find keywords. Next, interview the employee. The last steps involve administering tests, such as a personality test or drug test, and making the offer to the right candidate.
• The first step in selection is to review résumés. Even before you do this, though, it is important to develop criteria against which each candidate will be measured. Criteria can come from the job description as well as the job qualifications.
• Other tools, such as cognitive ability tests, credit checks, or personality tests, can be used to determine qualifications. When developing your criteria for interviewing, determine the level the applicant needs to meet to meet the minimum criteria—for example, a minimum score for a personality test.
• We should be concerned with validity and reliability of measurement tools. Validity refers to how valid the test is—that is, how well a test measures a candidate’s abilities to do a job. Reliability refers to which selection techniques yield similar data or results over time. It is important to choose the right measurement tool used to determine whether the candidate meets the criteria.
• Use of criteria before the interview process starts is also important to make sure disparate impact or disparate treatment do not occur in the interview process.
• When hiring, there is the option of internal and external candidates. Each has its own set of advantages and disadvantages. Internal candidates may be able to “hit the ground running” but external candidates may come in with new perspectives. Even if an internal candidate seems to be the best hire, it is best to still perform the process of posting the job and interviewing, since other less vocal employees might be qualified internal candidates as well. In other words, don’t assume one person is the obvious choice for the promotion.
• Traditional, telephone, panel, informational, meal, group, and video are types of interviews. A combination of several of these may be used to determine the best candidate for the job. A structured interview format means the questions are determined ahead of time, and unstructured means the questions are based on the individual applicant. The advantage of a structured interview is that all candidates are rated on the same criteria. Before interviewing occurs, criteria and questions for a structured interview should be developed.
• Interview questions can revolve around situational questions or behavioral questions. Situational questions focus on asking someone what they would do in a given situation, while behavioral questions ask candidates what they would have done in certain situations.
• Interview questions about national origin, marital status, age, religion, and disabilities are illegal. To avoid any legal issues, it is important for interviewers to be trained on which questions cannot be asked. The halo effect, which assumes that one desirable trait means all traits are desirable, should also be avoided.
• The process involved in interviewing a person includes the following steps: recruit new candidates; establish criteria for which candidates will be rated; develop interview questions based on the analysis; set a time line for interviewing and decision making; connect schedules with others involved in the interview process; set up interviews with candidates and set up any testing procedures; interview the candidates and perform any necessary testing; and once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria. Finally, put together an offer for the candidate.
• Developing a rapport, being honest, and managing the interview process are tips to having a successful interview.
• Once the interview process is complete, some companies use other means of measuring candidates. For example, work samples are an excellent way of seeing how someone might perform at your company.
• An aptitude test or achievement test can be given. An aptitude test measures how well someone might be able to do something, while an achievement test measures what the candidate already knows. Tests that measure cognitive ability and personality are examples.
• Some organizations also perform drug tests and physical tests. A physical test might consist of being able to lift a certain amount of weight, if required for the job. Honesty tests are also given, which measure the honesty level of the candidate. However, these tests may not be reliable, since someone can guess the “right” answer.
• Facebook, Twitter, and other social networking websites are used to gather information about a candidate. Calling references is another option.
• Every person interviewing the candidate should have a selection model; this method utilizes a statistical approach as opposed to a clinical approach. The selection table lists the criteria on the left and asks interviewers to provide a rating for each. This method can allow for a more consistent way of measuring candidates.
• The job of the HR professional isn’t finished once the selection is made. The next step is to make the offer. This step is important, because if it isn’t done properly, you could lose the candidate or have ill feelings at the onset of the employment relationship.
• Once you have made the decision to hire someone, make the offer to the candidate right away. Normally this is done through a phone call and a follow-up e-mail, outlining the details of the offer.
• It is not unusual for someone to negotiate salary or benefits. Know how far you can negotiate, and also be aware of how your current employees will be affected if you offer this person a higher salary.
• If you are having trouble coming to an agreement, be creative in what you can offer; for example, offer flextime instead of higher pay.
Chapter Case
The Four-Fifths Rule
The four-fifths rule is a way of measuring adverse impact in selection processes of organizations. It works like this: assume your organization requires a cognitive test for employment. You set a test score of 70 as the required pass rate for the candidate to be considered for an interview. Based on our numbers, if 50 percent of men passed this test with a score of 70, then four-fifths or 40 percent of women should also be able to pass the test. You might calculate it like this:
Gender Total who scored 70 or above Total who took the test Percent
Male 52 62 83.8 or 84% passed
Female 36 58 62.07 or 62%
If you divide the total of who scored above 70 by the total number who took the test, it shows the percentage of 84 percent passed the test. If you divide the number of women who passed by the total number of women who took the test, you come up with 62 percent. Then divide 62 percent by 84 percent (62/84 = 73.8%). The resulting 74 percent means that it is below the 80 percent or the four-fifths rule, and this test could be considered to have disparate impact.
52/62 = 84% of men who took the test passed the test
36/58 = 62% of women who took the test passed the test
62/84 = 73.8%, less than 80%, which could show disparate impact
This is only an indicator as to how the selection process works for the organization, and other factors, such as sample size, can impact the reliability of this test. Using the tables below, please calculate possible disparate impact and then answer the questions that follow.
National Origin Passing Test Score Total Number Taking the Test Percent
Caucasians 56 89
Minority groups 48 62
Age Passing Test Score Total Number Taking the Test Percent
People under 40 28 52
People over 40 23 61
Gender Passing Test Score Total Number Taking the Test Percent
Male 71 82
Female 64 85
1. Please calculate the above numbers using the four-fifths rule. Based on your calculation:
1. Which group or groups might be affected negatively by this test?
2. What would be your considerations before changing any selection tools based on this data?
3. How might you change your selection process to ensure disparate impact isn’t occurring at your organization?
Team Activity
1. In a team of two, take the Big Five personality test online (http://www.outofservice.com/bigfive/) and compare scores.
2. Assume you are hiring a retail salesperson and plan to administer the same Big Five personality test you took above. In your team, develop minimum percentile scores for each of the five areas that would be acceptable for your new hire. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/05%3A_Selection/5.07%3A_Cases_and_Problems.txt |
Matching Compensation with Core Values
As you sit down to review the compensation package your company offers, one thing that stands out is that your compensation package no longer matches the core values of your organization. When your organization merged five years ago with a similar firm that specializes in online shoe retailing, your company had to hire hundreds of people to keep up with growth. As a result—and what happens with many companies—the compensation plans are not revised and revisited as they should be. The core values your company adopted from the merging company focused on customer service, freedom to work where employees felt they could be most productive, and continuing education of employees, whether or not the education was related to the organization. The compensation package, providing the basic salary, health benefits, and 401(k) plans, seems a bit old-fashioned for the type of company yours has become.
After reviewing your company’s strategic plan and your human resource management (HRM) strategic plan, you begin to develop a compensation plan that includes salary, health benefits, and 401(k) plans, but you feel it might be smart to better meet the needs of your employees by making some changes to these existing plans. For example, you are considering implementing a team bonus program for high customer service ratings and coverage for alternative forms of medicine, such as acupuncture and massage. Instead of guessing what employees would like to see in their compensation packages, you decide to develop a compensation survey to assess what benefits are most important to your employees. As you begin this task, you know it will be a lot of work, but it’s important to the continued recruitment, retention, and motivation of your current employees.
6.02: Goals of a Compensation Plan
Learning Objectives
1. Be able to explain the goals of a compensation plan.
So far, we have discussed the process for strategic plan development and the recruitment and selection process. The next aspect of HRM is to develop compensation plans that will help in the recruitment and retention of employees. This is the topic of this chapter.
Most of us, no matter how much we like our jobs, would not do them without a compensation package. When we think of compensation, often we think of only our paycheck, but compensation in terms of HRM is much broader. A compensation package can include pay, health-care benefits, and other benefits such as 401(k) plans, which will all be discussed in this chapter. Before we discuss specifics, you should be aware of courses and certifications that can be earned through the WorldatWork Society of Certified Professionals, specifically related to compensation (other certifications will be discussed in their respective chapters).
WorldatWork offers several certifications in the area of compensation:
• Certified Compensation Professional (CCP)
• Certified Benefits Professional (CBP)
• Certified Sales Compensation Professional (CSCP)
• Certified Executive Compensation Professional (CECP)
These certifications involve taking a multiple-choice exam online or at one of the WorldatWork testing locations. The exams test for knowledge, experience, and skills in each of the compensation certification areas and can be a valuable asset to you when applying for HR positions.
The certifications are based on many of the aspects of this chapter, including understanding the goals of compensation packages for employees, which is our focus for this section.
First, the compensation package should be positive enough to attract the best people for the job. An organization that does not pay as well as others within the same industry will likely not be able to attract the best candidates, resulting in a poorer overall company performance.
Once the best employees and talent come to work for your organization, you want the compensation to be competitive enough to motivate people to stay with your organization. Although we know that compensation packages are not the only thing that motivates people, compensation is a key component. We discuss other motivations in Chapter 10.
Third, compensation can be used to improve morale, motivation, and satisfaction among employees. If employees are not satisfied, this can result not only in higher turnover but also in poor quality of work for those employees who do stay. A proper compensation plan can also increase loyalty in the organization.
Pay systems can also be used to reward individual or team performance and encourage employees to work at their own peak performance. In fact, in the 2011 list of the Best Companies to Work For by Fortune magazine, all the companies who topped the list (SAS and Boston Consulting Group, for example) had satisfied employees—not only with their pay, but their entire benefits package1.
With an appropriate pay system, companies find that customer service is better because employees are happier. In addition, having fairly compensated, motivated employees not only adds to the bottom line of the organization but also facilitates organizational growth and expansion. Motivated employees can also save the company money indirectly, by not taking sick days when the employee isn’t really sick, and companies with good pay packages find fewer disability claims as well.
So far, our focus on HRM has been a strategic focus, and the same should be true for development of compensation packages. Before the package is developed for employees, it’s key to understand the role compensation plays in the bottom line of the organization. For example, in 2010, the US military spent 22 percent of its budget on personnel salaries2. One-fifth of the total budget—or more—is not uncommon for most US organizations, depending on the industry. As a result, it is easy to see why the compensation plan should be an important aspect of the overall HRM strategic plan. The next few sections will detail the aspects of creating the right compensation packages: for your organization, including legal considerations.
Human Resource Recall
If you have had or currently have a job, do you feel the compensation plan motivated you? Why or why not?
Key Takeaways
• A compensation package is an important part of the overall strategic HRM plan, since much of the company budget is for employee compensation.
• A compensation package can include salary, bonuses, health-care plans, and a variety of other types of compensation.
• The goals of compensation are to attract people to work for your organization and to retain people who are already working in the organization.
• Compensation is also used to motivate employees to work at their peak performance and improve morale.
• Employees who are fairly compensated tend to provide better customer service, which can result in organizational growth and development.
Exercise
1. Visit a website that gives salary information for a variety of jobs, such as http://www.salary.com. Using the search box, type in your ideal job and research salary information. What is the median salary for the job you searched? What is the lowest salary you would be willing to accept for this job? At which point would you be completely satisfied with the pay for this job?
Footnotes
1. 100 Best Companies to Work For,” CNN Money, accessed February 11, 2011, https://money.cnn.com/magazines/fortune/bestcompanies/2011/full_list/
2. US Department of Defense, Financial Summary Tables, May 2009, accessed February 11, 2011, https://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2010/fy2010_summary_tables_whole.pdf. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/06%3A_Compensation_and_Benefits/6.01%3A_Introduction.txt |
Learning Objectives
1. Be able to explain the internal and external considerations of compensation package development.
2. Know how to develop a compensation philosophy.
There are a few basic aspects of compensation packages we should discuss before moving into the specific aspects of compensation. These foundations can assist in the development of a compensation strategy that meets the goals of your organization and is in line with your strategic plan.
Before beginning work on your compensation packages, some analysis should be done to determine your organization’s philosophy in regard to compensation. Before development of your compensation philosophies, there are some basic questions to address on your current compensation packages.
1. From the employee’s perspective, what is a fair wage?
2. Are wages too high to achieve financial health in your organization?
3. Do managers and employees know and buy-into your compensation philosophy?
4. Does the pay scale reflect the importance of various job titles within the organization?
5. Is your compensation good enough to retain employees?
6. Are state and federal laws being met with your compensation package?
7. Is your compensation philosophy keeping in line with labor market changes, industry changes, and organizational changes?
Once these basic questions are addressed, we can see where we might have “holes” in our compensation package and begin to develop new philosophies in line with our strategic plan, which benefits the organization. Some possible compensation policies might include the following:
1. Are salaries higher or lower depending on the location of the business? For example, orthopedic surgeons are paid higher in the North Central states (\$537,000) than in Hawaii (\$250,000), according to the Medscape Physical report of 2011 (Miller, 2011). Reasons could include cost of living in the area and fewer qualified people in a given area, giving them leverage to ask for a higher salary.
2. Are salaries lower or higher than the average in your region or area? If the salary is lower, what other benefits will the employee receive to make up for this difference? For example, wages might not be as high, but offering flextime or free day care might offset the lower salary.
3. Should there be a specific pay scale for each position in the organization, or should salaries be negotiated on an individual basis? If there is no set pay scale, how can you ensure individual salary offers are fair and nondiscriminatory?
4. What balance of salary and other rewards, such as bonuses, should be part of your compensation package? For example, some organizations prefer to offer a lower salary, but through bonuses and profit sharing, the employee has the potential to earn more.
5. When giving raises, will the employee’s tenure be a factor, or will pay increases be merit based only, or a combination of both?
Let’s discuss some internal and external factors in determining compensation in more detail.
Internal and External Pay Factors
One major internal factor is the compensation strategy the company has decided to use. Sixty-two percent of organizations have a written, documented compensation policy (Scott, 2011).
Some organizations choose a market compensation policy, market plus, or market minus philosophy. A market compensation policy is to pay the going rate for a particular job, within a particular market based on research and salary studies. The organization that uses a market plus philosophy will determine the going rate and add a percentage to that rate, such as 5 percent. So if a particular job category median pays \$57,000, the organization with a market plus of 5 percent philosophy will pay \$59,850. A market minus philosophy pays a particular percentage less than the market; so in our example, if a company pays 5 percent less, the same job would pay \$54,150. The University of Arizona, for example, posts its compensation philosophy on its website1:
In order to fulfill its mission, the University of Arizona shall maintain a compensation program directed toward attracting, retaining, and rewarding a qualified and diverse workforce. Within the boundaries of financial feasibility, employee compensation shall be externally competitive and internally equitable, and shall be based upon performance as recognized within the work unit.
In addition to their compensation philosophy, the university lists compensation objectives, such as “average salaries will be targeted at the average salary levels of employees in comparable positions in our various labor markets.” This is an example of a market compensation policy.
An example of an organization with a market plus philosophy is Cisco Systems, listed as one of the top-paying companies on Fortune’s annual list. For example, they pay \$131,716 for software engineers, while at Yahoo! software engineers are paid an average of \$101,669, using a market philosophy. The pay at Cisco reflects its compensation philosophy and objectives:
Cisco operates in the extremely competitive and rapidly changing high-technology industry. The Board’s Compensation Committee believes that the compensation programs for the executive officers should be designed to attract, motivate, and retain talented executives responsible for the success of Cisco and should be determined within a framework based on the achievement of designated financial targets, individual contribution, customer satisfaction, and financial performance relative to that of Cisco’s competitors. Within this overall philosophy, the Compensation Committee’s objectives are to do the following:
Offer a total compensation program that is flexible and takes into consideration the compensation practices of a group of specifically identified peer companies and other selected companies with which Cisco competes for executive talent
Provide annual variable cash incentive awards that take into account Cisco’s overall financial performance in terms of designated corporate objectives, as well as individual contributions and a measure of customer satisfaction
Align the financial interests of executive officers with those of shareholders by providing appropriate long-term, equity-based incentives
An example of an organization with a market minus philosophy is Whole Foods. The executive compensation for Whole Foods is a maximum of nineteen times the average store worker (or \$608,000), very low by Fortune 500 executive pay standards, which average 343 times (Allen, 2011). According to John Mackey, Whole Foods CEO, paying on a market minus philosophy makes good business sense: “Fewer things harm an organization’s morale more than great disparities in compensation. When a workplace is perceived as unfair and greedy, it begins to destroy the social fabric of the organization” (Hamner & McNichol, 2011). Another example of an organization with a market minus philosophy is Southwest Airlines. Despite the lower pay (and more hours), the organization boasts just a 1.4 percent turnover rate, which can be attributed not to pay but to the workplace culture and, as a result, loyalty to the company (Eggers, 2011).
There are many reasons why an organization would choose one philosophy over another. A market minus philosophy may tie into the company’s core values, as in Whole Foods, or it may be because the types of jobs require an unskilled workforce that may be easier and less expensive to replace. A company may use a market plus philosophy because the industry’s cutting-edge nature requires the best and the brightest.
Other internal pay factors might include the employer’s ability to pay, the type of industry, and the value of the employee and the particular job to the organization. In addition, the presence of a union can lead to mandated pay scales. Unions are discussed in Chapter 12.
External pay factors can include the current economic state. For example, in June 2011, the US unemployment rate was 9.2 percent, which is quite high for the country. As a result of surplus workers, compensation may be reduced within organizations because of oversupply of workers. Inflation and cost of living in a given area can also determine compensation in a given market.
Once an organization has looked at the internal and external forces affecting pay, it can begin to develop a pay system within the organization. We discuss how to develop a pay system in Section 6.3 “Types of Pay Systems”.
Key Takeaways
• Before beginning work on a pay system, some general questions need to be answered. Important starting points include questions ranging from what is a fair wage from the employees’ perspectives to how much can be paid but still retain financial health.
• After some pay questions are answered, a pay philosophy must be developed, based on internal and external factors. Some companies implement a market compensation philosophy, which pays the going market rate for a job. Other companies may decide to utilize a market plus philosophy, which pays higher than the average. A company could decide its pay philosophy is a market minus philosophy, which pays less than the market rate. For example, an organization may decide to pay lower salaries but offer more benefits.
• Once these tasks are done, the HR manager can then build a pay system that works for the size and industry of the organization.
Exercise
1. Think of your current organization or a past organization. What do you think their pay policy is/was? Describe and analyze whether you think it was or is effective. If you haven’t worked before, perform an Internet search on pay policies and describe/analyze the pay policy of an organization.
1University of Arizona, “Compensation Philosophy,” accessed July 23, 2011, www.hr.arizona.edu/compensation_philosophy. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/06%3A_Compensation_and_Benefits/6.03%3A_Developing_a_Compensation_Package.txt |
Learning Objectives
1. Explain types of job evaluation systems and their uses.
2. Be able to define and discuss the types of pay systems and factors determining the type of pay system used.
3. Know the laws relating to compensation.
Once you have determined your compensation strategy based on internal and external factors, you will need to evaluate jobs, develop a pay system, and consider pay theories when making decisions. Next, you will determine the mix of pay you will use, taking into consideration legal implications.
Job Evaluation Systems
As mentioned when we discussed internal and external factors, the value of the job is a major factor when determining pay. There are several ways to determine the value of a job through job evaluation. Job evaluation is defined as the process of determining the relative worth of jobs to determine pay structure. Job evaluation can help us determine if pay is equitable and fair among our employees. There are several ways to perform a job evaluation. One of the simplest methods, used by smaller companies or within individual departments, is a job ranking system. In this type of evaluation, job titles are listed and ranked in order of importance to the organization. A paired comparison can also occur, in which individual jobs are compared with every other job, based on a ranking system, and an overall score is given for each job, determining the highest-valued job to the lowest-valued job. For example, in Table 6.1 “Example of a Paired Comparison for a Job Evaluation”, four jobs are compared based on a ranking of 0, 1, or 2. Zero indicates the job is less important than the one being compared, 1 means the job is about the same, and 2 means the job is more important. When the scores are added up, it is a quick way to see which jobs are of more importance to the organization. Of course, any person creating these rankings should be familiar with the duties of all the jobs. While this method may provide reasonably good results because of its simplicity, it doesn’t compare differences between jobs, which may have received the same rank of importance.
Table \(1\) Example of a Paired Comparison for a Job Evaluation
Job Receptionist Project Manager Account Manager Sales Director
Receptionist X 0 0 0 0 = 4th
Project Administrative Assistant 1 X 0 0 1 = 3rd
Account Manager 2 1 X 0 3 = 2nd
Sales Director 2 2 2 X 6 = 1st
Based on the paired ranking system, the sales director should have a higher salary than the project administrative assistant, because the ranking for that job is higher. Likewise, a receptionist should be paid less than the project administrative assistant because this job ranks lower.
Table \(2\). Table \(2\) Example of a Job Classification System at the University of Washington
Job Code Job Title State Job Class Code Reference Representative Group Pay Table Pay Range Minimum Mo. Rate Maximum Mo. Incremental Rate OT Eligible
7715 ACCELERATOR TECHNICIAN 1 SEIU Local 925 Clerical Nonsupervisory B4 40 \$2689 \$3583 Y
7300 ACCOUNTANT 1 SEIU Local 925 Clerical Nonsupervisory B4 40 \$2689 \$3583 Y
7301 ACCOUNTANT 2 SEIU Local 925 Clerical Nonsupervisory B4 44 \$2949 \$3956 N
7302 ACCOUNTANT, SENIOR SEIU Local 925 Clerical Nonsupervisory B4 50 \$3410 \$4587 N
7011 ACCOUNTING SUPERVISOR SEIU Local 925 Clerical Supervisory B4 50 \$3410 \$4587 N
7045 ADMINISTRATIVE ASSISTANT A SEIU Local 925 Clerical Nonsupervisory B4 39 \$2623 \$3493 Y
7044 ADMINISTRATIVE ASSISTANT A-SUPV SEIU Local 925 Clerical Supervisory B4 41 \$2751 \$3667 Y
7046 ADMINISTRATIVE ASSISTANT B SEIU Local 925 Clerical Supervisory B4 42 \$2816 \$3763 Y
7080 ADMINISTRATIVE COORDINATOR SEIU Local 925 Clerical Nonsupervisory B4 37 \$2506 \$3325 Y
7490 ADMISSIONS SPECIALIST SEIU Local 925 Clerical Nonsupervisory B4 41 \$2751 \$3667 Y
7583 AFFIRMATIVE ACTION/HUMAN RIGHTS ASST SEIU Local 925 Clerical Nonsupervisory B4 41 \$2751 \$3667 Y
8696 ALCOHOLISM THERAPIST 1 WFSE HMC B0 56 \$3507 \$5021 Y
6119 ALCOHOLISM THERAPIST 2 359F Classified Non-Union C0 63 \$3761 \$5224 Y
6329 ANATOMIC PATHOLOGY LABORATORY LEAD 315H Classified Non-Union C0 73 \$4154 \$5771 Y
6328 ANATOMIC PATHOLOGY LABORATORY SUPERVISOR 315I Classified Non-Union C0 79 \$4412 \$6126 N
8146 ANATOMIC PATHOLOGY TECHNICIAN SEIU Local 925-HMC Technical B7 55 \$3472 \$4822 Y
8326 ANATOMIC PATHOLOGY TECHNICIAN SEIU LOCAL 925 Medical/Laboratory Tech B7 55 \$3472 \$4822 Y
8145 ANATOMIC PATHOLOGY TECHNICIAN TRAINEE SEIU Local 925-HMC Technical B7 40 \$2991 \$4155 Y
8325 ANATOMIC PATHOLOGY TECHNICIAN TRAINEE SEIU LOCAL 925 Medical/Laboratory Tech B7 40 \$2991 \$4155 Y
8147 ANATOMIC PATHOLOGY TECHNOLOGIST SEIU Local 925-HMC Technical B7 66 \$3874 \$5383 Y
8327 ANATOMIC PATHOLOGY TECHNOLOGIST SEIU LOCAL 925 Medical/Laboratory Tech B7 66 \$3874 \$5383 Y
6313 ANESTHESIOLOGY TECHNICAL SERVICES SUPV 320H Classified Non-Union CA 61 \$3686 \$5277 N
6310 ANESTHESIOLOGY TECHNICIAN 1 320E Classified Non-Union CA 13 \$2287 \$3271 Y
8711 ANESTHESIOLOGY TECHNICIAN 1 WFSE HMC BA 10 \$2219 \$3271 Y
8312 ANESTHESIOLOGY TECHNICIAN 2 SEIU LOCAL 925 Medical/Laboratory Tech BS 46 \$3344 \$4933 Y
8960 ANESTHESIOLOGY TECHNICIAN 2 1199NW-HMC Respiratory/Anesthesiology BS 46 \$3344 \$4933 Y
6311 ANESTHESIOLOGY TECHNICIAN LEAD 320G Classified Non-Union CA 52 \$3370 \$4826 Y
8959 ANESTHESIOLOGY TECHNICIAN LEAD 1199NW-HMC Respiratory/Anesthesiology BS 53 \$3585 \$5288 Y
7724 ANIMAL TECHNICIAN 1 SEIU Local 925 Clerical Nonsupervisory B4 25 \$1903 \$2506 Y
7725 ANIMAL TECHNICIAN 2 SEIU Local 925 Clerical Nonsupervisory B4 26 \$1948 \$2567 Y
7726 ANIMAL TECHNICIAN 3 SEIU Local 925 Clerical Nonsupervisory B4 30 \$2134 \$2816 Y
4727 ANIMAL TECHNICIAN SUPERVISOR 525H Classified Non-Union C1 35 \$2370 \$3063 Y
4658 ASSISTANT FACILITIES DESIGNER 540L Classified Non-Union C1 48 \$3213 \$4214 Y
8874 ASSISTANT STEAM ENGINEER WFSE Skilled Trades BL 46G \$3566 \$4106 Y
8507 BAKER WFSE Campuswide BI 30 \$2113 \$2789 Y
8508 BAKER LEAD WFSE Campuswide BI 33 \$2266 \$2994 Y
4700 BIOMEDICAL ELECTRONICS TECHNICIAN 1 511E Classified Non-Union CA 54 \$3438 \$4924 Y
4701 BIOMEDICAL ELECTRONICS TECHNICIAN 2 511F Classified Non-Union CA 68 \$3954 \$5659 Y
4702 BIOMEDICAL ELECTRONICS TECHNICIAN 3 511G Classified Non-Union CA 78 \$4368 \$6249 Y
4703 BIOMEDICAL ELECTRONICS TECHNICIAN LEAD 511H Classified Non-Union CA 83 \$4591 \$6568 Y
4704 BIOMEDICAL ELECTRONICS TECHNICIAN SUPV 511I Classified Non-Union CA 88 \$4826 \$6903 N
8875 BOILER OPERATOR WFSE Skilled Trades BL 42G \$3247 \$3736 Y
7613 BOOK PRODUCTION COORDINATOR SEIU Local 925 Clerical Nonsupervisory B4 44 \$2949 \$3956 Y
7075 BOOKKEEPING MACHINE OPERATOR SEIU Local 925 Clerical Nonsupervisory B4 29 \$2088 \$2751 Y
7550 BROADCAST TECHNICIAN 1 SEIU Local 925 Clerical Nonsupervisory B4 41 \$2751 \$3667 Y
7551 BROADCAST TECHNICIAN 2 SEIU Local 925 Clerical Nonsupervisory B4 47 \$3166 \$4255 Y
7552 BROADCAST TECHNICIAN 3 SEIU Local 925 Clerical Nonsupervisory B4 51 \$3493 \$4699 Y
7553 BROADCAST TECHNICIAN SUPERVISOR SEIU Local 925 Clerical Supervisory B4 55 \$3856 \$5186 N
7335 BUDGET ANALYST SEIU Local 925 Clerical Nonsupervisory B4 42 \$2816 \$3763 Y
7336 BUDGET/FISCAL ANALYST SEIU Local 925 Clerical Nonsupervisory B4 46 \$3093 \$4154 N
7337 BUDGET/FISCAL ANALYST LEAD SEIU Local 925 Clerical Nonsupervisory B4 51 \$3493 \$4699 N
7339 BUDGET/FISCAL OPERATIONS SUPERVISOR SEIU Local 925 Clerical Supervisory B4 57 \$4053 \$5448 N
7338 BUDGET/FISCAL UNIT SUPERVISOR SEIU Local 925 Clerical Supervisory B4 54 \$3763 \$5059 N
7021 BUILDING SERVICES COORDINATOR SEIU Local 925 Clerical Nonsupervisory B4 33 \$2289 \$3023 Y
7022 BUILDING SERVICES SUPERVISOR SEIU Local 925 Clerical Supervisory B4 38 \$2567 \$3410 Y
5215 BUILDINGS AND GROUNDS SUPERVISOR A 598G Classified Non-Union C1 49 \$3293 \$4322 N
5216 BUILDINGS AND GROUNDS SUPERVISOR B 598H Classified Non-Union C1 55 \$3819 \$5010 N
7119 BUYER 1 SEIU Local 925 Clerical Nonsupervisory B4 38 \$2567 \$3410 Y
7120 BUYER 2 SEIU Local 925 Clerical Nonsupervisory B4 44 \$2949 \$3956 Y
7122 BUYER 3 SEIU Local 925 Clerical Nonsupervisory B4 49 \$3325 \$4472 N
Source: Reprinted from The University of Washington website, Compensation: A Division of Human Resources, www.washington.edu/admin/hr/ocpsp/compensation/alpha.sort.files/alpha.sort.html (accessed September 14, 2011).
Another type of job evaluation system is the point-factor system, which determines the value of a job by calculating the total points assigned to it. The points given to a specific job are called compensable factors. These can range from leadership ability to specific responsibilities and skills required for the job. Once the compensable factors are determined, each is given a weight compared to the importance of this skill or ability to the organization. When this system is applied to every job in the organization, expected compensable factors for each job are listed, along with corresponding points to determine which jobs have the most relative importance within the organization. Tompkins County in New York uses a point-factor system. Some of their compensable factors include the following:
1. Knowledge
2. Autonomy
3. Supervision
4. Psychological demands
5. Interpersonal skills
6. Internal and external contacts
In this point-factor system, autonomy ranks the highest and is given a weight of twenty-nine, while knowledge is given a rate of twenty, for example. Each of the compensable factors has a narrative that explains how points should be distributed for each factor. In this system, one hundred points are given for knowledge for a bachelor’s degree and two to three years of experience, and eighty points are given if an employee has an associate’s degree or high school diploma and two to three years of experience. The points are then multiplied by the weight (for knowledge, the weight is twenty) to give a final score on that compensable factor. After a score is developed for each, the employee is placed on the appropriate pay level for his or her score, as illustrated in Figure \(2\).
Another option for job evaluation is called the Hay profile method. This proprietary job evaluation method focuses on three factors called know-how, problem solving, and accountability. Within these factors are specific statements such as “procedural proficiency.” Each of these statements is given a point value in each category of know-how, problem solving, and accountability. Then job descriptions are reviewed and assigned a set of statements that most accurately reflect the job. The point values for each of the statements are added for each job description, providing a quantitative basis for job evaluation and eventually, compensation. An advantage of this method is its quantitative nature, but a disadvantage is the expense of performing an elaborate job evaluation.
Pay Systems
Once you have performed a job evaluation, you can move to the third step, which we call pay grading. This is the process of setting the pay scale for specific jobs or types of jobs.
The first method to pay grade is to develop a variety of pay grade levels. Figure \(3\) shows an example. Then once the levels are developed, each job is assigned a pay grade. When employees receive raises, their raises stay within the range of their individual pay grade, until they receive a promotion that may result in a higher pay grade. The advantage of this type of system is fairness. Everyone performing the same job is within a given range and there is little room for pay discrimination to occur. However, since the system is rigid, it may not be appropriate for some organizations in hiring the best people. Organizations that operate in several cities might use a pay grade scale, but they may add percentages based on where someone lives. For example, the cost of living in Spokane, Washington, is much lower than in New York City. If an organization has offices in both places, it may choose to add a percentage pay adjustment for people living within a geographic area—for example, 10 percent higher in New York.
One of the downsides to pay grading is the possible lack of motivation for employees to work harder. They know even if they perform tasks outside their job description, their pay level or pay grade will be the same. This can incubate a stagnant environment. Sometimes this system can also create too many levels of hierarchy. For large companies, this may work fine, but smaller, more agile organizations may use other methods to determine pay structure. For example, some organizations have moved to a delayering and banding process, which cuts down the number of pay levels within the organization. General Electric delayered pay grades in the mid-1990s because it found that employees were less likely to take a reassignment that was at a lower pay grade, even though the assignment might have been a good development opportunity (Ferris, 1995). So, delayering enables a broader range of pay and more flexibility within each level. Sometimes this type of process also occurs when a company downsizes. Let’s assume a company with five hundred employees has traditionally used a pay grade model but decided to move to a more flexible model. Rather than have, say, thirty pay levels, it may reduce this to five or six levels, with greater salary differentials within the grades themselves. This allows organizations to better reward performance, while still having a basic model for hiring managers to follow.
Rather than use a pay grade scale, some organizations use a going rate model. In this model, analysis of the going rate for a particular job at a particular time is considered when creating the compensation package. This model can work well if market pressures or labor supply-and-demand pressures greatly impact your particular business. For example, if you need to attract the best project managers, but more are already employed (lack of supply)—and most companies are paying \$75,000 for this position—you will likely need to pay the same or more, because of labor supply and demand. Many tools are available, such as salarywizard.com, to provide going rate information on particular jobs in every region of the United States.
Compensation Strategies
The president of HR That Works provides some tips on determining compensation.
Another pay model is the management fit model. In this model, each manager makes a decision about who should be paid what when that person is hired. The downside to this model may be potential discrimination, halo effects, and resentment within the organization. Of course, these factors can create morale issues, the exact thing we want to avoid when compensating employees.
In addition to the pay level models we just looked at, other considerations might include the following:
1. Skill-based pay. With a skill-based pay system, salary levels are based on an employee’s skills, as opposed to job title. This method is implemented similarly to the pay grade model, but rather than job title, a set of skills is assigned a particular pay grade.
2. Competency-based pay. Rather than looking at specific skills, the competency-based approach looks at the employee’s traits or characteristics as opposed to a specific skills set. This model focuses more on what the employee can become as opposed to the skills he or she already has.
3. Broadbanding. Broadbanding is similar to a pay grade system, except all jobs in a particular category are assigned a specific pay category. For example, everyone working in customer service, or all administrative assistants (regardless of department), are paid within the same general band. McDonald’s uses this compensation philosophy in their corporate offices, stating that it allows for flexibility in terms of pay, movement, and growth of employees (McDonald’s Corporation, 2011).
4. Variable pay system. This type of system provides employees with a pay basis but then links the attainment of certain goals or achievements directly to their pay. For example, a salesperson may receive a certain base pay but earn more if he or she meets the sales quota.
How Would You Handle This?
You have been working for your organization for five years. After lots of hard work, you are promoted to sales manager. One of your first tasks is to develop goals for your sales team, then create a budget based on these goals. First, you look at the salaries of all the sales staff to find major pay discrepancies. Some salespeople, who perform equally well, are paid much lower than some sales staff whom you consider to be non-performers. As you dig deeper, you see this is a problem throughout the sales team. You are worried this might affect motivation for your team if they find out what others are making. How would you handle this?
Pay Theories
Now that we have discussed pay systems, it is important to look at some theories on pay that can be helpful to know when choosing the type of pay system your organization will use.
The equity theory is concerned with the relational satisfaction employees get from pay and inputs they provide to the organization. It says that people will evaluate their own compensation by comparing their compensation to others’ compensation and their inputs to others’ inputs. In other words, people will look at their own compensation packages and at their own inputs (the work performed) and compare that with others. If they perceive this to be unfair, in that another person is paid more but they believe that person is doing less work, motivational issues can occur. For example, people may reduce their own inputs and not work as hard. Employees may also decide to leave the organization as a result of the perceived inequity. In HR, this is an important theory to understand, because even if someone is being paid fairly, they will always compare their own pay to that of others in the organization. The key here is perception, in that the fairness is based entirely on what the employee sees, not what may be the actual reality. Even though HR or management may feel employees are being paid fairly, this may not be the employee’s belief. In HR, we need to look at two factors related to pay equity: external pay equity and internal pay equity. External pay equity refers to what other people in similar organizations are being paid for a similar job. Internal pay equity focuses on employees within the same organization. Within the same organization, employees may look at higher level jobs, lower level jobs, and years with the organization to make their decision on pay equity. Consider Walmart, for example. In 2010, Michael Duke, CEO of Walmart, earned roughly \$35 million in salary and other compensation (Gomstyne, 2010), while employees earned minimum wage or slightly higher in their respective states. While Walmart contends that its wages are competitive in local markets, the retail giant makes no apologies for the pay difference, citing the need for a specialized skill set to be able to be the CEO of a Fortune 500 company. There are hundreds of articles addressing the issue of pay equity between upper level managers and employees of an organization. To make a compensation strategy work, the perceived inputs (the work) and outputs (the pay) need to match fairly.
The expectancy theory is another key theory in relation to pay. The expectancy theory says that employees will put in as much work as they expect to receive. In other words, if the employee perceives they are going to be paid favorably, they will work to achieve the outcomes. If they believe the rewards do not equal the amount of effort, they may not work as hard.
The reinforcement theory, developed by Edward L. Thorndike (Indiana University, 2011), says that if high performance is followed by some reward, that desired behavior will likely occur in the future. Likewise, if high performance isn’t followed by a reward, it is less likely the high performance will occur in the future. Consider an extreme example of the reinforcement theory in the world of finance. On Wall Street, bonuses for traders and bankers are a major part of their salary. The average bonus in 2010 was \$128,530 (Smith, 2011), which does not take into account specific commissions on trades, which can greatly increase total compensation. One interesting consideration is the ethical implications of certain pay structures, particularly commission and bonus plans. For example, after the US government bailed out American International Group (AIG) with \$170 billion in 2009, it was reported AIG would still provide some \$165 million in bonuses to the same business unit that brought the company to near collapse, because of contractual issues. Traditionally, a bonus structure is designed to reward performance, rather than be a guaranteed part of the compensation plan, as was the case with AIG. Bonus and commission plans should be utilized to drive desired behavior and act as a reward for the desired behavior, as the reinforcement theory states.
All these theories provide us information to make better decisions when developing our own pay systems. Other considerations are discussed next.
Pay Decision Considerations
Besides the motivational aspect of creating a pay structure, there are some other considerations. First, the size of the organization and the expected expansion of the organization will be a factor. For example, if you are the HR manager for a ten-person company, you likely use a going rate or management fit model. While this is appropriate for your company today, as your organization grows, it may be prudent to develop a more formal pay structure. Ascentium Corporation, based in Seattle, Washington, found this to be the case. When the company started with fewer than fifteen employees, a management fit model was used. As the company ballooned to over five hundred employees in four cities, a pay banding model had to be put into place for fairness.
If your organization also operates overseas, a consideration is how domestic workers will be paid in comparison to the global market. One strategy is to develop a centralized compensation system, which would be one pay system for all employees, regardless of where they live. The downside to this is that the cost of living may be much less in some countries, making the centralized system possibly unfair to employees who live and work in more expensive countries. Another consideration is in what currency employees will be paid. Most US companies pay even their overseas workers in dollars, and not in the local currency where the employee is working. Currency valuation fluctuations could cause challenges in this regard (Watson, 2005). We further discuss some global compensation policies in Chapter 14.
How you communicate your pay system is extremely important to enhance the motivation that can be created by fair and equitable wage. In addition, where possible, asking for participation from your employees through the use of pay attitude surveys, for example, can create a transparent compensation process, resulting in higher performing employees.
Organizations should develop market pay surveys and review their wages constantly to ensure the organization is within expected ranges for the industry.
Human Resource Recall
Why do you think a transparent compensation policy is so important to motivating a workforce?
Table \(3\): Types of Pay
Pay Attributes
Salary Fixed compensation calculated on a weekly, biweekly, or monthly basis. No extra pay for overtime work.
Hourly Wage Employees are paid on the basis of number of hours worked.
Piecework System Employees are paid based on the number of items that are produced.
Types of Incentive Plans Attributes
Commission Plans An employee may or may not receive a salary but will be paid extra (e.g., a percentage for every sale made).
Bonus Plans Extra pay for meeting or beating some goal previously determined. Bonus plans can consist of monetary compensation, but also other forms such as time off or gift certificates.
Profit-Sharing Plans Annual bonuses paid to employees based on the amount of profit the organization earned.
Stock Options When an employee is given the right to purchase company stock at a particular rate in time. Please note that a stock “option” is different from the actual giving of stock, since the option infers the employee will buy the stock at a set rate, obviously, usually cheaper than the going rate.
Other Types of Compensation Attributes
Fringe Benefits This can include a variety of options. Sick leave, paid vacation time, health club memberships, daycare services.
Health Benefits Most organizations provide health and dental care benefits for employees. In addition, disability and life insurance benefits are offered.
401(k) Plans Some organizations provide a retirement plan for employees. The company would work with a financial organization to set up the plan so employees can save money, and often, companies will “match” a percentage of what the employee contributes to the plan.
Types of Pay
After a pay system has been developed, we can begin to look at specific methods of paying our employees. Remember that when we talk about compensation, we are referring to not only an actual paycheck but additional types of compensation, such as incentive plans that include bonuses and profit sharing. We can divide our total pay system into three categories: pay, incentives, and other types of compensation. Pay is the hourly, weekly, or monthly salary an employee earns. An incentive, often called a pay-for-performance incentive, is given for meeting certain performance standards, such as meeting sales targets. The advantage to incentive pay is that company goals can be linked directly to employee goals, resulting in higher pay for the employee and goal achievement by the organization. The following are desirable traits of incentive plans:
• Clearly communicated
• Attainable but challenging
• Easily understandable
• Tied to company goals
Table \(3\) illustrates the three types of compensation.
Most organizations use a combination of pay, incentives, and other compensation, as outlined in Table \(3\), to develop the total compensation package.
Laws Relating to Pay
As you have already guessed from our earlier chapter discussions, people cannot be discriminated against when it comes to development of pay systems. One issue hotly debated is the issue of comparable worth. Comparable worth states that people should be given similar pay if they are performing the same type of job. Evidence over the years shows this isn’t the case, with women earning less than men in many industries. On average, a woman earns 79 cents for every \$1.00 a man earns. For women of color, the gap is wider at 69 cents for African-American women and 59 cents for Latina women (National Organization for Women, 2011). Many publications state that women earn less than men for a few reasons:
1. Women work fewer hours because of family care and maternity leave.
2. The career path or job choice of women tends to be lower as a whole.
3. There is a bias favoring men as the “breadwinners,” and therefore they are paid more.
4. Women are valued less than men in the workplace.
5. Women don’t negotiate salaries as well as men do.
While the reasons are certainly debatable, there is evidence that young women (without children) entering the workforce actually earn more than their male counterparts, owing to higher levels of education (Dougherty, 2010). As you may remember from Chapter 3, the EEOC covers discrimination in the workplace, including pay discrimination based on race, color, religion, sex, and national origin. The Equal Pay Act of 1963 makes it illegal to pay different wages to men and women if they perform equal work in the same workplace.
More recent legislation on pay includes the Lilly Ledbetter Fair Pay Act of 2009, the first law signed by President Obama. This bill amends the Civil Rights Act stating that the 180-day statute of limitations for filing an equal pay lawsuit regarding pay discrimination resets with each discriminatory paycheck. The bill stemmed from a lawsuit against Goodyear Tire and Rubber Company by Lilly Ledbetter, who claimed that her nineteen-year career at the company consisted of unfair pay, compared to male workers in the organization. Her complaint was time barred by the US Supreme Court, and the new act addressed the time (180 days) constraint in which people have to file claims.
The Fair Labor Standards Act, or FLSA, was established in 1938 and set a minimum wage for jobs, overtime laws, and child labor laws. FLSA divides workers into exempt and nonexempt status, and jobs under exempt status do not fall under the FLSA guidelines. An exempt employee is usually paid a salary and includes executive, professional, outside sales, and administrative positions. A nonexempt employee is usually an hourly employee. For nonexempt employees, some states may implement a higher minimum wage than that established by the federal government. For example, in 2011, the minimum wage is \$8.67 per hour in Washington State, while the federal minimum wage is \$7.25 per hour. Obviously, as an HR manager or manager, it is your responsibility to ensure everyone is being paid the minimum wage. This law also requires overtime pay if employees work over forty hours per week. Organizations must also post the FLSA poster in a visible part of the workplace, outlining these laws.
Child labor also falls under FLSA. The goal of these laws is to protect the education of children, prohibit the employment of children in dangerous jobs, and limit the number of working hours of children during the school year and other times of the year (US Department of Labor, 2011).
According to the FLSA, tipped employees are those earning \$30 or more per month in tips, such as servers in a restaurant. Employers whose employees receive more than \$30 in tips may consider tips as part of wages, but they also must pay \$2.12 an hour in direct wages. They must also be able to show that the employee receives at least the applicable minimum wage. If the tips and direct wage do not meet the minimum wage, the employer must pay the difference.
Also relating to pay is the Federal Unemployment Tax Act (FUTA). FUTA provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay a federal and a state unemployment tax, and portions of these funds go toward unemployment benefits should the worker lose his or her job. The Federal Employees Compensation Act (FECA) provides federal employees injured in the performance of their jobs compensation benefits, such as disability. Please note that this is elective for private companies but required of federal agencies.
Negotiating Salary
On negotiating salary from the perspective of an employee.
Key Takeaways
• A job evaluation system should be used to determine the relative value of one job to another. This is the first step in setting up a pay system.
• Several types of pay systems can be implemented. A pay grade system sets up specific pay levels for particular jobs, while a going rate system looks at the pay through the industry for a certain job title. Management fit gives maximum flexibility for managers to pay what they think someone should earn.
• HR managers can also develop pay systems based on skills and competency and utilize broadbanding, which is similar to pay grades. Another option might include variable pay.
• There are several motivational theories in regard to pay. First, the equity theory says that people will evaluate their own satisfaction with their compensation by comparing it to others’ compensation. The expectancy theory says people will put in only as much work as they expect to receive in rewards. Finally, the reinforcement theory says if high performance is followed by a reward, high performance is likely to happen in the future.
• Other pay considerations include the size of the organization, whether the company is global, and the level of communication and employee involvement in compensation. HR managers should always be aware of what others are paying in the industry by performing market surveys.
• There are several laws pertaining to pay. Of course, the EEOC ensures that pay is fair for all and does not discriminate. FLSA sets a minimum wage and establishes standards for child labor. FUTA requires employers to pay unemployment taxes on employees. FECA ensures that federal employees receive certain benefits.
Exercises
1. Name and describe three considerations in developing a pay system. Which do you think is best?
2. Which pay theory do you think is the most important when developing your pay system? Why?
3. Visit http://www.dol.gov/dol/topic/wages/minimumwage.htm (please note that sometimes web address change so you may need to search for the information), which publishes minimum wage data for the United States. View the map and compare your state with the federal minimum wage. Is it higher or lower? Which two states have the highest minimum wage? The lowest? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/06%3A_Compensation_and_Benefits/6.04%3A_Types_of_Pay_Systems.txt |
Learning Objectives
1. Explain the various types of benefits that can be offered to employees.
As you already know, there is more to a compensation package than just pay. There are many other aspects to the creation of a good compensation package, including not only pay but incentive pay and other types of compensation. First, we will discuss benefits that are mandated by the federal government, and then we will discuss types of voluntary benefits, including both incentive pay and other types of compensation.
Mandated: Social Security and Medicare
The Social Security Act of 1935 requires employers to withdraw funds from workers’ paychecks to pay for retirement benefits. This is called a payroll tax. Please note that all organizations are legally compelled to offer this benefit. After several revisions, we now call this OASDHI or the Old Age, Survivors, Disability, and Health Insurance Program. To be insured, employees must work forty quarters, with a minimum of \$1,000 earned per quarter. Once this money is put aside, anyone born after 1960 will receive benefits at 67. The OASDHI tax in 2011 is 4.2 percent on earnings for employees, up to \$106,800 and 6.2 percent for the employer up to the same limits. This covers both retirement income as well as medical benefits, called Medicare, once the employee reaches retirement age.
Mandated: Unemployment Insurance and Workers’ Compensation
Unemployment insurance is required under the Social Security Act of 1935 and is also called the Federal Unemployment Tax Act (FUTA). This program’s goals include providing some lost income for employees during involuntary unemployment, helping workers find a new job, incentivizing employers to continue employment, and developing worker skills if they are laid off. The majority of this plan is funded by employers’ payroll taxes, which account for .8 percent per employee. The rate is actually 6.2 percent of compensation, but employers are allowed a tax credit for these payments, which results in the net .8 percent. With this benefit, employees receive unemployment benefits and/or job training when they are laid off or let go from a current job. However, employees would be ineligible to receive these benefits if they quit their job, as it must be involuntary. Just like Social Security, this payroll tax on employers is required.
Some employers also offer workers’ compensation benefits. If an employee is hurt on the job, he or she would receive certain benefits, such as a percentage of pay. Jobs are classified into risk levels, and obviously the higher the risk level, the higher the cost of insurance. This is not a federally mandated program, but for some occupations in some states, it may be a requirement.
Mandated: COBRA
While the government does not require companies to provide health-care and medical benefits to employees, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires companies to allow employees to extend their group coverage for up to thirty-six months. The restrictions for this plan include the requirement of a qualifying event that would mean a loss of benefits, such as termination or reduction in hours. For example, if an employee works forty hours a week with medical insurance, but the schedule is reduced to twenty hours, no longer qualifying him or her for benefits, COBRA would be an option.
Voluntary: Incentive Pay Systems
As we discussed earlier, there are several types of incentive pay systems that can be tied directly to business objectives and the employees’ ability to help the company meet those objectives. They include commissions, bonuses, profit sharing, stock options, team pay, and merit pay.
Commissions are usually calculated on the basis of a percentage and earned based on the achievement of specific targets that have been agreed upon by the employee and employer. For example, many salespeople receive commissions from each item sold. Many commission incentive plans require employees to meet a minimum level of sales, who then are paid a comission on each sale beyond the minimum. A straight commission plan is one in which the employee receives no base pay and entire pay is based on meeting sales goals. Many plans, however, include a base pay and commission for each sale. Base pay is the guaranteed salary the employee earns.
Several types of bonuses can be given to employees as incentive pay. Meeting certain company goals or successfully completing a project or other objectives can be tied to a bonus, which is a one-time payment to an employee. A spot bonus is an unplanned bonus given to an employee for meeting a certain objective. These types of bonuses do not always have to be money; they can be other forms such as a gift certificate or trip. Fifty-eight percent of WorldatWork members (WorldatWork, 2000) said that they provide spot bonuses to employees for special recognition above and beyond work performance.
Some organizations choose to reward employees financially when the organization as a whole performs well, through the use of profit sharing as an incentive. For example, if an organization has a profit-sharing program of 2 percent for employees, the employees would earn 2 percent of the overall profit of the company. As you have guessed, this can be an excellent incentive for employees to both work as a team and also monitor their own personal performance so as not to let down the team. For example, in 2011, US automaker General Motors gave one of its highest profit-sharing payouts ever. Forty-five thousand employees received \$189 million in a profit-sharing bonus, which equaled about \$4,200 per person (Bunkley, 2011). While profit sharing can be a great incentive, it can also be a large expense that should be carefully considered.
Employee ownership of the organization is similar to profit sharing but with a few key differences. In this type of plan, employees are granted stock options, which allow the employees to buy stock at a fixed price. Then if the stock goes up in value, the employee earns the difference between what he or she paid and the value of the stock. With this type of incentive, employees are encouraged to act in the best interest of the organization. Some plans, called employee stock ownership plans, are different from stock options, in that in these plans the employee is given stock as reward for performance.
In a smaller organization, team pay or group incentives can be popular. In this type of plan, if the group meets a specified goal, such as the increase of sales by 10 percent, the entire group receives a reward, which can consist of additional pay or bonus. Please note that this is different from individualized bonuses, discussed earlier, since the incentive is a reward for the group as opposed for the individual.
Merit pay is a pay program that links pay to how well the employee performs within the job, and it is normally tied to performance appraisals. Performance appraisals are discussed further in Chapter 10. Merit base is normally an annual pay increase tied to performance. The problem with merit pay is that it may only be received once per year, limiting incentive flexibility. To make merit pay work, performance guidelines should be predetermined. Some organizations offer cost of living annual increases (COLAs), which is not tied to merit but is given to employees as an annual inflationary increase.
Fortune 500 Focus
While the cost of health insurance premiums may be going up for most Americans, these premiums do not hit the individual employee’s pocketbook at Microsoft. Microsoft, based in Redmond, Washington, finds itself once again on the Fortune 500 Best Companies to Work For list in several areas, including paying for 100 percent of employees’ health-care premiums1. In addition to cutting this cost for employees, Microsoft also offers domestic partner benefits, one of the first Fortune 500 companies to do so. In 2005, Microsoft also began to offer partial coverage for transgender surgery to its existing health-care coverage, which earned Microsoft the highest attainable score by the Human Rights Campaign (HRC) Equality Index (GLEAM, 2011). Microsoft also promotes fitness and wellness as part of its health-care plan, providing an on-site fitness center and subsidized gym memberships.
Voluntary: Medical Insurance
According to the Bureau of Labor Statistics, 62 percent of companies in 2010 offered health-care benefits to employees (US Bureau of Labor Statistics, 2010). The yearly cost for employee medical insurance averages \$9,552, according to the 2009 Towers Perrin survey (Watson, 2009). With such a significant cost to companies, it is up to HR managers to contain these costs, while not negatively affecting employee motivation. Medical insurance usually includes hospital expenses, surgical expenses, and routine health-care visits. Most insurance plans also allow for wellness visits and other alternative care (e.g., massage and acupuncture) within the plans. Many employers also offer vision and dental care benefits as part of their benefits packages. Disability insurance is also provided by some employers as well. We will discuss each of these in detail next.
One important law to keep in mind regarding medical insurance is the Health Insurance Portability and Accountability Act (HIPAA) of 1996. It provides federal protections for personal health information held by covered entities, such as employers. In other words, employers cannot divulge or share health care information they may have on an employee.
As the HR professional, it will likely be your responsibility to choose the health-care plan that best meets the needs of your employees. Some options include the following:
1. Fee-for-service plans. In this type of plan, people pay for medical expenses out of pocket, and then are reimbursed for the benefit level. For example, if your insurance plan covers doctor visits, you could see any doctor, pay the bill, and then submit payment to your insurer for reimbursement. Most companies will have a base plan, which covers more serious issues requiring hospitalization, while the major medical part of the plan would cover routine services, such as doctor’s visits. As you can imagine, the disadvantage of this type of plan can be twofold: first, the initial expense for the employee, and second, the time it may take to receive reimbursement for employees. Remember that medical insurance can help retain and motivate employees and help you recruit new employees, so consideration of the disadvantages is important.
2. Health maintenance organizations (HMOs). The HMO will likely have greater coverage than the fee-for-service plan, but it limits the ability of employees to see the doctors they choose. There may be a limited number of physicians and specialists for the employee to see, and going outside the plan and seeing another doctor may result in an out-of-pocket expense for the employee. Most HMOs cover a wide range of medical issues and will usually require a copayment by the employee. Some may have minimum deductibles they must meet before the HMO will cover in full. For example, if you are part of an HMO with a deductible of \$500 and copayments of \$25, you would need to see the doctor for a value of \$500 (paid out of pocket) before you can begin to just make the \$25 copayment for visits. Some HMOs will not allow members to see a specialist, such as a dermatologist, without prior approval from the primary care physician.
3. Preferred provider organization (PPO). This type of medical plan is similar to HMOs but allows employees to see a physician outside the network. They will likely still have to pay a deductible as mentioned above, but PPOs do allow employees more freedom to see specialists, such as dermatologists.
When choosing the best type of plan for your organization, the following aspects should be considered:
1. The cost of the plan
2. The type of coverage
3. The quality of the care
4. Administration of the plan
First, the cost is usually a major consideration for the HR professional. Developing a budget for health-care costs, initiating bids from possible providers, and then negotiating those bids is a key factor in controlling this cost for employers.
Second, asking for employees’ opinions about the type of coverage they would prefer is a way to ensure your plan meets the needs of your employees. Next, consider the quality of care your employees will receive and, finally, how simple will the plan be for your HR department to administer. For example, many HMO plans offer fully automated and online services for employees, making them easy to administer.
Disability insurance provides income to individuals (usually a portion of their salary) should they be injured or need long-term care resulting from an illness. Short-term disability insurance (STD) provides benefits to someone if they are unable to work for six months or less, while long-term disability insurance (LTD) covers the employee for a longer period of time. Normally, disability insurance provides income to the employee that is 60–80 percent of their normal salary.
Voluntary: 401(k) Plans
As the scenery of the workforce has changed, benefits have changed, too. One such recent change is the movement of employee pension plans to 401(k) plans. While some organizations still offer pension plans, such plans are far more rare. A pension plan is a set dollar amount an employee will receive when they retire from their organization. This type of plan was popular when most people worked their entire life at the same company. However, many pension plans have gone bankrupt, and the United States has an agency to protect people from losing pension benefits. The Pension Benefit Guaranty Corporation (PBGC) was created by the Employee Retirement Income Security Act (ERISA) to protect pension benefits in private sector pension plans. If a pension plan ends or isn’t able to pay all benefits, PBGC’s insurance program pays the benefit that should have been provided. Financing for this plan comes from insurance premiums paid by the companies whose plans PBGC protects.
As more mobility in the workplace has occurred, most organizations no longer offer pension plans, but instead, they offer 401(k) plans. While a pension plan can motivate employee loyalty, 401(k) plans are far more popular. According to the US Bureau of Labor Statistics, employer-provided retirement plans, such as 401(k) plans, were available to 74 percent of all full-time workers in the United States (US Bureau of Labor Statistics, 2010), while 39 percent of part-time workers had access to retirement benefits.
A 401(k) plan is a plan set up by the organization in which employees directly deposit money from their paycheck. The funds are tax deferred for the employee until retirement. If an employee leaves the job, their 401(k) plan goes with them. As an extra incentive, many organizations offer to match what the employee puts into the plan, usually based on a percentage. For example, an employee can sign up to contribute 5 percent of salary into a 401(k) plan, and the company will contribute the same amount. Most companies require a vesting period—that is, a certain time period, such as a year, before the employer will match the funds contributed.
Usually, 401(k) plans are easy to administer, after the initial setup has occurred. If the employer is matching employee contributions, the expense of such a plan can be great, but it also increases employee retention. Some considerations when choosing a 401(k) plan are as follows:
1. Is the vendor trustworthy?
2. Does the vendor allow employees to change their investments and account information online?
3. How much are the management fees?
It is first important to make sure the vendor you are considering for administration of your 401(k) plan has a positive reputation and also provides ease of access for your employees. For example, most 401(k) plans allow employees to change their address online and move investments from a stock to a bond. Twenty-four-hour access has become the expectation of most employees, and as a result, this is a major consideration before choosing a plan. Most 401(k) plans charge a fee to manage the investments of your employees. The management fees can vary greatly, so receiving a number of bids and comparing these fees is important to ensure your employees are getting the best deal.
It is important to mention the Employee Retirement Income Security Act (ERISA) here, as this relates directly to administration of your 401(k) plan. First, ERISA does not require employers to offer a pension or 401(k) plan, but for those who do, it requires them to meet certain standards when administering this type of plan. Some of these standards include the following:
1. Requires participants receive specific information about the plan, such as plan features and funding
2. Sets minimum standards for participation and vesting
3. Requires accountability of plan’s fiduciary responsibilities
4. Requires payment of certain benefits, should the plan be terminated
Voluntary: Paid Time Off
Time off is a benefit we should address, since this type of benefit varies greatly, especially in other parts of the world. French companies, for example, are mandated by law to provide five weeks of paid vacation time to employees (Leung, 2009). In the United States, the number of days off provided is a major budget item worth considering. Here are the general types of time off:
Paid Holidays
Many companies offer a set number of paid holidays, such as New Year’s Day, Memorial Day, Christmas, Independence Day, and Thanksgiving.
Sick Leave
The number of sick leave days can vary greatly among employers. The average in the United States is 8.4 paid sick days offered to employees per year (HRM Guide, 2011).
Paid Vacation
With full-time employment, many organizations also offer paid vacation to employees, and it is generally expected as part of the compensation package. According to a survey performed by Salary.com, the average number of paid vacation days in the United States is nine days for one year of service, fourteen days for five years of service, and seventeen days for ten years of service to the organization (Yang, 2011).
Organizations vary greatly in how vacation time is accrued. Some organizations give one hour for a certain number of days worked, while others require a waiting period before earning any paid time off (PTO). In addition, some organizations allow their employees to carry over unused vacation time from one year to the next, while other employees must use their vacation every year or risk losing it.
Paid Time Off (PTO)
One option is to provide a set number of days off, which can be used for vacation time, holidays, and/or sick leave.
To promote longevity, some organizations offer paid (or for example, 60 percent of salary paid) sabbaticals. For example, after five years of employment, the employee may take a paid sabbatical for one month.
A Final Note on Compensation and Benefits Strategy
When creating your compensation plan, of course the ability to recruit and retain should be an important factor. But also, consideration of your workforce needs is crucial to any successful compensation plan. The first step in development of a plan is to ask the employees what they care about. Some employees would rather receive more pay with fewer benefits or better benefits with fewer days off. Surveying the employees allows you, as the HR professional, to better understand the needs of your specific workforce. Once you have developed your plan, understand that it may change to best meet the needs of your business as it changes over time.
Once the plan is developed, communicating the plan with your employees is also essential. Inform your employees via an HR blog, e-mails, and traditional methods such as face to face. Your employees might not always be aware of the benefits cost to the company, so making sure they know is your responsibility. For example, if you pay for 80 percent of the medical insurance premiums, let your employees know. This type of communication can go a long way to allowing the employees to see their value to you within the organization.
Compensation Strategies
Lynn Cameron, managing partner of TechEdge, discusses compensation strategies.
Key Takeaways
• Before beginning work on a pay system, some general questions need to be answered. Questions such as what is a fair wage from the employee’s perspective and how much can be paid but still retain financial health are important starting points.
• After some pay questions are answered, development of a pay philosophy must be developed. For example, an organization may decide to pay lower salaries but offer more benefits.
• Once these tasks are done, the HR manager can then build a pay system that works for the size and industry of the organization.
• Besides salary, one of the biggest expenses for compensation is medical benefits. These can include health benefits, vision, dental, and disability benefits.
• Social Security and unemployment insurance are both required by federal law. Both are paid as a percentage of income by the employee and employer.
• Depending on the state, workers’ compensation might be a requirement. A percentage is paid on behalf of the employee in case he or she is hurt on the job.
• A mandatory benefit, COBRA was enacted to allow employees to continue their health insurance coverage, even if they leave their job.
• There are three main types of health-care plans. A fee-based plan allows the insured to see any doctor and submit reimbursement after a visit. An HMO plan restricts employees to certain doctors and facilities and may require a copayment and/or deductibles. A PPO plan is similar to the HMO but allows for more flexibility in which providers the employee can see.
• Pension funds were once popular, but as people tend to change jobs more, 401(k) plans are becoming more popular, since they can move with the employee.
• Profit sharing is a benefit in which employees receive a percentage of profit the organization earns. Stock ownership plans are plans in which employees can purchase stock or are granted stock and become an owner in the organization.
• Team rewards are also a popular way to motivate employees. These can be in the form of compensation if a group or the company meets certain target goals.
• Paid time off, or PTO, can come in the form of holidays, vacation time, and sick leave. Usually, employees earn more days as they stay with the company.
• Communication with employees is key to a successful benefits strategy.
Exercises
1. Of the benefits we discussed, which ones are required by law? Which are not?
2. Research current Federal Insurance Contributions Act (FICA) tax rates and Social Security limits, as these change frequently. Write down each of these rates and be prepared to share in class.
3. Describe the considerations when developing medical benefits. Which do you think would be the most important to you as the HR manager?
4. Visit websites of three companies you might be interested in working for. Review the incentives they offer and be prepared to discuss your findings in class.
5. 100 Best Companies to Work For,” Fortune, accessed July 21, 2011, https://money.cnn.com/magazines/fortune/bestcompanies/2010/full_list/. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/06%3A_Compensation_and_Benefits/6.05%3A_Other_Types_of_Compensation.txt |
Chapter Summary
• A compensation package is an important part of the overall strategic HRM plan, since much of the company budget is for employee compensation.
• A compensation package can include salary, bonuses, health-care plans, and a variety of other types of compensation.
• The goals of compensation are first to attract people to work for your organization. Second, they can be used to retain people who are already working in the organization.
• Compensation is also used to motivate employees to work at their peak performance and improve morale of the organization.
• Employees who are fairly compensated tend to provide better customer service, which can result in organizational growth and development.
• Several types of pay systems can be implemented. A pay grade system sets up specific pay levels for particular jobs, while a going rate system looks at the pay throughout the industry for a certain job title. Management fit gives maximum flexibility for managers to pay what they think someone should earn.
• HR managers can also develop pay systems based on skills and competency and utilize a broadbanding approach, which is similar to pay grades. Another option might include variable pay.
• There are several motivational theories in regard to pay. First, the equity theory says that people will evaluate their own satisfaction with their compensation by comparing it to others’ compensation. The expectancy theory says people will put in only as much work as they expect to receive in rewards. Finally, the reinforcement theory says that if high performance is followed by a reward, high performance is likely to happen in the future.
• Other pay considerations include the size of the organization, whether the company is global, and the level of communication and employee involvement in compensation. HR managers should always be aware of what others are paying in the industry by performing market surveys.
• There are several laws pertaining to pay. Of course, the Equal Employment Opportunity Commission (EEOC) ensures that pay is fair for all and does not discriminate. The Fair Labor Standards Act (FLSA) sets a minimum wage and establishes standards for child labor. The Federal Unemployment Tax Act (FUTA) requires employers to pay unemployment taxes on employees. The Federal Employees Compensation Act (FECA) ensures that federal employees receive certain benefits.
• Besides salary, one of the biggest expenses for compensation is medical benefits. These can include health benefits, vision, dental, and disability benefits.
• The Consolidated Omnibus Budget Reconciliation Act(COBRA) was enacted to allow employees to continue their health insurance coverage, even if they leave their job.
• There are three main types of health-care plans. A fee-based plan allows the insured to see any doctor and submit reimbursement after a visit. An HMO plan restricts employees to certain doctors and facilities and may require a copayment and/or deductibles. A PPO plan is similar to the HMO but allows for more flexibility in which providers the employee can see.
• Pension funds were once popular, but as people tend to change jobs more, 401(k) plans are becoming more popular, since they can move with the employee.
• Profit sharing is a benefit in which employees receive a percentage of profit the organization earns. Stock ownership plans are plans in which employees can purchase stock or are granted stock and become an owner in the organization.
• Team rewards are also a popular way to motivate employees. These can be in the form of compensation if a group or the company meets certain target goals.
• Social Security and unemployment insurance are both required by federal law. Both are paid as a percentage of income by the employee and employer.
• Depending on the state, workers’ compensation might be a requirement. A percentage is paid on behalf of the employee in case he or she is hurt on the job.
• Paid time off, or PTO, can come in the form of holidays, vacation time, and sick leave. Usually, employees earn more days as they stay with the company.
• Communication with employees is key to a successful benefits strategy. This includes communication before implementing the plan as well as communication about the plan.
Chapter Case
PTO: Too Little or Too Much?
• You just finished analyzing information for the current compensation and benefits program. You find that some changes should be made, as the majority of employees (you have 120 employees) are not happy with what is being offered. In fact, the plan had not been revised in over fifteen years, making it dated and definitely ready for some changes.
• One of the major points of contention is the PTO the organization offers. Employees feel the current system of sick time and vacation time offers too few options. For example, one employee says, “I often come to work sick, so I can still have my vacation time for my vacation.” Another employee says, “I have given nine years to this organization, but I receive only three days more than someone who has just started.” Here is the current PTO offering:
1+ year 7 days
5+years 10 days
10+ years 14 days
1. What cost considerations would you take into account when revising this part of your compensation plan?
2. What other considerations would you take into account when developing a new PTO plan?
3. Propose a new plan and estimate the cost of your plan on an Excel spreadsheet. Be prepared to present to the board of directors.
Team Activity
1. Work in teams of four or five. Assume your organization is expanding and wants to open a sales office overseas. What compensation factors would be a concern? Brainstorm a list and be prepared to present to the rest of the class.
2. Go to www.bls.gov/ooh/ and review the information on the Occupational Outlook Handbook in teams of three. Pick three different jobs under the management category and record their average salary. Discuss reasons for the pay difference between the jobs you choose. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/06%3A_Compensation_and_Benefits/6.06%3A_Cases_and_Problems.txt |
Dissatisfaction Isn’t Always about Pay
As an HR consultant, your job normally involves reviewing HR strategic plans and systems of small to medium size companies, then making recommendations on how to improve. Most of the companies you work with do not have large HR departments, and they find it less expensive to hire you than to hire a full-time person.
Your current client, Pacific Books, is a small online retailer with forty-seven employees. Pacific Books has had some challenges, and as the economy has improved, several employees have quit. They want you to look into this issue and provide a plan to improve retention.
Pacific Books currently has just one person managing payroll and benefits. The individual managers in the organization are the ones who handle other HR aspects, such as recruiting and developing compensation plans. As you speak with the managers and the payroll and benefits manager, it is clear employees are not happy working for this organization. You are concerned that if the company does not improve its employee retention, they will spend an excessive amount of time trying to recruit and train new people, so retention of the current employees is important.
As with most HR issues, rather than just guessing what employees want, you develop a survey to send to all employees, including management. You developed the survey on SurveyMonkey and asked employee satisfaction questions surrounding pay and benefits. However, you know that there are many other things that can cause someone to be unhappy at work, so to take this survey a step further, you decide to ask questions about the type of work employees are doing, management style, and work-life balance. Then you send out a link to all employees, giving them one week to take the survey.
When the results come in, they are astounding. Out of the forty-seven employees, forty-three selected “dissatisfied” on at least four or more areas of the five-question survey. While some employees are not happy with pay and benefits, the results say that other areas of the organization are actually what are causing the dissatisfaction. Employees are feeling micromanaged and do not have freedom over their time. There are also questions of favoritism by some managers for some employees, who always seem to get the “best” projects. When you sit down with the CEO to discuss the survey results, at first she defends the organization by saying the company offers the highest salaries and best benefits in the industry, and she doesn’t understand how someone can be dissatisfied. You explain to her that employee retention and motivation is partly about pay and benefits, but it includes other aspects of the employee’s job, too. She listens intently and then asks you to develop a retention and motivation plan that can improve the organization.
7.02: The Costs of Turnover
Learning Objectives
1. Be able identify the difference between direct and indirect turnover costs.
2. Describe some of the reasons why employees leave.
3. Explain the components of a retention plan.
According to the book Keeping the People Who Keep You in Business by Leigh Branham (Branham, 2000), the cost of losing an employee can range from 25 percent to 200 percent of that employee’s salary. Some of the costs cited revolve around customer service disruption and loss of morale among other employees, burnout of other employees, and the costs of hiring someone new. Losing an employee is called turnover.
There are two types of turnover, voluntary turnover and involuntary turnover. Voluntary turnover is the type of turnover that is initiated by the employee for many different reasons. Voluntary turnover can be somewhat predicted and addressed in HR, the focus of this chapter. Involuntary turnover is where the employee has no choice in their termination—for example, employer-initiated due to nonperformance. This is discussed further in Chapter 9.
It has been suggested that replacement of an employee who is paid \$8 per hour can range upwards of \$4,000 (Paiement, 2009). Turnover can be calculated by
separations during the time period (month)/total number of employees midmonth × 100 = the percentage of turnover.
For example, let’s assume there were three separations during the month of August and 115 employees midmonth. We can calculate turnover in this scenario by
3/115 × 100 = 2.6% turnover rate.
This gives us the overall turnover rate for our organization. We may want to calculate turnover rates based on region or department to gather more specific data. For example, let’s say of the three separations, two were in the accounting department. We have ten people in the accounting department. We can calculate that by
accounting: 2/10 × 100 = 20% turnover rate.
The turnover rate in accounting is alarmingly high compared to our company turnover rate. There may be something happening in this department to cause unusual turnover. Some of the possible reasons are discussed in “Reasons for Voluntary Turnover”.
In HR, we can separate the costs associated with turnover into indirect costs and direct costs. Direct turnover costs include the cost of leaving, replacement costs, and transition costs, while indirect turnover costs include the loss of production and reduced performance. The following are some examples of turnover costs (Maertz & Campion, 1998):
• Recruitment of replacements
• Administrative hiring costs
• Lost productivity associated with the time between the loss of the employee and hiring of replacement
• Lost productivity due to a new employee learning the job
• Lost productivity associated with coworkers helping the new employee
• Costs of training
• Costs associated with the employee’s lack of motivation prior to leaving
• Sometimes, the costs of trade secrets and proprietary information shared by the employee who leaves
• Public relations costs
To avoid these costs, development of retention plans is an important function of the HR strategic plan. Retention plans outline the strategies the organization will use to reduce turnover and address employee motivation.
Table \(1\) Turnover Costs
Direct Indirect
Recruitment costs Lost knowledge
Advertising costs for new position Loss of productivity while new employee is brought up to speed
Orientation and training of new employee Cost associated with lack of motivation prior to leaving
Severance costs Cost associated with loss of trade secrets
Testing costs
Time to interview new replacements
Time to recruit and train new hires
Costs of Turnover
This video provides an overview of the cost of employee turnover.
Reasons for Voluntary Turnover
Before we discuss specific details on retention planning, it is important to address the reasons why people choose to leave an organization to begin with. One mistake HR professionals and managers make is to assume people leave solely on the basis of their unhappiness with their compensation packages. Many factors can cause demotivated employees, which we discuss in “Theories on Job Dissatisfaction”.
Once we find out what can cause voluntary turnover, we can develop retention strategies to reduce turnover. Some of the common reasons employees leave organizations can include the following:
1. A poor match between the job and the skills of the employee. This issue is directly related to the recruitment process. When a poor match occurs, it can cause frustration for the employee and for the manager. Ensuring the recruitment phase is viable and sound is a first step to making sure the right match between job and skills occurs.
2. Lack of growth. Some employees feel “stuck” in their job and don’t see a way to have upward mobility in the organization. Implementing a training plan and developing a clearly defined path to job growth is a way to combat this reason for leaving.
3. Internal pay equity. Some employees, while they may not feel dissatisfied with their own pay initially, may feel dissatisfaction when comparing their pay with others. Remember the pay equity theory discussed in Chapter 6? This theory relates to one reason why people leave.
4. Management. Many employees cite management as their reason for leaving. This can be attributed to overmanaging (micromanaging) people, managers not being fair or playing favorites, lack of or poor communication by managers, and unrealistic expectations of managers.
5. Workload. Some employees feel their workloads are too heavy, resulting in employees being spread thin and lacking satisfaction from their jobs, and possibly, lack of work-life balance as a result.
We know that some people will move or perhaps their family situation changes. This type of turnover is normal and expected. Figure \(1\) shows other examples of why people leave organizations.
As HR professionals and managers, we want to be sure we have plans in place to keep our best people. One such plan is the retention plan, which we will discuss in “Retention Plans”.
Human Resource Recall
Do you feel your current or past organization did a good job of reducing turnover? Why or why not?
Key Takeaways
• Retaining employees is an important component to a healthy organization. Losing an employee is called turnover. Turnover can be very expensive to an organization, which is why it is important to develop retention plans to manage turnover.
• Voluntary turnover is turnover that is initiated by the employee, while involuntary turnover is initiated by the organization for various reasons such as nonperformance.
• Direct turnover costs and indirect turnover costs can include the costs associated with employee replacement, declining employee morale, or lost customers.
• Some of the reasons why employees leave can include a poor match between job and skills, no growth potential, pay inequity among employees, the fairness and communication style of management, and heavy workloads.
Exercise
1. Perform an Internet search of average employee turnover cost and report findings from at least three different industries or companies. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/07%3A_Retention_and_Motivation/7.01%3A_Introduction.txt |
Learning Objectives
1. Be able to discuss some of the theories on job satisfaction and dissatisfaction.
2. Explain the components of a retention plan.
Effective high-performance work systems (HPWS) is the name given to a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization. A high-performance work system is a strategic approach to many of the things we do in HR, including retention. Generally speaking, a HPWS gets employees involved in conceiving, designing, and implementing processes that are better for the company and better for the employee, which increases retention. Figure \(1\) gives an example of HR’s part in creating these systems.
Keeping HPWS in mind, we can begin to develop retention plans. The first step in this process is to understand some of the theories on job satisfaction and dissatisfaction. Next, we can gather data as to the satisfaction level of our current employees. Then we can begin to implement specific strategies for employee retention.
Theories on Job Dissatisfaction
There are a number of theories that attempt to describe what makes a satisfied employee versus an unsatisfied employee. While you may have learned about these theories in another class, such as organizational behavior, they are worth a review here to help us better understand employee satisfaction from an HR perspective.
Progression of Job Withdrawal
The first step to developing a retention plan is understanding some of the theories surrounding job satisfaction. One of the basic theories is the progression of job withdrawal theory, developed by Dan Farrell and James Petersen (Farrell & Petersen, 1984). It says that people develop a set of behaviors in succession to avoid their work situation. These behaviors include behavior change, physical withdrawal, and psychological withdrawal.
Within the behavior change area, an employee will first try to change the situation that is causing the dissatisfaction. For example, if the employee is unhappy with the management style, he or she might consider asking for a department move. In the physical withdrawal phase, the employee does one of the following:
• Leaves the job
• Takes an internal transfer
• Starts to become absent or tardy
If an employee is unable to leave the job situation, he or she will experience psychological withdrawal. They will become disengaged and may show less job involvement and commitment to the organization, which can create large costs to the organization, such as dissatisfied customers.
Table \(1\): Process of Job Withdrawal
Employee becomes dissatisfied
• For any number of reasons discussed earlier in this chapter
Behavior change
• If unionized, increased grievances
• Whistle-blowing
• Change of conditions, such as applying for other jobs
Physical withdrawal
• Leave the job
• Internal transfer
• Absenteeism
• Tardiness
Psychological withdrawal
• Disengagement in job and/or with team members
• Less organizational commitment
• Become less productive
Hawthorne Studies
Between 1927 and 1932, a series of experiments were conducted by Elton Mayo in the Western Electric Hawthorne Works company in Illinois (Mayo, 1949; 2007). Mayo developed these experiments to see how the physical and environmental factors of the workplace, such as lighting and break times, would affect employee motivation.
This was some of the first research performed that looked at human motivation at work. His results were surprising, as he found that no matter which experiments were performed, worker output improved. His conclusion and explanation for this was the simple fact the workers were happy to receive attention from researchers who expressed interest in them. As a result, these experiments, scheduled to last one year, extended to five years to increase the knowledge base about human motivation.
The implication of this research applies to HR and managers even today. It tells us that our retention plans must include training and other activities that make the employee feel valued.
Maslow’s Hierarchy of Needs
In 1943, Abraham Maslow developed what was known as the theory of human motivation (Maslow, 1999). His theory was developed in an attempt to explain human motivation. According to Maslow, there is a hierarchy of five needs, and as one level of need is satisfied, it will no longer be a motivator. In other words, people start at the bottom of the hierarchy and work their way up. Maslow’s hierarchy consists of the following:
• Self-actualization needs
• Esteem needs
• Social needs
• Safety needs
• Physiological needs
Physiological needs are our most basic needs, including food, water, and shelter. Safety needs at work might include feeling safe in the actual physical environment, or job security. As humans, we have the basic need to spend time with others. Esteem needs refer to the need we have to feel good about ourselves. Finally, self-actualization needs are the needs we have to better ourselves.
The implications of his research tell us, for example, that as long as an employee’s physiological needs are met, increased pay may not be a motivator. Likewise, employees should be motivated at work by having all needs met. Needs might include, for example, fair pay, safety standards at work, opportunities to socialize, compliments to help raise our esteem, and training opportunities to further develop ourselves.
Herzberg Two-Factor Theory
In 1959, Frederick Herzberg published The Motivation to Work (Herzberg, et. al., 1993), which described his studies to determine which aspects in a work environment caused satisfaction or dissatisfaction. He performed interviews in which employees were asked what pleased and displeased them about their work. From his research, he developed the motivation-hygiene theory to explain these results.
The things that satisfied the employees were motivators, while the dissatisfiers were the hygiene factors. He further said the hygiene factors were not necessarily motivators, but if not present in the work environment, they would actually cause demotivation. In other words, the hygiene factors are expected and assumed, while they may not necessarily motivate.
His research showed the following as the top six motivation factors:
1. Achievement
2. Recognition
3. The work itself
4. Responsibility
5. Advancement
6. Growth
The following were the top six hygiene factors:
1. Company policies
2. Supervision
3. Relationship with manager
4. Work conditions
5. Salary
6. Relationship with peers
The implication of this research is clear. Salary, for example, is on the hygiene factor list. Fair pay is expected, but it doesn’t actually motivate someone to do a better job. On the other hand, programs to further develop employees, such as management training programs, would be considered a motivator. Therefore, our retention plans should be focused on the area of fair salary of course, but if they take the direction of Herzberg’s motivational factors, the actual motivators tend to be the work and recognition surrounding the work performed.
McGregor
Douglas McGregor proposed the X-Y theory in his 1960 book called The Human Side of Enterprise (McGregor, 2006). McGregor’s theory gives us a starting point to understanding how management style can impact the retention of employees. His theory suggests two fundamental approaches to managing people. Theory X managers, who have an authoritarian management style, have the following fundamental management beliefs:
• The average person dislikes work and will avoid it.
• Most people need to be threatened with punishment to work toward company goals.
• The average person needs to be directed.
• Most workers will avoid responsibility.
Theory Y managers, on the other hand, have the following beliefs:
• Most people want to make an effort at work.
• People will apply self-control and self-direction in pursuit of company objectives.
• Commitment to objectives is a function of expected rewards received.
• People usually accept and actually welcome responsibility.
• Most workers will use imagination and ingenuity in solving company problems.
As you can see, these two belief systems have a large variance, and managers who manage under the X theory may have a more difficult time retaining workers and may see higher turnover rates. As a result, it is our job in HR to provide training opportunities in the area of management, so our managers can help motivate the employees. Training is a large part of the retention plan. This will be addressed in more detail in “Implementing Retention Strategies”.
Human Resource Recall
What are the disadvantages of taking a theory X approach with your employees?
Carrot and Stick
It is unknown for sure where this term was first used, although some believe it was coined in the 1700s during the Seven Years’ War. In business today, the stick approach refers to “poking and prodding” to get employees to do something. The carrot approach refers to the offering of some reward or incentive to motivate employees. Many companies use the stick approach, as in the following examples:
• If you don’t increase your sales by 10 percent, you will be fired.
• Everyone will have to take a pay cut if we don’t produce 15 percent more than we are currently producing.
As you can see, the stick approach takes a punitive look at retention, and we know this may motivate for a short period of time, but not in the long term.
The carrot approach might include the following:
• If you increase sales by 10 percent, you will receive a bonus.
• If production increases by 15 percent, the entire team will receive an extra day off next month.
The carrot approach takes a much more positive approach to employee motivation but still may not be effective. For example, this approach can actually demotivate employees if they do not feel the goal is achievable. Also, if organizations use this as the only motivational technique, ignoring physiological rewards such as career growth, this could be a detriment as well. This approach is used as a retention method, usually as part of a compensation plan.
All the employee satisfaction theories we have discussed have implications for the development of our retention plans and reduction of turnover. These theories can be intertwined into the specific retention strategies we will implement. This is discussed in Section 7.3.1 “Salaries and Benefits”.
Sources of Employee Satisfaction Data
After we have an understanding of why employees leave and employee satisfaction theories, research is our next step in developing a retention plan that will work for your organization. There isn’t a “one size fits all” approach to retention planning, so the research component is essential to formulate a plan that will make a difference in turnover rates.
Research can be performed in two ways. First, exit interviews of employees who are leaving the organization can provide important retention information. An exit interview is an interview performed by HR or a manager that seeks information as to what the employee liked at the organization and what they see should be improved. Exit interviews can be a valuable way to gather information about employee satisfaction and can serve as a starting point for determining any retention issues that may exist in the organization. However, the exit survey data should be reviewed over longer periods of time with several employees, so we can be sure we are not making retention plans based on the feedback of only a few people.
Sample Exit Interview Questions
1. What is your primary reason for leaving?
2. What did you like most about your job?
3. What did you like least about your job?
4. Did you feel there was room for growth in your job?
5. What incentives did you utilize while at our company?
6. Which incentives would you change and why?
7. Did you have enough training to do your job effectively?
The second way to perform research is through employee satisfaction surveys. A standardized and widely used measure of job satisfaction is the job descriptive index (JDI) survey. While JDI was initially developed in 1969 at Bowling Green State University, it has gone through extensive revisions, the most recent one in 2009. JDI looks at five aspects of job satisfaction, including present job, present pay, opportunities for promotion, supervision, and coworkers1. Each of the five facets contains nine or eighteen questions; the survey can be given in whole or measure only one facet. The value of the scale is that an HR manager can measure job satisfaction over a period of time and compare current results to past results and even compare job satisfaction at their company versus their industry. This allows the HR manager to consider changes in the organization, such as a change in compensation structure, and see how job satisfaction is impacted by the change.
Any type of survey can provide information on the employee’s satisfaction with their manager, workload, and other satisfaction and motivational issues. An example of a general employee satisfaction survey is shown in Figure \(3\). However, a few things should be considered when developing an employee satisfaction survey:
1. Communicate the purpose and goal of the survey.
2. Once the survey is complete, communicate what changes have been made as a result of the survey.
3. Assure employees their responses will be anonymous and private.
4. Involve management and leadership in the survey development.
5. Ask clear, concise questions that get at the root of morale issues.
Once data have been gathered and analyzed, we can formulate our retention plans. Our plan should always be tied to the strategic goals of the organization and the HPWS previously developed, and awareness of motivational theories should be coupled with the plans. Here are the components of a retention plan:
1. JDI survey results, other survey results, and exit interview findings
2. Current retention plans, strengths, and weaknesses
3. Goals of a retention plan (e.g., reduce turnover by 10 percent)
4. Individual strategies to meet retention and turnover reduction goals.
5. Budgeting. An understanding of how your retention plans will impact the payroll budget is important. See Video 7.2 for an example on how to calculate turnover costs and compare those to costs saved with an effective retention strategy.
In “Implementing Retention Strategies”, we will discuss the implementation of specific retention strategies.
Key Takeaways
• A high-performance work system (HPWS) is a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization. The overall company strategy should impact the HPWS HR develops in regard to retention.
• Retention plans are developed to address employee turnover, resulting in a more effective organization.
• The first step in developing a retention plan is to use exit interviews and/or surveys to find out the satisfaction level of employees. Once you have the data, you can begin to write the plan, making sure it is tied to the organizational objectives.
• A standardized and widely used measure of job satisfaction is the JDI survey, or the Job Descriptive Index. While JDI was initially developed in 1969 at Bowling Green State University, it has gone through extensive revisions, the most recent one in 2009. JDI looks at five aspects of job satisfaction, including present job, present pay, opportunities for promotion, supervision, and coworkers1.
• A retention plan normally consists of survey and exit interview analysis, any current plans and strengths and weaknesses of those plans, the goal of the retention plan, and finally, the specific strategies to be implemented.
• There are many motivation theories that attempt to explain people’s motivation or lack of motivation at work.
• The Hawthorne studies were a series of studies beginning in 1927 that initially looked at physical environments but found that people tended to be more motivated when they felt cared about. The implications to retention are clear, in that employees should feel cared about and developed within the organization.
• Maslow’s theory on motivation says that if someone already has a need met, giving them something to meet more of that need will no longer motivate. Maslow divided the needs into physiological, safety, social, esteem, and self-actualization needs. Many companies only motivate based on the low-level needs, such as pay. Development of training opportunities, for example, can motivate employees on high-level self-actualization needs.
• Herzberg developed motivational theories based on actual motivation factors and hygiene factors. Hygiene factors are those things that are expected in the workplace and will demotivate employees when absent but will not actually motivate when present. If managers try to motivate only on the basis of hygiene factors, turnover can be high. Motivation on both of his factors is key to a good retention plan.
• McGregor’s theory on motivation looked at managers’ attitudes toward employees. He found that theory X managers had more of a negative view of employees, while theory Y managers had a more positive view. Providing training to the managers in our organization can be a key retention strategy based on McGregor’s theory.
• The carrot-and-stick approach means you can get someone to do something by prodding or by offering some incentive to motivate them to do the work. This theory implies these are the only two methods to motivate, which of course, we know isn’t true. The implication of this in our retention plan is such that we must utilize a variety of methods to retain employees.
Exercises
1. What types of things will motivate you in your career? Name at least five things. Where would these fit on Maslow’s hierarchy of needs and Herzberg’s two-factor theory?
2. How can you apply each of these motivation techniques to motivation theories?
1. Training
2. Employee recognition programs
3. Bonuses
4. Management training for your current managers
5. Profit sharing
1“Job Descriptive Index,” JDI Research Group, Bowling Green State University, accessed July 29, 2011, www.bgsu.edu/departments/psych/io/jdi/page54706.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/07%3A_Retention_and_Motivation/7.03%3A_Retention_Plans.txt |
Learning Objectives
1. Explain the strategies and considerations in development of a retention plan.
As we have addressed so far in this chapter, retention and reduction of turnover is paramount to a healthy organization. Performing research, such as calculating turnover rates, doing exit interviews, and surveying employees’ satisfaction, are the first steps. Once this is done, understanding motivational theories and the application of them in the retention plan can help reduce turnover. Next, we can apply specific retention strategies to include in our plans, while keeping our budget in mind. Some of the retention strategies discussed have already or will be discussed in their own chapters, but they are certainly worth a mention here as part of the overall plan.
Salaries and Benefits
As we know from Chapter 6 “Compensation and Benefits”, a comprehensive compensation plan that includes not only pay but things such as health benefits and paid time off (PTO) is the first retention strategy that should be addressed. The compensation plan should not only help in recruitment of the right people but also help retain employees. Utilizing a pay banding system, in which the levels of compensation for jobs are clearly defined, is one way to ensure fairness exists within internal pay structures.
As we know from this chapter, compensation is not everything. An employee can be well paid and have great benefits but still not be satisfied with the organization. Some of the considerations surrounding pay as a way to retain employees include the following:
1. Instituting a standard process. Many organizations do not have set pay plans, which can result in unfairness when onboarding (the process of bringing someone “on board” with the company, including discussion and negotiation of compensation) or offering pay increases. Make sure the process for receiving pay raises is fair and defensible, so as not to appear to be discriminatory. This can be addressed in both your compensation planning process as well as your retention plan.
2. A pay communication strategy. Employees deserve to know how their pay rates are being determined. Transparency in the process of how raises are given and then communicating the process can help in your retention planning process1.
3. Paid time off. Is your organization offering competitive PTO? Consider implementing a PTO system that is based on the amount of hours an employee works. For example, rather than developing a policy based on hours worked for the company, consider revising the policy so that for every X number of hours worked, PTO is earned. This can create fairness for the salaried employee, especially for those employees who may work more than the required forty hours.
Please refer to Chapter 6 “Compensation and Benefits” for more information on pay and benefits, and analyze how your compensation plans could be negatively affecting your retention.
Training and Development
To meet our higher level needs, humans need to experience self-growth. HR professionals and managers can help this process by offering training programs within the organization and paying for employees to attend career skill seminars and programs. In addition, many companies offer tuition reimbursement programs to help the employee earn a degree. Dick’s Drive-In, a local fast food restaurant in Seattle, Washington, offers \$18,000 in scholarships over four years to employees working twenty hours per week. There is a six-month waiting period, and the employee must continue to work twenty hours per week. In a high turnover industry, Dick’s Drive-In boasts one of the highest retention rates around.
How Would You Handle This?
You work for a small organization in the HR department. One of your web developers schedules a meeting with you, and during the meeting she says that she doesn’t see any career growth for her in the organization. As a result, she confides that she is planning to leave the organization as soon as she can find another job. She is one of the best developers you have and you would hate to lose her.
Performance Appraisals
Chapter 11 “Employee Assessment”, addresses performance appraisals. The performance appraisal is a formalized process to assess how well an employee does his or her job. The effectiveness of this process can contribute to employee retention, in that employees can gain constructive feedback on their job performance, and it can be an opportunity for the manager to work with the employee to set goals within the organization. This process can help ensure the employee’s upper level self-actualization needs are met, but it also can address some of the motivational factors discussed by Herzberg, such as achievement, recognition, and responsibility.
Human Resource Recall
How important is PTO to you? How do you think the amount of PTO would affect your likelihood to accept one job over another?
Succession Planning
Succession planning is a process of identifying and developing internal people who have the potential for filling positions. As we know, many people leave organizations because they do not see career growth or potential. One way we can combat this in our retention plan is to make sure we have a clear succession planning process that is communicated to employees. Succession planning is sometimes called the talent bench, because successful companies always have talented people “on the bench” or ready to do the job should a key position become vacant. The goals of most succession plans include the following (Rothwell & Kazanas, 1999):
• Identify high-potential employees capable of advancing to positions of higher responsibility.
• Ensure the development of these individuals to help them be “ready” to earn a promotion into a new position.
• Ensure diversity in the talent bench by creating a formal succession planning process.
Succession planning must be just that: planned. This allows clear communication to the employees on how they can further develop within the organization, and it helps them see what skills they should master before that time comes. Chapter 8 “Training and Development” will provide more information on how to develop and implement a succession plan.
Examples of Retention Strategies at Michels Corporation
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This video addresses some “real world” retention strategies used at Michels Corporation, a utility contractor services company.
Flextime, Telecommuting, and Sabbaticals
According to a Salary.com survey, the ability to work from home and flexible work schedules are benefits that would entice an employee to stay in their job2. The ability to implement this type of retention strategy might be difficult, depending on the type of business. For example, a retailer may not be able to implement this, since the sales associate must be in the store to assist customers. However, for many professions, it is a viable option, worth including in the retention plan and part of work-life balance, which we will discuss in Section 7.3.10 “Work-Life Balance”.
Some companies, such as Recreational Equipment Incorporated, based in Seattle, offer twelve weeks of unpaid leave per year (beyond the twelve weeks required under the Family and Medical Leave Act) for the employee to pursue volunteering or traveling opportunities. In addition, with fifteen years of service with the company, paid sabbaticals are offered, which include four weeks plus already earned vacation time.
Management Training
As we discuss in Section 7.1.1 “Reasons for Voluntary Turnover”, a manager can affect an employee’s willingness to stay on the job. In a recent Gallup poll of one million workers, a poor supervisor or manager is the number one reason why people leave their jobs3. Managers who bully, use the theory X approach, communicate poorly, or are incompetent may find it difficult to motivate employees to stay within the organization. While in HR we cannot control a manager’s behavior, we can provide training to create better management. Training of managers to be better communicators and motivators is a way to handle this retention issue. We will discuss training further in Chapter 8 “Training and Development”.
Conflict Management and Fairness
Perceptions on fairness and how organizations handle conflict can be a contributing factor to retention. Outcome fairness refers to the judgment that people make with respect to the outcomes they receive versus the outcomes received by others with whom they associate with. When people are deciding if something is fair, they will likely look at procedural justice, or the process used to determine the outcomes received. There are six main areas employees will use to determine the outcome fairness of a conflict:
1. Consistency. The employee will determine if the procedures are applied consistently to other persons and throughout periods of time.
2. Bias suppression. The employee perceives the person making the decision does not have bias or vested interest in the outcome.
3. Information accuracy. The decision made is based on correct information.
4. Correctability. The decision is able to be appealed and mistakes in the decision process can be corrected.
5. Representativeness. The employee feels the concerns of all stakeholders involved have been taken into account.
6. Ethicality. The decision is in line with moral societal standards.
For example, let’s suppose JoAnn just received a bonus and recognition at the company party for her contributions to an important company project. Another employee, Sam, might compare his inputs and outputs and determine it was unfair that JoAnn was recognized because he had worked on bigger projects and not received the same recognition or bonus. When we look at how our retention strategies are developed, we want to be sure they can apply to everyone in the organization; otherwise it may cause retention problems. Some of the procedures questioned could include the following:
• How time off is requested
• How assignments of the “best” projects are given
• Division of work
• Promotion processes
• Pay processes
While some of these policies may seem minor, they can make a big difference in retention. Besides development of fair policies, we should be sure that the policies are clearly communicated and any processes are communicated as well. These types of policies should be revisited yearly and addressed in the retention plan if it appears they are causing employee dissatisfaction.
In addition to a sense of fairness within the organization, there should be a specific way (process) of managing conflict. If the organization is unionized, it is likely a grievance process is already in place to handle many types of conflicts. We will discuss this process in greater detail in Chapter 12 “Working with Labor Unions”. There are four basic steps to handle conflict. First, the individuals in conflict should try to handle the conflict by discussing the problem with one another. If this doesn’t work, a panel of representatives from the organization should hear both sides of the dispute and make a recommendation. If this doesn’t work, the organization may want to consider mediation and, in extreme cases, arbitration. In mediation, a neutral third party from outside the organization hears both sides of a dispute and tries to get the parties to come to a resolution, while in arbitration, an outside person hears both sides and makes a specific decision about how things should proceed.
Fortune 500 Focus
With over nineteen thousand employees in sixty countries, Google has seen its share of retention problems4. In late 2010, Googlers left the organization en masse to work for Facebook or Twitter (Popper, 2010). Many who left were looking for pre–initial public offering (IPO) organizations to work with, something that Google couldn’t compete with, since it went IPO in April 2004. As a result of the high turnover, Google put its mathematical algorithms to work to determine which employees were most likely to leave, allowing HR to determine what departments to focus on in their retention plans. In 2011, Google gave every employee a 10 percent pay raise, and it continues to offer a variety of new and old perks, such as free food in any of its cafeterias, 20 percent of time to work on personal projects, and \$175 peer spot bonuses. Google also offers free laundry services, climbing walls, tuition reimbursement, child-care centers, financial planning classes, and matching funds (up to \$3,000 per employee) to nonprofit organizations. For all this, Google ranked number four on Fortune magazine’s list of 100 best companies to work for in 20115. Some say it isn’t the perks, high pay, or bonuses but the company culture that Google creates. A weekly all-hands meeting with the founders, where people are encouraged to ask the founders questions, and a team focus meeting where everyone shares ideas are examples of the company culture Google creates. Google exemplifies the importance of culture in retention of employees.
Job Design, Job Enlargement, and Empowerment
As we have discussed previously, one of the reasons for job dissatisfaction is the job itself. Ensuring we are appropriately matching skills with the job when we do our initial hiring is important. Revisiting the recruitment plan and selection process should be a consideration.
Job enrichment means to enhance a job by adding more meaningful tasks to make the employee’s work more rewarding. For example, if a retail salesperson is good at creating eye-catching displays, allow him or her to practice this skill and assign tasks revolving around this. Job enrichment can fulfill the higher level of human needs while creating job satisfaction at the same time. In fact, research in this area by Richard Hackman and Greg Oldham (Ford, 1969; Paul, et. al., 1969) found that employees need the following to achieve job satisfaction:
• Skill variety, or many different activities as part of the job
• Task identity, or being able to complete one task from beginning to end
• Task significance, or the degree to which the job has impact on others, internally or externally
• Autonomy, or freedom to make decisions within the job
• Feedback, or clear information about performance
In addition, job enlargement, defined as the adding of new challenges or responsibilities to a current job, can create job satisfaction. Assigning employees to a special project or task is an example of job enlargement. Be cautioned, though, that some employees may resent additional work, and job enlargement could actually be a demotivator. Otherwise, knowing the employee and his or her goals and adding work that can be an end to these goals is the best way to achieve retention through job enlargement.
Employee empowerment involves employees in their work by allowing them to make decisions and act upon those decisions, with the support of the organization. Employees who are not micromanaged and who have the power to determine the sequence of their own work day, for example, tend to be more satisfied than those who are not empowered. Empowerment can include the following:
• Encourage innovation or new ways of doing things.
• Make sure employees have the information they need to do their jobs; for example, they are not dependent on managers for information in decision making.
• Use management styles that allow for participation, feedback, and ideas from employees.
Pay-for-Performance Strategies
In Chapter 6 “Compensation and Benefits”, we discussed several pay-for-performance strategies we can implement to motivate our employees. A pay-for-performance strategy means that employees are rewarded for meeting preset objectives within the organization. For example, in a merit-based pay system, the employee is rewarded for meeting or exceeding performance during a given time period. Rather than a set pay increase every year, the increase is based on performance. Some organizations offer bonuses to employees for meeting objectives, while some organizations offer team incentive pay if a team achieves a specific, predetermined outcome. For example, each player on the winning team of the 2010 NFL Super Bowl earned a team bonus of \$83,000 (Rovell, 2011), while the losing team of the Super Bowl took home \$42,000. Players also earn money for each wild card game and payoff game. Some organizations also offer profit sharing, which is tied to a company’s overall performance. Gain sharing, different from profit sharing, focuses on improvement of productivity within the organization. For example, the city of Loveland in Colorado implemented a gain-sharing program that defined three criteria that needed to be met for employees to be given extra compensation. The city revenues had to exceed expenses, expenses had to be equal to or less than the previous year’s expenses, and a citizen satisfaction survey had to meet minimum requirements.
To make sure a pay-for-performance system works, the organization needs to ensure the following:
• Standards are specific and measureable.
• The system is applied fairly to all employees.
• The system is communicated clearly to employees.
• The best work from everyone in the organization is encouraged.
• Rewards are given to performers versus nonperformers.
• The system is updated as the business climate changes.
• There are substantial rewards for high performers.
As we have already addressed, pay isn’t everything, but it certainly can be an important part of the employee retention plan and strategy.
Pay for Performance: Teachers
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This video shows an example of a new pay-for-performance plan for teachers in South Carolina.
Work-Life Balance
Work-life balance discussions originated during the 1960s and 1970s and pertained mostly to working mothers’ meeting the demands of family and work. During the 1980s, the realization that meeting a work-life balance is important (for all, not just working mothers) resulted in companies such as IBM implementing flextime and home-based work solutions. The growing awareness of the work-life balance problem continued into the 1990s, when policies were developed and implemented but not acted upon by managers and employees, according to Jim Bird in Employment Relations Today (Bird, 2006). Today, work-life balance is considered an important topic, so much so that the World at Work Society offers special certifications in this area. The World at Work certification programs focus on creation of successful programs to attract, retain, and motivate employees.
Karol Rose, author of Work Life Effectiveness (Rose, 2006), says that most companies look at a systems approach of work-life balance, instead of a systems and individual approach. The systems approach to work-life balance includes policies and procedures that allow people flexibility, such as telecommuting and flextime options.
According to Rose, looking at the individual differences is equally as important as the systems approach. Brad Harrington, the director of Boston College’s Center for Work and Family, stresses this issue: “Work-life balance comes down, not to an organizational strategy, but to an individual strategy.” For example, a single parent has a different work-life balance need than someone without children. In other words, as HR professionals, we can create work-life balance systems, but we should also look at individual approaches. For example, at Recreational Equipment Incorporated (REI)6, they use the systems approach perspective and offer paid time off and sabbaticals, but their employee assistance program also offers access to services, referrals, and free consulting for the individual to find his or her perfect work-life balance. For this, REI receives a number nine ranking on Fortune’s list of best companies to work for in the area of work-life balance.
The company culture can contribute greatly to work-life balance. Some organizations have a culture of flexibility that fares well for workers who do not want to feel tethered to an office, while some workers prefer to be in the office where more informal socializing can occur. While some companies promote work-life balance on paper, upper management needs to let employees know it is OK to take advantage of the alternatives to create a positive work-life balance. For example, companies place different levels of value on work-life options such as telecommuting. An organization may have a telecommuting option, but the employees must feel it is OK to use these options. Even in a company that has work-life balance systems, a manager who sends e-mails at 10 p.m. on Saturday night could be sending the wrong message to employees about the expectations, creating an environment in which work-life balance is not practiced in reality. O’Neill, a surf gear company in California, sends a strong message to its employees by offering half-day Fridays during the summer7, so employees can get a head start on the weekend.
Jim Bird, in his work-life balance article in Employment Relations Today, suggests implementing a work-life balance training program that is dual purpose (can serve both personal interests and professional development). In other words, implement trainings in which the employee can develop both personal skills and interests that can translate into higher productivity at work.
Besides the training program, Bird suggests creating a monthly work-life newsletter as an educational tool to show the company’s commitment to work-life balance. The newsletter can include interviews from respected employees and tips on how to create a work-life balance.
Finally, training managers on the importance of work-life balance and how to create a culture that embraces this is a key way to use work-life balance as a retention strategy.
Other Retention Strategies
According to Fortune’s “100 Best Companies to Work For,”5 retention strategies that are more unusual might be part of your retention plan. Some strategies from the list might include the following:
• On-site daycare or daycare assistance
• Gym memberships or on-site gyms
• Concierge service to assist in party planning or dog grooming, for example
• On-site dry cleaning drop-off and pickup
• Car care, such as oil changes, on-site once a week
• On-site doggie daycare
• On-site yoga or other fitness classes
• “Summer Fridays,” when all employees work half days on Fridays during the summer
• Various support groups for cancer survivors, weight loss, or support in caring for aging parents
• Allowance for fertility treatment benefits
• On-site life coaches
• Peer-to-peer employee recognition programs
• Management recognition programs
While some of these options may not work in your organization, we must remember to be creative when our goal is to retain our best employees and reduce turnover in our organizations. The bottom line is to create a plan and make sure the plan is communicated to all employees.
Key Takeaways
• Once you determine the employee’s level of satisfaction through exit interviews and surveys and understand motivational theories, you can begin to develop specific retention strategies.
• Of course, salary and benefits are a major component of retention strategies. Consistent pay systems and transparent processes as to how raises occur must be included in a retention plan (and compensation strategy).
• Training and development meets the higher level needs of the individual. Many companies offer paid tuition programs, reimbursement programs, and in-house training to increase the skills and knowledge of the employee.
• Performance appraisals provide an avenue for feedback and goal setting. They also allow for employees to be recognized for their contributions.
• Succession plans allow employees to see how they can continue their career with the organization, and they clearly detail what employees need to do to achieve career growth, without leaving your organization.
• Flextime and telecommuting options are worth considering as an addition to your retention plan. These types of plans allow the employee flexibility when developing his or her schedule and some control of his or her work. Some companies also offer paid or unpaid sabbaticals after a certain number of years with the company to pursue personal interests.
• Since one of the reasons people are dissatisfied at their job is because of the relationship with their manager, providing in-house training to all management team members to help them become better communicators and better managers can trickle down to the employee level, creating better relationships and resulting in better retention and less turnover.
• Reviewing company policies to ensure they are fair can contribute to better retention. For example, how projects are assigned or the process for requesting vacation time can contribute to dissatisfaction if the employee feels the processes are not fair.
• Review the job design to ensure the employee is experiencing growth within their job. Changing the job through empowerment or job enlargement to help the growth of the employee can create better retention.
• Other, more unique ways of retaining employees might include offering services to make the employee’s life easier, such as dry cleaning, daycare services, or on-site yoga classes.
Exercise
1. Research two different companies you might be interested in working for. When reviewing their list of benefits, which ones are offered that might motivate someone to stay with the organization?
1“The Knowledge of Pay Study,” WorldatWork and The LeBlanc Group LLC, 2010, accessed February 26, 2011, www.worldatwork.org/waw/Content/research/html/research-home.jsp.
2“Employee Job Satisfaction and Retention Survey, 2007/2008,” Salary.com, 2008, accessed February 26, 2011, www.salary.com/docs/resources/JobSatSurvey_08.pdf.
3“No. 1 Reason People Quit Their jobs,” AOL News, Netscape, n.d., accessed July 28, 2011, webcenters.netscape.compuserve.com/whatsnew/package.jsp?name=fte/quitjobs/quitjobs&floc=wn-dx.
4“Our Philosophy,” Google, n.d., accessed July 28, 2011, www.google.com/about/corporate/company/tenthings.html.
5“100 Best Companies to Work For,” CNN Money, 2011, accessed July 28, 2011, http://money.cnn.com/magazines/fortune/bestcompanies/2011/snapshots/4.html.
6“Pay and Benefits: Total Rewards at REI,” Recreational Equipment Incorporated, n.d., accessed July 29, 2011, www.rei.com/jobs/pay.html.
7“Vans, Quiksilver, and California Top Skate Companies Offer Dream Careers to FIDM’s Graphic Design School Grads,” Fashion News, June 4, 2011, accessed July 29, 2011, www.fashionnews.com/2011/06/04/vans-quiksilver-californias-top-skate-companies-offer-dream-careers-to-fidms-graphic -design-school-grads. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/07%3A_Retention_and_Motivation/7.04%3A_Implementing_Retention_Strategies.txt |
Chapter Summary
• Retaining employees is an important component to a healthy organization. Losing an employee is called turnover.
• Direct turnover costs and indirect turnover costs can include the costs associated with employee replacement, declining employee morale, or lost customers.
• A high-performance work system (HPWS) is a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization. The overall company strategy should impact the HPWS HR develops in regard to retention.
• Retention plans are developed to address employee turnover, resulting in a more effective organization.
• Some of the reasons why employees leave can include a poor match between job and skills, no growth potential, pay inequity among employees, the fairness and communication style of management, and heavy workloads.
• The first step in developing a retention plan is to use exit interviews and/or surveys to find out the satisfaction level of employees. Once you have the data, you can begin to write the plan, making sure it is tied to the organizational objectives.
• A retention plan normally consists of survey and exit interview analysis, any current plans and strengths and weaknesses of those plans, the goal of the retention plan, and the specific strategies to be implemented.
• There are many motivation theories that attempt to explain people’s motivation or lack of motivation at work.
• The Hawthorne studies were a series of studies beginning in 1927 that initially looked at physical environments but found that people tended to be more motivated when they felt cared about. The implications to retention are clear, in that employees should feel cared about and developed within the organization.
• Maslow’s theory on motivation says that if someone already has a need met, giving them something to meet more of that need will no longer motivate. Maslow divided the needs into physiological, safety, social, esteem, and self-actualization needs. Many companies only motivate based on the low-level needs, such as pay. Development of training opportunities, for example, can motivate employees on high-level self-actualization needs.
• Herzberg developed motivational theories based on actual motivation factors and hygiene factors. Hygiene factors are those things that are expected in the workplace and will demotivate employees when absent but will not actually motivate when present. If managers try to motivate only on the basis of hygiene factors, turnover can be high. Motivation on both factors is key to a good retention plan.
• McGregor’s theory on motivation looked at managers’ attitudes toward employees. He found that theory X managers had more of a negative view of employees, while theory Y managers had a more positive view. Providing training to the managers in our organization can be a key retention strategy, based on McGregor’s theory.
• The carrot-and-stick approach means you can get someone to do something by prodding or offering some incentive to motivate them to do the work. This theory implies these are the only two methods to motivate, which we know isn’t true. The implication of this in our retention plan is such that we must utilize a variety of methods to retain employees.
• Once you determine the employee’s level of satisfaction through exit interviews and surveys and understand motivational theories, you can develop specific retention strategies.
• Of course, salary and benefits are a major component of retention strategies. Consistent pay systems and transparent processes as to how raises occur must be included in a retention plan (and compensation strategy).
• Training and development meets the higher level needs of the individual. Many companies offer paid tuition programs, reimbursement programs, and in-house training to increase the skills and knowledge of the employee.
• Performance appraisals provide an avenue for feedback and goal setting. They also allow for employees to be recognized for their contributions.
• Succession plans allow employees to see how they can continue their career with the organization, and they clearly detail what employees need to do to achieve career growth-without leaving your organization.
• Flextime and telecommuting options are worth considering as an addition to your retention plan. These types of plans allow the employee flexibility when developing his or her schedule and some control of his or her work. Some companies also offer paid or unpaid sabbaticals after a certain number of years with the company to pursue personal interests.
• Since one of the reasons people are dissatisfied at their job is because of the relationship with their manager, providing in-house training to all management team members to help them become better communicators and better managers can trickle down to the employee level, creating better relationships and resulting in better retention and less turnover.
• Reviewing company policies to ensure they are fair can contribute to better retention. For example, how projects are assigned or the process for requesting vacation time can contribute to dissatisfaction if the employee feels the processes are not fair.
• Review the job design to ensure the employee is experiencing growth within their job. Changing the job through empowerment or job enlargement to help the growth of the employee can create better retention.
• Other, more unique ways of retaining employees might include offering services to make the employee’s life easier, such as dry cleaning, daycare services, or on-site yoga classes.
Chapter Case
Turnover Analysis
You recently completed your company’s new compensation plan. You are happy with the results but know there is more to retaining the employees than just pay, and you don’t currently have a retention plan. Your organization is a large staffing firm, consisting of several offices on the West Coast. The majority of employees are staffing recruiters, and they fill full-time and temporary positions for a variety of clients. One of the challenges you face is a difference in geographical areas, and as a result, there are differences in what may motivate employees.
As you initially look at turnover numbers, you have the sense that turnover has increased over the last six months. Your initial thoughts are the need for a better retention strategy, utilizing a bonus structure as well as other methods of retention. Currently, your organization pays a straight salary to employees, does not offer flextime or telecommuting options, focuses on individual performance (number of staffing placements) rather than team performance, and provides five days of vacation for every two years with the organization.
Month Separated Employees Total Number of Employees Midmonth
March 12 552
April 14 541
May 16 539
June 20 548
July 22 545
1. Calculate monthly turnover for the past six months.
2. What are the possible reasons for turnover in your organization and other organizations?
3. What steps would you take to remedy the situation?
Team Activity
1. Following is a list of some possible retention strategies. Rank each one in order of importance to you as an employee (1 being the most important), then share your rankings with classmates:
1. Salary
2. Opportunity for bonuses, profit sharing
3. Benefits
4. Opportunity to grow professionally with the organization
5. Team bonuses
6. More paid time off
7. Option to telecommute
8. Flextime scheduling
9. Sense of empowerment
10. Tuition reimbursement
11. Job satisfaction | textbooks/biz/Management/Beginning_Management_of_Human_Resources/07%3A_Retention_and_Motivation/7.05%3A_Cases_and_Problems.txt |
Training: Not Like It Used to Be
Imagine this: You have a pile of work on your desk and as you get started, your Outlook calendar reminds you about a sexual harassment training in ten minutes. You groan to yourself, not looking forward to sitting in a conference room and seeing PowerPoint slide after PowerPoint slide. As you walk to the conference room, you run into a colleague who is taking the same training that day and commiserate on how boring this training is probably going to be. When you step into the conference room, however, you see something very different.
Computers are set up at every chair with a video ready to start on the computer. The HR manager greets you and asks you to take a seat. When the training starts, you are introduced (via video) on each of the computers to a series of sexual harassment example scenarios. The videos stop, and there is a recorded discussion about what the videos portrayed. Your colleagues in the Washington, DC, office are able to see the same training and, via video conferencing, are able to participate in the discussions. It is highly interactive and interesting. Once the training is finished, there are assignments to be completed via specific channels that have been set up for this training. You communicate about the material and complete the assignments in teams with members of your Washington, DC, office. If you want to review the material, you simply click on a review and the entire session or parts of the training can be reviewed. In fact, on your bus ride home from work, you access the channels on your iPhone, chatting with a colleague in your other office about the sexual harassment training assignment you have due next week. You receive an e-mail from your HR manager asking you to complete a training assessment located in a specific channel in the software, and you happily comply because you have an entirely new perspective on what training can be.
This is the training of today. No longer do people sit in hot, stuffy rooms to get training on boring content. Training has become highly interactive, technical, and interesting owing to the amount of multimedia we can use. Sun Microsystems, for example, has developed just the kind of software mentioned above, called Social Learning eXchange (SLX). This type of training allows people across the country to connect with each other, saving both money and time. In fact, Sun Microsystems received a Best Practices Award from Training Magazine for this innovative software in 20101. The SLX software allows training to be delivered in an interactive manner in multiple locations. The implications of this type of software are numerous. For example, SLX is used at Sun Professional Services division by delivering instructional videos on tools and software, which employees can view at their own pace2. There is also a channel in the software that allows the vice president to communicate with employees on a regular basis to improve employee communications. In another example, this software can be used to quickly communicate product changes to the sales team, who then begin the process of positioning their products to consumers. Training videos, including breakout sessions, can save companies money by not requiring travel to a session. These can even be accessed using application technology on cell phones. Employees can obtain the training they need in the comfort of their own city, office, or home. Someone is sick the day the training is delivered? No problem; they can review the recorded training sessions.
An estimated \$1,400 per employee is spent on training annually, with training costs consuming 2.72 percent of the total payroll budget3 for the average company. With such a large amount of funds at stake, HR managers must develop the right training programs to meet the needs; otherwise, these funds are virtually wasted. This chapter is all about how to assess, develop, implement, and measure an effective training program.
1“2010 Top 25 Winners,” Training Magazine, accessed July 25, 2010, www.trainingmag.com/article/2010-top-125-winners.
2“Video Community for the Enterprise,” Social Learning eXchange, accessed July 25, 2010, http://www.slideshare.net/sociallearningexchange/social-learning-exchange-slx?from=share_email.
3See the American Society for Training and Development Trend Review, ASTD Website, accessed July 25, 2010, http://www.astd.org/. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.01%3A_Introduction.txt |
Learning Objectives
1. Explain the four steps involved when training an employee.
Any effective company has training in place to make sure employees can perform his or her job. During the recruitment and selection process, the right person should be hired to begin with. But even the right person may need training in how your company does things. Lack of training can result in lost productivity, lost customers, and poor relationships between employees and managers. It can also result in dissatisfaction, which means retention problems and high turnover. All these end up being direct costs to the organization. In fact, a study performed by the American Society for Training and Development (ASTD) found that 41 percent of employees at companies with poor training planned to leave within the year, but in companies with excellent training, only 12 percent planned to leave (Branham, 2005). To reduce some costs associated with not training or undertraining, development of training programs can help with some of the risk. This is what this chapter will address.
For effective employee training, there are four steps that generally occur. First, the new employee goes through an orientation, and then he or she will receive in-house training on job-specific areas. Next, the employee should be assigned a mentor, and then, as comfort with the job duties grows, he or she may engage in external training. Employee training and development is the process of helping employees develop their personal and organization skills, knowledge, and abilities.
Employee Orientation
The first step in training is an employee orientation. Employee orientation is the process used for welcoming a new employee into the organization. The importance of employee orientation is two-fold. First, the goal is for employees to gain an understanding of the company policies and learn how their specific job fits into the big picture. Employee orientation usually involves filling out employee paperwork such as I-9 and 401(k) program forms.
The goals of an orientation are as follows:
1. To reduce start-up costs. If an orientation is done right, it can help get the employee up to speed on various policies and procedures, so the employee can start working right away. It can also be a way to ensure all hiring paperwork is filled out correctly, so the employee is paid on time.
2. To reduce anxiety. Starting a new job can be stressful. One goal of an orientation is to reduce the stress and anxiety people feel when going into an unknown situation.
3. To reduce employee turnover. Employee turnover tends to be higher when employees don’t feel valued or are not given the tools to perform. An employee orientation can show that the organization values the employee and provides tools necessary for a successful entry.
4. To save time for the supervisor and coworkers. A well-done orientation makes for a better prepared employee, which means less time having to teach the employee.
5. To set expectations and attitudes. If employees know from the start what the expectations are, they tend to perform better. Likewise, if employees learn the values and attitudes of the organization from the beginning, there is a higher chance of a successful tenure at the company.
Some companies use employee orientation as a way to introduce employees not only to the company policies and procedures but also to the staff. For an example of an orientation schedule for the day, see Figure \(1\)
Human Resource Recall
Have you ever participated in an orientation? What was it like? What components did it have?
In-House Training
In-house training programs are learning opportunities developed by the organization in which they are used. This is usually the second step in the training process and often is ongoing. In-house training programs can be training related to a specific job, such as how to use a particular kind of software. In a manufacturing setting, in-house training might include an employee learning how to use a particular kind of machinery.
Many companies provide in-house training on various HR topics as well, meaning it doesn’t always have to relate to a specific job. Some examples of in-house training include the following:
• Ethics training
• Sexual harassment training
• Multicultural training
• Communication training
• Management training
• Customer service training
• Operation of special equipment
• Training to do the job itself
• Basic skills training
As you can tell by the list of topics, HR might sometimes create and deliver this training, but often a supervisor or manager delivers the training.
Mentoring
After the employee has completed orientation and in-house training, companies see the value in offering mentoring opportunities as the next step in training. Sometimes a mentor may be assigned during in-house training. A mentor is a trusted, experienced advisor who has direct investment in the development of an employee. A mentor may be a supervisor, but often a mentor is a colleague who has the experience and personality to help guide someone through processes. While mentoring may occur informally, a mentorship program can help ensure the new employee not only feels welcomed but is paired up with someone who already knows the ropes and can help guide the new employee through any on-the-job challenges.
To work effectively, a mentoring program should become part of the company culture; in other words, new mentors should receive in-house training to be a mentor. Mentors are selected based on experience, willingness, and personality. IBM’s Integrated Supply Chain Division, for example, has successfully implemented a mentorship program. The company’s division boasts 19,000 employees and half of IBM’s revenues, making management of a mentorship program challenging. However, potential mentors are trained and put into a database where new employees can search attributes and strengths of mentors and choose the person who closely meets their needs. Then the mentor and mentee work together in development of the new employee. “We view this as a best practice,” says Patricia Lewis-Burton, vice president of human resources, Integrated Supply Chain Division. “We view it as something that is not left to human resources alone. In fact, the program is imbedded in the way our group does business” (Witt, 2005).
Some companies use short-term mentorship programs because they find employees training other employees to be valuable for all involved. Starbucks, for example, utilizes this approach. When it opens a new store in a new market, a team of experienced store managers and baristas are sent from existing stores to the new stores to lead the store-opening efforts, including training of new employees.
External Training
External training includes any type of training that is not performed in-house. This is usually the last step in training, and it can be ongoing. It can include sending an employee to a seminar to help further develop leadership skills or helping pay tuition for an employee who wants to take a marketing class. To be a Ford automotive technician, for example, you must attend the Ford ASSET Program, which is a partnership between Ford Motor Company, Ford dealers, and select technical schools1.
How Would You Handle This?
To Train or Not to Train
Towanda Michaels is the human resource manager at a medium-size pet supply wholesaler. Casey Cleps is a salesperson at the organization and an invaluable member of the team. Last year, his sales brought in about 20 percent of the company revenue alone. Everybody likes Casey: he is friendly, competent, and professional.
Training is an important part of the company, and an e-mail was sent last month that said if employees do not complete the required safety training by July 1, they would be let go.
It is July 15, and it has just come to Towanda’s attention that Casey has not completed the online safety training that is required for his job. When she approaches him about it, he says, “I am the best salesperson here; I can’t waste time doing training. I already know all the safety rules anyway.”
Would you let Casey go, as stated in the e-mail? How would you handle this?
Key Takeaways
• Employee training and development is the framework for helping employees develop their personal and organizational skills, knowledge, and abilities. Training is important to employee retention.
• There are four steps in training that should occur. Employee orientation has the purpose of welcoming new employees into the organization. An effective employee orientation can help reduce start-up costs, reduce anxiety for the employee, reduce turnover, save time for the supervisor and colleagues, and set expectations and attitudes.
• An in-house training program is any type of program in which the training is delivered by someone who works for the company. This could include management or HR. Examples might include sexual harassment training or ethics training. In-house training can also include components specific to a job, such as how to use a specific kind of software. In-house training is normally done as a second and ongoing step in employee development.
• A mentor form of training pairs a new employee with a seasoned employee. This is usually the third step in employee training. A mentor program for training should include a formalized program and process.
• External training is any type of training not performed in-house; part of the last training step, external training can also be ongoing. It can include sending employees to conferences or seminars for leadership development or even paying tuition for a class they want to take.
Exercises
1. Why do you think some companies do not follow the four training steps? What are the advantages of doing so?
2. What qualities do you think a mentor should have? List at least five.
3. Have you ever worked with a mentor in a job, at school, or in extracurricular activities? Describe your experience.
1“Automotive Technology/Ford ASSET Course,” Sheridan Technical Center, accessed July 29, 2011, www.sheridantechnical.com/Default.aspx?tabid=692. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.02%3A_Steps_to_Take_in_Training_an_Employee.txt |
Learning Objectives
1. Be able to explain and give examples of the types of training that can be offered within an organization.
There are a number of different types of training we can use to engage an employee. These types are usually used in all steps in a training process (orientation, in-house, mentorship, and external training). The training utilized depends on the amount of resources available for training, the type of company, and the priority the company places on training. Companies such as The Cheesecake Factory, a family restaurant, make training a high priority. The company spends an average of \$2,000 per hourly employee. This includes everyone from the dishwasher and managers to the servers. For The Cheesecake Factory, this expenditure has paid off. They measure the effectiveness of its training by looking at turnover, which is 15 percent below the industry average (Ruiz, 2006). Servers make up 40 percent of the workforce and spend two weeks training to obtain certification. Thirty days later, they receive follow-up classes, and when the menu changes, they receive additional training (Ruiz, 2006). Let’s take a look at some of the training we can offer our employees.
As you will see from the types of training below, no one type would be enough for the jobs we do. Most HR managers use a variety of these types of training to develop a holistic employee.
Technical or Technology Training
Depending on the type of job, technical training will be required. Technical training is a type of training meant to teach the new employee the technological aspects of the job. In a retail environment, technical training might include teaching someone how to use the computer system to ring up customers. In a sales position, it might include showing someone how to use the customer relationship management (CRM) system to find new prospects. In a consulting business, technical training might be used so the consultant knows how to use the system to input the number of hours that should be charged to a client. In a restaurant, the server needs to be trained on how to use the system to process orders. Let’s assume your company has decided to switch to the newest version of Microsoft Office. This might require some technical training of the entire company to ensure everyone uses the technology effectively. Technical training is often performed in-house, but it can also be administered externally.
Quality Training
In a production-focused business, quality training is extremely important. Quality training refers to familiarizing employees with the means of preventing, detecting, and eliminating nonquality items, usually in an organization that produces a product. In a world where quality can set your business apart from competitors, this type of training provides employees with the knowledge to recognize products that are not up to quality standards and teaches them what to do in this scenario. Numerous organizations, such as the International Organization for Standardization (ISO), measure quality based on a number of metrics. This organization provides the stamp of quality approval for companies producing tangible products. ISO has developed quality standards for almost every field imaginable, not only considering product quality but also certifying companies in environmental management quality. ISO9000 is the set of standards for quality management, while ISO14000 is the set of standards for environmental management. ISO has developed 18,000 standards over the last 60 years1. With the increase in globalization, these international quality standards are more important than ever for business development. Some companies, like 3M (QAI, 2011), choose to offer ISO training as external online training, employing companies such as QAI to deliver the training both online and in classrooms to employees.
Training employees on quality standards, including ISO standards, can give them a competitive advantage. It can result in cost savings in production as well as provide an edge in marketing of the quality-controlled products. Some quality training can happen in-house, but organizations such as ISO also perform external training.
Skills Training
Skills training, the third type of training, includes proficiencies needed to actually perform the job. For example, an administrative assistant might be trained in how to answer the phone, while a salesperson at Best Buy might be trained in assessment of customer needs and on how to offer the customer information to make a buying decision. Think of skills training as the things you actually need to know to perform your job. A cashier needs to know not only the technology to ring someone up but what to do if something is priced wrong. Most of the time, skills training is given in-house and can include the use of a mentor. An example of a type of skills training is from AT&T and Apple (Whitney, 2011), who in summer 2011 asked their managers to accelerate retail employee training on the iPhone 5, which was released to market in the fall.
Continuing Education Matters
A small business owner explains the advantages of offering informal skills training about new products.
Soft Skills Training
Our fourth type of training is called soft skills training. Soft skills refer to personality traits, social graces, communication, and personal habits that are used to characterize relationships with other people. Soft skills might include how to answer the phone or how to be friendly and welcoming to customers. It could include sexual harassment training and ethics training. In some jobs, necessary soft skills might include how to motivate others, maintain small talk, and establish rapport.
In a retail or restaurant environment, soft skills are used in every interaction with customers and are a key component of the customer experience. In fact, according to a Computerworld magazine survey, executives say there is an increasing need for people who have not only the skills and technical skills to do a job but also the necessary soft skills, such as strong listening and communication abilities (Hoffman, 2007). Many problems in organizations are due to a lack of soft skills, or interpersonal skills, not by problems with the business itself. As a result, HR and managers should work together to strengthen these employee skills. Soft skills training can be administered either in-house or externally.
Professional Training and Legal Training
In some jobs, professional training must be done on an ongoing basis. Professional training is a type of training required to be up to date in one’s own professional field. For example, tax laws change often, and as a result, an accountant for H&R Block must receive yearly professional training on new tax codes (Silkey, 2010). Lawyers need professional training as laws change. A personal fitness trainer will undergo yearly certifications to stay up to date in new fitness and nutrition information.
Some organizations have paid a high cost for not properly training their employees on the laws relating to their industry. In 2011, Massachusetts General Hospital paid over \$1 million in fines related to privacy policies that were not followed (Donnelly, 2011). As a result, the organization has agreed to develop training for workers on medical privacy. The fines could have been prevented if the organization had provided the proper training to begin with. Other types of legal training might include sexual harassment law training and discrimination law training.
Team Training
Do you know the exercise in which a person is asked to close his or her eyes and fall back, and then supposedly the team members will catch that person? As a team-building exercise (and a scary one at that), this is an example of team training. The goal of team training is to develop cohesiveness among team members, allowing them to get to know each other and facilitate relationship building. We can define team training as a process that empowers teams to improve decision making, problem solving, and team-development skills to achieve business results. Often this type of training can occur after an organization has been restructured and new people are working together or perhaps after a merger or acquisition. Some reasons for team training include the following:
• Improving communication
• Making the workplace more enjoyable
• Motivating a team
• Getting to know each other
• Getting everyone “onto the same page,” including goal setting
• Teaching the team self-regulation strategies
• Helping participants to learn more about themselves (strengths and weaknesses)
• Identifying and utilizing the strengths of team members
• Improving team productivity
• Practicing effective collaboration with team members
Team training can be administered either in-house or externally. Ironically, through the use of technology, team training no longer requires people to even be in the same room.
Human Resource Recall
What kind of team training have you participated in? What was it like? Do you think it accomplished what it was supposed to accomplish?
Managerial Training
After someone has spent time with an organization, they might be identified as a candidate for promotion. When this occurs, managerial training would occur. Topics might include those from our soft skills section, such as how to motivate and delegate, while others may be technical in nature. For example, if management uses a particular computer system for scheduling, the manager candidate might be technically trained. Some managerial training might be performed in-house while other training, such as leadership skills, might be performed externally.
For example, Mastek, a global IT solutions and services provider, provides a program called “One Skill a Month,” which enables managers to learn skills such as delegation, coaching, and giving feedback. The average number of total training days at Mastek is 7.8 per employee2 and includes managerial topics and soft skills topics such as e-mail etiquette. The goal of its training programs is to increase productivity, one of the organization’s core values.
Safety Training
Safety training is a type of training that occurs to ensure employees are protected from injuries caused by work-related accidents. Safety training is especially important for organizations that use chemicals or other types of hazardous materials in their production. Safety training can also include evacuation plans, fire drills, and workplace violence procedures. Safety training can also include the following:
• Eye safety
• First aid
• Food service safety
• Hearing protection
• Asbestos
• Construction safety
• Hazmat safety
The Occupational Safety and Health Administration, or OSHA, is the main federal agency charged with enforcement of safety and health regulation in the United States. OSHA provides external training to companies on OSHA standards. Sometimes in-house training will also cover safety training.
Starbucks Training Video
This is a short video Starbucks uses to train new employees on customer service.
Key Takeaways
• There are several types of training we can provide for employees. In all situations, a variety of training types will be used, depending on the type of job.
• Technical training addresses software or other programs that employees use while working for the organization.
• Quality training is a type of training that familiarizes all employees with the means to produce a good-quality product. The ISO sets the standard on quality for most production and environmental situations. ISO training can be done in-house or externally.
• Skills training focuses on the skills that the employee actually needs to know to perform their job. A mentor can help with this kind of training.
• Soft skills are those that do not relate directly to our job but are important. Soft skills training may train someone on how to better communicate and negotiate or provide good customer service.
• Professional training is normally given externally and might be obtaining certification or specific information needed about a profession to perform a job. For example, tax accountants need to be up to date on tax laws; this type of training is often external.
• Team training is a process that empowers teams to improve decision making, problem solving, and team-development skills. Team training can help improve communication and result in more productive businesses.
• To get someone ready to take on a management role, managerial training might be given.
• Safety training is important to make sure an organization is meeting OSHA standards. Safety training can also include disaster planning.
Exercises
1. Which type of training do you think is most important for an administrative assistant? What about for a restaurant server? Explain your answer.
2. Research OSHA. What are some of the new standards and laws it has recently developed? Outline a training plan for the new standards.
1“The ISO Story,” International Organization for Standards, accessed July 26, 2010, www.iso.org/iso/about/the_iso_story/iso_story_early_years.htm.
2Mastek website, accessed July 30, 2011, http://www.mastek.com/careers/learning-development.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.03%3A_Types_of_Training.txt |
Learning Objectives
1. Explain the types of training delivery methods.
Depending on the type of training occurring, you may choose one delivery method over another. This section discusses the types of delivery methods we can use to execute the types of training. Keep in mind, however, that most good training programs will use a variety of delivery methods.
Wendy’s Grill Training, circa 1989
This excellent training video was used at Wendy’s to teach employees how to grill the perfect burger. Although the video is over twenty years old, the concepts used in it are still true today.
On-the-Job Coaching Training Delivery
On-the-job coaching is one way to facilitate employee skills training. On-the-job coaching refers to an approved person training an employee on the skills necessary to complete tasks. A manager or someone with experience shows the employee how to perform the actual job. The selection of an on-the-job coach can be done in a variety of ways, but usually the coach is selected based on personality, skills, and knowledge. This type of skills training is normally facilitated in-house. The disadvantage of this training revolves around the person delivering the training. If he or she is not a good communicator, the training may not work. Likewise, if this person has “other things to do,” he or she may not spend as much time required to train the person and provide guidance. In this situation, training can frustrate the new employee and may result in turnover.
Mentoring and Coaching Training Delivery
Mentoring is also a type of training delivery. A mentor is a trusted, experienced advisor who has direct investment in the development of an employee. Mentoring is a process by which an employee can be trained and developed by an experienced person. Normally, mentoring is used as a continuing method to train and develop an employee. One disadvantage of this type of training is possible communication style and personality conflict. It can also create overdependence in the mentee or micro-management by the mentor. This is more different than on-the-job coaching, which tends to be short term and focuses on the skills needed to perform a particular job.
Brown Bag Lunch Training Delivery
Brown bag lunches are a training delivery method meant to create an informal atmosphere. As the name suggests, brown bag lunch training is one in which the training occurs during lunchtime, employees bring their food, and someone presents training information to them. The trainer could be HR or management or even another employee showing a new technical skill. Brown bag lunches can also be an effective way to perform team training, as it brings people together in a more relaxed atmosphere. Some companies offer brown bag lunch training for personal development as well. For example, HR might want to bring in a specialist on 401(k) plans, or perhaps an employee provides a slide presentation on a trip he or she has taken, discussing the things learned on the trip. One disadvantage to this type of training can be low attendance and garnering enough interest from employees who may not want to “work” during lunch breaks. There can also be inconsistency in messages if training is delivered and not everyone is present to hear the message.
Human Resource Recall
What types of brown bag lunch training would employees be most willing to attend? Do you think this type of training should be required?
Web-Based Training Delivery
Web-based training delivery has a number of names. It could be called e-learning or Internet-based, computer-based, or technology-based learning. No matter what it is called, any web-based training involves the use of technology to facilitate training. There are two types of web-based learning. First, synchronous learning uses instructor-led facilitation. Asynchronous learning is self-directed, and there is no instructor facilitating the course. There are several advantages to web-based training. First, it is available on demand, does not require travel, and can be cost efficient. However, disadvantages might include an impersonal aspect to the training and limited bandwidth or technology capabilities1.
Web-based training delivery lends itself well to certain training topics. For example, this might be an appropriate delivery method for safety training, technical training, quality training, and professional training. However, for some training, such as soft-skills training, job skills training, managerial training, and team training, another more personalized method may be better for delivery. However, there are many different platforms that lend themselves to an interactive approach to training, such as Sun Microsystems’ Social Learning eXchange (SLX) training system, which has real-time video and recording capabilities. Hundreds of platforms are available to facilitate web-based training. DigitalChalk, for example, allows for both synchronous and asynchronous training and allows the instructor or human relations manager to track training progress and completion (DigitalChalk, 2010). Some companies use SharePoint, an intranet platform, to store training videos and materials (Microsoft SharePoint, 2010). Blackboard and Angel (used primarily by higher education institutions) allows human resource managers to create training modules, which can be moderated by a facilitator or managed in a self-paced format. In any of the platforms available, media such as video and podcasts can be included within the training.
Considerations for selecting a web-based platform include the following:
• Is there a one-time fee or a per-user fee?
• Do the majority of your employees use a Mac or a PC, and how does the platform work with both systems?
• Is there enough bandwidth in your organization to support this type of platform?
• Is the platform flexible enough to meet your training needs?
• Does the software allow for collaboration and multimedia?
• Is there training for the trainer in adoption of this system? Is technical support offered?
Job Shadowing Training Delivery
Job shadowing is a training delivery method that places an employee who already has the skills with another employee who wants to develop those skills. Apprenticeships use job shadowing as one type of training method. For example, an apprentice electrician would shadow and watch the journeyman electrician perform the skills and tasks and learn by watching. Eventually, the apprentice would be able to learn the skills to do the job alone. The downside to this type of training is the possibility that the person job shadowing may learn “bad habits” or shortcuts to performing tasks that may not be beneficial to the organization.
Fortune 500 Focus
It takes a lot of training for the Walt Disney Company to produce the best Mickey Mouse, Snow White, Aladdin, or Peter Pan. In Orlando at Disneyworld, most of this training takes place at Disney University. Disney University provides training to its 42,000 cast members (this is what Disney calls employees) in areas such as culinary arts, computer applications, and specific job components. Once hired, all cast members go through a two-day Disney training program called Traditions, where they learn the basics of being a good cast member and the history of the company. For all practical purposes, Traditions is a new employee orientation.
Training doesn’t stop at orientation, though. While all positions receive extensive training, one of the most extensive trainings are especially for Disney characters, since their presence at the theme parks is a major part of the customer experience. To become a character cast member, a character performer audition is required. The auditions require dancing and acting, and once hired, the individual is given the job of several characters to play. After a two-week intensive training process on character history, personalities, and ability to sign the names of the characters (for the autograph books sold at the parks for kids), an exam is given. The exam tests competency in character understanding, and passing the exam is required to become hired (Hill, 2005).
While Disney University trains people for specific positions, it also offers an array of continuing development courses called Disney Development Connection. Disney says in 2010, more than 3,254,596 hours were spent training a variety of employees2, from characters to management. The training doesn’t stop at in-house training, either. Disney offers tuition reimbursement up to \$700 per credit and pays for 100 percent of books and \$100 per course for cost of other materials. In 2010, Disney paid over \$8 million in tuition expenses for cast members2.
Disney consistently ranks in “America’s Most Admired Companies” by Fortune Magazine, and its excellent training could be one of the many reasons.
Job Swapping Training Delivery
Job swapping is a method for training in which two employees agree to change jobs for a period of time. Of course, with this training delivery method, other training would be necessary to ensure the employee learns the skills needed to perform the skills of the new job. Job swap options can be motivational to employees by providing a change of scenery. It can be great for the organization as well to cross-train employees in different types of jobs. However, the time spent learning can result in unproductive time and lost revenue.
Vestibule Training Delivery
In vestibule training, training is performed near the worksite in conference rooms, lecture rooms, and classrooms. This might be an appropriate method to deliver orientations and some skills-based training. For example, to become a journeyman electrician, an apprentice performs job shadowing, on-the-job training, and vestibule training to learn the law and codes related to electricity installation. During the busy holiday season, Macy’s uses vestibule training to teach new hires how to use the cash register system and provides skills training on how to provide great customer service (Macy’s, 2010).
Many organizations use vestibule training for technical training, safety training, professional training, and quality training. It can also be appropriate for managerial training, soft skills training, and team training. As you can tell, this delivery method, like web-based training delivery, is quite versatile. For some jobs or training topics, this may take too much time away from performing the actual “job,” which can result in lost productivity.
International Assignment Training
Since we are working within a global economy, it might be necessary to provide training to employees who are moving overseas or working overseas. Up to 40 percent of international assignments are terminated early because of a lack of international training (Sullivan & Tu, 2011). Ensuring success overseas is reliant upon the local employee’s learning how to navigate in the new country. The following topics might be included in this type of training:
1. Cultural differences and similarities
2. Insight and daily living in the country
3. Social norms and etiquette
4. Communication training, such as language skills
This training is best delivered by a professional in the region or area in which the employee will be working. We discuss this topic in more detail in “International HRM”.
Key Takeaways
• Training delivery methods are important to consider, depending on the type of training that needs to be performed.
• Most organizations do not use only one type of training delivery method; a combination of many methods will be used.
• On-the-job coaching delivery method is a training delivery method in which an employee is assigned to a more experienced employee or manager to learn the skills needed for the job. This is similar to the mentor training delivery method, except a mentor training method is less about skills training and more about ongoing employee development.
• Brown bag lunch training delivery is normally informal and can involve personal development as well as specific job-related skills.
• Web-based training is any type of training that is delivered using technology.
• There are numerous platforms that can be used for web-based training and considerations, such as cost, when selecting a platform for use.
• A synchronous training method is used for web-based training and refers to delivery that is led by a facilitator. An asynchronous training method is one that is self-directed.
• Job shadowing is a delivery method consisting of on-the-job training and the employee’s learning skills by watching someone more experienced.
• To motivate employees and allow them to develop new skills, job swapping training delivery may be used. This occurs when two people change jobs for a set period of time to learn new skills. With this method, it is likely that other methods will also be used, too.
• Vestibule training delivery is also known as “near site” training. It normally happens in a classroom, conference room, or lecture room and works well to deliver orientations and some skills-based training. Many organizations also use vestibule training for technical training, safety training, professional training, and quality training.
• Since many companies operate overseas, providing training to those employees with international assignments can better prepare them for living and working abroad.
Exercises
1. Do an Internet search on web-based training. Discuss two of the platforms you found. What are the features and benefits?
2. Which training delivery method do you think you personally would prefer in a job and why?
3. What do you see as advantages and disadvantages to each type of training method?
1“Advantages and Disadvantages,” Web Based Training Information Center, accessed July 27, 2010, www.webbasedtraining.com/primer_advdis.aspx.
2“Training and Development,” Disney, accessed July 30, 2011, http://corporate.disney.go.com/citizenship2010/disneyworkplaces/overview/traininganddevelopment/. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.04%3A_Training_Delivery_Methods.txt |
Learning Objectives
1. Be able to design a training program framework.
2. Understand the uses and applications of a career development program.
The next step in the training process is to create a training framework that will help guide you as you set up a training program. Information on how to use the framework is included in this section.
Training Program Framework Development
When developing your training plan, there are a number of considerations. Training is something that should be planned and developed in advance.
The considerations for developing a training program are as follows:
1. Needs assessment and learning objectives. This part of the framework development asks you to consider what kind of training is needed in your organization. Once you have determined the training needed, you can set learning objectives to measure at the end of the training.
2. Consideration of learning styles. Making sure to teach to a variety of learning styles is important to development of training programs.
3. Delivery mode. What is the best way to get your message across? Is web-based training more appropriate, or should mentoring be used? Can vestibule training be used for a portion of the training while job shadowing be used for some of the training, too? Most training programs will include a variety of delivery methods.
4. Budget. How much money do you have to spend on this training?
5. Delivery style. Will the training be self-paced or instructor led? What kinds of discussions and interactivity can be developed in conjunction with this training?
6. Audience. Who will be part of this training? Do you have a mix of roles, such as accounting people and marketing people? What are the job responsibilities of these individuals, and how can you make the training relevant to their individual jobs?
7. Content. What needs to be taught? How will you sequence the information?
8. Timelines. How long will it take to develop the training? Is there a deadline for training to be completed?
9. Communication. How will employees know the training is available to them?
10. Measuring effectiveness of training. How will you know if your training worked? What ways will you use to measure this?
Human Resource Recall
Can you think of a time where you received training, but the facilitator did not connect with the audience? Does that ever happen in any of your classes (of course not this one, though)?
Needs Assessment
The first step in developing a training program is to determine what the organization needs in terms of training. There are three levels of training needs assessment: organizational assessment, occupational (task) assessment, and individual assessment:
1. Organizational assessment. In this type of needs assessment, we can determine the skills, knowledge, and abilities a company needs to meet its strategic objectives. This type of assessment considers things such as changing demographics and technological trends. Overall, this type of assessment looks at how the organization as a whole can handle its weaknesses while promoting strengths.
2. Occupational (task) assessment. This type of assessment looks at the specific tasks, skills knowledge, and abilities required to do jobs within the organization.
3. Individual assessment. An individual assessment looks at the performance of an individual employee and determines what training should be accomplished for that individual.
We can apply each of these to our training plan. First, to perform an organizational assessment, we can look at future trends and our overall company’s strategic plan to determine training needs. We can also see how jobs and industries are changing, and knowing this, we can better determine the occupational and individual assessments.
Researching training needs can be done through a variety of ways. One option is to use an online tool such as SurveyMonkey to poll employees on what types of training they would like to see offered.
As you review performance evaluations turned in by your managers, you may see a pattern developing showing that employees are not meeting expectations. As a result, this may provide data as to where your training is lacking.
There are also types of training that will likely be required for a job, such as technical training, safety training, quality training, and professional training. Each of these should be viewed as separate training programs, requiring an individual framework for each type of training. For example, an employee orientation framework will look entirely different from an in-house technical training framework.
Training must be tied to job expectations. Any and all training developed should transfer directly to the skills of that particular employee. Reviewing the HR strategic plan and various job analyses may help you see what kind of training should be developed for specific job titles in your organization.
Learning Objectives
After you have determined what type of training should occur, learning objectives for the training should be set. A learning objective is what you want the learner to be able to do, explain, or demonstrate at the end of the training period. Good learning objectives are performance based and clear, and the end result of the learning objective can be observable or measured in some way. Examples of learning objectives might include the following:
1. Be able to explain the company policy on sexual harassment and give examples of sexual harassment.
2. Be able to show the proper way to take a customer’s order.
3. Perform a variety of customer needs analyses using company software.
4. Understand and utilize the new expense-tracking software.
5. Explain the safety procedure in handling chemicals.
6. Be able to explain the types of communication styles and strategies to effectively deal with each style.
7. Demonstrate ethics when handling customer complaints.
8. Be able to effectively delegate to employees.
Once we have set our learning objectives, we can utilize information on learning styles to then determine the best delivery mode for our training.
Learning Styles
Understanding learning styles is an important component to any training program. For our purposes, we will utilize a widely accepted learning style model. Recent research has shown that classifying people into learning styles may not be the best way to determine a style, and most people have a different style depending on the information being taught. In a study by Pashler et al., the authors look at aptitude and personality as key traits when learning, as opposed to classifying people into categories of learning styles. Bearing this in mind, we will address a common approach to learning styles next.
An effective trainer tries to develop training to meet the three different learning styles1:
1. Visual learner. A visual learner usually has a clear “picture” of an experience. A visual learner often says things such as “I can see what you are saying” or “This looks good.” A visual learner is best reached using graphics, pictures, and figures.
2. Auditory learner. An auditory learner learns by sound. An auditory learner might say, “If I hear you right” or “What do you hear about this situation?” The auditory learner will learn by listening to a lecture or to someone explaining how to do something.
3. Kinesthetic learner. A kinesthetic learner learns by developing feelings toward an experience. These types of learners tend to learn by doing rather than listening or seeing someone else do it. This type of learner will often say things such as “This feels right.”
Most individuals use more than one type of learning style, depending on what kinds of information they are processing. For example, in class you might be a visual learner, but when learning how to change a tire, you might be a kinesthetic learner.
Delivery Mode
Depending on the type of training that needs to be delivered, you will likely choose a different mode to deliver the training. An orientation might lend itself best to vestibule training, while sexual harassment training may be better for web-based training. When choosing a delivery mode, it is important to consider the audience and budget constrictions. For example, Oakwood Worldwide, a provider of temporary housing, recently won the Top 125 Training Award for its training and development programs2. It offers in-class and online classes for all associates and constantly add to its course catalog. This is a major recruitment as well as retention tool for its employees. In fact, the company credits this program for retaining 25 percent of its workforce for ten years or more. Table \(1\) looks at each of the types of training and suggests appropriate options for delivery modes.
Table \(1\): Types of Training and Delivery
Delivery Method Type of Training Suggested
On-the-job coaching Technical training
Skills training
Managerial training
Safety training
Mentor Technical training
Skills training
Managerial training
Safety training
Brown bag lunch Quality training
Soft skills training
Professional training
Safety training
Web-based Technical training
Quality training
Skills training
Soft skills training
Professional training
Team training
Managerial training
Safety training
Job shadowing Technical training
Quality training
Skills training
Safety training
Job swapping Technical training
Quality training
Skills training
Professional training
Team training
Managerial training
Safety training
Vestibule training Technical training
Quality training
Skills training
Soft skills training
Professional training
Team training
Managerial training
Safety training
Budget
How much money do you think the training will cost? The type of training performed will depend greatly on the budget. If you decide that web-based training is the right delivery mode, but you don’t have the budget to pay the user fee for the platform, this wouldn’t be the best option. Besides the actual cost of training, another cost consideration is people’s time. If employees are in training for two hours, what is the cost to the organization while they are not able to perform their job? A spreadsheet should be developed that lists the actual cost for materials, snacks, and other direct costs, but also the indirect costs, such as people’s time.
Delivery Style
Taking into consideration the delivery method, what is the best style to deliver this training? It’s also important to keep in mind that most people don’t learn through “death by PowerPoint”; they learn in a variety of ways, such as auditory, kinesthetic, or visual. Considering this, what kinds of ice breakers, breakout discussions, and activities can you incorporate to make the training as interactive as possible? Role plays and other games can make the training fun for employees. Many trainers implement online videos, podcasts, and other interactive media in their training sessions. This ensures different learning styles are met and also makes the training more interesting.
Audience
Considering your audience is an important aspect to training. How long have they been with the organization, or are they new employees? What departments do they work in? Knowing the answers to these questions can help you develop a relevant delivery style that makes for better training. For example, if you know that all the people attending the training are from the accounting department, examples you provide in the training can be focused on this type of job. If you have a mixed group, examples and discussions can touch on a variety of disciplines.
Content Development
The content you want to deliver is perhaps one of the most important parts in training and one of the most time-consuming to develop. Development of learning objectives or those things you want your learners to know after the training makes for a more focused training. Think of learning objectives as goals—what should someone know after completing this training? Here are some sample learning objectives:
1. Be able to define and explain the handling of hazardous materials in the workplace.
2. Be able to utilize the team decision process model.
3. Understand the definition of sexual harassment and be able to recognize sexual harassment in the workplace.
4. Understand and be able to explain the company policies and structure.
After you have developed the objectives and goals, you can begin to develop the content of the training. Consideration of the learning methods you will use, such as discussion and role playing, will be outlined in your content area.
Development of content usually requires a development of learning objectives and then a brief outline of the major topics you wish to cover. With that outline, you can “fill in” the major topics with information. Based on this information, you can develop modules or PowerPoint slides, activities, discussion questions, and other learning techniques.
Timelines
For some types of training, time lines may be required to ensure the training has been done. This is often the case for safety training; usually the training should be done before the employee starts. In other words, in what time frame should an employee complete the training?
Another consideration regarding time lines is how much time you think you need to give the training. Perhaps one hour will be enough, but sometimes, training may take a day or even a week. After you have developed your training content, you will likely have a good idea as to how long it will take to deliver it. Consider the fact that most people do not have a lot of time for training and keep the training time realistic and concise.
From a long-term approach, it may not be cost effective to offer an orientation each time someone new is hired. One consideration might be to offer orientation training once per month so that all employees hired within that month are trained at the same time.
Development of a dependable schedule for training might be ideal, as in the following example:
1. Orientation is offered on the first Thursday of every month.
2. The second and third Tuesday will consist of vestibule training on management skills and communication.
3. Twice yearly, in August and March, safety and sexual harassment training will be given to meet the legal company requirements.
Developing a dependable training schedule allows for better communication to your staff, results in fewer communication issues surrounding training, and allows all employees to plan ahead to attend training.
Communication
Once you have developed your training, your next consideration is how you will communicate the available training to employees. In a situation such as an orientation, you will need to communicate to managers, staff, and anyone involved in the training the timing and confirm that it fits within their schedule. If it is an informal training, such as a brown bag lunch on 401(k) plans, this might involve determining the days and times that most people are in the office and might be able to participate. Because employees use Mondays and Fridays, respectively, to catch up and finish up work for the week, these days tend to be the worst for training.
Consider utilizing your company’s intranet, e-mail, and even old-fashioned posters to communicate the training. Many companies have Listservs that can relay the message to only certain groups, if need be.
Human Resource Recall
What can happen if training is not communicated to employees appropriately?
Measuring Effectiveness
After we have completed the training, we want to make sure our training objectives were met. One model to measure effectiveness of training is the Kirkpatrick model (Kirkpatrick, 2006), developed in the 1950s. His model has four levels:
1. Reaction: How did the participants react to the training program?
2. Learning: To what extent did participants improve knowledge and skills?
3. Behavior: Did behavior change as a result of the training?
4. Results: What benefits to the organization resulted from the training?
Each of Kirkpatrick’s levels can be assessed using a variety of methods. We will discuss those next.
Review the performance of the employees who received the training, and if possible review the performance of those who did not receive the training. For example, in your orientation training, if one of the learning objectives was to be able to request time off using the company intranet, and several employees who attended the training come back and ask for clarification on how to perform this task, it may mean the training didn’t work as well as you might have thought. In this case, it is important to go back and review the learning objectives and content of your training to ensure it can be more effective in the future.
Many trainers also ask people to take informal, anonymous surveys after the training to gauge the training. These types of surveys can be developed quickly and easily through websites such as SurveyMonkey. Another option is to require a quiz at the end of the training to see how well the employees understand what you were trying to teach them. The quiz should be developed based on the learning objective you set for the training. For example, if a learning objective was to be able to follow OSHA standards, then a quiz might be developed specifically related to those standards. There are a number of online tools, some free, to develop quizzes and send them to people attending your training. For example, Wondershare QuizCreator offers a free trial and enables the manager to track who took the quiz and how well they did. Once developed by the trainer, the quiz can be e-mailed to each participant and the manager can see how each trainee did on the final quiz. After you see how participants do on the quiz, you can modify the training for next time to highlight areas where participants needed improvement.
It can be easy to forget about this step in the training process because usually we are so involved with the next task: we forget to ask questions about how something went and then take steps to improve it.
One way to improve effectiveness of a training program is to offer rewards when employees meet training goals. For example, if budget allows, a person might receive a pay increase or other reward for each level of training completed.
Once the training framework has been developed, the training content can be developed. The training plan serves as a starting point for training development.
Career Development Programs and Succession Planning
Another important aspect to training is career development programs. A career development program is a process developed to help people manage their career, learn new things, and take steps to improve personally and professionally. Think of it as a training program of sorts, but for individuals. Sometimes career development programs are called professional development plans.
Table \(2\): Sample Career Development Plan Developed by an Employee and Commented on by Her Manager
Today’s Date February 15, 2012
Employee Sammie Smith
Current job title Clerk, Accounts Payable
Goals
• Develop management skills
• Learn accounting standards
• Promoted to Accounts Payable Manager
Estimated Costs
• Management training
• Peachtree accounting software Advanced training
• Earn AAAS online degree in accounting
• Take tax certification course
• Communications training
Completion Date Spring of 2014
Manager Notes:
• In-house training offered yearly: “Reading Body Language,” and “Writing Development,” and “Running an Effective Meeting”
• External Training needed: Peachtree software, AAAS Degree, Tax certification Training Course
• Assign Sammie to Dorothy Redgur, the CFO for mentorship
• Next steps: Sammie should develop a timeline for when she plans to complete the seminars.
The budget allows us to pay up to \$1,000 per year for external training for all employees. Talk with Sammie about how to receive reimbursement.
As you can see, the employee developed goals and made suggestions on the types of training that could help her meet her goals. Based on this data, the manager suggested in-house training and external training for her to reach her goals within the organization.
Career development programs are necessary in today’s organizations for a variety of reasons. First, with a maturing baby-boom population, newer employees must be trained to take those jobs once baby boomers retire. Second, if an employee knows a particular path to career development is in place, this can increase motivation. A career development plan usually includes a list of short- and long-term goals that employees have pertaining to their current and future jobs and a planned sequence of formal and informal training and experiences needed to help them reach the goals. As this chapter has discussed, the organization can and should be instrumental in defining what types of training, both in-house and external, can be used to help develop employees.
To help develop this type of program, managers can consider a few components (Heller, 2005):
1. Talk to employees. Although this may seem obvious, it doesn’t always happen. Talking with employees about their goals and what they hope to achieve can be a good first step in developing a formal career development program.
2. Create specific requirements for career development. Allow employees to see that if they do A, B, and C, they will be eligible for promotion. For example, to become a supervisor, maybe three years of experience, management training, and communication training are required. Perhaps an employee might be required to prove themselves in certain areas, such as “maintain and exceed sales quota for eight quarters” to be a sales manager. In other words, in career development there should be a clear process for the employees to develop themselves within the organization.
3. Use cross-training and job rotation. Cross-training is a method by which employees can gain management experience, even if for short periods of time. For example, when a manager is out of the office, putting an employee “in charge” can help the employee learn skills and abilities needed to perform that function appropriately. Through the use of job rotation, which involves a systematic movement of employees from job to job within an organization, employees can gain a variety of experiences to prepare them for upward movement in the organization.
4. Utilize mentors. Mentorship can be a great way for employees to understand what it takes to develop one’s career to the next level. A formal mentorship program in place with willing mentees can add value to your career development program.
There are many tools on the web, including templates to help employees develop their own career development plans. Many organizations, in fact, ask employees to develop their own plans and use those as a starting point for understanding long-term career goals. Then hopefully the organization can provide them with the opportunities to meet these career goals. In the late 1980s, many employees felt that career opportunities at their current organizations dwindled after seeing the downsizing that occurred. It gave employees the feeling that companies were not going to help develop them, unless they took the initiative to do so themselves. Unfortunately, this attitude means that workers will not wait for career opportunities within the company, unless a clear plan and guide is put into place by the company (Capelli, 2010). Here is an example of a process that can be used to put a career development program in place (Adolfo, 2010):
1. Meet individually with employees to identify their long-term career interests (this may be done by human resources or the direct manager).
2. Identify resources within the organization that can help employees achieve their goals. Create new opportunities for training if you see a gap in needs versus what is currently offered.
3. Prepare a plan for each employee, or ask them to prepare the plan.
4. Meet with the employee to discuss the plan.
5. During performance evaluations, revisit the plan and make changes as necessary.
Identifying and developing a planning process not only helps the employee but also can assist the managers in supporting employees in gaining new skills, adding value, and motivating employees.
Key Takeaways
• There are a number of key considerations in developing a training program. Training should not be handled casually but instead developed specifically to meet the needs of the organization. This can be done by a needs assessment consisting of three levels: organizational, occupational, and individual assessments.
• The first consideration is the delivery mode; depending on the type of training and other factors, some modes might be better than others.
• Budget is a consideration in developing training. The cost of materials, but also the cost of time, should be considered.
• The delivery style must take into account people’s individual learning styles. The amount of lecture, discussion, role plays, and activities are considered part of delivery style.
• The audience for the training is an important aspect when developing training. This can allow the training to be better developed to meet the needs and the skills of a particular group of people.
• The content obviously is an important consideration. Learning objectives and goals for the training should be developed before content is developed.
• After content is developed, understanding the time constraints is an important aspect. Will the training take one hour or a day to deliver? What is the time line consideration in terms of when people should take the training?
• Letting people know when and where the training will take place is part of communication.
• The final aspect of developing a training framework is to consider how it will be measured. At the end, how will you know if the trainees learned what they needed to learn?
• A career development process can help retain good employees. It involves creating a specific program in which employee goals are identified and new training and opportunities are identified and created to help the employee in the career development process.
Exercises
1. Develop a rough draft of a training framework using Figure \(1\) for a job you find on Monster.com.
2. Write three learning objectives you think would be necessary when developing orientation training for a receptionist in an advertising firm.
3. Why is a career development plan important to develop personally, even if your company doesn’t have a formal plan in place? List at least three reasons and describe.
1“What’s YOUR Learning Style?” adapted from Instructor Magazine, University of South Dakota, August 1989, accessed July 28, 2010, http://people.usd.edu/~bwjames/tut/learning-style/.
2“Oakwood Worldwide Honored by Training Magazine for Fifth Consecutive Year Training also Presents Oakwood with Best Practice Award,” press release, February 25, 2011, Marketwire, accessed February 26, 2011, http://www.live-pr.com/en/oakwood-worldwide-honored-by-training-magazine-r1048761409.htm. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.05%3A_Designing_a_Training_Program.txt |
Chapter Summary
• Employee training and development is a necessity in today’s work environment. Training and development can lead to lower turnover and increased motivation.
• There are four basic steps to employee training: employee orientation, in-house training, mentoring, and external training.
• Different types of training can be delivered, each falling into the steps of employee training. These include technical or technology training, quality training, skills training, soft skills training, professional training, team training, managerial training, and safety training.
• Within the types of training, we need to determine which method is best for the actual delivery of training. Options include on-the-job training, mentor training, brown bag lunches, web-based training, job shadowing, job swapping, and vestibule training.
• Development of a training development framework is the first step in solidifying the training.
• Considerations and steps to developing the training framework include determining the training needs, delivery modes, budget, delivery style, audience, content, time lines, communication of the training, and measurement of the training.
• Career development programs can be an essential piece to the training puzzle. A comprehensive program or plan, either developed by employees or administered by HR, can help with motivation and fill the gap when people in the organization leave or retire. It can also be used as a motivational tool.
Chapter Case
New on the Job
JoAnn Michaels just started her job as human resources manager at In the Dog House, a retail chain specializing in dog apparel and accessories. She is a good friend of yours you met in college.
The organization has 35 stores with 250 employees in Washington, Idaho, and Oregon. As the chain has grown, the training programs have been conducted somewhat piecemeal. Upon visiting some of the stores in a three-week tour, JoAnn has realized that all the stores seem to have different ways of training their in-store employees.
When she digs further, she realizes even the corporate offices, which employ seventy-five people, have no formal training program. In the past, they have done informal and optional brown bag lunch training to keep employees up to date. As a result, JoAnn develops a survey using SurveyMonkey and sends it to all seventy-five corporate employees. She created a rating system, with 1 meaning strongly disagree and 5 meaning strongly agree. Employees were not required to answer all questions, hence the variation in the number of responses column. After this task, JoAnn creates a slightly different survey and sends it to all store managers, asking them to encourage their retail employees to take the survey. The results are shown here.
In the Dog House Corporate Employee Survey Results
Question Number of Responses Average Rating
I am paid fairly. 73 3.9
I feel my group works well as a team. 69 2.63
I appreciate the amount of soft skills training offered at In the Dog House. 74 2.1
I can see myself growing professionally here. 69 1.95
I feel I am paid fairly. 74 3.8
I have all the tools and equipment I need to do my job. 67 4.2
I feel confident if there were an emergency at the office, I would know what to do and could help others. 73 2.67
I think my direct supervisor is an excellent manager. 55 2.41
The orientation training I received was helpful in understanding the expectations of the job. 75 3.1
I would take training related to my job knowing there would be a reward offered for doing so. 71 4.24
In the Dog House Retail Employee Survey Results
Question Number of Responses Average Rating
I am content with the benefits I am receiving. 143 1.2
I feel my store works well as a team. 190 4.1
I appreciate the amount of product training and information offered at In the Dog House. 182 2.34
I can see myself growing professionally here. 158 1.99
I feel I am paid fairly. 182 3.2
My supervisor works with my schedule, so I work at times that are convenient for me. 172 3.67
I feel confident if I had to evacuate the store, I would know what to do and could help customers. 179 2.88
I think my store manager is a great manager. 139 3.34
The orientation training I received was helpful in understanding the expectations of the job. 183 4.3
I am interested in developing my career at In the Dog House. 174 1.69
Based on the information JoAnn received from her survey, she decided some changes need to be made. JoAnn asks you to meet for coffee and take a look at the results. After you review them, JoAnn asks you the following questions. How would you respond to each?
1. “Obviously, I need to start working on some training programs. Which topics do you think I should start with?”
2. “How do I go about developing a training program that will be really useful and make people excited? What are the steps I need to take?”
3. “How should I communicate the training program to the corporate and retail employees? Should the new training I develop be communicated in the same way?”
4. “Do you think that we should look at changing pay and benefits? Why or why not?”
5. “Can you please help me draft a training program framework for what we have discussed? Do you think I should design one for both the corporate offices and one for the retail stores?” (Hint: Look at Figure 8.8 for guidelines.)
Team Activity
1. In teams of three to four, outline a two-hour training program for managers to better understand motivation for their employees. Motivation is discussed in Chapter 7. Use the training development model discussed in this chapter. Your training should address learning objectives, delivery modes, budget, delivery style, time line, communication, and measurement. Prepare a five-minute presentation to present in class.
2. Using the same plan above, plan and deliver the content to the rest of the class. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/08%3A_Training_and_Development/8.06%3A_Cases_and_Problems.txt |
The Biggest Challenge
Casey is seated at his desk reviewing his human resource strategic plan when Lily walks in, obviously upset. Her facial expressions show she is upset, and after she enters, she crosses her arms while standing in front of Casey’s desk. Casey thinks Lily is a very hard worker and does an excellent job managing people as the manager of her marketing department. Lately, she has been having trouble with some of her employees.
“Casey,” she says, “I really need to vent. Can I sit down and talk with you?” Casey offers Lily a seat and she sits down. She tells Casey that Sam, a marketing manager, made snide and underhanded comments during a meeting this morning. “For example, when I asked the status on one of our projects, Sam said snidely, ‘Why don’t you ask one of your marketing assistants? They are doing such a great job, after all.’ I suspect he is upset with something I wrote on my blog last week. As you know, I started the blog to continually let employees know of changes in the department and to provide feedback. In last week’s blog, I wrote about what a great job the marketing assistants are doing in my department.”
Lily goes on, “So I pulled him aside after the meeting and asked him about his comment. He said that he was upset that I had given feedback to the marketing assistants because he feels that as their manager, it is his job to do that. He felt I had stepped on his toes and the toes of other marketing managers.”
Casey thinks about the situation and asks Lily if she apologized. Lily responds, “I didn’t feel like I needed to. I do think the marketing assistants are doing a good job, and I don’t need to apologize for mentioning that. I am just trying to raise morale among them. You know, two marketing assistants have quit in the last three months.”
Casey leans back in his chair and gives some thought as to how to advise Lily. He suggests that Lily speak with Sam directly (not via e-mail) and tell him that her intention was only positive and not meant to be harmful, and see what happens. Lily thinks about that and says she will try to see Sam later today. When she leaves, Casey sits back and thinks about how communication is one of the biggest challenges in any job, but especially in human resources.
9.02: Communication Strategies
Learning Objectives
1. Explain the concept of emotional intelligence.
2. Describe the four types of communication in the workplace.
3. Explain the various communication styles and identify your own style.
4. Define nonverbal communication and describe the importance of it in an HR setting.
Communication, as you see in our opening scenario, is key to a successful career as a human resource manager (HRM) or as a manager. While communication is likely discussed in several of your business classes, it should also be addressed in an HRM book, since much of what we do in HR is based on effective communication.
How many times do miscommunications happen on a daily basis, either in your personal life or at your job? The good news is that we can all get better at communication. The first thing we need to do is learn how we can communicate with our employees. Then we will want to look at our own communication style and compare that with other styles. Have you ever spoken with someone you just didn’t “get”? It is probably because you have different communication styles. We address this in Section 9.1.3 “Communication Styles”. Body language is also a key contributor to communication; in fact, as was suggested in the late 1960s by researcher Albert Mehrabian, body language makes up 93 percent of our communication (Mehrabian & Ferris, 1967). Part of communication is also looking at the way we manage people. Depending on our style of management, we may use a variety of management styles to communicate things we need done or to give performance feedback. One major way companies communicate with employees is through the use of meetings. Some meetings can be very effective, but as you probably already know, many meetings aren’t very productive. We will discuss some strategies to help you run a more effective meeting.
Communication and Emotional Intelligence (EI)
One of the most important aspects to good communication is emotional intelligence (EI). Emotional intelligence is different from IQ. First, EI predicts much of life success, much more than IQ, in fact (Goleman, 2005). According to Daniel Goleman, a researcher on EI, there are five main aspects or domains to EI:
1. Knowing your emotions
2. Managing your emotions
3. Motivating yourself
4. Recognizing and understanding other people’s emotions
5. Managing relationships
First, let’s discuss knowing your emotions. If we don’t know how we feel about something, it can be difficult to communicate. It may seem obvious to know what we are feeling from moment to moment, but oftentimes we do not. How we feel impacts our body language as well as our verbal communication. For example, let’s say you just got home from work and had a really crummy day. When you get home, you find that your spouse has not unloaded the dishwasher yet, as you had agreed. Tie this with a crummy day, and you might communicate differently about it than if you had a great day.
On the other hand, if you recognize that you are tired and a bit cranky, your awareness of these emotions allows you to manage them. The third aspect of EI, motivating yourself, goes without saying in a management or human resource role. This is the key not only to career success but also to personal success.
The last two domains of EI revolve around being able to see and understand emotions in other people, which in turn can benefit the relationship. Let’s say, in the situation above, you get home and the dishwasher isn’t unloaded, but you recognize immediately through body language and facial expressions that your spouse is extremely upset by something. Seeing this emotion in someone else may help you decide if you should mention the dishwasher—or not—at this specific time. But what if you didn’t recognize this emotion and raised your voice to your spouse about the unloaded dishwasher? It will probably result in an argument. Using this example, I am sure you can see how this translates into the workplace. Emotional intelligence allows us to work better with people, understand them, and communicate with them.
Human Resource Recall
Do you think you are a good communicator? What could you improve?
Communication Directions
As you already know, communication in companies is key to having a successful organization. Those companies who communicate well with their employees end up with more loyal and motivated workers. Those that don’t communicate well, though, see increased turnover, absenteeism, dissatisfied customers, higher product defect rates, lack of focus on business objectives, and lack of innovation1. Proper communication can result in a sense of belonging and self-worth, leading to less turnover and absenteeism, which is mentioned in the opening scenario. These issues are also discussed in Chapter 7 “Retention and Motivation”. In Section 9.1.3 “Communication Styles”, we discuss some of the ways we can stay connected with our employees.
Four main types of communications occur within a company: upward communication, downward communication, diagonal communication, and horizontal communication. Each type of communication can serve a different purpose in human resources, and many messages may be sent in a variety of ways.
Upward communication is when the lower levels of an organization communicate with the upper levels of an organization. Some examples might be an employee satisfaction survey using online survey tools such as SurveyMonkey. These kinds of tools can be used to determine the changes that should occur in a company. Oftentimes human resource departments may develop a survey such as this to find out how satisfied the employees are with things such as benefits. Then the organization can make changes based on the satisfaction level of the employees. Employees might also engage in upward communication in a given work situation. They might tell their manager their plate is full and they can’t take on any new projects. This is considered upward communication, too.
Downward communication is the opposite of upward communication, in that the communication occurs from the upper levels of an organization down to the lower levels of the organization. A manager explaining how to do a task to an employee would be considered downward communication. Development of training programs to communicate safety in the organization might be another example. A change in a pay or bonus structure would be communicated using the downward approach as well.
Figure 9.1 Types of Communication Flow in Organizations
A diagonal communication approach occurs when interdepartmental communication occurs with people at different levels of the organization. When the human resources assistant speaks with the marketing manager about the hiring of a new employee in marketing, this would be considered diagonal communication.
Horizontal communication occurs when people of the same level in an organization, for example, a marketing manager and a human resource manager, communicate usually to coordinate work between departments. An accounting manager might share information with a production manager so the production manager knows how much budget they have left.
Within all the communication methods we discussed, there are a variety of approaches. Of course, the most obvious is the informal communication that occurs. An e-mail may be sent or a phone call made. Meetings are another way to communicate information. Companies can also use more formal means to communicate. A blog would be an example. Many companies use blogs to communicate information such as financial numbers, changes to policy, and other “state of the business” information. This type of information is often downward communication. However, blogs are not just for upper management anymore. Companies are using microblogs more and more to ensure that people in various departments stay connected with each other, especially when tasks tend to be very interdependent.
Companies also use social networking sites to keep in touch, such as Twitter and Facebook. For example, Alcatel-Lucent, a 77,000-employee telecommunications company in Europe, found that using social media keeps a large number of employees connected and tends to be a low or no-cost method of communicating. Rather than sending e-mail to their employees telling them to expect updates via these methods, the news is spread via word of mouth as most of the employees blog or use Facebook or other social media to communicate. In fact, Alcatel-Lucent has over eight hundred groups in its system, ranging from business related to ones social in nature (Gaudin, 2010). Use of this type of technology can result in upward, downward, horizontal, and diagonal communication all at once.
Companies also use intranets to communicate information to their employees. An intranet is an internal website, meaning that others generally cannot log in and see information there. The intranet may include information on pay and vacation time as well as recent happenings, awards, and achievements.
Communication Styles
In addition to the communication that occurs within organizations, each of us has our own individual communication style. Many organizations give tests that may indicate their candidate’s preferred style, providing information on the best job fit.
Our communication styles can determine how well we communicate with others, how well we are understood, and even how well we get along with others. As you can imagine, our personality types and our communication styles are very similar. Keep in mind, though, that no one person is “always” one style. We can change our style depending on the situation. The more we can understand our own dominant communication style and pinpoint the styles of others, the better we can communicate. The styles are expresser, driver, relater, and analytical. Let’s discuss each of these styles next.
People with an expresser communication style tend to get excited. They like challenges and rely heavily on hunches and feelings. Depending on the type of business, this can be a downfall as sometimes hard data should be used for decision-making purposes. These people are easily recognized because they don’t like too many facts or boring explanations and tend to be antsy if they feel their time is being wasted with too many facts.
People with a driver style like to have their own way and tend to be decisive. They have strong viewpoints, which they are not afraid to share with others. They like to take charge in their jobs but also in the way they communicate. Drivers usually get right to the point and not waste time with small talk.
People with a relater style like positive attention and want to be regarded warmly. They want others to care about them and treat them well. Because relaters value friendships, a good way to communicate well with them is to create a communication environment where they can feel close to others.
People with an analytical communication style will ask a lot of questions and behave methodically. They don’t like to be pressured to make a decision and prefer to be structured. They are easily recognized by the high number of questions they ask.
Table 9.1 Which One of These Communication Styles Do You Tend to Use?
Passive Assertive Aggressive
Definition Communication style in which you put the rights of others before your own, minimizing your own self-worth Communication style in which you stand up for your rights while maintaining respect for the rights of others Communication style in which you stand up for your rights but you violate the rights of others
Implications to others my feelings are not important we are both important your feelings are not important
I don’t matter we both matter you don’t matter
I think I’m inferior I think we are equal I think I’m superior
Verbal styles apologetic I statements you statements
overly soft or tentative voice firm voice loud voice
Nonverbal styles looking down or away looking direct staring, narrow eyes
stooped posture, excessive head nodding relaxed posture, smooth and relaxed movements tense, clenched fists, rigid posture, pointing fingers
Potential consequences lowered self-esteem higher self-esteem guilt
anger at self self-respect anger from others
false feelings of inferiority respect from others lowered self-esteem
disrespect from others respect of others disrespect from others
pitied by others feared by others
Let’s discuss an example of how these communication styles might interact. Let’s assume an analytical communicator and a relater are beginning a meeting where the purpose is to develop a project time line. The analytical communicator will be focused on the time line and not necessarily the rapport building that the relater would be focused on. The conversation might go something like this:
Relater:
What are you doing this weekend? I am going to my son’s baseball game. It is supposed to be hot—I am looking forward to it.
Analytical:
That’s great. OK, so I was thinking a start date of August 1st for this project. I can get Kristin started on a to-do list for the project.
Relater:
That would be great. Kristin is a really hard worker, and I’m sure she won’t miss any details.
Analytical:
Yes, she’s OK. So, your team will need to start development now with a start day coming up. How are you going to go about this?
How do these two personality styles walk away from this conversation? First, the relater may feel ignored or rejected, because the analytical communicator didn’t want to discuss weekend details. The analytical communicator may feel annoyed that the relater is wasting time talking about personal things when they have a goal to set a project time line. These types of small miscommunications in business are what can create low morale, absenteeism, and other workplace issues. Understanding which style we tend to use can be the key in determining how we communicate with others. Here is another, personal example of these communication styles and how a conversation might go:
Expresser, to his partner:
I am really excited for our hiking trip this weekend.
Driver:
I still think we should leave on Thursday night rather than Friday.
Expresser:
I told you, I don’t think I can get all day Friday off. Besides, we won’t have much time to explore anyway, if we get there on Thursday, it will already be dark.
Driver:
It won’t be dark; we will get there around 7, before anyone else, if we leave after work.
Expresser:
I planned the trip. I am the one who went and got our food and permits, I don’t see why you have to change it.
Driver:
You didn’t plan the trip; I am the one who applied for the permits.
In this situation, you can see that the expresser is just excited about the trip and brings up the conversation as such. The driver has a tendency to be competitive and wants to win, hence his willingness to get there Thursday before everyone else. The expresser, on the other hand, tried to sell his ideas and didn’t get the feedback he felt he deserved for planning the trip, which made the communication start to go south.
In addition to our communication personalities, people tend to communicate based on one of three styles. First, a passive communicator tends to put the rights of others before his or her own. Passive communicators tend to be apologetic or sound tentative when they speak. They do not speak up if they feel like they are being wronged.
An aggressive communicator, on the other hand, will come across as standing up for his or her rights, while possibly violating the rights of others. This person tends to communicate in a way that tells others they don’t matter, or their feelings don’t matter.
An assertive communicator respects his rights and the rights of others when communicating. This person tends to be direct but not insulting or offensive. The assertive communicator stands up for his or her own rights but makes sure the rights of others aren’t affected.
Have you heard of a passive-aggressive communicator? This person tends to be passive but later aggressive by perhaps making negative comments about others or making snide or underhanded comments. This person might express his or her negative feelings in an indirect way, instead of being direct. For example, you are trying to complete a project for a client and the deadline is three days away. You and your team are working frantically to finish. You ask one of your employees to come in to work on Saturday morning to finish up the loose ends, so the project will be ready to present to the client on Monday. Your employee agrees, but when you show up on Monday, the project isn’t ready to present. You find out that this person had plans on Saturday but wasn’t direct with you about this. So the project didn’t get completed, and you had to change the appointment with the client. Later, you also find out that this employee was complaining to everyone else that you had asked her to come in on Saturday. As you can see from this example, passive-aggressive behavior doesn’t benefit anyone. The employee should have been direct and simply said, “I can’t come in on Saturday, but I can come in Sunday or work late Friday night.” Ideally, we want to be assertive communicators, as this shows our own self-esteem but at the same time respects others and isn’t misleading to others, either.
When dealing with someone who exhibits passive-aggressive behavior, it is best to just be direct with them. Tell that person you would rather she be direct than not show up. Oftentimes passive-aggressive people try to play the martyr or the victim. Do not allow such people to press your buttons and get you to feel sorry for them. This gives them control and can allow them to take advantage.
Nonverbal Communication
Now that we have discussed the types of communication in organizations and different verbal communication styles, it is only appropriate to discuss body language as well. Most successful HR professionals are excellent at reading and understanding nonverbal language, especially during the interview process. This is discussed in Chapter 5 “Selection”. The interviewer’s nonverbal language can also help or hinder a candidate, so we want to be careful of our nonverbal language when interviewing someone. Nonverbal language accounts for a large part of communication. Without seeing and hearing the nonverbal clues, it is easier to have misunderstandings. Nonverbal language can include facial expressions, eye contact, standing or sitting posture, and the position of our hands. Our tone of voice, loudness or softness, and gestures can also be part of body language. The better we can get at knowing what our own body language is telling others and reading others’ body language, the better we can get at communicating well with others.
Strategic HR Communication Style in Organizations
" href="http://www.youtube.com/watch?v=YACilUpWifk" class="replaced-iframe">(click to see video)
This video addresses the importance of determining company communication style.
Consider the use of digital forms of communication, such as e-mail and text messaging. These forms of communication do not allow us to read another’s body language, which can often result in misconceptions about what another is saying. Use of “smiley” icons can make this clearer, but often people cannot detect sarcasm and other nonverbal communication cues. If you have something important to communicate, it is better to communicate most of the time in person or via phone, so you can hear tone and see facial expressions.
How Would You Handle This?
She Said What?
As the HR manager, you have a meeting scheduled in a few minutes with Adeline. Adeline is the accounting manager for a small firm in Boise, Idaho. She has four people who report to her, Alan being one of them. Alan manages three people in his position as account director. Adeline just left a meeting with one of Alan’s employees, who complained of Alan’s communication style and threatened to quit. She said that Alan belittles them and withholds information. She also complained of Alan making inappropriate comments, which were meant as a joke but were offensive. How would you handle this?
Another note to consider on body language is how body language can be different across cultures. For example, the OK sign (thumb and pointer figure put together to form a circle) means “great” or “fine” in the United States, but in Brazil, Germany, and Russia, this sign would be considered both rude and offensive. In Japan, this sign means you want the store to give you change in coins. When traveling, we often take for granted that gestures, and even interpersonal distance, or how far apart we stand from another person, are the same at home, but obviously this is not the case. Different nonverbal language can be different wherever you go, so reading up on the place you will visit can ensure you won’t offend anyone while there. Having this information can also help us train our employees for overseas assignments. This is discussed in Chapter 8 “Training and Development” and Chapter 14 “International HRM”.
Figure 9.2
What Are Each of These Images Telling Us?
Listening
Listening is obviously an important part of communication. There are three main types of listening. Competitive or combative listening happens when we are focused on sharing our own point of view instead of listening to someone else. In passive listening, we are interesting in hearing the other person and assume we hear and understand what the person says correctly, without verifying. In active listening, we are interested in what the other person has to say and we are active in checking our understanding with the speaker. For example, we may restate what the person has said and then verify our understanding is correct. The feedback process is the main difference between passive listening and active listening.
Figure 9.3 Active listening involves four phases (Steil, et. al., 2011).
Key Takeaways
• Emotional intelligence can be improved over time, unlike IQ, which stays stable throughout life.
• Emotional intelligence includes knowing and managing your emotions, motivating yourself, recognizing and understanding other people’s emotions, and managing relationships.
• There are four types of communication at work: downward, upward, horizontal, and diagonal. All types of communication can happen at once, especially with the use of blogs and social networking sites.
• Companies that use good communication tend to have less turnover and less absenteeism.
• There are four main types of communication styles: expresser, driver, relater, and analytical. The better we can understand our own style of communication and the communication styles of others, the easier it will be to communicate with them.
• Passive, aggressive, and passive-aggressive behaviors are not healthy ways of communicating. Assertive behavior, on the other hand, respects one’s own rights and the rights of others.
• Nonverbal communication is one of the most important tools we can use to communicate how we feel. Watching others’ body language can give us signals as to how they may really feel.
• Listening is also an important part of communication. Active listening occurs when we are interested in what the other person has to say, and we check with the speaker to make sure we understand what they have said. Competitive or combative listening is when we are focused on sharing our own point of view. Passive listening is when we listen to someone, but do not verify that we understand what someone is saying.
Exercises
1. Learn more about your EI by going to http://www.queendom.com/tests/access_page/index.htm?idRegTest=1121 and taking the test. Then answer the following questions:
1. What did the test say about your EI?
2. What are some things you can do to improve your EI? What strategies might you use to improve your EI?
2. Which communication style, the expresser, driver, relater, or analytical, do you typically use? How can you get better at understanding other people’s style and get comfortable communicating in their style?
3. Do you tend to be passive, assertive, or aggressive? Give an example of when you used each style and discuss the result.
4. Take a few hours and watch the body language of the people in your workplace or personal life. Pay careful attention, really being aware of body language. What was the situation? What kinds of body language did they show?
1“Effective Communication in the Workplace,” Business Performance, accessed July 19, 2010, www.businessperform.com/workplace-communication/workplace_communication.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/09%3A_Successful_Employee_Communication/9.01%3A_Introduction.txt |
Learning Objectives
1. Define the various types of management styles.
2. Explain how we can determine which style to use in a variety of situations.
Management style ties in very closely with communication style. There isn’t necessarily one management style that is better than another; they are simply different and might be used in a variety of situations. HR managers can provide training on each of these areas since management style impacts the ability and motivation of employees to do their jobs. This is addressed in Chapter 7 “Retention and Motivation”.
Fortune 500 Focus
One of the most famous Fortune 500 management styles is the GE Way, which has been discussed in numerous books and articles. In fact, GE has traditionally been the recruiting ground for other companies’ CEO searches. When Jack Welch, the famous GE CEO known for several books on his management style, including Winning, retired and was replaced, it took less than a week for the two runners-up for his job to be offered jobs at other Fortune 500 companies. Home Depot recruited Robert Nardellia and 3M recruited W. James McNearney (Deutsch, 2007). However, the command-and-control management style responsible for the success of GE did not work out well for several former GE executives. Command-and-control style is based on military management. The idea is to get people to do what you tell them to do, and if they don’t, there are major penalties, similar to an autocratic style. Many say that Nardellia was unsuccessful at Home Depot because of this ingrained management style learned at GE (Deutsch, 2007). For example, Nardellia insisted that shelves be stocked during off hours, and he instituted formal inventory control. Unfortunately, he didn’t understand most employees were not looking to rise within the organization, so the extra work didn’t provide any upside for the individuals, causing high turnover. An autocratic style may work well in some organizations, well enough for numerous books to be written, but management style isn’t always transferable to other organizations, as Nardellia found out at Home Depot.
Management styles are one of the most challenging topics we can deal with in a work setting. Everyone is different; everyone has a preference for which style motivates them the best in a variety of situations. Oftentimes managers make the mistake of using the same style for everyone, regardless of ability or motivation. In this section, we will discuss some of the main management styles and how to know which one to use in a specific situation.
Task Style versus People-Centered Style
When we look at the styles of management, we see that most styles fall into one of two categories, a task-oriented management style or a people-centered style.
A manager with a task-oriented style will focus on the technical or task aspects of the job. The concern for this manager is that employees know what is expected of them and have the tools needed to do their job.
A people-oriented style is more concerned with the relationships in the workplace. The manager emphasizes the interpersonal relations, as opposed to the task. The manager is most concerned about the welfare of the employee and tends to be friendly and trusting.
Understanding these two main differences in management style, we will now look at other possible styles a manager might use.
Participatory, Directing, or Teamwork Styles
Utilization of a participatory management style involves both a task-oriented style and a people-centered style. This style emphasizes how the employee’s assigned task fits into the bigger picture. This style will provide support and input where needed. As a result, the focus is on the task but also on the person and the relationships required to get the task done. This style might be used when the employees are experienced and the deadlines reasonable enough to provide the time needed to focus both on the task and the person. If more hands-on management is required1, might be appropriate. Consider a very tight deadline or an emergency situation in which someone needs to be calling the shots. For example, in your doggie treats business, you just received an order for one hundred dog cookies by later this afternoon. You might consider using a directing style to make sure it gets done on time. This style doesn’t focus on the person, but rather focuses on getting the task done; hence it tends to be more of a task-oriented style.
A manager who uses a teamwork management style believes there is a value (or necessity) in having people work in teams. As a result, this style tends to require a people-centered approach. Relationships are most important, and assuming the individuals work well together, the task will be successfully accomplished. The advantage to this style, given the type of task and situation, is that as a manager you are able to pool resources and abilities from several different people. Use of a team style can also provide big benefits for the company. For example, Google uses a teamwork approach it calls “grouplets.” Google believes that individuals should be able to spend time on something that interests them and is also company related. Engineers at Google spend 20 percent of their time on this endeavor. As a result, grouplets are formed, and the grouplet works on their idea with no specific budget. Some of the best ideas from Google have come through this teamwork process. Gmail, in fact, was developed using a grouplet (Mediratta, 2007).
Autocratic, Participative, and Free-Reign Styles
An autocratic style of management involves the task-oriented style. The focus is on getting things done, and relationships are secondary. This type of manager tends to tell people what to do and takes a “my way or the highway” approach. Another description for this type of manager is a taskmaster. This person uses his or her authority and makes all the decisions as to who does what, how it is done, and when it should get done.
On the other hand, a participative style constantly seeks input from the employees. Setting goals, making plans, and determining objectives are viewed as a group effort, rather than the manager making all the decisions.
At the other extreme, a free-rein style gives employees total freedom to make decisions on how things will get done. The manager may establish a few objectives, but the employees can decide how those objectives are met. In other words, the leader tends to be removed from the day-to-day activities but is available to help employees deal with any situation that may come up.
Path Goal Model for Leadership
The path goal theory says that the role of a leader is to define goals and lay down the path for the employees to meet those goals. Aspects include clarification of the task and scope of the process. Clarification of the employee’s role and clarification around how the success of the task will be measured are key aspects in this model. The leader also is involved in guidance and coaching surrounding the goal and removes obstacles for employees that might affect the completion of the task. The path goal theory says that if employees are satisfied by the leadership style, they will be motivated toward the goals of leadership. Part of the model also stresses that the skills, experience, and environmental contingencies of the job play a role in the success of the leader.
Figure 9.4 Path Goal Model for Leadership
Applying Management Styles
It is great to talk about management style, but application of that management style, especially in an HR environment, is just as important as knowing the management styles. In this section, we will discuss how and when you might use each style when managing people.
Another way we can view leadership is through the situational leadership model (Blanchard, 2000). This model, developed by Ken Blanchard (author of the One Minute Manager series of books), does a good job explaining how we might use one type of management style versus another.
The model looks at three areas: the relationship behavior of the manager, the task behavior of the manager, and the readiness of employees. The relationship behavior means how supportive the manager needs to be in helping employees. Task behavior refers to the type of style the manager should use when managing employees, based on their readiness level. Readiness includes the willingness and skills to perform the task at hand. Depending on where the employees fall in each of these areas, you might use a different management style:
• D4—High Competence, High Commitment—Experienced at the job and comfortable with their own ability to do it well. May even be more skilled than the leader.
• D3—High Competence, Variable Commitment—Experienced and capable, but may lack the confidence to go it alone or the motivation to do it well/quickly.
• D2—Some Competence, Low Commitment—May have some relevant skills but won’t be able to do the job without help. The task or the situation may be new to them.
• D1—Low Competence, High Commitment—Generally lacking the specific skills required for the job at hand but has the confidence and/or motivation to tackle it.
Based on the readiness and commitment of the employee, the leader can see what management style and level of support the employee should experience (Situational Leadership Grid, 2008):
• S1—Telling/Directing—High task focus, low relationship focus—Leaders define the roles and tasks of the “follower” and supervise them closely. Decisions are made by the leader and announced, so communication is largely one way. This style can be used with people who lack competence but are enthusiastic and committed and who need direction and supervision to get them started.
• S2—Selling/Coaching—High task focus, high relationship focus—Leaders still define roles and tasks but seek ideas and suggestions from the follower. Decisions remain the leader’s prerogative, but communication is much more two-way. This approach can be used with people who have some competence but lack commitment and who need direction and supervision because they are still relatively inexperienced. These individuals may also need support and praise to build their self-esteem and involvement in decision making to restore their commitment.
• S3—Participating/Supporting—Low task focus, high relationship focus—Leaders pass day-to-day decisions, such as task allocation and processes, to the follower. The leader facilitates and takes part in decisions, but control is given to the follower. This style can be used with people who have the necessary competence but lack confidence or motivation. These individuals may need little direction because of their skills, but support is necessary to bolster their confidence and motivation.
• S4—Delegating—Low task focus, low relationship focus—Leaders are still involved in decisions and problem solving, but control is with the follower. The follower decides when and how the leader will be involved. This style would work with people who have both competence and commitment and who are able and willing to work on a project by themselves with little supervision or support.
The bottom line when discussing management style is that no one style works best in all situations. We may be more comfortable with one style versus another, but we need to change our management style depending on the person and task we are working with. For example, if you have an employee who is brand new, you will likely work with that person using a more directive style. As she develops, you might change to a participative style. Likewise, someone who does good work and has lots of experience may prefer a free-rein style. Many managers make the mistake of trying to use the same style with every person in every situation. To be a great manager, we must change our styles based on the situation and the individual involved.
Figure 9.5 Blanchard’s Situational Leadership Model
How does this relate to human resources? First, in HR, we are the “go to” people when there are communication issues or issues between management and employees. By understanding these styles ourselves, it will be easier to communicate with and provide solutions for the people we work with. We might even be able to use this information to develop management training, which can result in better communication and higher productivity.
Human Resource Recall
What kind of management style does your supervisor use? Is it effective?
The Three Types of Bad Managers
" href="http://www.youtube.com/watch?v=uW6oJ988OJ8" class="replaced-iframe">(click to see video)
This video discusses several ways to deal with a poor manager.
Key Takeaways
• Just like in communication, a different management style should be used depending on the employee.
• Task styles focus on getting the job done, while people-centered styles focus on relationships.
• A participatory style involves both task-oriented and people-centered styles. A directing style is focused on the task and doesn’t allow for employee participation. A teamwork style focuses on teamwork and is a people-oriented style. The advantage of this style is the ability to use strengths from everyone on the team.
• An autocratic style doesn’t allow much room for employee decision making; the focus is on getting the task done. A participative style constantly requires input from employees. The free-rein style gives employees freedom to make decisions on how things will get done.
• The situational leadership model, which looks at relationship behavior, task behavior, and the readiness of employees, is used to recommend different management styles.
• No one management style works in all situations. Just like with communication, you will likely want to vary your approach based on the situation to get the best results.
Exercises
1. Why is it important to understand management style if you are an HR professional or manager? Discuss at least three points.
2. What combinations of management style might you use in each of these situations and why?
1. You are considering a major change in the way your company does business. Your staff has an excellent record of achieving goals, and your relationship with them is trusting and supportive.
2. Your employees do a great job. A situation has developed in which you need to make quick decisions and finish a project by the end of the week.
3. Your employees are having trouble getting the job done. Their performance as a whole is less than expected.
4. You have an employee who is very motivated but has little experience.
1“Three Effective Management Styles,” Dun & Bradstreet Credibility Corp., 2010, accessed February 5, 2010, smallbusiness.dnb.com/human-resources/workforce-management/11438-1.html. a directing management styleA management style in which the manager tends to direct rather than allow for feedback. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/09%3A_Successful_Employee_Communication/9.03%3A_Management_Styles.txt |
Chapter Summary
• Emotional intelligence can be improved over time, unlike IQ, which stays stable throughout life.
• Emotional intelligence includes knowing and managing your emotions, motivating yourself, recognizing and understanding other people’s emotions, and managing relationships.
• There are four types of communication at work: downward, upward, horizontal, and diagonal. All types of communication can happen at once, especially with the use of blogs and social networking sites.
• Companies that use good communication tend to have less turnover and less absenteeism.
• There are four main types of communication styles: expresser, driver, relater, and analytical. The better we can understand our own style of communication and the communication styles of others, the easier it will be to communicate with them.
• Passive, aggressive, and passive-aggressive behaviors are not healthy ways of communicating. Assertive behavior, on the other hand, respects one’s own rights and the rights of others.
• Nonverbal communication is one of the most important tools we can use to communicate how we feel. Watching others’ body language can give us signals as to how they may really feel.
• Just like in communication, a different management style should be used depending on the employee.
• Task styles focus on getting the job done, while people-centered styles focus on relationships.
• A participatory style involves both task-oriented and people-centered styles. A directing style is focused on the task and doesn’t allow for employee participation. A teamwork style focuses on teamwork and is a people-oriented style. The advantage of this style is the ability to use strengths from everyone on the team.
• An autocratic style doesn’t allow much room for employee decision making; the focus is on getting the task done. A participative style constantly requires input from employees. The free-rein style gives employees freedom to make decisions on how things will get done.
• The situational leadership model, which looks at relationship behavior, task behavior, and the readiness of employees, is used to recommend different management styles.
• No one management style works in all situations. Just like with communication, you will likely want to vary your approach based on the situation to get the best results.
Chapter Case
Management Style, Applied
You recently completely overhauled several aspects of employee benefits, including health insurance and compensation packages. You have also developed clear succession plans and career development plans to assist in the retention of your current employees. You are pretty excited about the changes and feel they are better for the employees, while costing your organization less money. These plans came from your development of a strategic plan and goals set last year. You think these plans will result in lower turnover.
However, in four recent exit interviews, the former employees mentioned the lack of communication from your department on the changes you made. They said they did not feel well informed and are disappointed they were not notified. In addition, they complained of micromanagement on the part of two particular managers. They said they spend half of their day responding to their managers with project updates, instead of working on the projects themselves. As you begin to think about these exit interviews, you realize that development of the strategic plan and implementing it simply isn’t enough; you must communicate the changes to employees as well. You also have a bit of concern about the management styles mentioned and think it might be a good time to offer training on effective management to your entire company.
1. Using concepts from this chapter and other HRM chapters, develop an outline for a training program on effective management.
2. Discuss some of the ways you can communicate the following topics to the employees: changes to benefits, training opportunities, compensation plans, and succession plans.
Team Activity
1. In groups of three to five, prepare a presentation you could give to a team of managers on management style and communication. In your presentation, address how management style affects employee retention. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/09%3A_Successful_Employee_Communication/9.04%3A_Cases_and_Problems.txt |
A Dilemma
You have been the store manager for a large coffee shop for three years but have never had this type of problem employee to handle before, and you schedule a meeting to speak with your HR manager about it. Jake, one of your best employees, has recently begun to have some problems. He is showing up to work late at least twice per week, and he missed the mandatory employee meeting on Saturday morning. When you ask him about it, he says that he is having some personal problems and will try to get better.
For a bit of time, Jake does get better, comes to work on time, and is his normal, pleasant self when helping customers. However, the situation gets more serious two weeks later when Jake comes to work smelling of alcohol and wearing the same clothes he wore to work the day before. You overhear some of the employees talking about Jake’s drinking problem. You pull Jake aside and ask him what is happening. He says his wife kicked him out of the house last night and he stayed with a friend, but he didn’t have time to gather any of his belongings when he left his house. You accept his answer and hope that things will get better.
A week later, when Jake arrives for his 10–7 shift, he is obviously drunk. He is talking and laughing loudly, smells of alcohol, and has a hard time standing up. You pull him aside and decide to have a serious talk with him. You confront him about his drinking problem, but he denies it, saying he isn’t drunk, just tired from everything happening with his wife. You point out the smell and the inability to stand up, and Jake starts crying and says he quit drinking ten years ago but has recently started again with his impending divorce. He begs for you to give him another chance and promises to stop drinking. You tell him you will think about it, but in the meantime, you send him home.
The meeting with HR is this afternoon and you feel nervous. You want to do what is right for Jake, but you also know this kind of disruptive behavior can’t continue. You like Jake as a person and he is normally a good employee, so you don’t want to fire him. When you meet with the HR manager, he discusses your options. The options, he says, are based on a discipline process developed by HR, and the process helps to ensure that the firing of an employee is both legal and fair. As you review the process, you realize that ignoring the behavior early on has an effect on what you can do now. Since you didn’t warn Jake earlier, you must formally document his behavior before you can make any decision to let him go. You hope that Jake can improve so it doesn’t come down to that.
10.02: Handling Performance
Learning Objectives
1. Explain the types of performance issues that occur in the workplace, and the internal and external reasons for poor performance.
2. Understand how to develop a process for handling employee performance issues.
3. Be able to discuss considerations for initiating layoffs or downsizing.
As you know from reading this book so far, the time and money investment in a new employee is overwhelming. The cost to select, hire, and train a new employee is staggering. But what if that new employee isn’t working out? This next section will provide some examples of performance issues and examples of processes to handle these types of employee problems.
Types of Performance Issues
One of the most difficult parts of managing others isn’t when they are doing a great job—it is when they aren’t doing a good job. In this section, we will address some examples of performance issues and how to handle them.
1. Constantly late or leaves early. While we know that flexible schedules can provide a work-life balance, managing this flexible schedule is key. Some employees may take advantage and, instead of working at home, perform nonwork-related tasks instead.
2. Too much time spent doing personal things at work. Most companies have a policy about using a computer or phone for personal use. For most companies, some personal use is fine, but it can become a problem if someone doesn’t know where to draw the line.
3. Inability to handle proprietary information. Many companies handle important client and patient information. The ability to keep this information private for the protection of others is important to the success of the company.
4. Family issues. Child-care issues, divorce, or other family challenges can cause absenteeism, but also poor work quality. Absenteeism is defined as a habitual pattern of not being at work.
5. Drug and alcohol abuse. The US Department of Labor says that 40 percent of industrial fatalities and 47 percent of industrial injury can be tied to alcohol consumption. The US Department of Labor estimates that employees who use substances are 25–30 percent less productive and miss work three times more often than nonabusing employees (US Department of Labor, 2011). Please keep in mind that when we talk about substance abuse, we are talking about not only illegal drugs but prescription drug abuse as well. In fact, the National Institute on Drug Abuse says that 15.2 million Americans have taken a prescription pain reliever, tranquilizer, or sedative for nonmedical purposes at least once (Fisher, 2011). Substance abuse can cause obvious problems, such as tardiness, absenteeism, and nonperformance, but it can also result in accidents or other more serious issues.
6. Nonperforming. Sometimes employees are just not performing at their peak. Some causes may include family or personal issues, but oftentimes it can mean motivational issues or lack of tools and/or ability to do their current job.
7. Conflicts with management or other employees. While it is normal to have the occasional conflict at work, some employees seem to have more than the average owing to personality issues. Of course, this affects an organization’s productivity.
8. Theft. The numbers surrounding employee theft are staggering. The American Marketing Association estimates \$10 billion is lost annually owing to employee theft, while the FBI estimates up to \$150 billion annually1. Obviously, this is a serious employee problem that must be addressed.
9. Ethical breaches. The most commonly reported ethical breaches by employees include lying, withholding information, abusive behavior, and misreporting time or hours worked, according to a National Business Ethics study2. Sharing certain proprietary information when it is against company policy and violating noncompete agreements are also considered ethical violations. Many companies also have a nonfraternization policy that restricts managers from socializing with nonmanagement employees.
10. Harassment. Engagement of sexual harassment, bullying, or other types of harassment would be considered an issue to be dealt with immediately and, depending on the severity, may result in immediate termination.
11. Employee conduct outside the workplace. Speaking poorly of the organization on blogs or Facebook is an example of conduct occurring outside the workplace that could violate company policy. Violating specific company policies outside work could also result in termination. For example, in 2010, thirteen Virgin Atlantic employees were fired after posting criticisms about customers and joking about the lack of safety on Virgin airplanes in a public Facebook group (Smith, 2010). In another example, an NFL Indianapolis Colts cheerleader was fired after racy Playboy promotional photos surfaced (before she became a cheerleader) that showed her wearing only body paint (Chandler, 2011).
While certainly not exhaustive, this list provides some insight into the types of problems that may be experienced. As you can see, some of these problems are more serious than others. Some issues may only require a warning, while some may require immediate dismissal. As an HR professional, it is your job to develop policies and procedures for dealing with such problems. Let’s discuss these next.
Fortune 500 Focus
To handle attendance problems at many organizations, a no-fault attendance plan is put into place. In this type of plan, employees are allowed a certain number of absences; when they exceed that number, a progressive discipline process begins and might result in dismissal of the employee. A no-fault attendance policy means there are no excused or unexcused absences, and all absences count against an employee. For example, a company might give one point for an absence that is called in the night before work, a half point for a tardy, and two points for a no-call and no-show absence. When an employee reaches a certain number determined by the company, he or she is disciplined. This type of policy is advantageous in industries in which unplanned absences have a direct effect on productivity, such as manufacturing and production. Another advantage is that managers do not need to make judgment calls on what is an excused versus an unexcused absence, and this can result in fairness to all employees.
One such company with a no-fault attendance policy is Verizon Communications. However, the Equal Employment Opportunity Commission (EEOC) investigated this policy and announced that Verizon will pay \$20 million to resolve a disability discrimination lawsuit (Evans, 2011). The lawsuit said that the company, through use of the no-fault attendance policy, denied reasonable accommodations required by the Americans with Disabilities Act (ADA). As a result, hundreds of Verizon employees were disciplined or fired. In this case, the EEOC cites paid or unpaid leave as one way for an employer to provide reasonable accommodations for an employee with a disability. The policy specified there would be no exceptions made to the no-fault attendance policy to accommodate employees with ADA disabilities. When discussing the case, the EEOC chair justified the agency’s position by saying, “Flexibility on leave can enable a worker with a disability to remain employed and productive, a win for the worker, employer, and the economy. By contrast, an inflexible leave policy may deny workers with disabilities a reasonable accommodation” (Evans, 2011). Part of the settlement also involved additional training to Verizon employees on ADA and how to administer the attendance plan. This successful lawsuit shows that even the most seemingly clear performance expectations must be flexible to meet legal obligations.
Human Resource Recall
What would you do if you saw a coworker taking a box of pens home from the office?
What Influences Performance?
When an employee isn’t performing as expected, it can be very disapointing. When you consider the amount of time it takes to recruit, hire, and train someone, it can be disappointing to find that a person has performance issues. Sometimes performance issues can be related to something personal, such as drug or alchol abuse, but often it is a combination of factors. Some of these factors can be internal while others may be external. Internal factors may include the following:
1. Career goals are not being met with the job.
2. There is conflict with other employees or the manager.
3. The goals or expectations are not in line with the employee’s abilities.
4. The employee views unfairness in the workplace.
5. The employee manages time poorly.
6. The employee is dissatisfied with the job.
Some of the external factors may include the following:
1. The employee doesn’t have correct equipment or tools to perform the job.
2. The job design is incorrect.
3. External motivation factors are absent.
4. There is a lack of management support.
5. The employee’s skills and job are mismatched.
All the internal reasons speak to the importance once again of hiring the right person to begin with. The external reasons may be something that can be easily addressed and fixed. Whether the reason is internal or external, performance issues must be handled in a timely manner. This is addressed in “Defining Discipline”. We discuss performance issues in greater detail in Chapter 11.
Defining Discipline
If an employee is not meeting the expectations, discipline might need to occur. Discipline is defined as the process that corrects undesirable behavior. The goal of a discipline process shouldn’t necessarily be to punish, but to help the employee meet performance expectations. Often supervisors choose not to apply discipline procedures because they have not documented past employee actions or did not want to take the time to handle the situation. When this occurs, the organization lacks consistency among managers, possibility resulting in motivational issues for other employees and loss of productivity.
To have an effective discipline process, rules and policies need to be in place and communicated so all employees know the expectations. Here are some guidelines on creation of rules and organizational policies:
1. All rules or procedures should be in a written document.
2. Rules should be related to safety and productivity of the organization.
3. Rules should be written clearly, so no ambiguity occurs between different managers.
4. Supervisors, managers, and human resources should communicate rules clearly in orientation, training, and via other methods.
5. Rules should be revised periodically, as the organization’s needs change.
Of course, there is a balance between too many “rules” and giving employees freedom to do their work. However, the point of written rules is to maintain consistency. Suppose, for example, you have a manager in operations and a manager in marketing. They both lead with a different style; the operations manager has a more rigid management style, while the marketing manager uses more of a laissez-faire approach. Suppose one employee in each of the areas is constantly late to work. The marketing manager may not do anything about it, while the operations manager may decide each tardy day merits a “write-up,” and after three write-ups, the employee is let go. See how lack of consistency might be a problem? If this employee is let go, he or she might be able to successfully file a lawsuit for wrongful termination, since another employee with the same performance issue was not let go. Wrongful termination means an employer has fired or laid off an employee for illegal reasons, such as violation of antidiscrimination laws or violation of oral and/or written employee agreements. To avoid such situations, a consistent approach to managing employee performance is a crucial part of the human resources job.
The Role of the Performance Appraisal in Discipline
Besides the written rules, each individual job analysis should have rules and policies that apply to that specific job. We discuss performance appraisal in further detail in Chapter 11, but it is worth a mention here as well. The performance appraisal is a systematic process to evaluate employees on (at least) an annual basis. The organization’s performance appraisal and general rules and policies should be the tools that measure the employee’s overall performance. If an employee breaks the rules or does not meet expectations of the performance appraisal, the performance issue model, which we will discuss next, can be used to correct the behavior.
Performance Issue Model
Because of the many varieties of performance issues, we will not discuss how to handle each type in detail here. Instead, we present a model that can be used to develop policies around performance, for fairness and consistency.
We can view performance issues in one of five areas. First, the mandated issue is serious and must be addressed immediately. Usually, the mandated issue is one that goes beyond the company and could be a law. Examples of mandated issues might include an employee sharing information that violates privacy laws, not following safety procedures, or engaging in sexual harassment. For example, let’s say a hospital employee posts something on his Facebook page that violates patient privacy. This would be considered a mandated issue (to not violate privacy laws) and could put the hospital in serious trouble. These types of issues need to be handled swiftly. A written policy detailing how this type of issue would be handled is crucial. In our example above, the policy may state that the employee is immediately fired for this type of violation. Or, it may mean this employee is required to go through privacy training again and is given a written warning. Whatever the result, developing a policy on how mandated issues will be handled is important for consistency.
The second performance issue can be called a single incident. Perhaps the employee misspeaks and insults some colleagues or perhaps he or she was over budget or late on a project. These types of incidents are usually best solved with a casual conversation to let the employee know what he or she did wasn’t appropriate. Consider this type of misstep a development opportunity for your employee. Coaching and working with the employee on this issue can be the best way to nip this problem before it gets worse.
Often when single incidents are not immediately corrected, they can evolve into a behavior pattern, which is our third type of performance issue. This can occur when the employee doesn’t think the incident is a big deal because he hasn’t been correct before or may not even realize his is doing something wrong. In this case, it’s important to talk with the employee and let him know what is expected.
If the employee has been corrected for a behavior pattern but continues to exhibit the same behavior, we call this a persistent pattern. Often you see employees correct the problem after an initial discussion but then fall back into old habits. If they do not self-correct, it could be they do not have the training or the skills to perform the job. In this phase of handling performance issues, it is important to let the employee know that the problem is serious and further action will be taken if it continues. If you believe the employee just doesn’t have the skills or knowledge to perform the job, asking him or her about this could be helpful to getting to the root of the problem as well. If the employee continues to be nonperforming, you may consider utilizing the progressive discipline process before initiating an employee separation. However, investigating the performance issue should occur before implementing any sort of discipline.
Investigation of Performance Issues
When an employee is having a performance issue, often it is our responsibility as HR professionals to investigate the situation. Training managers on how to document performance failings is the first step in this process. Proper documentation is necessary should the employee need to be terminated later for the performance issue. The documentation should include the following information:
1. Date of incident
2. Time of incident
3. Location (if applicable) of incident
4. A description of the performance issue
5. Notes on the discussion with the employee on the performance issue
6. An improvement plan, if necessary
7. Next steps, should the employee commit the same infraction
8. Signatures from both the manager and employee
With this proper documentation, the employee and the manager will clearly know the next steps that will be taken should the employee commit the infraction in the future. Once the issue has been documented, the manager and employee should meet about the infraction. This type of meeting is called an investigative interview and is used to make sure the employee is fully aware of the discipline issue. This also allows the employee the opportunity to explain his or her side of the story. These types of meetings should always be conducted in private, never in the presence of other employees.
In unionized organizations, however, the employee is entitled to union representation at the investigative interview. This union representation is normally called interest based bargaining referring to a National Labor Relations Board case that went to the United States Supreme Court in 1975. Recently, Weingarten rights continued to be protected when Alonso and Carus Ironworks was ordered to cease and desist from threatening union representatives who attempted to represent an employee during an investigative interview (National Labor Relations Board, 2011).
Options for Handling Performance Issues
Our last phase of dealing with employee problems would be a disciplinary intervention. Often this is called the progressive discipline process. It refers to a series of steps taking corrective action on nonperformance issues. The progressive discipline process is useful if the offense is not serious and does not demand immediate dismissal, such as employee theft. The progressive discipline process should be documented and applied to all employees committing the same offenses. The steps in progressive discipline normally are the following:
1. First offense: Unofficial verbal warning. Counseling and restatement of expectations.
2. Second offense: Official written warning, documented in employee file.
3. Third offense: Second official warning. Improvement plan (discussed later) may be developed. Documented in employee file.
4. Fourth offense: Possible suspension or other punishment, documented in employee file.
5. Fifth offense: Termination and/or alternative dispute resolution.
University of Iowa’s Progressive Discipline Process
The chart below shows the typical progressive discipline process at the University of Iowa:
Counseling and Restatement of Expectations
Counseling and Restatement of Expectations
Counseling by the immediate supervisor is the initial step to mentor or coach performance.
• Meet with the staff member and affirm expectations regarding performance.
• Discuss the performance deficit or behavioral concern.
• Provide a timeline and resources for improvement.
• Report consequences for no improvement.
• Document for an anecdotal file.
Written Reprimand Written Reprimand
At this time, the immediate supervisor may want to consult a Human Resources representative. After an investigation, follow the procedure outline above for the counseling process, with the exception of providing documentation to the employee in a letter of reprimand. The letter should outline previous informal efforts and the current problem. Send copies of the signed letter to the department personnel file, proper University authority, and the respective Union, if applicable.
Short Suspension (or Equivalent)*
Long Suspension (or Equivalent)*
Suspension or Equivalent
Fully investigate the concern, followed by discussion with the employee. Summarize previous progressive discipline and the current problem, and specify the timeframe for suspension in writing. Identify further discipline and possible termination as a potential consequence for not meeting and maintaining standards for improvement. Provide copies as for the written reprimand.
Termination Termination
Termination may be necessary when discipline is not successful in improving performance. Review the work history and record of progressive discipline with proper University authority. Schedule a final meeting with the employee and conduct a meeting at which a letter of termination is provided. If necessary, the termination notice may be sent via certified mail. Provide copies as for previous disciplinary measures.
*Salary reduction cannot be imposed on professional and scientific and faculty staff, due to union contracts
The Seven Tests of Just Cause
The seven test[s] of just cause represent a practical and effective way to determine whether a proposed disciplinary action is firmly and fairly grounded. It is fair to assume that these tests will be applied by arbitrators in the event that disciplinary actions are challenged, and it is therefore good practice to apply them prospectively when considering the imposition of progressive discipline.
Seven tests:
1. Notice
• Prior to imposition of discipline, employee must have notice of rules and expectations.
• Establish through:
• New employee orientation
• Orientation checklists
• Receipts for departmental handbooks
• Periodic reinforcement/coaching
2. Reasonable Rules and Orders
• Cannot be inconsistent with collective bargaining agreement(s)
• Cannot be arbitrary or capricious
• Must be reasonably related to business necessity
3. Investigation
• Must be thorough; consider all evidence, pro and con.
• Must be timely:
• Should be completed expeditiously
• Occurs before discipline imposed
• Give accused opportunity to respond (Loudermill hearing).
• Allow union representation (Weingarten rights).
4. Fair Investigation
• Result must not be forgone conclusion.
• Test assumptions/bias.
5. Proof
• Level of proof is normally substantial evidence.
• Greater proof required for more serious allegations.
6. Equal Treatment
• Rules must be applied even-handedly and without discrimination.
• Rules must be applied justly.
• Don’t blindly apply the same rule to all situations—managers/supervisors are expected to exercise judgment.
7. Penalty
• Must be fair, not arbitrary and capricious, or based on emotional response.
• Factor in length of service, prior performance history, and previous progressive discipline.
Another option for handling continued infractions is to consider putting the employee on an improvement plan, which outlines the expectations and steps the employee should take to improve performance. We address this in greater detail in Chapter 11 . The plan is detailed and outlined and ensures both parties understand the specific expectations for improvement. If the improvement plan does not work, a progressive discipline process might be used.
Alternative Dispute Resolution
Another option in handling disputes, performance issues, and terminations is alternative dispute resolution (ADR). This method can be effective in getting two parties to come to a resolution. In ADR, an unbiased third party looks at the facts in the case and tries to help the parties come to an agreement. In mediation, the third party facilitates the resolution process, but the results of the process are not binding for either party. This is different from arbitration, in which a person reviews the case and makes a resolution or a decision on the situation. The benefits of ADR are lower cost and flexibility, as opposed to taking the issue to court. We discuss these types of systems in greater detail in Chapter 12.
Some organizations use a step-review system. In this type of system, the performance issue is reviewed by consecutively higher levels of management, should there be disagreement by the employee in a discipline procedure. Some organizations also implement a peer resolution system. In this type of system, a committee of management and employees is formed to review employee complaints or discipline issues. In this situation, the peer review system normally involves the peer group reviewing the documentation and rendering a decision. Another type of ADR is called the ombudsman system. In this system, a person is selected (or elected) to be the designated individual for employees to go to should they have a complaint or an issue with a discipline procedure. In this situation, the ombudsman utilizes problem-solving approaches to resolve the issue. For example, at National Geographic Traveler Magazine an ombudsman handles employee complaints and issues and also customer complaints about travel companies.
Example of Mediation in Action
This longer video shows an example of dispute mediation between two employees.
Employee Separation
Employee separation can occur in any of these scenarios. First, the employee resigns and decides to leave the organization. Second, the employee is terminated for one or more of the performance issues listed previously. Lastly, absconding is when the employee decides to leave the organization without resigning and following the normal process. For example, if an employee simply stops showing up to work without notifying anyone of his or her departure, this would be considered absconding. Let’s discuss each of these in detail. Employee separation costs can be expensive, as we learned in Chapter 7. In the second quarter in 2011, for example, Halliburton reported \$8 million in employee separation costs (Lemaire, 2011).
Employee Separations and Layoffs
This video shows the progressive discipline process and the termination of an employee when he continually failed to meet expectations.
Resignation means the employee chooses to leave the organization. First, if an employee resigns, normally he or she will provide the manager with a formal resignation e-mail. Then the HR professional usually schedules an exit interview, which can consist of an informal confidential discussion as to why the employee is leaving the organization. If HR thinks the issue or reasons for leaving can be fixed, he or she may discuss with the manager if the resignation will be accepted. Assuming the resignation is accepted, the employee will work with the manager to determine a plan for his or her workload. Some managers may prefer the employee leave right away and will redistribute the workload. For some jobs, it may make sense for the employee to finish the current project and then depart. This will vary from job to job, but two weeks’ notice is normally the standard time for resignations.
If it is determined an employee should be terminated, different steps would be taken than in a resignation. First, documentation is necessary, which should have occurred in the progressive discipline process. Performance appraisals, performance improvement plans, and any other performance warnings the employee received should be readily available before meeting with the employee. It should be noted that the reliability and validity of performance appraisals should be checked before dismissing an employee based upon them. Questionable performance appraisals come from the real-world conditions common to rating situations, particularly because of limitations in the abilities of the raters (Weekley, 1989). Reliability and validity of performance appraisals are discussed in detail in Chapter 11.
Remember that if the discipline process is followed as outlined prior, a termination for nonperformance should never be a surprise to an employee. Normally, the manager and HR manager would meet with the employee to deliver the news. It should be delivered with compassion but be direct and to the point. Depending on previous contracts, the employee may be entitled to a severance package. A severance package can include pay, benefits, or other compensation for which an employee is entitled when they leave the organization. The purpose of a severance plan is to assist the employee while he or she seeks other employment. The HR professional normally develops this type of package in conjunction with the manager. Some considerations in developing a severance package (preferably before anyone is terminated) might include the following:
1. How the severance will be paid (i.e., lump sum or in x equal increments)
2. Which situations will pay a severance and which will not. For example, if an employee is terminated for violation of a sexual harassment policy, is a severance still paid?
3. A formula for how severance will be paid, based on work group, years with the organization, etc.
4. Legal documents, such as legal releases and non-compete agreements
5. How accrued vacation and/or sick leave will be paid, if at all
The last topic that we should discuss in this section is the case of an absconded employee. If an employee stops showing up to work, a good effort to contact this person should be the first priority. If after three days this person has not been reachable and has not contacted the company, it would be prudent to stop pay and seek legal help to recover any company items he or she has, such as laptops or parking passes.
Sometimes rather than dealing with individual performance issues and/or terminations, we find ourselves having to perform layoffs of several to hundreds of employees. Let’s address your role in this process next.
Rightsizing and Layoffs
Rightsizing refers to the process of reducing the total size of employees, to ultimately save on costs. Downsizing ultimately means the same thing as rightsizing, but the usage of the word has changed in that rightsizing seems to define the organization’s goals better, which would be to reduce staff to save money, or rightsize. When a company decides to rightsize and, ultimately, engage in layoffs, some aspects should be considered.
First, is the downturn temporary? There is nothing worse than laying people off, only to find that as business increases, you need to hire again. Second, has the organization looked at other ways to cut expenses? Perhaps cutting expenses in other areas would be advisable before choosing to lay people off. Finally, consideration should be given to offering temporary sabbaticals, voluntary retirement, or changing from a full- to part-time position. Some employees may even be willing to take a temporary pay cut to reduce costs. Organizations find they can still keep good people by looking at some alternatives that may work for the employee and the organization, even on a temporary basis.
If the company has decided the only way to reduce costs is to cut full-time employees, this is often where HR should be directly involved to ensure legal and ethical guidelines are met. Articulating the reasons for layoffs and establishing a formalized approach to layoffs is the first consideration. Before it is decided who should get cut, criteria should be developed on how these decisions will be made. Similar to how selection criteria might be developed, the development of criteria that determines which jobs will be cut makes the process of cutting more fair, albeit still difficult. Establishing the criteria ahead of time can also help avoid managers’ trying to “save” certain people from their own departments. After development of criteria, the next phase would be to sit down with management and decide who does or doesn’t meet the criteria and who will be laid off. At this point, before the layoffs happen, it makes sense to discuss severance packages. Usually, when an employee signs for a severance package, the employee should also sign a form (the legal department can help with this) that releases the organization from all future claims made by the employee.
After criteria have been developed, people selected, and severance packages determined, it’s key to have a solid communication plan as to how the layoffs will be announced. Usually, this involve an initial e-mail to all employees, letting them know of impending layoffs. Speak with each employee separately, then announce which positions were eliminated. The important thing to remember during layoffs is keeping your employees’ dignity; they did not do anything wrong to lose their job—it was just a result of circumstances.
Announcing Layoffs
We know that communicating a layoff announcement is important. This video, starring Kermit the Frog, is a good example of how not to announce layoffs—even on Sesame Street.
Key Takeaways
• Performance issues in the workplace are common. Examples of performance issues might include constant tardiness, too much time at work handling personal issues, mishandling of proprietary information, family issues, drug and alcohol problems, nonperformance, theft, or conflicts in the workplace.
• Employees choose to leave organizations for internal and external reasons. Some of these may include a mismatch of career goals, conflict, too high expectations, time-management issues, and mismatch of job and skills.
• HR professionals should develop a set of policies that deal with performance issues in the workplace. The advantage of having such a policy is that it can eliminate wrongful termination legal action.
• A mandated issue is usually one that deals with safety or legal issues that go beyond the workplace. An infringement of this type of issue requires immediate attention.
• A single incident may include a misstep of the employee, and he or she should immediately be spoken with to ensure it doesn’t happen again.
• A behavior pattern occurs when an employee consistently exhibits a performance issue. This type of issue should be discussed with the employee and plans taken, such as more training, to ensure it does not continue. A persistent pattern occurs when an employee consistently exhibits a performance issue and does not improve, despite HR’s talking with him or her.
• At some point during the persistent pattern, disciplinary action will likely need to be taken. It is important to develop consistent procedures on how to record and handle disciplinary issues. Most employers use a progressive discipline process to accomplish this goal.
• Employee separation occurs in one of three ways. First, the employee resigns from the organization. Second, the employee is terminated for performance issues, and third, an employee absconds. Absconds means the employee abandons his or her job without submitting a formal resignation.
• In some cases, a severance package may be offered to the employee upon his or her departure from the organization.
• Rightsizing is a term used when an organization must cut costs through layoffs of employees. Development of criteria for layoffs, communication, and severance package discussion are all parts of this process.
Exercises
1. What are some considerations before developing a severance package? What are the advantages of offering a severance package to your departing employees?
2. What are some common performance issues? What is HR’s role in handling these issues?
3. What process should you use to initiate layoffs?
1“Employee Theft and Legal Aspects,” Net Industries, accessed March 8, 2011, http://law.jrank.org/pages/1084/Employee-Theft-Legal-Aspects-Estimates-cost.html.
2“Careers By the Numbers,” InfoWorld, October 2, 2000, accessed August 1, 2011, http://books.google.com/books?id=ST0EAAAAMBAJ&pg=PA93&lpg=PA93&dq=Careers+By+the+Numbers +InfoWorld+October+2,+2000&source=bl&ots=KU2eMTa3C3&sig=rU3s8ywYcc0Z kUbuydMO3wrO1Rc&hl=en&sa=X&ei=yoVsT6PfGYSw0QH11u3TBg&ved=0CCIQ6 AEwAA#v=onepage&q= Careers%20By%20the%20Numbers%20InfoWorld%20October %202%2C%202000&f=false. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/10%3A_Managing_Employee_Performance/10.01%3A_Introduction.txt |
Learning Objectives
1. Be able to explain employee rights.
2. Define unions and explain their relation to the HRM function.
Employee rights is defined as the ability to receive fair treatment from employers. This section will discuss employee rights surrounding job protection, privacy, and unionization.
Job Protection Rights
If HR doesn’t understand or properly manage employee rights, lawsuits are sure to follow. It is the HR professional’s job to understand and protect the rights of employees. In the United States, the employment-at-will principle (EAW) is the right of an employer to fire an employee or an employee to leave an organization at any time, without any specific cause. The EAW principle gives both the employee and employer freedom to terminate the relationship at any time. There are three main exceptions to this principle, and whether they are accepted is up to the various states:
1. Public policy exception. With a public policy exception, an employer may not fire an employee if it would violate the individual state’s doctrine or statute. For example, in Borse v. Piece Goods Shop in Pennsylvania, a federal circuit court of appeals ruled that Pennsylvania law may protect at-will employees from being fired for refusing to take part in drug test programs if the employee’s privacy is invaded. Borse contended that the free speech provisions of the state and of the First Amendment protected the refusal to participate. Some public policy exceptions occur when an employee is fired for refusing to violate state or federal law.
2. Implied contract exception. In a breach of an implied contract, the discharged employee can prove that the employer indicated that the employee has job security. The indication does not need to be formally written, only implied. In Wright v. Honda, an Ohio employee was terminated but argued that the implied contract exception was relevant to the employment-at-will doctrine. She was able to prove that in orientation, Honda stressed to employees the importance of attendance and quality work. She was also able to prove that the language in the associate handbook implied job security: “the job security of each employee depends upon doing your best on your job with the spirit of cooperation.” Progress reports showing professional development further solidified her case, as she had an implied contract that Honda had altered the employment-at-will doctrine through its policies and actions.
3. Good faith and fair dealing exception. In the good faith and fair dealing exception, the discharged employee contends that he was not treated fairly. This exception to the employment-at-will doctrine is less common than the first two. Examples might include firing or transferring of employees to prevent them from collecting commissions, misleading employees about promotions and pay increases, and taking extreme actions that would force the employee to quit.
Table 10.1 State’s Acceptance of Employment-at-Will Exceptions
State Public-Policy Exception Implied-Contract Exception Good Faith and Fair Dealing Exception
Alabama no yes yes
Alaska yes yes yes
Arizona yes yes yes
Arkansas yes yes no
California yes yes yes
Colorado yes yes no
Connecticut yes yes no
Delaware yes no yes
District of Columbia yes yes no
Florida no no no
Georgia no no no
Hawaii yes yes no
Idaho yes yes yes
Illinois yes yes no
Indiana yes no no
Iowa yes yes no
Kansas yes yes no
Kentucky yes yes no
Louisiana no no no
Maine no yes no
Maryland yes yes no
Massachusetts yes no yes
Michigan yes yes no
Minnesota yes yes no
Mississippi yes yes no
Missouri yes no no
Montana yes no no
Nebraska no yes no
Nevada yes yes yes
New Hampshire yes yes no
New Jersey yes yes no
New Mexico yes yes no
New York no yes no
North Carolina yes no no
North Dakota yes yes no
Ohio yes yes no
Oklahoma yes yes no
Oregon yes yes no
Pennsylvania yes no no
Rhode Island no no no
South Carolina yes yes No
South Dakota yes yes no
Tennessee yes yes no
Texas yes no no
Utah yes yes yes
Vermont yes yes no
Virginia yes no no
Washington yes yes no
West Virginia yes yes no
Wisconsin yes yes no
Wyoming yes yes yes
Bold text indicates a state with all three exceptions.
Italic text indicates a state with none of the three exceptions.
When one of the exceptions can be proven, wrongful discharge accusations may occur. The United States is one of the few major industrial powers that utilize an employment-at-will philosophy. Most countries, including France and the UK, require employers to show just cause for termination of a person’s employment (USLegal, 2011). The advantage of employment at will allows for freedom of employment; the possibility of wrongful discharge tells us that we must be prepared to defend the termination of an employee, as to not be charged with a wrongful discharge case.
Employees also have job protection if they engage in whistleblowing. Whistleblowing refers to an employee’s telling the public about ethical or legal violations of his or her organization. This protection was granted in 1989 and extended through the Sarbanes-Oxley Act of 2002. Many organizations create whistleblowing policies and a mechanism to report illegal or unethical practices within the organization (Ravishankar, 2011).
Another consideration for employee job protection is that of an implied contract. It is in the best interest of HR professionals and managers alike to avoid implying an employee has a contract with the organization. In fact, many organizations develop employment-at-will policies and ask their employees to sign these policies as a disclaimer for the organization.
A constructive discharge means the employee resigned, but only because the work conditions were so intolerable that he or she had no choice. For example, if James is being sexually harassed at work, and it is so bad he quits, he would need to prove not only the sexual harassment but that it was so bad it required him to quit. This type of situation is important to note; should James’s case go to court and sexual harassment and constructive discharge are found, James may be entitled to back pay and other compensation.
The Worker Adjustment and Retraining Notification Act (WARN) requires organizations with more than one hundred employees to give employees and their communities at least sixty days’ notice of closure or layoff affecting fifty or more full-time employees. This law does not apply in the case of unforeseeable business circumstances. If an employer violates this law, it can be subject to back pay for employees (US Department of Labor, 2011). This does not include workers who have been with the organization for less than six months, however.
Retaliatory discharge means punishment of an employee for engaging in a protected activity, such as filing a discrimination charge or opposing illegal employer practices. For example, it might include poor treatment of an employee because he or she filed a workers’ compensation claim. Employees should not be harassed or mistreated should they file a claim against the organization.
Privacy Rights
Technology makes it possible to more easily monitor aspects of employees’ jobs, although a policy on this subject should be considered before implementing it. In regard to privacy, a question exists whether an employer should be allowed to monitor an employee’s online activities. This may include work e-mail, websites visited using company property, and also personal activity online.
Digital Footprints, Inc. is a company that specializes in tracking the digital movements of employees and can provide reports to the organization by tracking these footprints. This type of technology might look for patterns, word usage, and other communication patterns between individuals. This monitoring can be useful in determining violations of workplace policies, such as sexual harassment. This type of software and management can be expensive, so before launching it, it’s imperative to address its value in the workplace.
Another privacy concern can include monitoring of employee postings on external websites. Companies such as Social Sentry, under contract, monitor employee postings on sites such as Facebook, Twitter, LinkedIn, and YouTube (Teneros Corporation, 2011). Lawyers warn, however, that this type of monitoring should only be done if the employee has consented (People Management, 2011). A monitoring company isn’t always needed to monitor employees’ movements on social networking. And sometimes employees don’t even have to tweet something negative about their own company to lose their job. A case in point is when Chadd Scott, who does Atlanta sports updates for 680/The Fan, was fired for tweeting about Delta Airlines. In his tweet, he complained about a Delta delay and said they did not have enough de-icing fluid. Within a few hours, he was fired from his job, because Delta was a sponsor of 680/The Fan (Ho, 2011).
The US Patriot Act also includes caveats to privacy when investigating possible terrorist activity. The Patriot Act requires organizations to provide private employee information when requested. Overall, it is a good idea to have a clear company policy and perhaps even a signed waiver from employees stating they understand their activities may be monitored and information shared with the US government under the Patriot Act.
Depending on the state in which you live, employees may be given to see their personnel files and the right to see and correct any incorrect information within their files. Medical or disability information should be kept separate from the employee’s work file, per the Americans with Disabilities Act. In addition, the Health Insurance Portability and Accountability Act (HIPAA) mandates that health information should be private, and therefore it is good practice to keep health information in a separate file as well.
Finally, drug testing and the right to privacy is a delicate balancing act. Organizations that implement drug testing often do so for insurance or safety reasons. Because of the Drug-Free Workplace Act of 1988, some federal contractors and all federal grantees must agree they will provide a drug-free workplace, as a condition of obtaining the contract. The ADA does not view testing for illegal drug use as a medical examination (making them legal), and people using illegal drugs are not protected under the ADA (US Equal Employment Opportunity Commission, 2011); however, people covered under ADA laws are allowed to take medications directly related to their disability. In a recent case, Bates v. Dura Automotive Systems, an auto parts manufacturer had a high accident rate and decided to implement drug testing to increase safety. Several prescription drugs were banned because they were known to cause impairment. The plaintiffs in the case had been dismissed from their jobs because of prescription drug use, and they sued, claiming the drug-testing program violated ADA laws (Lewis, 2010). However, the Sixth Circuit Court reversed the case because the plaintiffs were not protected under ADA laws (they did not have a documented disability).
In organizations where heavy machinery is operated, a monthly drug test may be a job requirement. In fact, under the Omnibus Transportation Employee Testing Act of 1991, employers are legally required to test for drugs in transportation-related businesses such as airlines, railroads, trucking, and public transportation, such as bus systems. Medical marijuana is a relatively new issue that is still being addressed in states that allow its use. For example, if the company requires a drug test and the employee shows positive for marijuana use, does asking the employee to prove it is being used for medical purposes violate HIPAA privacy laws? This issue is certainly one to watch over the coming years.
Figure 10.3 Sample Policies on Privacy Relating to Technology
Human Resource Recall
What does the term retaliatory discharge mean?
Labor Unions
A union is an organization of employees formed to bargain with an employer. We discuss labor unions in greater detail in Chapter 12 “Working with Labor Unions”. It is important to mention unions here, since labor contracts often guide the process for layoffs and discipline. Labor unions have been a part of the US workplace landscape since the late 1920s, but the Wagner Act of 1935 significantly impacted labor and management relations by addressing several unfair labor practices. The National Labor Relations Board is responsible for administering and enforcing the provisions outlined in the Wagner Act. The act made acts such as interfering with the formation of unions and discriminating on the basis of union membership illegal for employers. By the 1940s, 9 million people were members of a union, which spurred the passage of the Taft-Hartley Act. This act set a new set of standards for fair practices by the unions, within a unionized environment.
The purpose of a union is to give collective bargaining power to a group of individuals. For example, instead of one person negotiating salary, a union gives people the power to bargain as a group, creating a shift from the traditional power model. Issues to negotiate can include pay, health benefits, working hours, and other aspects relating to a job. People often decide to form a union if they perceive the organization or management of the organization is treating them unfairly. Some people also believe that belonging to a union means higher wages and better benefits.
Many employers feel it is not in the best interest of the organization to unionize, so they will engage in strategies to prevent unionization. This is discussed further in Chapter 12 “Working with Labor Unions”. However, the Taft-Hartley Act says that employers can express their views about unions but may not threaten employees with loss of job or other benefits if they unionize. Some of the talking points an organization might express about unions include the following:
1. Less ability to deal more informally with the organization
2. Possibility of strikes
3. Payment of union dues by employees
4. Emphasis on what positive aspects the employer has provided
If employees still unionize, managers and HR professionals alike will engage in the bargaining process. The collective bargaining process is the process of negotiating an agreement between management and employees. This process ultimately defines the contract terms for employees. In negotiating with the union, being prepared is important. Gathering data of what worked with the old contract and what didn’t can be a good starting point. Understanding the union’s likely requests and preparing a counteraction to these requests and possible compromises should be done before even sitting down to the bargaining table. One of the better strategies for negotiating a contract is called interest-based bargaining. In this type of bargaining, mutual interests are brought up and discussed, rather than each party coming to the table with a list of demands. This can create a win-win situation for both parties.
Once an agreement has been decided, the union members vote whether to accept the new contract. If the contract is accepted, the next task is to look at how to administer the agreement.
First, the HR professional must know the contract well to administer it well. For example, if higher pay is successfully negotiated, obviously it would be the job of HR to implement this new pay scale. The HR professional may need to develop new sets of policies and procedures when a new agreement is in place. One such procedure HR may have to work with occasionally is the grievance process. As we will discuss in Chapter 12 “Working with Labor Unions”, the grievance process is a formal way by which employees can submit a complaint regarding something that is not administered correctly in the contract. Usually, the grievance process will involve discussions with direct supervisors first, discussions with the union representative next, and then the filing of a formal, written grievance complaint. Management is then required to provide a written response to the grievance, and depending on the collective bargaining agreement, a formalized process is stated on how the appeals process would work, should the grievance not be solved by the management response. One such example is the dismissal of members of the National Air Traffic Controller Association (union). In 2011, of the 140 proposed dismissals of air traffic controllers, 58 had penalties rescinded, reduced, or deferred (Hughes, 2011). This is because of due-process protections used to prevent mass firings when a new administration comes to power. Federal workers, including controllers, can challenge disciplinary action penalties through a government panel called the Merit Systems Protection Board. The process is described in union contracts and mentions involvement of an arbitrator, if necessary.
How Would You Handle This?
To Join or Not to Join
As the HR manager for a two-hundred-person company, you have always worked hard to ensure that workers received competitive benefits and salaries. When you hear rumors of the workers’ wanting to form a union, you are a little distressed, because you feel everyone is treated fairly. How would you handle this?
Key Takeaways
• The employment-at-will principle means that an employer can separate from an employee without cause, and vice versa.
• Even though we have employment at will, a wrongful discharge can occur when there are violations of public policy, an employee has a contract with an employer, or an employer does something outside the boundaries of good faith.
• Whistleblowing is when an employee notifies organizations of illegal or unethical activity. Whistleblowers are protected from discharge due to their activity.
• A constructive discharge means the conditions are so poor that the employee had no choice but to leave the organization.
• The Worker Adjustment and Retraining Notification Act (WARN) is a law that requires companies of one hundred or more employees to notify employees and the community if fifty or more employees are to be laid off.
• A retaliatory discharge is one that occurs if an employer fires or lays off an employee owing to a charge the employee filed. For example, if an employee files a workers’ compensation claim and then is let go, this could be a retaliatory discharge.
• The privacy of employees is an issue that HR must address. It is prudent to develop policies surrounding what type of monitoring may occur within an organization. For example, some organizations monitor e-mail, computer usage, and even postings on social network sites.
• Drug testing is also a privacy issue, although in many industries requiring safe working conditions, drug testing can be necessary to ensure the safety of all employees.
• A union is a group of workers who decide to work together toward a collective bargaining agreement. This agreement allows workers to negotiate as one, rather than as individuals.
• The Wagner Act, passed in 1935, addresses many issues related to workers’ unionization.
• The process of collective bargaining means to negotiate a contract between management and workers. HR is generally part of this process.
• Interest based bargaining occurs when mutual interests are discussed, rather than starting with a list of demands.
• Once an agreement is reached, HR is generally responsible for knowing the agreement and implementing any changes that should occur as a result of the agreement. One such example is understanding the grievance process.
Exercises
1. Perform an Internet search and find a union agreement. Discuss how the union agreement handles terminations and grievances.
2. Compare and contrast the differences between a retaliatory discharge and a constructive discharge. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/10%3A_Managing_Employee_Performance/10.03%3A_Employee_Rights.txt |
Chapter Summary
• Performance issues in the workplace are common. Examples of performance issues include constant tardiness, too much time at work handling personal issues, mishandling of proprietary information, family issues, drug and alcohol problems, nonperformance, theft, and conflicts in the workplace.
• Employees choose to leave organizations for internal and external reasons. Some of these may include a mismatch of career goals, conflict, too high expectations, time-management issues, and a mismatch between job and skills.
• HR professionals should develop a set of policies that deal with performance issues in the workplace. The advantage to having such policies is that they can eliminate wrongful termination legal action.
• A mandated issue is usually one that deals with safety or legal issues that go beyond the workplace. An infringement of this type of issue requires immediate attention.
• A single incident may include a misstep of the employee, and the employee should immediately be spoken with about it, to ensure it doesn’t happen again.
• A behavior pattern occurs when an employee consistently exhibits a performance issue. This type of issue should be discussed with the employee and actions taken, such as providing more training, to ensure it does not continue. A persistent pattern occurs when an employee consistently exhibits a performance issue and does not improve, despite HR’s talking with him or her.
• At some point during the persistent pattern, disciplinary action will likely need to be taken. It is important to develop consistent procedures on how to record and handle disciplinary issues.
• Employee separation occurs in one of three ways. First, the employee resigns from the organization. Second, the employee is terminated for performance issues, and third, an employee absconds. Absconds means the employee abandons his or her job without submitting a formal resignation.
• In some cases, a severance package may be offered to the employee upon his or her departure from the organization.
• Rightsizing is a term used when an organization must cut costs through layoffs of employees. Development of criteria for layoffs, communication, and severance package discussion are all parts of this process.
• Employment at will means that an employer can separate from an employee without cause, and vice versa.
• Even though we have employment at will, a wrongful discharge can occur when there are violations of public policy, an employee has a contract with an employer, or an employer does something outside the boundaries of good faith.
• Whistleblowing is when an employee notifies organizations of illegal or unethical activity. Whistleblowers are protected from discharge due to their activity.
• A constructive discharge means the conditions are so poor that the employee has no choice but to leave the organization.
• The Worker Adjustment and Retraining Notification Act (WARN) is a law that requires companies of one hundred or more employees to notify employees and the community if fifty or more employees are to be laid off.
• A retaliatory discharge is one that occurs if an employer fires or lays off an employee because of a charge the employee filed. For example, if an employee files a workers’ compensation claim and then is let go, this could be a retaliatory discharge.
• The privacy of employees is an issue that HR must address. It is prudent to develop policies surrounding what type of monitoring may occur within an organization. For example, some organizations monitor e-mail, computer usage, and even postings on social network sites.
• Drug testing is also a privacy issue, although in many industries requiring safe working conditions, drug testing can be necessary to ensure the safety of all employees.
• A union is a group of workers who decide to work together toward a collective bargaining agreement. This agreement allows workers to negotiate as one, rather than as individuals.
• The Wagner Act, passed in 1935, addresses many issues related to workers’ unionization.
• The process of collective bargaining means to negotiate a contract between management and workers. HR is generally part of this process.
• Interest based bargaining occurs when mutual interests are discussed, rather than starting with a list of demands.
• Once an agreement is reached, HR is generally responsible for knowing the agreement and implementing any changes that should occur as a result of the agreement. One such example is understanding the grievance process.
Chapter Case
Who Goes, Who Stays?
The consulting firm you have worked for over the last year is having some financial troubles. The large contracts it once had are slowly going away, and as your company struggles to make payroll, it is clear that layoffs must occur. The sales staff has not been meeting the sales goals set for them, resulting in incorrect budgets.
It has been decided that at least three people in the sales department should be laid off. You create a spreadsheet with pertinent sales employee data:
Name Title Years with the company Last overall rating on performance evaluation (1–5 scale, 5 being highest) Last year’s sales goal met?
Deb Waters Sales Manager 1 3 N/A as her position is managerial
Jeff Spirits Account Manager 5 3 Yes, 1% over
Orlando Chang Account Manager 3 4 Yes, 10% over goal
Jake Toolmeyer Account Manager 2 4 No, 2% under goal
Audrey Barnes Account Manager 5 5 Yes, 15% over goal
Kelly Andrews Account Manager 1 2 No, 20% under goal
Amir Saied Account Manager 8 5 Yes, 5% over goal
Winfrey Jones Account Manager 4 2 No, 10% under goal
1. Making reasonable assumptions, develop criteria for the layoffs in the sales department.
2. Develop a plan as to how layoffs will be communicated with the individual as well as within the company.
3. Discuss strategies to motivate those sales employees who stay with the organization.
Team Activities
1. In a team of three to four people, discuss each of the situations and determine if you think the employee should receive immediate termination or a progressive discipline process, and provide justification for your responses:
1. The employee stole one pack of office paper, stating he would be using it at home to perform his job.
2. An employee posted how boring her job is on a Facebook status update. You know she is Facebook friends with several clients.
3. The employee groped a colleague in the break room.
4. You saw the employee’s résumé posted on LinkedIn, stating she was looking for a new job.
5. The manager has told you the employee is difficult to work with and not liked by his colleagues.
2. In teams of three to four, discuss the following situation: Your marketing manager has just told you she plans to dismiss her administrative assistant for nonperformance and needs help designing a severance package. The administrative assistant was with the organization for two-and-a-half years and his current salary is \$35,670. What would you suggest he be offered? Discuss and be prepared to share your ideas with the class. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/10%3A_Managing_Employee_Performance/10.04%3A_Cases_and_Problems.txt |
A Tough Conversation
As you wake up this morning, you think about the performance evaluation you will give one of your employees, Sean, later this morning. Sean has been with your company for two years, and over the last six months his performance has begun to slide. As the manager, it is your responsibility to talk with him about performance, which you have done on several occasions. However, the performance evaluation will make his nonperformance more formalized. You know that Sean has had some personal troubles that can account for some of the performance issues, but despite this, you really need to get his performance up to par. Your goal in the performance evaluation interview today is to create an improvement plan for Sean, while documenting his nonperformance.
When you arrive at work, you look over the essay rating part of Sean’s evaluation. It details two client project deadlines that were missed, as well as the over-budget amounts of the two client projects. It was Sean’s responsibility to oversee both aspects of this project. When Sean arrives at your office, you greet him, ask him to take a seat, and begin to discuss the evaluation with him.
“Sean, while you have always been a high performer, these last few months have been lackluster. On two of your projects, you were over budget and late. The client commented on both of these aspects when it filled out the client evaluation. As a result, you can see this is documented in your performance evaluation.”
Using defensive nonverbal language, Sean says, “Missing the project deadlines and budget wasn’t my fault. Emily said everything was under control, and I trusted her. She is the one who should have a bad performance review.”
You say, “Ultimately, as the account director, you are responsible, as outlined in your job description. As you know, it is important to manage the accountability within your team, and in this case, you didn’t perform. In fact, in your 360 reviews, several of your colleagues suggested you were not putting in enough time on the projects and seemed distracted.”
“I really dislike those 360 reviews. It really is just a popularity contest, anyway,” Sean says. “So, am I fired for these two mistakes?” You have worked with people who exhibited this type of defensive behavior before, and you know it is natural for people to feel like they need to defend themselves when having this type of conversation. You decide to move the conversation ahead and focus on future behavior rather than past behavior.
You say, “Sean, you normally add a lot of value to the organization. Although these issues will be documented in your performance evaluation, I believe you can produce high-quality work. As a result, let’s work together to develop an improvement plan so you can continue to add value to the organization. The improvement plan addresses project deadlines and budgets, and I think you will find it helpful for your career development.”
Sean agrees begrudgingly and you begin to show him the improvement plan document the company uses, so you can fill it out together.
When you head home after work, you think about the day’s events and about Sean. As you had suspected, he was defensive at first but seemed enthusiastic to work on the improvement plan after you showed him the document. You feel positive that this performance evaluation was a step in the right direction to ensure Sean continues to be a high producer in the company, despite these mistakes. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/11%3A_Employee_Assessment/11.01%3A_Introduction.txt |
Learning Objectives
1. Define the reasons for a formal performance evaluation system.
2. Explain the process to develop a performance review system.
A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job. If you notice, the word systematic implies the performance evaluation process should be a planned system that allows feedback to be given in a formal—as opposed to informal—sense. Performance evaluations can also be called performance appraisals, performance assessments, or employee appraisals.
There are four reasons why a systematic performance evaluation system should be implemented. First, the evaluation process should encourage positive performance and behavior. Second, it is a way to satisfy employee curiosity as to how well they are performing in their job. It can also be used as a tool to develop employees. Lastly, it can provide a basis for pay raises, promotions, and legal disciplinary actions.
Designing a Performance Appraisal System
There are a number of things to consider before designing or revising an existing performance appraisal system. Some researchers suggest that the performance appraisal system is perhaps one of the most important parts of the organization (Lawrie, 1990), while others suggest that performance appraisal systems are ultimately flawed (Derven, 1990), making them worthless. For the purpose of this chapter, let’s assume we can create a performance appraisal system that will provide value to the organization and the employee. When designing this process, we should recognize that any process has its limitations, but if we plan it correctly, we can minimize some of these.
The first step in the process is to determine how often performance appraisals should be given. Please keep in mind that managers should constantly be giving feedback to employees, and this process is a more formal way of doing so. Some organizations choose to give performance evaluations once per year, while others give them twice per year, or more. The advantage to giving an evaluation twice per year, of course, is more feedback and opportunity for employee development. The downside is the time it takes for the manager to write the evaluation and discuss it with the employee. If done well, it could take several hours for just one employee. Depending on your organization’s structure, you may choose one or the other. For example, if most of your managers have five or ten people to manage (this is called span of control), it might be worthwhile to give performance evaluations more than once per year, since the time cost isn’t high. If most of your managers have twenty or more employees, it may not be feasible to perform this process more than once per year. To determine costs of your performance evaluations, see Table 11.1 “Estimating the Costs of Performance Evaluations”. Asking for feedback from managers and employees is also a good way to determine how often performance evaluations should be given.
Table 11.1 Estimating the Costs of Performance Evaluations
Narrow Span of Control
Average span of control 8
Average time to complete one written review 1 hour
Average time to discuss with employee 1 hour
Administrative time to set up meetings with employees 1/2 hour
8 employees × 2 hours per employee + 1/2 hour administrative time to set up times to meet with employees = 16.5 hours of time for one manager to complete all performance reviews
Wider Span of Control
Average span of control 25
Average time to complete one written review 1 hour
Average time to discuss with employee 1 hour
Administrative time to set up meetings with employees 1 hour
25 employees × 2 hours per employee + 1 hour administrative time to set up times to meet with employees = 51 hours
Once you have the number of hours it takes, you can multiply that by your manager’s hourly pay to get an estimated cost to the organization
16 hours × \$50 per hour = \$850
51 hours × \$50 per hour = \$2550
Should pay increases be tied to performance evaluations? This might be the second consideration before development of a performance evaluation process. There is research that shows employees have a greater acceptance of performance reviews if the review is linked to rewards (Bannister & Balkin, 1990).
The third consideration should include goal setting. In other words, what goals does the organization hope to achieve with the performance appraisal process?
Once the frequency, rewards, and goals have been determined, it is time to begin to formalize the process. First, we will need to develop the actual forms that will be used to evaluate each job within the organization. Every performance evaluation should be directly tied with that employee’s job description.
Determining who should evaluate the performance of the employee is the next decision. It could be their direct manager (most common method), subordinates, customers or clients, self, and/or peers. Table 11.2 “Advantages and Disadvantages of Each Source for Performance Evaluations” shows some of the advantages and disadvantages for each source of information for performance evaluations. Ultimately, using a variety of sources might garner the best results.
A 360-degree performance appraisal method is a way to appraise performance by using several sources to measure the employee’s effectiveness. Organizations must be careful when using peer-reviewed information. For example, in the Mathewson v. Aloha Airlines case, peer evaluations were found to be retaliatory against a pilot who had crossed picket lines during the pilot’s union strike against a different airline.
Management of this process can be time-consuming for the HR professional. That’s why there are many software programs available to help administer and assess 360 review feedback. Halogen 360, for example, is used by Princess Cruises and media companies such as MSNBC (Halogen Software, 2011). This type of software allows the HR professional to set criteria and easily send links to customers, peers, or managers, who provide the information requested. Then the data are gathered and a report is automatically generated, which an employee can use for quick feedback. Other similar types of software include Carbon360 and Argos.
Performance Appraisal System Errors
Before we begin to develop our performance review process, it is important to note some of the errors that can occur during this process. First, halo effects can occur when the source or the rater feels one aspect of the performance is high and therefore rates all areas high. A mistake in rating can also occur when we compare one employee to another, as opposed to the job description’s standards. Sometimes halo effects will occur because the rater is uncomfortable rating someone low on a performance assessment item. Of course, when this occurs, it makes the performance evaluation less valuable for employee development. Proper training on how to manage a performance appraisal interview is a good way to avoid this. We discuss this in Section 11.3.4 “Performance Appraisal Interviews”.
Validity issues are the extent to which the tool measures the relevant aspects of performance. The aspects of performance should be based on the key skills and responsibilities of the job, and these should be reviewed often to make sure they are still applicable to the job analysis and description.
Reliability refers to how consistent the same measuring tool works throughout the organization (or job title). When we look at reliability in performance appraisals, we ask ourselves if two raters were to rate an employee, how close would the ratings be? If the ratings would be far apart from one another, the method may have reliability issues. To prevent this kind of issue, we can make sure that performance standards are written in a way that will make them measurable. For example, instead of “increase sales” as a performance standard, we may want to say, “increase sales by 10 percent from last year.” This performance standard is easily measured and allows us to ensure the accuracy of our performance methods.
Acceptability refers to how well members of the organization, manager and employees, accept the performance evaluation tool as a valid measure of performance. For example, let’s assume the current measurement tools of Blewett Gravel, Inc. are in place and show validity for each job function. However, managers don’t think the tool is useful because they take too much time. As a result, they spend minimal time on the evaluation. This could mean the current process is flawed because of acceptability error.
Another consideration is the specificity, which tells employees the job expectations and how they can be met. If they are not specific enough, the tool is not useful to the employee for development or to the manager to ensure the employee is meeting expectations. Finally, after we have developed our process, we need to create a time line and educate managers and employees on the process. This can be done through formal training and communicated through company blogs or e-mails. According to Robert Kent (Kent, 2011), teaching people how to receive benefit from the feedback they receive can be an important part of the process as well.
Performance Appraisal Legal Considerations
The legality of performance appraisals was questioned in 1973 in Brito v. Zia, in which an employee was terminated based on a subjective performance evaluation. Following this important case, employers began to rethink their performance evaluation system and the legality of it.
The Civil Service Reform Act of 1978 set new standards for performance evaluation. Although these standards related only to public sector employees, the Reform Act began an important trend toward making certain performance evaluations were legal. The Reform Act created the following criteria for performance appraisals in government agencies:
1. All agencies were required to create performance review systems.
2. Appraisal systems would encourage employee participation in establishing the performance standards they will be rated against.
3. The critical elements of the job must be in writing.
4. Employees must be advised of the critical elements when hired.
5. The system must be based exclusively on the actual performance and critical elements of the job. They cannot be based on a curve, for example.
6. They must be conducted and recorded at least once per year.
7. Training must be offered for all persons giving performance evaluations.
8. The appraisals must provide information that can be used for decision making, such as pay decisions and promotion decisions.
Early performance appraisal research can provide us a good example as to why we should be concerned with the legality of the performance appraisal process (Field & Holley, 1982). Holley and Field analyzed sixty-six legal cases that involved discrimination and performance evaluation. Of the cases, defendants won thirty-five of the cases. The authors of the study determined that the cases that were won by the defendant had similar characteristics:
1. Appraisers were given written instructions on how to complete the appraisal for employees.
2. Job analysis was used to develop the performance measures of the evaluation.
3. The focus of the appraisal was actual behaviors instead of personality traits.
4. Upper management reviewed the ratings before the performance appraisal interview was conducted.
This tells us that the following considerations should be met when developing our performance appraisal process:
1. Performance standards should be developed using the job analysis and should change as the job changes.
2. Provide the employees with a copy of the evaluation when they begin working for the organization, and even consider having the employees sign off, saying they have received it.
3. All raters and appraisers should be trained.
4. When rating, examples of observable behavior (rather than personality characteristics) should be given.
5. A formal process should be developed in the event an employee disagrees with a performance review.
Now that we have discussed some of the pitfalls of performance appraisals, we can begin to discuss how to develop the process of performance evaluations.
Table 11.2 Advantages and Disadvantages of Each Source for Performance Evaluations
Source Advantages Disadvantages
Manager/Supervisor Usually has extensive knowledge of the employee’s performance and abilities Bias
Favoritism
Self Self-analysis can help with employee growth In the employee’s interest to inflate his or her own ratings
Peer Works well when the supervisor doesn’t always directly observe the employee Relationships can create bias in the review
Can bring a different perspective, since peers know the job well If evaluations are tied to pay, this can put both the employee and the peer in an awkward situation
If confidential, may create mistrust within the organization
Customer/Client Customers often have the best view of employee behavior Can be expensive to obtain this feedback
Can enhance long-term relationships with the customer by asking for feedback Possible bias
Subordinate Data garnered can include how well the manager treats employees Possible retaliation if results are not favorable
Can determine if employees feel there is favoritism within their department Rating inflation
Subordinates may not understand the “big picture” and rate low as a result
Can be used as a self-development tool for managers If confidential, may create mistrust within the organization
If nothing changes despite the evaluation, could create motivational issues among employees
Human Resource Recall
What are the steps we should take when developing a performance review process?
Key Takeaways
• A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.
• The use of the term systematic implies the process should be planned.
• Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.
• The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.
• Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determine how this will be handled in the next step in the performance appraisal development process.
• Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.
• After determining how often the evaluations should be given, if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.
• After you have determined what forms will be used (or developed), determine who will be the source for the information. Perhaps managers, peers, or customers would be an option. A 360 review process combines several sources for a more thorough review.
• There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating employees only on the objectives. Other errors might include validity, reliability, acceptability, and specificity.
• Performance evaluations should always be based on the actual job description.
• Our last step in development of this process is to communicate the process and train employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.
Exercises
1. Perform an Internet search on 360 review software. Compare at least two types of software and discuss advantages and disadvantages of each.
2. Discuss the advantages and disadvantages of each type of performance evaluation source. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/11%3A_Employee_Assessment/11.02%3A_Performance_Evaluation_Systems.txt |
Learning Objectives
1. Be able to describe the various appraisal methods.
It probably goes without saying that different industries and jobs need different kinds of appraisal methods. For our purposes, we will discuss some of the main ways to assess performance in a performance evaluation form. Of course, these will change based upon the job specifications for each position within the company. In addition to industry-specific and job-specific methods, many organizations will use these methods in combination, as opposed to just one method. There are three main methods of determining performance. The first is the trait method, in which managers look at an employee’s specific traits in relation to the job, such as friendliness to the customer. The behavioral method looks at individual actions within a specific job. Comparative methods compare one employee with other employees. Results methods are focused on employee accomplishments, such as whether or not employees met a quota.
Within the categories of performance appraisals, there are two main aspects to appraisal methods. First, the criteria are the aspects the employee is actually being evaluated on, which should be tied directly to the employee᾿s job description. Second, the rating is the type of scale that will be used to rate each criterion in a performance evaluation: for example, scales of 1–5, essay ratings, or yes/no ratings. Tied to the rating and criteria is the weighting each item will be given. For example, if “communication” and “interaction with client” are two criteria, the interaction with the client may be weighted more than communication, depending on the job type. We will discuss the types of criteria and rating methods next.
Graphic Rating Scale
The graphic rating scale, a behavioral method, is perhaps the most popular choice for performance evaluations. This type of evaluation lists traits required for the job and asks the source to rate the individual on each attribute. A discrete scale is one that shows a number of different points. The ratings can include a scale of 1–10; excellent, average, or poor; or meets, exceeds, or doesn’t meet expectations, for example. A continuous scale shows a scale and the manager puts a mark on the continuum scale that best represents the employee’s performance. For example:
Poor Excellent
The disadvantage of this type of scale is the subjectivity that can occur. This type of scale focuses on behavioral traits and is not specific enough to some jobs. Development of specific criteria can save an organization in legal costs. For example, in Thomas v. IBM, IBM was able to successfully defend accusations of age discrimination because of the objective criteria the employee (Thomas) had been rated on.
Many organizations use a graphic rating scale in conjunction with other appraisal methods to further solidify the tool’s validity. For example, some organizations use a mixed standard scale, which is similar to a graphic rating scale. This scale includes a series of mixed statements representing excellent, average, and poor performance, and the manager is asked to rate a “+” (performance is better than stated), “0” (performance is at stated level), or “−” (performance is below stated level). Mixed standard statements might include the following:
• The employee gets along with most coworkers and has had only a few interpersonal issues.
• This employee takes initiative.
• The employee consistently turns in below-average work.
• The employee always meets established deadlines.
An example of a graphic rating scale is shown in Figure 11.1 “Example of Graphic Rating Scale”.
Essay Appraisal
In an essay appraisal, the source answers a series of questions about the employee’s performance in essay form. This can be a trait method and/or a behavioral method, depending on how the manager writes the essay. These statements may include strengths and weaknesses about the employee or statements about past performance. They can also include specific examples of past performance. The disadvantage of this type of method (when not combined with other rating systems) is that the manager’s writing ability can contribute to the effectiveness of the evaluation. Also, managers may write less or more, which means less consistency between performance appraisals by various managers.
Checklist Scale
A checklist method for performance evaluations lessens the subjectivity, although subjectivity will still be present in this type of rating system. With a checklist scale, a series of questions is asked and the manager simply responds yes or no to the questions, which can fall into either the behavioral or the trait method, or both. Another variation to this scale is a check mark in the criteria the employee meets, and a blank in the areas the employee does not meet. The challenge with this format is that it doesn’t allow more detailed answers and analysis of the performance criteria, unless combined with another method, such as essay ratings. A sample of a checklist scale is provided in Figure 11.3 “Example of Checklist Scale”.
Figure 11.1 Example of Graphic Rating Scale
Figure 11.2 Example of Essay Rating
Figure 11.3 Example of Checklist Scale
Critical Incident Appraisals
This method of appraisal, while more time-consuming for the manager, can be effective at providing specific examples of behavior. With a critical incident appraisal, the manager records examples of the employee’s effective and ineffective behavior during the time period between evaluations, which is in the behavioral category. When it is time for the employee to be reviewed, the manager will pull out this file and formally record the incidents that occurred over the time period. The disadvantage of this method is the tendency to record only negative incidents instead of postive ones. However, this method can work well if the manager has the proper training to record incidents (perhaps by keeping a weekly diary) in a fair manner. This approach can also work well when specific jobs vary greatly from week to week, unlike, for example, a factory worker who routinely performs the same weekly tasks.
Work Standards Approach
For certain jobs in which productivity is most important, a work standards approach could be the more effective way of evaluating employees. With this results-focused approach, a minimum level is set and the employee’s performance evaluation is based on this level. For example, if a sales person does not meet a quota of \$1 million, this would be recorded as nonperforming. The downside is that this method does not allow for reasonable deviations. For example, if the quota isn’t made, perhaps the employee just had a bad month but normally performs well. This approach works best in long-term situations, in which a reasonable measure of performance can be over a certain period of time. This method is also used in manufacuring situations where production is extremely important. For example, in an automotive assembly line, the focus is on how many cars are built in a specified period, and therefore, employee performance is measured this way, too. Since this approach is centered on production, it doesn’t allow for rating of other factors, such as ability to work on a team or communication skills, which can be an important part of the job, too.
Ranking Methods
In a ranking method system (also called stack ranking), employees in a particular department are ranked based on their value to the manager or supervisor. This system is a comparative method for performance evaluations.The manager will have a list of all employees and will first choose the most valuable employee and put that name at the top. Then he or she will choose the least valuable employee and put that name at the bottom of the list. With the remaining employees, this process would be repeated. Obviously, there is room for bias with this method, and it may not work well in a larger organization, where managers may not interact with each employee on a day-to-day basis.
To make this type of evaluation most valuable (and legal), each supervisor should use the same criteria to rank each individual. Otherwise, if criteria are not clearly developed, validity and halo effects could be present. The Roper v. Exxon Corp case illustrates the need for clear guidelines when using a ranking system. At Exxon, the legal department attorneys were annually evaluated and then ranked based on input from attorneys, supervisors, and clients. Based on the feedback, each attorney for Exxon was ranked based on their relative contribution and performance. Each attorney was given a group percentile rank (i.e., 99 percent was the best-performing attorney). When Roper was in the bottom 10 percent for three years and was informed of his separation with the company, he filed an age discrimination lawsuit. The courts found no correlation between age and the lowest-ranking individuals, and because Exxon had a set of established ranking criteria, they won the case (Grote, 2005).
Another consideration is the effect on employee morale should the rankings be made public. If they are not made public, morale issues may still exist, as the perception might be that management has “secret” documents.
Fortune 500 Focus
Critics have long said that a forced ranking system can be detrimental to morale; it focuses too much on individual performance as opposed to team performance. Some say a forced ranking system promotes too much competition in the workplace. However, many Fortune 500 companies use this system and have found it works for their culture. General Electric (GE) used perhaps one of the most well-known forced ranking systems. In this system, every year managers placed their employees into one of three categories: “A” employees are the top 20 percent, “B” employees are the middle 70 percent, and “C” performers are the bottom 10 percent. In GE’s system, the bottom 10 percent are usually either let go or put on a performance plan. The top 20 percent are given more responsibility and perhaps even promoted. However, even GE has reinvented this stringent forced ranking system. In 2006, it changed the system to remove references to the 20/70/10 split, and GE now presents the curve as a guideline. This gives more freedom for managers to distribute employees in a less stringent manner1.
The advantages of a forced ranking system include that it creates a high-performance work culture and establishes well-defined consequences for not meeting performance standards. In recent research, a forced ranking system seems to correlate well with return on investment to shareholders. For example, the study (Sprenkel, 2011) shows that companies who use individual criteria (as opposed to overall performance) to measure performance outperform those who measure performance based on overall company success. To make a ranking system work, it is key to ensure managers have a firm grasp on the criteria on which employees will be ranked. Companies using forced rankings without set criteria open themselves to lawsuits, because it would appear the rankings happen based on favoritism rather than quantifiable performance data. For example, Ford in the past used forced ranking systems but eliminated the system after settling class action lawsuits that claimed discrimination (Lowery, 2011). Conoco also has settled lawsuits over its forced ranking systems, as domestic employees claimed the system favored foreign workers (Lowery, 2011). To avoid these issues, the best way to develop and maintain a forced ranking system is to provide each employee with specific and measurable objectives, and also provide management training so the system is executed in a fair, quantifiable manner.
In a forced distribution system, like the one used by GE, employees are ranked in groups based on high performers, average performers, and nonperformers. The trouble with this system is that it does not consider that all employees could be in the top two categories, high or average performers, and requires that some employees be put in the nonperforming category.
In a paired comparison system, the manager must compare every employee with every other employee within the department or work group. Each employee is compared with another, and out of the two, the higher performer is given a score of 1. Once all the pairs are compared, the scores are added. This method takes a lot of time and, again, must have specific criteria attached to it when comparing employees.
Human Resource Recall
How can you make sure the performance appraisal ties into a specific job description?
Management by Objectives (MBO)
Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice of Management (Drucker, 2006). This method is results oriented and similar to the work standards approach, with a few differences. First, the manager and employee sit down together and develop objectives for the time period. Then when it is time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine whether they were met. The advantage of this is the open communication between the manager and the employee. The employee also has “buy-in” since he or she helped set the goals, and the evaluation can be used as a method for further skill development. This method is best applied for positions that are not routine and require a higher level of thinking to perform the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To write objectives, they should be SMART (Doran, 1981):
1. Specific. There should be one key result for each MBO. What is the result that should be achieved?
2. Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number can be attached to an objective to make it measurable, for example “sell \$1,000,000 of new business in the third quarter.”
3. Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.
4. Result oriented. The objective should be tied to the company’s mission and values. Once the objective is made, it should make a difference in the organization as a whole.
5. Time limited. The objective should have a reasonable time to be accomplished, but not too much time.
Setting MBOs with Employees
" href="http://www.youtube.com/watch?v=mHgPnLCzBwU" class="replaced-iframe">(click to see video)
An example of how to work with an employee to set MBOs.
To make MBOs an effective performance evaluation tool, it is a good idea to train managers and determine which job positions could benefit most from this type of method. You may find that for some more routine positions, such as administrative assistants, another method could work better.
Behaviorally Anchored Rating Scale (BARS)
A BARS method first determines the main performance dimensions of the job, for example, interpersonal relationships. Then the tool utilizes narrative information, such as from a critical incidents file, and assigns quantified ranks to each expected behavior. In this system, there is a specific narrative outlining what exemplifies a “good” and “poor” behavior for each category. The advantage of this type of system is that it focuses on the desired behaviors that are important to complete a task or perform a specific job. This method combines a graphic rating scale with a critical incidents system. The US Army Research Institute (Phillips, et. al., 2006) developed a BARS scale to measure the abilities of tactical thinking skills for combat leaders. Figure 11.4 “Example of BARS” provides an example of how the Army measures these skills.
Figure 11.4 Example of BARS
Figure 11.5 More Examples of Performance Appraisal Types
How Would You Handle This?
Playing Favorites
You were just promoted to manager of a high-end retail store. As you are sorting through your responsibilities, you receive an e-mail from HR outlining the process for performance evaluations. You are also notified that you must give two performance evaluations within the next two weeks. This concerns you, because you don’t know any of the employees and their abilities yet. You aren’t sure if you should base their performance on what you see in a short time period or if you should ask other employees for their thoughts on their peers’ performance. As you go through the files on the computer, you find a critical incident file left from the previous manager, and you think this might help. As you look through it, it is obvious the past manager had “favorite” employees and you aren’t sure if you should base the evaluations on this information. How would you handle this?
Table 11.3 Advantages and Disadvantages of Each Performance Appraisal Method
Type of Performance Appraisal Method Advantages Disadvantages
Graphic Rating Scale Inexpensive to develop Subjectivity
Easily understood by employees and managers Can be difficult to use in making compensation and promotion decisions
Essay Can easily provide feedback on the positive abilities of the employee Subjectivity
Writing ability of reviewer impacts validity
Time consuming (if not combined with other methods)
Checklist scale Measurable traits can point out specific behavioral expectations Does not allow for detailed answers or explanations (unless combined with another method)
Critical Incidents Provides specific examples Tendency to report negative incidents
Time consuming for manager
Work Standards Approach Ability to measure specific components of the job Does not allow for deviations
Ranking Can create a high-performance work culture Possible bias
Validity depends on the amount of interaction between employees and manager
Can negatively affect teamwork
MBOs Open communication Many only work for some types of job titles
Employee may have more “buy-in”
BARS Focus is on desired behaviors Time consuming to set up
Scale is for each specific job
Desired behaviors are clearly outlined
No one performance appraisal is best, so most companies use a variety of methods to ensure the best results.
Key Takeaways
• When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.
• The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.
• The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.
• In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.
• An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee’s job performance.
• A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee’s job.
• Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.
• The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.
• In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.
• An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.
• An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.
• A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.
Exercise
1. Review each of the appraisal methods and discuss which one you might use for the following types of jobs, and discuss your choices.
1. Administrative Assistant
2. Chief Executive Officer
3. Human Resource Manager
4. Retail Store Assistant Manager
1“The Struggle to Measure Performance,” BusinessWeek, January 9, 2006, accessed August 15, 2011, http://www.businessweek.com/magazine/content/06_02/b3966060.htm. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/11%3A_Employee_Assessment/11.03%3A_Appraisal_Methods.txt |
Learning Objectives
1. Be able to discuss best practices in performance review planning.
2. Be able to write an improvement plan for an employee.
So far, we have discussed the necessity of providing formal feedback to employees through a systematic performance evaluation system. We have stressed the importance of making sure the HR professional knows how often performance evaluations should be given and if they are tied to pay increases.
The next step is to make sure you know the goals of the performance evaluation; for example, is the goal to improve performance and also identify people for succession planning? You will then determine the source for the performance evaluation data, and then create criteria and rating scales that relate directly to the employee’s job description. Once this is done, the successful functioning of the performance evaluation system largely depends on the HR professional to implement and communicate the system to managers and employees. This will be the primary focus of our next section.
Best Practices in Performance Appraisals
The most important things to remember when developing a performance evaluation system include the following:
1. Make sure the evaluation has a direct relationship to the job. Consider developing specific criteria for each job, based on the individual job specifications and description.
2. Involve managers when developing the process. Garner their feedback to obtain “buy-in” for the process.
3. Consider involving the employee in the process by asking the employee to fill out a self-evaluation.
4. Use a variety of methods to rate and evaluate the employee.
5. Avoid bias by standardizing performance evaluations systems for each job.
6. Give feedback on performance throughout the year, not just during performance review times.
7. Make sure the goals of the performance evaluation tie into the organizational and department goals.
8. Ensure the performance appraisal criteria also tie into the goals of the organization, for a strategic HRM approach.
9. Review the evaluation for each job title often, since jobs and expectations change.
As you can see from Figure \(1\), the performance appraisal aspect is just one part of the total process. We can call this a performance review system. The first step of the process is goal setting with the employee. This could mean showing the employee his or her performance appraisal criteria or sitting down with the employee to develop MBOs. The basic idea here is that the employee should know the expectations and how his or her job performance will be rated.
Constant monitoring, feedback, and coaching are the next step. Ensuring the employee knows what he or she is doing well and is not doing well in a more informal manner will allow for a more productive employee.
Next, of course, is the formal performance evaluation process. Choosing the criteria, rating scale, and source of the evaluation are steps we have already discussed. The next step is to work with the employee to develop improvement plans (if necessary) and offer any rewards as a result of excellent performance. The process then begins again, setting new goals with the employee.
Training Managers and Employees
As HR professionals, we know the importance of performance evaluation systems in developing employees, but this may not always be apparent to the managers we work with on a daily basis. It is our job to educate managers and employees on the standards for completing performance evaluation forms as well as train them on how to complete the necessary documents (criteria and ratings), how to develop improvement plans when necessary, and how to deliver the performance appraisal interview.
Employee Feedback
This video gives excellent tips on providing feedback to employees during the performance appraisal process.
First, after you have developed the new performance appraisal system (or adjusted an old one), consider offering training on how to effectively use it. The training, if required, can save time later and make the process more valuable. What we want to avoid is making it seem as if the performance appraisal process is “just one more thing” for managers to do. Show the value of the system in your training or, better yet, involve managers in developing the process to begin with.
Set standards should be developed for managers filling out the performance ratings and criteria. The advantage of this is accuracy of data and limiting possible bias. Consider these “ground rules” to ensure that information is similar no matter which manager is writing the evaluation:
1. Use only factual information and avoid opinion or perception.
2. For each section, comments should be at least two sentences in length, and examples of employee behavior should be provided.
3. Reviews must be complete and shared with the employee before the deadline.
4. Make messages clear and direct.
5. Focus on observable behaviors.
Once your managers are trained, understand how to fill out the forms, and are comfortable with the ground rules associated with the process, we can coach them on how to prepare for performance evaluations. For example, here are the steps you may want to discuss with your managers who provide performance evaluations:
1. Review the employee’s last performance evaluation. Note goals from the previous evaluation period.
2. Review the employee’s file and speak with other managers who interface with this person. In other words, gather data about performance.
3. Fill out the necessary forms for this employee’s appraisal. Note which areas you want to address in the appraisal interview with the employee.
4. If your organization bases pay increases on the performance evaluation, know the pay increase you are able to offer the employee.
5. Write any improvement plans as necessary.
6. Schedule a time and date with the employee.
Most people feel nervous about giving and receiving performance evaluations. One way to limit this is to show the employee the written evaluation before the interview, so the employee knows what to expect. To keep it a two-way conversation, many organizations have the employee fill out the same evaluation, and answers from the employee and manager are compared and discussed in the interview. When the manager meets with the employee to discuss the performance evaluation, the manager should be clear, direct, and to the point about positives and weaknesses. The manager should also discuss goals for the upcoming period, as well as any pay increases or improvement plans as a result of the evaluation. The manager should also be prepared for questions, concerns, and reasons for an employee’s not being able to meet performance standards.
Improvement plans should not be punitive, but the goal of an improvement plan should be to help the employee succeed. Improvement plans are discussed in Chapter 7. Coaching and development should occur throughout the employee’s tenure, and he or she should know before the performance evaluation whether expectations are not being met. This way, the introduction of an improvement plan is not a surprise. There are six main components to an employee improvement plan:
1. Define the problem.
2. Discuss the behaviors that should be modified, based on the problem.
3. List specific strategies to modify the behavior.
4. Develop long- and short-term goals.
5. Define a reasonable time line for improvements.
6. Schedule “check-in” dates to discuss the improvement plan.
An employee improvement plan works best if it is written with the employee, to obtain maximum buy-in. Once you have developed the process and your managers are comfortable with it, the process must be managed. This is addressed in Section 11.3.3 “Organizing the Performance Appraisal Process”.
Organizing the Performance Appraisal Process
While it will be up to the individual manager to give performance appraisals to employees, as an HR professional, it will be up to you to develop the process (which we have already discussed) and to manage the process. Here are some things to consider to effectively manage the process:
1. Provide each manager with a job description for each employee. The job description should highlight the expectations of each job title and provide a sound basis for review.
2. Provide each manager with necessary documents, such as the criteria and rating sheets for each job description.
3. Give the manager instructions and ground rules for filling out the documents.
4. Work with the manager on pay increases for each employee, if your organization has decided to tie performance evaluations with pay increases.
5. Provide coaching assistance on objectives development and improvement plans, if necessary.
6. Give time lines to the manager for each performance review he or she is responsible for writing.
Most HR professionals will keep a spreadsheet or other document that lists all employees, their manager, and time lines for completion of performance evaluations. This makes it easier to keep track of when performance evaluations should be given.
Of course, the above process assumes the organization is not using software to manage performance evaluations. Numerous types of software are available that allow the HR professional to manage key job responsibilities and goals for every employee in the organization. This software tracks progress on those goals and allows the manager to enter notes (critical incidents files) online. The software can track 360 reviews and send e-mail reminders when it is time for an employee or manager to complete evaluations. This type of software can allow for a smoother, more streamlined process. Of course, as with any new system, it can be time-consuming to set up and train managers and employees on how to use the system. However, many organizations find the initial time to set up software or web-based performance evaluation systems well worth the easier recording and tracking of performance goals.
No matter how the system is managed, it must be managed and continually developed to meet the ultimate goal—continuing development of employees.
The Performance Appraisal
This role-play highlights some of the things NOT to do when discussing a performance evaluation with an employee.
Performance Appraisal Interviews
Once a good understanding of the process is developed, it is time to think about the actual meeting with the employee. A performance review process could be intricately detailed and organized, but if the meeting with the employee doesn’t go well, the overall strategic objective of performance reviews may not be met. In Norman R. F. Maier’s famous book The Appraisal Interview, he addressed three types of appraisal interview styles. The first is the tell and sell interview. In this type of interview, the manager does most of the talking and passes his or her view to the employee. In the tell and listen type of interview, the manager communicates feedback and then addresses the employee’s thoughts about the interview. In the problem-solving interview, the employee and the manager discuss the things that are going well and those that are not going well, which can make for a more productive discussion. To provide the best feedback to the employee, consider the following:
1. Be direct and specific. Use examples to show where the employee has room for improvement and where the employee exceeds expectations, such as, “The expectation is zero accidents, and you have not had any accidents this year.”
2. Do not be personal; always compare the performance to the standard. For example, instead of saying, “You are too slow on the production line,” say, the “expectations are ten units per hour, and currently you are at eight units.”
3. Remember, it is a development opportunity. As a result, encourage the employee to talk. Understand what the employee feels he does well and what he thinks he needs to improve.
4. Thank the employee and avoid criticism. Instead of the interview being a list of things the employee doesn’t do well (which may give the feeling of criticizing), thank the employee for what the employee does well, and work on action plans together to fix anything the employee isn’t doing well. Think of it as a team effort to get the performance to the standard it needs to be.
The result of a completed performance evaluation usually means there are a variety of ramifications that can occur after evaluating employee performance:
1. The employee now has written, documented feedback on his or her performance.
2. The organization has documented information on low performance, in case the employee needs to be dismissed.
3. The employee has performed well and is eligible for a raise.
4. The employee has performed well and could be promoted.
5. Performance is not up to expectations, so an improvement plan should be put into place.
6. The employee hasn’t done well, improvement plans have not worked (the employee has been warned before), and the employee should be dismissed.
In each of these cases, planning in advance of the performance appraisal interview is important, so all information is available to communicate to the employee. Consider Robin, an employee at Blewett Gravel who was told she was doing an excellent job. Robin was happy with the performance appraisal and when asked about promotion opportunities, the manager said none was available. This can devalue a positive review and impact employee motivation. The point, of course, is to use performance evaluations as a development tool, which will positively impact employee motivation.
Preparing and Giving the Performance Appraisal
Some great tips on preparing for the performance appraisal meeting, and how to handle the meeting.
Key Takeaways
• There are many best practices to consider when developing, implementing, and managing a performance appraisal system. First, the appraisal system must always tie into organization goals and the individual employee’s job description.
• Involvement of managers in the process can initiate buy-in.
• Consider using self-evaluation tools as a method to create a two-way conversation between the manager and the employee.
• Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in conjunction with self- and manager evaluations can create a clearer picture of employee performance.
• Be aware of bias that can occur with performance appraisal systems.
• Feedback should be given throughout the year, not just at performance appraisal time.
• The goals of a performance evaluation system should tie into the organization’s strategic plan, and the goals for employees should tie into the organization’s strategic plan as well.
• The process for managing performance evaluations should include goal setting, monitoring and coaching, and doing the formal evaluation process. The evaluation process should involve rewards or improvement plans where necessary. At the end of the evaluation period, new goals should be developed and the process started over again.
• It is the HR professional’s job to make sure managers and employees are trained on the performance evaluation process.
• Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.
• The HR professional can assist managers by providing best practices information on how to discuss the evaluation with the employee.
• Sometimes when performance is not up to standard, an improvement plan may be necessary. The improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the expected behavior. The improvement plan should also address goals, time lines to meet the goals, and check-in dates for status on the goals.
• It is the job of the HR professional to organize the process for the organization. HR should provide the manager with training, necessary documents (such as criteria and job descriptions), instructions, pay increase information, and coaching, should the manager have to develop improvement plans.
• Some HR professionals organize the performance evaluation information in an Excel spreadsheet that lists all employees, job descriptions, and due dates for performance evaluations.
• There are many types of software programs available to manage the process. This software can manage complicated 360 review processes, self-evaluations, and manager’s evaluations. Some software can also provide time line information and even send out e-mail reminders.
• The performance evaluation process should be constantly updated and managed to ensure the results contribute to the success of the organization.
• A variety of ramifications can occur, from the employee’s earning a raise to possible dismissal, all of which should be determined ahead of the performance appraisal interview.
Exercises
1. What are the important aspects of an improvement plan? Why are these so important?
2. Name and describe three best practices for a performance evaluation system. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/11%3A_Employee_Assessment/11.04%3A_Completing_and_Conducting_the_Appraisal.txt |
Chapter Summary
• A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.
• The use of the term systematic implies the process should be planned.
• Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.
• The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.
• Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determining how this will be handled is the next step in the performance appraisal development process.
• Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.
• After determining how often the evaluations should be given, and if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.
• After you have determined what forms will be used (or developed), determine who will be the source for the information. Managers, peers, and customers are options. A 360 review process combines several sources for a more thorough review.
• There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating them only on the objectives.
• Performance evaluations should always be based on the actual job description.
• Our last step in the development of this process is to communicate the process and train our employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.
• When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.
• The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.
• The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.
• In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.
• An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee’s job performance.
• A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee’s job.
• Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.
• The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.
• In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.
• An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.
• An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.
• A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.
• There are many best practices to consider when developing, implementing, and managing a performance appraisal system. First, the appraisal system must always tie into organization goals and the individual employee’s job description.
• Involvement of managers in the process can initiate buy-in for the process.
• Consider using self-evaluation tools as a method to create a two-way conversation between the manager and the employee.
• Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in conjunction with self and manager evaluations can create a clearer picture of employee performance.
• Be aware of bias that can occur with performance appraisal systems.
• Feedback should be given throughout the year, not just at performance appraisal time.
• The goals of a performance evaluation system should tie into the organization’s strategic plan, and the goals for employees should tie into the organization’s strategic plan as well.
• The process for managing performance evaluations should include goal setting, monitoring and coaching, and doing the formal evaluation process. The evaluation process should involve rewards or improvement plans where necessary. At the end of the evaluation period, new goals should be developed and the process started over again.
• It is the HR professional’s job to make sure managers and employees are trained on the performance evaluation process.
• Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.
• The HR professional can assist managers by providing best practices information on how to discuss the evaluation with the employee.
• Sometimes when performance is not up to standard, an improvement plan may be necessary. The improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the expected behavior. The improvement plan should also address goals, time lines to meet the goals, and check-in dates for status on the goals.
• It is the job of the HR professional to organize the process for the organization. HR should provide the manager with training, necessary documents (such as criteria and job descriptions), instructions, pay increase information, and coaching, should the manager have to develop improvement plans.
• Some HR professionals organize the performance evaluation information in an Excel spreadsheet that lists all employees, job descriptions, and due dates for performance evaluations.
• There are many types of software available to manage the process. This software can manage complicated 360 review processes, self-evaluations, and manager’s evaluations. Some software can also provide time line information and even send out e-mail reminders.
• The performance evaluation process should be constantly updated and managed to ensure the results contribute to the success of the organization.
Chapter Case
Revamping the System
It is your first six months at your new job as an HR assistant at Groceries for You, a home delivery grocery service. When you ask the HR director, Chang, about performance evaluations, he just rolls his eyes and tells you to schedule a meeting in his Outlook calendar to discuss them. In the meantime, you gather some data that might be helpful in your discussion with Chang.
Number of managers 4
Number of employees 82
Average span of control Delivery—38
Warehouse—24
Marketing/technology—16
Job types 11—customer service
1—delivery manager
1—warehouse manager
1—marketing and technology manager
38—delivery drivers
24—warehouse workers
1—tech support
5—marketing and website design
When you meet, Chang is very forward with you about the current process. “Right now, managers groan when they are told they need to complete evaluations. The evaluations are general—we use the same form for all jobs in the organization. It appears that promotion decisions are not based on the evaluations but instead tend to be based on subjective criteria, such as how well the manager likes the individual. We really need to get a handle on this system, but I haven’t had the time to do it. I am hoping you can make some recommendations for our system and present them to me and then to the managers during next month’s meeting. Can you do this?”
1. Detail each step you will take as you develop a new performance evaluation system.
2. Identify specifics such as source, type of rating system, and criteria plans for each job category. Discuss budget for each performance evaluation. Address how you will obtain management buy-in for the new process.
3. Develop PowerPoint slides for your presentation to management about your proposed process and forms.
Team Activity
1. In a group of three to four, develop a performance evaluation sheet, using at least two methods, for the following job description, and present to the class:
Job Class Specification for:
ACCOUNTANT, City of Seattle
Class Specification Schematic Number: 2000504
Class Summary:
Performs a variety of professional accounting functions and tasks for a city department or utility. Audits, monitors, researches, and recommends revisions to accounting procedures and operations. Performs and coordinates the maintenance and production of accounting reports and records and ensures compliance with established accounting procedures and practices.
Distinguishing Characteristics of the Class:
The accountant class is capable of performing a range of professional accounting functions and tasks within the established guidelines of the department/city and according to generally accepted accounting practices, procedures, and methods. This class is supervised by a higher level accountant or manager and supervises accounting support personnel as required.
Assignments are performed under moderate supervision within established guidelines, generally accepted accounting principles, standards, and methods. Receives direction on special projects or where guidelines and rules are unclear. Knowledge of accounting practices, methods, laws, rules, ordinances, and regulations is required to determine the most appropriate accounting methods and procedures to apply and to ensure appropriate compliance.
Personal contacts are with department employees, other departments, agencies, or the public to provide information, coordinate work activities, and resolve problems.
Examples of Work:
• Analyzes and prepares cash flow forecasts and updates forecasts based on actual revenues and expenditures.
• Prepares financial reports, statements, and schedules.
• Audits and reconciles assigned accounts in the general ledger.
• Monitors and controls accounting activities in the recording of financial transactions, that is, accounts receivables, accounts payables, collections, and fixed assets.
• Verifies and reviews accounting transactions. Makes appropriate corrections, entries, and adjustments to ensure accuracy of reports.
• Researches, analyzes, and prepares journals for financial transactions.
• Analyzes and maintains subsidiary ledgers (i.e., investments). Monitors and maintains investment ledger entries and investment schedules.
• Prepares variance reports required by outside auditors and program summaries explaining variances.
• Coordinates, trains, and monitors the work of accounting support personnel to ensure proper work operations.
• Assists in development and modification of internal accounting control policies, procedures, and practices.
• Assists in special projects such as research and analysis of financial information, long-term debt schedules, investment security reports, and reports for special information requested by departmental personnel.
• Performs other related duties of a comparable level/type as assigned.
Work Environment/Physical Demands:
Work is performed in an office environment.
Minimum Qualifications:
Bachelor’s Degree in Accounting (or a combination of education and/or training and/or experience that provides an equivalent background required to perform the work of the class). | textbooks/biz/Management/Beginning_Management_of_Human_Resources/11%3A_Employee_Assessment/11.05%3A_Cases_and_Problems.txt |
Unhappy Employees Could Equal Unionization
As the HR manager for a two-hundred-person company, you tend to have a pretty good sense of employee morale. Recently, you are concerned because it seems that morale is low, because of pay and the increasing health benefit costs to employees. You discuss these concerns with upper-level management, but owing to financial pressures, the company is not able to give pay raises this year.
One afternoon, the manager of the marketing department comes to you with this concern, but also with some news. She tells you that she has heard talk of employees unionizing if they do not receive pay raises within the next few months. She expresses that the employees are very unhappy and productivity is suffering as a result. She says that employees have already started the unionization process by contacting the National Labor Relations Board and are in the process of proving 30 percent worker interest in unionization. As you mull over this news, you are concerned because the organization has always had a family atmosphere, and a union might change this. You are also concerned about the financial pressures to the organization should the employees unionize and negotiate higher pay. You know you must take action to see that this doesn’t happen. However, you know you and all managers are legally bound by rules relating to unionization, and you need a refresher on what these rules are. You decide to call a meeting first with the CEO and then with managers to discuss strategy and inform them of the legal implications of this process. You feel confident that a resolution can be developed before the unionization happens.
12.02: The Nature of Unions
Learning Objectives
1. Be able to discuss the history of labor unions.
2. Explain some of the reasons for a decline in union membership over the past sixty years.
3. Be able to explain the process of unionization and laws that relate to unionization.
A labor union, or union, is defined as workers banding together to meet common goals, such as better pay, benefits, or promotion rules. In the United States, 11.9 percent of American workers belong to a union, down from 20.1 percent in 19831. In this section, we will discuss the history of unions, reasons for decline in union membership, union labor laws, and the process employees go through to form a union. First, however, we should discuss some of the reasons why people join unions.
People may feel their economic needs are not being met with their current wages and benefits and believe that a union can help them receive better economic prospects. Fairness in the workplace is another reason why people join unions. They may feel that scheduling, vacation time, transfers, and promotions are not given fairly and feel that a union can help eliminate some of the unfairness associated with these processes. Let’s discuss some basic information about unions before we discuss the unionization process.
History and Organization of Unions
Trade unions were developed in Europe during the Industrial Revolution, when employees had little skill and thus the entirety of power was shifted to the employer. When this power shifted, many employees were treated unfairly and underpaid. In the United States, unionization increased with the building of railroads in the late 1860s. Wages in the railroad industry were low and the threat of injury or death was high, as was the case in many manufacturing facilities with little or no safety laws and regulations in place. As a result, the Bortherhood of Locomotive Engineers and several other brotherhoods (focused on specific tasks only, such as conductors and brakemen) were formed to protect workers’ rights, although many workers were fired because of their membership.
Labor Union AFL-CIO Perspective
" href="http://www.youtube.com/watch?v=ubIWyT7nGdU" class="replaced-iframe">(click to see video)
A video from the AFL-CIO shows a history of labor unions, from its perspective.
The first local unions in the United States were formed in the eighteenth century, in the form of the National Labor Union (NLU).
The National Labor Union, formed in 1866, paved the way for other labor organizations. The goal of the NLU was to form a national labor federation that could lobby government for labor reforms on behalf of the labor organizations. Its main focus was to limit the workday to eight hours. While the NLU garnered many supporters, it excluded Chinese workers and only made some attempts to defend the rights of African-Americans and female workers. The NLU can be credited with the eight-hour workday, which was passed in 1862. Because of a focus on government reform rather than collective bargaining, many workers joined the Knights of Labor in the 1880s.
The Knights of Labor started as a fraternal organization, and when the NLU dissolved, the Knights grew in popularity as the labor union of choice. The Knights promoted the social and cultural spirit of the worker better than the NLU had. It originally grew as a labor union for coal miners but also covered several other types of industries. The Knights of Labor initiated strikes that were successful in increasing pay and benefits. When this occurred, membership increased. After only a few years, though, membership declined because of unsuccessful strikes, which were a result of a too autocratic structure, lack of organization, and poor management. Disagreements between members within the organization also caused its demise.
The American Federation of Labor (AFL) was formed in 1886, mostly by people who wanted to see a change from the Knights of Labor. The focus was on higher wages and job security. Infighting among union members was minimized, creating a strong organization that still exists today. In the 1930s, the Congress of Industrial Organizations (CIO) was formed as a result of political differences in the AFL. In 1955, the two unions joined together to form the AFL-CIO.
Currently, the AFL-CIO is the largest federation of unions in the United States and is made up of fifty-six national and international unions. The goal of the AFL-CIO isn’t to negotiate specific contracts for employees but rather to support the efforts of local unions throughout the country.
Currently in the United States, there are two main national labor unions that oversee several industry-specific local unions. There are also numerous independent national and international unions that are not affiliated with either national union:
1. AFL-CIO: local unions include Airline Pilots Association, American Federation of Government Employees, Associated Actors of America, and Federation of Professional Athletes
2. CTW (Change to Win Federation): includes the Teamsters, Service Employees International Union, United Farm Workers of America, and United Food and Commercial Workers
3. Independent unions: Directors Guild of America, Fraternal Order of Police, Independent Pilots Association, Major League Baseball Players Association
The national union plays an important role in legislative changes, while the local unions focus on collective bargaining agreements and other labor concerns specific to the area. Every local union has a union steward who represents the interests of union members. Normally, union stewards are elected by their peers.
A national union, besides focusing on legislative changes, also does the following:
1. Lobbies in government for worker rights laws
2. Resolves disputes between unions
3. Helps organize national protests
4. Works with allied organizations and sponsors various programs for the support of unions
For example, in 2011, the national Teamsters union organized demonstrations in eleven states to protest the closing of an Ontario, California, parts distribution center. Meanwhile, Teamster Local 495 protested at the Ontario plant2.
Figure 12.1 The Complicated Structure of AFL-CIO
Current Union Challenges
The labor movement is currently experiencing several challenges, including a decrease in union membership, globalization, and employers’ focus on maintaining nonunion status. As mentioned in the opening of this section, the United States has seen a steady decline of union membership since the 1950s. In the 1950s, 36 percent of all workers were unionized (Friedman, 2010), as opposed to just over 11 percent today.
Human Resource Recall
When you are hired for your first job or your next job, do you think you would prefer to be part of a union or not?
Claude Fischer, a researcher from University of California Berkeley, believes the shift is cultural. His research says the decline is a result of American workers preferring individualism as opposed to collectivism (Fischer, 2010). Other research says the decline of unions is a result of globalization, and the fact that many jobs that used to be unionized in the manufacturing arena have now moved overseas. Other reasoning points to management, and that its unwillingness to work with unions has caused the decline in membership. Others suggest that unions are on the decline because of themselves. Past corruption, negative publicity, and hard-line tactics have made joining a union less favorable.
To fully understand unions, it is important to recognize the global aspect of unions. Statistics on a worldwide scale show unions in all countries declining but still healthy in some countries. For example, in eight of the twenty-seven European Union member states, more than half the working population is part of a union. In fact, in the most populated countries, unionization rates are still at three times the unionization rate of the United States (Federation of European Employers, 2011). Italy has a unionization rate of 30 percent of all workers, while the UK has 29 percent, and Germany has a unionization rate of 27 percent.
In March 2011, Wisconsin governor Scott Walker proposed limiting the collective bargaining rights of state workers to save a flailing budget. Some called this move “union busting” and said this type of act is illegal, as it takes away the basic rights of workers. The governor defended his position by saying there is no other choice, since the state is in a budget crisis. Other states such as Ohio are considering similar measures. Whatever happens, there is a clear shift for unions today.
Globalization is also a challenge in labor organizations today. As more and more goods and services are produced overseas, unions lose not only membership but union values in the stronghold of worker culture. As globalization has increased, unions have continued to demand more governmental control but have been only somewhat successful in these attempts. For example, free trade agreements such as the North American Free Trade Agreement (NAFTA) have made it easier and more lucrative for companies to manufacture goods overseas. This is discussed in Chapter 14 “International HRM”. For example, La-Z-Boy and Whirlpool closed production facilities in Dayton and Cleveland, Ohio, and built new factories in Mexico to take advantage of cheaper labor and less stringent environmental standards. Globalization creates options for companies to produce goods wherever they think is best to produce them. As a result, unions are fighting the globalization trend to try and keep jobs in the United States.
There are a number of reasons why companies do not want unions in their organizations, which we will discuss in greater detail later. One of the main reasons, however, is increased cost and less management control. As a result, companies are on a quest to maintain a union-free work environment. In doing so, they try to provide higher wages and benefits so workers do not feel compelled to join a union. Companies that want to stay union free constantly monitor their retention strategies and policies.
Labor Union Laws
The Railway Labor Act (RLA) of 1926 originally applied to railroads and in 1936 was amended to cover airlines. The act received support from both management and unions. The goal of the act is to ensure no disruption of interstate commerce. The main provisions of the act include alternate dispute resolution, arbitration, and mediation to resolve labor disputes. Any dispute must be resolved in this manner before a strike can happen. The RLA is administered by the National Mediation Board (NMB), a federal agency, and outlines very specific and detailed processes for dispute resolution in these industries.
The Norris-LaGuardia Act of 1932 (also known as the anti-injunction bill), barred federal courts from issuing injunctions (a court order that requires a party to do something or refrain from doing something) against nonviolent labor disputes and barred employers from interfering with workers joining a union. The act was a result of common yellow-dog contracts, in which a worker agreed not to join a union before accepting a job. The Norris-LaGuardia Act made yellow-dog contracts unenforceable in courts and established that employees were free to join unions without employer interference.
In 1935, the Wagner Act (sometimes called the National Labor Relations Act) was passed, changing the way employers can react to several aspects of unions. The Wagner Act had a few main aspects:
1. Employers must allow freedom of association and organization and cannot interfere with, restrain, or coerce employees who form a union.
2. Employers may not discriminate against employees who form or are part of a union, or those who file charges.
3. An employer must bargain collectively with representation of a union.
The National Labor Relations Board (NLRB) oversees this act, handling any complaints that may arise from the act. For example, in April 2011, the NLRB worked with employees at Ozburn-Hessey Logistics in Tennessee after they had been fired because of their involvement in forming a union. The company was also accused of interrogating employees about their union activities and threatened employees with loss of benefits should they form a union. The NLRB utilized their attorney to fight on behalf of the employees, and a federal judge ordered the company to rehire the fired employees and also to desist in other antiunion activities3.
Figure 12.2
The Taft-Hartley Act prevents certain types of strikes, even in unionized companies.
The Taft-Hartley Act also had major implications for unions. Passed in 1947, Taft-Hartley amended the Wagner Act. The act was introduced because of the upsurge of strikes during this time period. While the Wagner Act addressed unfair labor practices on the part of the company, the Taft-Hartley Act focused on unfair acts by the unions. For example, it outlawed strikes that were not authorized by the union, called wildcat strikes. It also prohibited secondary actions (or secondary boycotts) in which one union goes on strike in sympathy for another union. The act allowed the executive branch of the federal government to disallow a strike should the strike affect national health or security. One of the most famous injunctions was made by President Ronald Reagan in 1981. Air traffic controllers had been off the job for two days despite their no-strike oath, and Reagan ordered all of them (over eleven thousand) discharged because they violated this federal law.
The Landrum Griffin Act, also known as the Labor Management Reporting and Disclosure (LMRDA) Act, was passed in 1959. This act required unions to hold secret elections, required unions to submit their annual financial reports to the U.S. Department of Labor, and created standards governing expulsion of a member from a union. This act was created because of racketeering charges and corruptions charges by unions. In fact, investigations of the Teamsters Union found they were linked to organized crime, and the Teamsters were banned from the AFL-CIO. The goal of this act was to regulate the internal functioning of unions and to combat abuse of union members by union leaders.
Figure 12.3 Major Acts Regarding Unions, at a Glance
Railway Labor Act
• Covers railroad and airlines
• Alternate dispute resolution methods instead of striking for these two industries
Norris-LaGuardia Act
• As a result of yellow-dog contracts
• Barred federal courts from issuing injunctions against nonviolent labor disputes
Wagner Act
• Allowed for freedom to join a union without interference
• May not discriminate against union employees
• Set collective bargaining rules
Taft-Hartley Act
• Amended Wagner Act
• Focus was on unfair practices by the union
Landrum-Friffing Act
• Required unions to hold secret elections
• Financial reporting of unions required
The Unionization Process
There are one of two ways in which a unionization process can begin. First, the union may contact several employees and discuss the possibility of a union, or employees may contact a union on their own. The union will then help employees gather signatures to show that the employees want to be part of a union. To hold an election, the union must show signatures from over 30 percent of the employees of the organization.
Figure 12.4 The Unionization Process
Employee Dissatisfaction
• Union contacts employees or employees contact union
Initial Organization Meeting
• Initial meeting with union to gather employee support.
Signatures
• Must have 30% of employee signatures to move forward with unionization process.
Secret Ballot Election or Card Check Method
• Once 30% of signatures are gathered, a secret ballot election is administered by the National Labor Relations Board (if the company does not accept the card check method).
Voting and Contract
• If the vote is “yes” (51% majority), the National Labor Relations Board certifies the union as the legal bargaining representative of the employees.
Once the signatures are gathered, the National Labor Relations Board is petitioned to move forward with a secret-ballot election. An alternative to the secret-ballot election is the card check method, in which the union organizer provides the company with authorization cards signed by a simple majority (half plus one). The employer can accept the cards as proof that the employees desire a union in their organization. The NLRB then certifies the union as the employees’ collective bargaining representative.
If the organization does not accept the card check method as authorization for a union, the second option is via a secret ballot. Before this method is used, a petition must be filed by the NLRB, and an election is usually held two months after the petition is filed. In essence, the employees vote whether to unionize or not, and there must be a simple majority (half plus one). The NLRB is responsible for election logistics and counting of ballots. Observers from all parties can be present during the counting of votes. Once votes are counted, a decision on unionization occurs, and at that time, the collective bargaining process begins.
Once the NLRB is involved, there are many limits as to what the employer can say or do during the process to prevent unionization of the organization. It is advisable for HR and management to be educated on what can legally and illegally be said during this process. It is illegal to threaten or intimidate employees if they are discussing a union. You cannot threaten job, pay, or benefits loss as a result of forming a union. Figure 12.5 “Things That Shouldn’t Be Said to Employees during a Unionization Process” includes information on what should legally be avoided if employees are considering unionization.
Figure 12.5 Things That Shouldn’t Be Said to Employees during a Unionization Process
Obviously, it is in the best interest of the union to have as many members as possible. Because of this, unions may use many tactics during the organizing process. For example, many unions are also politically involved and support candidates who they feel best represent labor. They provide training to organizers and sometimes even encourage union supporters to apply for jobs in nonunion environments to actively work to unionize other employees when they are hired. This practice is called union salting. Unions, especially on the national level, can be involved in corporate campaigns that boycott certain products or companies because of their labor practices. The United Food and Commercial Workers (UFCW), for example, has a “Wake Up Walmart Campaign” that targets the labor practices of this organization.
Strategies Companies Use to Avoid Unionization
Most organizations feel the constraints of having a union organization are too great. It affects the cost to the organization and operation efficiency. Collective bargaining at times can put management at odds with its employees and cost more to produce products and services. Ideally, companies will provide safe working conditions, fair pay, and benefits so the employees do not feel they need to form a union. There are three main phases of unionization:
1. Phase 1: Your organization is union free and there is little or no interest in unionizing.
2. Phase 2: You learn that some employees are discussing unionization or you learn about specific attempts by the union to recruit employees.
3. Phase 3: You receive a petition from the National Labor Relations Board filed by a union requesting a unionization vote.
Because of increased costs and operational efficiency, it is normally in a company’s best interest to avoid unionization. While in phase 1, it is important to review employee relations programs including pay, benefits, and other compensation. Ensure the compensation plans are fair so employees feel fairly treated and have no reason to seek the representation of a union.
Despite your best efforts, you could hear of unionization in your organization. The goal here is to prevent the union from gaining support to ask for a National Labor Relations Board election. Since only 30 percent of employees need to sign union cards for a vote to take place, this phase to avoid unionization is very important. During this time, HR professionals and managers should respond to the issues the employees have and also develop a specific strategy on how to handle the union vote, should it get that far.
In phase 3, familiarization with all the National Labor Relations Board rules around elections and communications is important. With this information, you can organize meetings to inform managers on these rules. At this time, you will likely want to draw up an antiunion campaign and communicate that to managers, but also make sure it does not violate laws. To this end, develop specific strategies to encourage employees to vote “no” for the union. Some of the arguments that might be used include talking with the employee and mentioning the following:
1. Union dues are costly.
2. Employees could be forced to go on strike.
3. Employees and management may no longer be able to discuss matters informally and individually.
4. Unionization can create more bureaucracy within the company.
5. Individual issues may not be discussed.
6. Many decisions within a union, such as vacation time, are based on seniority only.
With unionization in decline, it is likely you may never need to handle a new union in your organization. However, organizations such as Change to Win are in the process of trying to increase union membership. This organization has four affiliated unions, with a goal to strengthen the labor movement. Teamsters, United Food and Commercial Workers, United Farm Workers, and Service Employees International Union are all unions affiliated with this organization (Change to Win, 2011). The next few years will be telling as to the fate of unions in today’s organizations.
Fortune 500 Focus
Perhaps no organization is better known for its antiunion stance than Walmart. Walmart has over 3,800 stores in the United States and over 4,800 internationally with \$419 billion in sales4. Walmart employs more than 2 million associates worldwide4. The billions of dollars Walmart earns do not immunize the company to trouble. In 2005, the company’s vice president, Tom Coughlin, was forced to resign after admitting that between \$100,000 and \$500,000 was spent for undeclared purposes, but it was eventually found that the money was spent to keep the United Food and Commercial Workers union (UFCW) out of Walmart (Los Angeles Times Wire Services, 2011) (he was found guilty and sentenced to two years of house arrest).
Other claims surrounding union busting are the closing of stores, such as the Walmart Tire and Lube Express in Gatineau, Quebec (UFCW Canada, 2011), when discussions of unionization occurred. Other reports of union busting include the accusation that company policy requires store managers to report rumors of unionizing to corporate headquarters. Once the report is made, all labor decisions for that store are handled by the corporate offices instead of the store manager. According to labor unions in the United States, Walmart is willing to work with international labor unions but continues to fiercely oppose unionization in the United States. In one example, after butchers at a Jacksonville, Texas, Walmart voted to unionize, Walmart eliminated all US meat-cutting departments.
A group called OUR Walmart (Organization United for Respect), financed by the United Food and Commercial Workers* (UFCW) union, has stemmed from the accusations of union busting. Walmart spokesperson David Tovar says he sees the group as a Trojan horse assembled by labor organizations to lay the groundwork for full-fledged unionization and seek media attention to fulfill their agenda. While the organization’s activities may walk a fine line between legal and illegal union practices under the Taft-Hartley Act, this new group will certainly affect the future of unionization at Walmart in its US stores.
*Note: UFCW was part of the AFL-CIO until 2005 and now is an independent national union.
The Impact of Unions on Organizations
You may wonder why organizations are opposed to unions. As we have mentioned, since union workers do receive higher wages, this can be a negative impact on the organization. Unionization also impacts the ability of managers to make certain decisions and limits their freedom when working with employees. For example, if an employee is constantly late to work, the union contract will specify how to discipline in this situation, resulting in little management freedom to handle this situation on a case-by-case basis. In 2010, for example, the Art Institute of Seattle faculty filed signatures and voted on unionization5. Some of the major issues were scheduling issues and office space, not necessarily pay and benefits. While the particular National Labor Relations Board vote was no to unionization, a yes vote could have given less freedom to management in scheduling, since scheduling would be based on collective bargaining contracts. Another concern about unionization for management is the ability to promote workers. A union contract may stipulate certain terms (such as seniority) for promotion, which means the manager has less control over the employees he or she can promote.
Section 12.2 “Collective Bargaining” and Section 12.3 “Administration of the Collective Bargaining Agreement” discuss the collective bargaining and grievance processes.
Key Takeaways
• Union membership in the United States has been slowly declining. Today, union membership consists of about 11.9 percent of the workforce, while in 1983 it consisted of 20 percent of the workforce.
• The reasons for decline are varied, depending on whom you ask. Some say the moving of jobs overseas is the reason for the decline, while others say unions’ hard-line tactics put them out of favor.
• Besides declining membership, union challenges today include globalization and companies’ wanting a union-free workplace.
• The United States began its first labor movement in the 1800s. This was a result of low wages, no vacation time, safety issues, and other issues.
• Many labor organizations have disappeared, but the American Federation of Labor (AFL) still exists today, although it merged with the Congress of Industrial Organizations (CIO) and is now known as the AFL-CIO. It is the largest labor union and represents local labor unions in a variety of industries.
• The United States has a low number of union members compared with other countries. Much of Europe, for example, has over 30 percent of their workforce in labor unions, while in some countries as much as 50 percent of the workforce are members of a labor union.
• Legislation has been created over time to support both labor unions and the companies who have labor unions. The Railway Labor Act applies to airlines and railroads and stipulates that employees may not strike until they have gone through an extensive dispute resolution process. The Norris-LaGuardia Act made yellow-dog contracts illegal and barred courts from issuing injunctions.
• The Wagner Act was created to protect employees from retaliation should they join a union. The Taft-Hartley Act was developed to protect companies from unfair labor practices by unions.
• The National Labor Relations Board is the overseeing body for labor unions, and it handles disputes between companies as well as facilitates the process of new labor unions in the developing stages. Its job is to enforce both the Wagner Act and the Taft-Hartley Act.
• The Landrum Griffin Act was created in 1959 to combat corruption in labor unions during this time period.
• To form a union, the organizer must have signatures from 30 percent of the employees. If this occurs, the National Labor Relations Board will facilitate a card check to determine more than 50 percent of the workforce at that company is in agreement with union representation. If the company does not accept this, then the NLRB holds secret elections to determine if the employees will be unionized. A collective bargaining agreement is put into place if the vote is yes.
• Companies prefer to not have unions in their organizations because it affects costs and operational productivity. Companies will usually try to prevent a union from organizing in their workplace.
• Managers are impacted when a company does unionize. For example, management rights are affected, and everything must be guided by the contract instead of management prerogative.
Exercises
1. Visit the National Labor Relations Board website. View the “weekly case summary” and discuss it in at least two paragraphs, stating your opinion on this case.
2. Do you agree with unionization within organizations? Why or why not? List the advantages and disadvantages of unions to the employee and the company.
1“Union Members: 2010,” Bureau of Labor Statistics, US Department of Labor, news release, January 21, 2011, accessed April 4, 2011, www.bls.gov/news.release/pdf/union2.pdf.
2“Teamsters Escalate BMW Protests across America,” PR Newswire, August 2, 2011, accessed August 15, 2011, http://www.teamster.org/content/teamsters-escalate-bmw-protests-across-america.
3“Federal Judge Orders Employer to Reinstate Three Memphis Warehouse Workers and Stop Threatening Union Supporters While Case Proceeds at NLRB,” Office of Public Affairs, National Labor Relations Board, news release, April 7, 2011, accessed April 7, 2011, www.nlrb.gov/news/federal-judge-orders-employer-reinstate-three-memphis-warehouse-workers- and-stop-threatening-un.
4“Investors,” Walmart Corporate, 2011, accessed August 15, 2011, http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome.
5“Union Push in For-Profit Higher Ed,” Inside Higher Ed, May 24, 2010, accessed August 15, 2011, www.insidehighered.com/news/2010/05/24/union. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/12%3A_Working_with_Labor_Unions/12.01%3A_Introduction.txt |
Learning Objectives
1. Be able to describe the process of collective bargaining.
2. Understand the types of bargaining issues and the rights of management.
3. Discuss some strategies when working with unions.
When employees of an organization vote to unionize, the process for collective bargaining begins. Collective bargaining is the process of negotiations between the company and representatives of the union. The goal is for management and the union to reach a contract agreement, which is put into place for a specified period of time. Once this time is up, a new contract is negotiated. In this section, we will discuss the components of the collective bargaining agreement.
The Process of Collective Bargaining
In any bargaining agreement, certain management rights are not negotiable, including the right to manage and operate the business, hire, promote, or discharge employees. However, in the negotiated agreement there may be a process outlined by the union for how these processes should work. Management rights also include the ability of the organization to direct the work of the employees and to establish operational policies. As an HR professional sits at the bargaining table, it is important to be strategic in the process and tie the strategic plan with the concessions the organization is willing to make and the concessions the organization will not make.
Another important point in the collective bargaining process is the aspect of union security. Obviously, it is in the union’s best interest to collect dues from members and recruit as many new members as possible. In the contract, a checkoff provision may be negotiated. This provision occurs when the employer, on behalf of the union, automatically deducts dues from union members’ paychecks. This ensures that a steady stream of dues is paid to the union.
To recruit new members, the union may require something called a union shop. A union shop requires a person to join the union within a certain time period of joining the organization. In right-to-work states a union shop may be illegal. Twenty-two states have passed right-to-work laws, as you can see in Figure 12.6 “Map of Right-to-Work States”. These laws prohibit a requirement to join a union or pay dues and fees to a union. To get around these laws, agency shops were created. An agency shop is similar to a union shop in that workers do not have to join the union but still must pay union dues. Agency shop union fees are known as agency fees and may be illegal in right-to-work states. A closed shop used to be a mechanism for a steady flow of membership. In this arrangement, a person must be a union member to be hired. This, however, was made illegal under the Taft-Hartley Act. According to a study by CNBC, all twenty-two right-to-work states are in the top twenty-five states for having the best workforces1. However, according to the AFL-CIO, the average worker in a right-to-work state makes \$5,333 less per year than other workers2.
Figure 12.6 Map of Right-to-Work States
In a collective bargaining process, both parties are legally bound to bargain in good faith. This means they have a mutual obligation to participate actively in the deliberations and indicate a desire to find a basis for agreement. There are three main classification of bargaining topics: mandatory, permissive, and illegal. Wages, health and safety, management rights, work conditions, and benefits fall into the mandatory category. Permissive topics are those that are not required but may be brought up during the process. An example might include the requirement of drug testing for candidates or the required tools that must be provided to the employee to perform the job, such as a cellular phone or computer. It is important to note that while management is not required by labor laws to bargain on these issues, refusing to do so could affect employee morale. We can also classify bargaining issues as illegal topics, which obviously cannot be discussed. These types of illegal issues may be of a discriminatory nature or anything that would be considered illegal outside the agreement.
Examples of Bargaining Topics
• Pay rate and structure
• Health benefits
• Incentive programs
• Job classification
• Performance assessment procedure
• Vacation time and sick leave
• Health plans
• Layoff procedures
• Seniority
• Training process
• Severance pay
• Tools provided to employees
• Process for new applicants
The collective bargaining process has five main steps; we will discuss each of these steps next. The first step is the preparation of both parties. The negotiation team should consist of individuals with knowledge of the organization and the skills to be an effective negotiator. An understanding of the working conditions and dissatisfaction with working conditions is an important part of this preparation step. Establishing objectives for the negotiation and reviewing the old contract are key components to this step. The management team should also prepare and anticipate union demands, to better prepare for compromises.
Figure 12.7 Steps in Collective Bargaining
The second step of the process involves both parties agreeing on how the time lines will be set for the negotiations. In addition, setting ground rules for how the negotiation will occur is an important step, as it lays the foundation for the work to come.
In the third step, each party comes to the table with proposals. It will likely involve initial opening statements and options that exist to resolve any situations that exist. The key to a successful proposal is to come to the table with a “let’s make this work” attitude. An initial discussion is had and then each party generally goes back to determine which requests it can honor and which it can’t. At this point, another meeting is generally set up to continue further discussion.
Once the group comes to an agreement or settlement (which may take many months and proposals), a new contract is written and the union members vote on whether to accept the agreement. If the union doesn’t agree, then the process begins all over again.
Ramifications of a Bargaining Impasse
When the two parties are unable to reach consensus on the collective bargaining agreement, this is called a bargaining impasse. Various kinds of strikes are used to show the displeasure of workers regarding a bargaining impasse. An economic strike is a strike stemming from unhappiness about the economic conditions during contract negotiations. For example, 45,000 Verizon workers rallied in the summer of 2011 when contract negotiations failed (Goldberg, 2011). The two unions, Communications Workers of America and the International Brotherhood of Electric Workers, claim that the new contract is unfair, as it asks Verizon workers to contribute more to health plans, and the company is also looking to freeze pensions at the end of the year and reduce sick time (Goldberg, 2011). Verizon says the telecommunications business is changing, and it cannot afford these expenses. An unfair labor practices strike can happen during negotiations. The goal of an unfair labor practices strike is to get the organization to cease committing what the union believes to be an unfair labor practice. A bargaining impasse could mean the union goes on strike or a lockout occurs. The goal of a lockout, which prevents workers from working, is to put pressure on the union to accept the contract. A lockout can only be legally conducted when the existing collective bargaining agreement has expired and there is truly an impasse in contract negotiations. In summer 2011, the National Basketball Association locked out players when the collective bargaining agreement expired, jeopardizing the 2011–12 season (Kyler, 2011) while putting pressure on the players to accept the agreement. Similarly, the goal of a strike is to put pressure on the organization to accept the proposed contract. Some organizations will impose a lockout if workers engage in slowdowns, an intentional reduction in productivity. Some unions will engage in a slowdown instead of a strike, because the workers still earn pay, while in a strike they do not. A sick-out is when members of a union call in sick, which may be illegal since they are using allotted time, while a walk-out is an unannounced refusal to perform work. However, this type of tactic may be illegal if the conduct is irresponsible or indefensible, according to a judge. Jurisdictional strikes are used to put pressure on an employer to assign work to members of one union versus another (if there are two unions within the same organization) or to put pressure on management to recognize one union representation when it currently recognizes another. The goal of a sick-out strike is to show the organization how unproductive the company would be if the workers did go on strike. As mentioned under the Taft-Hartley Act, wildcat strikes are illegal, as they are not authorized by the union and usually violate a collective bargaining agreement. Sympathy strikes are work stoppages by other unions designed to show support for the union on strike. While they are not illegal, they may violate the terms of the collective bargaining agreement.
Human Resource Recall
How would you feel about going on strike? What kinds of situations may cause you to do so?
Working with Labor Unions
First and foremost, when working witih labor unions, a clear understanding of the contract is imperative for all HR professionals and managers. The contract (also called the collective bargaining agreement) is the guiding document for all decisions relating to employees. All HR professionals and managers should have intimate knowledge of the document and be aware of the components of the contract that can affect dealings with employees. The agreement outlines all requirements of managers and usually outlines how discipline, promotion, and transfers will work.
Because as managers and HR professionals we will be working with members of the union on a daily basis, a positive relationship can not only assist the day-to-day operations but also create an easier bargaining process. Solicitation of input from the union before decisions are made can be one step to creating this positive relationship. Transparent communication is another way to achieve this goal.
In HR, one of the major aspects of working with labor unions is management of the union contract. We discuss the grievance process in Section 12.3 “Administration of the Collective Bargaining Agreement”.
How Would You Handle This?
Union Busting
The employees in your organization are unhappy with several aspects of their job, including pay. You have tried to solve this issue by creating new compensation plans, but with no avail. You hear talk of unionizing. When you bring this issue to your CEO, she vehemently opposes unions and tells you to let the employees know that if they choose to unionize, they will all lose their jobs. Knowing the CEO’s threat is illegal, and knowing you may lose your job if the workers decide to unionize, how would you handle this?
Key Takeaways
• A union has two goals: to add new members and to collect dues. A check-off provision of a contract compels the organization to take union dues out of the paycheck of union members.
• In a union shop, people must join the union within a specified time period after joining the organization. This is illegal in right-to-work states. An agency shop is one where union membership is not required but union dues are still required to be paid. This may also be illegal in right-to-work states.
• Made illegal by the Taft-Hartley Act, a closed shop allows only union members to apply and be hired for a job.
• Collective bargaining is the process of negotiating the contact with union representatives. Collective bargaining, to be legal, must always be done in good faith.
• There are three categories of collective bargaining issues. Mandatory issues might include pay and benefits. Permissive bargaining items may include things such as drug testing or the required equipment the organization must supply to employees. Illegal issues are those things that cannot be discussed, which can include issues that could be considered discriminatory.
• The collective bargaining process can take time. Both parties prepare for the process by gathering information and reviewing the old contract. They then set time lines for the bargaining and reveal their wants and negotiate those wants. A bargaining impasse occurs when members cannot come to an agreement.
• When a bargaining impasse occurs, a strike or lockout of workers can occur. An economic strike occurs during negotiations, while an unfair labor practices strike can occur anytime, and during negotiations. A sick-out can also be used, when workers call in sick for the day. These strategies can be used to encourage the other side to agree to collective bargaining terms.
• Some tips for working with unions include knowing and following the contract, involving unions in company decisions, and communicating with transparency.
Exercises
1. Research negotiation techniques, then list and describe the options. Which do you think would work best when negotiating with unions?
2. Of the list of bargaining issues, which would be most important to you and why?
1“Best Workforces Are in Right to Work States,” Redstate, June 30, 2011, accessed August 14, 2011, http://www.redstate.com/laborunionreport/2011/06/30/best-workforces-are-in-right-to-work-states-survey-finds/.
2“Right to Work for Less,” AFL-CIO, accessed August 14, 2011, www.aflcio.org/issues/legislativealert/stateissues/work/. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/12%3A_Working_with_Labor_Unions/12.03%3A_Collective_Bargaining.txt |
Learning Objectives
1. Be able to explain how to manage the grievance process.
A grievance procedure or process is normally created within the collective bargaining agreement. The grievance procedure outlines the process by which grievances over contract violations will be handled. This will be the focus of our next section.
Procedures for Grievances
A violation of the contract terms or perception of violation normally results in a grievance. The process is specific to each contract, so we will discuss the process in generalities. A grievance is normally initiated by an employee and then handled by union representatives. Most contracts specify how the grievance is to be initiated, the steps to complete the procedure, and identification of representatives from both sides who will hear the grievance. Normally, the HR department is involved in most steps of this process. Since HRM has intimate knowledge of the contract, it makes sense for them to be involved. The basic process is shown in Figure 12.8 “A Sample Grievance Process”.
Figure 12.8 A Sample Grievance Process
The first step is normally an informal conversation with the manager, employee, and possibly a union representative. Many grievances never go further than this step, because often the complaint is a result of a misunderstanding.
If the complaint is unresolved at this point, the union will normally initiate the grievance process by formally expressing it in writing. At this time, HR and management may discuss the grievance with a union representative. If the result is unsatisfactory to both parties, the complaint may be brought to the company’s union grievance committee. This can be in the form of an informal meeting or a more formal hearing.
After discussion, management will then submit a formalized response to the grievance. It may decide to remedy the grievance or may outline why the complaint does not violate the contract. At this point, the process is escalated.
Further discussion will likely occur, and if management and the union cannot come to an agreement, the dispute will normally be brought to a national union officer, who will work with management to try and resolve the issue. A mediator may be called in, who acts as an impartial third party and tries to resolve the issue. Any recommendation made by the mediator is not binding for either of the parties involved. Mediators can work both on grievance processes and collective bargaining issues. For example, when the National Football League (NFL) and its players failed to reach a collective bargaining agreement, they agreed to try mediation (Associated Press, 2011). In this case, the agreement to go to mediation was a positive sign after several months of failed negotiations. In the end, the mediation worked, and the NFL players started the 2011–12 season on time. In Washington State (as well as most other states), a nonprofit organization is available to assist in mediations (either grievance or collective bargaining related) and arbitrations. The goal of such an organization is to avoid disruptions to public services and to facilitate the dispute resolution process. In Washington, the organization is called the Public Employment Relations Commission (PERC). Figure 12.9 “The Mediation Process for the Public Employment Relations Commission in Washington State” shows the typical grievance handling process utilizing the free PERC services.
Figure 12.9 The Mediation Process for the Public Employment Relations Commission in Washington State
See Chapter 391-55 WAC. Grievance mediation resolves grievances under existing contracts. The “normal” flow is:
1. Request for Grievance Mediation (PERC Form G-1 or equivalent) is filed at PERC’s Olympia office. PERC will only act on requests where the parties have agreed, in advance, to submit any unresolved issues to final and binding arbitration.
2. A PERC staff mediator is assigned, and the mediator contacts the parties to schedule a meeting. This is accomplished informally, but may be confirmed by a letter or e-mail messages.
3. Mediation sessions are usually held in employer offices or union offices, unless the parties arrange and pay the costs for other meeting spaces. PERC has only limited facilities for mediation in agency offices.
4. The mediator meets with parties to discuss the issues, explore alternatives, and arrive at an agreement to resolve the particular grievance(s) submitted.
• The mediator will not conduct an evidential hearing, as would be done in arbitration.
• The mediator will not issue a formal opinion, as would be done in arbitration, but may send a letter to confirm a settlement reached or recommendation(s) made.
• Mediators draw on their knowledge and experiences but do not have a power of compulsion.
5. Communications between the mediator and the parties, as well as the mediator’s notes, are confidential. A mediator cannot be called to give testimony about the mediation in any subsequent proceeding.
If no resolution develops, an arbitrator might be asked to review the evidence and make a decision. An arbitrator is an impartial third party who is selected by both parties and who ultimately makes a binding decision in the situation. Thus arbitration is the final aspect of a grievance.
Some examples of grievances might include the following:
1. One employee was promoted over another, even though he had seniority.
2. An employee doesn’t have the tools needed to perform his or her job, as outlined in the contract.
3. An employee was terminated, although the termination violated the rules of the contract.
4. An employee was improperly trained on chemical handling in a department.
Most grievances fall within one of four categories. There are individual/personal grievances, in which one member of the union feels he or she has been mistreated. A group grievance occurs if several union members have been mistreated in the same way. A principle grievance deals with basic contract issues surrounding seniority or pay, for example. If an employee or group is not willing to formally file a grievance, the union may file a union or policy grievance on behalf of that individual or group.
The important things to remember about a grievance are that it should not be taken personally and, if used correctly can be a fair, clear process to solving problems within the organization.
Grievance Process for Flight Attendants
" href="http://www.youtube.com/watch?v=agMgB9y7k3w" class="replaced-iframe">(click to see video)
This video shows a philosophical perspective of the grievance process for the Association of Flight Attendants union.
Key Takeaways
• The grievance process is a formal process to address any complaints about contract violations.
• The grievance process varies from contract to contract. It is an important part of the contract that ensures a fair process for both union members and management.
• HR is normally involved in this process, since it has intimate knowledge of the contract and laws that guide the contract.
• The grievance process can consist of any number of steps. First, the complaint is discussed with the manager, employee, and union representative. If no solution occurs, the grievance is put into writing by the union. Then HR, management, and the union discuss the process, sometimes in the form of a hearing in which both sides are able to express their opinion.
• Management then expresses its decision in writing to the union.
• If the union decides to escalate the grievance, the grievance may be brought to the national union for a decision. At this point, an arbitrator may be brought in, suitable to both parties, to make the final binding decision.
• There are four main types of grievances. First, the individual grievance is filed when one member of the union feels mistreated. A group grievance occurs when several members of the union feel they have been mistreated and file a grievance as a group. A principle grievance may be filed on behalf of the union and is usually based on a larger issue, such as a policy or contract issue. A union or policy grievance may be filed if the employee does not wish to file individually.
• Grievances should not be taken personally and should be considered a fair way in which to solve problems that can come up between the union and management.
Exercise
1. What are the advantages of a grievance process? What disadvantages do you see with a formalized grievance process? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/12%3A_Working_with_Labor_Unions/12.04%3A_Administration_of_the_Collective_Bargaining_Agreement.txt |
Chapter Summary
• Union membership in the United States has been slowly declining. Today, union membership consists of about 11.9 percent of the workforce, while in 1983 it consisted of 20 percent of the workforce.
• The reasons for decline are varied, depending on who you ask. Some say the moving of jobs overseas is the reason for the decline, while others say unions’ hard-line tactics put them out of favor.
• The United States began its first labor movement in the 1800s. This was a result of low wages, no vacation time, safety issues, and other issues.
• Many labor organizations have disappeared, but the American Federation of Labor (AFL) still exists today, although it merged with the Congress of Industrial Organizations (CIO) and is now known as the AFL-CIO. It is the largest labor union and represents local labor unions in a variety of industries.
• The United States has a low number of union members compared with other countries. Much of Europe, for example, has over 30 percent of their workforce in labor unions, while in some countries as much as 50 percent of the workforce are members of a labor union.
• Legislation has been created over time to support both labor unions and the companies who have labor unions. The Wagner Act was created to protect employees from retaliation should they join a union. The Taft-Hartley Act was developed to protect companies from unfair labor practices by unions.
• The National Labor Relations Board is the overseeing body for labor unions, and it handles disputes between companies as well as facilitates the process of certifying new labor unions. Its job is to enforce the Wagner and Taft-Hartley acts.
• The Landrum Griffin Act was created in 1959 to combat corruption in labor unions during this time period.
• To form a union, the organizer must have signatures from 30 percent of the employees. If this occurs, the National Labor Relations Board will facilitate a card check to determine whether more than 50 percent of the workforce at that company is in agreement with union representation. If the company does not accept this, then the NLRB holds secret elections to determine if the employees will be unionized.
• A union has two goals: to add new members and to collect dues. The checkoff provision of a contract compels the organization to take union dues out of the paycheck of union members.
• In a union shop, people must join the union within a specified time period of joining the organization. This is illegal in right-to-work states.
• Made illegal by the Taft-Hartley Act, a closed shop allows only union members to apply and be hired for a job.
• Collective bargaining is the process of negotiating the contact with union representatives. Collective bargaining, to be legal, must always be done in good faith.
• There are three categories of collective bargaining issues. Mandatory issues might include pay and benefits. Permissive bargaining items may include things such as drug testing or the required equipment the organization must supply to employees. Illegal issues are those things that cannot be discussed, which can include issues that could be considered discriminatory.
• The collective bargaining process can take time. Both parties prepare for the process by gathering information and reviewing the old contract. They then set time lines for the bargaining and reveal their wants and negotiate those wants. A bargaining impasse occurs when members cannot come to an agreement.
• When a bargaining impasse occurs, a strike or lockout of workers can occur. These are both strategies that can be used to encourage the other side to agree to collective bargaining terms.
• Some tips for working with unions include knowing and following the contract, involving unions in company decisions, and communicating with transparency.
• The grievance process is a formal process that addresses any complaints about contract violations.
• The grievance process varies from contract to contract. It is an important part of the contract that ensures a fair process for both unions members and management.
• HRM is normally involved in the grievance process, since it has intimate knowledge of the contract and laws guiding the contract.
• The grievance process can consist of any number of steps. First, the complaint is discussed with the manager, employee, and union representative. If no solution occurs, the grievance is put into writing by the union. Then HR, management, and the union discuss the process, sometimes in the form of a hearing in which both sides are able to express their opinion.
• Management then expresses its decision in writing to the union.
• If the union decides to escalate the grievance, the grievance may be brought to the national union for a decision. At this point, an arbitrator may be brought in, suitable to both parties, to make the final binding decision.
• There are four main types of grievances. First, the individual grievance is filed when one member of the union feels mistreated. A group grievance occurs when several members of the union feel they have been mistreated and file a grievance as a group. A principle grievance may be filed on behalf of the union and is usually based on a larger issue, such as a policy or contract issue. A union or policy grievance may be filed if the employee does not wish to file the grievance individually.
• Grievances should not be taken personally and should be considered a fair way in which to solve problems that can come up between the union and management.
Chapter Case
But I Didn’t Know
After a meeting with the operations manager of your organization, you close the door to your office so you can think of strategies to resolve an issue that has come up. The operations manager casually mentioned he had just finished a performance review of one of his employees and offered the employee a large raise because of all the hours the employee was putting in. The raise was equal to 11 percent of the employee’s salary. The operations manager, being new both to the company and to a union shop, wasn’t aware of the contract agreement surrounding pay increases. An employee must receive a minimum of a 2 percent pay increase per year and a maximum of 6 percent per year based on the contract. You worry that if the union gets wind of this, everyone at that employee’s pay level may file a grievance asking for the same pay raise. Of course, the challenge is that the manager already told this person he would be receiving the 11 percent raise. You know you need to act fast to remedy this situation.
1. As an HR professional, what should you have done initially to prevent this issue from happening?
2. Outline a specific strategy to implement stating how you will prevent this from happening in the future.
3. What would you do about the 11 percent pay raise that was already promised to the employee?
4. If the union files a grievance, what type of grievance do you think it would be? Provide reasoning for your answer.
5. If the union does file a grievance, draft a response to the grievance to share with your upper-level managers as a starting point for discussion on how to remedy the situation.
Team Activity
1. Break into teams of four or five. Please choose the following roles for each of your team members:
• Mediator
• Manager
• HR professional
• Employee
Once roles are chosen, please determine a solution or make a recommendation for the following situation (remember, this is a role play; you may make reasonable assumptions): The employee believes the performance evaluation the manager gave was unfair and has filed a grievance about it. The employee shows proof of a good attendance record and three letters from colleagues stating the high quality of her work. The manager contends the employee does not use time wisely at work, hence the 3 out of 5 rating. The manager is able to show several examples of poor time usage. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/12%3A_Working_with_Labor_Unions/12.05%3A_Cases_and_Problems.txt |
Training for Safety
As the HR manager of a large construction company, your workers’ health and safety is of paramount concern. Last week, you reported an incidence rate of 7.5 accidents per 100 employees to the Occupational Safety and Health Administration (OSHA). When you compared these numbers to last year, you found the number had significantly increased, as it was 4.2. This is concerning, because you know an unsafe workplace is not only bad for employees and bad for business, but it could result in fines from OSHA. You ask your operations managers to meet with you about the situation. When you bring this to his attention, he doesn’t seem at all concerned about the almost double increase in accidents over the last year. He says the increase in accidents is a result of scaffolding falling during a building project where several workers were hurt. He says this one accident skewed the numbers. He mentions that the supervisor responsible for the scaffolding had been let go six months ago for other reasons, and he assures you that there is no reason to be concerned. A few weeks after this conversation, two of your workers spend time in the hospital because of a falling scaffolding injury. Again, you approach the operations manager and he assures you that those employees were just new and he will implement proper procedures. You know the incident will result in another high incident percentage, even if there isn’t another accident the rest of the year. You consider your options.
You look back over ten years of accident reports and find there are three areas for which your company seems to have 90 percent of all accidents. You decide you will develop a training program to address these safety issues in your workplace. You refer to your HRM textbook for tips on how to prepare and communicate this training to your employees. When you present this option to your operations manager, he says that employees don’t have the time to take from their jobs to go through this training and suggests you just let it go. You are prepared for this response, and you give him the dollar figure of money lost owing to worker injury in your organization. This gets his attention, especially when you compare it to the small cost of doing a two-hour training for all employees. Both of you check your Outlook schedules to find the best day of the week to schedule the training, for minimum impact on employees’ work.
13.02: Workplace Safety and Health Laws
Learning Objectives
1. Be able to explain OSHA laws.
2. Understand right-to-know laws.
Workplace safety is the responsibility of everyone in the organization. HR professionals and managers, however, play a large role in developing standards, making sure safety and health laws are followed, and tracking workplace accidents. Occupational Safety and Health Administration (OSHA) Laws addresses workplace laws as they relate to safety.
Occupational Safety and Health Administration (OSHA) Laws
In 2009 (the most recent data available at the time of this writing), 4,340 fatalities and 3.3 million injuries were reported1. This staggering number represents not only the cost to employees’ well-being but also financial and time costs to the company. This is why health and safety is a key component of any human resource management (HRM) strategic plan.
What Is OSHA About?
A short video on the purpose of OSHA.
The Occupational Safety and Health Act (OSHA), passed in 1970, created the Occupational Safety and Health Administration, which oversees health and safety in the workplace. The organization’s mission is to ensure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance. For example, OSHA offers ten- and thirty-hour courses on workplace hazards and also provides assistance to ensure companies are in compliance with standards. OSHA is part of the US Department of Labor, with the main administrator being the assistant secretary of labor for occupational safety and health. This person reports to the labor secretary, who is a member of the president’s cabinet.
Although OSHA applies to all companies, health and safety standards are specifically mentioned for the following types of businesses:
1. Construction
2. Shipyard
3. Marine terminals
Although OSHA standards may appear to apply only to companies in production, manufacturing, or construction, even companies with primarily an office function are required to abide by the laws set by OSHA. Examples (not at all an exhaustive list) of the types of safety laws (for all types of businesses) that are overseen by OSHA are as follows:
1. Regulations on walking/working surfaces. According to OSHA, slips, trips, and falls constitute the majority of general industry accidents and 15 percent of all accidental deaths. The standards apply to all permanent places of employment. The provision says that “all passageways, storerooms, and service rooms shall be kept clean and orderly. Every floor and working space shall be kept free of protruding nails, splinters, holes, or loose boards.” These are a few examples included in this provision.
2. Means of egress (exiting), which includes emergency evacuation plans. “Every building or structure shall be arranged and maintained as to provide free and unobstructed egress from all part of the buildings. No lock or fastening to prevent free escape from inside the building should be installed (except in penal or corrective institutions).” The provision also says that exits shall be marked by a visible sign.
3. Occupational noise exposure. “Protection against the effects of noise exposure shall be provided when the sound levels reach a specified level. Controls should be used to control the sound, and protective equipment should be provided.”
4. Hazardous handling of materials. OSHA regulates exposure to four hundred substances and requires communication about the possible chemical hazards to employees.
5. Protective equipment, such as eye, face, and respiratory protection. OSHA requires the use of personal protective equipment to reduce employee exposure to hazards. For example, head protection is required when workers are in an area where there is potential for falling, and eye and face protection is required when workers are exposed to eye or face hazards such as flying particles and molten metal.
6. Sanitation. Some examples of these OSHA requirements include the following: Potable water should be provided in all places of employment. Vermin control is required in all enclosed workplaces. Toilet facilities must be provided, separate for each sex. The number of toilets provided depends on the number of employees.
7. Requirement of first aid supplies on-site. First aid kits are mandatory and should include gauze pads, bandages, gauze roller bandages, and other required items.
8. Standards for fire equipment. Fire extinguishers are required to be on-site for use by employees, unless there is a written fire policy that requires the immediate and total evacuation of employees.
9. Standards for machine guards and other power tools. Moving machine parts require safeguards (depending upon the industry) to prevent crushed fingers, hands, amputations, burns, or blindness. Safeguards might include a guard attached to the machine.
10. Electrical requirements and standards. OSHA electrical standards are designed to protect employees from electric shock, fires, and explosions. Electrical protective devices are required to cover wiring. OSHA also addresses the installation of electrical wiring.
11. Commercial diving operation requirements. OSHA provides information on the safety aspects of commercial diving such as pre- and postdive procedures, mixed-gas diving, and necessary qualifications of the dive team.
HR professionals and managers should have a good understanding of these laws and make sure, no matter which industry, that all these standards are followed in the workplace. These standards are normally part of the overall strategic HRM plan of any organization and are even more crucial to organizations involved in manufacturing.
There exist many examples of OSHA violations. For example, in a Queensbury, Pennsylvania, Dick’s Sporting Goods store, OSHA found six violations, including blocked access to a fire extinguisher and workers’ entering a trash compactor with the power supply on. Dick’s was fined \$57,300 by OSHA and told it had fifteen days to comply or contest the findings (Churchill, 2011).
The Most Frequently Violated and Cited OSHA Standards
1. 1926.451—Scaffolding
2. 1926.501—Fall Protection
3. 1910.1200—Hazard Communication
4. 1910.134—Respiratory Protection
5. 1926.1053—Ladders
6. 1910.147—Lockout/Tagout
7. 1910.305—Electrical, Wiring Methods
8. 1910.178—Powered Industrial Trucks
9. 1910.303—Electrical, General Requirements
10. 1910.212—Machine Guarding
Right-to-Know Laws
The Emergency Planning and Community Right to Know Act (EPCRA) or more simply, right-to-know laws, were established by Congress in 1986. The purpose of this act was to require local and state governments to provide emergency response plans to respond to a chemical emergency2. The other requirement is that these plans must be reviewed on an annual basis. Companies that handle extremely hazardous substances (EHSs) in large quantities must develop response plans as well. In addition, any organization that manufactures, processes, or stores certain hazardous chemicals must make available to local fire departments and state and local officials material data safety sheets. The material data safety sheet should also be provided to employees, as the data lists not only the chemical components but health risks of the substance, how to handle the material safely, and how to administer first aid in the case of an accident. This requirement also states that inventories of all on-site chemicals must be reported to local and state governments, but the data sheets must also be made public, too.
This law and how it will be reported should be facilitated by the HR professional. Although the HRM may not know the chemical makeup of the materials used, he or she is responsible for facilitating the process to ensure that reporting is done timely and accurately. For organizations that use EHSs often, it is worthwhile to include the reporting process within the orientation training and provide ongoing training as the law changes. The A-Treat Bottling facility in Allentown, Pennsylvania, was cited by OSHA for repeat violations of lacking material safety data sheets for the chemicals it uses in manufacturing, among other infractions such as blocked exits and forklift violations. The fines totaled \$110,880, and the company had fifteen days to comply or contest the allegations3.
It is also important to note that some state standards are different from federal standards, which means the HR professional will need to be aware of the laws in the individual state in which the company is operating.
Human Resource Recall
How do you think the OSHA requirements apply to office work settings?
OSHA Enforcement
The record-keeping aspect of OSHA is perhaps as important as following the laws. Companies having fewer than ten employees in some industries are not required to keep records. The purpose of the record keeping does not imply that the employee or the company is at fault for a illness or injury. In addition, just because a record is kept doesn’t mean the employee will be eligible for workersworker’s compensation#8217; compensation. The record-keeping aspect normally refers to the keeping of incidence rates, or the number of illnesses or injuries per one hundred full-time employees per year, as calculated by the following formula:
incidence rate=number of injuries and illness × 200,000total hours worked by all employees in the period
Two hundred thousand is the standard figure used, as it represents one hundred full-time employees who work forty hours per week for fifty weeks per year. An HR professional can then use this data and compare it to other companies in the same industry to see how its business is meeting safety standards compared with other businesses. This calculation provides comparable information, no matter the size of the company. If the incidence rate is higher than the average, the HR professional might consider developing training surrounding safety in the workplace.
Knowing what should be reported and what shouldn’t be reported is an important component to OSHA. Figure \(1\) provides a decision tree that explains this. Data are reported using a form called OSHA 300, which is shown in Figure \(2\).
As mentioned earlier, OSHA is responsible for enforcing standards. Besides requiring reporting, OSHA also performs inspections. OSHA is responsible for 7 million worksites across the country and so, of course, has to prioritize which ones it visits. OSHA has five main priorities for inspecting sites. First, it will inspect imminent danger situations. These are serious dangers that could cause death or serious harm. The second priority is for those sites where three or more employees were harmed, suffered illness, or were killed. These events are classified as fatalities or catastrophes and must be reported within an eight-hour time frame. The next priority is responding to complaints, which employees are allowed to file anonymously. Organizations that have had previous violations are prioritized next, and finally, planned programs. A planned program might be an organization that has had safety problems in the past and is working with OSHA to remedy the problem.
Most site visits are unannounced and begin with the inspector introducing himself or herself. Prior to this, the inspector has performed research on the organization to be inspected. Once this occurs, a representative of the organization is assigned to accompany the inspector and the inspector discusses the reasons for the site visit. The HR professional is normally responsible for this task.
The inspector then walks around, pointing out any obvious violations, and then the inspector and representative discuss the findings. Within six months a complete report is sent, along with any citations or fines based on what the inspector found. If the organization is in disagreement with the violation or citation, a follow-up meeting with the OSHA director is scheduled and some fines may be reduced if the organization can show how it has improved and met the standards since the original visit.
OSHA has several penalties (per violation) it can assess on organizations, ranging from \$7,000 to \$70,000. The higher penalties often are a result of very serious offenses, in which an employee could have been killed, but also are imposed for willful offenses that the employer was aware could cause serious injury or death and did nothing about them. This is considered blatant indifference to the law. For example, Northeastern Wisconsin Wood Products was issued \$378,620 in fines for willful violations in the summer of 2011. The violations stemmed from repeat visits and citations to the facility, where no safety changes had been made. Some of the willful violations included lack of guards on dangerous machine belts and band saw blades and open-sided floors without a guardrail to prevent falls. Michael Connors, OSHA’s regional administrator in Chicago, said, “Northeastern Wisconsin Wood Products has a history of failing to comply with OSHA standards. The company has yet to abate many violations cited in previous inspections and are unduly placing their workers at risk4.” While any violation of OSHA is serious, a willful violation is more serious, and the fines associated with it represent this.
Fortune 500 Focus
PepsiCo is the world’s largest manufacturer, seller, and distributor of Pepsi-Cola products and generates \$119 billion in sales every year5. Tropicana juice is owned by Pepsi-Co. In October of 2005, a spark triggered an explosion at a Tropicana juice processing plant in Bradenton, Florida, causing burns to two-thirds of a worker’s body. While the worker survived, he underwent multiple surgeries to treat his burns. In this case, OSHA concluded that the fire could have been prevented if Tropicana had followed basic safety requirements such as risk evaluation, given tools to workers that did not produce sparks, and monitored for a buildup of flammable vapors and ventilated the area. OSHA inspectors tallied up a dozen violations, including two serious ones. Vice president of operations Mike Haycock said the plant has an incidence rate that is far lower than others in the industry, and plants around the country have immediately addressed many of the problems and are constantly working to correct other problems (Just-drinks editorial team, 2006).
The irony is that although the Tropicana factory paid \$164,250 in fines to OSHA, the company was part of the VPP or Voluntary Protection Program, whose membership benefits include exemption from regular inspections. Even after the fire, in 2007, OSHA formally reapproved the plant as a “star site,” the highest level in VPP, meaning the plant pledged to exceed OSHA standards (Hamby, 2011). OSHA contends the VPP program isn’t perfect but is still a useful model to all employers of what can be achieved. For admission into the VPP program, workplaces must show they have fewer accidents and missed work days than average for their industry. According to Robert Tuttle, president of the local Teamsters union representing Tropicana workers, accidents are more common when employees are shifted out of their normal responsibilities, which is more common as the weak economy has led to staff cuts (Gulliver, 2011). Tropicana plants have had more than eighty deaths since 2000, varying from preventable explosions to chemical releases to crane accidents (Hamby, 2011). PepsiCo and Tropicana have taken a hard stance on these types of accidents, as each of the plants now has a safety manager trained on OSHA standards to prevent accidents. In addition, strict operating procedures have been implemented to prevent future problems.
Key Takeaways
• Every year, 4,340 fatalities and 3.3 million injuries occur in the workplace in the United States.
• The Occupational Safety and Health Act was passed in 1970, with the goal of providing a safe and healthy work environment for all US workers.
• The Occupational Safety and Health Administration is part of the US Department of Labor and was created as a result of the act in 1970.
• OSHA applies to some specific industries, such as construction, shipyards, and marine terminals. However, some of the OSHA regulations apply to all industries.
• Some states may also have safety requirements that may be more stringent than federal laws.
• Right-to-know laws refer to a material data safety sheet, which discusses the types of chemicals, proper handling and storage, and first aid in case of an accident. These data sheets should be made available to the general public and employees.
• Right-to-know laws also require specific reporting to local and state agencies on chemicals used in certain quantities for some industries.
• OSHA requires recording keeping for all workplace accidents or illness. Record keeping is usually the responsibility of HR, and reports are made via OSHA Form 300.
• OSHA can inspect any site without prior notification. Usually, OSHA will gather information, visit the site, and ask for a representative. The representative is normally the HR person. The site visit will be performed, followed by discussion with the company representative. Within six months of the visit, a report and any penalties will be communicated.
Exercises
1. Research the Internet for recent OSHA violations and write two paragraphs describing one.
2. Research possible strategies to reduce OSHA violations and write a paragraph on at least two methods.
1“Workplace Injuries and Illnesses: 2009,” Bureau of Labor Statistics, US Department of Labor, news release, October 21, 2010, accessed April 14, 2011, www.bls.gov/news.release/archives/osh_10212010.pdf.
2“Emergency Planning and Community Right-to-Know Act (EPCRA),” United States Environmental Protection Agency, accessed April 15, 2011, www.epa.gov/epahome/r2k.htm.
3“OSHA Cites Allentown Soft Drink Company,” NewsWire.com, August 4, 2011, accessed August 21, 2011, http://www.mmdnewswire.com/us-labor-departmen-57793.html.
4“\$378,620 in Fines Issued for Willful Violations,” Occupational Health and Safety, July 31, 2011, accessed August 21, 2011, http://ohsonline.com/articles/2011/07/31/378620-in-fines-issued-to-wisconsin-wood-firm-for-willful-violations.aspx? admgarea=news.
5“PepsiCo Annual Report,” accessed September 15, 2011, www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/13%3A_Safety_and_Health_at_Work/13.01%3A_Introduction.txt |
Learning Objectives
1. Be able to explain health concerns that can affect employees at work.
While OSHA covers many areas relating to health and safety at work, a few other areas are also important to mention. Stress management, office-related injuries such as carpal tunnel syndrome, and no-fragrance areas are all contemporary issues surrounding employee health and safety. We will discuss these issues in this section.
Stress
In its annual survey on stress in America (American Psychological Association, 2011), the American Psychological Association found that money (76 percent), work (70 percent), and the economy (65 percent) remain the most oft-cited sources of stress for Americans. Job instability is on the rise as a source of stress: nearly half (49 percent) of adults reported that job instability was a source of stress in 2010 (compared to 44 percent in 2009). At the same time, fewer Americans are satisfied with the ways their employers help them balance work and nonwork demands (36 percent in 2010 compared to 42 percent in 2009). The implications of these findings are obviously important for HRM professionals.
Before we discuss what HR professionals can do, let’s discuss some basic information about stress. As it is currently used, the term stress was coined by Hans Selye in 1936, who defined it as “the nonspecific response of the body to any demand for change” (The American Institute of Stress, 2011). In other words, we can say that stress is the reaction we have to a stressor. A stressor is some activity, event, or other stimulus that causes either a positive or negative reaction in the body. Despite what people may think, some stress is actually good. For example, receiving a promotion at work may cause stress, but this kind of stress is considered to be positive. Stress is very much a personal thing, and depending on individual personalities, people may have different opinions about what is a stressor and what is not. For example, a professor does not normally find public speaking to be a stressor, while someone who does not do it on a daily basis may be very stressed about having to speak in public.
Stress Management
Some tips on how to deal with stress
Selye recognized that not all stress is negative. Positive stress is called eustress. This type of stress is healthy and gives a feeling of fulfillment and other positive feelings. Eustress can cause us to push ourselves harder to meet an end goal. On the other hand, distress is the term used for negative stress. While eustress can push us, distress does not produce positive feelings and can go on for a long time without relief. We can further classify distress by chronic stress, which is prolonged exposure to stress, and acute stress, which is short-term high stress. For example, someone who receives little or no positive result from stress and is continuously stressed may experience chronic stress. Acute stress occurs in shorter bursts and may be experienced while someone is on a tight deadline for a project.
Two other terms related to stress are hyperstress and hypostress. Hyperstress is a type of stress in which there are extremes with little or no relief for a long period of time. This type of stress often results in burnout. Hypostress is the lack of eustress or distress in someone’s life. Remember, some stress can be good and pushes us to work harder. We see this type of stress with people who may work in a factory or other type of repetitive job. The effect of this type of stress is usually feelings of restlessness.
One last important thing to note is how a person goes through the cycle of stress. Figure \(1\) shows an example of how stress is good up to a point, but beyond that point, the person is fatigued and negatively affected by the stress. Bear in mind, this varies from person to person based on personality type and stress-coping mechanisms.
As you have already guessed, stress on the job creates productivity issues, which is why it concerns HR professionals. We know that stress can cause headaches, stomach issues, and other negative effects that can result in lost productivity but also result in less creative work. Stress can raise health insurance costs and cause employee turnover. Because of this, according to HR Magazine (Tyler, 2011), many employers are taking the time to identify the chief workplace stressors in employees’ lives. With this information, steps can be taken to reduce or eliminate such stress.
PricewaterhouseCoopers, for example, implemented several strategies to reduce stress in its workplace. The firm restructured its work teams so that rather than having one employee work with one client, teams of employees work with groups of clients. Rather than having an employee say, “I can’t go to my son’s baseball game because I need to wait for this client call,” this arrangement allows employees to cover for each other.
The organization also requires employees to take vacation time and even promotes it with posters throughout the office. In fact, even weekends are precious at PricewaterhouseCoopers. If an employee sends an e-mail on the weekend, a popup screen reminds her or him it is the weekend and it is time to disconnect.
Being a Student Can Be Stressful
Here are the most common stressors for college students:
• Death of a loved one
• Relocating to a new city or state
• Divorce of parents
• Encounter with the legal system
• Transfer to a new school
• Marriage
• Lost job
• Elected to leadership position
• New romantic relationship
• Serious argument with close friend
• Increase in course load or difficulty of courses
• Change in health of family member
• First semester in college
• Failed important course
• Major personal injury or illness
• Change in living conditions
• Argument with instructor
• Outstanding achievement
• Change in social life
• Change in sleeping habits
• Lower grades than expected
• Breakup of relationship
• New job
• Financial problems
• Change in eating habits
• Chronic car trouble
• Pregnancy
• Too many missed classes
• Long commute to work/school
• Working more than one job
• Impending graduation
• Argument with family member
• Sexual concerns
• Changes in alcohol and/or drug use
• Roommate problems
• Raising children
Offering flextime is also a way to reduce employee stress. It allows employees to arrange their work and family schedule to one that reduces stress for them. This type of creative scheduling, according to Von Madsen, HR manager at ARUP Laboratories (Tyler, 2011), allows employees to work around a schedule that suits them best. Other creative ways to reduce stress might be to offer concierge services, on-site child care, wellness initiatives, and massage therapy. All these options can garner loyalty and higher productivity from employees.
Human Resource Recall
What does your organization do to reduce stress? What should it do that it is not doing?
Cumulative Trauma Disorders
Cumulative trauma disorders (CTDs) are injuries to the fingers, hands, arms, or shoulders that result from repetitive motions such as typing.
Carpal tunnel syndrome, or CTS, is a common cumulative disorder in which the hand and wrist is particularly affected. CTS is a disabling syndrome that fortunately can be prevented or at least minimized. According to one study of CTS (Matias, et. al., 1998), the percentage of a workday at a computer, posture while at the workstation, and the individual’s body features all contribute to this workplace issue. More recently, CTD can be found in people who text a lot or use their smartphones to type or surf the Internet.
There are a number of keyboards, chairs, and other devices that can help limit or prevent CTD issues. CTD disorders cost companies money through higher health-care costs and workersworker’s compensation#8217; compensation payments. CTD is a required recordable case under OSHA. OSHA has voluntary employer guidelines for reducing CTD in specific industries such as poultry processing, shipyards, retail grocery, and nursing homes. OSHA is currently developing standards for industry-specific and task-specific jobs1.
Microsoft is attempting to relieve CTD by developing “surface” technology. First introduced in 2007, the system is controlled through intuitive touch rather than the traditional mouse and keyboard. Microsoft and Samsung in early 2011 introduced the newest consumer-ready product, which looks like a large tablet (or iPad) used to perform the same functions as one normally would on her computer (Microsoft News Center, 2011).
How Would You Handle This?
To Tell or Not?
You work for a large multinational organization as a manager on the factory floor. One of your employees was moving large barrels of chemicals from one workstation to another, when the barrel burst and gave him mild burns. When you talk with him about it, he says it was his own fault, and he doesn’t want to take any days off or see a doctor. How would you handle this?
Video Display Terminals (VDTs)
In 1984, only 25 percent of people used computers at work, and today that number is 68 percent2. Awareness of the effects of computer monitors and other similar terminals are necessary to ensure a healthy workplace. Vision problems; fatigue; eye strain; and neck, back, arm, and muscle pain are common for frequent users of VDTs. OSHA recommands taking a break after every hour on a computer screen and reducing glare on screens. Proper posture and seat adjustment also limits the amount of injuries due to VDTs.
Chemical and Fragrance Sensitivities
The EEOC defines a disability as a physical or mental impairment that substantially limits one or more of the major life activities of individuals and the ability to provide evidence of such an impairment3. Because of this definition, people who have multiple chemical sensitivity (MCS) or environmental illness (EI) are eligible for reasonable accommodations in the workplace. MCS or EI is the inability to tolerate an environmental chemical or class of foreign chemicals. Symptoms can include headache, dizziness, inability to breathe, muscle pain, and many more depending on the person. As a result, implementing policies surrounding MCS may be not only a legal requirement but a best practice to keep employees safe and healthy in the workplace. Some examples of such policies might include the following:
1. Institute a fragrance-free workplace policy (e.g., no scented lotions, hair products, or perfumes).
2. Limit use of restroom air fresheners, cleaning agents, and candles.
3. Ensure the ventilation system is in good working order.
4. Provide a workspace with windows where possible.
5. Consider providing an alternate workspace.
6. Be cautious of remodels, renovations, and other projects that may cause excessive dust and odors.
If an organization is going to implement a fragrance-free work policy, this is normally addressed under the dress code area of the organization’s employee manual. However, many employers are reluctant to require employees to refrain from wearing or using scented products. In this case, rather than creating a policy, it might be worthwhile to simply request a fragrance-free zone from employees through e-mail and other means of communication. An example of such a policy is used by Kaiser Permanente:
We recognize that exposure to strong scents and fragrances in the environment can cause discomfort, as well as directly impact the health of some individuals. Since we hope to support a healthful environment for employees, physicians, and visitors, it is the intent of Quality and Operations Support to strive for a fragrance-controlled workplace. Therefore, for the comfort and health of all, use of scents and fragrant products by QOS employees, other than minimally scented personal care products, is strongly discouraged (Kaiser Permanente Fragrance Policy, 2011).
Chemicals and Substances
OSHA, as we mentioned earlier, has certain standards for how chemicals should be handled and how they should be labeled. Chemicals should be labeled in English, and employees must be able to cross-reference the chemicals to the materials safety data sheet, which describes how the chemicals should be handled.
It is estimated that 1,200 new chemicals are developed in North America alone every year (International Labor Organization, 2011). For many of these chemicals, little is known about their immediate or long-term effects on the health of workers who come into contact with them. As a result, policies should be developed on how chemicals should be handled, and proper warnings should be given as to the harmful effects of any chemicals found in a job site.
In the United States, twenty-six of the fifty states have smoking bans in enclosed public spaces. These smoking bans are designed to protect workers’ health from the dangers of secondhand smoke. A recent report released by the Centers for Disease Control and Prevention (Steenhuysen, 2011) says that state or local smoke-free laws cover 47.8 percent of workplaces. The report says if the trend continues, the United States will be 100 percent smoke free by 2020. Many companies implement no-smoking policies because of health-care costs, and some companies, such as Humana, Inc., say their no-tobacco policy is simply setting a good example (since they are a health-care organization). Humana tests all applicants for tobacco in a preemployment screening that applies to all tobacco products4. Most workplaces have no-smoking policies, and some even prefer not to hire smokers because of the higher cost of health care. Policies dealing with substances and chemicals are an important part of any employee training and orientation.
Benefits to a Smoke-Free Work Environment and Sample Policy
For the employees
• A smoke-free environment helps create a safer, healthier workplace.
• Workers who are bothered by smoke will not be exposed to it at work.
• Smokers who want to quit may have more of a reason to do so.
• Smokers may appreciate a clear company policy about smoking at work.
• Managers are relieved when there is a clearly defined process for dealing with smoking in the workplace.
For the employer
• A smoke-free environment helps create a safer, healthier workplace.
• Direct health-care costs to the company may be reduced.
• A clear plan that is carefully put into action by the employer to lower employees’ exposure to secondhand smoke shows the company cares.
• Employees may be less likely to miss work due to smoking-related illnesses.
• Maintenance costs go down when smoke, matches, and cigarette butts are taken out of work facilities.
• Office equipment, carpets, and furniture last longer.
• The risk of fires is lower.
• It may be possible to get lower rates on health, life, and disability insurance coverage as fewer employees smoke.
Sample smoking policy
Because we recognize the hazards caused by exposure to environmental tobacco smoke, it shall be the policy of ____________ to provide a smoke-free environment for all employees and visitors. This policy covers the smoking of any tobacco product and the use of oral tobacco products or “spit” tobacco, and it applies to both employees and nonemployee visitors of ____________.
Source: American Cancer Society, http://www.cancer.org/Healthy/StayAwayfromTobacco/Smoke-freeCommunities/CreateaSmoke-freeWorkplace/smoking-in-the-workplace-a-model-policy (accessed August 20, 2011).
Drugs and alcohol are discussed in Chapter 10 on managing performance issues. Substance abuse in the workplace can cause many problems for the organization. Not only does it create impaired ability to perform a job—resulting in more accidents—but it results in more sick days and less productivity, and substance abusers are more likely to file workersworker’s compensation#8217; compensation claims. Keep in mind that taking prescription drugs, if not used in the proper amounts or used long after the prescribed use, is considered substance abuse. A drug-free policy, according to OSHA5, has five parts:
1. A policy
2. Supervisor training
3. Employee education
4. Employee assistance
5. Drug testing
According to the National Clearinghouse for Alcohol and Drug Information, substance abuse costs companies over \$100 billion in the United States alone (Buddy, 2011). This staggering figure alone makes it worthwhile for companies to implement a policy and training on substance abuse.
Workplace Substance Abuse
This video provides some advice on how to deal with employee personal problems, including drug abuse.
Workplace Violence and Bullying
According to OSHA, 2 million American workers are victims of workplace violence every year6. OSHA addresses some of the workers who are at increased risk for workplace violence:
1. Workers who exchange money with the public
2. Workers who deliver goods, passengers, or services
3. People who work alone or in small groups
4. Workers who work late at night or early in the morning
5. Workers who work in high-crime areas
It is up to the organization and human resources to implement policies to ensure the safety of workers and provide a safe working environment. OSHA provides tips to provide a safer workplace:
1. Establish a workplace violence prevention policy, with a zero tolerance policy.
2. Provide safety education.
3. Secure the workplace with cameras, extra lighting, and alarm systems.
4. Provide a drop safe to limit the amount of cash on hand.
5. Provide cell phones to workers.
6. Require employees to travel in groups using a “buddy system.”
Development of workplace policies surrounding these items is important. Ongoing training and development in these areas are key to the creation of a safe workplace. While outside influences may affect employee safety, it is also important to be aware of the employee’s safety from other employees. There are several indicators of previolence as noted by the Workplace Violence Research Institute (Mattman, 2010):
1. Increased use of alcohol and/or illegal drugs
2. Unexplained increase in absenteeism
3. Noticeable decrease in attention to appearance and hygiene
4. Depression and withdrawal
5. Explosive outbursts of anger or rage without provocation
6. Threats or verbal abuse to coworkers and supervisors
7. Repeated comments that indicate suicidal tendencies
8. Frequent, vague physical complaints
9. Noticeably unstable emotional responses
10. Behavior indicative of paranoia
11. Preoccupation with previous incidents of violence
12. Increased mood swings
13. Has a plan to “solve all problems”
14. Resistance and overreaction to changes in procedures
15. Increase of unsolicited comments about firearms and other dangerous weapons
16. Repeated violations of company policies
17. Escalation of domestic problems
Workplace Violence
A video on workplace violence training.
Anyone exhibiting one or more of these preincident indicators should get the attention of HRM. The HR professional should take appropriate action such as discussing the problem with the employee and offering counseling.
Workplace bullying is defined as a tendency of individuals or groups to use persistent or repeated aggressive or unreasonable behavior against a coworker or subordinate. The Workplace Bullying Institute found that 35 percent of workers have reported being bullied at work. This number is worth considering, given that workplace bullying reduces productivity with missed work days and turnover. The Workplace Bullying Institute found that litigation and settlement of bullying lawsuits can cost organizations \$100,000 to millions of dollars, in addition to the bad publicity that may be created. Examples of workplace bullying include the following:
1. Unwarranted or invalid criticism
2. Blame without factual information
3. Being treated differently than the rest of your work group
4. Humiliation
5. Unrealistic work deadlines
6. Spreading rumors
7. Undermining or deliberately impeding a person’s work
In an Indiana Supreme court case, a hospital employee who was repeatedly bullied by a surgeon sued for emotional distress and won. This ruling drew national attention because it was an acknowledgment by the courts of the existence of workplace bullying as a phenomenon (Klein, 2008). Prevention of workplace bullying means creating a culture in which employees are comfortable speaking with HR professionals and managers (assuming they are not the ones bullying) about these types of situations. Similar to traditional bullying, cyberbullying is defined as use of the Internet or technology used to send text that is intended to hurt or embarrass another person. Examples include using Facebook to post negative comments or setting up a fake e-mail account to send out fake e-mails from that person. Comments or blogs and posts that show the victim in a bad light are other examples of cyberbullying. Similar to workplace bullying, cyberbullying is about power and control in workplace relationships. Elizabeth Carll’s research on cyberbullying shows that people who experience this type of harassment are more likely to experience heightened anxiety, fear, shock, and helplessness, which can result in lost productivity at work and retention issues (White, 2011), a major concern for the HR professional. The US Justice Department shows that some 850,000 adults have been targets of online harassment (White, 2011). Many states, including New York, Missouri, Rhode Island, and Maryland, have passed laws against digital harassment as far back as 2007 (National Conference of State Legislatures, 2011). In a recent cyberbullying case, a US Court of Appeals upheld a school’s discipline of a student for engaging in off-campus cyberbullying of another student (Solove, 2011). In the case, the victim said a MySpace profile was created that included inappropriate pictures of her, and the page’s creator invited other people to join. The student who created the page sued the school after she was disciplined for it, saying it violated her right to free speech, but courts found that students do not have the right to cyberbully other students. While it seems that cyberbullying is for young people, as mentioned earlier, 35 percent of American workers feel they have been bullied. Bullying should be identified immediately and handled, as it affects workplace productivity, customer satisfaction, and eventually, profits.
Workplace Bullies
This video provides tips on how to deal with a workplace bully.
Employee Privacy
In today’s world of identity theft, it is important that HR professionals work to achieve maximum security and privacy for employees. When private information is exposed, it can be costly. For example, in March of 2011, the Texas Comptroller’s office inadvertently disclosed on a public website the names, addresses, and social security numbers of 3.5 million state workers (Hart, 2011). The state has already spent \$1.8 million to remedy this problem by sending letters to affected parties and hiring technology consultants to review office procedures. While keeping employee information private is the responsibility of all management in an organization, ensuring privacy remains the job of the HR professional.
Some of the things to combat employee identity theft include the following:
1. Conduct background and criminal checks on employees who will have access to sensitive data.
2. Restrict access to areas where data is stored, including computers.
3. Provide training to staff who will have access to private employee information.
4. Keep information in locked files or in password-protected files.
5. Use numbers other than social security numbers to identify employees.
Another privacy issue that comes up often is the monitoring of employee activities on devices that are provided to them by the organization. Case law, for the most part, has decided that employees do not have privacy rights if they are using the organization’s equipment, with a few exceptions. As a result, more than half of all companies engage in some kind of monitoring. According to an American Management Association7 survey, 73 percent of employers monitor e-mail messages and 66 percent monitor web surfing. If your organization finds it necessary to implement monitoring policies, ensuring the following is important to employee buy-in of the monitoring:
1. Develop a policy for monitoring.
2. Communicate what will be monitored.
3. Provide business reasons for why e-mail and Internet must be monitored.
Working with your IT department to implement standards and protect employee data kept on computers is a must in today’s connected world. Communication of a privacy policy is an important step as well. Agrium, a Canadian-based supplier of agricultural products in North America, states its employee privacy policy on its website and shares with employees the tactics used to prevent security breaches8.
At Agrium we are committed to maintaining the accuracy, confidentiality, and security of your personal information. This Privacy Policy describes the personal information that Agrium collects from or about you, and how we use and to whom we disclose that information.
Terrorism
Since the 9/11 attacks, terrorism and its effect on the workplace are in the forefront of the HR professional’s mind. Planning for evacuations is the job of everyone in an organization, but HR should initiate this discussion. OSHA provides free assistance in implementing plans and procedures in case of a terror attack. OSHA also provides a fill-in-the-blank system (www.osha.gov/SLTC/etools/evacuation/expertsystem/default.htm) to help organizations write a comprehensive report for evacuations and terrorist attacks.
Promoting a Culture of Safety and Health
Employee health and safety is a must in today’s high-stress work environments. Although some may see employee health as something that shouldn’t concern HR, the increasing cost of health benefits makes it in the best interest of the company to hire and maintain healthy employees. In fact, during the recession of the late 2000s, when cutbacks were common, 50 percent of all workplaces increased or planned to increase investments in wellness and health at their organization (Sears, 2009).
Example of Health and Safety Policy
Cordis (A Johnson & Johnson Company) Environmental, Health, and Safety Policy
Cordis Corporation is committed to global Environmental, Health, and Safety (EHS) performance and leadership with respect to its associates, customers, suppliers, contractors, visitors, and communities. To fulfill this commitment, Cordis Corporation conducts its business emphasizing regulatory compliance and collaboration.
We strive for:
• Comprehensive risk management
• Pollution prevention
• Healthy lifestyle culture
• Continuous improvement and sustainability
• Engaging partnerships
• Possession of outstanding EHS capabilities and skill sets
We affirm that EHS is:
• A core business value and a key indicator of organizational excellence
• Considered in every task we perform and in every decision we make
We believe that:
• All incidents and injuries are preventable
• Process Excellence is the driver for continuous improvement and sustainable results in all aspects of EHS
• Every associate is responsible and accountable for complying with all aspects of EHS, creating a safe and healthy work environment while leaving the smallest environmental footprint
A safe culture doesn’t happen by requiring training sessions every year; it occurs by creating an environment in which people can recognize hazards and have the authority and ability to fix them. Instead of safety being a management focus only, every employee should take interest by being alert to the safety issues that can exist. If an employee is unable to handle the situation on his or her own, the manager should then take suggestions from employees seriously; making the change and then communicating the change to the employee can be an important component of a safe and healthy workplace.
A culture that promotes safety is one that never puts cost or production numbers ahead of safety. You do not want to create a culture in which health and safety priorities compete with production speedup, which can lead to a dangerous situation.
Another option to ensure health and safety is to implement an employee assistance program (EAP). This benefit is intended to help employees with personal problems that could affect their performance at work. The EAP usually includes covered counseling and referral services. This type of program can assist employees with drug or alcohol addictions, emotional issues such as depression, stress management, or other personal issues. Sometimes these programs are outsourced to organizations that can provide in-house training and referral services to employees. For example, REI (Recreation Equipment Inc.), based in Seattle, has a comprehensive EAP for its employees in both retail stores and corporate offices.
Possible techniques you can implement to have a safe and healthy work environment include the following:
1. Know OSHA and other safety laws.
2. Provide training to employees on OSHA and safety laws.
3. Have a written policy for how violations will be handled.
4. Commit the resources (time and money) necessary to ensure a healthy work environment.
5. Involve employees in safety and health discussions, as they may have good ideas as to how the organization can improve.
6. Make safety part of an employee’s job description; in other words, hold employees accountable for always practicing safety at work.
7. Understand how the health (or lack of health) of your employees contributes to or takes away from the bottom line and implement policies and programs to assist in this effort.
Key Takeaways
• Stress is a major concern for organizations, since it can decrease productivity in the workplace. There are several types of stress.
• Eustress is a positive type of stress that can cause people to work harder toward a goal. Distress, on the other hand, is a type of negative stress.
• Acute stress occurs in short bursts, such as when finishing a project, while chronic stress tends to persist for long periods of time.
• Hyperstress is stress that is unrelieved for long periods of time and can often result in employee burnout. Hypostress is the lack of eustress in one’s life, which can be as damaging as other types of stress, since stress is sometimes what pushes people harder.
• HR professionals can encourage employees to take vacation time, offer flextime, and encourage employees to take weekends off to help reduce stress.
• Cumulative trauma disorder (CTD) affects the hands, fingers, arms, or shoulders as a result of continuous repetitive motions. Carpel tunnel syndrome (CTS) is a type of CTD that affects the hand and wrist. People with these disorders often work in a factory or at a desk where they are doing repetitive motions constantly, such as typing or cashiering.
• OSHA has voluntary guidelines for reducing CTD in the workplace. HR can assist by ensuring employees are provided with proper equipment and training.
• Multiple chemical sensitivity (MCS) or environmental illness (EI) is extreme sensitivity to chemicals found in products such as hairsprays or lotions. Some individuals are extremely sensitive to other types of chemicals, such as those used in the manufacturing of carpets.
• MCS can be considered a disability if it limits one or more life activities. In this case, reasonable accommodations must be made, such as implementing fragrance-free zones as part of a workplace dress code.
• OSHA has specific guidelines on how to handle chemicals, but other chemicals, such as those from secondhand smoke, are an important consideration in workplace safety. Twenty-six states, for example, have implemented no-smoking policies to help protect the health of workers.
• Workplace violence affects 2 million Americans every year. A number of groups, such as those who deliver goods, people, or services, are at greatest risk. However, workplace violence can occur internally, which is why we must be aware of the warning signs.
• Workplace bullying is when a person is aggressive and unreasonable in his or her behavior toward another individual. Cyberbullying is similar, except technology is used to humiliate and intimidate the employee.
• Keeping employee information private is the job of HR and IT. In addition, some organizations may engage in web or e-mail monitoring to ensure employees are on task. Specific policies should be developed and communicated to let employees know how they may be monitored.
• Some organizations have employee assistance programs (EAPs) that can provide assistance, counseling, and the like in case of personal problems or drug or alcohol abuse.
• To maintain a healthful working environment, know OSHA policies and make sure people are trained on the policies. Also ensure that specific policies on all areas of health and safety are communicated and employees are trained in those areas where necessary.
Exercises
1. Visit www.osha.gov/SLTC/etools/evacuation/expertsystem/default.htm and create your own evacuation plan using the tool on the OSHA website. (Note: web addresses sometimes change, so you may have to search further for the tool.) Bring your plan to class to share.
2. Research examples of workplace bullying, write two paragraphs about two examples, and share your findings with the class.
1“OSHA Protocol for Developing Industry-Specific and Task-Specific Ergonomics Guidelines,” Occupational Safety and Health Administration, accessed April 25, 2011, www.osha.gov/SLTC/ergonomics/protocol.html.
2“Survey Shows Widespread Enthusiasm for High Technology,” NPR Online, n.d., accessed August 20, 2011, www.npr.org/programs/specials/poll/technology/.
3“Section 902: Definition of the Term Disability,” Equal Employment Opportunity Commission, accessed April 25, 2011, www.eeoc.gov/policy/docs/902cm.html#902.1.
4“Insurer Humana Inc. Won’t Hire Smokers in Arizona,” Associated Press, June 30, 2011, accessed August 20, 2011, finance.yahoo.com/news/Insurer-Humana-Inc-wont-hire-apf-961910618.html?x=0&.v=1.
5“Workplace Substance Abuse,” Occupational Safety and Health Administration, accessed August 20, 2011, www.osha.gov/SLTC/substanceabuse/index.html.
6“Workplace Violence” (OSHA Fact Sheet), Occupational Safety and Health Administration, accessed April 25, 2011, http://www.osha.gov/OshDoc/data_General_Facts/factsheet-workplace-violence.pdf.
7“Electronic Monitoring and Surveillance Survey,” American Management Association, 2007, accessed April 27, 2011, press.amanet.org/press-releases/177/2007-electronic-monitoring-surveillance-survey/.
8“Employee Privacy Policy,” Agrium Inc., accessed August 21, 2011, www.agrium.com/employee_privacy.jsp. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/13%3A_Safety_and_Health_at_Work/13.03%3A_Health_Hazards_at_Work.txt |
Chapter Summary
• Every year, 4,340 fatalities and 3.3 million injuries occur in the workplace in the United States.
• The Occupational Safety and Health Act was passed in 1970, with the goal of providing a safe and healthy work environment for all US workers.
• The Occupational Safety and Health Administration is part of the US Department of Labor and was created as a result of the act in 1970.
• OSHA applies to some specific industries such as construction, shipyards, and marine terminals. However, some of the regulations of OSHA apply to all industries.
• Some states may also have safety requirements, which may be more stringent than federal Laws.
• Right-to-know laws refer to a material data safety sheet, which discusses the types of chemicals, proper handling and storage, and first aid in case of an accident. These data sheets should be made available to the general public and employees.
• Right-to-know laws also require specific reporting to local and state agencies on chemicals used in certain quantities for some industries.
• OSHA requires recording keeping for all workplace accidents or illness. The record keeping is usually the responsibility of HR; OSHA Form 300 is used for reporting purposes.
• OSHA can inspect any site without prior notification. Usually, it will gather information, visit the site, and ask for a representative. The representative is normally the HR person. The site visit will be performed, followed by discussion with the company representative. Within six months of the visit a report and any penalties will be communicated.
• Stress is a major concern for organizations, since it can decrease productivity in the workplace. There are several types of stress.
• Eustress is a positive type of stress that can cause people to work harder toward a goal. Distress, on the other hand, is a type of negative stress.
• Acute stress occurs in short bursts, such as when finishing a project, while chronic stress tends to persist for long periods of time.
• Hyperstress is stress that is unrelieved for long periods of time and can often result in employee burnout. Hypostress is the lack of eustress in one’s life, which can be as damaging as other types of stress, since stress is sometimes what pushes people harder.
• HR professionals can encourage employees to take vacation time, offer flextime, and encourage employees to take weekends off to help reduce stress.
• Cumulative trauma disorder (CTD) affects the hands, fingers, arms, or shoulders as a result of continuous repetitive motions. Carpel tunnel syndrome (CTS) is a type of CTD that affects the hand and wrist. People with these disorders often work in a factory or at a desk where they are doing repetitive motions constantly, such as typing or cashiering.
• OSHA has voluntary guidelines for reducing CTD in the workplace. HR can assist by ensuring employees are provided with proper equipment and training.
• Multiple chemical sensitivity (MCS) or environmental illness (EI) is extreme sensitivity to chemicals found in products such as hairsprays or lotions. Some individuals are extremely sensitive to other types of chemicals, such as those used in the manufacturing of carpets.
• MCS can be considered a disability if it limits one or more of life activities. In this case, reasonable accommodations must be made, such as implementing fragrance-free zones as part of a workplace dress code.
• OSHA has specific guidelines on how to handle chemicals, but other chemicals, such as those from secondhand smoke, are an important consideration in workplace safety. Twenty-six states, for example, have implemented no-smoking policies to help protect the health of workers.
• Workplace violence affects 2 million Americans every year. A number of groups, such as those that deliver goods, people, or services, are at greatest risk. However, workplace violence can occur internally, which is why we must be aware of the warning signs.
• Workplace bullying is when a person is aggressive and unreasonable in his or her behavior toward another individual. Cyberbullying is similar, except technology is used to humiliate and intimidate the employee.
• Keeping employee information private is the job of HR and IT. In addition, some organizations may engage in web or e-mail monitoring to ensure employees are on task. Specific policies should be developed and communicated to let employees know how they may be monitored.
• Some organizations have employee assistance programs (EAPs) that can provide assistance, counseling, and the like in case of personal problems or drug or alcohol abuse.
• To maintain a healthful working environment, know OSHA policies and make sure people are trained on the policies. Also ensure that specific policies on all areas of health and safety are communicated and employees are trained in those areas where necessary.
Chapter Case
Bullying Ming
• You just ended a meeting with Ming (one of your six employees), who gave you some disturbing information. She feels she is being bullied by one of her coworkers and is seeking your advice on how to handle it. Ming said that Mindy has been saying “good morning” to everyone as she walks by their office but doesn’t say it to Ming. Ming also said that Mindy organized a farewell lunch for one of your departing employees last week and didn’t invite Ming. She also told you of nasty things that Mindy tells other colleagues about her. For example, last month when Ming ran into Mindy at the grocery store, Mindy told everyone the next day the medications that Ming had in her cart, which included medication for irritable bowel syndrome. Ming also showed you an e-mail that Mindy had sent blaming Ming for the loss of one of Mindy’s clients. Mindy had copied the entire department on the e-mail. Ming thinks that other employees have been reluctant to involve her in projects as a result of this e-mail. Ming left your office quite upset, and you think you may need to take some action.
1. Do you think Ming is correct in saying Mindy is bullying her? What are the indications of bullying?
2. What advice would you give to Ming?
3. How would you handle this situation with Mindy, without embarrassing Ming?
Team Activity
1. Calculate the yearly incidence rates for Organic Foods Company:
1. 2010: 10 injuries with 300,000 hours worked
2. 2011: 5 injuries with 325,000 hours worked
3. 2012: 20 injuries with 305,000 hours worked
2. What are some of the possible causes for the increase in incidence rates? | textbooks/biz/Management/Beginning_Management_of_Human_Resources/13%3A_Safety_and_Health_at_Work/13.04%3A_Cases_and_Problems.txt |
Things Weren’t What They Seemed
When your organization decided to go “global” two years ago, the executives didn’t know what they were getting into. While the international market was attractive for your company’s product, the overall plan wasn’t executed well. The organization was having great success selling its baby bath product in the domestic market, and once that market was saturated, the organization decided to sell the product in South America. Millions of dollars’ worth of research went into product marketing, and great success was had selling the product internationally. It was only when the organization decided to develop a sales presence in Peru and purchase a company there that the problems started. While market research had been done on the product itself, the executives of the company did little research to find out the cultural, economic, and legal aspects of doing business in that country. It was assumed that the Peru office would run just like the US office in terms of benefits, compensation, and hiring practices. This is where the strategy went wrong.
Many cultural aspects presented themselves. When executives visited the Peru office, the meeting was scheduled for 9 a.m., and executives were annoyed that the meeting didn’t actually start until 9:45 a.m. When the annoyed executives started in on business immediately, the Peruvian executives disapproved, but the US executives thought they disapproved of the ideas and weren’t aware that the disapproval came from the fact that Peruvians place a high emphasis on relationships, and it was rude to get down to business right away. When the executives walked around the office and spoke with various employees, this blunder cost respect from the Peruvian executives. Because Peru has a hierarchical structure, it was considered inappropriate for the executives to engage employees in this way; they should have been speaking with management instead.
Besides the cultural misunderstandings, executives had grossly underestimated the cost of compensation in Peru. Peru requires that all employees receive a bonus on the Peruvian Independence Day and another on Christmas. The bonus is similar to the monthly salary. After a year of service, Peruvians are allowed to go on paid vacation for thirty calendar days. Higher benefit costs were also an issue as well, since Peru requires workers to contribute 22 percent of their income to pension plans, and the company is required to pay 9 percent of salaries toward social (universal) health insurance. Life insurance is also required to be paid by the employer after four years of service, and severance payments are compulsory if the organization has a work stoppage or slowdown.
As you wade through the variety of rules and regulations, you think that this could have been avoided if research had been performed before the buyout happened. If this had occurred, your company would have known the actual costs to operate overseas and could have planned better.
Source: Based on information from CIA World Factbook and PKF Business Advisors.
14.02: Offshoring Outsourcing
Learning Objectives
1. Be able to explain the terminology related to international HRM.
2. Define global HRM strategies.
3. Explain the impact of culture on HRM practices.
As you already know, this chapter is all about strategic human resource management (HRM) in a global environment. If this is an area of HRM that interests you, consider taking the WorldatWork Global Remuneration Professional certification (GRP). The GRP consists of eight examinations ranging from global rewards strategy to job analysis in a global setting1.
Before we begin to discuss HRM in a global environment, it is important to define a few terms, some of which you may already know. First, offshoring is when a business relocates or moves some or part of its operations to another country. Outsourcing involves contracting with another company (onshore or offshore) to perform some business-related task. For example, a company may decide to outsource its accounting operations to a company that specializes in accounting, rather than have an in-house department perform this function. Thus a company can outsource the accounting department, and if the function operates in another country, this would also be offshoring. The focus of this chapter will be on the HRM function when work is offshored.
The Global Enviornment
Although the terms international, global multinational, and transnational tend to be used interchangeably, there are distinct differences. First, a domestic market is one in which a product or service is sold only within the borders of that country. An international market is one in which a company may find that it has saturated the domestic market for the product, so it seeks out international markets in which to sell its product. Since international markets use their existing resources to expand, they do not respond to local markets as well as a global organization. A global organization is one in which a product is being sold globally, and the organization looks at the world as its market. The local responsiveness is high with a global organization. A multinational is a company that produces and sells products in other markets, unlike an international market in which products are produced domestically and then sold overseas. A transnational company is a complex organization with a corporate office, but the difference is that much of the decision making, research and development, and marketing are left up to the individual foreign market. The advantage to a transnational is the ability to respond locally to market demands and needs. The challenge in this type of organization is the ability to integrate the international offices. Coca-Cola, for example, engaged first in the domestic market, sold products in an international market, and then became multinational. The organization then realized they could obtain certain production and market efficiencies in transitioning to a transnational company, taking advantage of the local market knowledge.
Table \(1\) Differences between International, Global, Multinational, and Transnational Companies
Global Transnational
Centrally controlled operations Foreign offices have control over production, markets
No need for home office integration, since home office makes all decisions Integration with home office
Views the world as its market High local responsiveness
Low market responsiveness, since it is centrally controlled
International Multinational
Centrally controlled Foreign offices are viewed as subsidiaries
No need for home office integration, as home office makes all decisions Home office still has much control
Uses existing production to sell products overseas High local responsiveness
Low market responsiveness
Globalization has had far-reaching effects in business but also in strategic HRM planning. The signing of trade agreements, growth of new markets such as China, education, economics, and legal implications all impact international business.
Trade agreements have made trade easier for companies. A trade agreement is an agreement between two or more countries to reduce barriers to trade. For example, the European Union consists of twenty-seven countries (currently, with five additional countries as applicants) with the goal of eliminating trade barriers. The North American Trade Agreement (NAFTA) lifts barriers to trade between Canada, the United States, and Mexico. The result of these trade agreements and many others is that doing business overseas is a necessity for organizations. It can result in less expensive production and more potential customers. Because of this, along with the strategic planning aspects of a global operation, human resources needs to be strategic as well. Part of this strategic process can include staffing differences, compensation differences, differences in employment law, and necessary training to prepare the workforce for a global perspective. Through the use of trade agreements and growth of new markets, such as the Chinese market, there are more places available to sell products, which means companies must be strategically positioned to sell the right product in the right market. High performance in these markets requires human capital that is able to make these types of decisions.
The level of education in the countries in which business operates is very important to the HR manager. Before a business decides to expand into a particular country, knowledge of the education, skills, and abilities of workers in that country can mean a successful venture or an unsuccessful one if the human capital needs are not met. Much of a country’s human capital depends on the importance of education to that particular country. In Denmark, for example, college educations are free and therefore result in a high percentage of well-educated people. In Somalia, with a GDP of \$600 per person per year, the focus is not on education but on basic needs and survival.
Economics heavily influences HRM. Because there is economic incentive to work harder in capitalist societies, individuals may be more motivated than in communist societies. The motivation comes from workers knowing that if they work hard for something, it cannot be taken away by the government, through direct seizure or through higher taxes. Since costs of labor are one of the most important strategic considerations, understanding of compensation systems (often based on economics of the country) is an important topic. This is discussed in more detail in Section 14.3.3 “Compensation and Rewards”.
The legal system practiced in a country has a great effect on the types of compensation; union issues; how people are hired, fired, and laid off; and safety issues. Rules on discrimination, for example, are set by the country. In China, for example, it is acceptable to ask someone their age, marital status, and other questions that would be considered illegal in the United States. In another legal example, in Costa Rica, “aguinaldos” also known as a thirteenth month salary, is required in December2. This is a legal requirement for all companies operating in Costa Rica. We discuss more specifics about international laws in Section 14.3.5 “The International Labor Environment”.
Table \(2\) Top Global 100 Companies
Rank Company Revenues (\$ millions) Profits (\$ millions)
1 Walmart Stores 408,214 14,335
2 Royal Dutch Shell 285,129 12,518
3 Exxon Mobil 284,650 19,280
4 BP 246,138 16,578
5 Toyota Motor 204,106 2,256
6 Japan Post Holdings 202,196 4,849
7 Sinopec 187,518 5,756
8 State Grid 184,496 −343
9 AXA 175,257 5,012
10 China National Petroleum 165,496 10,272
11 Chevron 163,527 10,483
12 ING Group 163,204 −1,300
13 General Electric 156,779 11,025
14 Total 155,887 11,741
15 Bank of America Corp. 150,450 6,276
16 Volkswagen 146,205 1,334
17 ConocoPhillips 139,515 4,858
18 BNP Paribas 130,708 8,106
19 Assicurazioni Generali 126,012 1,820
20 Allianz 125,999 5,973
21 AT&T 123,018 12,535
22 Carrefour 121,452 454
23 Ford Motor 118,308 2,717
24 ENI 117,235 6,070
25 J.P. Morgan Chase & Co. 115,632 11,728
26 Hewlett-Packard 114,552 7,660
27 E.ON 113,849 11,670
28 Berkshire Hathaway 112,493 8,055
29 GDF Suez 111,069 6,223
30 Daimler 109,700 −3,670
31 Nippon Telegraph & Telephone 109,656 5,302
32 Samsung Electronics 108,927 7,562
33 Citigroup 108,785 −1,606
34 McKesson 108,702 1,263
35 Verizon Communications 107,808 3,651
36 Crédit Agricole 106,538 1,564
37 Banco Santander 106,345 12,430
38 General Motors 104,589
39 HSBC Holdings 103,736 5,834
40 Siemens 103,605 3,097
41 American International Group 103,189 −10,949
42 Lloyds Banking Group 102,967 4,409
43 Cardinal Health 99,613 1,152
44 Nestlé 99,114 9,604
45 CVS Caremark 98,729 3,696
46 Wells Fargo 98,636 12,275
47 Hitachi 96,593 −1,152
48 International Business Machines 95,758 13,425
49 Dexia Group 95,144 1,404
50 Gazprom 94,472 24,556
51 Honda Motor 92,400 2,891
52 Électricité de France 92,204 5,428
53 Aviva 92,140 1,692
54 Petrobras 91,869 15,504
55 Royal Bank of Scotland 91,767 −4,167
56 PDVSA 91,182 1,608
57 Metro 91,152 532
58 Tesco 90,234 3,690
59 Deutsche Telekom 89,794 491
60 Enel 89,329 7,499
61 UnitedHealth Group 87,138 3,822
62 Société Générale 84,157 942
63 Nissan Motor 80,963 456
64 Pemex 80,722 −7,011
65 Panasonic 79,893 −1,114
66 Procter & Gamble 79,697 13,436
67 LG 78,892 1,206
68 Telefónica 78,853 10,808
69 Sony 77,696 −439
70 Kroger 76,733 70
71 Groupe BPCE 76,464 746
72 Prudential 75,010 1,054
73 Munich Re Group 74,764 3,504
74 Statoil 74,000 2,912
75 Nippon Life Insurance 72,051 2,624
76 AmerisourceBergen 71,789 503
77 China Mobile Communications 71,749 11,656
78 Hyundai Motor 71,678 2,330
79 Costco Wholesale 71,422 1,086
80 Vodafone 70,899 13,782
81 BASF 70,461 1,960
82 BMW 70,444 284
83 Zurich Financial Services 70,272 3,215
84 Valero Energy 70,035 −1,982
85 Fiat 69,639 −1,165
86 Deutsche Post 69,427 895
87 Industrial & Commercial Bank of China 69,295 18,832
88 Archer Daniels Midland 69,207 1,707
89 Toshiba 68,731 −213
90 Legal & General Group 68,290 1,346
91 Boeing 68,281 1,312
92 US Postal Service 68,090 −3,794
93 Lukoil 68,025 7,011
94 Peugeot 67,297 −1,614
95 CNP Assurances 66,556 1,396
96 Barclays 66,533 14,648
97 Home Depot 66,176 2,661
98 Target 65,357 2,488
99 ArcelorMittal 65,110 118
100 WellPoint 65,028 4,746
Source: Adapted from Fortune 500 List 2010, http://money.cnn.com/magazines/fortune/global500/2010/full_list/ (accessed August 11, 2011).
Global HR Trends
Howard Wallack, director of Global Member programs for the Society for Human Resource Management (SHRM), talks about some of the global HR trends and gives tips on how to deal with these trends from the HR perspective.
HRM Global Strategies
When discussing HRM from the global perspective, there are many considerations. Culture, language, management styles, and laws would all be considerations before implementing HRM strategies. (Beechler et al., 2004) argued that for multinational companies, identifying the best HRM processes for the entire organization isn’t the goal, but rather finding the best fit between the firm’s external environment (i.e., the law) and the company’s overall strategy, HRM policies, and implementation of those policies. To this end, Adler and Bartholomew developed a set of transnational competencies that are required for business to thrive in a global business environment (Adler & Bartholomew, 1992). A transnational scope means that HRM decisions can be made based on an international scope; that is, HRM strategic decisions can be made from the global perspective rather than a domestic one. With this HRM strategy, decisions take into consideration the needs of all employees in all countries in which the company operates. The concern is the ability to establish standards that are fair for all employees, regardless of which country they operate in. A transnational representation means that the composition of the firm’s managers and executives should be a multinational one. A transnational process, then, refers to the extent to which ideas that contribute to the organization come from a variety of perspectives and ideas from all countries in which the organization operates. Ideally, all company processes will be based on the transnational approach. This approach means that multicultural understanding is taken into consideration, and rather than trying to get international employees to fit within the scope of the domestic market, a more holistic approach to HRM is used. Using a transnational approach means that HRM policies and practices are a crucial part of a successful business, because they can act as mechanisms for coordination and control for the international operations (Pudelko & Harzing, 2007). In other words, HRM can be the glue that sticks many independent operations together.
Before we look at HRM strategy on the global level, let’s discuss some of the considerations before implementing HRM systems.
Culture as a Major Aspect of HRM Overseas
Culture is a key component to managing HRM on a global scale. Understanding culture but also appreciating cultural differences can help the HRM strategy be successful in any country. Geert Hofstede, a researcher in the area of culture, developed a list of five cultural dimensions that can help define how cultures are different (Hofstede, 2011).
The first dimension of culture is individualism-collectivism. In this dimension, Hofstede describes the degree to which individuals are integrated into groups. For example, in the United States, we are an individualist society; that is, each person looks after him- or herself and immediate family. There is more focus on individual accomplishments as opposed to group accomplishments. In a collective society, societies are based on cohesive groups, whether it be family groups or work groups. As a result, the focus is on the good of the group, rather than the individual.
Power distance, Hofstede’s second dimension, refers to the extent to which the less powerful members of organizations accept that power is not distributed equally. For example, some societies may seek to eliminate differences in power and wealth, while others prefer a higher power distance. From an HRM perspective, these differences may become clear when employees are asked to work in cross-functional teams. A Danish manager may have no problem taking advice from employees because of the low power distance of his culture, but a Saudi Arabian manager may have issues with an informal relationship with employees, because of the high power distance.
Uncertainty avoidance refers to how a society tolerates uncertainty. Countries that focus more on avoidance tend to minimize the uncertainty and therefore have stricter laws, rules, and other safety measures. Countries that are more tolerant of uncertainty tend to be more easygoing and relaxed. Consider the situation in which a company in the United States decides to apply the same HRM strategy to its operations in Peru. The United States has an uncertainty avoidance score of 46, which means the society is more comfortable with uncertainty. Peru has a high uncertainty avoidance, with a score of 87, indicating the society’s low level of tolerance for uncertainty. Let’s suppose a major part of the pay structure is bonuses. Would it make sense to implement this same compensation plan in international operations? Probably not.
Masculinity and femininity refers to the distribution of emotional roles between genders, and which gender norms are accepted by society. For example, in countries that are focused on femininity, traditional “female” values such as caring are more important than, say, showing off. The implications to HRM are huge. For example, Sweden has a more feminine culture, which is demonstrated in its management practices. A major component in managers’ performance appraisals is to provide mentoring to employees. A manager coming from a more masculine culture may not be able to perform this aspect of the job as well, or he or she may take more practice to be able to do it.
The last dimension is long-term–short-term orientation, which refers to the society’s time horizons. A long-term orientation would focus on future rewards for work now, persistence, and ordering of relationships by status. A short-term orientation may focus on values related to the past and present such as national pride or fulfillment of current obligations. We can see HRM dimensions with this orientation in succession planning, for example. In China the person getting promoted might be the person who has been with the company the longest, whereas in short-term orientation countries like the United States, promotion is usually based on merit. An American working for a Chinese company may get upset to see someone promoted who doesn’t do as good of a job, just because they have been there longer, and vice versa.
Based on Hofstede’s dimensions, you can see the importance of culture to development of an international HRM strategy. To utilize a transnational strategy, all these components should be factored into all decisions such as hiring, compensation, and training. Since culture is a key component in HRM, it is important now to define some other elements of culture.
Table \(3\) Examples of Countries and Hofstede’s Dimensions
Country Power Distance Individualism/Collectivism Masculinity/Femininity Uncertainty Avoidance Long/Short Term Orientation
New Zealand 22 79 58 49 30
UK 35 89 66 35 25
United States 40 91 62 46 29
Japan 54 46 95 92 80
Taiwan 58 17 45 69 87
Zambia 64 27 41 52 25
India 77 48 56 40 61
China 80 20 66 40 118
Philippines 94 32 64 44 19
Chile 63 23 28 86 (this dimension was only studied in 23 countries)
Power distance: Refers to the comfort level of power differences among society members. A lower score shows greater equality among levels of society, such as New Zealand.
Individualism/collectivism: A high ranking here, such as the United States, means there is more concern for the individualistic aspects of society as opposed to collectivism. Countries with high scores on individualism means the people tend to be more self-reliant.
Masculinity/femininity: A lower score may indicate lower levels of differentiation between genders. A lower score, such as Chile, may also indicate a more openly nurturing society.
Uncertainty avoidance: Refers to the tolerance for uncertainty. A high score, such as Japan’s, means there is lower tolerance for uncertainty, so rules, laws, policies, and regulations are implemented.
Long/short term orientation: Refers to thrift and perseverance, overcoming obstacles with time (long-term orientation), such as China, versus tradition, social obligations.
Culture refers to the socially accepted ways of life within a society. Some of these components might include language, norms, values, rituals, and material culture such as art, music, and tools used in that culture. Language is perhaps one of the most obvious parts of culture. Often language can define a culture and of course is necessary to be able to do business. HRM considerations for language might include something as simple as what language (the home country or host country) will documents be sent in? Is there a standard language the company should use within its communications?
Fortune 500 Focus
For anyone who has traveled, seeing a McDonald’s overseas is common, owing to the need to expand markets. McDonald’s is perhaps one of the best examples of using cultural sensitivity in setting up its operations despite criticism for aggressive globalization. Since food is usually a large part of culture, McDonald’s knew that when globalizing, it had to take culture into consideration to be successful. For example, when McDonald’s decided to enter the Indian market in 2009, it knew it needed a vegetarian product. After several hundred versions, local McDonald’s executives finally decided on the McSpicy Paneer as the main menu item. The spicy Paneer is made from curd cheese and reflects the values and norms of the culture (Lubin, 2011).
In Japan, McDonald’s developed the Teriyaki Burger and started selling green tea ice cream. When McDonald’s first started competing in Japan, there really was no competition at all, but not for the reason you might think. Japanese people looked at McDonald’s as a snack rather than a meal because of their cultural values. Japanese people believe that meals should be shared, which can be difficult with McDonald’s food. Second, the meal did not consist of rice, and a real Japanese meal includes rice—a part of the national identity (Ohnuki-Tierney, 1997) and values. Most recently, McDonald’s introduced the McBaguette in France to align with French cultural values (Rappanport, 2011). The McBaguettes will be produced in France and come with a variety of jams, a traditional French breakfast. Just like in product development, HRM must understand the differences between cultures to create the best HRM systems that work for the individual culture.
Norms are shared expectations about what is considered correct and normal behavior. Norms allow a society to predict the expected behavior and be able to act in this manner. For many companies operating in the United States, a norm might be to dress down for work, no suit required. But if doing business overseas, that country’s norm might be to wear a suit. Not understanding the norms of a culture can offend potential clients, customers, and colleagues.
Values, another part of culture, classify things as good or bad within a society. Values can evoke strong emotional feelings from a person or a society. For example, burning of the American flag results in strong emotions because values (love of country and the symbols that represent it) are a key component of how people view themselves, and how a culture views society. In April 2011, a pastor in Florida burned a holy book, the Koran, which sparked outrage from the Muslim community all over the world. This is an example of a strongly held value that when challenged can result in community rage (Drury, 2011).
Rituals are scripted ways of interacting that usually result in a specific series of events. Consider a wedding in the United States, for example. The basic wedding rituals (first dance, cutting of cake, speech from best man and bridesmaid) are practiced throughout society. Besides the more formalized rituals within a society, such as weddings or funerals, daily rituals, such as asking someone “How are you?” (when you really don’t want to know the answer) are part of culture, too. Even bonding rituals such as how business cards are exchanged and the amount of eye contact given in a social situation can all be rituals as well.
The material items a culture holds important, such as artwork, technology, and architecture, can be considered material culture. Material culture can range from symbolic items, such as a crucifix, or everyday items, such as a Crockpot or juicer. Understanding the material importance of certain items to a country can result in a better understanding of culture overall.
Cultural Differences
This funny commercial notes examples of cultural differences.
Human Resource Recall
Which component of culture do you think is the most important in HRM? Why?
Key Takeaways
• Offshoring is when a business relocates or moves part of its operations to a country different from the one it currently operates in.
• Outsourcing is when a company contracts with another company to do some work for another. This can occur domestically or in an offshoring situation.
• Domestic market means that a product is sold only within the country that the business operates in.
• An international market means that an organization is selling products in other countries, while a multinational one means that not only are products being sold in a country, but operations are set up and run in a country other than where the business began.
• The goal of any HRM strategy is to be transnational, which consists of three components. First, the transnational scope involves the ability to make decisions on a global level rather than a domestic one. Transnational representation means that managers from all countries in which the business operates are involved in business decisions. Finally, a transnational process means that the organization can involve a variety of perspectives, rather than only a domestic one.
• Part of understanding HRM internationally is to understand culture. Hofstede developed five dimensions of culture. First, there is the individualism-collectivism aspect, which refers to the tendency of a country to focus on individuals versus the good of the group.
• The second Hofstede dimension is power distance, that is, how willing people are to accept unequal distributions of power.
• The third is uncertainty avoidance, which means how willing the culture is to accept not knowing future outcomes.
• A masculine-feminine dimension refers to the acceptance of traditional male and female characteristics.
• Finally, Hofstede focused on a country’s long-term orientation versus short-term orientation in decision making.
• Other aspects of culture include norms, values, rituals, and material culture. Norms are the generally accepted way of doing things, and values are those things the culture finds important. Every country has its own set of rituals for ceremonies but also for everyday interactions. Material culture refers to the material goods, such as art, the culture finds important.
• Other HRM aspects to consider when entering a foreign market are the economics, the law, and the level of education and skill level of the human capital in that country.
Exercise
1. Visit http://www.geert-hofstede.com/ and view the cultural dimensions of three countries. Then write a paragraph comparing and contrasting all three.
1“Global Remuneration Professional,” WorldatWork Society of Certified Professionals, accessed August 10, 2010, www.worldatworksociety.org/society/certification/html/certification-grp.jsp.
2“Labor Laws and Policy,” The Real Costa Rica, accessed April 29, 2011, http://www.therealcostarica.com/costa_rica_business/costa_rica_labor_law.html. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/14%3A_International_HRM/14.01%3A_Introduction.txt |
Learning Objectives
1. Be able to explain the three staffing strategies for international businesses and the advantages and disadvantages for each.
2. Explain the reasons for expatriate failures.
One of the major decisions for HRM when a company decides to operate overseas is how the overseas operation will be staffed. This is the focus of this section.
Types of Staffing Strategy
There are three main staffing strategies a company can implement when entering an overseas market, with each having its advantages and disadvantages. The first strategy is a home-country national strategy. This staffing strategy uses employees from the home country to live and work in the country. These individuals are called expatriates. The second staffing strategy is a host-country national strategy, which means to employ people who were born in the country in which the business is operating. Finally, a third-country national strategy means to employee people from an entirely different country from the home country and host country. Table \(1\) lists advantages and disadvantages of each type of staffing strategy. Whichever strategy is chosen, communication with the home office and strategic alignment with overseas operations need to occur for a successful venture.
Table \(1\) Advantages and Disadvantages of the Three Staffing Strategies
Home-Country National Host-Country National Third-Country National
Advantages Greater control of organization Language barrier is eliminated The third-country national may be better equipped to bring the international perspective to the business
Managers gain experience in local markets Possible better understanding of local rules and laws Costs associated with hiring such as visas may be less expensive than with home-country nationals
Possible greater understanding and implementation of business strategy Hiring costs such as visas are eliminated
Cultural understanding
Morale builder for employees of host country
Disadvantages Adapting to foreign environment may be difficult for manager and family, and result in less productivity Host-country manager may not understand business objectives as well without proper training Must consider traditional national hostilities
Expatriate may not have cultural sensitivity May create a perception of “us” versus “them” The host government and/or local business may resent hiring a third-country national
Language barriers Can affect motivation of local workers
Cost of visa and hiring factors
Human Resource Recall
Compare and contrast a home-country versus a host-country staffing strategy.
Expatriates
According to Simcha Ronen, a researcher on international assignments, there are five categories that determine expatriate success. They include job factors, relational dimensions, motivational state, family situation, and language skills. The likelihood the assignment will be a success depends on the attributes listed in Table \(2\). As a result, the appropriate selection process and training can prevent some of these failings. Family stress, cultural inflexibility, emotional immaturity, too much responsibility, and longer work hours (which draw the expatriate away from family, who could also be experiencing culture shock) are some of the reasons cited for expatriate failure.
Table \(2\) Categories of Expatriate Success Predictors with Examples
Job Factors Relational Dimensions Motivational State Family Situation Language Skills
Technical skills Tolerance for ambiguity Belief in the mission Willingness of spouse to live abroad Host-country language
Familiarity with host country and headquarters operations Behavioral flexibility Congruence with career path Adaptive and supportive spouse Nonverbal communication
Managerial skills Nonjudgmentalism Interest in overseas experience Stable marriage
Administrative competence Cultural empathy and low ethnocentrism Interest in specific host-country culture
Interpersonal skills Willingness to acquire new patterns of behavior and attitudes
Source: Adapted from Simcha Ronen, Training the International Assignee (San Francisco: Jossey-Bass, 1989), 426–40.
Most expatriates go through four phases of adjustment when they move overseas for an assignment. They include elation/honeymoon, resistance, adaption, and biculturalism. In the elation phase, the employee is excited about the new surroundings and finds the culture exotic and stimulating. In the resistance phase, the employee may start to make frequent comparisons between home and host country and may seek out reminders of home. Frustration may occur because of everyday living, such as language and cultural differences. During the adaptation phase, the employee gains language skills and starts to adjust to life overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this phase, the expatriate is embracing life overseas. In the last phase, biculturalism, the expatriate embraces the new culture and begins to appreciate his old life at home equally as much as his new life overseas. Many of the problems associated with expatriate failures, such as family life and cultural stress, have diminished.
Expat Failures
A short discussion on why international assignments fail.
Host-Country National
The advantage, as shown in Table \(1\) of hiring a host-country national can be an important consideration when designing the staffing strategy. First, it is less costly in both moving expenses and training to hire a local person. Some of the less obvious expenses, however, may be the fact that a host-country national may be more productive from the start, as he or she does not have many of the cultural challenges associated with an overseas assignment. The host-country national already knows the culture and laws, for example. In Russia, 42 percent of respondents in an expatriate survey said that companies operating there are starting to replace expatriates with local specialists. In fact, many of the respondents want the Russian government to limit the number of expatriates working for a company to 10 percent1. When globalization first occurred, it was more likely that expatriates would be sent to host countries, but in 2011, many global companies are comfortable that the skills, knowledge, and abilities of managers exist in the countries in which they operate, making the hiring of a host-country national a favorable choice. Also important are the connections the host-country nationals may have. For example, Shiv Argawal, CEO of ABC Consultants in India, says, “An Indian CEO helps influence policy and regulations in the host country, and this is the factor that would make a global company consider hiring local talent as opposed to foreign talent” (Rajagorpal, 2011).
Third-Country Nationals
One of the best examples of third-country nationals is the US military. The US military has more than seventy thousand third-country nationals working for the military in places such as Iraq and Afghanistan. For example, a recruitment firm hired by the US military called Meridian Services Agency recruits hairstylists, construction workers, and electricians from all over the world to fill positions on military bases (Stillman, 2011). Most companies who utilize third-country national labor are not new to multinational businesses. The majority of companies who use third-country national staffing have many operations already overseas. One example is a multinational company based in the United States that also has operations in Spain and transfers a Spanish manager to set up new operations in Argentina. This would be opposed to the company in the United States sending an American (expatriate) manager to Argentina. In this case, the third-country national approach might be the better approach because of the language aspect (both Spain and Argentina speak Spanish), which can create fewer costs in the long run. In fact, many American companies are seeing the value in hiring third-country nationals for overseas assignments. In an International Assignments Survey2, 61 percent of United States–based companies surveyed increased the use of third-country nationals by 61 percent, and of that number, 35 percent have increased the use of third-country nationals to 50 percent of their workforce. The main reason why companies use third-country nationals as a staffing strategy is the ability of a candidate to represent the company’s interests and transfer corporate technology and competencies. Sometimes the best person to do this isn’t based in the United States or in the host country.
Key Takeaways
• There are three types of staffing strategies for an international business. First, in the home-country national strategy, people are employed from the home country to live and work in the country. These individuals are called expatriates. One advantage of this type of strategy is easier application of business objectives, although an expatriate may not be culturally versed or well accepted by the host-country employees.
• In a host-country strategy, workers are employed within that country to manage the operations of the business. Visas and language barriers are advantages of this type of hiring strategy.
• A third-country national staffing strategy means someone from a country, different from home or host country, will be employed to work overseas. There can be visa advantages to using this staffing strategy, although a disadvantage might be morale lost by host-country employees.
Exercises
1. Choose a country you would enjoy working in, and visit that country’s embassy page. Discuss the requirements to obtain a work visa in that country.
2. How would you personally prepare an expatriate for an international assignment? Perform additional research if necessary and outline a plan.
1“Russia Starts to Abolish Expat jobs,” Expat Daily, April 27, 2011, accessed August 11, 2011, www.expat-daily.com/news/russia-starts-to-abolish-expat-jobs/.
2“More Third Country Nationals Being Used,” n.d., SHRM India, accessed August 11, 2011, http://www.shrmindia.org/more-third-country-nationals-being-used. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/14%3A_International_HRM/14.03%3A_Staffing_Internationally.txt |
Learning Objectives
1. Be able to explain how the selection process for an expatriate differs from a domestic process.
2. Explain possible expatriate training topics and the importance of each.
3. Identify the performance review and legal differences for international assignments.
4. Explain the logistical considerations for expatriate assignments.
In an international environment, as long as proper research is performed, most HRM concepts can be applied. The important thing to consider is proper research and understanding of cultural, economic, and legal differences between countries. This section will provide an overview of some specific considerations for an international business, keeping in mind that with awareness, any HRM concept can be applied to the international environment. In addition, it is important to mention again that host-country offices should be in constant communication with home-country offices to ensure policies and practices are aligned with the organization.
Recruitment and Selection
As we discussed in Section 14.2 “Staffing Internationally”, understanding which staffing strategy to use is the first aspect of hiring the right person for the overseas assignment. The ideal candidate for an overseas assignment normally has the following characteristics:
1. Managerial competence: technical skills, leadership skills, knowledge specific to the company operations.
2. Training: The candidate either has or is willing to be trained on the language and culture of the host country.
3. Adaptability: The ability to deal with new, uncomfortable, or unfamiliar situations and the ability to adjust to the culture in which the candidate will be assigned.
As we discussed earlier, when selecting an expatriate or a third-country national for the job, assuring that the candidate has the job factors, relational dimensions, motivational state, family situation, and language skills (or can learn) is a key consideration in hiring the right person. Some of the costs associated with failure of an expatriate or third-country national might include the following:
1. Damage to host-country relationships
2. Motivation of host-country staff
3. Costs associated with recruitment and relocation
4. Possible loss of that employee once he or she returns
5. Missed opportunities to further develop the market
Because success on an overseas assignment has such complex factors, the selection process for this individual should be different from the selection process when hiring domestically. The process should start with the job analysis, as we discussed in Chapter 4. The job analysis and job description should be different for the overseas assignment, since we know that certain competencies (besides technical ones) are important for success. Most of those competencies have little to do with the person’s ability to do the job but are related to his or her ability to do the job in a new cultural setting. These additional competencies (besides the skills needed for the job) may be considered:
1. Experience working internationally
2. Extroverted
3. Stress tolerance
4. Language skills
5. Cultural experiences
Once the key success factors are determined, many of which can be based on previous overseas assignments successes, we can begin to develop a pool of internal candidates who possess the additional competencies needed for a successful overseas assignment.
To develop the pool, career development questions on the performance review can be asked to determine the employee’s interest in an overseas assignment. Interest is an important factor; otherwise, the chance of success is low. If there is interest, this person can be recorded as a possible applicant. An easy way to keep track of interested people is to keep a spreadsheet of interested parties, skills, languages spoken, cultural experiences, abilities, and how the candidates meet the competencies you have already developed.
Once an overseas assignment is open, you can view the pool of interested parties and choose the ones to interview who meet the competencies required for the particular assignment.
Training
Much of the training may include cultural components, which were cited by 73 percent of successful expatriates as key ingredients to success (The Economist Intelligence Unit, 2010).
Training isn’t always easy, though. The goal is not to help someone learn a language or cultural traditions but to ensure they are immersed in the sociocultural aspects of the new culture they are living in. Roger N. Blakeney (Blakeney, 2006), an international business researcher, identifies two main pathways to adapting to a new culture. First, people adjust quickly from the psychological perspective but not the social one. Blakeney argues that adjusting solely from the psychological perspective does not make an effective expatriate. Although it may take more time to adjust, he says that to be fully immersed and to fully understand and be productive in a culture, the expatriate must also have sociocultural adaption. In other words, someone who can adjust from a sociocultural perspective ends up performing better because he or she has a deeper level of understanding of the culture. Determining whether your candidate can gain this deeper level would figure in your selection process.
One of the key decisions in any global organization is whether training should be performed in-house or an outside company should be hired to provide the training. For example, Communicaid offers online and on-site training on a variety of topics listed. Whether in-house or external training is performed, there are five main components of training someone for an overseas assignment:
1. Language
2. Culture
3. Goal setting
4. Managing family and stress
5. Repatriation
Training on languages is a basic yet necessary factor to the success of the assignment. Although to many, English is the international business language, we shouldn’t discount the ability to speak the language of the country in which one is living. Consider Japan’s largest online retailer, Rakuten, Inc. It mandated that English will be the standard language by March 2012 (Thregold, 2010). Other employers, such as Nissan and Sony, have made similar mandates or have already implemented an English-only policy. Despite this, a large percentage of your employee’s time will be spent outside work, where mastery of the language is important to enjoy living in another country. In addition, being able to discuss and negotiate in the mother tongue of the country can give your employee greater advantages when working on an overseas assignment. Part of language, as we discussed in Chapter 9, isn’t only about what you say but also includes all the nonverbal aspects of language. Consider the following examples:
• In the United States, we place our palm upward and use one finger to call someone over. In Malaysia, this is only used for calling animals. In much of Europe, calling someone over is done with palm down, making a scratching motion with the fingers (as opposed to one finger in the United States). In Columbia, soft handclaps are used.
• In many business situations in the United States, it is common to cross your legs, pointing the soles of your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of the body.
• Spatial differences are an aspect of nonverbal language as well. In the United States, we tend to stand thirty-six inches (an arm length) from people, but in Chile, for example, the space is much smaller.
• Proper greetings of business colleagues differ from country to country.
• The amount of eye contact varies. For example, in the United States, it is normal to make constant eye contact with the person you are speaking with, but in Japan it would be rude to make constant eye contact with someone with more age or seniority.
The goal of cultural training is to train employees what the “norms” are in a particular culture. Many of these norms come from history, past experience, and values. Cultural training can include any of the following topics:
1. Etiquette
2. Management styles
3. History
4. Religion
5. The arts
6. Food
7. Geography
8. Logistics aspects, such as transportation and currency
9. Politics
Cultural training is important. Although cultural implications are not often discussed openly, not understanding the culture can harm the success of a manager when on overseas assignment. For example, when Revlon expanded its business into Brazil, one of the first products it marketed was a Camellia flower scented perfume. What the expatriate managers didn’t realize is that the Camellia flower is used for funerals, so of course, the product failed in that country (Roy, 1998). Cultural implications, such as management style, are not always so obvious. Consider the US manager who went to Mexico to manage a production line. He applied the same management style that worked well in America, asking a lot of questions and opinions of employees. When employees started to quit, he found out later that employees expect managers to be the authority figure, and when the manager asked questions, they assumed he didn’t know what he was doing.
Training on the goals and expectations for the expatriate worker is important. Since most individuals take an overseas assignment to boost their careers, having clear expectations and understanding of what they are expected to accomplish sets the expatriate up for success.
Because moving to a new place, especially a new country, is stressful, it is important to train the employee on managing stress, homesickness, culture shock, and likely a larger workload than the employee may have had at home. Some stress results from insecurity and homesickness. It is important to note that much of this stress occurs on the family as well. The expatriate may be performing and adjusting well, but if the family isn’t, this can cause greater stress on the employee, resulting in a failed assignment. Four stages of expatriate stress identified in the Selyes model, the General Adaption Syndrome, are shown in Figure 14.5 “General Adaption Syndrome to Explain Expatriate Stress”. The success of overseas employees depends greatly on their ability to adjust, and training employees on the stages of adjustment they will feel may help ease this problem.
Cultural Differences
This video discusses practical implications of cultural differences.
Spouses and children of the employee may also experience much of the stress the expatriate feels. Children’s attendance at new schools and lack of social networks, as well as possible sacrifice of a spouse’s career goal, can negatively impact the assignment. Many companies offer training not only for the employee but for the entire family when engaging in an overseas assignment. For example, global technology and manufacturing company Honeywell offers employees and their families a two-day cultural orientation on the region they will be living in (Klaff, 2002). Some of the reasons for lack of adjustment by family members might include the following:
1. Language issues
2. Social issues
3. Schooling
4. Housing
5. Medical services
The ability of the organization to meet these family needs makes for a more successful assignment. For example, development of an overseas network to provide social outlets, activities, schooling and housing options, assignment of mentors to the spouse, and other methods can help ease the transition.
Finally, repatriation is the process of helping employees make the transition to their home country. Many employees experience reverse culture shock upon returning home, which is a psychological phenomenon that can lead to feelings of fear, helplessness, irritability, and disorientation. All these factors can cause employees to leave the organization soon after returning from an assignment, and to take their knowledge with them. One problem with repatriation is that the expatriate and family have assumed things stayed the same at home, while in fact friends may have moved, friends changed, or new managers may have been hired along with new employees. Although the manager may be on the same level as other managers when he or she returns, the manager may have less informal authority and clout than managers who have been working in the particular office for a period of time. An effective repatriation program can cost \$3,500 to \$10,000 per family, but the investment is worth it given the critical skills the managers will have gained and can share with the organization. In fact, many expatriates fill leadership positions within organizations, leveraging the skills they gained overseas. One such example is FedEx president and CEO David Bronczek and executive vice president Michael Drucker. Tom Mullady, the manager of international compensation planning at FedEx, makes the case for a good repatriation program when he says, “As we become more and more global, it shows that experience overseas is leveraged back home” (Klaff, 2002).
Repatriation planning should happen before the employee leaves on assignment and should be a continuous process throughout the assignment and upon return. The process can include the following:
• Training and counseling on overseas assignment before leaving
• Clear understanding of goals before leaving, so the expatriate can have a clear sense as to what new skills and knowledge he or she will bring back home
• Job guarantee upon return (Deloitte and Touche, for example, discusses which job each of the two hundred expats will take after returning, before the person leaves, and offers a written letter of commitment (Klaff, 2002).)
• Assigning the expatriate a mentor, ideally a former expatriate
• Keeping communication from home open, such as company newsletters and announcements
• Free return trips home to stay in touch with friends and family
• Counseling (at Honeywell, employees and families go through a repatriation program within six months of returning (Klaff, 2002).)
• Sponsoring brown bag lunches where the expatriate can discuss what he or she learned while overseas
• Trying to place expatriates in positions where they can conduct business with employees and clients from where they lived
It is also important to note that offering an employee an international assignment can help develop that person’s understanding of the business, management style, and other business-related development. Working overseas can be a crucial component to succession planning. It can also be a morale booster for other employees, who see that the chosen expatriate is further able to develop his or her career within the organization.
While the focus of this section has been on expatriate assignments, the same information on training is true for third-country nationals.
If it is decided that host-country nationals will be hired, different training considerations might occur. For example, will they spend some time at your domestic corporate headquarters to learn the business, then apply what they learned when they go home? Or, does it make more sense to send a domestic manager overseas to train the host-country manager and staff? Training will obviously vary based on the type of business and the country, and it may make sense to gain input from host-country managers as opposed to developing training on your own. As we have already discussed in this chapter, an understanding of the cultural components is the first step to developing training that can be utilized in any country.
Compensation and Rewards
There are a few options when choosing compensation for a global business. The first option is to maintain companywide pay scales and policies, so for example, all sales staff are paid the same no matter what country they are in. This can reduce inequalities and simplify recording keeping, but it does not address some key issues. First, this compensation policy does not address that it can be much more expensive to live in one place versus another. A salesperson working in Japan has much higher living expenses than a salesperson working in Peru, for example. As a result, the majority of organizations thus choose to use a pay banding system based on regions, such as South America, Europe, and North America. This is called a localized compensation strategy. Microsoft and Kraft Foods both use this approach. This method provides the best balance of cost-of-living considerations.
However, regional pay banding is not necessarily the ideal solution if the goal is to motivate expatriates to move. For example, if the employee has been asked to move from Japan to Peru and the salary is different, by half, for example, there is little motivation for that employee to want to take an assignment in Peru, thus limiting the potential benefits of mobility for employees and for the company.
One possible option is to pay a similar base salary companywide or regionwide and offer expatriates an allowance based on specific market conditions in each country (Carland, 1993). This is called the balance sheet approach. With this compensation approach, the idea is that the expatriate should have the same standard of living that he or she would have had at home. Four groups of expenses are looked at in this approach:
1. Income taxes
2. Housing
3. Goods and services
4. Base salary
5. Overseas premium
The HR professional would estimate these expenses within the home country and costs for the same items in the host country. The employer then pays differences. In addition, the base salary will normally be in the same range as the home-country salary, and an overseas premium might be paid owing to the challenge of an overseas assignment. An overseas premium is an additional bonus for agreeing to take an overseas assignment. There are many companies specializing in cost-of-living data, such as Mercer Reports. It provides cost-of-living information at a cost of \$600 per year. Table \(1\) shows a hypothetical example of how the balance sheet approach would work.
Table \(1\) The Balance Sheet Approach to Compensation
Chicago, IL Tokyo Allowance
Tax rate 30% 35% 5% or \$288/month
Housing \$1250 \$1800 \$550
Base salary \$5400 \$5,750 \$350
Overseas premium 15% \$810
Total allowance \$1998
Total salary and allowance \$5400 \$7748
Other compensation issues, which will vary greatly from country to country, might include the following:
1. The cost of benefits in another country. Many countries offer universal health care (offset by higher taxes), and therefore the employee would have health benefits covered while working and paying taxes in that country. Canada, Finland, and Japan are examples of countries that have this type of coverage. In countries such as Singapore, all residents receive a catastrophic policy from the government, but they need to purchase additional insurance for routine care (Countries with Universal Healthcare, 2011). A number of organizations offer health care for expatriates relocating to another country in which health care is not already provided.
2. Legally mandated (or culturally accepted) amount of vacation days. For example, in Australia twenty paid vacation days are required, ten in Canada, thirty in Finland, and five in the Philippines. The average number of US worker vacation days is fifteen, although the number of days is not federally mandated by the government, as with the other examples (Sahadi, 2007).
3. Legal requirements of profit sharing. For example, in France, the government heavily regulates profit sharing programs (Wilke, et. al., 2007).
4. Pay system that works with the country culture, such as pay systems based on seniority. For example, Chinese culture focuses heavily on seniority, and pay scales should be developed according to seniority. In Figure 14.6 “Hourly World Compensation Comparisons for Manufacturing Jobs”, examples of hourly compensation for manufacturing workers are compared.
5. Thirteenth month (bonus) structures and expected (sometimes mandated) annual lump-sum payments. Compensation issues are a major consideration in motivating overseas employees. A systematic system should be in place to ensure fairness in compensation for all expatriates.
Performance Evaluations
The challenge in overseas performance evaluations is determining who should rate the performance of the expatriate. While it might make sense to have the host-country employees and managers rate the expatriate, cultural differences may make this process ineffective. Cultural challenges may make the host country rate the expatriate more harshly, or in some cases, such as Indonesia, harmony is more important than productivity, so it may be likely an Indonesia employee or manager rates the expatriate higher, to keep harmony in the workplace (Whitfield, 2011).
If the home-country manager rates the performance of the expatriate, he or she may not have a clear indication of the performance, since the manager and expatriate do not work together on a day-to-day basis. A study performed by Gregersen, Hite, and Black suggests that a balanced set of raters from host and home countries and more frequent appraisals relate positively to the accuracy of performance evaluations (Gregersen, et. al., 1996). They also suggest that the use of a standardized form relates negatively to perceived accuracy. Carrie Shearer, an international HR expert, concurs by stating that the standardized form, if used, should also include special aspects for the expatriate manager, such as how well the expatriate fits in with the culture and adaptation ability (Shearer, 2004).
Besides determining who should rate the expatriate’s performance, the HR professional should determine the criteria for evaluating the expatriate. Since it is likely the expatriate’s job will be different overseas, the previous criteria used may not be helpful in the evaluation process. The criteria used to rate the performance should be determined ahead of time, before the expatriate leaves on assignment. This is part of the training process we discussed earlier. Having a clear picture of the rating criteria for an overseas assignment makes it both useful for the development of the employee and for the organization as a tool. A performance appraisal also offers a good opportunity for the organization to obtain feedback about how well the assignment is going and to determine whether enough support is being provided to the expatriate.
The International Labor Environment
As we have already alluded to in this chapter, understanding of laws and how they relate to host-country employees and expatriates can vary from country to country. Because of this, individual research on laws in the specific countries is necessary to ensure adherence:
1. Worker safety laws
2. Worker compensation laws
3. Safety requirements
4. Working age restrictions
5. Maternity/paternity leaves
6. Unionization laws
7. Vacation time requirements
8. Average work week hours
9. Privacy laws
10. Disability laws
11. Multiculturalism and diverse workplace, antidiscrimination law
12. Taxation
As you can tell from this list, the considerable HRM factors when doing business overseas should be thoroughly researched.
One important factor worth mentioning here is labor unions. As you remember from Chapter 12, labor unions have declined in membership in the United States. Collective bargaining is the process of developing an employment contract between a union and management within an organization. The process of collective bargaining can range from little government involvement to extreme government involvement as in France, for example, where some of the labor unions are closely tied with political parties in the country.
Some countries, such as Germany, engage in codetermination, mandated by the government. Codetermination is the practice of company shareholders’ and employees’ being represented in equal numbers on the boards of organizations, for organizations with five hundred or more employees. The advantage of this system is the sharing of power throughout all levels of the organization; however, some critics feel it is not the place of government to tell companies how their corporation should be run. The goal of such a mandate is to reduce labor conflict issues and increase bargaining power of workers.
Taxation of expatriates is an important aspect of international HRM. Of course, taxes are different in every country, and it is up to the HR professional to know how taxes will affect the compensation of the expatriate. The United States has income tax treaties with forty-two countries, meaning taxing authorities of treaty countries can share information (such as income and foreign taxes paid) on residents living in other countries. US citizens must file a tax return, even if they have not lived in the United States during the tax year. US taxpayers claim over \$90 billion in foreign tax credits on a yearly basis (Internal Revenue Service, 2011). Foreign tax credits allow expatriates working abroad to claim taxes paid overseas on their US tax forms, reducing or eliminating double taxation. Many organizations with expatriate workers choose to enlist the help of tax accountants for their workers to ensure workers are paying the correct amount of taxes both abroad and in the United States.
Table \(2\): Examples of HRM-Related Law Differences between the United States and China
United States China*
Employment Contracts Most states have at-will employment Contract employment system. All employees must have a written contract
Layoffs No severance required Company must be on verge of bankruptcy before it can lay off employees
Two years of service required to pay severance; more than five years of experience requires a long service payment
Termination Employment at will Employees can only be terminated for cause, and cause must be clearly proved. They must be given 30 days’ notice, except in the case of extreme circumstances, like theft
Overtime None required for salaried employees Employees who work more than 40 hours must be paid overtime
Salary Up to individual company A 13-month bonus is customary, but not required, right before the Chinese New Year
Vacation No governmental requirement Mandated by government:
First year: no vacation
Year 2–9: 5 days
Years 10–19: 10 days
20 years or more: 15 days
Paid Holidays None required by law 3 total. Chinese New Year, International Labor Day, and National Day. However, workers must “make up” the days by working a day on the previous weekend
Social Security Required by law for employer and employee to pay into social security Greater percentages are paid by employer: 22% of salary paid by employer, 8% paid by employee
Discrimination Laws Per EEOC, cannot discriminate based on race, sex, age, genetic information, or other protected groups Laws are in place but not enforced
Maternity Leave Family and Medical Leave Act allows 12 weeks 90 days’ maternity leave
*In China, all employees are covered by the Labor Contract Law.
Source: Harris and Moure, pllc, “China Employment Contracts, Ten Things to Consider,” China Law Blog, http://www.chinalawblog.com/2010/04/china_employment_contracts_ten.html (accessed August 13, 2011) and Cindy Zhang, “Employment Law in China,” June 21, 2011, http://www.attorneycz.com/ (accessed August 13, 2011).
Logistics of International Assignments
As you learned earlier, providing training for the expatriate is an important part of a successful assignment. However, many of the day-to-day aspects of living are important, too.
One of the most important logistical aspects is to make sure the employee can legally work in the country where you will be sending him or her, and ensuring his or her family has appropriate documentation as well. A visa is permission from the host country to visit, live, or work in that country. Obtaining visas is normally the job of an HR professional. For example, the US Department of State and the majority of countries require that all US citizens have a valid passport to travel to a foreign country. This is the first step to ensuring your host-country national or third-country national can travel and work in that country.
Next, understanding the different types of visas is a component to this process. For example, the United States offers a Visa Waiver Program (VWP) that allows some nationals of thirty-six participating countries to travel to the United States for stays of less than ninety days. Iceland, Singapore, and France are examples of countries that participate in this program. For most host-national assignments, however, this type of visa may not be long enough, which then requires research of the individual country. It is important to mention that most countries have several types of visas, such as the following:
1. Visas for crew members working on ships or airlines
2. Tourist visas
3. Student visas
4. Employment visas for long-term employment at a foreign company
5. Business visas
The visa process and time line can vary greatly depending on the country for which the visa is required. For example, obtaining a visa to work in China may take six months or longer. The best place to research this topic is on the country’s embassy website.
Besides ensuring the expatriate can legally work in the country, other considerations are worth mentioning as well:
1. Housing. Where will I live is one of the most important questions that an expatriate may ask. The HR professional can help this process by outsourcing a leasing or rental company in the city where the expatriate will live to find a rental that meets the expectations of the expatriate. Choosing a place to live ahead of time can reduce stress (one of the causes of failure for assignments) for the expatriate and his or her family. Allowances may be made for housing costs, as discussed in the compensation section.
2. Moving belongings. Determination of how belongings left behind will be stored at home or if those items will be brought to the host country is another logistical consideration. If items will be brought, beyond what can be carried in a suitcase, the HR professional may want to consider hiring a moving logistics company that specializes in expatriate moves to help with this process.
3. The possibility of return trips home. As part of the initial discussion, the option of offering return trips home can make repatriation and performance reviews with home-country managers easier. This also gives the expatriate and his or her family the opportunity to visit with family and friends, reducing reverse culture shock upon return.
4. Schooling. Some organizations may want to provide information on the schooling system to the expatriate, if he or she has children. Schools begin at different times of the year, and this information can make the registration process for school easier on the family.
5. Spousal job. We know already from earlier in this chapter that one of the biggest challenges facing expatriates (and reasons for failure) is unhappiness of the spouse. He or she may have had a career at home and given that up while the spouse takes an assignment. HR professionals might consider offering job search services as part of the allowance discussed earlier in this chapter. Lockheed Martin, for example, offers job search services to spouses moving overseas (Minehan, 2011).
In any situation, support from the HR professional will help make the assignment a success, which shows that HRM practices should be aligned with company goals.
How Would You Handle This?
Visa Blues
Your manager has just notified you that one of your marketing managers has taken an assignment in China to work for one year. You tell your manager you will begin the visa process for employment. She disagrees and tells you it will be quicker to just get a tourist visa. You mention this is illegal and could get the employee and company in trouble, but she insists on your getting a tourist visa so the employee can leave within the month. How would you handle this?
Key Takeaways
• Personality traits are a key component to determining whether someone is a good fit for an overseas assignment. Since 73 percent of overseas assignments fail, ensuring the right match up front is important.
• The ideal expatriate is able to deal with change, is flexible, and has the support of his or her family. Ideal expatriates are also organized, take risks, and are good at asking for help.
• The adjustment period an expatriate goes through depends on his or her initial preparation. Blakeney said there are two levels of adjustment: psychological adjustment and sociocultural adjustment. Although the psychological may take less time, it is the sociocultural adjustment that will allow the assignment to be successful.
• Training is a key component in the HRM global plan, whether expatriates or host-country nationals are to be hired. Both will require a different type of training. Training can reduce culture shock and stress.
• Consideration of the expatriate’s family and their ability to adjust can make a more successful overseas assignment
• Compensation is another consideration of a global business. The balance sheet approach pays the expatriate extra allowances, such as living expenses, for taking an international assignment.
• Other considerations such as vacation days, health-care benefits, and profit-sharing programs are important as well.
• Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws relating to disabilities, pregnancy, and safety, for example, should be understood before doing business overseas.
• Labor unions have different levels of involvement in different parts of the world. For example, Germany has codetermination, a policy that requires companies to have employees sit on various boards.
• The United States has treaties with forty-two countries to share information about expatriates. The United States offers foreign tax credits to help expatriates avoid double taxation. However, US citizens must file taxes every year, even if they have not lived in the United States during that year.
• Logistical help can be important to ensuring the success of an overseas assignment. Help with finding a place to live, finding a job for a spouse, and moving can make the difference between a successful assignment and an unsuccessful one.
• The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter the United States for up to a ninety-day period. This type of visa may not work well for expatriates, so it is important to research the type of visa needed from a particular country by using that country’s embassy website.
Exercise
1. Research the country of your choice. Discuss at least five of the aspects you should know as an HRM professional about doing business in that country. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/14%3A_International_HRM/14.04%3A_International_HRM_Considerations.txt |
Chapter Summary
• Offshoring is when a business relocates or moves part of its operations to a country different from the one it currently operates in.
• Outsourcing is when a company contracts with another company to do some work for another. This can occur domestically or in an offshoring situation.
• Domestic market means that a product is sold only within the country that the business operates in.
• An international market means that an organization is selling products in other countries, while a multinational one means that not only are products being sold in a country, but operations are set up and run in a country other than where the business began.
• The goal of any HRM strategy is to be transnational, which consists of three components. First, the transnational scope involves the ability to make decisions on a global level rather than a domestic one. Transnational representation means that managers from all countries in which the business operates are involved in business decisions. Finally, a transnational process means that the organization can involve a variety of perspectives, rather than only a domestic one.
• Part of understanding HRM internationally is to understand culture. Hofstede developed five dimensions of culture. First, there is the individualism-collectivism aspect, which refers to the tendency of a country to focus on individuals versus the good of the group.
• The second Hofstede dimension is power distance, that is, how willing people are to accept unequal distributions of power.
• The third is uncertainty avoidance, which means how willing the culture is to accept not knowing future outcomes.
• A masculine-feminine dimension refers to the acceptance of traditional male and female characteristics.
• Finally, Hofstede focused on a country’s long-term orientation versus short-term orientation in decision making.
• Other aspects of culture include norms, values, rituals, and material culture. Norms are the generally accepted way of doing things, and the values are those things the culture finds important. Every country has its own set of rituals for ceremonies but also for everyday interactions. Material culture refers to the material goods, such as art, the culture finds important.
• Other HRM aspects to consider when entering a foreign market are the economics, the law, and the level of education and skill level of the human capital in that country.
• There are three types of staffing strategies for an international business. First, in the home-country national strategy, people are employed from the home country to live and work in the country. These individuals are called expatriates. One advantage of this type of strategy is easier application of business objectives, although an expatriate may not be culturally versed or well accepted by the host-country employees.
• In a host-country strategy, workers are employed within that country to manage the operations of the business. Visas and language barriers are advantages of this type of hiring strategy.
• A third-country national staffing strategy means someone from a country, different from home or host country, will be employed to work overseas. There can be visa advantages to using this staffing strategy, although a disadvantage might be morale lost by host-country employees.
• Personality traits are a key component to determining whether someone is a good fit for an overseas assignment. Since 73 percent of overseas assignments fail, ensuring the right match up front is important.
• The ideal expatriate is able to deal with change, is flexible, and has the support of his or her family. Ideal expatriates are also organized, take risks, and are good at asking for help.
• The adjustment period an expatriate goes through depends on his or her initial preparation. Blakeney said there are two levels of adjustment: psychological adjustment and sociocultural adjustment. Although the psychological adjustment may take less time, it is the sociocultural adjustment that will allow the assignment to be successful.
• Training is a key component in the HRM global plan, whether expatriates or host-country nationals are to be hired. Both will require a different type of training. The expatriate should receive extensive training on culture, language, and adjustment.
• Compensation is another consideration of a global business. Most companies keep a standard regional salary but may offer allowances for some expenses. Cost of living, taxes, and other considerations are important.
• Performance should be evaluated by both host-country and home-country managers and employees. The criteria should be determined ahead of time.
• Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws relating to disabilities, pregnancy, and safety, for example, should be understood before doing business overseas.
• Logistical help can be important to ensuring the successful overseas assignment. Help with finding a place to live, finding a job for a spouse, and moving can make the difference between a successful assignment and an unsuccessful one.
• The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter the United States for up to a ninety-day period. This type of visa may not work well for expatriates, so it is important to research the type of visa needed from a particular country by using that country’s embassy website.
Chapter Case
Fish to Go Is Going Places
• Your company, Fish to Go, is a quick service restaurant specializing in fish tacos. Your success in the United States has been excellent, and your company has decided to develop an international strategy to further develop your market share. As the vice president for human resources, you have been asked to develop an international staffing strategy. The organization has decided that it makes the most sense to hire host-country nationals to manage the restaurants. Your current Fish to Go managers earn upwards of \$45,000 per year, plus 2 percent profit sharing. The organization is also looking to you to determine and develop a comprehensive training program for your host-country managers. A training program is also needed for employees, but you have decided to wait and develop this with input from the host-country managers. Fish to Go has identified Mexico and the UK as the first two countries that will be entered. Perform the necessary research to prepare a PowerPoint presentation to the board of directors.
1. What are the advantages of choosing a host-country national staffing strategy?
2. Develop a compensation plan for each of the two countries, revising the current compensation for managers in the United States, if necessary. The compensation plan should include salary, benefits, and any fringe benefits to attract the most qualified people. The plan should also address any legal compensation requirements for both countries.
3. Develop an outline for a training plan, making reasonable assumptions about the information a new manager would need to know at Fish to Go.
Team Activity
1. What are four major considerations for aligning the HRM strategy with an overall globalization strategy? Discuss each and rank them in order of importance.
2. Find a team with an even number of members. Split each team into “reasons for localized compensation” and “reasons for regional or global compensation.” Be prepared to debate the issue with prepared points. | textbooks/biz/Management/Beginning_Management_of_Human_Resources/14%3A_International_HRM/14.05%3A_Cases_and_Problems.txt |
1.1.1 Introduction
On May 11, 2007, the College of Business Administration approved a Statement of Values designed to serve as a guideline for the moral development of this community. But this Statement of Values is as much a process as a product. Just as Johnson and Johnson sought to promote the moral development of its corporate community by "challenging" its corporate credo, ADEM also seeks to promote its moral development by challenging, interpreting, and realizing its Statement of Values.
Your task in this module is to read the appended Statement of Values (SOV) and provide two responses. First, can you think of any problems that have arisen in the past that could have been avoided if this SOV had been adopted and implemented? In other words, assess how effective you think the SOV is as a means for preventing moral harm. Second, challenge the SOV: (1) Are there any interpretation problems you see that would lead to misunderstanding and improper use? And (2) what SOV gaps do you see, that is, what ethical issues remain that are not fully treated under the SOV?
Carrying out these tasks will help you identify creative ways to integrate moral values into your academic endeavors in this class and in other activities this semester. The goal of the SOV is to set the ADEM community on a course of continual improvement. These respective exercises will help start the process.
1.1.2 What you need to know...
Include information that you expect your students to study and learn in this module as well as information that will help them carry out the module activities.
Statement of Values: http://legacy.cnx.org/content/m14850...t/SOV_Copy.doc
Figure 1.2: Clicking on this figure will open the UPRM College of Business Administration's Statement of Value. The SOV can also be accessed by clicking on the links above provided with this module.
SOV Preamble:
As a result of an ongoing process of reflection and assessment, the College of Business Administration (its students, faculty, staff, and administrators) arms its commitment and loyalty to the following values: justice and fairness, responsibility, respect, trust, and integrity. This statement sets forth these values in order to educate and inspire as well as to promote dialogue and continual improvement. In particular, these values serve to describe this community's identity and express their aspirations. It is meant to complement existing laws, regulations, professional standards, and codes of ethics by enhancing the pursuit of excellence consistent with the College's Vision and Mission. In all of its activities, the College of Business Administration will:
sov values
1. Justice/Fairness: Be impartial, objective and refrain from discrimination or preferential treatment in the administration of rules and policies and in its dealings with students, faculty, staff, administration, and other stakeholders.
2. Responsibility: Recognize and fulfill its obligations to its constituents by caring for their essential interests, by honoring its commitments, and by balancing and integrating conflicting interests. As responsible agents, the faculty, employees, and students of the College of Business Administration are committed to the pursuit of excellence, devotion to the community's welfare, and professionalism.
3. Respect: Acknowledge the inherent dignity present in its diverse constituents by recognizing and respecting their fundamental rights. These include rights to property, privacy, the free exchange of ideas, academic freedom, due process, and meaningful participation in decision making and policy formation.
4. Trust: Recognize that trust solidifies communities by creating an environment where each can expect ethically justifiable behavior from all others. While trust is tolerant of and even thrives in an environment of diversity, it also must operate within the parameters set by established personal and community standards.
5. Integrity: Promote integrity as characterized by sincerity, honesty, authenticity, and the pursuit of excellence. Integrity shall permeate and color all its decisions, actions and expressions. It is most clearly exhibited in intellectual and personal honesty in learning, teaching, mentoring and research.
Compliance Strategy:
• The traditionally most prevalent method for interpreting codes of ethics and statements of values is the compliance method. This method sets forth minimal standards and implements incentives for meeting these standards. It is based on three interrelated components::
• Rules: Compliance strategies are centered around strict codes of ethics composed of rules that set forth minimum thresholds of acceptable behavior. The use of rules to structure employee action does run into problems due to the gap between rule and application, the appearance of novel situations, and the impression that it gives to employees that obedience is based on conformity to authority.
• Monitoring: The second component consists of monitoring activities designed to ensure that employees are conforming to rules and to identify instances of non-compliance. Monitoring is certainly effective but it requires that the organization expend time, money, and energy. Monitoring also places stress upon employees in that they are aware of constantly being watched. Those under observation tend either to rebel or to automatically adopt behaviors they believe those doing the monitoring want. This considerably dampens creativity, legitimate criticism, and innovation.
• Disciplining Misconduct: The last key component to a compliance strategy is punishment. Punishment can be effective especially when establishing and enforcing conduct that remains above the criminal level. But reliance on punishment for control tends to impose solidarity on an organization rather than elicit it. Employees conform because they fear sanction. Organizations based on this fear are never really free to pursue excellence.
Values Orientation:
• The SOV can also be read as the identification and [armation] of a community's aspirations. By taking on this values orientation, the SOV replaces the reactive compliance perspective with a proactive stance oriented toward excellence. The emphasis here is on how the community can support its members by identifying best practices toward realizing these aspirations and especially how it can provide support to those who fall short. This values-based orientation is built upon the following three components
• Development of Shared Values: Using a process similar to the one described above, a community develops a Statement of Shared Values. These provide guidelines that replace the hard and fast rules of a compliance code. Statements in values-oriented codes play a different logical function than statements in compliance codes. "Principles of Professional/Organizational Conduct" in compliance codes specify circumstances of compliance: time, agent, place, purpose, manner, etc. These circumstances provide sufficient content to allow principles of professional conduct to function as rules that can be violated. This gives them "teeth," that is, makes it possible to enforce them by sanctions and punishments. "Ideals of the Profession/Organization state a community's shared aspirations. They set forth levels of behavior well beyond the minimum. Because they chart out directions for continuous improvement, Ideals of the Profession/Organization profess a community's commitment to excellence rather than the moral minimum.
• Support for Employees: Since Statements of Values can set forth excellences or aspirations, the role of the community changes from monitoring and punishing to helping community members realize key values in their day to day activities. In other words, the role of the organization changes from punitive to supportive.
• Ethical Aspirations: In summary, values orientations can be interpreted as setting forth higher standards for behavior. Going well beyond the moral and legal minimum, these values when clarified in a community's statement of values serve as aspirations. A values orientation requires that a community design strategies that reinterpret and realize basic values as excellences. Hence, it is most compatible with a virtue orientation and virtue ethical theory.
1.1.3 What you will do...
Suppose the SOV has been adopted and implemented for several years now. Exercise your moral imagination and envision problems that the pursuit of these excellences would have avoided.
Exercises
Question 1: What kind of moral harms could it have prevented had it been in effect?
Question 2: Do the adaptation and implementation of the SOV promise to make us (ADEM stakeholders) a better community?
• If so, how?
• If not, what are its weaknesses?
• Nota Bene: If you feel that the adoption of the SOV will not make us a better community, feel free to state this and then explain your position.
Challenging the Statement of Values as in successful corporate compliance and values programs, the following exercise encourages you to challenge the SOV by identifying interpretation problems and SOV gaps.
Exercises
Question 1: Can you anticipate any interpretation problems that may arise with the adaptation and implementation of the SOV? How should these be addressed?
Question 2: Can you identify important moral problems that are not covered or anticipated by the Statement of Values? How could the SOV be modified to cover these problems and fill the gaps?
1.1.4 What did you learn?
Reflecting on what you have done is an absolutely essential part of the learning process. In this section of the module, the class will be divided into small groups, and each group member begins by presenting his or her responses to the above four questions. Explaining your responses to others in terms that they understand and with reasons that you share with them helps you to see your own views in a different, more comprehensive way. Listening to what others say helps to integrate new information and perspectives into your thinking on an issue. In other words, it expands and deepens your own position.
After you explain your responses to the other members of your group, discuss how the SOV can be embedded in everyday academic activities. How can SOV values be realized in...
• group work
• course syllabi
• College Administrative procedures such as complaint processing and matriculation
• class attendance
• Choose one of these issues for discussion. If you have time, go to another.
Sample issues for discussion
• How can teachers realize justice in their evaluation procedures?
• How can students participate responsibly in their classes?
• How does cheating affect relations of trust between students, especially between those who cheat and those who don't?
• How can the practice of setting and holding office hours lead to or undermine relations of respect between teachers and students?
• How can academic integrity be interpreted as an aspiration? What would constitute an academic integrity compliance program?
• Does the SOV pertain to recent changes in the class schedule at UPRM? Which values pertain and why? Is an example of an SOV gap?
• Again, choose one of these for group discussion. If you have time, go to another.
Meta-Discussion
• A meta-discussion is a discussion about a discussion. Reflecting on the discussion your group has just had...
• Did you agree on most issues? Why do you think you all agreed? What did you do to prevent groupthink, i.e., a group atmosphere where disagreement is covered over by various methods or means.
• Did you disagree?
• How did you respond to disagreement? For example, did you try to impose consensus?
• State as clearly as possible the different positions held by group members and how they differed
1.1.5 Appendix
SOV Module Word 97 Version: http://legacy.cnx.org/content/m14850...ng_SOV_W97.doc
Figure 1.3: This module is also available in a Word 97 handout. Clicking on this figure will download the le including handouts for each of the discussion activities outlined above.
This student module was carried out in classes at UPRM in Business Ethics 8/10/07 and 8/13/07. All three sections including the Meta-Discussion were completed by close to 60 students. An informal summary of the students' responses and the issues they raised can be found in the corresponding Instructor Module which is under construction and will be published shortly.
1.1.6 My College's Values and Me: An exercise for ESOR 4019
The exercise, "My College's Values and Me," developed by Marta Colón de Toro, provides an excellent instrument for disseminating the Statement of Values to students, collecting reactions and feedback from them to incorporate into future developments, and to start reflecting on how the SOV can be realized in the classroom and the ADEM community at large. The following media file contains the classroom exercise carried out in the fall semester, 2007, at UPRM.
My College's Values and Me: legacy.cnx.org/content/m14850/latest/MyCollegeValuesandMe.doc
Figure 1.4: This exercise has been developed by Marta Colón de Toro for the integration of the SOV into the class, "Wages and Salary Administration." A revised version will be substituted shortly.
1.1.7 EAC Toolkit Project
1.1.7.1 This module is a WORK-IN-PROGRESS; the author(s) may update the content as needed. Others are welcome to use this module or create a new derived module. You can COLLABORATE to improve this module by providing suggestions and/or feedback on your experiences with this module.
Please see the Creative Commons License regarding permission to reuse this material.
1.1.7.2 Funded by the National Science Foundation: "Collaborative Development of Ethics Across the Curriculum Resources and Sharing of Best Practices," NSF-SES-0551779 | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.01%3A_Integrating_the_Statement_of_Values_into_Course_Syllabi.txt |
1.2.1 Module Introduction
This module poses an ethical dilemma, that is, a forced choice between two bad alternatives. Your job is to read the scenario and choose between the two horns of the dilemma. You will make your choice and then justify it in the first activity. In the second activity, you will discuss your choice with others. Here, the objective is to reach consensus on a course of action or describe the point at which your group's progress toward consensus stopped. The Mountain Terrorist Exercise almost always generates lively discussion and helps us to reflect on our moral beliefs. Don't expect to reach an agreement with your fellow classmates quickly or effortlessly. (If you do, then your instructor will find ways of throwing a monkey wrench into the whole process.) What is more important here is that we learn how to state our positions clearly, how to listen to others, how to justify our positions, and how to assess the justifications ordered by others. In other words, we will all have a chance to practice the virtue of reasonableness. And we will learn reasonableness not when it's easy (as it is when we agree) but when it becomes difficult (as it is when we disagree).
The second half of this module requires that you reflect carefully on your moral reasoning and that of your classmates. The Mountain Terrorist Exercise triggers the different moral schemas that make up our psychological capacity for moral judgment. Choosing one horn of the dilemma means that you tend to favor one kind of schema while choosing the other horn generally indicates that your favor another. The dominant moral theories that we will study this semester provide detailed articulations and justifications of these moral schemas. Reflecting on your choice, the reasons for your choice, and how your choice differs from that of your classmates will help you get started on the path of studying and effectively utilizing moral theory.
The following scenario comes originally from the philosopher, Bernard Williams. It is also presented in introductory ethics textbooks (such as Geoffrey Thomas' An Introduction to Ethics). The first time this module's author became aware of its use in the classroom was in a workshop on Agriculture Ethics led by Paul Thompson, then of Texas A&M University, in 1992.
1.2.2 Moral Theories Highlighted
1. Utilitarianism: the moral value of an action lies in its consequences or results
2. Deontology: the moral value of an action lies, not in its consequences, but in the formal characteristics of the action itself.
3. Virtue Ethics: Actions sort themselves out into virtuous or vicious actions. Virtuous actions stem from a virtuous character while vicious actions stem from a vicious or morally awed character. Who we are is reveals through what we do.
1.2.3 Mountain Terrorist Scenario
You are in a remote mountain village. A group of terrorists has lined up 20 people from the village; they plan on shooting them for collaborating with the enemy. Since you are not from the village, you will not be killed. Taking advantage of your position, you plead with the terrorists not to carry out their plan. Finally, you convince the leader that it is not necessary to kill all 20. He takes a gun, empties it of all its bullets except one, and then hands it to you. He has decided to kill only one villager to set an example to the rest. As an honored guest and outsider, you will decide who will be killed, and you will carry out the deed. The terrorists conclude with a warning; if you refuse to kill the villager, then they will revert back to the original plan of killing all 20. And if you try any funny business, they will kill the 20 villagers and then kill you. What should you do?
your options
1. Take the gun, select a villager, and kill him or her.
2. Refuse the terrorists' offer and walk away from the situation.
activity 1
In a short essay of one to two pages, describe what you would do if you were in the position of the tourist. Then justify your choice.
activity 2
Bring your essay to class. You will be divided into small groups. Present your choice and justification to the others in your group. Then listen to their choices and justifications. Try to reach a group consensus on choice and justification. (You will be given 10-15 minutes.) If you succeed, present your results to the rest of the class. If you fail, present to the class the disagreement that blocked consensus and what you did (within the time limit) to overcome it.
1.2.4 Taxonomy of Ethical Approaches
There are many ethical approaches that can be used in decision making. The Mountain Terrorist Exercise is based on an artificial scenario designed to separate these theoretical approaches along the lines of the different "horns" of a dilemma. Utilitarians tend to choose to shoot a villager "in order to save 19." In other words, they focus their analysis on the consequences of an action alternative and choose the one that produces the least harm. Deontologists generally elect to walk away from the situation. This is because they judge an action on the basis of its formal characteristics. A deontologist might argue that killing the villager violates natural law or cannot be made into a law or rule that consistently applies to everybody. A deontologist might say something like, "What right do I have to take another person's life?" A virtue ethicists might try to imagine how a person with the virtue of courage or integrity would act in this situation. (Williams claims that choosing to kill the villager, a duty under utilitarianism, would undermine the integrity of a person who abhorred killing.)
Table Connecting Theory to Domain
1. Row 1: Utilitarianism concerns itself with consequences. It claims that the moral value of an action is "colored" by its results. The harm test, which asks us to choose the least harmful alternative, encapsulates or summarizes this theoretical approach. The basic principle of utilitarianism is the principle of utility: choose that action that produces the greatest good for the greatest number. Utilitarians Available for free at Connexions 9 would shoot a villager in order to save 19. But Utilitarianism, like other forms of consequentialism, has prediction challenges. What are the short-, middle-, and long-term consequences of an action? These become harder to determine the further we are from the present.
2. Row 2: Npn-consequentialism turns away from consequences to focus on the formal characteristics of an action. (For example, Kant says the good action is one that does duty for duty's sake.) Deontology, a kind of non-consequentialism, helps us to identify and justify rights along with their correlative duties The reversibility test summarizes deontology by asking the question, "Does your action still work if you switch (=reverse) roles with those on the receiving end? Deontology has two formulations of its fundamental principle. The Categorical Imperative exhorts us to act only on that maxim which can be converted into a universal law. The Formula of the End proscribes that we "treat others always as ends, never merely as means," The rights that represent special cases of treating people as ends and not merely as means include (a) informed consent, (b) privacy, (c) due process, (d) property, (e) free speech, and (f) conscientious objection. The deontologist would choose not to kill a villager because the act of killing is formally wrong.
3. Row 3: Virtue ethics turns away from the action and focuses on the agent, the person performing the action. The word, "Virtue," refers to different sets of skills and habits cultivated by agents. These skills and habits, consistently and widely performed, support, sustain, and advance different occupational, social, and professional practices. (See MacIntyre, After Virtue, and Solomon, Ethics and Excellence, for more on the relation of virtues to practices.) The public identification test summarizes this approach: an action is morally acceptable if it is one with which I would willingly be publicly associated given my moral convictions. Individual virtues that we will use this semester include integrity, justice, responsibility, reasonableness, honesty, trustworthiness, and loyalty.
• These different approaches are meant to work together. Each gives us insight into different dimensions of the problematic situation. Utilitarianism and deontology both focus on the action. Utilitarianism uses consequences to evaluate the action while deontology evaluates an action in terms of its underlying motive and its formal characteristics.
• Virtue ethics turns away from the action to focus on the agent. It asks us to determine what the action says about the character or person of the agent. If the action is irresponsible, then the agent is irresponsible. Virtue ethics can be implemented by projecting a moral exemplar into the situation. You might ask, "What would so-and-so do in this situation?" if this person were your mentor, a person you admire, or a moral exemplar. Or you might examine virtues that are realized through your action. For example, Williams says that taking the life of a villager might seriously disrupt or corrupt your integrity.
• The capability approach takes a still different focus on the situation by having us bring into view those factors in the situation which could empower or impede the expression of human capabilities like thought, imagination, movement, health, and life.
Covering All the Bases
Theory Category Ethical Approach Ethics Test Basic Principles Action in MT Scenario
Consequentialism Utilitarianism Harm Test Principle of Utility: greatest good for greatest number Shoot one villager to save nineteen
Non-consequentialism Deontology: right theory or duty theory Reversibility Test: view action from receiving end Categorical Imperative: act on maxim which can be universal law; Formula of End: treat persons as ends, not merely as means Do not take a gun; leave the village
Character-Based Virtue Ethics Publicity Test Virtue is the means between extremes of excess and defect Do the honorable thing
Human Functioning Capability Approach Check if action expands or contracts substantive freedoms Substantive freedoms composing a life of dignity; beings and doings essential to eudaimonia Choose that action that expands freedom and secures dignity
Table 1.1: Table 1
1.2.5 Comments on the Relation Between Ethical Approaches
The Mountain Terrorist Exercise has, in the past, given students the erroneous idea that ethical approaches are necessarily opposed to one another. As one student put it, "If deontology tells us to walk away from the village, then utilitarianism must tell us to stay and kill a villager because deontology and utilitarianism, as different and opposed theories, always reach different and opposed conclusions on the actions they recommend." The Mountain Terrorist dilemma was specially constructed by Bernard Williams to produce a situation that ordered only a limited number of alternatives. He then tied these alternatives to different ethical approaches to separate them precisely because in most real-world situations they are not so readily distinguishable. Later this semester, we will turn from these philosophical puzzles to real-world cases where ethical approaches function in a very different and mostly complementary way. As we will see, ethical approaches, for the most part, converge on the same solutions. For this reason, this module concludes with 3 meta-tests. When approaches converge on a solution, this strengthens the solution's moral validity. When approaches diverge on a solution, this weakens their moral validity. A third meta-test tells us to avoid framing all ethical problems as dilemmas (=forced choices between undesirable alternatives) or what Carolyn Whitbeck calls "multiple-choice" problems. You will soon learn that effective moral problem solving requires moral imagination and moral creativity. We do not "find" solutions "out there" ready-made but design them to harmonize and realize ethical and practical values.
Meta-Tests:
• Divergence Test: When two ethical approaches differ on a given solution, then that difference counts against the strength of the solution. Solutions on which ethical theories diverge must be revised towards convergence.
• Convergence Test: Convergence represents a meta-test that attests to solution strength. Solutions on which different theoretical approaches converge are, by this fact, strengthened. Convergence demonstrates that a solution is strong, not just over one domain, but over multiple domains.
• Avoid Framing a Problem as a Dilemma. A dilemma is a no-win situation that orders only two alternatives of action both of which are equally bad. (A trilemma orders three bad alternatives, etc.) Dilemmas are better dissolved than solved. Reframe the dilemma into something that admits of more than two no-win alternatives. Dilemma framing (framing a situation as an ethical dilemma) discourages us from designing creative solutions that integrate the conflicting values that the dilemma poses as incompatible.
1.2.6 Module Wrap-Up
1. Reasonableness and the Mountain Terrorist Exercise. It may seem that this scenario is the last place where the virtue of reasonableness should prevail, but look back on how you responded to those of your classmates who chose differently in this exercise and who ordered arguments that you had not initially thought of. Did you "listen and respond thoughtfully" to them? Were you "open to new ideas" even if these challenged your own? Did you "give reasons for" your views, modifying and shaping them to respond to your classmates' arguments? Did you "acknowledge mistakes and misunderstandings" such as responding critically and personally to a classmate who put forth a different view? Finally, when you turned to working with your group, were you able to "compromise (without compromising personal integrity)"? If you did any or all of these things, then you practiced the virtue of reasonableness as characterized by Michael Pritchard in his book, Reasonable Children: Moral Education and Moral Learning (1996, University of Kansas Press, p. 11). Congratulate yourself on exercising reasonableness in an exercise designed to challenge this virtue. You passed the test.
2. Recognizing that we are already making ethical arguments. In the past, students have made the following arguments on this exercise: (a) I would take the gun and kill a villager in order to save nineteen; (b) I would walk away because I don't have the right to take another's life; (c) While walking away might appear cowardly it is the responsible thing to do because staying and killing a villager would make me complicit in the terrorists' project. As we discussed in class, these and other arguments make use of modes of thought captured by ethical theories or approaches. The first employs the consequentialist approach of utilitarianism while the second makes use of the principle of respect that forms the basis of our rights and duties. The third works through a conflict between two virtues, courage and responsibility. This relies on the virtue approach. One accomplishment of this exercise is to make you aware of the fact that you are already using ethical arguments, i.e., arguments that appeal to ethical theory. Learning about the theories behind these arguments will help you to makes these arguments more effective.
3. Results from Muddy Point Exercises The Muddy Point Exercises you contributed kept coming back to two points. (a) Many of you pointed out that you needed more information to make a decision in this situation. For example, who were these terrorists, what causes were they fighting for, and were they correct in accusing the village of collaborating with the enemy? Your request for more information was quite appropriate. But many of the cases we will be studying this semester require decisions in the face of uncertainty and ignorance. These are unavoidable in some situations because of factors such as the cost and time of gathering more information. Moral imagination skillfully exercised can do a lot to compensate when all of the facts are not in. (b) Second, many of you felt overly constrained by the dilemma framing of the scenario. Those of you who entered the realm of "funny business" (anything beyond the two alternatives of killing the villager or walking away) took a big step toward effective moral problem-solving. By rejecting the dilemma framing of this scenario, you were trying to reframe the situation to allow for more and more ethically viable alternatives. Trying to negotiate with the Terrorists is a good example of reframing the scenario to admit of more ethical alternatives of action than killing or walking away.
4. Congratulations on completing your first ethics module! You have begun recognizing and practicing skills that will help you to tackle real-life ethical problems. (Notice that we are going to work with "problems", not "dilemmas".) We will now turn, in the next module, to look at those who managed to do good in the face of difficulty. Studying moral exemplars will provide the necessary corrective to the "no-win" Mountain Terrorist Exercise. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.02%3A_Theory_Building_Activities_-_Mountain_Terrorist_Exercise.txt |
Module Introduction
Much of your future work will be organized around group or team activities. This module is designed to prepare you for this by getting you to reflect on ethical and practical problems that arise in small groups like work teams. Four issues, based on well-known ethical values, are especially important. How do groups achieve justice (in the distribution of work), responsibility (in specifying tasks, assigning blame, and awarding credit), reasonableness (ensuring participation, resolving conflict, and reaching consensus), and honesty (avoiding deception, corruption, and impropriety)? This module asks that you develop plans for realizing these moral values in your group work this semester. Furthermore, you are provided with a list of some of the more common pitfalls of group work and then asked to devise strategies for avoiding them. Finally, at the end of the semester, you will review your goals and strategies, reflect on your successes and problems, and carry out an overall assessment of the experience.
Module Activities
1. Groups are provided with key ethical values that they describe and seek to realize through group activity.
2. Groups also study various obstacles that arise in collective activity: the Abilene Paradox, Groupthink, and Group Polarization.
3. Groups prepare initial reports consisting of plans for realizing key values in their collective activity. They also develop strategies for avoiding associated obstacles.
4. At the end of the semester, groups prepare a self-evaluation that assesses success in realizing ethical values and avoiding obstacles.
5. Text boxes in this module describe pitfalls in group activities and offer general strategies for preventing or mitigating them. There is also a text box that provides an introductory orientation on key ethical values or virtues.
A Framework for Value-Integration
The objective of this module is to teach you to teach yourselves how to work in small groups. You will develop and test procedures for realizing value goals and avoiding group pitfalls. You will also use Socio-Technical System Analysis to help you understand better how to take advantage of the way in which different environments enable group activities and to anticipate and minimize the way in which other environments can constrain or even oppose group activities.
• Discovery: "The goal of this activity is to 'discover' the values that are relevant to, inspire, or inform a given design project, resulting in a list of values and bringing into focus what is often implicit in a design project." [Flanagan et al. 323]. The discovery of group values is a trial and error process. To get started, use the ADEM Statement of Values or the short value profiles listed below.
• Translation: "[T]ranslation is the activity of embodying or expressing...values in a system design. Translation is further divided into operationalization, which involves defining or articulating values in concrete terms, and implementation which involves specifying corresponding design features" [Flanagan et al., 338]. You will operationalize your values by developing profiles. (See below or the ADEM Statement of Values for examples.) Then you will implement your values by developing realization procedures. For example, to realize justice in carrying out a group task, first we will discuss the task as a group, second we will divide it into equal parts, third, fourth, etc.
• Verification: "In the activity of verification, designers assess to what extent they have successfully implemented target values in a given system. [Strategies and methods] may include internal testing among the design team, user testing in controlled environments, formal and informal interviews and surveys, the use of prototypes, traditional quality assurance measures such as automated and regression-oriented testing and more" [Flanagan et al., 344-5]. You will document your procedures in the face of different obstacles that may arise in your efforts at value-realization. At the end of your semester, you will verify your results by showing how you have refined procedures to more effectively realize values.
The framework on value realization and the above-quoted passages can be found in the following resource: M. Flanagan, D. Howe, and H. Nissenbaum, “Embodying Values in Technology: Theory and Practice,” in Information Technology and Moral Philosophy, Jeroen van den Hoven and John Weckert, Eds. Cambridge, UK: Cambridge University Press, 2008, pp. 322-353.
Value Profiles for Professional Ethics
1. Definition - A value "refers to a claim about what is worthwhile, what is good. A value is a single word or phrase that identifies something as being desirable for human beings." Brincat and Wike, Morality and the Professional Life: Values at Work
2. Reasonableness - Defusing disagreement and resolving conflicts through integration. Characteristics include seeking relevant information, listening and responding thoughtfully to others, being open to new ideas, giving reasons for views held, and acknowledging mistakes and misunderstandings. (From Michael Pritchard, Reasonable Children)
3. Responsibility - The ability to develop moral responses appropriate to the moral issues and problems that arise in one's day-to-day experience. Characteristics include avoiding blame-shifting, designing overlapping role responsibilities to fill responsibility "gaps", expanding the scope and depth of general and situation-specific knowledge, and working to expand control and power.
4. Respect - Recognizing and working not to circumvent the capacity of autonomy in each individual. Characteristics include honoring rights such as privacy, property, free speech, due process, and participatory rights such as informed consent. Disrespect circumvents autonomy by deception, force, or manipulation.
5. Justice - Giving each his or her due. Justice breaks down into kinds such as distributive (dividing benefits and burdens fairly), retributive (fair and impartial administration of punishments), administrative (fair and impartial administration of rules), and compensatory (how to fairly recompense those who have been wrongfully harmed by others).
6. Trust - According to Solomon, trust is the expectation of moral behavior from others.
7. Honesty - Truthfulness as a mean between too much honesty (bluntness which harms) and dishonesty (deceptiveness, misleading acts, and mendaciousness).
8. Integrity - A meta-value that refers to the relation between particular values. These values are integrated with one another to form a coherent, cohesive and smoothly functioning whole. This resembles Solomon's account of the virtue of integrity.
Exercise 1: Developing Strategies for Value Realization
Directions
1. Identify value goals. Start with two or three. You can add or subtract from these as the semester progresses.
2. Give a brief description of each using terms that reflect your group's shared understandings. You may use the descriptions in this module or those in the ADEM Statement of Values but feel free to modify these to fit your group's context. You could also add characteristics and sample rules and aspirations.
3. For each value goal, identify and spell out a procedure for realizing it. See the examples just below for questions that can help you develop value procedures for values like justice and responsibility.
Examples
• Design a plan for realizing key moral values of teamwork. Your plan should address the following value-based tasks
• How does your group plan on realizing justice? For example, how will you assign tasks within the group that represent a fair distribution of the workload and, at the same time, recognize differences in individual strengths and weaknesses? How does your group plan on dealing with members who fail to do their fair share?
• How does your group plan on realizing responsibility? For example, what are the responsibilities that members will take on in the context of collective work? Who will be the leader? Who will play devil's advocate to avoid groupthink? Who will be the spokesperson for the group? How does your group plan to make clear to each individual his or her task or role responsibilities?
• How does your group plan on implementing the value of reasonableness? How will you guarantee that each individual participates fully in group decisions and activities? How will you deal with the differences, non-agreements, and disagreements that arise within the group? What process will your group use to reach agreement? How will your group insure that every individual has input, that each opinion will be heard and considered, and that each individual will be respected?
• How does your group plan on implementing the value of (academic) honesty? For example, how will you avoid cheating or plagiarism? How will you detect plagiarism from group members, and how will you respond to it?
• Note: Use your imagination here and be specific on how you plan to realize each value. Think preventively (how you plan on avoiding injustice, irresponsibility, injustice, and dishonesty) and proactively (how you can enhance these values). Don't be afraid to outline specific commitments. Expect some of your commitments to need reformulation. At the end of the semester, this will help you write the final report. Describe what worked, what did not work, and what you did to fix the latter.
Obstacles to Group Work (Developed by Chuck Huff for Good Computing: A Virtue Approach to Computer Ethics)
1. The Abilene Paradox. "The story involves a family who would all rather have been at home that ends up having a bad dinner in a lousy restaurant in Abilene, Texas. Each believes the others want to go to Abilene and never questions this by giving their own view that doing so is a bad idea. In the Abilene paradox, the group winds up doing something that no individual wants to do because of a breakdown of intra-group communication." (From Huff, Good Computing, an unpublished manuscript for a textbook in computer ethics. See materials from Janis; complete reference below.)
2. Groupthink. The tendency for very cohesive groups with strong leaders to disregard and defend against information that goes against their plans and beliefs. The group collectively and the members individually remain loyal to the party line while happily marching off the cliff, all the while blaming “them” (i.e., outsiders) for the height and situation of the cliff. (Also from Huff, Good Computing, an unpublished manuscript for a textbook in computer ethics.)
3. Group Polarization. Here, individuals within the group choose to frame their differences as disagreements. Framing a difference as non-agreement leaves open the possibility of working toward agreement by integrating the differences or by developing a more comprehensive standpoint that dialectally synthesizes the differences. Framing a difference as disagreement makes it a zero-sum game; one’s particular side is good, all the others bad, and the only resolution is for the good (one’s own position) to win out over the bad (everything else). (Weston provides a nice account of group polarization in Practical Companion to Ethics. This is not to be confused with Cass Sunstein's different account of group polarization in Infotopia.)
4. Note: All of these are instances of a social psychological phenomenon called conformity. But there are other processes at work too, like group identification, self-serving biases, self-esteem enhancement, self-fulfilling prophecies, etc.
More Obstacles to Group Work
• Free Riders: Free riders are individuals who attempt to "ride for free" on the work of the other members of the group. Some free-riders cynically pursue their selfish agenda while others fall into this pitfall because they are unable to meet all their obligations. (See conflict of effort.)
• Outliers: These are often mistaken for free riders. Outliers want to become participants but fail to become fully integrated into the group. This could be because they are shy and need encouragement from the other group members. It could also be because the other group members know one another well and have habitual modes of interaction that exclude outsiders. One sign of outliers; they do not participate in group social activities but they still make substantial contributions working by themselves. ("No, I can't come to the meeting--just tell me what I have to do.")
• Hidden Agendas: Cass Sunstein introduces this term. A group member with a "hidden agenda" has something he or she wants to contribute but, for some reason or other, hold back. For example, this individual may have tried to contribute something in the past and was "shot down" by the group leader. The next time he or she will think, "Let them figure it out without me."
• Conflict of Effort: conflict of Effort often causes an individual to become a free rider or an outlier. These group members have made too many commitments and come unraveled when they all come due at the same time. Students are often overly optimistic when making out their semester schedules. They tightly couple work and class schedules while integrating home responsibilities. Everything goes well as long as nothing unusual happens. But if a coworker gets sick and your supervisor asks you to come in during class times to help out, or you get sick, it becomes impossible to keep the problem from "spilling out" into other areas of your schedule and bringing down the whole edifice. Developing a schedule with periods of slack and flexibility can go a long way toward avoiding conflict of effort. Groups can deal with this by being supportive and flexible. (But it is important to draw the line between being supportive and carrying a free rider.)
Best Practices for Avoiding Abilene Paradox
• At the end of the solution generating process, carry out an anonymous survey asking participants if anything was left out they were reluctant to put before group.
• Designate a Devil's Advocate charged with criticizing the group's decision.
• Ask participants to reaffirm group decision--perhaps anonymously.
Best Practices for Avoiding Groupthink (Taken from Janis, 262-271)
• "The leader of a policy-forming group should assign the role of critical evaluator to each member, encouraging the group to give high priority to airing objections and doubts."
• "The leaders in an organization's hierarchy, when assigning a policy-planning mission to a group, should be impartial instead of stating preferences and expectations at the outset."
• "Throughout the period when the feasibility and effectiveness of policy alternatives are being surveyed, the policy-making group should from time to time divide into two or more subgroups to meet separately...."
• One or more outside experts or qualified colleagues within the organization who are not core members of the policy-making group should be invited to each meeting ...and should be encouraged to challenge the views of the core members."
• "At every meeting devoted to evaluating policy alternatives, at least one member should be assigned the role of devil's advocate."
Best Practices for Avoiding Polarization (Items taken from "Good Computing: A Virtue Approach to Computer Ethics" by Chuck Huff, William Frey and Jose Cruz (Unpublished Manuscript)
• Set Quotas. When brainstorming, set a quota and postpone criticism until after quota has been met.
• Negotiate Interests, not Positions. Since it is usually easier to integrate basic interests than specific positions, try to frame the problem in terms of interests.
• Expanding the Pie. Conflicts that arise from situational constraints can be resolved by pushing back those constraints through negotiation or innovation.
• Nonspecific Compensation. One side makes a concession to the other but is compensated for that concession by some other coin.
• Logrolling. Each party lowers their aspirations on items that are of less interest to them, thus trading off a concession on a less important item for a concession from the other on a more important item.
• Cost-Cutting. One party makes an agreement to reduce its aspirations on a particular thing, and the other party agrees to compensate the party for the specific costs that reduction in aspirations involves.
• Bridging. Finding a higher-order interest on which both parties agree, and then constructing a solution that serves that agreed-upon interest.
Exercise 2 - Avoiding the Pitfalls of Group Work
• Design a plan for avoiding the pitfalls of group work enumerated in the text box above.
• How does your group plan on avoiding the Abilene Paradox?
• How does your group plan on avoiding Group Polarization?
• How does your group plan on avoiding Groupthink?
• Note: Use imagination and creativity here. Think of specific scenarios where these obstacles may arise, and what your group can do to prevent them or minimize their impact.
Exercise 3: Socio-Technical System
Your group work this semester will take place within a group of nested or overlapping environments. Taken separately and together, these will structure and channel your activity, facilitating action in certain circumstances while constraining, hindering, or blocking it in others. Prepare a socio-technical system table for your group to help structure your group self-evaluation. Include hardware/software, physical surroundings, stakeholders (other groups, teacher, other classes, etc.), procedures (realizing values, avoiding pitfalls), university regulations (attendance), and information structures (collecting, sharing, disseminating)
Some things about Socio-Technical Systems
1. Socio-Technical System Analysis provides a tool to uncover the different environments in which business activity takes place and to articulate how these constrain and enable different business practices.
2. A socio-technical system can be divided into different components such as hardware, software, physical surroundings, people/groups/roles, procedures, laws/statutes/regulations, and information systems.
3. But while these different components can be distinguished, they are in the final analysis inseparable. STSs are, first and foremost, systems composed of interrelated and interacting parts.
4. STSs also embody values such as moral values (justice, responsibility, respect, trust, integrity) and non-moral values (efficiency, satisfaction, productivity, effectiveness, and profitability). These values can be located in one or more of the system components. They come into conflict with one another causing the system to change.
5. STSs change and this change traces out a path or trajectory. The normative challenge of STS analysis is to find the trajectory of STS change and work to make it as value-realizing as possible.
Socio-Technical System Table for Groups
Hardware/Software Physical Surroundings Stakeholders Procedures University Regulations Information Structures
Think about the new role of your smartphones in group work in class. Will you be using Google Docs to exchange documents? How do the classroom and the arrangement of objects within it constrain and enable group activities? Think about other teachers, classes, supervisors, jobs, and other individuals that can have an impact on your ability to carry out group assignments. Name but don't describe in detail, the value-realizing procedures your group is adopting. What are university regulations that will have an impact on your group work? For example, switches between MWF and TTH schedules. There is a wealth of information and skill locked in each of your group's members. How will you unleash these and telescope them into group work and activities? How, in other words, will you work to maximize group synergies and minimize group disadvantages?
Exercises 1-3 compose the Preliminary Self-Evaluation which is due shortly after semester-long groups are formed. Exercise 4 is the close-out group self-evaluation which is due at the end of the semester.
Exercise 4: Prepare a Final, Group Self-Evaluation
• Due Date: One week after the last class of the semester when your group turns in all its materials.
• Length: A minimum of five pages not including Team Member Evaluation Forms
• Contents:
• 1. Restate the Ethical and Practical Goals that your group developed at the beginning of its formation.
• 2. Provide a careful, documented assessment of your group’s success in meeting these goals. (Don’t just assert that “Our group successfully realized justice in all its activities this semester.” How did your group characterize justice in the context of its work? What specific activities did the group carry out to realize this value? What, among these activities, worked and what did not work?)
• 3. Identify obstacles, shortcomings or failures that your group experienced during the semester. How did these arise? Why did they arise? How did you respond to them? Did your response work? What did you learn from this experience?
• 4. Assess the plans you set forth in your initial report on how you intended to realize values and avoid pitfalls. How did these work? Did you stick to your plans or did you find it necessary to change or abandon them in the face of challenges?
• 5. Discuss your group’s procedures and practices? How did you divide and allocate work tasks? How did you reach a consensus on difficult issues? How did you ensure that all members were respected and allowed significant and meaningful participation? What worked and what did not work with respect to these procedures? Will you repeat them in the future? Would you recommend these procedures as best practices for future groups?
• 6. What did you learn from your experience working as a team this semester? What will require further reflection and thought? In other words, conclude your self-evaluation with a statement that summarizes your experience working together as a team this semester.
Appendix for ADMI 4016, Falkl 2013 and following
• What are the results of your group's challenge to the College of Business Administration's Statement of Values? (This can be found in Developing Ethics Codes and Statements of Value. See exercise 2. http://cnx.org/content/m14319/1.11/
• What is your group's CID Structure? See presentation two at the bottom of the module, A Short History of the Corporation. http://cnx.org/content/m17314/1.7/
Wrap Up: Some further points to consider...
1. Don’t gloss over your work with generalizations like, “Our group was successful and achieved all of its ethical and practical goals this semester.” Provide evidence for successful claims. Detail the procedures designed by your group to bring about these results. Are they “best practices”? What makes them the best practices?
2. Sometimes—especially if difficulties arose—it is difficult to reflect on your group’s activities for the semester. Make the effort. Schedule a meeting after the end of the semester to finalize this reflection. If things worked well, what can you do to repeat these successes in the future? If things didn’t work out, what can you do to avoid similar problems in the future? Be honest, be descriptive and avoid blame language.
3. This may sound harsh but get used to it. Self-evaluations—group and individual—are an integral part of professional life. They are not easy to carry out but properly done they help to secure success and avoid future problems.
4. Student groups—perhaps yours—often have problems. This self-evaluation exercise is designed to help you face them rather than push them aside. Look at your goals. Look at the strategies you set forth for avoiding Abilene, groupthink, and group polarization. Can you modify them to deal with problems? Do you need to design new procedures?
Ethics of Team Work Presentations
Values in Team Work (Thought Experiments)
Ethics of Team Work.pptx
Pitfalls to Avoid in Group Work
Pitfalls to Avoid in Group Work.pptx
Thought Experiments on Group Work
Thought Experiments on Group Work.docx
Team Member Evaluation Forms (Required)
TEAM MEMBER RATING SHEET-3.docx
New Ethics of Teamwork Presentation (Spring 2012)
Ethics of Teamwork.pptx
Ethics of Teamwork Jeopardy
Team_Jeopardy.pptx
Bibliography
1. Weston, A. (2002). A Practical Companion to Ethics: 2nd Edition. Oxford, UK: Oxford University Press
2. Flores, F. and Solomon, R. (2003). Building Trust: In Business, Politics, Relationships and Life. Oxford, UK: Oxford University Press.
3. Brincat, Cynthia A. and Wike, Victoria S. (2000) Morality and the Professional Life: Values at Work. Upper Saddle River, NJ: Prentice Hall.
4. Urban Walker, M. (2006). Moral Repair: Reconstructing Moral Relations After Wrongdoing. Cambridge, UK: Cambridge University Press.
5. Pritchard, M. (1996). Reasonable Children: Moral Education and Moral Learning. Lawrence, KS: Kansas University Press.
6. Huff, Chuck and Jawer, Bruce. (1994). "Toward a Design Ethic for Computing Professionals." Social Issues in computing: Putting Computing in its Place. Eds. Chuck Huff and Thomas Finholt. New York: McGraw-Hill. 130-136.
7. Janis, I. Groupthink: Psychological Studies of Policy Decisions and Fiascoes--2nd Ed.. Boston, Mass: Wadsworth.
8. Sunstein, C.R. (2006). Infotopia: How Many Minds Produce Knowledge. Oxford, UK: Oxford University Press, 217-225. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.03%3A_Ethics_of_Teamwork.txt |
Module Introduction
Through the activities of this module, you will learn to balance cautionary tales in business and professional ethics with new stories about those who consistently act in a morally exemplary way. While cautionary tales teach us what to avoid, narratives from the lives of moral exemplars show us how to be good. A study of moral best practices in business and professional ethics shows that moral exemplars exhibit positive and learnable skills. This module, then, looks at moral exemplars in business and the professions, outlines their outstanding accomplishments, and helps you to unpack the strategies they use to overcome obstacles to doing good.
You will begin by identifying outstanding individuals in business and associated practices who have developed moral "best practices." Your task is to look at these individuals, retell their stories, identify the skills that help them do good, and build a foundation for a more comprehensive study of virtue in occupational and professional ethics.
Moral Exemplar Terms
Moral Exemplar
• An individual who demonstrates outstanding moral conduct often in the face of difficult or demanding circumstances. (Beyond the “call of duty”)
• Often moral exemplars perform actions that go beyond what is minimal, required, ordinary, or even extraordinary.
• Moral exemplars perform actions that are "above and beyond the call of duty."
• Most importantly, they perform these actions repeatedly across a career or even a lifetime. In some way, their exemplary conduct has become "second nature."
Supererogatory
• "A supererogatory act is an act that is beyond the call of duty. It is something that is morally good to do but not obligatory. Examples of supererogatory acts are donating blood, volunteering on a rape crisis hotline, babysitting (without accepting recompense) a friend’s two-year-old triplets for the afternoon, or throwing oneself on a live hand grenade in order to save one’s buddies’ lives." (Baron, 1997: 614)
• Baron's definition (found in the Encyclopedia of Business Ethics) captures how the supererogatory occupies a moral space well above that of the minimally decent or even the ordinary. Supererogatory actions are outstanding, extraordinary, and exemplary in both moral and practical senses.
• Urmson, a moral philosopher, remarks how the supererogatory has been neglected (up to the mid-twentieth century) by moral philosophy, dominated as it was in the previous century by the debate between Utilitarianism and Deontology.
• Two quotations from Urmson show this clearly: (1)“But it does seem that these facts have been neglected in their general, systematic accounts of morality. It is indeed easy to see that on some of the best-known theories there is no room for such facts” (Urmson, 1958, p. 206). (2)“[s]imple utilitarianism, Kantianism, and intuitionism, then, have no obvious theoretical niche for the saint and the hero” (Urmson, 1958: 207).
• Baron, M. (1997). “Supererogation”, Blackwell Encyclopedic Dictionary of Business Ethics, Patricia H. Werhane and R. Edward Freeman, eds., New York: Blackwell: 614-7.
• Urmson, J.O. (1958). “Saints and Heroes.” Essays in Moral Philosophy, A.I. Melden, ed., Seattle: University of Washington Press: 198-216.
Moral Minimum
• Compare and distinguish the idea of the supererogatory with that of the moral minimum.
• The difference is between that which is morally exemplary versus that which is just over the threshold of wrongdoing.
• "I suggest that moral minimums are best understood as negative standards, universally agreed upon “bottom lines” beyond which it is morally questionable to act. For example, it is almost always wrong to deliberately harm or contribute to harming another person or persons; to deliberately violate their rights to freedom, life, or property; to treat individuals or classes of individuals with disrespect; to compete or cooperate unfairly; not to honor promises or contract; or to be dishonest or deceitful. Whereas these moral minimums do not define goodness, fairness, or benefit, or define the positive content of rights, they set minimum guidelines for behavior that most people everywhere might agree on…." (Werhane, 1999: 122).
• Werhane, P. (1999). Moral Imagination and Management Decision-Making, Oxford, UK: Oxford University Press.
Moral Exemplar Criteria in Computing
1. Either a sustained commitment to moral ideals or ethical principles in computing that include a generalized respect for humanity or sustained evidence of moral virtue in the practice of computing.
2. A disposition to make computing decisions in accord with one’s moral ideals or ethical principles, implying a consistency between one’s actions and intentions and between the means and ends of one’s actions
3. A willingness to risk one’s self-interest for the sake of one’s moral values.
4. A tendency to be inspiring to other computer professional and thereby to move them to moral action
5. A sense of realistic humility about one’s own importance relative to the world at large, implying a relative lack of concern for one’s own ego.
6. Huff, C. and Barnard, L. (2009). “Good Computing: Moral Exemplars in the Computing Profession”, IEEE Technology and Society Magazine: 47-54.
Responders and Idealists
• This quotation from Blum provides a nice characterization of "moral responders."
• "the 'responder' moral exemplar does not, prior to confronting situations in which she manifests moral excellence, possess a set of moral principles which she has worked out explicitly, committed herself to, and attempted to guide her life by."
• "the responder responds to the situations she faces and to individuals in a 'morally excellent way.'".
• Blum, L. (1994). “Moral Exemplars: reflections on Schindler, the Trochmés, and others”, Moral Perception and Particularity, Cambridge, Mass.: Cambridge University Press: 65-97.
Idealists
• According to Blum (and Hailie), Magda Trochme is a responder while her husband, Andre Trochme is an idealist. Both perform morally exemplary and supererogatory actions but out of different motivations.
• "To be an idealist [one] must see these ideals as more than merely personal goals or a personal conception of the good. They must be formulated as general values, and regarded by the agent as having some kind of intrinsic worth or general validity.
• Blum, L. (1994). “Moral Exemplars: reflections on Schindler, the Trochmés, and others”, Moral Perception and Particularity, Cambridge, Mass.: Cambridge University Press: 65-97.
Moral Heroes and Moral Saints
• Moral heroes achieve their good and excellent goals only by making substantial sacrifices. The notion of self-sacrifice is the key distinguishing characteristic of this kind of exemplar.
• What distinguishes moral saints from other kinds of moral exemplar is the criterion of moral faultlessness; these exemplars achieve their excellences by means of conduct that is free from any moral flaw.
• Moral saints are often used to argue for the unity of virtues thesis, namely, that the virtues work together forming a system where each is necessary and mutually supports the others.
Table of Moral Exemplars Table of Moral Exemplars
Moral Heroes Moral Saints
Idealists MLK and Andre Trochme Thomas More
Responders Magda Trochme and Oscar Schindler Mother Teresa and Saint Francis
Exercise 1: Choose a moral exemplar
• Identify a moral exemplar and provide a narrative description of his or her life story.
• To get this process started, look at the list of moral exemplars provided in this module. The links in the upper left-hand corner of this module will help you to explore their accomplishments in detail. Feel free to choose your own exemplar. Make sure you identify someone in the occupational and professional areas such as business and engineering. These areas have more than their share of exemplars, but they tend to escape publicity because their actions avoid publicity generating disasters rather than bring them about.
Moral Exemplars
• 1. William LeMesseur. LeMesseur designed the Citicorp Building in New York. When a student identified a critical design flaw in the building during a routine class exercise, LeMesseur responded, not by shooting the messenger, but by developing an intricate and effective plan for correcting the problem before it issued in drastic real-world consequences. Check out LeMesseur's profile at online ethics and see how he turned a potential disaster into a good deed.
• 2. Fred Cuny, starting in 1969 with Biafra, carried out a series of increasingly effective interventions in international disasters. He brought effective methods to disaster relief such as engineering know-how, political savvy, good business sense, and aggressive advocacy. His timely interventions saved thousands of Kurdish refugees in the aftermath of the Persian Gulf War in 1991. He also helped design and implement an innovative water filtration system in Sarajevo during the Bosnia-Serb conflict in 1993. For more details, consult the biographical sketch at online ethics.
• 3. Roger Boisjoly worked on a team responsible for developing o-ring seals for fuel tanks used in the Challenger Shuttle. When his team noticed evidence of gas leaks he made an emergency presentation before officials of Morton Thiokol and NASA recommending postponing the launch scheduled for the next day. When decision-makers refused to change the launch date, Boisjoly watched in horror the next day as the Challenger exploded seconds into its flight. Find out about the courageous stand Boisjoly took in the aftermath of the Challenger explosion by reading the biographical sketch at online ethics.
• 4. Muhammad Yunus won the Nobel Prize for Peace in 2006. His effort in setting up "micro-businesses" funded through "micro-lending" has completely changed the paradigm on how to extend business practices to individuals at the bottom of the pyramid. Learn about his strategies for creating micro-businesses and how those strategies have been extended throughout the world, including Latin America, by listening to an interview with him broadcast by the Online News Hour. (See link included in this module.)
• 5. Bill Gates has often been portrayed as a villain, especially during the anti-trust suit against Mircosoft in the mid-1990s. Certainly, his aggressive and often ruthless business practices need to be evaluated openly and critically. But recently Gates stopped participating in the day-to-day management of his company, Microsoft, and has set up a charitable foundation to oversee international good works projects. Click on the link included in this module to listen to and read an interview recently conducted with him and his wife, Melinda, on their charitable efforts.
• 6. Jeffrey Skilling, the former CEO of Enron, can hardly be called a moral exemplar. Yet when Enron was at its peak, its CEO, Jeffrey Skilling, was considered among the most innovative, creative, and brilliant of contemporary corporate CEOs. View the documentary, The Smartest Guys in the Room, read the book of the same title, and learn about the configuration of character traits that led to Skilling's initial successes and ultimate failure. A link included in this module will lead you to an interview with Skilling conducted on March 28, 2001.
• Inez Austin worked to prevent contamination from nuclear wastes produced by a plutonium production facility. Visit Online Ethics by clicking on the link above to find out more about her heroic stand.
• Rachael Carson's book, The Silent Spring, was one of the key events inaugurating the environmental movement in the United States. For more on the content of her life and her own personal act of courage, visit the biographical profile at Online Ethics. You can click on the Supplemental Link provided above.
Exercise Two: Moral Exemplar Profiles
• What are the positive and negative influences you can identify for your moral exemplar?
• What good deeds did your exemplar carry out?
• What obstacles did your moral exemplar face and how did he or she overcome them?
• What skills, attitudes, beliefs, and emotions helped to orient and motivate your moral exemplar.?
Exercise Three
Prepare a short dramatization of a key moment in the life of your group's moral exemplar.
Text Box: Two different Types of Moral Exemplar
• Studies carried out by Chuck Huff into moral exemplars in computing suggest that moral exemplars can operate as craftspersons or reformers. (Sometimes they can combine both these modes.)
• Craftspersons (1) draw on pre-existing values in computing, (2) focus on users or customers who have needs, (3) take on the role of providers of a service/product, (4) view barriers as inert obstacles or puzzles to be solved, and (5) believe they are effective in their role.
• Reformers (1) attempt to change organizations and their values, (2) take on the role of moral crusaders, (3) view barriers as active opposition, and (4) believe in the necessity of systemic reform
• These descriptions of moral exemplars have been taken from a presentation by Huff at the STS colloquium at the University of Virginia in October 2006. Huff's presentation can be found at the link provided in the upper left-hand corner of this module.
Elements of a Life Story Interview
• Major Influences
• Peak and Nadir Experiences
• Challenges and Opportunities.
• Goals, Values, and Objectives
• Commentary: The life story interview collects the subject's life in narrative form. Those conducting to the interview along with those studying it are skilled in identifying different patterns and structures in the interview. (Identifying and classifying the patterns is called "coding".)
• Huff, Rogerson, and Barnard interviewed moral exemplars in computing in Europe and coded for the following: “social support and antagonism, the use of technical or social expertise, the description of harm to victims or need for reform, actions taken toward reform, designs undertaken for users or clients, effectiveness and ineffectiveness of action, and negative and positive emotion” (Huff and Barnard, 2009: 50).
• They identified two kinds of moral exemplars in computing: helpers (or craftspersons) and reformers.
Helpers and Reformers
• Craftspersons work to preserve existing values, see themselves as providers of a service, frame problems as overcoming barriers, and seek ethical ends (Huff and Barnard, 2009: 50).
• Reformers focus on social systems, see themselves as moral crusaders, work to change values, view individuals as victims of injustice, and take system reform as their goal (Huff and Barnard, 2009: 50).
What Makes a Moral Exemplar? PRIMES Explained
General Comments on Exemplars
• Moral exemplars have succeeded in integrating moral and professional attitudes and beliefs into their core identity. Going against these considerations for moral exemplars is tantamount to acting against self. Acting in accordance with them becomes second nature.
• Moral exemplars often achieve their aims with the support of "support groups." In fact, moral exemplars are often particularly adept at drawing support from surrounding individuals, groups and communities. This goes against the notion that exemplars are isolated individuals who push against the current. (Not all exemplars need fit as heroes into Ayn Rand novels.)
• Moral exemplars often do not go through periods of intensive and prolonged deliberation in order to hit upon the correct action. If we want a literary example, we need to replace the tortured deliberations of a Hamlet with the quick and intuitive insight of an Esther Summerson. (Summerson is a character in Charles Dickens' novel, Bleak House. See both William Shakespeare and Charles Dickens for more examples of villains and exemplars.) Some have situated moral exemplars within virtue ethics. They have cultivated moral habits that allow them to do good as second nature. They have also found ways to integrate moral reasoning with emotion (as motive), perception (which helps them zero in on moral relevance), and skill (which helps implement moral value). In this sense, moral expertise functions much as athletic or technical expertise; all are difficult to acquire but once acquired lead to highly skilled actions performed almost effortlessly.
PRIMES Primes stands for Personality, Integrating value into self-system, Moral Ecology, and Moral Skills Sets. These are the elements composing moral expertise that have been identified by Huff and Rogerson based on interviews they conducted with exemplars in the areas of computing.
Personality
• Moral exemplars exhibit different configurations of personality traits based on the big five. Locate the moral exemplar you have chosen in terms of the following five continuums (or continua):
• Neuroticism to Lack of Neuroticism (Stability?)
• Agreeableness to Disagreeableness
• Extraversion to Introversion
• Openness to Closedness
• Conscientiousness to Lack of Conscientiousness
• Examine your exemplar on each of these scales. In and of themselves, these qualities are neither good nor bad. They can be integrated to form bad characters or good characters. In many cases, moral exemplars stand out through how they have put their personality characteristics to "good use." (They have used them as vehicles or channels to excellence.)
Integrating Moral Value into Self-System
• As said above, moral exemplars stand out by the way in which (and the extent to which) they have integrated moral value into their self-system. Because of this, they are strongly motivated to do good and avoid doing bad. Both (doing good and refraining from doing bad) express who they are. If they slip into bad deeds, this motivational system pushes them to improve to avoid repeating bad deeds.
• One way of integrating moral value into self-system is by looking at stories and narratives of those who have displayed moral excellence. Many of the individuals portrayed above (Carson, Boisjoly, LeMesseur, Cuny, Austin, and Yunus) provide concrete models of outstanding moral careers.
• Literature also provides its models of moral exemplars. Charles Dickens paints especially powerful portraits of both moral heroes (Esther Summerson and "Little Dorritt") and villains (Heep and Skimpole).
• Other vehicles for integrating moral value centrally into the self-system lie in affiliations, relationships, and friendships. Aristotle shows the importance of good friendships in developing virtues. Moral exemplars most often can point to others who have served as mentors or strong positive influences. For example, Roger Boisjoly tells of how he once went to a senior colleague for advice on whether to sign off on a design that was less than optimal. His colleague's advice: would you be comfortable with your wife or child using a product based on this design?
• The ethicist, Bernard Williams, has argued forcefully for the importance of personal projects in establishing and maintaining integrity. Personal projects, roles, and life tasks all convey value; when these hold positive moral value and become central unifying factors in one's character, then they also serve to integrate moral value into the self-system.
• Augusto Blasi, a well known moral psychologist, gives a particularly powerful account (backed by research) of the integration of moral value into self-system and its motivational effect.
Moral Ecology
• Moral Ecologies: "The term moral ecology encourages us to consider the complex web of relationships and influences, the long persistence of some factors and the rapid evolution of others, the variations in strength and composition over time, the micro-ecologies that can exist within larger ones, and the multidirectional nature of causality in an ecology." From Huff et. al.
• Moral ecologies refer to social surrounds, that is, the different groups, organizations, and societies that surround us and to which we are continually responding.
• We interact with these social surrounds as organisms interact with their surrounding ecosystems. In fact, moral ecologies offer us roles (like ecological niches) and envelop us in complex organizational systems (the way ecosystems are composed of interacting and interrelated parts). We inhabit and act within several moral ecologies; these moral ecologies, themselves, interact. Finally, moral ecologies, like natural ecosystems, seek internal and external harmony and balance. Internally, it is important to coordinate different the constituent individuals and the roles they play. Externally, it is difficult but equally important to coordinate and balance the conflicting aims and activities of different moral ecologies.
• Moral ecologies shape who we are and what we do. This is not to say that they determine us. But they do channel and constrain us. For example, your parents have not determined who you are. But much of what you do responds to how you have experienced them; you agree with them, refuse to question their authority, disagree with them, and rebel against them. The range of possible responses is considerable but these are all shaped by what you experienced from your parents in the past.
• The moral ecologies module (see the link provided above) describes three different moral ecologies that are important in business: quality-, customer-, and finance-driven companies. (More "kinds" could be generated by combining these in different ways: for example, one could characterize a company as customer-driven but transforming into a quality-driven company.) Roles, strategies for dissent, assessment of blame and praise, and other modes of conduct are shaped and constrained by the overall character of the moral ecology.
• Moral ecologies, like selves, can also be characterized in terms of the "centrality" of moral value. Some support the expression of moral value or certain kinds of moral value (like loyalty) while undermining or suppressing the expression of others (like courage or autonomy).
• Finally, think in terms of how personality traits integrated around moral value interact with different types of moral ecology. If a moral ecology undermines virtuous conduct, what strategies are available for changing it? Or resisting it? If there are different kinds of moral exemplar, which pair best with which moral ecology? (How would a helper or craftsperson prevail in a finance-driven moral ecology like those characterized by Robert Jackall in Moral Mazes?
Moral Skills Sets
• Moral expertise is not reducible to knowing what constitutes good conduct and doing your best to bring it about. Realizing good conduct, being an effective moral agent, bringing value into the work, all require skills in addition to a "good will." PRIMES studies have uncovered four skill sets that play a decisive role in the exercise of moral expertise.
• Moral Imagination: The ability to project into the standpoint of others and view the situation at hand through their lenses. Moral imagination achieves a balance between becoming lost in the perspectives of others and failing to leave one's own perspective. Adam Smith terms this balance "proportionality" which we can achieve in empathy when we feel with them but do not become lost in their feelings. Empathy consists of feeling with others but limiting the intensity of that feeling to what is proper and proportionate for moral judgment.
• Moral Creativity: Moral Creativity is close to moral imagination and, in fact, overlaps with it. But it centers in the ability to frame a situation in different ways. Patricia Werhane draws attention to a lack of moral creativity in the Ford Pinto case. Key Ford directors framed the problem with the gas tank from an economical perspective. Had they considered other framings they might have appreciated the callousness of refusing to recall Pintos because the costs of doing so (and retrofitting the gas tanks) were greater than the benefits (saving lives). They did not see the tragic implications of their comparison because they only looked at the economic aspects. Multiple framings open up new perspectives that make possible the design of non-obvious solutions.
• Reasonableness: Reasonableness balances openness to the views of others (one listens and impartially weighs their arguments and evidence) with commitment to moral values and other important goals. One is open but not to the extent of believing anything and failing to keep fundamental commitments. The Ethics of Team Work module (see link above) discusses strategies for reaching a consensus that is employed by those with the skill set of reasonableness. These help avoid the pitfalls of group-based deliberation and action.
• Perseverance: Finally, perseverance is the "ability to plan moral action and continue on that course by responding to circumstances and obstacles while keeping ethical goals intact." Huff et. al.
Presentation on Moral Exemplars
Brief Comments on Moral Exemplars.pptx
Bibliography
• Blasi, A. (2004). Moral Functioning: Moral Understanding and Personality. In D.K Lapsley and D. Narvaez (Eds.) Moral Development, Self, and Identity, (pp. 335-347). Mahwah, N. J.: Lawrence Erlbaum Associates, Inc.
• Blum, L. (1994). “Moral Exemplars: reflections on Schindler, the Trochmés, and others”, Moral Perception and Particularity, Cambridge, Mass.: Cambridge University Press: 65-97.
• Colby, A., Damon, W. (1992). Some do care: Contemporary lives of moral commitment. New York: Free Press.
• Flanagan, O. (1991). Varieties of moral personality: Ethics and psychological realism. Cambridge, MA: Harvard University Press.
• Huff, C., Rogerson, S. (2005). Craft and reform in moral exemplars in computing. Paper presented at ETHICOMP2005 in Linköping, September.
• Huff, C., Frey, W. (2005). Moral Pedagogy and Practical Ethics. Science and Engineering Ethics, 11(3), 389-408.
• Huff, C., Barnard, L., Frey, W. (2008). Good computing: a pedagogically focused model of virtue in the practice of computing (part 1), Journal of Information, Communication and Ethics in Society, 6(3), 246-278.
• Huff, C., Barnard, L., Frey, W. (2008). Good computing: a pedagogically focused model of virtue in the practice of computing (part 2), Journal of Information, Communication and Ethics in Society, 6(4), 286- 316.
• Huff, C. and Barnard, L. (2009). “Good Computing: Moral Exemplars in the Computing Profession”, IEEE Technology and Society Magazine: 47-54.
• Jackall, R. (1988). Moral Mazes: The World of Corporate Managers. Oxford: Oxford University Press.
• Johnson, M. (1993). Moral Imagination: Implications of Cognitive Science for Ethics. Chicago: Chicago University Press, 199-202.
• Lawrence, A. and Weber, J. (2010). Business and Society: Stakeholders Ethics and Public Policy, 13th Edition. New York: McGraw-Hill.
• Pritchard, M. (1998). "Professional Responsibility: Focusing on the Exemplary," in Science and Engineering Ethics, 4: 215-234.
• Urmson, J.O. (1958). “Saints and Heroes.” Essays in Moral Philosophy, A.I. Melden, ed., Seattle: University of Washington Press: 198-216.
• Werhane, P. (1999). Moral Imagination and Management Decision Making. Oxford: Oxford University Press, 93-96. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.04%3A_Moral_Exemplars_in_Business_and_Professional_Ethics.txt |
Module Introduction
This module uses materials being prepared for Good Computing: A Virtue Approach to Computer Ethics, to set up an exercise in which you will identify and spell out virtues relevant to your professional discipline. After identifying these virtues, you will work to contextualize them in everyday practice. Emphasis will be placed on the Aristotelian approach to virtues which describes a virtue as the disposition toward the mean located between the extremes of excess and defect. You will also be asked to identify common obstacles that prevent professionals from realizing a given virtue and moral exemplars who demonstrate consistent success in realizing these virtues and responding to obstacles that stand in the way of their realization. In a variation on this module, you could be asked to compare the virtues you have identified for your profession with virtues that belong to other moral ecologies such as those of the Homeric warrior.
Three Versions of Virtue Ethics: Virtue 1, Virtue 2, and Virtue 3
Virtue ethics has gone through three historical versions. The first, Virtue 1, was set forth by Aristotle in ancient Greece. While tied closely to practices in ancient Greece that no longer exist today, Aristotle's version still has a lot to say to us in this day and age. In the second half of the twentieth century, British philosophical ethicists put forth a related but different theory of virtue ethics (virtue 2) as an alternative to the dominant ethical theories of utilitarianism and deontology. Virtue 2 promised a new foundation of ethics consistent with work going on at that time in the philosophy of mind. Proponents felt that turning from the action to the agent promised to free ethical theory from the intractable debate between utilitarianism and deontology and offered a way to expand scope and relevance of ethics. Virtue 3 reconnects with Aristotle and virtue 1 even though it drops the doctrine of the mean and Aristotle's emphasis on character. Using recent advances in moral psychology and moral pedagogy, it seeks to rework key Aristotelian concepts in modern terms. In the following, we will provide short characterizations of each of these three versions of virtue ethics.
Virtue 1: Aristotle's Virtue Ethics
• Eudaimonia. Happiness, for Aristotle, consists of a life spent fulfilling the intellectual and moral virtues. These modes of action are auto-telic, that is, they are self-justifying and contain their own ends. By carrying out the moral and intellectual virtues for a lifetime, we realize ourselves fully as humans. Because we are doing what we were meant to do, we are happy in this special sense of eudaimonia.
• Arete. Arete is the Greek word we usually translate as "virtue". But arete is more faithfully translated as excellence. For Aristotle, the moral and intellectual virtues represent excellences. So the moral life is more than just staying out of trouble. Under Aristotle, it is centered in pursuing and achieving excellence for a lifetime.
• Virtue as the Mean. Aristotle also characterizes virtue as a settled disposition to choose the mean between the extremes of excess and defect, all relative to person and situation. Courage (the virtue) is the mean between the extremes of excess (too much courage or recklessness) and defect (too little courage or cowardice). Aristotle's claim that most or all of the virtues can be specified as the mean between extremes is controversial. While the doctrine of the mean is dropped in Virtue 2 and Virtue 3, we will still use it in developing virtue tables. (See exercise 1 below.) You may not find both extremes for the virtues you have been assigned but make the effort nonetheless.
• Ethos. "Ethos" translates as character which, for Aristotle, composes the seat of the virtues. Virtues are well settled dispositions or habits that have been incorporated into our characters. Because our characters are manifested in our actions, the patterns formed by these over time reveal who we are. This can be formulated as a decision-making test, the public identification test. Because we reveal who we are through our actions we can ask, when considering an action, whether we would care to be publicly identified with this action. "Would I want to be publicly known as the kind of person who would perform that kind of action? Would I, through my cowardly action, want to be publicly identified as a coward? Would I, through my responsible action, want to be publicly identified as a responsible person? Because actions provide others with a window into our characters, we must make sure be sure that they portray us as we want to be portrayed.
• Aisthesis of the Phronimos. This Greek phrase, roughly translated as the perception of the morally experienced agent, reveals how important practice and experience are to Aristotle in his conception of moral development. One major difference between Aristotle and other ethicists (utilitarians and deontologists) is the emphasis that Aristotle places on developing into or becoming a moral person. For Aristotle, one becomes good by first repeatedly performing good actions. So morality is more like an acquired skill than a mechanical process. Through practice we develop sensitivities to what is morally relevant in a situation, we learn how to structure our situations to see moral problems and possibilities, and we develop the skill of "hitting" consistently on the mean between the extremes. All of these are skills that are cultivated in much the same way as a basketball player develops through practice the skill of shooting the ball through the hoop.
• Bouleusis. This word translates as "deliberation." For Aristotle, moral skill is not the product of extensive deliberation (careful, exhaustive thinking about reasons, actions, principles, concepts, etc.) but of practice. Those who have developed the skill to find the mean can do so with very little thought and effort. Virtuous individuals, for Aristotle, are surprisingly unreflective. They act virtuously without thought because it has become second nature to them.
• Akrasia. Ross translates this word as "incontinence" which is outmoded. A better translation is weakness of will. For Aristotle, knowing where virtue lies is not the same as doing what virtue demands. There are those who are unable to translate knowledge into resolution and then into action. Because akrasis (weakness of will) is very real for Aristotle, he also places emphasis in his theory of moral development on the cultivation of proper emotions to help motivate virtuous action. Later ethicists seek to oppose emotion and right action; Aristotle sees properly trained and cultivated emotions as strong motives to doing what virtue requires.
• Logos Aristotle's full definition of virtue is "a state of character concerned with choice, lying in a mean, i.e. the mean relative to us, this being determined by a rational principle, and by that principle by which [a person] of practical wisdom would determine it." (Ross's translation in Nichomachean Ethics, 1106b, 36.) We have talked about character, the mean, and the person of practical wisdom. The last key term is "logos" which in this definition is translated by reason. This is a good translation if we take reason in its fullest sense so that it is not just the capacity to construct valid arguments but also includes the practical wisdom to assess the truth of the premises used in constructing these arguments. In this way, Aristotle expands reason beyond logic to include a fuller set of intellectual, practical, emotional, and perceptual skills that together form a practical kind of wisdom.
Virtue 2
• The following summary of Virtue 2 is taken largely from Rosalind Hursthouse. While she extensively qualifies each of these theses in her own version of virtue ethics, these points comprise an excellent summary of Virtue 2 which starts with G.E.M. Anscombe's article, "Modern Moral Philosophy," and continues on into the present. Hursthouse presents this characterization of Virtue 2 in her book, On Virtue Ethics (2001) U.K.: Oxford University Press: 17.
• Virtue 2 is agent-centered. Contrary to deontology and utilitarianism which focus on whether actions are good or right, V2 is agent-centered in that it sees the action as an expression of the goodness or badness of the agent. Utilitarianism focuses on actions which bring about the greatest happiness for the greatest number; deontology seeks those actions that respect the autonomy of individuals and carry out moral obligations, especially duties. These theories emphasize doing what is good or right. Virtue 2, on the other hand, focuses on the agent's becoming or being good.
• Can Virtue 2 tell us how to act? Because V2 is agent-centered, critics claim that it cannot provide insight into how to act in a given situation. All it can say is, "Act the way a moral exemplar would act." But what moral standards do moral exemplars use or embody in their actions? And what moral standards do we use to pick out the moral exemplars themselves? Hursthouse acknowledges that this criticism hits home. However, she points out that the moral standards come from the moral concepts that we apply to moral exemplars; they are individuals who act courageously, exercise justice, and realize honesty. The moral concepts "courage," "justice," and "honesty" all have independent content that helps guide us. She also calls this criticism unfair: while virtue 2 may not provide any more guidance than deontology or utilitarianism, it doesn't provide any less. Virtue 2 may not provide perfect guidance, but what it does provide is favorably comparable to what utilitarianism and deontology provide.
• Virtue 2 replaces Deontic concepts (right, duty, obligation) with Aretaic concepts (good, virtue). This greatly changes the scope of ethics. Deontic concepts serve to establish our minimum obligations. On the other hand, aretaic concepts bring the pursuit of excellence within the purview of ethics. Virtue ethics produces a change in our moral language that makes the pursuit of excellence an essential part of moral inquiry.
• Finally, there is a somewhat different account of virtue 2 (call it virtue 2a) that can be attributed to Alisdair MacIntyre. This version "historicizes" the virtues, that is, looks at how our concepts of key virtues have changed over time. (MacIntyre argues that the concept of justice, for example, varies greatly depending on whether one views justice in Homeric Greece, Aristotle's Greece, or Medieval Europe.) Because he argues that skills and actions are considered virtuous only in relation to a particular historical and community context, he redefines virtues as those skill sets necessary to realize the goods or values around which social practices are built and maintained. This notion fits in well with professional ethics because virtues can be derived from the habits, attitudes, and skills needed to maintain the cardinal ideals of the profession.
Virtue 3
Virtue 3 can best be outlined by showing how the basic concepts of Virtue 1 can be reformulated to reflect current research in moral psychology.
1. Reformulating Happiness (Eudaimonia). Mihaly Csikcszentmihalyi has described flow experiences (see text box below) in which autotelic activities play a central role. For Aristotle, the virtues also are autotelic. They represent faculties whose exercise is key to realizing our fullest potentialities as human beings. Thus, virtues are self-validating activities carried out for themselves as well as for the ends they bring about. Flow experiences are also important in helping us to conceptualize the virtues in a professional context because they represent a well practiced integration of skill, knowledge, and moral sensitivity.
2. Reformulating Values (Into Arete or Excellence). To carry out the full project set forth by virtue 3, it is necessary to reinterpret as excellence key moral values such as honesty, justice, responsibility, reasonableness, and integrity. For example, moral responsibility has often been described as carrying out basic, minimal moral obligations. As an excellence, responsibility becomes refocused on extending knowledge and power to expand our range of effective, moral action. Responsibility reformulated as an excellence also implies a high level of care that goes well beyond what is minimally required.
3. De-emphasizing Character. The notion of character drops out to be replaced by more or less enduring and integrated skills sets such as moral imagination, moral creativity, reasonableness, and perseverance. Character emerges from the activities of integrating personality traits, acquired skills, and deepening knowledge around situational demands. The unity character represents is always complex and changing.
4. Practical Skill Replaces Deliberation. Moral exemplars develop skills which, through practice, become second nature. These skills obviate the need for extensive moral deliberation. Moral exemplars resemble more skillful athletes who quickly develop responses to dynamic situations than Hamlets stepping back from action for prolonged and agonizing deliberation.
5. Greater Role for Emotions. Nancy Sherman discusses how, for Aristotle, emotion is not treated as an irrational force but as an effective tool for moral action once it has been shaped and cultivated through proper moral education. To step beyond the controversy of what Aristotle did and did not say about the emotions (and where he said it) we place this enhanced role for emotions within virtue 3. Emotions carry out four essential functions: (a) they serve as modes of attention; (b) they also serve as modes of responding to or signaling value; (c) they fulfill a revelatory function; and (d) they provide strong motives to moral action. Nancy Sherman, Making a Necessity of Virtue: Aristotle and Kant on Virtue (1997), U.K.: Cambridge University Press: 39-50.
Flow Experiences
• The psychologist, Mihaly Csikszentmihalyi, has carried out fascinating research on what he terms "flow experiences." Mike Martin in Meaningful Work (2000) U.K.: Oxford,: 24, summarizes these in the following bullets:
• "clear goals as one proceeds"
• "immediate feedback about progress"
• "a balance between challenges and our skills to respond to them"
• "immersion of awareness in the activity without disruptive distractions"
• "lack of worry about failure"
• loss of anxious self-consciousness"
• time distortions (either time flying or timeslowing pleasurably)"
• the activity becomes autotelic: an end in itself, enjoyed as such"
Virtue Tables
The table just below provides a format for spelling out individual virtues through (1) a general description, (2) the correlative vices of excess and defect, (3) the skills and mental states that accompany and support it, and (4) real and fictional individuals who embody it. Following the table are hints on how to identify and characterize virtues. We start with the virtue of integrity:
Virtue Description Excess Defect Obstacles to realizing the virtue in professional practices Moral Exemplar
Integrity A meta-virtue in which the holder exhibits unity of character manifested in holding together even in the face of strong disruptive pressures or temptations Excess: Rigidity--sticking to one´s guns even when one is obviously wrong(2,3) Defect: Wantonness. A condition where one exhibits no stability or consistency in character Individual corruption: Individuals can be tempted by greed toward the vice of defect. Lack of moral courage can also move one to both extremes Saint Thomas More as portrayed in Robert Bolt´s A Man for All Seasons. More refuses to take an oath that goes against the core beliefs in terms of which he defines himself.
Institutional Corruption: One may work in an organization where corruption is the norm. This generates dilemmas like following an illegal order or getting fired.
Exercise 1: Construct Virtue Tables for Professional Virtues
1. Discuss in your group why the virtue you have been assigned is important for the practice of your profession. What goods or values does the consistent employment of this virtue produce?
2. Use the discussion in #1 to develop a general description of your virtue. Think along the following lines: people who have virtue X tend to exhibit certain characteristics (or do certain things) in certain kinds of situations. Try to think of these situations in terms of what is common and important to your profession or practice.
3. Identify the corresponding vices. What characterizes the points of excess and defect between which your virtue as the mean lies?
4. What obstacles arise that prevent professionals from practicing your virtue? Do well-meaning professionals lack power or technical skill? Can virtues interfere with the realization of non-moral values like financial values? See if you can think of a supporting scenario or case here.
5. Identify a moral exemplar for your virtue. Make use of the exemplars described in the Moral Exemplars in Business and Professional Ethics module.
6. Go back to task #2. Redefine your description of your virtue in light of the subsequent tasks, especially the moral exemplar you identified. Check for coherence.
7. Finally, does your virtue stand alone or does it need support from other virtues or skills? For example, integrity might also require moral courage.
Exercise 2: Reflect on these Concluding Issues
• Did you have trouble identifying a moral exemplar? Many turn to popular figures for their moral exemplars. Movies and fiction also offer powerful models. Why do you think that it is hard to find moral exemplars in your profession? Is it because your profession is a den of corruption? (Probably not.) Do we focus more on villains than on heroes? Why or why not?
• What did you think about the moral leaders portrayed in the Moral Exemplars in Business and Professional Ethics module?
• Did you have trouble identifying both vices, i.e., vices of excess and defect? If so, do you think this because some virtues may not have vices of excess and defect? What do you think about Aristotle's doctrine of the mean?
• Did you notice that the virtue profiles given by your group and the other groups in the class overlapped? Is this a problem for virtue theory? Why do our conceptions of the key moral values and virtues overlap?
• Did you find the virtues difficult to apply? What do you think about the utilitarian and deontological criticism of virtue ethics, namely, that it cannot provide us with guidelines on how to act in difficult situations? Should ethical theories emphasize the act or the person? Or both?
• The most tenacious obstacle to working with virtue ethics is to change focus from the morally minimal to the morally exemplary. “Virtue” is the translation of the Greek word, arête. But “excellence” is, perhaps, a better word. Understanding virtue ethics requires seeing that virtue is concerned with the exemplary, not the barely passable. (Again, looking at moral exemplars helps.) Arête transforms our understanding of common moral values like justice and responsibility by moving from minimally acceptable to exemplary models.
Moral Leaders The profiles of several moral leaders in practical and professional ethics. Computer Ethics Cases This link provides several computer ethics cases and also has a description of decision making and socio-technical systems frameworks. Moral Exemplars in Business and Professional Ethics Profiles of several moral leaders in practical and professional ethics.
Presentation on Virtue Ethics
An Introduction to Virtue Ethics.pptx
I. Why Study Virtue Ethics?
Reasons
• It provides new insights into moral education
• Involves the whole self: attitudes, knowledge, skill, emotion
• It reorients moral theory toward excellence
II. Three Definitions
Elena Lugo
• “Las virtudes son disposiciones y rasgos del carácter del agente moral a la hora de ejecutar las acciones inherentes al ser persona.
• se trata de un punto intermedio entre dos extremos, ninguno de los cuales representa un valor moral, sino que más bien puede constituir un vicio o al menos carecer de excelencia
• no son meros rasgos del carácter que se operan automáticamente, sino respuestas deliberadas ante las situaciones concretas
• Lugo,E. (2002) Relación Medico / paciente: encuentro interpersonal ética y espiritualidad. Pontificia Universidad Católica de Puerto Rico: 88
Rosalind Hursthouse
• “A virtue such as honesty or generosity is not just a tendency to do what is honest or generous, nor is it to be helpfully specified as a “desirable” or “morally valuable” character trait.
• It is, indeed a character trait—that is, a disposition which is well entrenched in its possessor, something that, as we say “goes all the way down”, unlike a habit such as being a tea-drinker—but the disposition in question…is multi-track.
• It is concerned with many other actions as well, with emotions and emotional reactions, choices, values, desires, perceptions, attitudes, interests expectations and sensibilities.
• To possess a virtue is to be a certain sort of person with a certain complex mindset.”
• Hursthouse, R. (2007) “Virtue Ethics” Stanford Encyclopedia of Philosophy http://plato.stanford.edu/entries/ethics-virtue/
MacIntyre
• MacIntyre, a modern theorist, brings out the communitarianism in Aristotle
• “A virtue is an acquired human quality the possession and exercise of which tend to enable us to achieve those goods which are internal to practices and the lack of which effectively prevents us from achieving any such goods.
III. Virtues and Practices
Virtues are dispositions that bring about the internal and external goods around which a social or professional practice is built.
Constituents of a Practice
• Participants: Formed of individuals whose activities, attitudes, and goals are integrated, shared, or overlap in significant ways
• Rules and Procedures: Participants occupy roles which outline tasks and procedures. Roles in a practice are coordinated so that they combine to bring about complex ends beyond the capabilities of isolated individuals
• Boundaries: Boundaries such as disciplinary and theoretical principles surround practices and serve to distinguish one from the other
• External Goals: Engineering serves public wellbeing. Medicine health. Law justice. Business commerce.
• Internal Goals: Engineering has the internal goals of faithful agency (to client), collegiality (to peers), and loyalty (to the profession or practice itself)
IV. Developing Virtues for Practices
1. Choose a virtue that is important for your occupation or profession. What goods or values does the consistent employment of this virtue produce?
2. Develop a general description of your virtue. (Think along the following lines: people who have virtue X tend to exhibit certain characteristics (or do certain things) in certain kinds of situations. Try to think of these situations in terms of what is common and important to your profession or practice.)
3. Identify the corresponding vices of excess and defect.
4. Identify the obstacles arise that prevent professionals from practicing your virtue? Do well-meaning professionals lack power or technical skill?
5. Identify a moral exemplar for your virtue. Make use of the exemplars described in the Moral Exemplars in Business and Professional Ethics module.
6. Does your virtue stand alone or does it need support from other virtues or skills? For example, integrity might also require moral courage.
resources
• Murdoch, I. (1970). The Sovereignty of Good. UK: London, Routledge.
• Sherman, N. (1989). The Fabric of Character: Aristotle’s Theory of Virtue. UK: Oxford, Oxford University Press.
• Hursthouse, R. (1999). On Virtue Ethics. UK: Oxford, Oxford University Press.
• Virtue Ethics. (2003). Edited by Stephen Darwall. UK: Oxford: Blackwell.
• Blum, L. (1994). Moral Perception and Particularity. UK: Cambridge University Press.
• Pincoffs, E.L. (1986). Quandaries and Virtues: Against Reductivism in Ethics. Lawrence, KS: University of Kansas Press.
• Virtue Ethics (1997). Edited by Crisp, R. and Slote, M. UK: Oxford, Oxford University Press.
• Environmental Virtue Ethics. (2005). Edited by Sandler, R. and Cafaro, P. New York: Rowman and Littlefield.
• Frey, W. (2008). “Engineering Ethics in Puerto Rico: Issues and Narratives. Science and Engineering Ethics, 14: 417-431.
• Frey, W. (2010). “Teaching Virtue: Pedagogical Implications of Moral Psychology. Science and Engineering Ethics, 16: 611-628.
• Huff, C., Barnard, L. and Frey, W. (2008) “Good computing: a pedagogically focused model of virtue in the practice of computing (parts 1 and 2)." Information, Communication and Ethics in Society, 6(3), 246-278.
• Huff, C., Barnard, L. and Frey, W. (2008) “Good computing: a pedagogically focused model of virtue in the practice of computing (parts 1 and 2). Information, Communication and Ethics in Society, 6(4), 284-316. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.05%3A_Theory-Building_Activities_-_Virtue_Ethics.txt |
Module Introduction
In this module, you will view the DVD Incident at Morales and carry out a series of activities designed to familiarize you with issues in ethical leadership, social responsibility, and globalization. Links to interviews with major figures on globalization, to the Connexions module "Socio-Technical Systems in Decision Making" and to online material on "Incident at Morales" will help you to gather the information you need to complete this module.
Issues in Incident at Morales
• Quotes are taken from the Study Guide to "Incident at Morales"
• Confidentiality: "Although the lawyers note that Fred has no legal obligations to Chemitoil because he did not sign a non-disclosure agreement, does Fred have a moral obligation to ensure the confidentiality of the information he may have learned at Chemitoil?
• Wally's "One Rule": What is the impact of Wally's "One Rule" on Fred's ability to do his job? More importantly, does this interfere with Fred's ability to meet his professional ethical obligations in the course of conducting his job?"
• Lutz and Lutz Controls: Wally claims that Lutz and Lutz controls are the best among the available alternatives. He also claims that the fact that Chuck's brother-in-law works with Lutz and Lutz is not a relevant factor. How should Fred choose in this situation regarding controls?
• Couplings: In choosing both the type of couplings and piping as well as to use a local (Mexico) supplier without a plant inspection, what factors should Fred take into account? What should be the margin of error in terms of pressure? How does Fred balance safety and reliability with the need to cut costs due to the parent company's recent acquisitions?
• Environmental Regulations--When in Rome...: Should Fred take advantage of less strict environmental regulations in Mexico to save money for Phaust corporation? What are the responsibilities of multi-national corporations that operate in countries like Mexico?
Exercise 1: Incident at Moral Socio-Technical System
Prepare a socio-technical analysis of Morales, Mexico. Your analysis will examine the insertion of the Phaust chemical plant into the Morales context. Using the following list of values, can you identify any potential value conflicts? Safety, Equity/Justice, intellectual property, confidentiality, responsibility, reasonableness.
Preparing a STS Table
• Study the two templates in the module, "Socio-Technical Systems in Professional Decision Making." See which one applies best to the Incident at Morales case.
• Redo the headings of the table substituting relevant items for those in the templates that are not relevant. For example, in preparing a STS table for a computer system, you may wish to change rate and rate structures into something like data and data structures.
• Fill in the relevant columns in your newly revised table. For example, in the Incident at Morales, the description of the physical surroundings would be based on the brief video segment where Fred is consulting with Wally and Manuel. What is the geographical area like? (It looks like a dry climate given the DVD.) What is the plant like? (It is, at the very least, small.) Attention to detail--even trivial detail--is important for these columns of the STS.
• For the second table, take the short value list we have been working with this semester and (1) look for new value mismatches, (2) identify existing value conflicts, and (3) describe any harmful long term consequences. In Incident at Morales, you may want to concentrate on justice (equity), responsibility for safety, respect, property, and free speech.
• Keep your tables simple and direct. You will have only a few minutes to debrief on them. Remember, this is a device to help you visualize value conflicts hidden in technologies and socio-technical systems.
Socio-Technical System
Hardware Software Physical Surroundings People, Groups, Roles Procedures Laws, Statutes, Regulations Data and Data Structures
STS and Values
Hardware/Software Physical Surroundings People, Groups, Roles Procedures Laws, Statutes, Regulations Data and Data Structures
Justice (Equity and Access) Responsibility
Responsibility
Respect (Privacy and Due Process)
Property
Free Speech
Exercise 2: Opportunities for Ethical Leadership
You will be assigned one of the topics described above. Discuss this topic with your group. Answer the questions. The prepare a brief summary of your answers to share with the rest of the class. The topics, again, are confidentiality, Wally's "One Rule", Lutz and Lutz Controls, the quality and integrity of the couplings, and the difference in environmental regulations. Throughout your reflections look for opportunities open to Fred to demonstrate ethical leadership. What obstacles stand in his way? What can he do to overcome them?
Decision Point for Business Ethics, Fall 2007
• Generate Solutions, Test Solutions, and Develop a Solution Implementation plan from the perspective of Fred. Focus specifically on whether Fred, as an engineer, should sign off on the plant as it is being passed over to operations.
• Decision Point: Chuck's solution to the French company's budget cuts was to pass along long term expenses and operational problems to the plant operation group.
• At the end of the video, Fred has been asked to sign off on the plant's documents and, essentially, approve this "pass along" strategy.
• What kind of ethical problems does Chuck's solution create?
• Knowing this, should Fred have signed off on the plant at the end of the video?
• Take Fred's perspective. Generate solutions, test them, and develop an implementation from Fred's perspective. Summarize your group's work by developing a solution table, solution evaluation matrix, and a feasibility table. Be prepared to summarize (not present) these tables informally to the rest of the class.
Refined Solution Table
Decision Alternative Description Justification: problem fit, ethics, feasibility
Solution 1
Solution 2
Solution Evaluation Matrix
Solution / Test Reversibility Harm / Benefits Publicity Feasibility (Global)
Solution 1
Solution 2
For Feasibility Table, see m14789.
Exercise 3
Read and listen to the interviews with Shiva, who is opposed to globalization, and O'Rourke, who takes a pro-globalization. Summarize their arguments. Using these arguments, construct your own argument on globalization and apply it to the Morales case: Is the incident that occurred at Morales an inevitable result of globalization or merely the result of bad individual and corporate decisions?
Incident at Morales in Ethics Bowl
Decision Scenario from "Incident at Morales" (Taken from Study Guide)
• "Although the lawyers note that Fred has no legal obligations to Chemitoil because he did not sign a non-disclosure agreement, does Fred have a moral obligation to ensure the confidentiality of the information he may have learned at Chemitoil?
• Return to the moment where Wally gives Fred the preliminary plant plans. Then place yourself in the following dialogue:
• WALLY Good. Chuck is going to have a project kick-off meeting this afternoon. Your plant design will be on the agenda. It’ll be at three. We don’t waste time around here. We’re fast at Phaust. Corporate tag line. As Fred gazes around his new work-station, smiling, Wally starts routing through a filing cabinet. He finds the preliminary plant plans and hands them to Fred. WALLY You might want to look at this. (hopeful) Tell me if this is like what you were building at your last job.
• You are Fred. Is Wally asking you to violate your (moral) confidentiality obligation with Chemitoil? Present a response to Wally's question. Show how this response respects both your former employer, Chemitoil, and your current employer, Phaust.
Decision Scenario from "Incident at Morales:" Environmental Integrity or Reliable Controls
• You are Fred. After you point out to Wally, that Lutz and Lutz controls are expensive, he advises you to "pick your fights when you can win them." (Chuck's brother-in-law is the customer representative for Lutz and Lutz.) On the other hand your wife, an EPA compliance litigator, points out how dangerous it is to put untreated toxic waste material in unlined evaporation ponds because of the possibility of drinking water contamination.
• You think about taking Wally's advice. Which fight should you choose, saving the environment while opting for cheaper controls or remaining with the expensive Lutz and Lutz controls but going ahead with the unlined evaporation ponds?
• In your presentation address this broader issue. Is Wally right? Should we trade off safety and environmental concerns when the budget is tight? | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/01%3A_Ethical_Leadership/1.06%3A_Ethical_Leadership_Using_Incident_at_Morales.txt |
Module Introduction
Preliminary Draft distributed at APPE, 2005 in San Antonio, TX
Engineers and other professionals work in large corporations under the supervision of managers who may lack their expertise, skills, and commitment to professional standards. This creates communication and ethical challenges. At the very least, professionals are put in the position of having to advocate their ethical and professional standards to those who, while not being opposed to them, may not share their understanding of and commitment to them.
This module is designed to give you the tools and the practice using them necessary to prevail in situations that require advocacy of ethical and professional standards. In this module you carry out several activities. (1) You will study the philosophical and ethical foundations of modern rights theory through a brief look at Kantian Formalism. (2) You will learn a framework for examining the legitimacy of rights claims. (3) You will practice this framework by examining several rights claims that engineers make over their supervisors. This examination will require that you reject certain elements, rephrase others, and generally recast the claim to satisfy the requirements of the rights justification framework. (4) Finally, in small groups, you will build tables around your reformulation of these rights claims and present the results to the class. This module will help you to put your results together with the rest of your classmates and collectively assemble a toolkit consisting of the legitimate rights claims that engineers and other professionals can make over their managers and supervisors.
For more background on rights theory and the relation of rights and duties see (1) Henry Shue, Basic Rights: Subsistence, Affluence, and U.S. Foreign Policy, 2nd edition, Princeton, 1980 and (2) Thomas Donaldson, The Ethics of International Business, Oxford, 1989. This exercise has been used in computer and engineering ethics classes at the University of Puerto Rico at Mayaguez from 2002 on to the present. It is being incorporated into the textbook, Good Computing: A Virtue Approach to Computer Ethics by Chuck Huff, William Frey, and Jose Cruz.
What you need to know...
Problematic Right Claims
1. El derecho para actuar de acuerdo a la conciencia etica y rechazar trabajos en los cuales exista una variacion de opinones morales.
2. El derecho de expresar juicio profesional, y hacer pronunciamientos publicos que sean consistentes con restricciones corporativas sobre la informacion propietaria.
3. El derecho a la lealtad corporativa y la libertad de que sea hecho un chivo expiatorio para catastrofes naturales, ineptitud de administracion u otras fuerzas mas alla del control del ingeniero.
4. El derecho a buscar el mejoramiento personal mediante estudios postgraduados y envolverse en asociaciones profesionales.
5. .El derecho a participar en actividades de partidos politicos fuera de las horas de trabajo.
6. El derecho a solicitar posiciones superiores con otras companias sin que la companis en la que trabaje tome represalias contra el ingeniero.
7. El derecho al debido proceso de ley y la libertad de que se le apliquen penalidades arbitrarias o despidos.
8. El derecho a apelar por revision ante una asociacion profesional, ombudsman o arbitro independiente.
9. El derecho a la privacidad personal.
10. Rights claims come from: Bill W. Baker. (2004) "Engineering Ethics: An Overview," in Engineering Ethics: Concepts, Viewpoints, Cases and Codes, eds. Jimmy H. Smith and Patricia M. Harper. Compiled and Published by the National Institute for Engineering Ethics: 21-22.
11. Translated into Spanish and published in: Etica en la Practica Profesional de la Ingenieria by Wilfredo Munoz Roman published in 1998 by the Colegio de Ingenieros y Agrimensores de Puerto Rico and Universidad Politecnica de Puerto Rico
Problematic Rights Claims quoted directly from Bill Baker, Engineering Ethics: An Overview. Claims form a "Bill of Rights" set forth by Murray A. Muspratt of Chisholm Institute of Technology, Victoria, Australia (American society of Civil Engineers' Journal of Professional Issues in Engineering, October 1985)
1. "The right to act in according to ethical conscience and to decline assignments where a variance of moral opinion exists.
2. The right to express professional judgment, and to make public pronouncements that are consistent with corporate constraints on proprietary information.
3. The right to corporate loyalty and freedom from being made a scapegoat for natural catastrophes, administrative ineptitude or other forces beyond the engineer's control.
4. The right to seek self-improvement by further education and involvement in professional associations.
5. The right to participate in political party activities outside of working hours.
6. The right to apply for superior positions with other companies without being blacklisted.
7. The right to due process and freedom from arbitrary penalties or dismissal.
8. The right to appeal for ethical review by a professional association, ombudsman or independent arbitrator.
9. The right to personal privacy."
Kantian Formalism, Part I: Aligning the moral motive and the moral act
• Kant's moral philosophy has exercised substantial influence over our notions of right and duty. We begin with a brief summary of this theory based on the work, The Foundations of the Metaphysics of Morals.
• Kant states that the only thing in this world that is good without qualification is a good will. He characterizes this will in terms of its motive, "duty for duty's sake."
• Consider the following example. You see a boy drowning. Even though the water is rough and the current strong you are a good enough swimmer to save him. So while your inclination may be to give way to fear and walk away, you are duty-bound to save the drowning boy.
• An action (saving or not saving the drowning boy) has moral worth depending on the correct correlation of right action and right motive. The following table shows this.
Duty for Duty's Sake
Motive = Inclination (desire for reward or fear) Motive = Duty
Act Conforms to Duty You save the drowning boy for the reward. Act conforms to duty but is motivated by inclination. Has no moral worth. You save the drowning boy because it is your duty. Act conforms to duty and is for the sake of duty. Your act has moral worth.
Act violates a duty. You don't save the drowning boy because you are too lazy to jump in. Act violates duty motivated by inclination. You drown trying to save the drowning boy. He also dies. Act fails to carry out duty but is motivated by duty anyway. The act miscarries but since the motive is duty it still has moral worth.
Part II of Kantian Formalism: Giving content to Duty for Duty's Sake
• Kant sees morality as the expression and realization of the rational will. The first formulation of this rational will is to will consistently and universally.
• This leads to the Categorical Imperative: I should act only on that maxim (=personal rule or rule that I give to myself) that can be converted into a universal law (=a rule that applies to everybody without self-contradiction).
• This formulation is an imperative because it commands the will of all reasonable beings. It is categorical because it commands without exceptions or conditions. The CI tells me unconditionally not to lie. It does not say, do not lie unless it promotes your self interest to do so.
• The following table shows how to use the Categorical Imperative to determine whether I have a duty not to lie.
Applying the Categorical Imperative
1. Formulate your maxim (=personal rule) Whenever I am in a difficult situation, I should tell a lie.
2. Universalize your maxim. Whenever anybody is in a difficult situation, he or she should tell a lie.
3. Check for a contradiction (logical or practical) When I lie, I will the opposite for the universal law. Put differently, I will that everybody (but me) be a truth-teller and that everybody believe me a truth-teller. I then make myself the exception to this universal law. Thus my maxim (I am a liar) contradicts the law (everybody else is a truth-teller)
Kantian Formalism, Part III: The Formula of the End
• When I will one thing as universal law and make myself the exeception in difficult circumstances, I am treating others, in Kantian terms, merely as means.
• This implies that I subordinate or bend them to my interests and projects without their consent. I do this by circumventing their autonomy through (1) force, (2) fraud (often deception), or (3) manipulation. Treating them with respect would involve telling them what I want (what are my plans and projects) and on this basis asking them to consent to particpate and help me. The extreme case for treating others merely as means is enslaving them.
• We do on occasion treat others as means (and not as mere means) when we hire them as employees. But this is consistent with their autonomy and rational consent because we explain to them what is expected (we give them a job description) and compensate them for their efforts. For this reason there is a world of difference between hiring others and enslaving them.
• The Formula of the End = Act so as to treat others (yourself included) always as ends and never merely as means.
Some Key Definitions for a Rights Framework
• Kantian formalism provides a foundation for respect for the intrinsic value of humans as autonomous rational beings. Using this as a point of departure, we can develop a method for identifying, spelling out, and justifying the rights and duties that go with professionalism. This framework can be summarized in four general propositions:
• 1. Definition: A right is an essential capacity of action that others are obliged to recognize and respect. This definition follows from autonomy. Autonomy can be broken down into a series of specific capacities. Rights claims arise when we identify these capacities and take social action to protect them. Rights are inviolable and cannot be overridden even when overriding would bring about substantial public utility.
• 2. All rights claims must satisfy three requirements. They must be (1) essential to the autonomy of individuals and (2) vulnerable so that they require special recognition and protection (on the part of both individuals and society). Moreover, the burden of recognizing and respecting a claim as a right must not deprive others of something essential. In other words, it must be (3) feasible for both individuals and social groups to recognize and respect legitimate rights claims.
• 3. Definition: A duty is a rule or principle requiring that we both recognize and respect the legitimate rights claims of others. Duties attendant on a given right fall into three general forms: (a) duties not to deprive, (b) duties to prevent deprivation, and (c) duties to aid the deprived.
• 4. Rights and duties are correlative; for every right there is a correlative series of duties to recognize and respect that right.
• These four summary points together form a system of professional and occupational rights and correlative duties.
Right Claim Justification Framework
• Essential: To say that a right is essential to autonomy is to say that it highlights a capacity whose exercise is necessary to the general exercise of autonomy. For example, autonomy is based on certain knowledge skills. Hence, we have a right to an education to develop the knowledge required by autonomy, or we have a right to the knowledge that produces informed consent. In general, rights are devices for recognizing certain capacities as essential to autonomy and respecting individuals in their exercise of these capacities.
• Vulnerable: The exercise of the capacity protected under the right needs protection. Individuals may interfere with us in our attempt to exercise our rights. Groups, corporations, and governments might overwhelm us and prevent us from exercising our essential capacities. In short, the exercise of the capacity requires some sort of protection. For example, an individual’s privacy is vulnerable to violation. People can gain access to our computers without our authorization and view the information we have stored. They can even use this information to harm us in some way. The right to privacy, thus, protects certain capacities of action that are vulnerable to interference from others. Individual and social energy needs to be expended to protect our privacy.
• Feasible: Rights make claims over others; they imply duties that others have. These claims must not deprive the correlative duty-holders of anything essential. In other words, my rights claims over you are not so extensive as to deprive you of your rights. My right to life should not deprive you of your right to self-protection were I to attack you. Thus, the scope of my right claims over you and the rest of society are limited by your ability to reciprocate. I cannot push my claims over you to recognize and respect my rights to the point where you are deprived of something essential.
Types of Duty Correlative to a Right
• Duty not to deprive: We have a basic duty not to violate the rights of others. This entails that we must both recognize and respect these rights. For example, computing specialists have the duty not to deprive others of their rights to privacy by hacking into private files.
• Duty to prevent deprivation: Professionals, because of their knowledge, are often in the position to prevent others from depriving third parties of their rights. For example, a computing specialist may find that a client is not taking sufficient pains to protect the confidentiality of information about customers. Outsiders could access this information and use it without the consent of the customers. The computing specialist could prevent this violation of privacy by advising the client on ways to protect this information, say, through encryption. The computing specialist is not about to violate the customers’ rights to privacy. But because of special knowledge and skill, the computing specialist may be in a position to prevent others from violating this right.
• Duty to aid the deprived: Finally, when others have their rights violated, we have the duty to aid them in their recovery from damages. For example, a computing specialist might have a duty to serve as an expert witness in a lawsuit in which the plaintiff seeks to recover damages suffered from having her right to privacy violated. Part of this duty would include accurate, impartial, and expert testimony.
Application of Right/Duty Framework
1. We can identify and define specific rights such as due process. Moreover, we can set forth some of the conditions involved in recognizing and respecting this right.
2. Due Process can be justified by showing that it is essential to autonomy, vulnerable, and feasible.
3. Right holders can be specified.
4. Correlative duties and duty holders can be specified.
5. Finally, the correlative duty-levels can be specified as the duties not to violate rights, duties to prevent rights violations (whenever feasible), and the duties to aid the deprived (whenever is feasible).
Example Rights Table: Due Process
Right: Due Process Justification Right-Holder:Engineer as employee and member of professional society. Correlative Duty-Holder: Engineer's Supervisor, officials in professional society. Duty Level
Definition: The right to respond to organizational decisions that may harm one in terms of a serious organizational grievance procedure.Necessary Conditions:1. Several levels of appeal.2. Time limits to each level of appeal.3. Written notice of grievance.4. Peer representation.5. Outside arbitration.
Essential: Due Process is essential in organizations to prevent the deprivation of other rights or to provide aid in the case of their deprivation.
Vulnerable: Rights in general are not recognized in the economic sphere, especially in organizations.
Feasible: Organizations, have successfully implemented due process procedures.
Professionals who are subject to professional codes of ethics. Supports professionals who are ordered to violate professional standards. Human Resources, Management, Personnel Department.(Individuals with duty to design, implement, and enforce a due process policy)Corporate directors have the duty to make sure this is being done.
Not to Deprive:Individuals cannot be fired, transferred, or demoted without due process
Prevent Deprivation: Organizations can prevent deprivation by designing and implementing a comprehensive due process policy.
Aid the DeprivedBinding arbitration and legal measures must exist to aid those deprived of due process rights
What you are going to do...
Exercise: Develop a Rights Table
1. You will be divided into small groups and each will be assigned a right claim taken from the above list.
2. Describe the claim (essential capacity of action) made by the right. For example, due process claims the right to a serious organizational grievance procedure that will enable the right-holder to respond to a decision that has an adverse impact on his or her interests. It may also be necessary in some situations to specify the claim’s necessary conditions.
3. Justify the right claim using the rights justification framework. In other words show that the right claim is essential, vulnerable, and feasible.
4. Be sure to show that the right is essential to autonomy. If it is vulnerable be sure to identify the standard threat. (A standard threat is an existing condition that threatens autonomy.)
5. Provide an example of a situation in which the right claim becomes active. For example, an engineer may claim a right to due process in order to appeal what he or she considers an unfair dismissal, transfer, or performance evaluation.
6. Identify the correlative duty-holder(s) that need to take steps to recognize and respect the right. For example, private and government organizations may be duty-bound to create due process procedures to recognize and respect this right.
7. Further spell out the right by showing what actions the correlative duties involve. For example, a manager should not violate an employee's due process right by firing him or her without just cause. The organization's human resources department might carry out a training program to help managers avoid depriving employees of this right. The organization could aid the deprived by designing and implementing binding arbitration involving an impartial third party.
Be prepared to debrief on your right claim to the rest of the class. When other groups are debriefing, you are free to challenge them on whether their claim is essential to autonomy, whether they have identified a valid "standard threat," and whether the correlative duties are feasible or deprive others of something essential. Your goal as a class is to have a short but effective list of rights that professionals take with them to the workplace.
Makes copies of your rights table and give it to the other groups in class. Be sure to make a copy for your instructor. Together, you will build a table of rights claims that engineers and other professionals make against managers and corporations. This will provide you a useful and comprehensive decision-making tool in that you will be able to examine decision alternatives in terms of how they stand with regard to the rights you and your classmates and scrutinized and justified through this exercise.
Conclusion
Conclusion: Topics for Further Reflection
• Not every claim to a right is a legitimate or justifiable claim. The purpose of this framework is to get you into the habit of thinking critically and skeptically about the rights claims that you and others make. Every legitimate right claim is essential, vulnerable, and feasible. Correlative duties are sorted out according to different levels (not to deprive, prevent deprivation, and aid the deprived); this, in turn, is based on the capacity of the correlative duty holder to carry them out. Finally, duties correlative to rights cannot deprive the duty-holder of something essential.
• Unless you integrate your right and its correlative duties into the context of your professional or practical domain, it will remain abstract and irrelevant. Think about your right in the context of the real world. Think of everyday situations in which the right and its correlative duties will arise. Invent cases and scenarios. If you are an engineering student, think of informed consent in terms of the public’s right to understand and consent to the risks associated with engineering projects. If you are a computing student think of what you can do with computing knowledge and skills to respect or violate privacy rights. Don’t stop with an abstract accounting of the right and its correlative duties.
• Rights and duties underlie professional codes of ethics. But this is not always obvious. For example, the right of free and informed consent underlies much of the engineer’s interaction with the public, especially the code responsibility to hold paramount public health, safety, and welfare. Look at the different stakeholder relations covered in a code of ethics. (In engineering this would include public, client, profession, and peer.) What are the rights and duties outlined in these stakeholder relations? How are they covered in codes of ethics?
• This module is effective in counter-acting the tendency to invent rights and use them to rationalize dubious actions and intentions. Think of rights claims as credit backed by a promise to pay at a later time. If you make a right claim, be ready to justify it. If someone else makes a right claim, make them back it up with the justification framework presented in this module. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/02%3A_Ethical_Leadership_-Making/2.01%3A_Theory-Building_Activities_-_Rights.txt |
Module Introduction
In this module, you will learn and practice three frameworks designed to integrate ethics into decision making in the areas of practical and occupational ethics. The first framework divides the decision making process into four stages: problem specification, solution generation, solution testing, and solution implementation. It is based on an analogy between ethics and design problems that is detailed in a table presented below. The second framework focuses on the process of testing solution alternatives for their ethics by deploying three ethics tests that will help you to evaluate and rank alternative courses of action. The reversibility, harm, and publicity tests each "encapsulate" or summarize an important ethical theory. Finally, a feasibility test will help you to uncover interest, resource, and technical constraints that will affect and possibly impede the realization of your solution or decision. Taken together, these three frameworks will help steer you toward designing and implementing ethical solutions to problems in the professional and occupational areas.
Two online resources provide more extensive background information. The first, www.computingcases.org, provides background information on the ethics tests, socio-technical analysis, and intermediate moral concepts. The second, onlineethics.org/essays/educa.../teaching.html, explores in more detail the analogy between ethics and design problems. Much of this information will be published in Good Computing: A Virtue Approach to Computer Ethics, a textbook of cases and decision-making techniques in computer ethics that is being authored by Chuck Huff, William Frey, and Jose A. Cruz-Cruz.
Problem-Solving or Decision-Making Framework: Analogy between ethics and design
Traditionally, problem-solving frameworks in professional and occupational ethics have been taken from rational decision procedures used in economics. While these are useful, they lead one to think that ethical decisions are already "out there" waiting to be discovered. In contrast, taking a design approach to ethical decision making emphasizes that ethical decisions must be created, not discovered. This, in turn, emphasizes the importance of moral imagination and moral creativity. Carolyn Whitbeck in Ethics in Engineering Practice and Research describes this aspect of ethical decision making through the analogy she draws between ethics and design problems in chapter one. Here she rejects the idea that ethical problems are multiple-choice problems. We solve ethical problems not by choosing between ready-made solutions given with the situation; rather we use our moral creativity and moral imagination to design these solutions. Chuck Huff builds on this by modifying the design method used in software engineering so that it can help structure the process of framing ethical situations and creating actions to bring these situations to a successful and ethical conclusion. The key points in the analogy between ethical and design problems are summarized in the table presented just below.
Analogy between design and ethics problem-solving
Design Problem Ethical Problem
Construct a prototype that optimizes (or satisfices) designated specifications Construct a solution that integrates and realizes ethical values (justice, responsibility, reasonableness, respect, and safety)
Resolve conflicts between different specifications by means of integration Resolve conflicts between values (moral vs. moral or moral vs. non-moral) by integration
Test prototype over the different specifications Test solution over different ethical considerations encapsulated in ethics tests
Implement tested design over background constraints Implement ethically tested solution over resource, interest, and technical constraints
Software Development Cycle: Four Stages
(1) problem specification, (2) solution generation, (3) solution testing, and (4) solution implementation.
Problem specification
Problem specification involves exercising moral imagination to specify the socio-technical system (including the stakeholders) that will influence and will be influenced by the decision we are about to make. Stating the problem clearly and concisely is essential to design problems; getting the problem right helps structure and channel the process of designing and implementing the solution. There is no algorithm available to crank out effective problem specification. Instead, we offer a series of guidelines or rules of thumb to get you started in a process that is accomplished by the skillful exercise of moral imagination.
For a broader problem framing model see Harris, Pritchard, and Rabins, Engineering Ethics: Concepts and Cases, 2nd Edition, Belmont, CA: Wadsworth, 2000, pp. 30-56. See also Cynthia Brincat and Victoria Wike, Morality and Professional Life: Values at Work, New Jersey: Prentice Hall, 1999.
Different Ways of Specifying the Problem
• Many problems can be specified as disagreements. For example, you disagree with your supervisor over the safety of the manufacturing environment. Disagreements over facts can be resolved by gathering more information. Disagreements over concepts (you and your supervisor have different ideas of what safety means) require working toward a common definition.
• Other problems involve conflicting values. You advocate installing pollution control technology because you value environmental quality and safety. Your supervisor resists this course of action because she values maintaining a solid profit margin. This is a conflict between a moral value (safety and environmental quality) and a nonmoral value (solid profits). Moral values can also conflict with one another in a given situation. Using John Doe lawsuits to force Internet Service Providers to reveal the real identities of defamers certainly protects the privacy and reputations of potential targets of defamation. But it also places restrictions on legitimate free speech by making it possible for powerful wrongdoers to intimidate those who would publicize their wrongdoing. Here the moral values of privacy and free speech are in conflict. Value conflicts can be addressed by harmonizing the conflicting values, compromising on conflicting values by partially realizing them, or setting one value aside while realizing the other (=value trade offs).
• If you specify your problem as a disagreement, you need to describe the facts or concepts about which there is disagreement.
• If you specify your problem as a conflict, you need to describe the values that conflict in the situation.
• One useful way of specifying a problem is to carry out a stakeholder analysis. A stakeholder is any group or individual that has a vital interest at risk in the situation. Stakeholder interests frequently come into conflict and solving these conflicts requires developing strategies to reconcile and realize the conflicting stakes.
• Another way of identifying and specifying problems is to carry out a socio-technical analysis. Socio-technical systems (STS) embody values. Problems can be anticipated and prevented by specifying possible value conflicts. Integrating a new technology, procedure, or policy into a socio-technical system can create three kinds of problem. (1) Conflict between values in the technology and those in the STS. For example, when an attempt is made to integrate an information system into the STS of a small business, the values present in an information system can conflict with those in the socio-technical system. (Workers may feel that the new information system invades their privacy.) (2) Amplification of existing value conflicts in the STS. The introduction of a new technology may magnify an existing value conflict. Digitalizing textbooks may undermine copyrights because digital media is easy to copy and disseminate on the Internet. (3) Harmful consequences. Introducing something new into a socio-technical system may set in motion a chain of events that will eventually harm stakeholders in the socio-technical system. For example, giving laptop computers to public school students may produce long term environmental harm when careless disposal of spent laptops releases toxic materials into the environment.
• The following table helps summarize some of these problem categories and then outlines generic solutions.
Problem Type Sub-Type Solution Outline
Disagreement
Factual Type and mode of gathering information
Conceptual Concept in dispute and method for agreeing on its definition
Conflict
Moral vs. Moral
Non-moral vs. moral
Non-moral vs. non-moral
Value Integrative Partially Value Integrative Trade Off
Moral Ecologies
Finance-Driven Ecologies
Customer-Driven Ecologies
Quality-Driven Ecologies
Strategy for dissenting from a staff position where one is outside decision-making Practicing ethical advocacy when "going to the mat" on ethical perspectives in group decision-making Ability to draw attention to ethical values that form center of organization identity
Likely Concepts in Conceptual Disagreement Public Intellectual Property, Faithful Agency, Professional Integrity, Loyalty, Public Safety and Health, Due Process, Responsible Dissent Working from Legal Definitions Bridging: moving from cases to concepts Discussion: Playing on shared values and trust to reach consensus through dialogue
The materials on moral ecologies come from Huff, C., Barnard, L., and Frey, W. (2008). “Good computing: a pedagogically focused model of virtue in the practice of computing (parts 1 and 2)”, Journal of Information, Communication and Ethics in Society, Volume 6, Issues 3 and 4: 246-316. See also, Michael Davis, Thinking Like An Engineer, Oxford, 1998, 119-156.
Instructions for Using Problem Classification Table
1. Is your problem a conflict? Moral versus moral value? Moral versus non-moral values? Non-moral versus non-moral values? Identify the conflicting values as concisely as possible. Example: In Toysmart, the financial values of creditors come into conflict with the privacy of individuals in the database: financial versus privacy values.
2. Is your problem a disagreement? Is the disagreement over basic facts? Are these facts observable? Is it a disagreement over a basic concept? What is the concept? Is it a factual disagreement that, upon further reflection, changes into a conceptual disagreement?
3. Does your problem arise from an impending harm? What is the harm? What is its magnitude? What is the probability that it will occur?
4. If your problem is a value conflict then can these values be fully integrated in a value integrating solution? Or must they be partially realized in a compromise or traded off against one another?
5. If your problem is a factual disagreement, what is the procedure for gathering the required information, if this is feasible?
6. If your problem is a conceptual disagreement, how can this be overcome? By consulting a government policy or regulation? (OSHA on safety for example.) By consulting a theoretical account of the value in question? (Reading a philosophical analysis of privacy.) By collecting past cases that involve the same concept and drawing analogies and comparisons to the present case?
Moral Ecologies
• "Moral Ecology" refers to the organization in which one works. Calling this organization an "ecology" conveys the idea that it is a system of interrelated parts. These "ecologies" differ depending on the content of the organization's central, identity-conferring values.
• In finance-driven companies, financial values form the core of the organization's identity. Ethical advocacy requires skills in bringing ethical issues to the attention of decision-makers and getting them to take these issues seriously. It helps to state ethical concerns in multi-disciplinary language. (For example, show that ignoring ethical concerns will cost the company money in the long run.)
• Customer-driven ecologies place customer values like usability, affordability, and efficiency, in the forefront of group deliberation and decision-making. Often, one must play the role of "ethics advocate" in deliberation and decision-making. One is expected to argue forcefully and persistently ("go to the mat") to make sure that ethical considerations are integrated into group deliberations and decision-making.
• Quality-driven companies place ethical values into the core of group deliberations and decision-making. Here one is not so much ethics advocate as ethics enabler. This new role requires that one help one's group find creative ways of integrating ethical values with other concerns like customer and financial values.
If you are having problems specifying your problem
• Try identifying the stakeholders. Stakeholders are any group or individual with a vital interest at stake in the situation at hand.
• Project yourself imaginatively into the perspectives of each stakeholder. How does the situation look from their standpoint? What are their interests? How do they feel about their interests?
• Compare the results of these different imaginative projections. Do any stakeholder interests conflict? Do the stakeholders themselves stand in conflict?
• If the answer to one or both of these questions is "yes" then this is your problem statement. How does one reconcile conflicting stakeholders or conflicting stakeholder interests in this situation?
Framing Your Problem
• We miss solutions to problems because we choose to frame them in only one way.
• For example, the Mountain Terrorist Dilemma is usually framed in only one way: as a dilemma, that is, a forced decision between two equally undesirable alternatives. (Gilbane Gold is also framed as a dilemma: blow the whistle on Z-Corp or go along with the excess polution.)
• Framing a problem differently opens up new horizons of solution. Your requirement from this point on in the semester is to frame every problem you are assigned in at least two different ways.
• For examples of how to frame problems using socio-technical system analysis see module m14025.
• These different frames are summarized in the next box below.
Different Frames for Problems
• Technical Frame: Engineers frame problems technically, that is, they specify a problem as raising a technical issue and requiring a technical design for its resolution. For example, in the Hughes case, a technical frame would raise the problem of how to streamline the manufacturing and testing processes of the chips.
• Physical Frame: In the Laminating Press case, the physical frame would raise the problem of how the layout of the room could be changed to reduce the white powder. Would better ventilation eliminate or mitigate the white powder problem?
• Social Frame: In the "When in Aguadilla" case, the Japanese engineer is uncomfortable working with the Puerto Rican woman engineer because of social and cultural beliefs concerning women still widely held by men in Japan. Framing this as a social problem would involve asking whether there would be ways of getting the Japanese engineer to see things from the Puerto Rican point of view.
• Financial or Market-Based Frames: The DOE, in the Risk Assessment case below, accuses the laboratory and its engineers of trying to extend the contract to make more money. The supervisor of the head of the risk assessment team pressures the team leader to complete the risk assessment as quickly as possible so as not to lose the contract. These two framings highlight financial issues.
• Managerial Frame: As the leader of the Puerto Rican team in the "When in Aguadilla" case, you need to exercise leadership in your team. The refusal of the Japanese engineer to work with a member of your team creates a management problem. What would a good leader, a good manager, do in this situation? What does it mean to call this a management problem? What management strategies would help solve it?
• Legal Frame: OSHA may have clear regulations concerning the white powder produced by laminating presses. How can you find out about these regulations? What would be involved in complying with them? If they cost money, how would you get this money? These are questions that arise when you frame the Laminating Press case as a legal problem.
• Environmental Framing: Finally, viewing your problem from an environmental frame leads you to consider the impact of your decision on the environment. Does it harm the environment? Can this harm be avoided? Can it be mitigated? Can it be offset? (Could you replant elsewhere the trees you cut down to build your new plant?) Could you develop a short term environmental solution to "buy time" for designing and implementing a longer term solution? Framing your problem as an environmental problem requires that you ask whether this solution harms the environment and whether this harming can be avoided or remedied in some other way.
Solution Generation
In solution generation, agents exercise moral creativity by brainstorming to come up with solution options designed to resolve the disagreements and value conflicts identified in the problem specification stage. Brainstorming is crucial to generating nonobvious solutions to difficult, intractable problems. This process must take place within a non-polarized environment where the members of the group respect and trust one another. (See the module on the Ethics of Group Work for more information on how groups can be successful and pitfalls that commonly trip up groups.) Groups effectively initiate the brainstorming process by suspending criticism and analysis. After the process is completed (say, by meeting a quota), then participants can refine the solutions generated by combining them, eliminating those that don't fit the problem, and ranking them in terms of their ethics and feasibility. If a problem can't be solved, perhaps it can be dissolved through reformulation. If an entire problem can't be solved, perhaps the problem can be broken down into parts some of which can be readily solved.
Having trouble generating solutions?
• One of the most difficult stages in problem-solving is to jump-start the process of brainstorming solutions. If you are stuck then here are some generic options guaranteed to get you "unstuck."
• Gather Information: Many disagreements can be resolved by gathering more information. Because this is the easiest and least painful way of reaching consensus, it is almost always best to start here. Gathering information may not be possible because of different constraints: there may not be enough time, the facts may be too expensive to gather, or the information required goes beyond scientific or technical knowledge. Sometimes gathering more information does not solve the problem but allows for a new, more fruitful formulation of the problem. Harris, Pritchard, and Rabins in Engineering Ethics: Concepts and Cases show how solving a factual disagreement allows a more profound conceptual disagreement to emerge.
• Nolo Contendere. Nolo Contendere is Latin for not opposing or contending. Your interests may conflict with your supervisor but he or she may be too powerful to reason with or oppose. So your only choice here is to give in to his or her interests. The problem with nolo contendere is that non-opposition is often taken as agreement. You may need to document (e.g., through memos) that your choosing not to oppose does not indicate agreement.
• Negotiate. Good communication and diplomatic skills may make it possible to negotiate a solution that respects the different interests. Value integrative solutions are designed to integrate conflicting values. Compromises allow for partial realization of the conflicting interests. (See the module, The Ethics of Team Work, for compromise strategies such as logrolling or bridging.) Sometimes it may be necessary to set aside one's interests for the present with the understanding that these will be taken care of at a later time. This requires trust.
• Oppose. If nolo contendere and negotiation are not possible, then opposition may be necessary. Opposition requires marshaling evidence to document one's position persuasively and impartially. It makes use of strategies such as leading an "organizational charge" or "blowing the whistle." For more on whistle-blowing consult the discussion of whistleblowing in the Hughes case that can be found in computing cases.
• Exit. Opposition may not be possible if one lacks organizational power or documented evidence. Nolo contendere will not suffice if non-opposition implicates one in wrongdoing. Negotiation will not succeed without a necessary basis of trust or a serious value integrative solution. As a last resort, one may have to exit from the situation by asking for reassignment or resigning.
Refining solutions
• Are any solutions blatantly unethical or unrealizable?
• Do any solutions overlap? Can these be integrated into broader solutions?
• Can solutions be brought together as courses of action that can be pursued simultaneously?
• Go back to the problem specification? Can any solutions be eliminated because they do not address the problem? (Or can the problem be revised to better fit what, intuitively, is a good solution.)
• Can solutions be brought together as successive courses of action? For example, one solution represents Plan A; if it does not work then another solution, Plan B, can be pursued. (You negotiate the problem with your supervisor. If she fails to agree, then you oppose your supervisor on the grounds that her position is wrong. If this fails, you conform or exit.)
• The goal here is to reduce the solution list to something manageable, say, a best, a second best, and a third best. Try adding a bad solution to heighten strategic points of comparison. The list should be short so that the remaining solutions can be intensively examined as to their ethics and feasibility.
Solution Testing: The solutions developed in the second stage must be tested in various ways.
1. Reversibility: Would I still think the choice of this option good if I were one of those adversely affected by it? (Davis uses this formulation in various publications.) I identify different stakeholders and then take up their roles. Through this imaginative projection, I should consider how the action under consideration will affect them and how they will view, interpret, and experience this affect.
2. Harm: Does this option do less harm than any available alternative? Here I try to design an action that will minimize harmful effects. I should factor in the likely results of the action under consideration but I should also evaluate how justly these results will be distributed among stakeholders.
3. Publicity: What kind of person will I become if I choose this action? This is Davis' formulation of this test as a virtue test. The key to this test is that you associate the agent with the action. If I (the agent) am publicly judged as a person in terms of this action, what does this say about me as a person? Am I comfortable being judged an irresponsible person on the basis of my being identified with my irresponsible action?
4. Meta-Test - Convergence: Do a quick inventory here. Do the ethics tests come together and agree on ranking this solution as a strong one? Then this solution satisfies the convergence meta-test and this provides independent evidence of the strength of the solution.
5. Meta-Test - Divergence: Again, do a quick inventory of your solution evaluation matrix results to this point. Do the tests differ or diverge on this point? This is independent evidence of the weakness of this solution. Think about why this solution may be strong under one test but weak under the others.
6. The solution evaluation matrix presented just below models and summarizes the solution testing process.
Solution Evaluation Matrix
Solution/Test Reversibility Harm Publicity Meta-Test: Convergence Meta-Test: Divergence
Description Would I still think the choice of this option good if I were one of those adversely affected by it? (Davis) Does this option do less harm than any available alternative? What person would I become were I to choose and perform this action? (Associating my character with the moral color of the action.) Do the three ethics tests (reversibility, harm, publicity) come together on this solution? Do the three ethics tests (reversibility, harm, publicity) differ on this solution?
Your best solution
A good (but not the best) solution
Your worst solution or a really bad solution
Solution Implementation
The chosen solution must be examined in terms of how well it responds to various situational constraints that could impede its implementation. What will be its costs? Can it be implemented within necessary time constraints? Does it honor recognized technical limitations or does it require pushing these back through innovation and discovery? Does it comply with legal and regulatory requirements? Finally, could the surrounding organizational, political, and social environments give rise to obstacles to the implementation of the solution? In general this phase requires looking at interest, technical, and resource constraints or limitations. A Feasibility Matrix helps to guide this process.
The Feasibility Tests focuses on situational constraints. How could these hinder the implementation of the solution? Should the solution be modified to ease implementation? Can the constraints be removed or remodeled by negotiation, compromise, or education? Can implementation be facilitated by modifying both the solution and changing the constraints?
Feasibility Matrix
Resource Constraints Technical Constraints Interest Constraints
Personalities
Time Organizational
Cost Applicable Technology Legal
Materials Manufacturability Social, Political, Cultural
Different Feasibility Constraints
1. The Feasibility Test identifies the constraints that could interfere with realizing a solution. This test also sorts out these constraints into resource (time, cost, materials), interest (individuals, organizations, legal, social, political), and technical limitations. By identifying situational constraints, problem-solvers can anticipate implementation problems and take early steps to prevent or mitigate them.
2. Time. Is there a deadline within which the solution has to be enacted? Is this deadline fixed or negotiable?
3. Financial. Are there cost constraints on implementing the ethical solution? Can these be extended by raising more funds? Can they be extended by cutting existing costs? Can agents negotiate for more money for implementation?
4. Technical. Technical limits constrain the ability to implement solutions. What, then, are the technical limitations to realizing and implementing the solution? Could these be moved back by modifying the solution or by adopting new technologies?
5. Manufacturability. Are there manufacturing constraints on the solution at hand? Given time, cost, and technical feasibility, what are the manufacturing limits to implementing the solution? Once again, are these limits fixed or flexible, rigid or negotiable?
6. Legal. How does the proposed solution stand with respect to existing laws, legal structures, and regulations? Does it create disposal problems addressed in existing regulations? Does it respond to and minimize the possibility of adverse legal action? Are there legal constraints that go against the ethical values embodied in the solution? Again, are these legal constraints fixed or negotiable?
7. Individual Interest Constraints. Individuals with conflicting interests may oppose the implementation of the solution. For example, an insecure supervisor may oppose the solution because he fears it will undermine his authority. Are these individual interest constraints fixed or negotiable?
8. Organizational. Inconsistencies between the solution and the formal or informal rules of an organization may give rise to implementation obstacles. Implementing the solution may require support of those higher up in the management hierarchy. The solution may conflict with organization rules, management structures, traditions, or financial objectives. Once again, are these constraints fixed or flexible?
9. Social, Cultural, or Political. The socio-technical system within which the solution is to be implemented contains certain social structures, cultural traditions, and political ideologies. How do these stand with respect to the solution? For example, does a climate of suspicion of high technology threaten to create political opposition to the solution? What kinds of social, cultural, or political problems could arise? Are these fixed or can they be altered through negotiation, education, or persuasion?
Ethics Tests For Solution Evaluation
Three ethics tests (reversibility, harm/beneficence, and public identification) encapsulate three ethical approaches (deontology, utilitarianism, and virtue ethics) and form the basis of stage three of the SDC, solution testing. A fourth test (a value realization test) builds upon the public identification/virtue ethics test by evaluating a solution in terms of the values it harmonizes, promotes, protects, or realizes. Finally a code test provides an independent check on the ethics tests and also highlights intermediate moral concepts such as safety, health, welfare, faithful agency, conflict of interest, confidentiality, professional integrity, collegiality, privacy, property, free speech, and equity/access). The following section provides advice on how to use these tests. More information can be found at www.computingcases.org.
Setting Up the Ethics Tests: Pitfalls to avoid
Set-Up Pitfalls: Mistakes in this area lead to the analysis becoming unfocused and getting lost in irrelevancies. (a) Agent-switching where the analysis falls prey to irrelevancies that crop up when the test application is not grounded in the standpoint of a single agent, (b) Sloppy action-description where the analysis fails because no specific action has been tested, (c) Test-switching where the analysis fails because one test is substituted for another. (For example, the public identification and reversibility tests are often reduced to the harm/beneficence test where harmful consequences are listed but not associated with the agent or stakeholders.)
Set up the test
1. Identify the agent (the person who is going to perform the action)
2. Describe the action or solution that is being tested (what the agent is going to do or perform)
3. Identify the stakeholders (those individuals or groups who are going to be affected by the action), and their stakes (interests, values, goods, rights, needs, etc.
4. Identify, sort out, and weigh the consequences (the results the action is likely to bring about)
Harm/Beneficence Test
• What harms would accompany the action under consideration? Would it produce physical or mental suffering, impose financial or non-financial costs, or deprive others of important or essential goods?
• What benefits would this action bring about? Would it increase safety, quality of life, health, security, or other goods both moral and non-moral?
• What is the magnitude of each these consequences? Magnitude includes likelihood it will occur (probability), the severity of its impact (minor or major harm) and the range of people affected.
• Identify one or two other viable alternatives and repeat these steps for them. Some of these may be modifications of the basic action that attempt to minimize some of the likely harms. These alternatives will establish a basis for assessing your alternative by comparing it with others.
• Decide on the basis of the test which alternative produces the best ratio of benefits to harms?
• Check for inequities in the distribution of harms and benefits. Do all the harms fall on one individual (or group)? Do all of the benefits fall on another? If harms and benefits are inequitably distributed, can they be redistributed? What is the impact of redistribution on the original solution imposed?
Pitfalls of the Harm/Beneficence Test
1. “Paralysis of Analysis" comes from considering too many consequences and not focusing only on those relevant to your decision.
2. Incomplete Analysis results from considering too few consequences. Often it indicates a failure of moral imagination which, in this case, is the ability to envision the consequences of each action alternative.
3. Failure to compare different alternatives can lead to a decision that is too limited and one-sided.
4. Failure to weigh harms against benefits occurs when decision-makers lack the experience to make the qualitative comparisons required in ethical decision making.
5. Finally, justice failures result from ignoring the fairness of the distribution of harms and benefits. This leads to a solution which may maximize benefits and minimize harms but still give rise to serious injustices in the distribution of these benefits and harms.
Reversibility Test
1. Set up the test by (i) identifying the agent, (ii) describing the action, and (iii) identifying the stakeholders and their stakes.
2. Use the stakeholder analysis to identify the relations to be reversed.
3. Reverse roles between the agent (you) and each stakeholder: put them in your place (as the agent) and yourself in their place (as the one subjected to the action).
4. If you were in their place, would you still find the action acceptable?
Cross Checks for Reversibility Test (These questions help you to check if you have carried out the reversibility test properly.)
• Does the proposed action treat others with respect? (Does it recognize their autonomy or circumvent it?)
• Does the action violate the rights of others? (Examples of rights: free and informed consent, privacy, freedom of conscience, due process, property, freedom of expression)
• Would you recommend that this action become a universal rule?
• Are you, through your action, treating others merely as means?
Pitfalls of the Reversibility Test
• Leaving out a key stakeholder relation
• Failing to recognize and address conflicts between stakeholders and their conflicting stakes
• Confusing treating others with respect with capitulating to their demands (“Reversing with Hitler”)
• Failing to reach closure, i.e., an overall, global reversal assessment that takes into account all the stakeholders the agent has reversed with.
Steps in Applying the Public Identification Test
• Set up the analysis by identifying the agent, describing the action, and listing the key values or virtues at play in the situation.
• Association the action with the agent.
• Describe what the action says about the agent as a person. Does it reveal him or her as someone associated with a virtue or a vice?
Alternative Version of Public Identification
• Does the action under consideration realize justice or does it pose an excess or defect of justice?
• Does the action realize responsibility or pose an excess or defect of responsibility?
• Does the action realize reasonableness or pose too much or too little reasonableness?
• Does the action realize honesty or pose too much or too little honesty?
• Does the action realize integrity or pose too much or too little integrity?
Pitfalls of Public Identification
• Action not associated with agent. The most common pitfall is failure to associate the agent and the action. The action may have bad consequences and it may treat individuals with respect but these points are not as important in the context of this test as what they imply about the agent as a person who deliberately performs such an action.
• Failure to specify moral quality, virtue, or value. Another pitfall is to associate the action and agent but only ascribe a vague or ambiguous moral quality to the agent. To say, for example, that willfully harming the public is bad fails to zero in on precisely what moral quality this ascribes to the agent. Does it render him or her unjust, irresponsible, corrupt, dishonest, or unreasonable? The virtue list given above will help to specify this moral quality.
Code of Ethics Test
• Does the action hold paramount the health, safety, and welfare of the public, i.e., those affected by the action but not able to participate in its design or execution?
• Does the action maintain faithful agency with the client by not abusing trust, avoiding conflicts of interest, and maintaining confidences?
• Is the action consistent with the reputation, honor, dignity, and integrity of the profession?
• Does the action serve to maintain collegial relations with professional peers?
Meta Tests
• The ethics and feasibility tests will not always converge on the same solution. There is a complicated answer for why this is the case but the simple version is that the tests do not always agree on a given solution because each test (and the ethical theory it encapsulates) covers a different domain or dimension of the action situation. Meta tests turn this disadvantage to your advantage by feeding the interaction between the tests on a given solution back into the evaluation of that solution.
• When the ethics tests converge on a given solution, this convergence is a sign of the strength and robustness of the solution and counts in its favor.
• When a given solution responds well to one test but does poorly under another, this is a sign that the solution needs further development and revision. It is not a sign that one test is relevant while the others are not. Divergence between test results is a sign that the solution is weak.
Application Exercise
You will now practice the four stages of decision making with a real-world case. This case, Risk Assessment, came from a retreat on Business, Science, and Engineering Ethics held in Puerto Rico in December 1998. It was funded by the National Science Foundation, Grant SBR 9810253.
Risk Assessment ScenarioCase Scenario: You supervise a group of engineers working for a private laboratory with expertise in nuclear waste disposal and risk assessment. The DOE (Department of Energy) awarded a contract to your laboratory six years ago to do a risk assessment of various nuclear waste disposal sites. During the six years in which your team has been doing the study, new and more accurate calculations in risk assessment have become available. Your laboratory’s study, however, began with the older, simpler calculations and cannot integrate the newer without substantially delaying completion. You, as the leader of the team, propose a delay to the DOE on the grounds that it is necessary to use the more advanced calculations. Your position is that the laboratory needs more time because of the extensive calculations required; you argue that your group must use state of the art science in doing its risk assessment. The DOE says you are using overly high standards of risk assessment to prolong the process, extend the contract, and get more money for your company. They want you to use simpler calculations and finish the project; if you are unwilling to do so, they plan to find another company that thinks differently. Meanwhile, back at the laboratory, your supervisor (a high level company manager) expresses to you the concern that while good science is important in an academic setting, this is the real world and the contract with the DOE is in jeopardy. What should you do?
Part One: Problem Specification
1. Specify the problem in the above scenario. Be as concise and specific as possible
2. Is your problem best specifiable as a disagreement? Between whom? Over what?
3. Can your problem be specified as a value conflict? What are the values in conflict? Are the moral, nonmoral, or both?
Part Two: Solution Generation
1. Quickly and without analysis or criticism brainstorm 5 to ten solutions
2. Refine your solution list. Can solutions be eliminated? (On what basis?) Can solutions be combined? Can solutions be combined as plan a and plan b?
3. If you specified your problem as a disagreement, how do your solutions resolve the disagreement? Can you negotiate interests over positions? What if your plan of action doesn't work?
4. If you formulated your problem as a value conflict, how do your solutions resolve this conflict? By integrating the conflicting values? By partially realizing them through a value compromise? By trading one value off for another?
Part Three: Solution Testing
1. Construct a solution evaluation matrix to compare two to three solution alternatives.
2. Choose a bad solution and then compare to it the two strongest solutions you have.
3. Be sure to avoid the pitfalls described above and set up each test carefully.
Part Four: Solution Implementation
1. Develop an implementation plan for your best solution. This plan should anticipate obstacles and offer means for overcoming them.
2. Prepare a feasibility table outlining these issues using the table presented above.
3. Remember that each of these feasibility constraints is negotiable and therefore flexible. If you choose to set aside a feasibility constraint then you need to outline how you would negotiate the extension of that constraint.
Problem Solving Presentation
Decision Making Manual V5.pptx
Shortened Presentation for Fall 2012
Decision Making Manual V6.pptx
Vigo Socio-Technical System Table and Problems
Vigo STS.docx
Test Rubric Fall 2009: Problem-Solving
PE_Rubric_EO_S09.docx | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/02%3A_Ethical_Leadership_-Making/2.02%3A_Three_Frameworks_for_Ethical_Problem-Solving_in_Business_and_the_Professions.txt |
Introduction
In this module, you will study a real-world ethical problem, the Toysmart case, and employ frameworks based on the software development cycle to (1) specify ethical and technical problems, (2) generate solutions that integrate ethical value, (3) test these solutions, and (4) implement them over situation-based constraints. This module will provide you with an opportunity to practice integrating ethical considerations into real-world decision-making and problem-solving in business and computing. This whole approach is based on an analogy between ethics and design (Whitbeck).
Large real-world cases like Toysmart pivot around crucial decision points. You will take on the role of one of the participants in the Toysmart case and problem-solve in teams from one of three decision points. Problem-solving in the real world requires perseverance, moral creativity, moral imagination, and reasonableness; one appropriates these skills through practice in different contexts. Designing and implementing solutions requires identifying conflicting values and interests, balancing them in creative and dynamic solutions, overcoming technical limits, and responding creatively to real-world constraints.
Each decision point requires that you take up the position of a participant in the case and work through decision-making frameworks from his or her perspective. You may be tempted to back out and adopt an evaluative posture from which to judge the participants. Resist this temptation. This module is specifically designed to give you practice in making real-world decisions. These skills emerge when you role-play from one of the standpoints within the case. You will learn that decision-making requires taking stock of one’s situation from within a clearly defined standpoint and then accepting responsibility for what arises from within that standpoint.
Cases such as Toysmart are challenging because of the large amount of information gathering and sorting they require. Moral imagination responds to this challenge by providing different framings that help to filter out irrelevant data and structure what remains. Framing plays a central role in problem specification. For example, Toysmart could be framed as the need to develop more effective software to help negotiate the exchange of information online. In this case, a software programming expert would be brought in to improve P3P programs. Or it could be framed as a legal problem that requires amending the Bankruptcy Code. What is important at this stage is that you and your group experiment with multiple framings of the case around your decision point. This makes it possible to open up avenues of solution that would not be possible under one framing.
Tackling large cases in small teams also helps develop the communication and collaboration skills that are required for group work. Take time to develop strategies for dividing the workload among your team members. The trick is to distribute equally but, at the same time, to assign tasks according to the different abilities of your team members. Some individuals are better at research while others excel in interviewing or writing. Also, make sure to set aside time when you finish for integrating your work with that of your teammates. Start by quickly reviewing the information available on the case. This is called “scoping the case.” Then formulate specific questions to focus further research on information relevant to your problem-solving efforts. This includes information pertinent to constructing a socio-technical analysis, identifying key “embedded” ethical issues, and uncovering existing best and worst practices.
A case narrative, STS (socio-technical system) description, and two ethical reflections have been published at http://computingcases.org. This module also links to websites on bankruptcy and privacy law, the Model Business Corporation Act, consumer privacy information, and the TRUSTe website.
Toysmart Narrative
Toysmart was a Disney-supported company that sold educational toys online from December 1998 to May 2000. After disappointing Christmas sales in 1999, Disney withdrew its financial support. The greatly weakened dot-com company lasted less than a year after this. On May 22, 2000, Toysmart announced that it was closing down and brought in a consulting firm, The Recovery Group, to evaluate its assets, including a customer database of 260,000 profiles, each worth up to \$500.
Fierce opposition emerged when Toysmart placed ads in the Wall Street Journal and the Boston Globe to sell this database. Customer interest groups pointed out that Toysmart had promised not to share customer information with third parties. Toysmart also prominently displayed the TRUSTe seal which testified further to the company's obligations to respect customer privacy and security. Selling this data to third parties would break Toysmart promises, violate TRUSTe policies, and undermine consumer confidence in the security and privacy of online transactions. Toysmart's obligations to its customers came into direct conflict with its financial obligations to its investors and creditors.
TRUSTe reported Toysmart's intention to sell its database to the FTC (Federal Trade Commission) who on July 10, 2000 filed a complaint "seeking injunctive and declaratory relief to prevent the sale of confidential, personal customer information" (FTC article) Toysmart's promise never to share customer PII with third parties provided the legal foundation for this complaint. According to the FTC, Toysmart "violated Section 5 of the FTC Act by misrepresenting to customers that personal information would never be shared with third parties, then disclosing, selling, or offering that information for sale." Finally, because it collected data from children under 13 who entered various contests offered on its website, Toysmart was also cited for violating the Children's Online Privacy Protection Act or COPPA.
The FTC reached a settlement with Toysmart. The bankrupt dot-com must "file an order in the bankruptcy court prohibiting the sale of its customer data as a 'stand-alone asset'. In other words, the rights bundled in the liquidation and sale of Toysmart did not include the liberty of buyers to dispose of the asset in whatever way they saw fit. According to the negotiated settlement, buyers were bound by the commitments and promises of the original owners. Toysmart creditors "can sell electronic assets only if the purchasing company abided by the same privacy policy." In essence, the FTC asked Toysmart creditors to honor the spirit, if not the letter, of Toysmart's original promise to its customers not to sell their PII to third parties. Creditors now had to guarantee that (1) the buyer had the same basic values as Toysmart (for example, a commitment to selling quality, educational toys), (2) the buyer use the data in the same way that Toysmart had promised to use it when collecting it, and (3) the buyer would not transfer the information to third parties without customer consent. In this way, the settlement proposed to protect Toysmart customer privacy interests while allowing creditors to recover their losses through the sale of the bankrupt company's "crown jewel", its customer database.
On August 17, 2000, the Federal Bankruptcy Court declined to accept the Toysmart-FTC settlement. Instead, they argued that Toysmart and the FTC should wait to see if any parties willing to buy the database would come forward. The Bankruptcy Court felt that potential buyers would be scared off by the FTC suit and the pre-existing obligations created by Toysmart promises and TRUSTe standards. Should a buyer come forth, then they would evaluate the buyer's offer in terms of the FTC-Toysmart settlement designed to honor the privacy and security commitments made to Toysmart customers.
A final settlement was reached on January 10, 2001. When a buyer did not come forward, Buena Vista Toy Company, a Disney Internet subsidiary who was also a major Toysmart creditor, agreed to buy the database for \$50,000 with the understanding that it would be immediately destroyed. The database was then deleted and affidavits were provided to this effect.
Toysmart Chronology
Time LineChronology of Toysmart Case
1997 David Lord, a former college football player, come to work for Holt Education Outlet in Waltham, Mass.
December 1998 Lord and Stan Fung (Zero Stage Capital) buy Holt Education Outlet and rename it "Toysmart." (Lorek) Toysmart focuses on providing customers with access to 75,000 toys through an online catalog. (Nashelsky).
August 1999 Toysmart turns down a 25 million offer from an investment firm. Accepts Disney offer of 20 million in cash and 25 million in advertising,
September 1999 Toysmart posts privacy policy which promises not to release information collected on customers to third parties. At about this time, Toysmart receives permission from TRUSTe to display its seal certifying that Toysmart has adopted TRUSTe procedures for protecting privacy and maintaining information security.
Christmas 1999 After disappointing Christmas toy sales, Disney withdraws its support from Toysmart.
April 2000 COPPA goes into effect. (Childhood Online Privacy Protection Act) Prohibits soliciting information from children under 13 without parental consent.
June 2000 (approximately) Toysmart erases 1500 to 2000 customer profiles from database to comply with COPPA (information collected after law went into effect)
May 22, 2000 Toysmart announces that it is closing its operations and selling its assets. Its initial intention is to reorganize and start over.
June 9, 2000 Toysmart creditors file an involuntary bankruptcy petition rejecting Toysmart proposal to reorganize. They petition the U.S. Trustee to form a Creditors Committee to oversee the liquidation of Toysmart assets.
June 23, 2000 Toysmart consents to involuntary bankruptcy petition. Files Chapter 11 bankruptcy. It rejects reorganization and works with lawyers and the Recovery Group to liquidate its assets.
June 2000 Recovery Group analyzes Toysmart assets and identifies its customer information database as one of its most valuable assets (a "crown jewel")
June 9, 2000 Disney subsidiary, acting as Toysmart creditor, places ads in Wall Street Journal and Boston Globe offers Toysmart customer database for sale.
After June 9, 2000 TRUSTe discovers Toysmart ad. Informs FTC (Federal Trade Commission) that selling of customer database to third parties violates TRUSTe guidelines and violates Toysmart's promises to customers(13,2)
July 10, 2000 FTC files complaint against Toysmart "seeking injunctive and declaratory relief to prevent the sale of confidential, personal customer information." District attorneys of 41 states also participate in complaint against Toysmart.
July 27, 2000 Hearing by U.S. Bankruptcy Court on Toysmart case. Includes Toysmart proposal to sell customer database.
Late July 2000 FTC and Toysmart reach settlement. Toysmart can only sell customer information to a third party who shares Toysmart values and agrees to carry out same privacy policy as Toysmart.
Late July 2000 Federal bankruptcy court rejects FTC and Toysmart settlement. Suggests waiting to see if a buyer comes forth.
January 10, 2001 Walt Disney Internet subsidiary (Buena Vista Toy Company?) pays Toysmart \$50,000 for its database. Toysmart then destroys the database and provides a confirming affidavit. (18,2)
Insert paragraph text here.
Supporting Documents and Tables
Toysmart Creditors Source Lorek
Creditor Description Debt Impact
Zero Stage Capital Venture Capital Firm 4 million
Citibank 4 million
Arnold Communications 2.5 million
Children's Television Workshop 1.3 million
Data Connections Set up high-speed cable and fiber optics for Toysmart 85,000 Data Connections took out a loan to keep solvent
Integrated Handling Concepts Set up packaging and handling system for Toysmart 40,000 Requires dot-coms to pay upfront after Toysmart experience
Blackstone Software business 45,000 "It puts us in jeopardy as well"
PAN Communications "Public relations agency specializing in e-business" 171,390 Turns down deals with dot-com companies and requires up-front payments
Insert paragraph text here.
Intermediate Moral Concept: Informed Consent
Concept and Definition
• Informed Consent: The risk bearer consents to take on the risk on the basis of a complete understanding of its nature and breadth.
• Belmont Report: "subjects, to the degree that they are capable, be given the opportunity to choose what shall or shall not happen to them."
• "This opportunity is provided when adequate standards for informed consent are satisfied."
• Quotes take from Belmont Report
Arguments for Free and Informed Consent as a Moral Right
• Free and informed consent is essential for the exercise of moral autonomy. Absence implies force, fraud, or manipulation all of which block the exercise of moral autonomy.
• The standard threat occurs when crucial risk information is not communicated to the risk-taker. This could be because the risk taker cannot appreciate the risk, because the mode of communication is inadequate, or because the information has been covered up. Given this standard threat, free and informed consent is vulnerable; it must be protected.
• Informed consent must be shaped around its feasibility, that is, the ability of the duty holder to recognize and respect this right in others. If private individuals exercise their right as a veto, then they can block socially beneficial projects. There are also serious problems concerning children, mentally challenged adults, and future generations. Finally, it may not be possible or feasible to know all risks in advance.
Conditions for Recognizing and Respecting Right
• From Belmont Report
• Information: research procedure, their purposes, risks and anticipated benefits, alternative procedures (where therapy is involved), and a statement offering the subject the opportunity to ask questions and to withdraw at any time from the research.
• Comprehension: manner and context in which information is conveyed is as important as the information itself.
• Voluntariness: an agreement to participate in research constitutes a valid consent only if voluntarily given. This element of informed consent requires conditions free of coercion and undue influence.
Other Legal and Moral Frameworks
• Institutional Research Boards or IRBs now require documentation of informed consent on research projects carried out under the university's auspicies. This is in response to requirements by granting agencies such as the National Institute for Health and the National Science Foundation.
• Consenting to the transfer of PII (personal identifying information) online:opt-in and opt-out.
• Opt-in: Information is transferred only upon obtaining express consent. Default is not transferring information.
• Opt-in: Information transfer is halted only when person to whom information applies does something positive, i.e., refuses to consent to transfer. Default is on transferring the information.
• Liability Rules and Property Rules: These also have to do with consent. Sagoff makes this distinction with reference to activities that have an impact on the environment. an injunction referring to liability rules stops the activity to protect the individual who proves impact. Property rules require only that the producer of the environmental impact compensate the one who suffers the impact.
Cases Employing Informed Consent
• Therac-25: Patients receiving radiation therapy should be made aware of the risks involved with treatment by the machine. Free and informed consent is involved when shutting down the machines to investigate accident reports or continuing operating the machines while investigating accident reports. In both cases, it is necessary, under this right, to let patients know what is going on and their risks.
• Toysmart Case: Toysmart creditors are about to violate Toysmart's promise not to transfer customer information profiles to third parties. This transfer can occur, morally, but only with the express consent of the customers who have provided the information. The devil is in the details. Do opt-in or opt-out procedures best recognize and respect free and informed consent in this case?
• Hughes Case: Hughes customers want their chips right away and are pressuring Saia and the crowd to deliver them. Would they consent to renegotiate the conditions under which environmental tests can be skipped?
Privacy and Property Summaries
Bibliographical NoteThe triangle of privacy is widely disseminated in the literature of business ethics. The author first became aware of it form George G Brenkert (1981) "Privacy, Polygraphs and Work," Business and Professional Ethics 1, Fall 1981" 19-34. Information on intellectual property comes from Lawrence Lessig (2006) Code.2, Basic Books: Chapter 10.
What you need to know …
What you need to know about socio-technical systems
1. STS have seven broad components: hardware, software, physical surroundings, people/groups/roles, procedures, laws, and data/data structures.
2. Socio-technical systems embody values
• These include moral values like safety, privacy, property, free speech, equity and access, and security. Non-moral values can also be realized in and through Socio Technical Systems such as efficiency, cost-effectiveness, control, sustainability, reliability, and stability.
• Moral values present in Socio Technical Systems can conflict with other embedded moral values; for example, privacy often conflicts with free speech. Non-moral values can conflict with moral values; developing a safe system requires time and money. And, non-moral values can conflict; reliability undermines efficiency and cost effectiveness. This leads to three problems that come from different value conflicts within Socio Technical Systems and between these systems and the technologies that are being integrated into them.
• Mismatches often arise between the values embedded in technologies and the Socio Technical Systems into which they are being integrated. As UNIX was integrated into the University of California Academic Computing STS (see Machado case at Computing Cases), the values of openness and transparency designed into UNIX clashed with the needs of students in the Academic Computing STS at UCI for privacy.
• Technologies being integrated into Socio Technical Systems can magnify, exaggerate, or exacerbate existing value mismatches in the STS. The use of P2P software combined with the ease of digital copying has magnified existing conflicts concerning music and picture copyrights.
• Integrating technologies into STSs produces both immediate and remote consequences and impacts.
3. Socio-technical systems change
• These changes are bought about, in part, by the value mismatches described above. At other times, they result from competing needs and interests brought forth by different stakeholders. For example, bicycle designs, the configuration of typewriter keys, and the design and uses of cellular phones have changed as different users have adapted these technologies to their special requirements.
• These changes also exhibit what sociologists call a “trajectory”, that is, a path of development. Trajectories themselves are subject to normative analysis. For example, some STSs and the technologies integrated into them display a line of development where the STS and the integrated technology are changed and redesigned to support certain social interests. The informating capacities of computing systems, for example, provide information which can be used to improve a manufacturing processes can or to monitor workers for enhancing management power. (See Shoshanna Zuboff, The Age of the Smart Machine
• Trajectories, thus, outline the development of STSs and technologies as these are influenced by internal and external social forces.
In this section, you will learn about this module’s exercises. The required links above provide information on the frameworks used in each section. For example, the Socio-Technical System module provides background information on socio-technical analysis. The "Three Frameworks" module provides a further description of the ethics tests, their pitfalls, and the feasibility test. These exercises will provide step by step instructions on how to work through the decision points presented above.
For more information see Huff and Jawer below.
Decision Point One:You are David Lord, a former employee of Holt Educational Outlet, a manufacturer of educational toys located in Waltham, Mass. Recently, you have joined with Stan Fung of Zero Stage Capital, a venture capital firm to buy out Holt Educational Outline. After changing its name to Toysmart, you and Fung plan to transform this brick and mortar manufacturer of educational toys into an online firm that will link customers to a vast catalogue of educational, high quality toys. Designing a website to draw in toy customers, linking to information on available toys, setting up a toy distribution and shipping system, and implementing features that allow for safe and secure online toy purchases will require considerable financing. But, riding the crest of the dot-com boom, you have two promising options. First, a venture capital firm has offered you \$20,000,000 for website development, publicity, and other services. Second, Disney has offered the same amount for financing, but has added to it an additional \$25,000,000 in advertising support. Disney has a formidable reputation in this market, a reputation which you can use to trampoline Toysmart into prominence in the growing market in educational toys. However, Disney also has a reputation of micro-managing its partners. Develop a plan for financing your new dot-com.
Things to consider in your decision-making:
1. What are Toysmart values? What are Disney values? Would Disney respect Toysmart’s values?
2. What synergies could result from working with Disney? For example, could you share information on customers? You could feed your customer profiles to Disney in exchange for their customer profiles. What kind of data managing technology would be required for this? What ethical problems could arise from transferring customer identifying information to third parties?
3. What kind of commitment would you be willing to make to Disney in terms of product and sales? How should Disney reciprocate? For example, how long should they stick with you through sales that fall short of projections?
Decision Point Two:You work for Blackstone, "an 18-person software business." You have been asked by Toysmart to provide software the following functions: (1) designing a webpage that would attract customers and communicate Toysmart Values, (2) advise Toysmart on its privacy and data security policy including whether to register with an online trust, security measures to protect customer data during online transactions, and measures to prevent unauthorized access to customer data while stored, and (3) a comprehensive online catalogue that would provide customers with access to educational toys from a variety of small busines manufacturers. An example of small toy manufacturers to which Toysmart should be linked is Brio Corporation which manufactures wooden toys such as blocks, trains, and trucks. Develop general recommendations for Toysmart around these three areas.
Information for this scenario comes from Laura Lorek, "When Toysmart Broke," www.zdnet.com/eweek/stories/g...612962,00.html. Accessed July 16, 2001.
Things to consider in your decision-making
• Toysmart is a fairly new dot-com. While it is supported by Disney, it is still a risky venture. Should you ask them for advance payment for whatever services you render? What kind of policies does your company have for identifying and assessing financial risk?
• What kind of privacy and data security policy should you recommend to Toysmart? What kind of values come into conflict when a company like Toysmart develops and implements privacy and data security measures? (Use your STS description to answer this question.)
• Should Toysmart become bankrupt, their data base would turn into a valuable asset. What recommendations should you make to help Toysmart plan around this possibility? What values come into conflict when planning to dispose of assets during bankruptcy proceedings? What kind of obligations does a company take on during its operation that continue even after it has become bankrupt?
• Using the link provided with this module, visit the TRUSTe website and find its white paper on developing a privacy policy. Evaluate this privacy policy for Toysmart. What benefits can a strong privacy policy bring to a dot-com? Should Toysmart work to qualify to display the TRUSTe seal on its website? Examine TRUSTe procedures for transferring confidential customer PII to third parties? What obligations will this create? Would this over-constrain Toysmart?
Decision Point Three:You work for PAN Communications and have been providing advertising services for Toysmart. Now you find out that Toysmart has filed a Chapter 11 bankruptcy, and it has an outstanding debt to your company for \$171,390. As a part of this filing procedure, Toysmart has reported its assets at \$10,500,000 with debts of \$29,000,000. Toysmart creditors, including PAN Communications, have petitioned the Office of the United States Trustee for a "Creditors' Committee Solicitation Form." This will allow for the formation of a committee composed of Toysmart creditors who decide on how the assets of the bankrupt firm will be distributed. You, because of your knowledge of bankruptcy and accounting procedures, have been asked to represent your company on this committee. This bleak situation is somewhat remedied by the customer data base that Toysmart compiled during its operation. It contains profiles of the PII (personal identifying information) of 260,000 individuals. Because selling educational toys is profitable, there is a good chance that this data base could be sold for up to \$500 a profile to a third party. Should you recommend selling this data base? Should Toysmart customers be notified of the pending transfer of their PII and, if so, how should they be notified?
Here are some constraints that outline your decision
• As a member of the Creditors' Committee, you have a fiduciary duty to Toysmart creditors in working to distribute fairly the remaining Toysmart assets. This would, all things being equal, lead to recommending selling the Toysmart customer data base
• There are some provisions in the bankruptcy code that may require or allow overriding fiduciary duties given prior legal commitments made by Toysmart. These commitments, in the form of strong privacy guarantees made to customers by Toysmart on its webpage, may constitute an "executory contract." See the Legal Trail table in the Toysmart case narrative and also Larren M. Nashelsky, "On-Line Privacy Collides With Bankruptcy Creditors," New York Law Journal, New York Law Publishing Company, August 28, 2000.
• Finally, Nashelsky makes an interesting argument. While deontological considerations would require setting aside creditor interests and honoring Toysmart privacy promises, a justice-based argument would recommend a compromise. Bankruptcy proceedings start from the fact that harm (financial) has been done. Consequently, the important justice consideration is to distribute fairly the harms involved among the harmed parties. Harm distributions are correlated with benefit distributions. Because Toysmart customers benefited from Toysmart offerings, they should also bear a share of the harms produced when the company goes bankrupt. This requires that they allow the distribution of their PII under certain conditions.
Things to consider in your decision-making
• How do you balance your obligations to PAN with those to other Toysmart creditors as a member of the Creditors' Committee?
• How should you approach the conflict between honoring Toysmart promises and carrying out Creditor Committee fiduciary duties? Do you agree with Nashelsky's argument characterized above?
• Should the Bankruptcy Code be changed to reflect issues such as these? Should privacy promises be considered an “executory contract” that overrides the duty to fairly and exhaustively distribute a company's assets?
• Finally, what do you think about the FTC's recommendation? The Bankruptcy Court's response? The final accommodation between Toysmart and Buena Vista Toy Company?
What you will do ...
In this section, you will learn about this module’s exercises. The required links above provide information on the frameworks used in each section. For example, the Socio-Technical System module provides background information on socio-technical analysis. The "Three Frameworks" module provides a further description of the ethics tests, their pitfalls, and the feasibility test. These exercises will provide step by step instructions on how to work through the decision points presented above.
Exercise One: Problem Specification
In this exercise, you will specify the problem using socio-technical analysis. The STS section of the Toysmart Case narrative (found at Computing Cases) provides a good starting point. In the first table, enter the information from the Toysmart case materials pertinent to the general components of a STS, its hardware, software, physical surroundings, people/groups/roles, procedures, laws, data. Some examples taken from the STS description at Computing Cases are provided to get you started. Then, using the second table, identify the values that are embedded in the different components of the STS. For example, PICS (platforms for internet content selection) embody the values of security and privacy. Finally, using the data from your socio-technical analysis, formulate a concise problem statement.
Exercise 1a:Read the socio-technical system analysis of the Toysmart case at http://computingcases.org. Fill in the table below with elements from this analysis that pertain to your decision point.
Socio-Technical System Table
Hardware Software Physical Surroundings People/Groups/Roles Procedures Laws, Codes, Regulations Data and Data Structures
Holt Education Outlet Platforms for Internet Content Selection Cyber Space Toysmart the corporation Buying Toys Online COPPA Toysmart Customer Data Base
Instructions for Table 1:
1. Go to http://computingcases.org and review the STS description provided for the Toysmart case.
2. Pull out the elements of the STS description that are relevant to your decision point. List them under the appropriate STS component in the above table.
3. Think about possible ways in which these components of the Toysmart STS interact. For example, what kinds of legal restrictions govern the way data is collected, stored, and disseminated?
4. Develop your STS table with an eye to documenting possible ethical conflicts that can arise and are relevant to your decision point.
Values Embedded by Relevant SoftwareValues embedded in key software components in the Toysmart case. Emphasis on machine/software negotiation for privacy preferences in Internet transactions.
Software / Value Embedded PICS (Platforms for Internet Content Selection) (Platforms for Privacy Preferences) SSLs (Secured Socket Layers) that encrypt pages asking for SS numbers
Security Embodies privacy and security by filtering objectionable data. Security selected over free speech. Integrates property with security and privacy by converting information into property. Realizes / supports security by sealing off domains of information.
Privacy Embodies privacy and security by filtering objectionable data. Security selected over free speech. Integrates property and security by filtering objectionable data. Security selected over free speech. Realizes and supports privacy by sealing off domains of information.
Property Integrates property with security and privacy by converting information into property Realizes and supports property by restricting access (intellectual property protected by excluding non-authorized access.
Free Speech Interferes with free speech by filtering content. Content can be filtered with recipient's awareness. Facilitates by permitting information exchange on model of property exchange. But this limits exchange by assigning it a price. Restricts access.
Justice (Equity and Access) Could be used to restrict access to ideas by filtering ideas. Thus it could cut off flow of information into the intellectual commons. Facilitates by permitting information exchange on model of property exchange. But this limits exchange by assigning it a price. Because it restricts access to a domain, it can be used to reduce or cut off flow of information into the intellectual commons.
Exercise 1bExamine the values embedded in the STS surrounding this decision point. Locate your values under the appropriate component in the Toysmart STS. For example, according to the STS description for Toysmart found at Computing Cases, the software programs prominent in this case embody certain values; SSLs embody security and privacy, P3P property, and PICS privacy. Next, look for areas where key values can come into conflict.
Value Table
Hardware Software Physical Surroundings People/Groups/Roles Procedures Laws/Codes/Regulations Data/Data Structures
Security
Privacy
Property
Justice (Equity/Access)
Free Speecy
Instructions for Table 2:
1. This module links to another Connexions module, Socio-Technical Systems in Professional Decision-Making. There you will find short profiles of the values listed in the above table: security, privacy, property, justice, and free speech. These profiles will help you to characterize the values listed in the above table.
2. The second ethical reflection in the Toysmart case narrative (at Computing Cases) also contains a discussion of how property comes into conflict with privacy.
3. Identify those components of the Toysmart STS that embody or embed value. For example, list the values realized and frustrated by the software components discussed in the Toysmart case in the STS description.
4. Look for ways in which different elements of the STS that embed value can interact and produce value conflicts. These conflicts are likely sources for problems that you should discuss in your problem statement and address in your solution.
Exercise 1c:Write out the requirements (ethical and practical) for a good solution. Identify the parts of the STS that need changing. Then, develop a concise summary statement of the central problem your decision point raises. As you design solutions to this problem, you may want to revise this problem statement. Be sure to experiment with different ways of framing this problem.
Harris, Pritchard, and Rabins provide a useful approach to problem specification. See references below.
Exercise Two: Solution Generation
Generate solutions to the problem(s) you have specified in Exercise 1. This requires that...
• each member of your group develop a list of solutions,
• the group combines these individual lists into a group list, and...
• the group reduces this preliminary list to a manageable number of refined and clarified solutions for testing in the next stage.
Helpful Hints for Solution Generation
1. Solution generation requires proficiency in the skills of moral imagination and moral creativity.Moral imagination is the ability to open up avenues of solution by framing a problem in different ways. Toysmart could be framed as a technical problem requiring problem-solving skills that integrate ethical considerations into innovative designs. Moral creativity is the ability to formulate non-obvious solutions that integrate ethical considerations over various situational constraints.
2. Problems can be formulated as interest conflicts. In this case different solution options are available.
• Gather Information. Many disagreements can be resolved by gathering more information. Because this is the easiest and least painful way of reaching consensus, it is almost always best to start here. Gathering information may not be possible because of different constraints: there may not be enough time, the facts may be too expensive to gather, or the information required goes beyond scientific or technical knowledge. Sometimes gathering more information does not solve the problem but allows for a new, more fruitful formulation of the problem. Harris, Pritchard, and Rabins in Engineering Ethics: Concepts and Cases show how solving a factual disagreement allows a more profound conceptual disagreement to emerge.
• Nolo Contendere. Nolo Contendere is latin for not opposing or contending. Your interests may conflict with your supervisor but he or she may be too powerful to reason with or oppose. So your only choice here is to give in to his or her interests. The problem with nolo contendere is that non-opposition is often taken as agreement. You may need to document (e.g., through memos) that you disagree with a course of action and that your choosing not to oppose does not indicate agreement.
• Negotiate. Good communication and diplomatic skills may make it possible to negotiate a solution that respects the different interests. Value integrative solutions are designed to integrate conflicting values. Compromises allow for partial realization of the conflicting interests. (See the module, The Ethics of Team Work, for compromise strategies such as logrolling or bridging.) Sometimes it may be necessary to set aside one's interests for the present with the understanding that these will be taken care of at a later time. This requires trust.
• Oppose. If nolo contendere and negotiation are not possible, then opposition may be necessary. Opposition requires marshalling evidence to document one's position persuasively and impartially. It makes use of strategies such as leading an "organizational charge" or "blowing the whistle." For more on whistle-blowing consult the discussion of whistle blowing in the Hughes case that can be found at computing cases.
• Exit. Opposition may not be possible if one lacks organizational power or documented evidence. Nolo contendere will not suffice if non-opposition implicates one in wrongdoing. Negotiation will not succeed without a necessary basis of trust or a serious value integrative solution. As a last resort, one may have to exit from the situation by asking for reassignment or resigning.
3. Solutions can be generated by readjusting different components of the STS.
• Technical Puzzle. If the problem is framed as a technical puzzle, then solutions would revolve around developing designs that optimize both ethical and technical specifications, that is, resolve the technical issues and realize ethical value. In this instance, the problem-solver must concentrate on the hardware and software components of the STS.
• Social Problem. If the problem is framed as a social problem, then solutions would revolve around changing laws or bringing about systemic reform through political action. This would lead one to focus on the people/groups/roles component (working to social practices) or the legal component.
• Stakeholder Conflict. If the problem is framed as a conflict between different stakeholder interests, then the solution would concentrate on getting stakeholders (both individuals and groups) to agree on integrative or interest compromising solutions. This requires concentrating on the people/group/role component of the STS. (Note: A stakeholder is any group or individual with a vital interest at play in the situation.)
• Management Problem. Finally, if the problem is framed as a management problem, then the solution would revolve around changing an organization's procedures. Along these lines, it would address the (1) fundamental goals, (2) decision recognition procedures, (3) organizational roles, or (4) decision-making hierarchy of the organization. These are the four components of the CID (corporate internal decision) structure described in the “Ethical Reflections” section of the Toysmart case.
• Nota Bene: Financial issues are covered by the feasibility test in the solution implementation stage. As such, they pose side issues or constraints that do not enter into the solution generation phase but the solution implementation phase.
4. Brainstorming. Moral creativity, which involves designing non-obvious solutions, forms an essential part of solution generation. Here are some guidelines to get you started.
• Individually make out a list of solutions before the group meeting. Work quickly to realize a pre-established quota of five to ten solutions. After composing a quick first draft, revise the list for clarity only; make no substantial changes.
• Start the group brainstorming process by having the group review and assemble all the individual solutions. Do this quickly and without criticism. Beginning criticism at this stage will kill the creativity necessary for brainstorming and shut down the more timid (but creative) members of the group.
• Review the list and identify solutions that are identical or overlap. Begin the refining process by combining these solutions.
• Having reviewed all the brainstormed solutions, it is now time to bring in criticism. Begin by eliminating solutions with major ethical problems such as those that violate rights, produce injustices, or cause extensive harm.
• Identify but do not eliminate solutions that are ethical but raise serious practical problems. Do not initially eliminate an ethical solution because there are obstacles standing in the way of its implementation. Be descriptive. Identify and impartially describe the obstacles. Later, in the solution implementation stage, you may be able to design creative responses to these obstacles.
• Identify solutions that do not "fit" your problem statement. These require a decision. You can throw out the solution because it does not solve the problem or you can change the problem. If a solution does not fit the problem but, intuitively, seems good, this is a sign that you need to take another look at your problem statement.
• Don’t automatically reject partial solutions. For example, sending memos through email rather than printing them out and wasting paper may not solve the entire recycling problem for your company. But it represents a good, partial solution that can be combined with other partial solutions to address the bigger problem.
• Through these different measures, you will gradually integrate criticism into your brainstorming process. This will facilitate working toward a manageable, refined list of solutions for testing in the next stage.
Exercise 3: Develop a Solution List
• Have each member of your team prepare a solution list and bring it to the next group meeting. Set a quota for this individual list, say, 5 to 10 solutions.
• Prepare a group list out of the lists of the individual members. Work to combine similar solutions. Be sure to set aside criticism until the preliminary group list is complete.
• Make use of the following table.
• Refine the group list into a manageable number of solutions for testing in the next stage. Combine overlapping solutions. Eliminate solutions that do not respond to the requirements and the problem statement that you prepared in the previous exercise. Eliminate solutions that violate important ethical considerations, i.e., solutions that violate rights, produce harms, etc.
• Check your refined solution list with your problem statement. If they do not match, eliminate the solution or redefine the problem
Refined Brainstorm List
Solution Ranking Description of Solution Justification (fits requirements, fits problem)
Best Solution
Second Best Solution
Third Best Solution
Fourth Best Solution
Fifth Best Solution
Anthony Weston provides an illuminating and useful discussion of creative problem solving in the reference provided below.
Exercise Three: Solution Testing
In this section, you will test the solutions on the refined list your group produced in the previous exercise. Three ethics tests, described below, will help you to integrate ethical considerations in the problem-solving process. A global feasibility test will help to identify solutions with serious practical problems. Finally, a Solution Evaluation Matrix summarizes the results for class debriefings.
Setting up for the test.
• Identify the agent perspective from which the decision will be made
• Describe the action as concisely and clearly as possible.
• Identify the stakeholders surrounding the decision, i.e., those who will suffer strong impacts (positively or negatively) from the implementation of your decision. Stakeholders have a vital or essential interest (right, good, money, etc) in play with this decision.
• In the harm/beneficence test, identify the likely results of the action and sort these into harms and benefits.
• For the reversibility test, identify the stakeholders with whom you will reverse positions.
• For the public identification test, identify the values, virtues, or vices your action embodies. Associate these with the character of the agent.
Harm/Beneficence Test
1. What are the harms your solution is likely to produce? What are its benefits? Does this solution produce the least harms and the most benefits when compared to the available alternatives?
2. Pitfall—Too much. In this "Paralysis of Analysis" one factor in too many consequences. To avoid the fallacy restrict the analysis to the most likely consequences with the greatest magnitude (Magnitude indicates the range and severity of impact).
3. Pitfall—Too Little. A biased or incomplete analysis results when significant impacts are overlooked. Take time to uncover all the significant impacts, both in terms of likelihood and in terms of magnitude.
4. Pitfall—Distribution of Impacts. Consider, not only the overall balance of harms and benefits but also how harms and benefits are distributed among the stakeholders. If they are equally or fairly distributed, then this counts in the solution's favor. If they are unequally or unfairly distributed, then this counts against the solution. Be ready to redesign the solution to distribute better (=more equitably or fairly) the harmful and beneficial results.
Reversibility Test
1. Would this solution alternative be acceptable to those who stand to be most affected by it? To answer this question, change places with those who are targeted by the action and ask if from this new perspective whether the action is still acceptable?
2. Pitfall—Too much. When reversing with Hitler, a moral action appears immoral and an immoral action appears moral. The problem here is that the agent who projects into the immoral standpoint loses his or her moral bearings. The reversibility test requires viewing the action from the standpoint of its different targets. But understanding the action from different stakeholder views does not require that one abandon himself or herself to these views.
3. Pitfall—Too little. In this pitfall, moral imagination falls short, and the agent fails to view the action from another stakeholder standpoint. The key in the reversibility test is to find the middle ground between too much immersion in the viewpoint of another and too little.
4. Pitfall—Reducing Reversibility to Harm/Beneficence. The reversibility test requires that one assess the impacts of the action under consideration on others. But it is more than a simple listing of the consequences of the action. These are viewed from the standpoint of different stakeholders. The reversibility test also goes beyond considering impacts to considering whether the action treats different stakeholders respectfully. This especially holds when the agent disagrees with a stakeholder. In these disagreements, it is important to work out what it means to disagree with another respectfully.
5. Pitfall—Incomplete survey of stakeholders. Leaving out significant stakeholder perspectives skews the results of the reversibility test. Building an excellent death chamber works when one considers the action from the standpoint of Hitler; after all, it’s what he wants. But treating an individual with respect does not require capitulating to his or her desires, especially when these are immoral. And considering the action from the standpoint of other stakeholders (say the possible victims of newer, more efficient gas chambers) brings out new and radically different information.
6. Pitfall—Not Weighing and Balancing Stakeholder Positions. This pitfall is continuous with the previous one. Different stakeholders have different interests and view events from unique perspectives. The reversibility test requires reviewing these interests and perspectives, weighing them against one another, and balancing out their differences and conflicts in an overall, global assessment.
Publicity (or Public Identification) Test
1. Would you want to be publicly associated or identified with this action? In other words, assume that you will be judged as a person by others in terms of the moral values expressed in the action under consideration. Does this accord with how you would want to or aspire to be judged?
2. Pitfall—Failure to association action with character of agent. In the publicity test, the spotlight of analysis moves from the action to the agent. Successfully carrying out this test requires identifying the agent, describing the action, and associating the agent with the action. The moral qualities exhibited in the action are seen as expressing the moral character of the agent. The publicity test, thus, rests on the idea that an agent's responsible actions arise from and express his or her character.
3. Pitfall—Failure to appreciate the moral color of the action. The publicity test assumes that actions are colored by the ends or goods they pursue. This means that actions are morally colored. They can express responsibility or irresponsibility, courage or cowardice, reasonableness or unreasonableness, honesty or dishonesty, integrity or corrpution, loyalty or betrayal, and so forth. An analysis can go astray by failing to bring out the moral quality (or qualities) that an action expresses.
4. Pitfall—Reducing Publicity to Harm/Beneficence Test. Instead of asking what the action says about the agent, many reduce this test to considering the consequences of publicizing the action. So one might argue that an action is wrong because it damages the reputation of the agent or some other stakeholder. But this doesn't go deep enough. The publicity test requires, not that one calculate the consequences of wide-spread knowledge of the action under consideration, but that one draws from the action the information it reveals about the character of the agent. The consequences of bad publicity are covered by the harm/beneficence test and do not need to be repeated in the public identification test. The publicity test provides new information by turning from the action to the agent. It focuses on what the action (its moral qualities and the goods it seeks) says about the agent.
Comparing the Test Results: Meta-Tests
1. The ethics tests will not always converge on the same solution because each test (and the ethical theories it encapsulates) covers a different dimension of the action: (1) harm/beneficence looks at the outcomes or consequences of the action, (2) reversibility focuses on the formal characteristics of the action, and (3) publicity zeros in on the moral character of the agent.
2. The meta-tests turn this surface disagreement into an advantage. The convergence or divergence between the ethics tests become indicators of solution strength and weakness.
3. Convergence. When the ethics tests converge on a given solution, this indicates solution strength and robustness.
4. Divergence. When tests diverge on a solution—a solution does well under one test but poorly under another—this signifies that it needs further development and revision. Test divergence is not a sign that one test is relevant while the others are not. Divergence indicates solution weakness and is a call to modify the solution to make it stronger.
Exercise 3: Summarize your results in a Solution Evaluation Matrix
1. Place test results in the appropriate cell.
2. Add a verbal explanation to the SEM table.
3. Conclude with a global feasibility test that asks, simply, whether or not there exist significant obstacles to the implementation of the solution in the real world.
4. Finish by looking at how the tests converge on a given solution. Convergence indicates solution strength; divergence signals solution weakness.
Solution Evaluation Matrix
Solution/Test Harm/Beneficence Reversibility Publicity (public identification) Feasibility
First Solution
Second Solution
Third Solution
Fourth Solution
Fifth Solution
The ethics tests are discussed in Cruz and Davis. See references below. Wike and Brincat also discuss value based approaches in the two references below.
Exercise Four: Solution Implementation
In this section, you will trouble-shoot the solution implementation process by uncovering and defusing potential obstacles. These can be identified by looking at the constraints that border the action. Although constraints specify limits to what can be realized in a given situation, they are more flexible than generally thought. Promptly identifying these constraints allows for proactive planning that can push back obstacles to solution implementation and allow for realization of at least some of the value embodied in the solution.
A Feasibility Test focuses on these situational constraints and poses useful questions early on in the implementation process. What conditions could arise that would hinder the implementation of a solution? Should the solution be modified to ease implementation under these constraints? Can the constraints be removed or modified through activities such as negotiation, compromise, or education? Can solution implementation be facilitated by modifying both the solution and the constraints?
Feasibility Constraints
Category Sub-Category
Resource Money/Cost Time/Deadlines Materials
Interest Organizational(Supervisor) Legal (laws, regulations) Political/Social
Technical Technology does not exist Technology patented Technology needs modification
Resource Constraints:
• Does the situation pose limits on resources that could limit the realization of the solution under consideration?
• Time. Is there a deadline within which the solution has to be enacted? Is this deadline fixed or negotiable?
• Financial. Are there cost constraints on implementing the ethical solution? Can these be extended by raising more funds? Can they be extended by cutting existing costs? Can agents negotiate for more money for implementation?
• Resource. Are necessary resources available? Is it necessary to plan ahead to identify and procure resources? If key resources are not available, is it possible to substitute other, more available resources? Would any significant moral or non-moral value be lost in this substitution?
Interest Constraints
• Does the solution threaten stakeholder interests? Could it be perceived as so threatening to a stakeholder’s interests that the stakeholder would oppose its implementation?
• Individual Interests. Does the solution threaten the interests of supervisors? Would they take measures to block its realization? For example, a supervisor might perceive the solution as undermining his or her authority. Or, conflicting sub-group interests could generate opposition to the implementation of the solution even though it would promote broader organizational objectives.
• Organizational Interests. Does the solution go against an organization's SOPs (standard operating procedures), formal objectives, or informal objectives? Could acting on this solution disrupt organization power structures? (Perhaps it is necessary to enlist the support of an individual higher up in the organizational hierarchy in order to realize a solution that threatens a supervisor or a powerful sub-group.)
• Legal Interests. Are there laws, statutes, regulations, or common law traditions that oppose the implementation of the solution? Is it necessary to write an impact statement, develop a legal compliance plan, or receive regulatory approval in order to implement the solution?
• Political/Social/Historical Constraints. Would the solution threaten or appear to threaten the status of a political party? Could it generate social opposition by threatening or appearing to threaten the interests of a public action group such as an environmental group? Are there historical traditions that conflict with the values embedded in the solution?
Technical Constraints
• Technology does not yet exist. Would the implementation of the solution require breaking new technological ground?
• Technology Protected by Patent. The technology exists but is inaccessible because it is still under a patent held by a competitor.
• Technology Requires Modification. The technology required to implement solution exists but needs to be modified to fit the context of the solution. Important considerations to factor in would be the extent of the modification, its cost, and how long it would take to bring about the modification.
Exercise Five: Ethical Perspective Pieces
Getting Consent to Information TransferCustomer Consent If you have followed the case so far, you see that while the money Toysmart owes to Citibank may just be a drop in the bucket, the welfare and even survival of other Toysmart creditors depends on how much money can be retrieved through the bankruptcy process. The following Ethical Perspective argues that the right of creditors for their money cannot be traded off with the right to privacy of Toysmart customers profiled in their now valuable data base. These two stakeholders and their stakes—in this case rights—need to be integrated as fully as possible. The key lies in the execution of the consumer right to be informed and to freely consent to the transfer of their data to third parties This right’s execution must address three important aspects.
• Customer consent must be obtained by having them opt-in rather than opt-out of the transfer of PII. Opt-in represents a more active, opt-out a more passive mode of consent. By opting into the data transfer, Toysmart customers consent explicitly, knowingly, and freely to the transfer of their information. Opt-out is passive because unless customers expressly forbid it, the transfer of their PII to a third party will occur. The chances are that many customers will consent only if compensated. And the mechanics of obtaining positive opt-in consent are complicated. Is this done by email or snail mail? How can Toysmart customers be fully informed? What kind of timeline is necessary for their full consent? Implimentation of opt-in consent is more adequate morally speaking but much more difficult, time-consuming, and costly in its implementation.
• Any exchange of information must be in accord with TRUSTe standards which Toysmart agreed to when they solicited the right to use the TRUSTe seal. TRUSTe has its own standards (they can be found through the link above) which reinforce the above discussion of informed consent but also bring in other matters. Important here is the utilitarian concern of building and maintaining consumer trust to encourage their using the Internet for e-business. Web site certification agencies like TRUSTe exist to validate that a web site is trustworthy; but to maintain this validation, customers must know that TRUSTe will enforce its standards when websites become reluctant to follow them. TRUSTe must be aggressive and strict here in order to maintain the high level of trust they have generated with e-business customers.
• An important part of TRUSTe standards on the transfer of PII to third parties is their insistence that these third parties share the values of those who have been given the information. Toysmart cultivated a reputation as a trustworthy company devoted to producing safe, high quality, educational toys. The customer data base should be transferred only to concerns that share these goals and the accompanying values. (What are these?) Did Toysmart compromise on these goals and values when they agreed to accept Disney financing and advertising support? What are Toysmart values? What are Disney values?
In conclusion, this perspective piece is designed to get you to think about the right of informed consent, whether it can be reconciled with financial interests and rights of Toysmart creditors, and how this right can be implemented in the concrete details of this case. It has argued that customer PII can be transferred but only with the consent of the customers themselves. It has defined this consent in terms of express opting-into the transfer on the part of the customers. It has also argued that the third part must share the values and goals of Toysmart, especially those values accompanying Toysmart promises to customers.
Group Exercise
Identify the role played and the values held by each of the following participants:
1. David Lord (CEO of Toysmart)
2. Disney (as venture capitalist)
3. TRUSTe (as non-profit)
4. Toysmart Creditors (Pan Communications)
5. FTC (government regulatory agency)
6. Toysmart Customers
Toysmart's customer data base
1. Should Toysmart creditors be allowed to sell the customer data base to third parties? Respond to arguments pro and con given by participants in the case.
2. Assume Toysmart should be allowed to sell the data base to their third party. What kind of values should this third party have?
3. Assume Toysmart has to get customer consent before selling the data base. How should customer consent be obtained? (What counts as customer consent?)
What did you learn?
This section provides closure to the module for students. It may consist of a formal conclusion that summarizes the module and outlines its learning objectives. It could provide questions to help students debrief and reflect on what they have learned. Assessment forms (e.g., the “Muddiest Point” Form) could be used to evaluate the quality of the learning experience. In short, this section specifies the strategy for bringing the module to a close.
In this module, you have…
• studied a real world case that raised serious problems with intellectual property, privacy, security, and free speech. Working with these problems has helped you to develop a better “working” understanding of these key concepts,
• studied and practiced using four decision-making frameworks: (1) using socio-technical analysis to specify the problem in a complex, real world case, (2) practiced brainstorming techniques to develop and refine solutions that respond to your problem, (3) employed three ethics tests to integrate ethical considerations into your solutions and to test these solutions in terms of their ethics, and (4) applied a feasibility analysis to your solutions to identify and trouble-shoot obstacles to the implementation of your ethical solution,
• explored the analogy between solving ethical and design problems,
• practiced the skills of moral imagination, moral creativity, reasonableness, and perseverance, and…
• experienced, through key participant perspectives, the challenges of ethics advocacy “under the gun.”
Debrief on your group work before the rest of the class
1. Provide a concise statement and justification of the problem your group specified
2. Present the refined solution generation list your group developed in exercise 2.
3. Present and provide a quick summary explanation of the results of your group’s solution evaluation matrix.
4. Show your group’s feasibility matrix and summarize your assessment of the feasibility of implementing the solution alternatives you tested in exercise three.
Group Debriefing
1. Were there any problem you group had working together to carry out this case analysis? What were the problems and how did you go about solving them?
2. What problems did you have with understanding and practicing the four frameworks for solving problems? How did you go about solving these problems? Does your group have any outstanding questions or doubts?
3. Now that you have heard the other groups present their results, what differences emerged between your group’s analysis and those of the other groups? Have you modified your analysis in light of the analyses of the other groups? If so how? Do the other groups need to take into account any aspects of your group’s debriefing?
Toysmart Presentations
Toysmart_2.pptx Toysmart_3.pptx
Updated concept presentation for Spring 2011
Review on Privacy and Property.pptx
Privacy, Intellectual Property, Free and Informed Consent
Review on Privacy Property Consent.pptx IMC_V2_97.doc
Appendix
Toysmart References
1. Morehead, N. Toysmart: Bankruptcy Litmus Test. Wired Magazine, 7/12/00. Accessed 10/4/10. http://www.wired.com/techbiz/media/news/2000/07/37517
2. Toysmart Settles: Database Killed. Associated Press. Accessed through Wired Magazine on 10/4/10 at www.wired.com/politics/law/ne...01/01/41102ere
3. Kaufman, J. and Wrathall, J. "Internet Customer Data Bases" National Law Journal, September 18, 2000. Accessed July 12, 2001 Lexis Nexis Academic University.
4. "FTC Sues Failed Website, Toysmart.com, for Deceptively Offering for Sale Personal Information of Website Visitors." July 10, 2000. Accessed at www.ftc.gov on 10/4/10.
5. "FTC Announces Settlement With Bankrupt Website, Toysmart.com, Regarding Alleged Privacy Policy Violations." July 21, 2000. Accessed at www.ftc.com on 10/4/10
6. "37 Attorneys General Revolve Protection of Consumer Privacy" National Association of Attorneys General. AG Bulletin. December 2000. Accessed 2/12/01 through Lexis Nexis Academic University.
7. Salizar, L. "The Difficulties Practitioners Can Face When Dealing with Dot-Com Bankruptcies." Nov 2000. Accessed through Lexis Nexis Academic University on 7/12/01.
8. "FTC Sues Toysmart Over Database" Reuters. 7/10/00 Accessed at http://www.wired.com/politics/law/news/2000/07/37484 on 10/4/10.
9. "On Shaky Ground" Karen. September 2000. American Lawyer Newspapers. Accessed from Lexis Nexis Academic University on July 12, 2000.
10. "FTC Files Suit Against Failed Toy Retailer Over Privacy Promise" Associated Press. 7/10/00. Accessed 7/18/01. TRUSTe Spokesperson: "Bottom line--it's unacceptable, ethically wrong, and potentially illegal for a company to say one thing and do something different."
11. Lorek, Laura. "When Toysmart Broke" Inter@ctive week. August 21, 2000. zdnet.com. Provides biographical informaiton on Lord and brick and mortar company Hold Educational Outlet.
12. Rosencrance, Linda. "FTC Settles With Toysmart" Computer World. July 21, 2000. Accessed 7/16/01.
13. Nasholsky, Larren. " Online Privacy Collides with Bankruptcy Creditors: Potential Resolutions fo rcomputing Concerns. New Your Law Journal, 8/28/00. Accessed through Lexis Nexis Academic Univesity on 7/12/00.
14. Tavani, H. (2004). Ethics and Technology: Ethical Issues in an Age of Information and Communication Technology. Danvers, MA: John Wiley and Sons.
This optional section contains additional or supplementary information related to this module. It could include: assessment, background such as supporting ethical theories and frameworks, technical information, discipline specific information, and references or links.
References
1. Brincat, Cynthia A. and Wike, Victoria S. (2000) Morality and the Professional Life: Values at Work. Upper Saddle River, NJ: Prentice Hall.
2. Cruz, J. A., Frey, W. J. (2003) An Effective Strategy for Integration Ethics Across the Curriculum in Engineering: An ABET 2000 Challenge, Science and Engineering Ethics, 9(4): 543-568.
3. Davis, M., Ethics and the University, Routledge, London and New York, 1999: 166-167.
4. Richard T. De George, "Ethical Responsibilities of Engineers in Large Organizations: The Pinto Case," in Ethical Issues in Engineering, ed. Deborah G. Johnson (1991) New Jersey: Prentice-Hall: 175-186.
5. Charles Harris, Michael Pritchard and Michael Rabins (2005) Engineering Ethics: Concepts and Cases, 3rd Ed. Belmont, CA: Thomson/Wadsworth: 203-206.
6. Huff, Chuck and Jawer, Bruce, "Toward a Design Ethics for Computing Professionals in Social Issues in Computing: Putting Computing in its Place, Huff, Chuck and Finholt, Thomas Eds. (1994) New York: McGraw-Hill, Inc.
7. Solomon, Robert C. (1999) A Better Way to Think About Business: How Personal Intgrity Leads to Corporate Success. Oxford, UK: Oxford University Press.
8. Anthony Weston. (2001) A Practical Companion to Ethics, 2nd ed. USA: Oxford University Press, 2001, Chapter 3.
9. Carolyn Whitbeck (1998) Ethics in Engineering Practice and Research. U.K. Cambridge University Press: 55-72 and 176-181.
10. Wike, Victoria S. (2001) "Professional Engineering Ethics Bahavior: A Values-based Approach," Proceedings of the 2001 American Society for Engineering Education Annual Conference and Exposition, Session 2461.
EAC ToolKit Project
This module is a WORK-IN-PROGRESS; the author(s) may update the content as needed. Others are welcome to use this module or create a new derived module. You can COLLABORATE to improve this module by providing suggestions and/or feedback on your experiences with this module.
Please see the Creative Commons License regarding permission to reuse this material. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/02%3A_Ethical_Leadership_-Making/2.03%3A_Toysmart_Case_Exercises_-_Student_Module.txt |
Module Introduction
Milagro Beanfield War: Joe Mondragon has created quite a stir in Milagro, a small village in New Mexico. He has illegally diverted water from the irrigation ditch to his field to grow beans. Access to scarce water in New Mexico has created sharp political and social disputes which have reached a crises point in Milagro. Competing with traditional subsistence farmers like Joe is the profitable recreation industry. Ladd Devine, a wealthy developer, has joined with the state government in New Mexico to build a large recreational center consisting of a restaurant, travel lodge, individual cabins and a lavish golf course. Since there is not enough water to cover both recreational and agricultural uses and since Ladd Devine's project promises large tax revenues and new jobs, the state government has fallen behind him and has promised to give to the recreational facilities all the water it needs. Hence, the problem created by Mondragon's illegal act. You work for Ladd Devine. He has asked you to look into local opposition to the recreational facility. Along these lines, you attend the town meeting scheduled by Ruby Archuleta in the town's church. You are concerned about Charlie Bloom's presentation and the impact it may have on the local community. Prepare a STS analysis to test Bloom's assertions and better prepare Ladd Devine for local opposition to his facility.
Incident at MoralesFred is a chemical engineer hired by Phaust Corporation to design and make operational a new chemical plant for the manufacture of their newly redesigned paint thinner. Under financial pressure from the parent French company, Chemistre, they have decided to locate their new plant in Morales, Mexico to take advantage of lower costs and more flexible government regulations. You are well on the way toward designing this new plant when news comes from Chemistre that all budgets are being cut 20% to finance Chemistre's latest takeover acquisition. You are Fred and are now faced with a series of difficult financial-engineering decisions. Should you hold out for the more expensive Lutz and Lutz controls or use the cheaper ones produced locally? Should you continue with the current plant size or cut plant size and capacity to keep within budgetary constraints? You have also been made aware of the environmental and health risks associated with not lining the waste ponds used by the plant. Do you advocate lining the ponds or not, the latter being within compliance for Mexican environmental and health regulations. Prepare a STS analysis to help you make and justify these decisions. Make a series of recommendations to your supervisors based on this study.
Puerto Rican Projects
• Your company, Cogentrix, proposes a cogeneration plant that uses coal, produces electricity, and creates steam as a by-product of electricity generation process. Because the steam can be sold to nearby tuna canning plants, your company wishes to study the feasibility of locating its plant in or near Mayaguez, Puerto Rico. (Co-generation technology has become very popular and useful in some places.) Carry out an STS analysis to identify potential problems. Make a recommendation to your company. If your recommendation is positive, discuss how the plant should be modified to fit into the Mayaguez, Puerto Rico STS.
• Your company, Southern Gold Resources, is interested in mining different regions in central Puerto Rico for copper and gold. But you know that twenty years earlier, two proposals by two international mining companies were turned down by the PR government. Carry out a STS study to examine the feasibility of designing a different project that may be more acceptable to local groups. What does your STS analysis tell you about social and ethical impacts, financial promise, and likely local opposition. Can profitable mining operations be developed that respect the concerns of opposed groups? What is your recommendation based on your STS analysis?
• Windmar, a company that manufactures and operates windmills for electricity generation has proposed to locate a windmill farm in a location adjacent to the Bosque Seco de Guanica. They have encountered considerable local opposition. Carry out a STS analysis to understand and clarify this opposition. Can the concerns of local stakeholders be addressed and the windmill farm still remain profitable? How should the windmill project be modified to improve its chances of implementation?
Things to Know about STSs
What is a Socio-Technical System? (STS): A socio-technical system (STS) is a tool to help a business anticipate and successfully resolve interdisciplinary business problems. "Interdisciplinary business problems" refer to problems where financial values are intertwined with technical, ethical, social, political, and cultural values. (Reference: Chuck Huff, Good Computing: A Virtue Approach to Computer Ethics, draft manuscript for Jones and Bartlett Publishers)
Some Things to Know About STSs
1. Socio-Technical systems provide a tool to uncover the different environments in which business activity takes place and to articulate how these constrain and enable different business practices.
2. A STS can be divided into different components such as hardware software, physical surroundings, people/groups/roles, procedures, laws/statutes/regulations, and information systems. Other components include the natural environment, markets, and political systems.
3. But while different components can be distinguished, these are, in the final analysis, inseparable. Socio-Technical Systems are first and foremost systems: their components are interrelated and interact so that a change in one often produces changes that reverberate through the system.
4. Socio-Technical systems embody moral values such as justice, responsibility, respect, trust, and integrity as well as non-moral values such as efficiency, satisfaction, productivity, effectiveness, and profitability. Often these values can be located in one or more of the system components. Often they conflict with one another causing the system as a whole to change.
5. STSs change, and this change traces out a path or trajectory. The normative challenge here is to bring about and direct changes that place the STS on a value-positive trajectory. In the final analysis, we study STS to make sure that they change in a value-realizing direction.
Constituents or Sub-Environments of Business Activity
Paragraph summary of sub-environments of business followed by a table devoted to each one.
• Technology including hardware, software, designs, prototypes, products, or services. Examples of engineering projects in Puerto Rico are provided in the PR STS grid. In the Therac-25 case, the hardware is the double pass accelerator, in Hughes the analog-to-digital integrated circuits, and in Machado the UNIX software system and the computers in the UCI laboratories that are configured by this system. Because technologies are structured to carry out the intentions of their designers, they embed values.
• Physical Surroundings. Physical surroundings can also embed values. Doors, by their weight, strength, material, size, and attachments (such as locks) can promote values such as security. Physical surroundings promote, maintain, or diminish other values in that they can permit or deny access, facilitate or hinder speech, promote privacy or transparency, isolate or disseminate property, and promote equality or privilege.
• People, Groups, and Roles. This component of an STS has been the focus of traditional stakeholder analyses. A stakeholder is any group or individual which has an essential or vital interest in the situation at hand. Any decision made or design implemented can enhance, maintain, or diminish this interest or stake. So if we consider Frank Saia a decision-maker in the Hughes case, then the Hughes corporation, the U.S. Air Force, the Hughes sub-group that runs environmental tests on integrated circuits, and Hughes customers would all be considered stakeholders.
• Procedures. How does a company deal with dissenting professional opinions manifested by employees? What kind of due process procedures are in place in your university for contesting what you consider to be unfair grades? How do researchers go about getting the informed consent of those who will be the subjects of their experiments? Procedures set forth ends which embody values and legitimize means which also embody values.
• Laws, statutes, and regulations all form essential parts of STSs. This would include engineering codes as well as the state or professional organizations charged with developing and enforcing them
• The final category can be formulated in a variety of ways depending on the specific context. Computing systems gather, store, and disseminate information. Hence, this could be labeled data and data storage structure. (Consider using data mining software to collect information and encrypted and isolated files for storing it securely.) In engineering, this might include the information generated as a device is implemented, operates, and is decommissioned. This information, if fed back into refining the technology or improving the design of next generation prototypes, could lead to uncovering and preventing potential accidents. Electrical engineers have elected to rename this category, in the context of power systems, rates and rate structures.
Technological ComponentTechnological component of STS
Component Description Examples Frameworks More Frameworks
Technological Hardware: Machines of different kinds Door (with tasks delegated to it such as automatically shutting and being locked) Value Discovery (identifying and locating values in STS) Social Constructionism>: Restoring interpretive flexibility to reconstruct a technology to remove bias and realize value
Code that configures machines around human purposes Power generating technologies based on renewable and nonrenewable resources Value Translation (Operationalizing and implementing values in an STS by designing and carrying out a procedure) Identifying and mitigating complexity in the form of tightly-coupled systems and non-linear causal chains
Technology can constrain business activity by de-skilling Automobiles, computers, cell phones all of which have produced profound changes in our STSs Value Verification (Using methods of participatory observation to determine how effectively values have been realized.) De-centralizing control and authority
Technology, especially software, can instrument human action Microsoft Office, Firefox Browser, Google Chrome, Google Docs, Social Networking software Transperspectivity: discovering strands of construction of current STS; identifying possibilities for reconstruction Designing to avoid the technological imperative and reverse adaptation (where humans abandon ends and serve the ends of technologies
Table 2: Ethical and Social ComponentEthical Environments of the socio-technical system
Component Description Examples Frameworks More Frameworks
Ethical Environment Moral Constructs: Spheres of justice where distribution takes place according to context-dependent rules (Rules) Basic Moral Concepts: rights, duties, goods, values, virtues, responsibility, and justice Utilitarianism: Happiness is tied to maximizing the satisfaction of aggregated preferences. Basic Capabilities: life, bodily health, bodily integrity
Social Constructs: Power and its distribution among groups and individuals Intermediate Moral Concepts: Privacy, Property, Informed Consent, Free Speech, due Process, Safety/Risk Rights: Capacities of action that are essential to autonomy, vulnerable to standard threats, and correlated with feasible duties Cognitive Capabilities: Sense, Imagination, Thought; Emotion; Practical Reason
Right: A right is a capacity of action, essential to autonomy, that others are obliged to recognize and respect. Privacy: If the information is directly relevant to the relation to the holder and the seeker, then it is not private. Virtues: Settled dispositions toward choosing the mean between extremes of excess and defect. (Courage is the mean between cowardice and recklessness) Social Capabilities: Affiliations, Other Species
Duty: A duty is a principle that obliges us to recognize and respect the rights of others. Property: That with which I mix my labor is mine. Intellectual property is non-rivalrous and non-excludable. Capabilities Approach: For Nussbaum, capabilities answer the question, “What is this person able to do or be?” For Sen, capabilities are “‘substantial freedoms,’ a set of (causally interrelated) opportunities to choose and act.” Capabilities that address vulnerabilities: Play and Control over one's environment
Physical Surroundings This table summarizes the physical environment of the STS and how it can constrain or enable action.
Physical Surroundings Description Examples Frameworks Frameworks
Physical environment imposes constraints (limits) over actions that restrict possibilities and shape implementation. Influence of rivers, mountains, and valleys on social and economic activities such as travel, trade, economic and agricultural activity, commerce, industry, and manufacturing. Classroom environment enables or constrains different teaching and learning styles. For example, one can pair off technically enhanced and technically challenged classrooms with student-centered and teacher-centered pedagogical styles and come up with four different learning environments. Each constrains and enables a different set of activities. The physical arrangement of objects in the classroom as well as the borders created by walls, doors, and cubicles can steer a class toward teacher-centered or student-centered pedagogical styles.
People, Groups, and Roles (Stakeholders)This table shows the social or stakeholder environment of the STS. A stakeholder is any group or individual that has a vital interest at play in the STS.
Stakeholders Description Examples Frameworks Frameworks
Any group or individual that has a vital interest at play (at stake) in the STS. Market Stakeholders: Employees, Stockholders Non-Market Stakeholders: communities, activist groups and NGOs Role: The place or station a stakeholder occupies in a given organizational system and the associated tasks or responsibilities.
customers, suppliers retailers/wholesalers, creditors business support groups, governments, general public (those impacted by projects who do not participate directly in their development Interests: Goods, values, rights, interests, and preferences at play in the situation which the stakeholder will act to protect or promote.
(Distinction between market and non-market stakeholders comes from Lawrence and Weber, Business and Society: Stakeholders, Ethics, Public Policy, 12th edition. McGraw-Hill, 14-15. Alliances are discussed by Patricia Werhane et al., Alleviating Poverty Through Profitable Partnerships: Globalization, Markets, and Economic Well-being. Routledge (2009). Relation: Each stakeholder is related to other stakeholders in an alliance and each relation is tied to goods and values.
Procedural Environment
Procedural Description Examples Framework Framework
A series of interrelated actions carried out in a particular sequence to bring about a desired result, such as the realization of a value. Procedures can schematize value by setting out a script for its realization. Hiring a new employee: (a) settling on and publishing a job description; (b) soliciting and reviewing applications from candidates; (c) reducing candidate list and interviewing finalists; (d) selecting a candidate; (e) tendering that candidate a job offer.Other procedures: forming a corporation, filing for bankruptcy, gaining consent to transfer TGI and PII to a third party (Toysmart: opt-in and opt-out procedures). Value Realization Process in Software Engineering: (a) Discovery: Uncovering values shared by a given community; (b) Translation: operationalizing and implementing values in a given STS; (c) Verification: using methods of participatory observation (surveys and interviews) to validate that the values in question have been discovered and translated. Challenging the Statement of Values: (a) A stakeholder group raises a conceptual, translation, range, or development issue; (b) Group presents their challenge and response to other stakeholders; (c) If other stakeholder groups agree, then the challenge leads to a revision in the SOV; (d) Community as a whole approves the revision.
Legal Environment: Laws, Statutes, Regulations
Laws, Statutes, Regulations Description Examples Frameworks Frameworks
Laws differ from ethical principles and concepts in that laws prescribe the minimally moral while ethical principles and concepts routinely explore higher moral "spaces." Criminal Law: Applies to individuals; interested party in a criminal trial is society, not the victim. Civil Law: Torts concern wrongful injury. The objective of a tort is to make the victim "while" after an injury. US and British law work through a common law system where current decisions are based on past decisions or precedent.
Ethical principles challenge and criticize laws by bringing into question their normative content. Involves proving a mens rea (guilty mind) and actus reus (guilty or law-breaking act) and that the mens rea caused the actus reus. To prevail in a tort one ust prove (in order of severity) negligence, recklessness, or intent. The Puerto Rican system of law is based on the Napoleonic code where decisions relate directly to existing law and statute and precedent plays a weaker role.
Laws can challenge ethical principles and concepts by raising issues of practicality. Also, as in responsibility theory, the law can structure and inform the moral discussion. Criminal law does not apply to corporations because they "have no soul to damn and no body to kick" Baron Thurlow Negligence involves proving that the defendant failed to meet some standard of due care. Question: How does the statute-based Napoleonic system in PR constrain and enable business practice in relation to other systems such as the British and American common law systems?
Contract law concerns the violation of the terms of a contract.
Market Environment
Market Environment Description Examples Frameworks Frameworks
Business takes place within different markets that shape supply, demand, and price. Globalization frequently requires that a business be adept at operating across different markets Laissez- Faire: Each economic unit makes choice based on rational (enlightened) self-interest. (Private ownership of goods.) Assumptions of a Free Market System: (a) Individual decisions are aggregated. (b) Information flows through price structure. Recent economic studies of the limits of laissez-faire markets:
Liberal use made here of notes from Economics class taught by CR Winegardner, University of Toledo, 1971-1972 Liberal Democratic Socialism: Limited government intervention is needed to improve upon the choice of individual economic units. (Mixture of private and public ownership) (c) Free association. (d) Absence of force or fraud. (e) Individual agents are rational utility maximizer (a) Information Asymmetries (as studied by Stiegliz). (b) Monopolies which, in the absence of competition, can dictate standards of price, product and service.
Materials also take from Natural Capitalism from Lovins and Hawkings. Communist, Authoritarian Socialism: The state is in the best position to know what choices and policies are beneficial for the economy as a whole and its component parts. (Public ownership of goods and services) (f) Governments should adopt a hands-off stance because interference disrupts the ability of markets to produce utility-maximizing conditions.(4,4) Animal spirits deflect economic decision-making away from perfect utility maximizing. They include confidence, fairness, corruption, money illusion, and stories.(4,5)
(5,1) (5,2) (5,3) (5,4) Ghoshal: bad management theories are destroying good mangement practices as they become self-fulfilling prophecies. Ghoshal is especially critical of agency theory, compliance/punitive approaches to corporate governance, and the theory of human nature he calls "Homo Economicus."(5,5)
Information Environment: Collecting, Storing, and Transferring Information
Information Environment(1,1) Description(1,2) Examples(1,3) Frameworks(1,4) Frameworks(1,5)
(2,1) How data and information is collected, stored, and transmitted along with ethical issues such as informed consent and privacy that accompany information management (2,2) Informed Consent: Obtaining consent from information holder when collecting, storing, and transferring personal identifying information or transaction generated information.(2,3) Privacy in Context (2,4) Data Transfer and Informed Consent(2,5)
(3,1) (3,2) Belmont Report: (a) Principles: Respect for persons, beneficence, and justice; (b) Application 1: Informed consent as "subjects to the degree that they are capable be given the opportunity to choose what shall or shall not happen to them;" (c) Application 2: assessment of risks and benefits; (d) Application 3: Selection of subjects for experiment.(3,3) (a) Identify individuals in groups in a context; (b) Identify the roles played by these individuals and groups.(3,4) Opt-in: Information is not transferred unless data-holder expressly consents; Opt-out: Data will be transferred unless holder expressly refuses or withdraws consent.(3,5)
(4,1) (4,2) Conditions of Informed Consent Information, Comprehension, Voluntariness. (4,3) (c) Identify context-relative norms that guide activities within context and between one context and another. (Materials on privacy in context are taken from Helen Nissembaum in her book, Privacy in Context(4,4) Fair Information Practices: (a) Notice: full disclusure and redress (way to resolve problems); (b) Choice: Choice about how informaitn is to be used; (c) Access: access to stored and about to be disclosed information; (d) Security: ways that information will be kept secure and unauthorized access prevented incollection, storage, and transfer of information.(4,5)
System of the Natural Environment
Natural Environment (1,1) Description (1,2) Examples (1,3) Frameworks (1,4) Frameworks(1,5)
(2,1) Wicked Problems(2,2) Principles of Systainability according to B. Norton(2,3) Four Theoretical Approaches to Environmental Ethics(2,4) Environmental Value as determined by shadow markets(2,5)
(3,1) (a) Difficulties in formulating and structuring problem; (b) Non-compatibility of solutions (several ways of stating solutions).(3,2) Precautionary Principle: "in situations of high risk and high uncertainty,always choose the lowest risk option." (Cass Sunstein distinguishes several senses of the PP including one which makes it impossible to deviate from the status quo) (Norton 348)(3,3) (a) Extensionism: Peter Singer's extension of Utilitarianism to cover sentient beings; (b) Tom Regan's ascription of rights to select animals. Biocentrism: Taylor's attribution of moral consideration to all teleological centers of a life.(3,4) Willingness-to-pay: Resource in question would go to the highest bidder, that is, value is dependent on most intense preference and the disposable income to assert that preference(3,5)
(4,1) (c) Wicked problems are "non-repeatable" in that they are context-dependent. This renders learning from previous problems and solutions much more difficult; (d) Wicked problems involve "competing values" that cannot be realized at the same time and that cannot be homogenized or plotted on a single scale; (e) Wicked problems exhibit "open-ended inter-temporal effects". Closely paraphrased from Norton, Systainability, 133-5(4,2) Safe Minimum Standard: "save the resource, provided the costs of doing so are bearable" (Norton 346)(4,3) Land Ethics: A thing has value or is good insofar as it promotes the integrity, stability, and beauty of the biotic community. Biotic community includes humans, non-humans, species, and ecosystems all interacting as a system. From Aldo Leopole, Sand County Almanac; Virtue Environmental Ethics: Approach centers on virtues as habits that promote sustainable transactions with the natural environment. Hursthouse provides a provocative example with the virtue, respect for nature.(4,4) Willingness-to-sell: Resource is owned by the public so its value is determined by its selling rather than buying price. This frees bid fromdisposable income. Now value becomes more reflective of the identity-conferring beliefs and attitudes of a community and its members.(4,5)
Ethics of STS Research
• Right of Free and Informed Consent: This is the right of participants in a research project to know the harms and benefits of the research. It also includes the right not to be forced to participate in a project but, instead, offer or withdraw voluntarily their consent to participate. When preparing an STS analysis, it is mandatory to take active measures to facilitate participants's free and informed consent.
• Any STS analysis must take active measures to recognize potential harms and minimize or eliminate them. This is especially the case regarding the information that may be collected about different individuals. Special provisions must be taken to maintain confidentiality in collecting, storing, and using sensitive information. This includes careful disposal of information after it is no longer needed.
Participatory Observation
• As we said above, a socio-technical system (STS) is “an intellectual tool to help us recognize patterns in the way technology is used and produced.” Constructing these tools requires combining modes of analysis that are ordinarily kept separate. Because STSs embed values, they are normative. These values can help to chart out trajectories of change and development because they outline values that the system needs to realize, maintain, or even enhance. In this way, the study of STSs is normative and a legitimate inquiry for practical and professional ethics. On the other hand, STS analysis requires finding out what is already there and describing it. So STS analysis is descriptive as well. In this textbox, we will talk briefly about the descriptive or empirical components of STS analysis. This material is taken from the draft manuscript of Good Computing: A Virtue Approach to Computer Ethics and has been developed by Chuck Huff.
• Interviews: Semi-Structured and Structured Interviews conducted with those familiar with a given STS provide an excellent source of information on the constituents of a given STS and how these fit together into an interrelated whole. For example, the STS grid on power systems was put together by experts in this area who were able to provide detailed information on power rates and protocols, software used to distribute energy through the gridlines, and different sources (representing both hard and soft technologies) of power generation.
• Field Observation: Those constructing a STS analysis go directly to the system and describe it in its day-to-day operation. Two books provide more information on the types and techniques of field observation: 1. David M. Fetterman, Ethnography: 2nd Edition, Applied Social Research Methods Series, Vol 17. London, UK.: Sage Publishers, 1998 and 2. James P. Spradley, Participant Observation. New York, Harcourt, 1980. The data collected in this method can also be used to construct day-in-the-life scenarios that describe how a given technology functions on a typical day. These scenarios are useful for uncovering value conflicts and latent accidents. See James T. Reason, Human Error, Cambridge, UK.: Cambridge University Press, 1990 for information on latent accidents, how they are detected, and how they are prevented.
• Questionnaires: Questionnaires are useful for gathering general information from large numbers of people about a STS. Constructing good questionnaires is a difficult process that requires patience as well as trial and error. (Trying out questions on classmates and friends is the best way to identify unclear or misleading questions.) Avoiding complex, overly leading, and loaded questions represent a few of the challenges facing those who would construct useful questionnaires.
• Archival and physical trace methods: Looking at user manuals provides insight into how a system has been designed and how it works. Studying which keys are worn down on computer keyboards provides information on the kind of work being done. Comparing how a system is intended to work with how it is in fact being used is also illuminating, especially when one is interested in tracing the trajectory of a STS. Working with archival and physical trace methods requires critical thought and detective work.
• None of the above methods, taken in isolation, provides complete information on a STS. Triangulation represents the best way to verify data and to reconcile conflicting data. Here we generate evidence and data from a variety of sources then compare and collate. Claims made by interviewees that match direct on-site observations confirm one another and indicate data strength and veracity. Evidence collected through questionnaires that conflicts with evidence gathered through archival research highlights the need for detective work that involves further observation, comparison, interpretation, and criticism.
• Developing STS analyses bears a striking resemblance to requirements analysis. In both cases, data is collected, refined, and put together to provide an analysis. A key to success in both is the proper combination of normative and descriptive procedures.
Exercise 1: Make a Table that Describes the Socio-Technical System
Directions: Identify the constituents of the Socio-Technical System. Use the broad categories to prompt you.
1. What are the major hardware and software components?
2. Describe the physical surroundings.
3. What are the major people groups or roles involved?
4. Describe any procedures in the STS.
5. Itemize the laws, statutes, and regulations.
6. Describe the data and data structures in your STS. Use the two templates below that fill in this table for energy generation systems and for engineering ethics in Puerto Rico.
Socio Technical System Table
Hardware Software Physical Surroundings People, Groups, Roles Procedures Laws Data and Data Structures
Exercise 2: Identify Value Mismatches in the STS
Directions: identify the values embedded in the STS. Use the table below to suggest possible values as well as the locations in which they are embedded.
1. Integrity: "Integrity refers to the attributes exhibited by those who have incorporated moral values into the core of their identities. Such integration is evident through the way values denoting moral excellence permeate and color their expressions, actions, and decisions. Characteristics include wholeness, stability, sincerity, honesty to self and others, authenticity, and striving for excellence.
2. Justice: Justice as fairness focuses on giving each individual what is his or her due. Three senses of justice are (1) the proper, fair, and proportionate use of sanctions, punishments and disciplinary measures to enforce ethical standards (retributive justice), (2) the objective, dispassionate, and impartial distribution of the benefits and burdens associated with a system of social cooperation (distributive justice), (3) an objectively determined and fairly administered compensation for harms and injustices suffered by individuals (compensatory justice), and (4) a fair and impartial formulation and administration of rules within a given group.
3. Respect: Respecting persons lies essentially in recognizing their capacity to make and execute decisions as well as to set forth their own ends and goals and integrate them into life plans and identities. Respects underlies rights essential to autonomy such as property, privacy, due process, free speech, and free and informed consent.
4. Responsibility: (Moral) Responsibility lies in the ability to identify the morally salient features of a situation and then develop actions and attitudes that answer to these features by bringing into play moral and professional values. Responsibility includes several senses: (1) individuals are responsible in that they can be called upon to answer for what they do; (2) individuals have responsibilities because of commitments they make to carrying out the tasks associated with social and professional roles; (3) responsibility also refers to the way in which one carries out one's obligations (This can range from indifference to others that leads to minimal effort to high care for others and commitment to excellence)
5. Free Speech: Free Speech is not an unlimited right. Perhaps the best place to start is Mill's argument in On Liberty. Completely true, partially true, and even false speech cannot be censored, the latter because censoring false speech deprives the truth of the opportunity to clarify and invigorate itself by defending itself. Mill only allows for a limitation of free speech based on harm to those at which the speech is directed. Speech that harms an individual (defamatory speech or shouting "fire" in a crowded theatre) can be censored out of a consideration of self-defense, not of the speaker, but of those who stand to be harmed by the speech.
6. Privacy: If an item of information is irrelevant to the relation between the person who has the information and the person sho seeks it, then that information is private. Privacy is necessary to autonomy because control over information about oneself helps one to structure and shape one's relations with others.
7. Property: According to Locke, we own as property that with which we have mixed our labor. Thomas Jefferson argues that ideas are problematic as property because, by their very nature, they are shared once they are expressed. They are also nonrivalrous and nonexclusive.
Drawing Problems from Embedded Values
• Changes in an STS (e.g., the integration of a new technology) produce value mismatches as the values in the new component conflict with those already existing within the STS. Giving laptops to children produces a conflict between children's safety requirements and the safety features embedded in laptops as designed for adults.
• Changes within an STS can exaggerate existing value conflicts. Using digitalized textbooks on laptop computers magnifies the existing conflict concerning intellectual property; the balance between copyrights and educational dissemination is disrupted by the ease of copying and distributing digitalized media.
• Changes in STS can also lead to long term harms. Giving laptops to children threatens environmental harm as the laptops become obsolete and need to be safely disposed of.
Values Embedded in STS
Hardware Software Physical Surroundings People, Groups, Roles Procedures Laws Data and Data Structures
Integrity
Justice
Respect
Responsibility for Safety
Free Speech
Privacy
Intellectual Property
Using Socio-Technical System Grids for Problem Specification
The activity of framing is a central component of moral imagination. Framing a situation structures its elements into a meaningful whole. This activity of structuring suggests both problems and solutions. Framing a situation in different ways offers alternative problem specifications and solution possibilities. Since skillful framing requires practice, this part of the module suggests how socio-technical system tables can help provide different frames for problem specification and solution generation.
Different Problem Frames
• Technical Frame: Engineers frame problems technically, that is, they specify a problem as raising a technical issue and requiring a technical design for its resolution. For example, in the STS grid appended below, the Burger Man corporation wishes to make its food preparation areas more safe. Framing this technically, it would be necessary to change the designs of ovens so they are more accident-proof.
• Physical Frame: How can the Burger Man corporation redesign its restaurants as physical facilities to make them more accessible? One way is to change the access points by, say, designing ramps to make restaurants wheelchair accessible. Framing this as a physical problem suggests solutions based on changing the physical structure and arrangement of the Burger Man STS.
• Social Frame: Burger Man as a corporation has stakeholders, that is, groups or individuals who have an essential interest at play in relation to the corporation. For example, framing the problem of making Burger Man more safe as a social problem might suggest the solution of integrating workplace safety into worker training programs and conducting regular safety audits to identify embedded risks.
• Financial or Market-Based Frames: Burger Man is a for-profit corporation which implies that it has certain financial responsibilities. Consequently, Burger Man should be concerned with how to provide safe, child-proof chairs and tables that do not cut unduly into corporate profits. But like the legal perspective, it is necessary to conduct ethical and social framing activities to compensate for the one-sidedness of financial framing.
• Managerial Frame: Many times ethical problems can be framed as managerial problems where the solution lies in changing managerial structures, reporting relations, and operating procedures. For example, Burger Man may develop a specific procedure when a cashier finishes a shift and turns over the cash register and its contents to another cashier. Burger Man may develop cleaning procedures and routines to minimize the possibility of serving contaminated or spoiled food to customers.
• Legal Frame: Burger Man may choose to frame its environmental responsibilities into developing effective procedures for complying with OSHAA and EPA regulations. Framing a problem legally certainly helps to identify effective and necessary courses of action. But, because the ethical and social cannot be reduced to the legal, it is necessary to apply other frames to uncover additional risks not suggested by the legal framing.
• Environmental Framing: Finally, how does Burger Man look from the environmental standpoint? Does it consider environmental value (environmental health, safety, and integrity) as merely a side constraint to be addressed only insofar as it interferes with realizing supposedly more important values such as financial values? Is it a value to be traded off with other values? (For example, Burger Man may destroy the local environment by cutting down trees to make room for its latest restaurant but it offsets this destruction through its program of planting new trees in Puerto Rican tropical rain forests.) Framing a problem as an environmental problem puts the environment first and sets as a goal the integration of environmental values with other values such as worker safety and corporate profits.
Media File Uplinks
This module consists of two attached Media Files. The first file provides background information on STSs. The second file provides two sample STS grids or tables. These grids will help you to develop specific STSs to analyze cases in engineering, business, and computer ethics without having to construct a completely new STS for each case. Instead, using the two tables as templates, you will be able to zero in on the STS that is unique to the situation posed by the case. This module also presents background constraints to problem-solving in engineering, business, and computer ethics. These constraints do not differ absolutely from the constituents of STSs. However, they pose underlying constraints that outline the feasibility of an ethical decision and help us to identify obstacles that may arise when we attempt to implement ethical decisions.
Socio-Technical Environments Table
STS2.pdf
References
1. Brincat, Cynthia A. and Wike, Victoria S. (2000) Morality and the Professional Life: Values at Work. Upper Saddle River, NJ: Prentice Hall.
2. Huff, Chuck and Jawer, Bruce, "Toward a Design Ethics for Computing Professionals in Social Issues in Computing: Putting Computing in its Place, Huff, Chuck and Finholt, Thomas Eds. (1994) New York: McGraw-Hill, Inc.
3. Solomon, Robert C. (1999) A Better Way to Think About Business: How Personal INtgrity Leads to Corporate Success. Oxford, UK: Oxford University Press.
4. Wike, Victoria S. (2001) "Professional Engineering Ethics Behavior: A Values-based Approach," Proceedings of the 2001 American Society for Engineering Education Annual Conference and Exposition, Session 2461.
Bibliographical Information on Power STS
1. Acceptable Evidence: Science and Values in Risk Management, edited by Deborah G. Mayo and Rachelle D. Hollander. London, UK: Oxford University Press, 1991.
2. K. S. Shrader-Frechette. “Ethics and Energy” in Earthbound: New Introductory Essays in Environmental Ethics, 1st Edition, edited by Tom Regan. NY, NY: Random House, 1984.
3. Nancy G. Leveson. Safeware: System Safety and Computers. NY, NY: Addison-Wesley Publishing Company, 1995.
4. Charles Perrow. Normal Accidents: Living with High-Risk Technologies. North America, Basic Books, 1984.
5. Malcolm Gladwell. “Blowup” in The New Yorker, January 22, 1996: 32-36.
6. James Reason. Human Error. Cambridge, UK: Cambridge University Press. 1990.
7. Mark Sagoff. The Economy of the Earth: Philosophy, Law, and the Environment. Cambridge, UK: Cambridge University Press, 1988. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/03%3A_Social_Responsibility/3.01%3A_Socio-Technical_Systems_in_Professional_Decision_Making.txt |
Introduction
While social responsibility has been recognized as one of the key areas of business ethics, much more needs to be done to develop frameworks and tools to clarify the concept itself and to implement it in business and professional practice on a day-to-day basis. This module will give students the opportunity to practice using frameworks and techniques that address these two needs.
Developing socio-technical system analyses provides an effective means to highlight issues of social responsibility. Since socio-technical systems embody values, building their descriptions allows us to read off potential problems due to harmful impacts and value conflicts. To facilitate this, you will be building socio-technical system descriptions using a grid or matrix that provides the components of socio-technical systems, levels under which they can be analyzed, and the values that they tend to embody. Building socio-technical system descriptions also requires using methods of participatory observation. These include constructing surveys and questionnaires, developing interviews, and building day-in-the-life scenarios. This module will help you frame and respond to social responsibility issues by providing a framework for socio-technical analysis and a set of methodological tools taken from participatory observation.
Case Narrative
Texas Laptop Case
1. In the late 1990s, the Texas State Board of Education proposed the ambitious plan of providing each of the state's four million public school students with their own laptop computer. This plan was devised to solve several problems confronting Texas public education.
2. Laptop computers could make educational resources more accessible to students who were faced with special challenges like deafness or blindness. Computers offer software options (such as audiobooks) that promise to reach more students than traditional printed textbooks.
3. Laptops also promised to solve the problem of obsolete textbooks. Texas purchased textbooks for their students at considerable costs. The purchasing cycle ran for six years. By the end of this cycle, textbooks were out of date. For example, in the late 1990s when the laptop plan was proposed, history textbooks still referred to the Soviet Union and to the existence of the Berlin Wall. Laptops, on the other hand, would present textbook content in digital form which would eliminate printing and shipping costs and facilitate updates through online downloads.
4. Texas business leaders were concerned about the computer literacy of the upcoming generation of students. By employing laptops in more and more teaching activities, students would learn how to interact with computers while taking advantage of the new and more effective modes of presentation offered.
1. However, adopting laptops also presented problems that critics quickly brought forth.
2. Teachers would need to learn how to use laptop computers and would have to change their teaching to accommodate them in the classroom.
3. Apparent cost savings disappeared upon further, closer examination. For example, it became clear that textbook publishers would not so easily give up the revenues they had come to depend upon that came from textbook purchases for public school students. Updates from downloads could turn out to be more expensive and educational software could be coded to restrict access and dissemination.
4. Further studies indicated that technical support costs would run two to three times initial outlays. Keeping laptop hardware and software up and running required technical support and continued investment.
5. Texas found that while some school districts--the richer ones--had already begun projects to integrate computing technology, the poorer school districts would require considerable financial support.
To deal with these problems, Texas carried out several pilot projects that examined the effectiveness of laptop integration in select school districts. While several successes were reported a series of problems arose that led the Texas Board of Education officials to postpone the laptop project. First, pilot projects depended on donations from private computing vendors. While some were forthcoming, others failed to deliver hardware on time and provided only minimal technical support. Second, teachers resisted laptop integration due to the extensive investment of time required to appropriate computing skills and the difficulty of modifying existing curricula and teaching styles to accommodate laptop hardware and software. Third, at that time the available educational software, such as digitalized textbooks, was expensive, inadequately developed, and narrowly focused on curricular areas such as writing and math practice. Teachers also began to develop more comprehensive and philosophical criticisms of laptop use. Education specialist, Larry Cuban, argued that while laptops provided good support for vocational education, they failed to deliver on other educational goals such as teaching children how to interact with their peers and teachers and teaching children the civic virtues necessary to become active participants in a democratic form of government. Studies began to appear that argued that skills developed through computer use came at the expense of other, more social skills.
The Texas Laptop plan was never formally implemented beyond the pilot project phase. However, several computer-integration projects have been carried out in other parts of the country. For example, Larry Cuban reports on computer integration projects carried out in Silicon Valley in California. MIT has developed a cheap laptop computer for use in developing nations. You can find a link to computer integration projects that have been implemented in Philadelphia public schools through the support of the Microsoft Foundation.
Students in computer ethics classes at the University of Puerto Rico at Mayaguez have looked into the feasibility of integrating laptops in the public school socio-technical system in Puerto Rico. They began by looking at the project to provide public school teachers with laptops that was carried out in the late 1990s under the Pedro Rossello administration. The student research projects came to focus on three problem areas. First, they examined whether there were structures in laptop design that made computers unfit for use by children. Second, they studied whether social or ethical problems would arise from the disposal of spent laptops. Third, they investigated the impact on copyright law and intellectual property practices that digitalizing printed textbooks would have.
What you are going to do...
Decision Point One
You are a computer engineer and have been subcontracted by your local government to purchase new portable computers for high school teachers. Your job includes...
• Selecting the kind of computer to be used
• Identifying vendors who will sell the computers
• Overseeing the distribution of computers to high school teachers
• Developing a training program to help teachers learn to use computers
• Designing a technical support hotline to help teachers work out any technical problems that may arise
Distributing computers to high school teachers seems simple enough. You select computers, buy them, and give them to the teachers. Yet only a slight change in circumstances can bring into the open latent or potential ethical issues:
• How should you go about setting up the bidding process to determine the computers to be used?
• What should you do to determine teacher and student needs and how computers can respond to these needs? It makes very little sense to provide computers and then tell teachers and students to use them. What are they to do with these computers? How do they fit them into everyday education? This requires seeing the computer project from the standpoints of students, their parents, and teachers. The reversibility test will help here.
• Who stands to benefit from your actions? Who stands to be harmed from these actions? How will benefits and harms be distributed through the different stakeholders in this case?
• Latent ethical problems exist in this socio-technical system that can erupt into full-blown problems with small changes in circumstances
• Someone you know well--say your cousin--submits a bid. What ethical issues does this turn of events give rise to?
• The contract to provide computers is awarded to your cousin, and he provides reliable computers at a reasonable price. Then, a few weeks later, you read the following headline in the newspaper: "More Government Corruption--Computer Czar's Cousin Counts Millions in Cozy Computer Contract" What do you do now?
• A group of angry high school teachers holds a press conference in which they accuse the government of forcing them to use computing technology in their classes. They say you are violating their academic freedom. How should you respond?
• Someone in the government suggesting placing a program in each computer that allows government officials to monitor the computers and track user behavior. How would you feel if your computer use were being monitored without your knowledge or consent> Are their circumstances under which monitoring could bring about any social benefits? What are the likely harms? Do the benefits outweigh the harms? Suppose you go along with this and read the following headline in the morning newspaper: "Government Snoops B ug High School computers". Using the publicity test, what kind of person would you appear to be in the public's eye? How would you view yourself in terms of this action?
Decision Point Two
You are Dr. Negroponte from MIT. For several years now, you have been working to design laptop computers that respond to a wide range of needs of children in poor, developing nations. You have set up an incentive for people in developed nations to contribute to children in poor nations. For \$300, one can buy two laptops, keep one, and have the other donated to a child in a developing nation. This has generated computers but governments in developing nations--enthusiastic at first--have recently shown themselves reluctant to carry through on their commitments. Your goal of reducing laptop costs to \$100 per computer has also stalled. It has been difficult to generate projected economies of scale.
• The laptops employ a simple design. They use Linux as an operating system since this shareware can be freely downloaded. The computers are also designed to be used in areas where the underlying infrastructure, especially electricity, is unreliable. They are battery-driven and a hand crank allows for recharging batteries when electricity is unavailable. They employ a wireless connection to the Internet.
• An Open Education Resource movement has been started to generate educational resources directly and freely available to children using MIT laptops. This movement has generated considerable educational content of varying qualities. Reports available online provide insights into the pros and cons of the open resource educational movement. Whether this can (or should) replace traditional textbooks (which can be quite expensive and difficult to update) is still open to debate.
• There is evidence that laptops can and have contributed to an enhanced learning experience for children in developing nations. Poor attendance, a large and chronic problem, has been improved in laptop programs. Children enjoy their computers and seem better motivated in general as a result. They take their computers home for homework and share them with the rest of their family. Many teachers have successfully adapted their teaching styles to this Internet-supported, technologically enhanced educational mode.
• But recently, laptops have come under increasing critical scrutiny.
• They are more expensive than traditional educational materials such as textbooks
• They compete for scarce financial resources and may be less cost-effective in the long run than other, more traditional educational resources.
• The MIT laptop has no hard drive, a fact critically singled out by Microsoft's founder, Bill Gates. They have been designed to use the Linus operating system rather than Microsoft's more expensive and complicated one.
• Developing nation governments have recently shown "cold feet" to putting action behind their verbal commitments to laptop computers. This may, in part, be due to concerns expressed by parents and teachers.
• Defend the MIT Laptop Project in the face of these and other criticisms.
• Should their design be modified to suit better children's needs as well as the concerns of teachers and parents?
• What features do MIT laptops already display that respond to student, parent, and teacher needs?
• What are the alternatives to MIT Laptops? For example, evaluate the proposal made by a group in computer ethics to invest in and emphasize instruction in computer laboratories housed in schools themselves. What problems would this new approach avoid? What are its limitations in comparison to the laptop approach?
Decision Point Three
• You live in a developing nation. While you have work, it doesn't pay well and you are barely able to provide for your family's basic needs. One problem and things will get very difficult for you and your family.
• Your child came home with an MIT-designed laptop computer. She and her classmates have benefited from the computers donated to their school by the generosity of developed nations where concerned citizens can buy two computers and have one donated to needy children. You find this somewhat patronizing and you see these laptops as a mixed blessing.
• On the one hand, this laptop has helped you and your family to enjoy the benefits of access to the Internet, although, because of poor infrastructure, this access is limited, sporadic, and subject to frequent breakdowns. On the other hand, you question whether your child is mature enough to use and care for her computer. If anything should happen, you would be required to buy a new replacement laptop, and you simply don't have the money.
• Yet should you not replace your daughter's broken laptop, she would be excluded from the education her peers enjoy because she would no longer have a computer. You question whether you want to run on this "treadmill."
• Furthermore, you can see that laptops--even MIT laptops--are designed for adults, not children. They are made of heavy metals and other toxic materials. The batteries, especially, are dangerous because of the materials they contain. They wear out and replacing them can be expensive.
• Your child could also become a target for robbers. She walks to and from school carrying her computer, and you know of other children who have been beaten and robbed of their laptops.
• So you see these laptops as a mixed blessing fraught with risk. What should you do?
What you are going to do...
Exercise 1: Prepare an STS Grid
• Construct a socio-technical system (STS) grid for public schools in Puerto Rico
• Using the templates found in "Socio-Technical Systems in Professional Decision Making", identify the key constituents such as hardware, software, physical surroundings, etc.
• Select key levels for analysis. For example, you may want to look at the STS from the standpoint of individuals (students and teachers), small groups (public school systems), and institutions (education and business)
• Starting with a short list of values, identify the values embedded in the public school STS and, if possible, the specific components in which these values are embedded. A good place to start is to see how different physical arrangements of the classroom embody different approaches to education
Values in STSs: Values that can be used for exercise 1 include Justice (equity and access), Property, Privacy, Free Speech, Responsibility (Safety). More on these values can be found by clicking on the Computing Cases link provided in this module. Several of these values are defined in the Ethics of Team Work module, m13769.
Exercise 2: Identifying Potential or Latent Problems in STSs
• Choose one of the following three problem areas to help focus your work: (1) value problems that may arise when laptops with their current design are integrated in the PR STS; (2) value problems that may arise by the digitalization of textbooks and other educational materials; (3) value problems and potential harms that may arise during the disposal of spent laptops.
• Compare values embodied in current laptop design with those embodied in the Puerto Rican public school STS. Are there any conflicts? What are these?
• Look more closely at the Puerto Rican public school STS. Are there any conflicts that will be highlighted, exaggerated, or increased by the integration of laptop computers.
• Finally, look for potential harms that could occur in the short, middle, and long term future.
Exercise 3: Develop Counter-Measures to Problems
• Generate 5 to 10 options to respond to the problems you have identified. Make sure that you include the status quo among your options.
• Check each option against the problems you have identified. Does the option solve the problems identified in your STS analysis? Does it integrate the conflicting values and avoid untoward results? Does it give rise to new problems?
• Prepare a short presentation for the class (5 to 10 minutes) where you outline your problem, set forth the range of solutions you have identified, and describe and justify your solution. Be sure to address issues that may arise when you turn to implementing your solution.
• Provide a one or two-sentence argument that your solution is best for delivering on social responsibility.
Exercise 4: Evaluate the Microsoft Philadelphia Public Schools Project
• Listen to/read the news report on the Microsoft Foundation's project to integrate computing technology in Philadelphia. (You can find it by clicking on the link in this module.)
• Is this an example of a corporation carrying out its social responsibility to the surrounding community?.
• Evaluate Microsoft generally in terms of its social responsibility.
Presentations
Social Justice and Responsible Technology: Social Justice and Resp Tech.pptx
Educational Laptops Presentation: Educational Laptops.pptx | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/03%3A_Social_Responsibility/3.02%3A_Ethics_and_Laptops_-_Identifying_Social_Responsibility_Issues_in_Puerto_Rico.txt |
Module Introduction
In this module, you will learn about professional and occupational codes of ethics by looking at a bad code, writing your own code, and then critically examine a professional code of ethics, the engineering code for the Colegio de Ingenieros y Agrimensores de Puerto Rico. Three exercises will take you through the process of examining the Pirate Creed, writing your own code, and examining the Colegio’s code. Text boxes will provide helpful background information on purposes served by professional codes, philosophical objections, and a framework for working your way through a stakeholder-based code like that of the CIAPR or the National Society of Professional Engineers. This module provides a Spanish translation of the Pirate Creed prepared by Dr. Dana Livingston Collins of the Department of Humanities in the University of Puerto Rico at Mayagüez.
Concluding this module are two word documents uploaded as media files. One provides the exercises that are presented in this module in XML format. The other provides the background information that has been presented in this module as Textboxes.
Module Activities
1. You will analyze the Pirate Creed in terms of (a) its different functions, (b) the community values it embodies, and (c) how it stands toward nonmembers of the pirate community as well as members.
2. You will write a code of ethics for an occupational or professional area such as business or engineering.
3. You will debrief the rest of the class on your group's code, clarify its functions and values, and defend it if necessary.
4. This module will conclude with a look at the code of ethics of the Puerto Rico State Society of Professional Engineers and Land surveyors or Colegio de Ingenieros y Agrimensores de Puerto Rico.
Pirates Creed of Ethics (translated into Spanish by Dana Collins)
1. El capitán tendrá comando total durante una batalla y tendrá la autoridad para dirigir el barco. El que no sigua al capitán podrá ser castigado se la tripulación no vota en contra del castigo.
2. Si el barco naufraga, la tripulación permanecerá unidos hasta el capitán consigue otra nave. Si la nave es propiedad común de la tripulación, la primera nave capturada pertenecerá al capitán con una (1) parte de botín.
3. El cirujano del barco recibirá doscientas (200) coronas para el mantenimiento de su equipo médico y recibirá una (1) parte del botín.
4. Los otros oficiales recibirán una (1) parte cada uno, y si se distinguen, la tripulación determinará cuanto recibirán como recompensa.
5. El botín de una nave capturada será distribuido en partes iguales.
6. El primero que señale la aparición de un barco que sea capturado recibirá cien (100) coronas.
7. El que pierda un ojo, una mano, o una pierna mientras está en servicio, recibirá hasta seis esclavos o seiscientas (600) coronas.
8. Los suministros y raciones serán compartidos por igual.
9. La penalidad por traer una mujer disfrazada a bordo es la muerte.
10. Si un hermano roba de otro, perderá su nariz u orejas. Se peca de nuevo, se le darán un mosquete, municiones, plomo y una botella de agua y será abandonado en una isla.
11. Si hay duda en una disputa entre hermanos, una corte de honor determinará el veredicto. Si un hermano es encontrado culpable, la primera vez será perdonado, pero al ofender de nuevo, será atado a un cañón y recibirá un latigazo de cada miembro de la tripulación. El mismo castigo será dado a todos, incluyendo oficiales, quienes se emborrachen al punto de perder sus sentidos mientras estén en el barco.
12. El que se duerma mientras está trabajando como centinela, recibirán latigazos por todos los miembros de la tripulación. Se repite el crimen, su cabeza será rajada.
13. A todos quienes conspiren para desertar, o lo que hayan desertado y sean capturados, sus cabezas serán rajadas.
14. Pelas entre varios hermanos mientras estén a bordo será resueltos en tierra con pistolas y espadas. El que saque primera sangre será el vencedor. No pueden golpear a otro mientras estén a bordo de la nave.
Exercise 1: Pirate Creed
• What is good about the Pirate Creed of Ethics?
• what is bad about the Pirate Creed of Ethics?
• What is the purpose of the Creed for the Pirate Community?
• What values are embedded in the Pirate Creed
• How does the Pirate Creed deal with nonmembers?
Exercise 2: Writing a Code of Ethics for Engineers
• Step One: Identify the purpose of your engineering code of ethics. For example, is it to punish wrongful behavior, provide a set of guidelines, educate the community, support ethical behavior, or create an ethics dialogue?
• Step Two: Identify the contributions that engineering makes to society.
• Step Three: Identify the stakeholders of the engineering profession. A stakeholder is any group or individual with a vital or essential interest tied to what engineers do. along with these stakeholders, identify their stakes, that is, the goods, rights, interests or values that are maintained, promoted, or diminished by what engineers do?
• Step Four: Enumerate the obligations or duties that engineers have toward each of these stakeholders. In other words, what can engineers do to maintain, promote, or diminish the stakes of each stakeholder?
• Step Five: Identify the conflicting obligations that arise from the fact that engineers have different stakeholders who hold conflicting stakes? Do any of these stakeholders or stakes have obvious priority over the others?
• Step Six: Step back and reflect on what you have written. For example, look for different kinds of provisions. Does your code use ideals of the profession which set forth the profession's central or cardinal objectives? Does your code contain principles of professional conduct which set forth minimal levels of behavior and prerscribe sanctions and punishments for compliance failures? In the CIAPR (Colegio de Ingenieros y Agrimensores de Puerto Rico) code of ethics, the fundamental principles and basic canons set forth the ideals of the profession. The principles of professional conduct fall in the section on practical norms.
• Step Seven: The Final Audit. Submit your code to an overall audit to see if anything has been left out. Have you included all the stakeholders and their stakes? Have you left out any ethical considerations such as rights and duties? Compare your code to the law. Are your code's provisions legal? Do they overlap with existing law? Do they imply criticisms of existing laws? If they imply punishments or sanctions, what measures does your code prescribe to administer justly and properly these sanctions? Finally, be sure to guard against the equal but opposite sins of over-specificity and too much generality. Overly specific codes try to provide a rule for every possible situation. Because this is impossible, these codes tend toward rigidity, inflexibility, and irrelevance. Codes that are too general fail because they can be interpreted to rationalize any kind of claim and, thus, mask immoral actions and intentions.
Exercise 3: Studying the code of Ethics of the Colegio de Ingenieros y Agrimensores de Puerto Rico
• Identify the provisions that touch upon the relation of the engineer to the public. What goods are at stake in this relation? What can engineers do to preserve or promote these goods?
• Identify provisions that touch upon the relation of the engineer to the client. What goods are at stake in this relation? What can engineers do to preserve or promote these goods?
• Identify provisions that touch upon the relation of the engineer to the CIAPR (professional engineering society) What goods are at stake in this relation? what can engineers do to preserve or promote these goods?.
• Finally, identify provisions that touch upon the relation of the engineer to other engineers (peer relations). What goods are at stake in this relation? What can engineers do to preserve or promote these goods?
Textbox 1: Code of Ethics of Colegio de Ingenieros y Agrimensores de Puerto Rico (Puerto Rico State society of Professional Eng
• The CIAPR code of ethics has three parts:
• Part One: Three Fundamental Principles which express cardinal objectives for engineering practice in Puerto Rico
• Part Two: Ten Canons which set forth general rules for ethical engineering practice
• Part Three: Each canon is repeated followed by several practical norms. by setting forth detailed rules, practical norms specify and interpret the basic canons. They also set forth specific and concrete rules for professional and ethical conduct
• The CIAPR code of ethics is a stakeholder code. This means it identifies engineering stakeholders, the goods they depend upon, and the duties engineers have in protecting or promoting these goods.
Key Engineer Relations
• The relation between engineer and public is founded on the goods of health, safety and welfare.
• The relation between engineer and client is founded on the good of faithful agency (trust).
• The relation between the individual engineer and the profession is founded on the engineer working to maintain the good reputation and integrity of the profession.
• The peer relation between practicing engineers is founded on the good of collegiality.
Engineer and Public
• Duties arising in this relation are tied to maintaining or promoting the goods of health, safety, and welfare. They include minimizing harm, avoiding paternalism (making decisions for others who have the right and ability to make these for themselves), free and informed consent (the right of those taking a risk to consent to that risk).
• FP1: Deberán considerar su principal función como profesionales la de servir a la humanidad. Su relación como professional y cliente, y como professional y patrono, deberá estar sujeta a su función fundamental de promover el bienestar de la humanidad y la de proteger el interés público.
• Canon 1: Velar por sobre toda otra consideración por la seguridad, el ambiente, la salud y el bienestar de la comunidad en la ejecución de sus responsabilidades profesionales.
• Practical Norm 1d: Cuando tengan conocimiento o suficiente razón para creer que otro ingeniero o agrimensor viola las disposiciones de este Código, o que una persona o firma pone en peligro la seguridad, el ambiente, la salud o el bienestar de la comunidad, presentarán tal información por escrito a las autoridades concernidas y cooperarán con dichas autoridades proveyendo aquella información o asistencia que les sea requerida.
Engineer to Client
• Duties stemming from this relation arise out of faithful agency, that is, the responsibility of an engineer to remain true to the client's interests. Positively this includes exercising due care for the client by carrying out the client's interests through the exercise of sound, competent engineering professional judgment. Negatively this entails avoiding conflicts of interest and revealing the client's confidential information.
• Faithful Agency: Canon 4—Actuar en asuntos profesionales para cada patrono o cliente como agentes fieles o fiduciarios, y evitar conflictos de intereses o la mera apariencia de éstos, manteniendo siempre la independencia de criterio como base del profesionalismo.
• Conflict of Interest: 4a—Evitarán todo conflicto de intereses conocido o potencial con sus patronos o clientes e informarán con prontitud a sus patronos o clientes sobre cualquier relación de negocios, intereses o circunstancias que pudieran influenciar su juicio o la calidad de sus servicios.
• Confidentiality: 4i—Tratarán toda información, que les llegue en el curso de sus encomiendas profesionales, como confidencial y no usarán tal información como medio para lograr beneficio personal si tal acción es adversa a los intereses de sus clientes, de sus patronos, de las comisiones o juntas a las que pudiera pertenecer o del público.
Engineer to Profession
• This includes working to promote the profession's autonomy and independence as well as maintaining its good reputation. Moreover it requires that engineers participate in their professional society, work to advance engineering, be objective and impartial in their work, and associate only with persons of good reputation.
• Canon 3: Emitir declaraciones públicas únicamente en una forma veraz y objetiva.
• Practical Norm 3a: Serán objetivos y veraces en informes profesionales, declaraciones o testimonios. Incluirán toda la información relevante y pertinente en tales informes, declaraciones o testimonios.
Engineer to Engineer
• This relation is based on the good of Collegiality. It requires that engineers work to maintain friendly and collaborative relations with other engineers by avoiding disloyal competition and comparative advertising and by always giving peers due credit for their contributions to engineering projects and designs.
• Practical Norm 4l: Antes de realizar trabajos para otros, en los cuales puedan hacer mejoras, planos, diseños, inventos, u otros registros, que puedan justificar la obtención de derechos de autor o patentes, llegarán a un acuerdo en relación con los derechos de las respectivas partes. (Give due credit to colleagues for their work).
• Canon 5: Edificar su reputación profesional en el mérito de sus servicios y no competir deslealmente con otros. (Avoid disloyal competition)
• Practical Norm 6b: Anunciarán sus servicios profesionales sin auto-alabanza y sin lenguaje engañoso y de una manera en que no se menoscabe la dignidad de sus profesiones. (Non-comparative advertising)
• Practical Norm 5h: No tratarán de suplantar, ni suplantarán otro ingeniero o agrimensor, después de que una gestión profesional le haya sido ofrecida o confiada a éste, ni tampoco competirá injustamente con él. (Avoid disloyal competition)
Professional Codes as Social Contracts
• What some have said about defining ethics could also be applied to defining a profession: it's a bit like "nailing jello to a tree." Nevertheless, we can make to reasonable claims about professions: tye can be treated as social contracts, and they have someting to do with specialized knowledge. If these two claims hold, then a third claim can be made, namely, that professions have an ineliminable ethical dimension.
• A legitimate contract between two parties requires a quid pro quo (a mutually beneficial exchange) and free consent (consent that includes full information and excludes force or deception). The social contract between engineering and society can be pictured in the following way:
Profession as Social Contract
Society grants to Profession Profession grants to Society
Autonomy Self-Regulation
Prestige Primacy of public health, safety, and welfare
Monopoly Developing and enforcing ethical and professional standards
Society grants autonomy, prestige, and monopoly control to the profession of engineering.
1. Autonomy includes freedom from regulation and control from the outside through cumbersome laws, regulations, and statutes.
2. Prestige includes high social status and generous pay.
3. Monopoly status implies that the profession of engineering itself determines who can practice engineering and how it should be practiced.
4. The profession promises to use its autonomy responsibly by regulating itself. it does this by developing and enforcing professional and ethical standards. By granting prestige to the profession, society has removed the need for the profession to collectively bargain for its self-interest.
5. Not having to worry about its collective self-interest, the profession is now free to hold paramount the health, safety, and welfare of the public.
6. This contract explains why professions develop codes of ethics. Codes document to the public the profession's commitment to carry out its side of the social contract, namely, to hold paramount public welfare. They can do this because society will honor its side of the contract, namely, to remove from the profession the need to fight for its self-interest
This social contract is more symbolic and explanatory than real.
• Codes allow the profession to document to society that it has developed proper standards and intends to enforce them. They express the profession's trust in society to keep its side of the bargain by granting autonomy, prestige, and monopoly. Of course this contract has never been explicitly enacted at a point in historical time. But the notion of a social contract with a mutually beneficial exchange (a quid pro quo) provides a useful device for modeling the relation that has actually evolved between society and its professions.
Professions and Responsibility
• Professions have been created to exercise stewardship over knowledge and skill domains.
• Exercising stewardship over X generally means watching over, preserving, protecting, and even improving X. Stewardship is a forward-looking kind of responsibility similar to the responsibility that a parent exercises toward his or her children. The steward is a trusted servant or agent of the landowner who acts in the owner's place while the later is absent or incapacitated.
• "Stewardship," thus, refers to the profession's responsibility to safeguard its specific domain of knowledge and skill. This domain is essential to society in some way (it provides society with a basic, common good) and society delegates responsibility for this domain to its members who are specially suited to exercise it.
• So, generally speaking, professions can be characterized in terms of epistemological and ethical responsibilities.
• The epistemological responsibility refers to stewardship over the knowledge and skills that characterizes the profession. The profession preserves, transmit, and advances this domain of knowledge and skill. (Epistemology = study of knowledge.)
• The ethical dimension refers to the responsibility of the profession to safeguard knowledge and skill for the good of society. Society trusts the profession to do this for the sake of the comnmon good. Society also trusts the profession to regulate its own activities by developing and enforcing ethical and professional standards.
Objections to and Mischievous Side Effects of Codes of Ethics
These objections are taken from John Ladd, "The Quest for a Code of Professional Ethics: An Intellectual and Moral Confusion." This article can be found in Deborah G. Johnson, editor, (1991) Ethical Issues in Engineering, New Jersey: Prentice Hall: 130-136. The author of this module has taken some liberties in this presentation.
• Codes "confuse ethics with law-making" (Ladd, 130). Ethics is deliberative and argumentative while law-making focuses on activities such as making and enforcing rules and policies.
• A code of ethics is an oxymoron. Ethics requires autonomy of the individual while a code assumes the legitimacy of an external authority imposing rule and order on that individual.
• Obedience to moral law for autonomous individuals is motivated by respect for the moral law. On the other hand, obedience to civil law is motivated by fear of punishment. Thus, Ladd informs us that when one attaches "discipinary procedures, methods of adjudication and sanctions, formal and informal, to the principles that one calls 'ethical' one automatically converts them into legal rules or some other kind of authoritative rules of conduct...."(Ladd 131) Accompanying code provisions with punishments replaces obedience based on respect for the (moral) law with conformity based on fear of punishment.
• Codes lead to the dangerous tendency to reduce the ethical to the legal. Ethical principles can be used to judge or evaluate a disciplinary or legal code. But the reverse is not true; existing laws cannot trump ethical principles in debates over ethical issues and ethical decisions. As Ladd puts it, "That is not to say that ethics has no relevance for projects involving the creation, certification and enforcement of rules of conduct for members of certain groups....[I]ts [ethics's] role in connection with these projects is to appraise, criticize and perhaps even defend (or condemn) the projects themselves, the rules, regulations and procedures they prescribe, and the social and political goals and institutions they represent." (Ladd 130)
• Codes have been used to justify immoral actions. Professional codes have been misued by individuals to justify actions that go against common morality. For example, lawyers may use the fact that the law is an adversarial system to justify lying. Ladd responds in the following way to this dodge: "{T}here is no special ethics belonging to professionals. Professionals are not, simply because they are professionals, exempt from the common obligations, duties and responsibilities that are binding on ordinary people. They do not have a special moral status that allows them to do things that no one else can." (Ladd 131)
Mischievous Side-Effects of Codes (from John Ladd)
• Codes make professionals complacent. (Ladd 135) First, they reduce the ethical to the minimally acceptable. Second, they cover up wrongful actions or policies by calling them--within the context of the code--"ethical". For example, the NSPE code of ethics used to prohibit competitive bidding. Enshrining it in their code of ethics gave it the appearance of being ethical when in fact it was motivated primarily by self interest. This provision was removed when it was declared unconstitutional by the U.S. Supreme Court for violating the Anti-Trust law.
• Because codes focus on micro-ethical problems, "they tend to divert attention from macro-ethical problems of a profession." (Ladd 135) For example, in Puerto Rico, the actions of the Disciplinary Tribunal of the Colegio de Ingenieros y Agrimensores de Puerto Rico tend to focus on individual engineers who violate code provisions concerned with individual acts of corruption; these include conflicts of interest, failing to serve as faithful agents or trustees, and participating in corrupt actions such as taking or giving bribes. On the other hand, the CIAPR does not place equal attention on macro-ethical problems such as "the social responsibilities of professionals as a group" (Ladd 132), the role of the profession and its members in society (Ladd 135), and the "role professions play in determining the use of technology, its development and expansion, and the distribution of the costs." (Ladd 135)
Exercise: Questions for Reflection
1. Which of Ladd's criticisms apply to the Pirate Creed?
2. How does your group's code of ethics stand in relation to Ladd's criticisms?
3. Do Ladd's objections apply t the ABET, NSPE, or CIAPR codes? | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/04%3A_Changing_Organizational/4.01%3A_Pirate_Code_for_Engineering_Ethics.txt |
Module Introduction
Codes of ethics evoke opposite reactions from people who teach, do research in, or are practitioners of occupational and professional ethics. Some hold that teaching codes of ethics is essential to preparing students for their future careers. Corporations, for example, have come to view codes as the cornerstone of a successful compliance program. Professional societies, such as the Puerto Rico State Society of Professional Engineers and Land Surveyors, also make the drafting, revising, and disseminating professional codes of ethics a central part of practicing professional engineering ethics. But many strongly oppose codes because they promote the wrong sorts of attitudes in those who would be influenced by them. As you will see below, philosophical ethicists raise objections to codes because they undermine moral autonomy, lead to uncritical acceptance of authority, and replace moral motives with fear of punishment. These polar stances are grounded in the very different perspectives from which different groups approach codes. But they are also grounded in the fact that codes take many different forms and serve distinct functions. For example, consider the introductory considerations presented in the following:
Different Uses for Codes
Kinds of Codes:
• Professional Codes of Ethics. Professions such as engineering and accounting have developed codes of ethics. These set forth the ideals of the profession as well as more mundane challenges faced by members. Engineering codes, for example, set forth service to humanity as an ideal of the profession. But they also provide detailed provisions to help members recognize conflicts of interest, issues of collegiality, and confidentiality responsibilities.
• Corporate Codes of Ethics. Corporate codes are adopted by many companies to respond better to the Federal Sentencing Guidelines. These codes provide guidelines on particularly sticky issues (When does a gift become a bribe?) They also set forth provisions that express the core values of the corporation. These lengthy codes with detailed provisions support a compliance approach to organizational discipline.
• Corporate Credos. Some companies have shortened their lengthy codes into a few general provisions that form a creed. Johnson and Johnson's Credo is famous in this respect and can be found by clicking on the Business Ethics Library link provided above.
• Statements of Values. Finally, more mature companies find it useful to express and disseminate their core value commitments in Statements of Values. These form the basis of values-based decision-making. While codes of ethics clearly establish minimum standards of acceptable conduct, Statements of Values outline the aspirations that can drive companies toward continuous improvement.
Functions or Purposes Served by Codes:
• Discipline. This function gets all the attention. Most codes are set forth to establish clearly and forcefully an organization's standards, especially its minimum standards of acceptable conduct. Having established the limits, organizations can then punish those who exceed them.
• Educate. This can range from disseminating standards to enlightening members. Company A's employees learned that anything over \$100 was a bribe and should not be accepted. But engineers learn that their fundamental responsibility is to hold paramount public safety, health, and welfare. Codes certainly teach minimum standards of conduct, but they can help a community to articulate and understand their highest shared values and aspirations.
• Inspire. Codes can set forth ideals in a way that inspires a community's members to strive for excellence. They can be written to set forth the aspirations and value commitments that express a community's ideals. They can point a community toward moral excellence.
• Stimulate Dialogue. Engineering professional codes of ethics have changed greatly over the last 150 years. This has been brought about by a vigorous internal debate stimulated by these very codes. Members debate controversial claims and work to refine more basic statements. Johnson and Johnson credits their credo for their proactive and successful response to the Tylenol crisis. Regularly, employees "challenge the credo" by bringing up difficult cases and testing how effectively the credo guides decision-making and problem-solving. The CIAPR's Disciplinary Tribunal cases have served as a focus for discussions on how to interpret key provisions of the organization's code of ethics. The NSPE Board of Ethical Review decisions have also provided an excellent forum for clarifying ethical concepts (public safety, conflict of interest) in the context of cases brought to the board by NSPE members. The BER discusses cases in terms of relevant provisions of the NSPE code. Over the years, the NSPE BER has established a firm foundation for the resolution of difficult ethical cases by developing analogies with cases it has already discussed and clarified.
• Empower and Protect. Codes empower and protect those who are committed to doing the right thing. If an employer orders an employee to do something that violates that employee's ethical or professional standards, the code provides a basis for saying, "No!". Engineers have refused to carry out directives that place in jeopardy the health and safety of the public based on statements like canon 1 of the CIAPR code. (The NSPE code has similar provisions.) Because codes establish and disseminate moral standards, they can provide the structure to convert personal opinion into reasoned professional judgment. To reiterate, they provide support to those who would do the right thing, even under when there is considerable pressure to do the opposite.
• Codes capture or express a community's identity. They provide the occasion to identify, foster commitment, and disseminate the values with which an organization wants to be identified publicly. These values enter into an organization's core beliefs and commitments forming an identify-conferring system. By studying the values embedded in a company's code of ethics, observing the values actually displayed in the company's conduct, and looking for inconsistencies, the observer can gain insight into the core commitments of that company. Codes express values that, in turn, reveal a company's core commitments, or (in the case of a hypocritical organization) those values that have fallen to the wayside as the company has turned to other value pursuits.
Difficulties with Codes:
• The following objections lead philosophers to argue that presenting codes of ethics in ethics classes undermines several key moral attitudes and practices.
• Codes can undermine moral autonomy by habituating us to act from motives like deference to external authority and fear of punishment. We get out of the habit of making decisions for ourselves and fall into the habit of deferring to outside authority.
• Codes often fail to guide us through complex situations. Inevitably, gaps arise between general rules and the specific situations to which they are applied; concrete situations often present new and unexpected challenges that rules, because of their generality, cannot anticipate. Arguing that codes should provide action recipes for all situations neglects the fact that effective moral action requires more than just blind obedience to rules.
• Codes of ethics can encourage a legalistic attitude that turns us away from the pursuit of moral excellence and toward just getting by or staying out of trouble. For example, compliance codes habituate us to striving only to maintain minimum standards of conduct. They fail to motivate and direct action toward aspirations. Relying exclusively on compliance codes conveys the idea that morality is nothing but staying above the moral minimum.
This module is designed to steer you through these complex issues by having you draft a Statement of Values for students at your university. As you work through your Statement of Values, you will learn that codes have strengths and weaknesses, serve different functions, and embody values. To get you started in this process, you will study a defective code, the Pirate Credo. A quick glance is all that is needed to see that codes are "all too human" and need to be approached critically. In a second activity, you will identify the values embedded in professional, corporate, and academic codes. Working with these values, you will develop a list upon which your group will build its own Statement of Values in a third activity. Finally, you will construct value profiles that include a general description, sample provisions, value-based challenges, and value principles. These will all contribute to motivating those in your community to commit to and work in concert to realize these values.
How an academic community developed a Statement of Values
A False Start: The faculty of the Arts and Sciences College of University X decided to form a committee to write a code of ethics. This committee met several times during the course of an academic semester to prepare the first draft. When they finished, they circulated copies throughout the college. Then they held a series of public hearings where interested members of the College could criticize the code draft. These were lightly attended and those attending had only a few suggestions for minor changes. However, when the code was placed before the faculty for approval, considerable opposition emerged. For example, a provision discouraging faculty from gossiping was characterized by opponents as an attempt by a hostile College administration, working through the committee, to eliminate faculty free speech. Several opponents expressed opposition to the very idea of a code of ethics. "Does the administration think that our faculty is so corrupt," they asked, "that the only hope for improvement is to impose upon them a set of rules to be mindlessly followed and ruthlessly enforced?" At the end of this debate, the faculty overwhelmingly rejected the code.
Reflections on "A False Start"
• Should codes of ethics be democratically developed from the "bottom-up" or should they be authoritatively imposed from the "top-down?" Or does this depend on certain characteristics of the community? Maybe corporate managers should have lawyers draft their codes to meet the Federal Sentencing Guidelines; these completed codes should then be implemented throughout the company at all levels. Maybe academic communities should democratically determine their own codes, and if they are unable to do so, then so much the worse for the "very idea" of a code of ethics.
• The Ethics of Team Work module presents three ways that lead groups to go off the tracks: Group Polarization, Groupthink, and "Going to Abilene." Do you think that any of these would explain false starts in developing a code of ethics? How can these group pitfalls be overcome?
• Groups are often polarized around different and conflicting ideologies or paradigms. Thomas Kuhn discusses paradigms in the context of scientific debates. When these debates are fueled by conflicting and incompatible paradigms, they can turn acrimonious and prove extraordinarily difficult to resolve. For Kuhn, paradigms articulate and encapsulate different world views; the meanings and experiences shared by one group operating under one paradigm are often not shared by those operating under different paradigms. Members of the Arts and Sciences faculty of University X may have disagreed about the provisions proscribing gossiping because they were operating under different conceptual systems brought about by incommensurable paradigms. If faculty members assumed different meanings for 'gossiping', 'code', and 'discipline', then this would fuel the polarization of non-agreement like that which occurred at University X.
• Cass Sunstein proposes that communities work around ideological or paradigm-driven disputes by developing, in special circumstances, "incompletely theorized agreements." These agreements are brought about by bracketing commitments to a given ideology or paradigm. This allows one side to work on understanding the other instead of marshaling arguments to defend the set of views entailed by its paradigm. So Sunstein's recommendation to the College of Arts and Sciences of University X would be to suspend commitment to defending the core beliefs of the conflicting ideologies and try to hold discussions at a more concrete, incompletely theorized level. This makes finding common ground easier. When shared understandings are forged, then they can serve as bridges to more complex, more completely theorized positions.
• Looking at this problem from a completely different angle, do codes of ethics require a background of trust? If so, how can trust be built up from within highly diverse and highly polarized communities or groups?
• Finally, can codes of ethics be abused by more ruthless groups and individuals? For example, as those in the College of Arts and Sciences claimed, can codes of ethics be used by those in positions of power to strengthen that power and extend control over others?
A Success Story:
• Three years later at the same university, another faculty group set out to construct a code of ethics in order to respond to accreditation requirements. They began with the idea of constructing a stakeholder code.
• First, they identified the stakeholders of the college's activities, that is, groups or individuals who had a vital interest in that community's actions, decisions, and policies.
• Second, they identified the goods held by each of these stakeholders which could be vitally impacted by the actions of the college. For example, education represented the key good held by students that could be vitally impacted by the activities and decisions of the College.
• Working from each stakeholder relation and the good that characterized that relation, members of the college began crafting code provisions. Some set forth faculty duties such as keeping regular office hours, grading fairly, and keeping up to date in teaching and research. Others emphasized student duties such as working responsibly and effectively in work teams, adhering to standards of academic honesty, and attending classes regularly.
Because stakeholder codes embody a community's values, the individuals in charge of drafting the code decided that a more direct approach would be to identify the embodied values and refine them into a Statement of Values. This formal statement could later be developed in different directions including a more detailed compliance code.
Turning their efforts toward preparing a Statement of Value Process, the Business Administration community went through the following steps:
1. They discussed a flawed document, the Pirate Credo. This brought about three positive results: participants came to see how codes embody values, that codes serve different functions, and that codes clarify relations between the insiders and outsiders of a community.
2. Participants examined "bona fide" codes of ethics such as academic codes, codes of honor, corporate codes, and professional codes. Since codes embody values, they developed lists of the values these codes embodied.
3. The sample provisions crafted in the earlier stakeholder code effort were presented so that participants could identify the values these embodied. Previous efforts in developing a stakeholder code could be benchmarked against the codes studied in the previous step. Convergences and divergences were noted and used to further characterize the college's community in terms of its similarities and differences with other communities.
4. In this step, faculty members were asked to reduce the values list to a manageable number of five to seven. This led to the most contentious part of the process. Participants disagreed on the conception of value, the meaning of particular values like justice, and on whether rights could be treated as values.
5. To resolve this disagreement, discussion leaders proposed using ballots to allow participants to vote on values. This process was more than a simple up or down vote. Participants also ranked the values under consideration.
6. After the top five values were identified, efforts were made, in describing each of the remaining values, to find places to include at least components of the values left out. For example, while confidentiality was not included in the final value list, it was reintegrated as a component of the more general value of respect. Thus, the final values list could be made more comprehensive and more acceptable to the faculty community by reintegrating some values as parts of other, more general values. Another way of picking up values left behind in the voting process was to combine values that shared significant content. Values that did not make it into the final list were still noted with the provision that they could be integrated into subsequent drafts of the Statement of Values.
7. A committee was formed to take each value through a value template. After describing the value, they formulated a principle summarizing the ethical obligations it entailed, crafted sample provisions applying the value, and posed different challenges the value presented to help guide a process of continuous improvement.
8. The committee presented its results to the faculty who approved this first draft Statement of Values
9. The faculty then developed a schedule whereby the Statement of Values would be revisited, expanded, revised, and improved.
Textbox 1: Responding to the Federal Sentencing Guidelines
Recent efforts to develop ethics codes in the academic context for both students and faculty may, in part, stem from the success of ethics compliance programs developed in business and industry in response to the Federal Sentencing Guidelines. Organizational codes of ethics have been integrated alongside other compliance structure and activities to prevent criminal behavior, to detect criminal behavior, and to ensure prompt and effective organizational response once such behavior has been detected.
The following section contains short excerpts from the Federal Sentencing Guidelines. For more details consult the materials referenced in note 5 below.
• "The hallmark of an effective program to prevent and detect violations of law is that the organization exercised due diligence in seeking to prevent and detect criminal conduct by its employees and other agents. Due diligence requires at a minimum that the organization must have taken the following types of steps:
• The organization must have established compliance standards and procedures to be followed by ite employees and other agents that are reasonably capable of reducing the prospect of criminal conduct.
• Specific individual(s) within high-level personnel of the organization must have been assigned overall responsibility to oversee compliance with such standards and procedures.
• The organization must have used due care not to delegate substantial discretionary authority to individuals whom the organization knew, or should have known through the exercise of due diligence, had a propensity to engage in illegal activities.
• The organization must have taken steps to communicate effectively its standards and procedures to all employees and other agents, e.g., by requiring participation in training programs or by disseminating publications that explain in a practical manner what is required.
• The organization must have taken reasonable steps to achieve compliance with its standards, e.g., by utilizing monitoring and auditing systems reasonably designed to detect criminal conduct by its employees and other agents and by having in place and publicizing a reporting system whereby employees and other agents could report criminal conduct by others within the organization without fear of retribution.
Recommendations by the Federal Sentencing Guidelines for an Effective Compliance Program
• Appointing individuals to serve as ethics or compliance officers
• Developing corporate credos and codes of ethics that effectively communicate an organization's ethical standards and expectations to employees.
• Designing ethics training programs for all employees
• Designing and implementing monitoring and auditing systems
• Designing and implementing an effective system of punishments and sanctions. These must be accompanied by investigative procedures that respect employee due process rights.
Textbox 2: Compliance Oriented Codes and Programs Versus Values Oriented Codes and Programs
Compliance Strategy
1. The initial and still probably the most prevalent method for responding to the Federal Sentencing Guidelines is the compliance strategy. This strategy is based on three interrelated components:
2. Rules: Compliance strategies are centered around strict codes of ethics composed of rules that set forth minimum thresholds of acceptable behavior. The use of rules to structure employee action does run into problems due to the gap between rule and application, the appearance of novel situations, and the impression that it gives to employees that obedience is based on conformity to authority.
3. Monitoring: The second component consists of monitoring activities designed to ensure that employees are conforming to rules and to identify instances of non-compliance. Monitoring is certainly effective but it requires that the organization expend time, money, and energy. Monitoring also places stress upon employees in that they are aware of constantly being watched. Those under observation tend either to rebel or to automatically adopt behaviors they believe those doing the monitoring want. This considerably dampens creativity, legitimate criticism, and innovation.
4. Disciplining Misconduct: The last key component to a compliance strategy is punishment. Punishment can be effective especially when establishing and enforcing conduct that remains above the criminal level. But reliance on punishment for control tends to impose solidarity on an organization rather than elicit it. Employees conform because they fear sanction. Organizations based on this fear are never really free to pursue excellence.
Values Orientation
1. To facilitate comparison, three correlative but different elements to Values-Based or aspirational approaches will be identified.
2. Development of Shared Values: Using a process similar to the one described above, a company develops a Statement of Shared Values. These provide guidelines that replace the hard and fast rules of a compliance code. Statements in values-oriented codes play a different logical function than statements in compliance codes. "Principles of Professional/Organizational Conduct" in compliance codes specify circumstances of compliance: time, agent, place, purpose, manner, etc. These provide sufficient content to set forth principles of professional conduct as rules that can be violated. This, in turn, allows them to be backed by punishment for violation. "Ideals of the Profession” (or organization) set forth a community's shared aspirations. These are pitched at a level well above and beyond the minimum. Communities can and should define themselves as much by their aspirations as by their threshold standards.
3. Support for Employees: Since Statements of Values set forth excellences or aspirations, the role of the organization changes from monitoring and then punishing misbehavior to finding ways of opening avenues for employees to realize key values in their day to day activity. Excellence is not something to be reached overnight. It requires rethinking basic motivations, attitudes, beliefs, and goals. Companies need to identify obstacles to achieving ideals and then develop support structures to help those who seek to realize ideals. Values-based approaches change from punishing conduct that falls below the minimum to providing collective support to those who strive for the excellent.
4. Locking in on Continual Improvement: The philosopher, John Dewey, characterizes moral responsibility as the drive to better ourselves. The particular twist in Dewey’s approach is to find ways of folding what has been learned from the past into meeting new challenges that arise in the future. This involves changing habits and, ultimately, changing character. Continual improvement is the ultimate goal of corporations oriented toward excellence. The values these “moral ecologies” identify structure and channel this endeavor. What is needed at this stage is to develop concrete programs and strategies for identifying obstacles to excellence, removing them, and remaining on track for excellence.
5. To summarize, some companies identify a compliance strategy where they set forth rules that establish minimum levels of acceptable conduct, monitor compliance, and punish non-compliance. Others, value-oriented or aspiration-oriented companies, identify core values or aspirations (by reflecting on community values and finding them embedded in extant codes of ethics), develop programs and structures to support those who strive for these values, and work to lock in a program of continual improvement or betterment.
6. Something to think about. Compliance approaches work best in what of company, organization or moral ecology. (Think about this in terms of the central or core commitments such as those in finance-, customer-, and quality-driven companies.) Values-based approaches work best in what kind of company, organization or moral ecology? How does one transition from compliance to values-based approaches? How does one integrate the two?
Exercise 1: Evaluating the Pirate Credo
Read the Pirate Credo. Then answer the following questions individually...
• What is good about the Pirate Credo?
• What is bad about the Pirate Credo?
• What is the purpose served by the Pirate Credo? For the Pirate Community? For non-members?
Exercise 2: Statement of Value Challenge
• Is the SOV comprehensive? (For example, can you think of a case that it does not adequately cover? Are there values that it leaves out in the sense that they cannot be subsumed by one or more SOVs?
• Are the value descriptions clear? For example, if you have confused values on the multiple-choice or matching sections of your exams, is this because the descriptions need reworking and clarifying?
• Last year, an ADEM stakeholder group suggested that values should be paired with one another. For example, because integrity is a meta-value it should be paired with other values like trust. Or should trust and responsibility be paired with one another? In this case, should the SOV be expanded to explore the relations between different values?
• When ADEM stakeholders identified their values in 2005, they prioritized and ranked them. Justice was ranked highest followed by responsibility, respect, trust, and integrity. Should this hierarchy or ranking be changed? For example, last year stakeholders suggested that integrity should be ranked first because it is a meta-value that talks about the relationship between other values.
Exercise 3: Developing Corporate Codes of Ethics
1. Ethics Bowl Corporations. You have been assigned corporations corresponding to two of the six ethics bowl cases. For your presenting corporation, you will be developing a partial code of ethics. For the commenting corporation, you need to familiarize yourself with the moral ecology of the corporation, its needs, and be ready to comment on the code offered by another group.
2. What kind of moral ecology is predominant in your corporation? Is it financial-, customer-, or quality-driven. Look at how the type of moral ecology structures other organizational activities: allocation of praise and blame, exchange of information, treatment of dissenting opinions, and central of moral concerns. All of these issues need to be addressed directly or indirectly in your code.
3. What is the ethical challenge that is highlighted in the ethics bowl scenario based on your case? For this information, see the "Ethics Bowl in the Environment of the Organization" module
4. What functions are you addressing in your code outline? Looking above, these would include educate, inspire, create dialogue, discipline, empower, secure and express identity.
5. Develop within the time available a sketch of a code. This could be a section of a compliance code, a corporate credo, or a statement of values. In choosing your form, think carefully about the function(s) of your code. Have something that you can present, informally, for around 3 to 5 minutes.
Exercise 4: Evaluating Bona Fide Codes of Ethics
Form small work teams of four to five individuals. Carry out the following four steps and report your results to the rest of the group...
1. Review a few sample codes per team
2. List the values you identify in the codes. Express each value as a word or in as few words as possible
3. Identify any recurring values
4. Record and post the list of values
Exercise 5: Do a Statement of Values for Students at Your University
In this exercise, work with your group to develop a refined list of five to seven values. You can refine your list by integrating or synthesizing values, grouping specific values under more general ones, and integrating values into others as parts. Do your best to make your list comprehensive and representative.
1. Brainstorm: list the values for your group. Keep in mind that values are multi-dimensional. For example, in the academic context, the values will break down into dimensions corresponding to stakeholder: faculty, students, administration, and other academic stakeholders
2. Refine: reduce your list to a manageable size (5-7). Do this by rewording, synthesizing, combining, and eliminating
3. Post: share your list with the entire group
4. Revise: make any last-minute changes
5. Combine: a moderator will organize the lists into a ballot
6. Vote: Each person ranks the top five values
Exercise 6--Conveying Our Values: Crafting a Values-Based Code
Each value in your Statement of Values needs to be accompanied by a Value Profile. Give a description of the value in everyday, non-technical terms. Think concretely. For example, those who exemplify your value behave in a certain fashion, exhibit certain commitments, pursue certain projects, and show certain attitudes and emotions. Try to think of general guidelines to keep in mind when working to realize your value. Finally, values challenge us because portray our aspirations. Think of specific ways values challenge us. For example, students may set for themselves the challenge of working responsibly in teams. They can further spell out what kinds of actions and attitudes this might require. Faculty members might set for themselves the challenge of grading more fairly. This could require actions like developing rubrics and refining exams to make them clearer. The purpose of this fourth exercise is to provide content to your statement of values and begin its implementation in your community. The following steps enumerated below will help.
1. Value: Responsibility
2. Description: A responsible person is a person who...
3. Principle: The faculty, students, and staff of the College of Business Administration will...
4. Commitments: Keep office hours, do your fair share in work teams, divide work into clear and coordinated tasks, etc.
Exercise 7: Creating Awareness of the UPRM College of Business Administration Statement of Values
This exercise provides you an opportunity to study and discuss the UPRM College of Business Administration Statement of Values (available via the PREREQUISITE LINKS). Your task consists of the following tasks:
• Read the entire UPRM CBA Statement of Values (individually)
• Discuss the particular section/value assigned to your group and briefly describe what commitments or challenges does this value present for the students, faculty and/or staff of the CBA
• List the most important commitments or challenges as precise and concise principles
Exercise 8: Assessing the UPRM College of Business Administration Statement of Values
This exercise offers four scenarios in academic integrity. Your job is to discuss each scenario in terms of the values listed in the UPRM College of Business Administration Statement of Values (available via the PREREQUISITE LINKS).
Marta Acevedo, a business administration student, has a report due tomorrow. She has been overwhelmed for the last few weeks with assignments from other classes and doesn't really have time to complete this exercise. She discovers that her roommate took this same class the previous semester and has a complete report on disk. She considers using her roommate's report. Should she? What would you do if you were her?
• Is Marta threatening any of the values listed in the ADEM SOV? Which ones?
• What can be done prevent this kind of problem from arising in the first place? Should Marta have planned her course load better when registering? Can teachers coordinate to prevent overloading students with the same deadlines? Whose fault is this? The students? The teachers? The system?
• Can this problem be posed as a conflict between ADEM values and other values held by students and teachers? If so, what are values that are in conflict? How can these conflicts be addressed?
• Do you think the ADEM SOV adequately addresses this problem? If not, how can it be improved?
You are head of your department. A recent study has revealed that plagiarism, which is a university-wide problem, is especially bad in your department. Imagine your relief when a member of your faculty brings you his latest software project, a super-effective and comprehensive anti-plagiarism software program. This program does everything. It detects subtle changes in style in student papers. Its new search engine quickly connects to existing online paper data bases, greatly expanding the ability of a professor to detect the sources from which their students have copied. Furthermore, it allows professors to upload papers and projects from past semesters and provides fast and flexible indexing to help them identify recycled student work. Professors can zero in on students using recycled papers, and the former students who have become their suppliers. Following the recent lead of Ohio State University, you can now revoke the degrees of past students who participate in this version of academic dishonesty. In short, this new and exciting software package allows you to monitor the work of present and past students to a degree thought impossible even in the recent past. “Plagiarism,” your colleague tells you, “will now become a thing of the past.”
• Does this anti-plagiarism program threaten any of the values in the ADEM SOV? If so, which values?
• Is the department chairperson treating students disrespectfully by adopting and implementing the anti-plagiarism software? Can faculty treat students disrespectfully as "justifiable" retaliation for student cheating and plagiaring? Do two wrongs make a right?
• What is the cause of plagiarism? Do students do it out of ignorance of standards and practices of documentation and achnowledgment? Do they do it because they procrastinate until they do not have time to do the assignment properly? Do students resort to plagiarism because they have too many conflicting obligations such as family, job, large course loads, etc.?
You teach an advanced course in Engineering Economics that has both graduate and undergraduate students. At the end of the semester the students turn in a group project that comprises 40% of their grade. One of the groups complains to you that only 4 out of the 5 members have done any work. The fifth student, the one who allegedly has done no work, is an undergraduate. The others are graduate students. You talk with the undergraduate who claimed that she tried to involve herself in the group activities but was excluded because she was an undergraduate. What should you do?
• ADEM faculty have identified students not working together effectively in groups as a major concern. Do you find this a problem? What do you think are the causes of students not participating effectively in work groups?
• Assume that the teacher in this case is committed to implementing the ADEM SOV. Which values are at play in this case? Design an action for the teacher that realizes these values?
• Assume you are a member of this student work group. What can groups do to ensure that every member is able to participate fully? What do group members do to exclude individuals from participating?
You are studying frantically for your exam in a computer engineering course. It will be very difficult. But your roommate, who is also taking the course and has the exam tomorrow, seems unconcerned. When you ask why, he tells you that he has a copy of the exam. Apparently, a group of students in the class found out how to hack into the professor’s computer and download the exam. (They installed a Trojan horse called Sub-Seven into the professor’s computer which allows unauthorized access; then they searched through the professor’s files, found the exam and downloaded it.) Your roommate has the exam in his hand and asks you if you would like to look at it. What should you do?
• A group of students in a computer ethics class created a survey that asked students if they would avail themselves of exams obtained through means such as that described in the scenario above. Sixty percent of the respondents said that they would. Compare this to the value commitments expressed in the ADEM SOV? Is there a gap between aspiration and behavior? What can be done to reduce this gap?
• Suppose you took the exam. Would this have any long term effects on your character? Would acting dishonestly this time make it easier to do so in the future?
• Suppose you wish to uphold standards of academic integrity in this case and not take the exam. Should you turn your roommate in to the teacher? Would keeping this exam theft a secret undermine any of the UPRM ADEM values? If so, which ones?
You have now discussed some or all of the above cases in terms of the ADEM Statement of Values. What do you think are the strengths of this document? What are its weaknesses? Do you recommend any changes? What are these?
Sources for Cases:
• Case 1 has been developed by William Frey, Chuck Huff, and José Cruz for their book, Good Computing: A Virtue Approach to Computer Ethics. This book is currently in draft stage and is under contract with Jones and Bartlett Publishing Company.
• Cases 2 and 3 were developed by UPRM faculty teams from the College of Engineering during workshops held for the ABET 2001 Steering Committee and the Department of Industrial Engineering. These workshops took place April 6, 2001 and May 14, 2001.
• Case 4 has been modified from “The Plagiarism Detector” written by Moshe Kam. It can be found at the beginning of the ethics chapter in Practical Engineering Design, edited by Maja Bystrom and Bruce Eisenstein. Moshe Kam. “The Plagiarism Detector”, in Practical Engineering Design, edited by Maja Bystrom and Bruce Eisenstein. Boca Raton, FLA: CFC Press, 2005: 27-28.
Assessment Tools
This presentation is composed of slides previously given before the AACSB, ADEM faculty at UPRM, and material published by the authors in Technology and Society Magazine. (See bibliography below)
SOV_Development.pptx
Bibliography
1. Lynn Sharp Paine (1994) "Managing for Organizational Integrity," in Harvard business review, March-April: 106-117
2. Gary R. Weaver and Linda Klebe Trevino (1999) "Compliance and Values Oriented Ethics Programs: Influences on Employees' Attitudes and Behavior," in Business Ethics Ethics Quarterly 9(2): 315-335
3. Stuart C. Gilman (2003) "Government Ethics: If Only Angels Were to Govern," in Professioinal Ethics, edited by Neil R. Luebke in Ph Kappa Phi Forum, Spring 2003: 29-33.
4. Stephen H. Unger (1994) Controlling Technology: Ethics and the Responsible Engineer, 2nd Edition. New York: John Wiley and Sons: 106-135.
5. "Federal Sentencing Guidelines--Sentencing of Organizations," in Ethical Theory and Business, 5th Edition, edited by Tom L Beauchamp and Norman E. Bowie, New Jersey: Prentice Hall: 182-187. This article was reprinted with permission from The United States Law Week, Vol. 50 pp. 4226-29 (March 26, 1991) (Bureau of National Afairs, Inc. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/04%3A_Changing_Organizational/4.02%3A_Developing_Ethics_Codes_and_Statements_of_Values.txt |
Introduction
I. Introduction: The Hughes Aircraft Case involves a group of employees in charge of testing chips for weapons systems. Because of the lengthy testing procedure required by the U.S. Defense Department, Hughes soon fell behind schedule in delivering chips to customers. To get chips out faster, some Hughes middle-level managers began to put pressure on employees to pass chips that had failed tests or to pass them without testing. The scenarios below consist of narratives that stop at the point of decision. Your job is to complete the narrative by making a decision. Alternatives are provided to get the process started, but you may find it necessary to design your own solution. Ethics and feasibility tests help you to evaluate these alternatives and even design new ones more to your liking. This format superficially resembles the Gray Matters exercise used at Boeing Corporation. (More information on the history of Gray Matters can be found by consulting Carolyn Whitbeck, Ethics in Engineering Practice, 1998, 176-182.) This version differs in being more open-ended and more oriented toward giving you the opportunity to practice using ethical theory (which has been encapsulated into ethics tests).
Directions
• Read the following scenarios and the accompanying solutions
• Evaluate the alternatives in terms of the tests described below.
• Choose the one you think best or design your own solution if you believe you can do better.
• Summarize your results by filling in the solution evaluation matrix that appears on the page following the scenario. Notice that the first column repeats the solution alternatives.
• Be prepared to present your matrix to the class. You will also provide the other groups in the class with a copy of your matrix for their ethics portfolios
Bibliographical Note: The six scenarios below were developed by Chuck Huff as Participant Perspectives. They were first published online through the Computing Cases website. (Computing Cases was developed through two National Science Foundation grants, DUE-9972280 and DUE-9980768.) A revised version of these participant perspectives has been published in the anthology, Whistleblowing: Perspectives and Experiences, edited by Reena Raj and published in 2008 by the Icfai University Press, Nagarjuna Hills, Punjagutta, Hyderbad, India. These materials can be found on pages 75-80.
Scenario One: Responding to Organizational Pressure: Frank Saia has worked at Hughes Aircraft for a long time. Now he is faced with the most difficult decisions of his career. He has been having problems in the environmental testing phase of his microchip manufacturing plant; the detailed nature of these tests has caused Hughes to be consistently late in delivering the chips to customers. Because of the time pressure to deliver chips, Saia has been working to make the production of chips more efficient without losing the quality of the product. Chips are manufactured and then tested, and this provides two places where the process can bottle up. Even though you might have a perfectly fine chip on the floor of the plant, it cannot be shipped without testing. And, since there are several thousand other chips waiting to be tested, it can sit in line for a long time. Saia has devised a method that allows testers to put the important chips, the “hot parts,” ahead of the others without disrupting the flow and without losing the chips in the shuffle. He has also added a “gross leak” test that quickly tells if a chip in a sealed container is actually sealed or not. Adding this test early in the testing sequence allows environmental testing to avoid wasting time by quickly eliminating chips that would fail a more fine-grained leak test later in the sequence. Because environmental testing is still falling behind, Saia’s supervisors and Hughes customers are getting angry and have begun to apply pressure. Karl Reismueller, the director of the Division of Microelectronics at Hughes, has given Saia’s telephone number to several customers, whose own production lines were shut down awaiting the parts that Saia has had trouble delivering. His customers are now calling him directly to say “we’re dying out here” for need of parts. Frank Saia has discovered that an employee under his supervision, Donald LaRue, has been skipping tests on the computer chips. Since LaRue began this practice, they have certainly been more on time in their shipments. Besides, both LaRue and Saia know that many of the “hot” parts are actually for systems in the testing phase, rather than for ones that will be put into active use. So testing the chips for long-term durability that go into these systems seems unnecessary. Still, LaRue was caught by Quality Control skipping a test, and now Saia needs to make a decision. Upper management has provided no guidance; they simply told him to “handle it” and to keep the parts on time. He can’t let LaRue continue skipping tests, or at least he shouldn’t let this skipping go unsupervised. LaRue is a good employee, but he doesn’t have the science background to know which tests would do the least damage if they were skipped. He could work with LaRue and help him figure out the best tests to skip so the least harm is done. But getting directly involved in skipping the tests would mean violating company policy and federal law.
Alternatives:
1. Do nothing. LaRue has started skipping tests on his own initiative. If any problems arise, then LaRue will have to take responsibility, not Saia, because LaRue was acting independently of and even against Saia’s orders.
2. Call LaRue in and tell him to stop skipping tests immediately. Then call the customers and explain that the parts cannot be shipped until the tests are carried out.
3. Consult with LaRue and identify nonessential chips or chips that will not be used in systems critical to safety. Skipping tests on these chips will do the least damage.
4. Your solution…
Scenario Two: Responding to WrongdoingMargaret Goodearl works in a supervisory position in the environmental testing group at Hughes Aircraft. Her supervisor, Donald LaRue, is also the current supervisor for environmental testing. The group that LaRue and Goodearl together oversee test the chips that Hughes makes in order to determine that they would survive under the drastic environmental conditions they will likely face. Rigorous testing of the chips is the ideal, but some chips (the hot chips) get in line ahead of others. Goodearl has found out that over the last several months, many of these tests are being skipped. The reason: Hughes has fallen behind in the production schedule and Hughes upper management and Hughes customers have been applying pressure to get chip production and testing back on schedule. Moreover, LaRue and others feel that skipping certain tests doesn’t matter, since many of these chips are being used in systems that are in the testing phase, rather than ones that will be put into active use. A few months after Margaret Goodearl started her new position, she was presented with a difficult problem. One of the “girls” (the women and men in Environmental Testing at Hughes), Lisa Lightner, came to her desk crying. She was in tears and trembling because Donald LaRue had forcefully insisted that she pass a chip that she was sure had failed the test she was running. Lightner ran the hermeticity test on the chips. The chips are enclosed in a metal container, and one of the questions is whether the seal to that container leaks. From her test, she is sure that the chip is a “leaker”—the seal is not airtight so that water and corrosion will seep in over time and damage the chip. She has come to Goodearl for advice. Should she do what LaRue wants and pass a chip she knows is a leaker?
Alternatives:
1. Goodearl should advise Lightner to go along with LaRue. He is her supervisor. If he orders to pass the chip, then she should do so.
2. Goodearl should go to Human Resources with Lightner and file a harassment complaint against LaRue. Skipping tests is clearly illegal and ordering an employee to commit an illegal act is harassment.
3. Goodearl and Lightner should blow the whistle. They should go to the U.S. defense department and inform them of the fact that Hughes Aircraft is delivering chips that have either failed tests or have not been tested.
4. Your solution…
Scenario 3: Goodearl, Ibarra, and the AMRAAM Incident: Now that Goodearl had few sympathizers among upper management, she increasingly turned to Ruth Ibarra in Quality assurance for support in her concerns about test skipping and the falsification of paperwork. One day, Goodearl noticed that some AMRAAM chips with leak stickers were left on her project desk in the environmental testing area. The leak stickers meant that the seal on the chips' supposedly airtight enclosure had failed a test to see if they leaked. AMRAAM meant that the chips were destined to be a part of an Advanced Medium Range Air-to-Air Missile. Goodearl knew that these parts could not be retested and needed to be simply thrown away. So why was someone keeping them? She also knew that these were officially "hot parts" and that the company was behind schedule in shipping these parts. After consulting with Ruth Ibarra, the two of them decided to do some sleuthing. They took the chips and their lot travelers to a photocopy machine and made copies of the travelers with "failed" noted on the leak test. They then replaced the chips and their travelers on the desk. Later that day, as Don LaRue passed the desk, Goodearl asked Don LaRue if he knew anything about the chips. "None of your business," he replied. The chips disappeared, and later the travelers showed up in company files with the "failed" altered to "passed." So, Goodearl and Ibarra had clear evidence (in their photocopy of the "failed" on the traveler) that someone was passing off failed chips to their customers. And these were important chips, part of the guidance system of an air-to-air missile.
Alternatives: Since they have clear evidence, Goodearl and Ibarra should blow the whistle. Evaluate each of the following ways in which they could blow the whistle
1. Blow the whistle to Hughes’ Board of Directors. In this way they can stop the test skipping but will also be able to keep the whole affair “in house.”
2. Blow the whistle to the local news media. In this way they will shame Hughes into compliance with the testing requirements.
3. Take the evidence to the U.S. Department of Defense, since they are the client and are being negatively impacted by Hughes’ illegal actions.
4. Some other mode of blowing the whistle….
Solution Evaluation Matrix
Alternatives/Tests Reversibility/Rights Test Harm/Benefits Test Virtue/Value Test (Also Publicity) Global Feasibility Test (Implementation Obstacles)
Alternative One (Worst Alternative) Evaluate Alt 1 using reversibility/rights test
Alternative Two (Best among those given) Weigh harms against benefits for alt 2
Alternative Three What values/disvalues are realized in alt 3?
Your Solution What obstacles could hinder implementation of solution?
Ethics Tests: Set Up and Pitfalls
III. Solution Evaluation Tests
• REVERSIBILITY: Would I think this is a good choice if I were among those affected by it?
• PUBILICITY: Would I want to be publicly associated with this action through, say, its publication in the newspaper?
• HARM/BENEFICENCE: Does this action do less harm than any of the available alternatives?
• FEASIBILITY: Can this solution be implemented given time, technical, economic, legal, and political constraints?
Harm Test Set-Up
• Identify the agent (=the person who will perform the action). Describe the action (=what the agent is about to do).
• Identify the stakeholders (individuals who have a vital interest at risk) and their stakes.
• Identify, sort out, and weight the expected results or consequences.
Harm Test Pitfalls
• Paralysis of Action--considering too many consequences
• Incomplete analysis--considering too few results
• Failure to weigh harms against benefits
• Failure to compare different alternatives
• Justice failures--ignoring the fairness of the distribution of harms and benefits
Reversibility Test Set-Up
• Identify the agent
• Describe the action
• Identify the stakeholders and their stakes
• Use the stakeholder analysis to select the relations to be reversed.
• Reverse roles between the agent (you) and each stakeholder: put them in your place (as the agent) and yourself in their place (as the target of the action
• If you were in their place, would you still find the action acceptable?
Reversibility Pitfalls
• Leaving out a key stakeholder relation
• Failing to recognize and address conflicts between stakeholders and their conflicting stakes
• Confusing treating others with respect with capitulating to their demands (Reversing with Hitler)
• Failing to reach closure, i.e., an overall global reversal assessment that takes into account all the stakeholders the agent has reversed with
Public Identification Set-Up
• Set up the analysis by identifying the agent, describing the action under consideration, and listing the key values or virtues at play in the situation
• Associate the action with the agent
• Identify what the action says about the agent as a person. Does it reveal him or her as someone associated with a virtue/value or a vice?
Public Identification Pitfalls
1. Action is not associated with the agent. The most common pitfall is failure to associate the agent and the action. The action may have bad consequences and it may treat individuals with disrespect but these points are not as important in the context of this test as what they imply about the agent as a person who deliberately performs such an action
2. Failure to specify the moral quality, virtue, or value of the action that is imputed to the agent in the test. To say, for example, that willfully harming the public is bad fails to zero in on precisely what moral quality this attributes to the agent. Does it render him or her unjust, irresponsible, corrupt, dishonest, or unreasonable?
This timeline is taken from the Computing Cases website developed and maintained by Dr. Charles Huff at St. Olaf College. Computing Cases is funded by the National Science Foundation, NSF DUE-9972280 and DUE 9980768.
Time Line
1979 Ruth Ibarra begins working for Hughes Aircraft company's Microelectronic Circuit Division (Hughes MCD) in Newport Beach, CA
1981 Margaret Goodearl begins working for Hughes MCD as a supervisor for assembly on the hybrid production floor and as a supervisor in the hybrid engineering lab
1984 Ibarra becomes supervisor for hybrid quality assurance
1985 Goodearl asks Ibarra to look at errors in paperwork, Ibarra brings errors to the attention of her supervisors and was told to keep quiet. This begins time period where Goodearl/Ibarra become aware of problems in hybrid chip testing and paperwork.
1986 Goodearl becomes supervisor for seals processing in the environmental testing area.
1986 False Claims Act (31 U.S. C 3729-3733) becomes False Claims Reform Act of 1986 making it stronger and easier to apply.
Oct. 1986 Goodearl/Ibarra report problems ot Hughes management, and, after the problems were not fixed, Goodearl/Ibarra reported the allegations of faulty testing to the United States Department of Defense.
Jan 9, 1987 Earliest date that Hughes may have stopped neglecting environmental screening tests.
1988 Ibarra leaves Hughes feeling that her job had been stripped of all real responsibility.
March 1989 Goodearl is laid off from Hughes.
1995 Goodearl and her husband are divorced.
Civil Suit Timeline
1990-1996 United States of America, ex rel. Taxpayers Against Fraud, Ruth Aldred (was Ibarra), and Margaret Goodearl v. Hughes Aircraft Company, Inc.
1990 Goodearl files wrongful discharge suit against Hughes and a number of individual managers, which was eventually dropped in favor of the civil suit.
May 29, 1990 Thinking the government investigation was taking too much time, Goodearl/Aldred file civil suit against Hughes under False Claims Reform Act of 1986 with the help of Taxpayers Against Fraud and Washington law firm Phillips and Cohen.
December 1992 Under provisions of the FCA, the U.S. Department of Justice Civil Division takes over the civil case.
Sep. 10, 1996 Hughes found guilty in civil trial. Pays U.S. Government 4,050,00 dollars and each relator 891,000 dollars plus a separate payment of 450,000 dollars to cover attorney's fees, costs, and expenses.
Criminal Suit Timeline
1991-1993 United States of America v. Hughes Aircraft Co., and Donald LaRue
December 13, 1991 After a lengthy investigation, the U.S. Department of Defense charges Hughes and Donald A. LaRue with a 51-count indictment accusing it of falsifying tests of microelectronic circuits (criminal suit).
June 15, 1992 Hughes found guilty of conspiring to defraud the U.S. Government in crminal case, co-defendent LaRUE acquitted following 4-week trial. Goodearl/Aldred called as witnesses in trial. Hughes appeals.
Oct. 29, 1992 Hughes fined 3.5 million in criminal trial decision.
December 2, 1993 Appellate court upholds 1992 criminal conviction and sentence. Hughes appeals.
Hughes Case Socio Technical System
Hughes Socio Technical System
Hardware/Software Physical Surroundings People, Roles, Structures Procedures Laws and Regulations Data and Data Structures
Description Hybrid Chips (circuitry hermetically sealed in metal or ceramic packages in inert gas atmosphere Battle conditions under which chips might be used Hughes Microelectric Circuit Division Chip Testing: Temperature Cycle, Constant Acceleration, Mechanical Shock, Hermeticity (Fine and Gross Leak), P.I.N.D. Legally Mandated Tests Lot Travelors to document chips
Analogue to Digital Conversion Chips E-1000 at Hughes (Clean Room) Department of Defense (Office of Inspector General) Hughes Human Resources Procedures for Complaints Whistle Blower Protection Legislation
Radar and Missile Guidance Systems Hughes Quality Control Dissenting Professional Opinions Qui Tam Lawsuit, Civil Suit, Criminal Suit
Individuals: Reismueller, Temple, Saia, LaRue, Goodearl, Ibarra/Aldren
Responsible Dissent
Sources:
• Computing Cases is the primary source for the material below on responsible dissent. It is based on the materials for responsibly carrying out dissent and disagreement that was formerly posted at the IEEE website. The IEEE has since taken this material down.
• The Online Ethics Center has also posted the IEEE material on responsible dissent. The origin of this material as well as a thorough discussion of its content can be found in Carolyn Whitbek, Ethics in Engineering Practice and Research: 2nd Edition, Cambridge, UK: Cambridge University Press, 2011. Chapter 7, "Workplace Rights and Responsibilities, pp. 227-269.
• Much of this material (IEEE Guidelines and a discussion of Dissenting Professional Opinion Guidelines) can be found in Chapter 7 ("Averting the Conflict at the Source")in the following: Stephen H., Unger, Controlling Technology: Ethics and the Responsible Engineer: 2nd Edition, New York: John Wiley and Sons, INC.
Generic Forms of Dissent:
• Gather more information
• Nolo Contendere (Don't fight it. Go along.)
• Oppose diplomatically: Offer your supervisor alternatives to the wrong he or she has ordered.
• Oppose by confronting: Threaten to go over your supervisor's head or threaten to blow the whistle
• Distance yourself: Ask to be transferred to another section to avoid being implicated in the wrongdoing
• Exit: Quit and do nothing or quit and blow the whistle
• Document your position: If your company has a Dissenting Professional Opinion process. If it doesn't, work to have one implemented. By establishing your opposition, you distance yourself morally from the wrong you have documented
• Which one is right? Use your tests. Which does the best job of satisfying the three ethics tests of reversibility, harm, and publicity? Which does the best job with the ADEM values: justice, responsibility, respect, trust, and integrity?
Introduction to Circumstances of Compromise: The following presents the circumstances of compromise as laid down by Martin Benjamin in Splitting the Difference. (See below for complete reference.) Benjamin provides five conditions that indicate when a compromise may be necessary. But he also argues that integrity helps draw a line beyond which compromise must not go. One should not sacrifice basic beliefs that constitute one's personal identity or self-system. A good example of using integrity to draw the line on compromise can be found in the characterization of Thomas More in Robert Bolt's A Man for All Seasons. (See also the movie of the same name.) In the preface to the play, Bolt explicitly presents what follows as an exercise in articulating and testing integrity.
Circumstances of Compromise:
• Under these conditions, it may be necessary to "split the difference."
• Factual uncertainty
• Moral complexity
• Continuing Cooperative Relationship
• Decision cannot be deferred
• Scarcity of Resources
More on Moral Complexity: Martin Benjamin in Splitting the Difference quotes John Rawls on moral complexity: “Diversity naturally arises from our limited powers and distinct perspectives; it is unrealistic to suppose that all our differences are rooted in ignorance and perversity, or else in the rivalries that result from scarcity….Deep and unresolvable differences on matters of fundamental significance…[must be acknowledged] as a permanent condition of human life.”
Application of Circumstances of Compromise:
• Factual Uncertainty: Where are the chips under consideration going? If they go to an essential system in an operative technology, then their malfunctioning could lead to loss of life. If they go to a non-essential system (like a prototype being tested) then maybe the testing process can be streamlined. This may require compromise between Hughes management, chip-testing team, and customers.
• Moral Complexity: How should an employee like LaRue weigh his loyalty to supervisors and company and his obligation to the public and client? Setting aside his harassment of Gooderal, is Saia's position (or at least a part of it) morally defensible?
• Continuing cooperative relationship: How important should it be to Gooderal that she needs to sustain her relationship with her supervisor, LaRue, for the long term? How important is it that Hughes managers respond to difficult messages rather than attempt to "shoot the messenger." (Again, thinking in terms of continuing cooperative relationship?)
• Decision cannot be deferred: Why is it impossible to defer the decision on whether to respond to test skipping? This case poses several difficult constraints. How many of these can be "pushed back" through negotiation? Could Saia use his newly found accessibility to customers to negotiate with them an extension on the delivery deadlines?
• Scarcity of resources: How are the resources of time, personnel, and money scarce in this case? Is there any way to push back these constraints by negotiating more time (extending deadlines for delivering chips), personnel (bringing in additional people to test chips), and resources (developing better tools to test chips more quickly). Could, for example, it be possible to transfer Hughes employees from other areas to help out, temporarily, on chip testing?
Ethical Dissent:
1. Establish a clear technical foundation.
2. Keep your arguments on a high professional plane, as impersonal and objective as possible, avoiding extraneous issues and emotional outbursts.
3. Try to catch problems early, and keep the argument at the lowest managerial level possible.
4. Before going out on a limb, make sure that the issue is sufficiently important.
5. Use (and help establish) organizational dispute resolution mechanisms.
6. Keep records and collect paper.
7. These items originate with the IEEE which has dropped them from their website. They can be accessed through the link above with the Online Ethics Center; the list there is more complete. The above is quoted from the Computing Cases website: http://computingcases.org/case_mater...l_dissent.html.
Before Going Public:
1. Make sure of your motivation.
2. Count your costs.
3. Obtain all the necessary background materials and evidence.
4. Organize to protect your own interests.
5. Choose the right avenue for your disclosure.
6. Make your disclosure in the right spirit.
7. These items come from the IEEE (see onlineethics link) and from the manuscript of Good Computing by Chuck Huff, William Frey, and Jose Cruz.
Places to Go:
1. Government Agencies
2. Judicial Systems
3. Legislators
4. Advocacy Groups
5. News Media
6. In Puerto Rico, laws 14 and 426 have been passed to protect those who would blow the whistle on government corruption. The Oficina de Etica Gubernamental de Puerto Rico has a whistle blower's hotline. See link above.
When to Blow the Whistle:
1. Serious and Considerable Harm
2. Notification of immediate supervisor.
3. Exhaustion of internal channels of communication/appeal.
4. Documented Evidence.
5. Likelihood of successful resolution.
6. When the first three conditions are satisfied, whistle-blowing is morally permissible. (You may do it but you are not required or obligated to do it.) This is because you have brought your concerns before decision-makers, given them a chance to respond, and, in the face of their unwillingness to do so, still find the issue of great importance.
7. When all five conditions are satisfied, then whistle-blowing becomes morally obligatory. In this case, you have a moral duty to blow the whistle. Here, your duty is grounded in your responsibility to inform those who are likely to be harmed by the wrongdoing.
References:
1. Richard T. De George, "Ethical Responsibilities of Engineers in Large Organizations: The Pinto Case," in Ethical Issues in Engineering, ed. Deborah G. Johnson (1991) New Jersey: Prentice-Hall: 175-186.
2. Carolyn Whitbeck (1998) Ethics in Engineering Practice and Research. U.K. Cambridge University Press: 55-72 and 176-181.
3. Charles Harris, Michael Pritchard and Michael Rabins (2005) Engineering Ethics: Concepts and Cases, 3rd Ed. Belmont, CA: Thomson/Wadsworth: 203-206.
Hughes Dramatic Rehearsals
A note on dramatic rehearsals:
• The notion of dramatic rehearsal comes from John Dewey's Human Nature and Moral Conduct. An agent works through a solution alternative in the imagination before executing it in the real world. The dramatic rehearsal tests the idea in a mental laboratory created by the moral imagination. Steven Fesmire in his book, John Dewey and Moral Imagination: Pragmatism in Ethics (Indiana University Press, 2003), provides a comprehensive interpretation of Dewey's suggestive idea.
• The scenarios portrayed below reflect events in the case but some changes have been made to create six focused decision points. For a more accurate portrayal of the case events, see Computing Cases (computingcases.org)
Decision Point One
• Frank Saia has worked at Hughes Aircraft for a long time. Now he is faced with the most difficult decisions of his career. He has been having problems in the environmental testing phase of his microchip manufacturing plant; the detailed nature of these tests has caused Hughes to be consistently late in delivering the chips to customers.
• Because of the time pressure to deliver chips, Saia has been working to make the production of chips more efficient without losing the quality of the product. Chips are manufactured and then tested, and this provides two places where the process can bottle up. Even though you might have a perfectly fine chip on the floor of the plant, it cannot be shipped without testing. And, since there are several thousand other chips waiting to be tested, it can sit in line for a long time. Saia has devised a method that allows testers to put the important chips, the “hot parts,” ahead of the others without disrupting the flow and without losing the chips in the shuffle. He has also added a “gross leak” test that quickly tells if a chip in a sealed container is actually sealed or not. Adding this test early in the testing sequence allows environmental testing to avoid wasting time by quickly eliminating chips that would fail a more fine-grained leak test later in the sequence.
• Because environmental testing is still falling behind, Saia’s supervisors and Hughes customers are getting angry and have begun to apply pressure. Karl Reismueller, the director of the Division of Microelectronics at Hughes, has given Saia’s telephone number to several customers, whose own production lines were shut down awaiting the parts that Saia has had trouble delivering. His customers are now calling him directly to say “we’re dying out here” for need of parts.
Dialogue for Decision Point One
• Construct a dialogue in which Saia responds to the pressure from his supervisor, Karl Reismueller
• Be sure to address the customer complaints
Decision Point Two
• Frank Saia has discovered that an employee under his supervision, Donald LaRue, has been skipping tests on the computer chips. Since LaRue began this practice, they have certainly been more on time in their shipments. Besides, both LaRue and Saia know that many of the “hot” parts are actually for systems in the testing phase, rather than for ones that will be put into active use. So testing the chips for long-term durability that go into these systems seems unnecessary. Still, LaRue was caught by Quality Control skipping a test, and now Saia needs to make a decision. Upper management has provided no guidance; they simply told him to “handle it” and to keep the parts on time.
• He can’t let LaRue continue skipping tests, or at least he shouldn’t let this skipping go unsupervised. LaRue is a good employee, but he doesn’t have the science background to know which tests would do the least damage if they were skipped. He could work with LaRue and help him figure out the best tests to skip so the least harm is done. But getting directly involved in skipping the tests would mean violating company policy and federal law.
Dialogue
• Construct a dialogue in which Saia confronts LaRue about skipping the tests
• Address the following issues:
• Should Saia work with LaRue to identify tests that are not necessary and then have LaRue skip these?
• How should Saia and LaRue deal with the concerns that Quality Control has expressed about skipping the tests?
Decision Point Three
• Margaret Goodearl works in a supervisory position in the environmental testing group at Hughes Aircraft. Her supervisor, Donald LaRue, is also the current supervisor for environmental testing. The group that LaRue and Goodearl together oversee test the chips that Hughes makes in order to determine that they would survive under the drastic environmental conditions they will likely face. Rigorous testing of the chips is the ideal, but some chips (the hot chips) get in line ahead of others. Goodearl has found out that over the last several months, many of these tests are being skipped. The reason: Hughes has fallen behind in the production schedule and Hughes upper management and Hughes customers have been applying pressure to get chip production and testing back on schedule. Moreover, LaRue and others feel that skipping certain tests doesn’t matter, since many of these chips are being used in systems that are in the testing phase, rather than ones that will be put into active use.
• A few months after Margaret Goodearl started her new position, she was presented with a difficult problem. One of the “girls” (the women and men in Environmental Testing at Hughes), Lisa Lightner, came to her desk crying. She was in tears and trembling because Donald LaRue had forcefully insisted that she pass a chip that she was sure had failed the test she was running.
• Lightner ran the hermeticity test on the chips. The chips are enclosed in a metal container, and one of the questions is whether the seal to that container leaks. From her test, she is sure that the chip is a “leaker”—the seal is not airtight so that water and corrosion will seep in over time and damage the chip. She has come to Goodearl for advice. Should she do what LaRue wants and pass a chip she knows is a leaker?
Dialogue
• Construct a dialogue that acts out Goodearl’s response to her knowledge that LaRue is regularly skipping tests
• Should Goodearl first talk directly to LaRue? What if he responds defensively?
• Should Goodearl go over LaRue’s head and discuss his skipping the tests with one of his supervisors? To whom should she go? How could she prepare for possible retaliation by LaRue? What should she know before doing this?
• If LaRue or another supervisor should fail to respond to the test skipping, should Goodearl continue responsible dissent or drop the issue (=nolo contendere)
• Could Goodearl not contend the issue but distance herself? (What if Hughes has no DPO procedure?)
Decision Point Four
Ruth Ibarra (from Quality Assurance) has seen Shirley Reddick resealing chips without the authorization stamp. Ibarra has asked Goodearl to find out what’s going on. When Goodearl asks LaRue, he replies, “None of your damn business.” Shortly after this, Gooderal receives a phone call from Jim Temple, one of her superiors, telling her to come to his office. Temple informs Goodearl in no uncertain terms that she needs to back down. “You are doing it again. You are not part of the team, running to Quality with every little problem.” When Goodearl insisted she did not “run to Quality” but Quality came to her, Temple replies, “Shape up and be part of the team if you want your job.”
Dialogue
• Construct a dialogue in which Gooderal responds to this latest test skipping issue
• Consider these issues in constructing your dialogue:
• Goodearl had already confronted LaRue about test skipping when Lisa Lightner came to her. After failing to get results, she had decided to drop the issue
• How should Goodearl respond to Temple? Should she continue pushing responsible dissent or give way to Temple’s threats?
Decision Point Five
• After her conversation with Temple, Goodearl goes to the Personnel Department to inquire into filing a harassment complaint against her supervisors at Hughes
• After her discussion she sees the personnel official leave his office and turn toward Frank Saia’s office, one of Goodearl’s supervisors.
• Goodearl is then called to Saia’s office. An angry Saia throws his glasses at her and threatens to fire her if she persists. He also asks her where she gets off filing a harassment charge against him.
Dialogue
• Construct a dialogue in which Gooderal reacts to Saia both during Saia’s outburst and after it.
• Is Saia harassing Gooderal? (How do we define “harassing” in this context?)
• How should Goodearl respond given that Saia’s latest outburst was caused by the personnel official reporting to him the confidential meeting he had with Goodearl?
• What are Goodearl’s options at this point? Are any of the strategies for responsible dissent we have studied so far relevant or of use?
Decision Point Six
• Margaret Goodearl and Ruth Ibarra have made several attempts to get their supervisors to respond to the problem of skipping the environmental tests. The general response has been to shoot the messenger rather than respond to the message. Both Goodearl and Ibarra have been branded trouble makers and told to mind their own business. They have been threatened with dismissal if they persist.
• So they have decided to blow the whistle, having exhausted all the other options. They initiated contact with officials in the U.S. government’s Office of the Inspector General. These officials are interested but have told Goodearl and Ibarra that they need to document their case.
• One day they find two hybrids (chips that combine two different kinds of semiconductor devices on a common substrate) on LaRue’s desk. These chips which are destined for an air-to-air missile have failed the leak test. It is obvious that LaRue plans on passing them without further testing during the evening shift after Goodearl has gone home. Goodearl and Ibarra discuss whether this presents a good opportunity to document their case for the Office of the Inspector General.
Dialogue
• Construct an imaginary conversation between Goodearl and Ibarra where they discuss different strategies for documenting their concerns to the Office of the Inspector General?
• Have them consider the following:
• By looking for documented evidence against their employer, have Goodearl and Ibarra violated their duties of trust and confidentiality?
• Some argue that before blowing the whistle, an employee should exhaust internal channels. Have Goodearl and Ibarra discuss whether they can do anything more inside Hughes before taking evidence outside
Questions on Dramatic Reflections
Directions: After you have acted out your decision point in the Hughes case, you and your group have two further activities. First, you will answer the questions below to help you reflect generally on the nature of dramatic rehearsals and specifically on recent dramatization. These five questions (outlined in detail just below) ask you to discuss your dramatic form, the form of responsible dissent you used, how the action you dramatized fared with the three ethics tests, the value and interest conflicts you dealt with, and the constraints that bordered your decision point. Second, you will provide a storyboard that summarizes the drama you acted out before class. This is also detailed just below.
As was said above, John Dewey suggested the idea that underlies these dramatic rehearsals or What-if dramas. As Dewey puts it "[d]eliberation is actually an imaginative rehearsal of various courses of conduct. We give way, in our mind, to some impulse; we try, in our mind, some plan. Following its career through various steps, we find ourselves in imagination in the presence of the consequences that would follow: and as we then like and approve, or dislike and disapprove, these consequences, we find the original impulse or plan good or bad. Deliberation [becomes] dramatic and active…." (Dewey, 1960, p. 135) Think of your "dramatic rehearsal" as an experiment carried out in your imagination. The hypothesis is the alternative course of action decided upon by your group that forms the basis of your "What-if" rehearsal. Imagine that you carry out your alternative in the real world. What are its consequences? How are these distributed? How would each of the stakeholders in your case view the action? How does this fit in with your conception of a moral or professional career? Your imagination is the laboratory in which you test the action your group devises as a hypothesis.
This quote will also help you understand the concept of dramatic rehearsal. It comes from John Gardner, a famous novelist, and Mark Johnson, a theorist in moral imagination. John Gardner has argued that fiction is a laboratory in which we can explore in imagination the probable implications of people’s character and choices. He describes what he calls “moral fiction” as a “philosophical method” in which art “controls the argument and gives it its rigor, forces the writer to intense yet dispassionate and unprejudiced watchfulness, drives him—in ways abstract logic cannot match—to unexpected discoveries and, frequently, a change of mind.” (Johnson, p. 197; Gardner, p. 108).
There are different versions of what form dramatic form takes. In general there is plot, character, agon (struggle or confronting obstacles), resolution, and closure. A drama is a narrative, an unfolding of related events in time. One event arises to give way to another and so forth. Dramas can be driven by the ends of the characters and the unfolding can be the realization or frustration of these activities. Dramatic rehearsals take isolated actions and restore them to this context of dramatic form.
1. What is the dramatic form taken on by your enactment?
• Perhaps your drama is a comedy. Many groups have chosen this form but have found it hard to explain why. How does comedy help your group to get its message across? What is its message?
• Some groups have approached this rehearsal as a tragedy where the good intentions and goals of those involved all turned out bad. In many ways, this is how the case played out in reality. So, if your group chose tragedy, then it is important to state why there were no viable alternatives to the choices actually made by the participants in the Hughes case. What constraints prevented the agents from achieving their ends? (Look for more than just bad people here.)
• Some groups decided to frame their rehearsal as a documentary Here a narrator describes and frames the activities carried out by the different participants offering commentary and analysis.
• Continuing with the documentary line, some groups have presented their drama as proceedings in a trial where a judge presides over attorneys presenting the arguments from both sides. This approach has the advantage of laying out the different perspectives but when the judge reaches a decision, it takes on the risk of oversimplifying the case by making one side completely right and the other completely wrong. The "winner takes all" interpretation of a court trial (guilty-innocent) often leaves out moral complexity.
• Some groups convert their dramas into Quixotic ventures where they "tilt at windmills." Here they try to present scenarios where idealistic participants strive to realize their values over difficult, constraining and harsh realities. The advantage of this approach is that it does not compromise on values and ideals. The disadvantage is that it may underestimate elements in the real world that oppose acting on the ideal. Realizing the "intermediate possible" may be the best route here.
• Some groups approach their dramatizations as cautionary tales where they act out the harsh consequences that attend immoral, greedy, selfish, or corruption action. Here the world is constrained by justice. Those who hubristically try to exceed these constraints are punished for their transgressions. Cautionary tales are more moralistic than tragedies but, at some point, converge on this other dramatic form.
• You are, of course, encouraged to go beyond this list by inventing your own dramatic form or combining those listed above to produce a new, synthetic form. The point here is that dramatic forms both filter and structure elements of this complicated case. I am asking that you be deliberate and thoughtful about how you work your way through the Hughes case. What did your dramatic form leave out? How did it structure the drama differently than other forms? Why did you choose the form you chose?
2. Your dramatic rehearsal also should test the three forms of responsible dissent we studied this semester.
• Generic Forms of Dissent. Did your rehearsal test any of the generic forms of dissent such as gather more information, nolo contendere, oppose diplomatically, oppose confrontationally, distance yourself, or exit?
• Moral Compromise. Did your rehearsal deploy any of the strategies of moral compromise? For example, referring to the Ethics of Teamwork, did it deploy bridging, logrolling, expanding the pie, or non-specific compensation? Were you able to get things moving by negotiating interests rather than person-based positions? What were the circumstances that elicited compromise? For example, does the Hughes case display any "moral complexity?"
• Blowing the Whistle. If your drama followed the case and advocated blowing the whistle, provide a justification using the class framework. For example, argue that whistleblowing was permissible or that it was obligatory. To whom do your recommend blowing the whistle given the problems Ibarra and Goodearl had with the Inspector General's office? How would you recommend they go about gathering documented evidence? What should they do before blowing the whistle? In short, do more, both in your drama and in this reflection, than just advocate the action. Describes the means, complexities, and circumstances surrounding blowing the whistle on Hughes.
3. Outline your ethics experiment by examining the action you advocate using the three ethics tests.
• Reversibility. How does your action look when you reverse with the key stakeholders? Project into their shoes avoiding the extremes of too much identification and too little identification.
• Harm. What harms have you envisioned through your dramatic rehearsal? Are these harms less quantitatively and qualitatively than the action actually taken in the case?
• Publicity. Finally, project the action taken in your rehearsal into the career of a moral professional. Is it consistent with this career or does it embrace (or neglect) values out of place in such a career. In other words, carry out the publicity test by associating the values embedded in the action you portray with the character of a good or moral agent carrying out a moral, professional career.
4. Value and interest conflicts in your drama.
• All these decision points involve some kind of conflict. How did you characterize this conflict in your dramatization? Pose your conflict in terms of values. How did your drama "resolve" this value conflict?
5. Recognizing and dealing with the constraints you found in your decision point.These drama/decision points had different kinds and degrees of constraints. Early decision points have fewer constraints than later because the earlier decisions both condition and constrain those that follow. Here is another issue you may need to address. Your feasibility test from the "Three Frameworks" module outlines three kinds of constraints: resource, interest (social or personality), and technical. Did any of these apply? Outline these and other constraints and describe how they were dealt with in your drama.
Story Boards
Suggestions for Story Boards
• Divide your dramatization into four to six frmaes. Now draw a picture in each frame, one that captures a key moment of your dramatization.
• Check for continuity. Each frame should present elements that show how it emerges from the previous frame and how it transitions into the subsequent frame. The first frame should help the reader find the context in which your drama takes place. The last frame should provide as much closure as your drama permits.
• In general, your storyboard should summarize the dramatization you acted out in front of the rest of the class. But while acting through your drama, you received feedback from the class and, perhaps, began to rethink things. So feel free to make changes in your storyboard to reflect your deeper understanding of your decision point. If you make changes in your storyboard, discuss this in your dramatic reflections. Explain why you decided to change things.
Hughes Case Media Files
Hughes Case and Dialogue Points: Hughes_V3a.pptx, Responsible Dissent.pptx
What If Dramatic Rehearsals: Hughes_Drama_V2.pptx
Debating Topics for ADMI 4016, Spring 2011: Reflections on debate.pptx
Jeopardy: Responsible Dissent: Jeopardy6.pptx
Jeopardy for codes of ethics: Jeo_Codes.pptx Hughes 2014.docx
Bibliography
• Martin Benjamin. (1990). Splitting the Difference: Compromise and Integrity in Ethics and Politics. Lawrence, KS: University of Kansas Press.
• Chuck Huff and William Frey. "The Hughes Whistleblowing Case." In Reena Raj (Ed.) Whistleblowing: Perspectives and Experiences, 75-80. 2008, Hyderabad India: Icfai University Press.
• Charles Harris, Michael Pritchard, Michael Rabins. "Engineers as Employees," in Engineering Ethics: Concepts and Cases, 2nd Edition. Wadsworth Thompson Learning, 2000. Section 8.8 of Chapter 8 discusses DeGeorge's criteria for whistle-blowing.
• Richard T. DeGeorge. "Ethical Responsibilities of Engineers in Large Organizations," in Business and Professional Ethics Journal, Vol 1, no. 1: 1-14.
• Stephen H., Unger, Controlling Technology: Ethics and the Responsible Engineer: 2nd Edition, New York: John Wiley and Sons, INC, 1994.
• Richard T. De George, "Ethical Responsibilities of Engineers in Large Organizations: The Pinto Case," in Ethical Issues in Engineering, ed. Deborah G. Johnson (1991) New Jersey: Prentice-Hall: 175-186.
• Carolyn Whitbeck (1998) Ethics in Engineering Practice and Research. U.K. Cambridge University Press: 55-72 and 176-181. See also 2nd edition (2011) Chapter 7.
• Charles Harris, Michael Pritchard and Michael Rabins (2005) Engineering Ethics: Concepts and Cases, 3rd Ed. Belmont, CA: Thomson/Wadsworth: 203-206.
• Gardner, J. (1978). On Moral Fiction. New York: Basic Books.
• Johnson, M. (1994). Moral Imagination: Implications of Cognitive Science for Ethics. Chicago, IL: University of Chicago Press. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/04%3A_Changing_Organizational/4.03%3A_Gray_Matters_for_the_Hughes_Aircraft_Case.txt |
This media file describes the rules and procedures for the UPRM version of the ethics bowl competition. Included is a timeline for the competition and a rubric that identifies the four scoring categories. Both have been adopted from the national ethics bowl competition developed by Robert Ladenson and held yearly at the meetings of the Association for Practical and Professional Ethics.
This media file has a powerpoint presentation delivered by Jose Cruz, Halley Sanchez, and William Frey at the 2004 meeting of the Association for Practical and Professional Ethics. The presentation describes activities that help prepare students for the competition, shows how the cases used in the competition are selected, breaks down the competition into its constituent parts, and describes how students are debriefed after the competition. The activities used to prepare students for the competition are crucial; they provide opportunities to practice skills in moral imagination. Debriefing activities are equally important since students frequently fail to see how they have developed skills in preparing for and participating in the competition.
5.02: Practical and Professional Ethics Bowl Activity - Follow-Up In-Depth Case Analysis
Module Introduction
This module provides students with a structure for preparing an in-depth case study analysis based on feedback they have received through their participation in an Ethics Bowl competition as part of the requirements for courses in Practical and Professional Ethics taught at the University of Puerto Rico at Mayaguez. Students viewing this module will find formats for analyzing decision making cases and position cases such as the decisions published by the National Society of Professional Engineers Board of Ethical Review. They will receive information pertinent to preparing in-depth case analyses, short summaries of the case pool for the Ethics Bowl competition, and a summary of procedures for carrying out a group self-evaluation. More information on the Engineering Ethics Bowl carried out at UPRM can be found in Jose A Cruz-Cruz, William J. Frey, and Halley D. Sanchez, "The Ethics Bowl in Engineering Ethics at the University of Puerto Rico - Mayaguez" in Teaching Ethics 4(3): 15-32.
Choosing Your Case
1. You must choose one of the two cases you presented on in the Ethics Bowl. (This means the case on which you gave your initial presentation.
2. You may choose either the first round decision-making case or the NSPE Board of Ethical Review Case
How should you choose your case?
1. Which case did you find the most interesting, challenging, or fruitful?
2. On which case did you receive the most interesting feedback from the other team and the judges?
3. Do you want to make, defend, and implement a decision or analyze a BER decision?
Once you choose your case, you need to analyze it according to the following steps:
Decision-Making Cases
Worksheets Decision-Making Case
Identify and state the (ethically) relevant facts
STS Table (Table + Verbal Explanation) Prepare a Socio-Technical Analysis. Fill in the STS table (see below) and then verbally describe each component.
Value Table (Table + Written Problem Statement) Fill out a Value Table (see below) Use it to identify the ethical problem or problems. Summarize this by providing a concise problem statement that is explicitly tied to the Value Table.
Brainstorm Lists (initial and refined lists) 4. Brainstorm solution to the problem or problems. Be sure to discuss how list was generated and how it was refined. Describe value integration and interest negotiating strategies used.
Solution Evaluation Matrix (Matrix + Verbal Explanation and Justification) 5. Compare, evaluate, and rank the solutions
6. Choose the best available solution. Provide a justification summarizing ethical and feasibility considerations highlighted in Solution Evaluation Matrix.
Feasibility Matrix (Matrix + Verbal Explanation) 7. Develop a plan for implementing your solution. Discuss and justify this plan explicitly in terms of the specific feasibility considerations in the Feasibility Matrix.
Develop and discuss preventive measures (if applicable)
NSPE-BER Case
Worksheets
1. Identify and state the (ethically) relevant facts
Stakeholders (Matrix + Verbal Explanation) 2. Identify the stakeholders and their stakes.
Problem Classification (Matrix + Concise Verbal Problem Statement) 3. Identify the ethical problem or problems
4. State the BER decision and summarize their code-based justification (cite code provisions, summarize principles, and list relevant precedents)
Solution Evaluation (Matrix + detailed verbal explanation and justification) 5. Evaluate the BER decision using the three ethics tests, code test, and global feasibility test.
6. Construct a strong counter-position and counter-argument to the BER decision
Solution Evaluation (Matrix + detailed verbal explanation and justification) 7. Evaluate counter-position and counter-argument using the 3 ethics tests, feasibility test, and code test
Solution Implementation (Feasibility Matrix + Verbal Explanation) 8. Evaluate counter-position and counter-argument in terms of relevant feasibility considerations. Provide a matrix/table + verbal explanation.
In-Depth Analysis: Step by Step
Description of In-Depth Case Analysis
Title of Assignment: "In-Depth Case Analysis”
Due Date for Written Projects: One week after the last class of the semester
What is required?
1. Participation in at least two ethics bowl competitions
2. Each group will choose from the two cases it debated in the Ethics Bowl a case for a more extended analysis carrying out the seven-step decision-making framework. They will prepare an extended analysis of this case (10 to 20 pages)
3. Each group will prepare summaries of the 15 cases assigned for the ethics bowl. These summaries (a minimum of one page for each case) will be handed in with the extended case study analysis. These summaries should include a problem statement, a solution evaluation matrix, and a feasibility matrix
4. Each final submission will also include a group self-evaluation. This evaluation will include:
• _____a list of the goals each group set for itself
• _____a careful, justified and documented assessment of your success in reaching these goals
• _____a careful assessment of what you did and did not learn in this activity
• _____a discussion of obstacles you encountered and measures your group took to overcome these
• _____a discussion of member participation and contribution including the member contribution forms
• _____in general what worked and what didn’t work for you and your group in this activity
5. A group portfolio consisting of the materials prepared by your group during the group class activities:
• _____Virtue Chart (Responsibility)
• _____Gray Matters Solution Evaluation Matrix
• _____Rights Chart: Free & Informed Consent
• _____Group Code of Ethics
Structure of Written Analysis
1. A brief summary of the case focusing on the ethically relevant facts.
2. A Socio-Technical System Table + Short paragraph on each of the seven categories.
3. A Value Table + a short paragraph on the embedded values you have identified and where they occur in the STS. Then state whether you have found any value mismatches, magnified existing value conflicts, and remote/harmful consequences.
4. On the basis of your STS analysis and value conflict analysis, provide a short, concise problem statement. Make sure the problem you have identified is grounded in your STS and value analysis. If not, one or the other (or both) needs to be changed.
5. A brainstorm list in which you record the solutions your group has designed to solve the problem stated above. The rough unrefined list should include around 10 solutions. Then refine this list into three. Spend time detailing how you reached your refined list. Did you synthesize rough solutions? On what basis did you leave a solution out all together? Did you find other ways of relating or combining solutions? Spend time documenting your brainstorming and refining process. Show in detail how you came up with the refined list.
6. Do a comparative evaluation of three of the refined solutions you developed in the previous step. First, prepare a solution evaluation matrix that summarizes your comparative evaluation. Use the table provided below. Second, provide a verbal account of the solution evaluation and comparison process you present in the solution evaluation matrix.
7. Reach a final decision. Defend your decision using the ethics and feasibility tests. If the decision situation in which you are working is a dynamic one, then proppose a series of solutions that you will pursue simultaneously, including how you would respond to contingencies that might arise. (You could express this in the form of a decision tree.)
8. Fill out a Feasibility Matrix. See matrix below
9. Present an implementation plan based on your Feasibility Matrix. This plan should list the obstacles that might arise and how you plan to overcome them. (For example, don't just say, "Blow the whistle." Discuss when, how, where, to whom, and in what manner. How would you deal with reprisals? Would your action seriously disrupt internal relations of trust and loyalty? How would you deal with this?) Work out a detailed plan to implement your decision using the feasibility constraints to "suggest" obstacles and impediments.
10. Finally, discuss preventive measures you can take to prevent this type of problem from arising again in the future.
Socio-Technical System Table
Hardware Software Physical Surroundings People, Groups, Roles Procedures Laws, Statutes, Regulations Data and Data Structures
STS Value Table
Hardware Software Physical Surroundings People, Groups, Roles Procedures Laws Data and Data Structures
Integrity
Justice
Respect
Responsibility for Safety
Free Speech
Privacy
Property
Solution Evaluation Matrix
Solution/Test Reversibility or Rights Harms/Beneficence or Net Utility Virtue Value Code Global Feasibility
Description Is the solution reversible with stakeholders? Does it honor basic rights? Does the solution produce the best benefit/harm ratio? Does the solution maximize utility? Does the solution express and integrate key virtues? Moral values realized? Moral values frustrated? Value conflicts resolved or exacerbated? Does the solution violate any code provisions? What are the resource, technical, and interest constraints that could impede implementation?
Best solution
Best alternate solution
Worst solution
Feasibility Matrix
Resource Constraints Technical Constraints Interest Constraints
Time Cost Available materials, labor, etc Applicable technology Manufacturability Personalities Organizational Legal Social, Political, Cultural
Format
1. Group, team-written projects are to be 10-20 pages in length, double spaced, with standard 1-inch margins, and typewritten. This does not include documentation, appendices, and other notes
2. It is essential that you carefully and fully document the resources that you have consulted. The most direct way to do this is to include numbered entries in a concluding section entitled, "Works Cited". These entries should provide complete bibliographical information according to standard form (Chicago Manual of Style or the MLA Manual of Style). Then insert the number of the entry in parenthesis in the text next to the passage that is based on it. (Example: "The self is a relation that relates itself to its own self…." (4) The number "4" refers to the fourth item in the "Works Cited" section at the end of your paper)
3. Practical norm 5j of the CIAPR code of ethics sets forth the obligation of the professional engineer to give others due credit for their work. For this reason, plagiarism will not be tolerated in any form. Possible forms of plagiarism include but are not limited to the following:
• Quoting directly from other sources without documenting (footnote or bibliography) and/or without using quotation marks. Claiming that this is an appendix will not excuse this action. Claiming ignorance will not excuse this action.
• Using the ideas or work of others without giving due credit or proper acknowledgment. "Proper acknowledgment”,” in this context, requires a standard bibliographical reference and the use of quotation marks if the material is being directly quoted.
• If your paper relies exclusively or primarily on extensively quoted materials or materials closely paraphrased from the work of others, then it will not be credited as your work even if you document it. To make it your own, you have to summarize it in your own words, analyze it, justify it, or criticize it.
• You will not be credited for material that you translate from English to Spanish unless you add to it something substantial of your own.
• In general, what you appropriate from another source must be properly digested, analyzed, and expressed in your own words. If you have any questions on this, please ask me.
• Any plagiarized document—one which violates the above rules—will be given a zero. You will be given a chance to make this up, and the grade on the make-up project will be averaged in with the zero given to the plagiarized document. Since this is a group grade, everyone in the group will be treated the same, even though the plagiarizer may be only one person. Each member of the group is responsible to assure that other members do not plagiarize in the name of the group. (Since the due date for the written project is late in the semester, this will probably require that I give the entire group, i.e., all members, an Incomplete.) Each member of the group will be held individually responsible in the above-described manner for the final content of the written report.
4. This is not a research project but an exercise in integrating ethics into real world cases. In Chapters 2 and 3 of Engineering Ethics: Concepts and Cases, the authors present a thorough discussion of the case study analysis/problem solving method discussed in class. You also have supporting handouts in your file folders from Magic Copy Center as well as materials I have presented directly in class. Engineering Ethics: Concepts and Cases also contains several sample case studies that can help guide you in constructing your own presentation. What I am looking for is a discussion of the case in terms of the ethical approaches and decision-making frameworks we have discussed this semester. You do not need to "wow" me with research into other areas peripherally related to the case; you need to show me that you have practiced decision-making and made a serious effort to integrate ethical considerations into the practice of engineering.
5. The usual criteria concerning formal presentations apply when competing in the Ethics Bowl. Dress professionally.
6. You may write your group, team-written project in either Spanish or English.
7. All competitions will take place in the regular classroom.
Media Files Beginning Spring 2007
These media files provide information on the ethics bowl and the follow-up activities including individual decision point summaries, in-depth case analysis, and group self-evaluation. They have been integrated into the Business Ethics course during the Spring semester, 2008 and will apply from this date on into the future.
Ethics Bowl Cases for ADMI 4016: Environment of the Organization
Ethics Bowl Cases.docx
Check List
Breakdown of Project Grade:
Group Team-Written Project: 200 points, group grade.
• This is your group's in-depth case analysis
• It will analyze the decision scenario your group presented on in the ethics bowl
• Your task is to give a full and comprehensive analysis of a decision point using the tables presented above, accompanying verbal descriptions, and carrying out the four-stage problem-solving framework of specifying the problem, generating solutions, testing solutions in terms of their ethics, and implementing these solutions.
Nota Bene
• After the Ethics Bowl, I will provide the class with general feedback and presentations on how to prepare the final project. When you submit your final report, I will be looking for how you responded to my comments and suggestions and to the comments and suggestions of the judges and the class.
• Attendance is mandatory for all Ethics Bowl competitions. This is important because you will help one another by the comments and discussions that are generated by the presentations. Students not competing need to listen actively and respectfully to the presenting group. Keep in mind the twin standards of respect and professionalism. I will deduct points from the grades of groups and/or individuals who do not listen courteously to the presentations of others or who do not attend class during the presentation cycle.
Nota Bene:
Check List
• Each group will turn in this checklist, fully filled out and signed. Checking signifies that your group has completed and turned in the item checked. Failure to submit this form will cost your group 20 points
• ____ One page summaries of the 10 Ethics Bowl decision points taken from the Therac-25, Biomatrix, Toysmart, and Hughes cases.
• ____ Group, in-depth analysis of the case your team presented on in the Ethics Bowl.
• ____ List of Ethically Relevant Facts
• ____ Socio-Technical System Table + Verbal Explanation
• ____ Value Table + Problem Statement + Justification
• ____ List of Brainstormed Solutions + Descriptin of Refining Process + Refined list
• ____ Solution Evaluation Matrix + Verbal Comparison of Three Alternatives from refined solution list
• ____ Chosen Solution + Verbal Justification
• ____ Feasibility Matrix + Solution Implementation Plan concretely described and based on feasibility matrix
• ____ Preventive Measures (if applicable)
Materials Required from Ethics Bowl
• _____Ethics Bowl Score Sheets
• _____The decision point your team presented on in the competition
• _____The decision point your team commented on in the competition
____ Group Self-Evaluation Form including...
• ____ a list of the goals your group set for itself
• ____ a carefully prepared, justified, and documented assessment of your group's success in reaching these goals
• ____ a careful assessment of what you did and did not learn in this activity
• ____ a discussion of obstacles you encountered and the measures your group took to overcome these
• ____ a discussion of member participation and contribution including the member contriution forms
• ____ a general discussion of what worked and what did not work for you and your group in this activity
_____Each member will turn in a filled out Team Member Evaluation Form. This form can be accessed through the media file listed above. It is suggested that you do this anonomously by turning in your Team Member Evaluation Form in a sealed envelop with the rest of these materials. You are to evaluate yourself along with your teammates on the criteria mentioned in the form. Use the scale suggested in the form.
Group Portfolios Include...
• _____Virtue Tables including the moral exemplar profile your group prepared and presented.
• _____The justification using the rights framework of the right assigned to your group. This was one of the rights asserted by engineers against their corporate employers.
• _____A one page summary of how you developed your role in the Incident at Morales "Vista Publica."
• _____The code or statement of values summary prepared by your group as a part of the Pirate Code of Ethics module. This summary focused on one of six organizations: East Texas Cancer Center, Biomatrix, Toysmart, Hughes Aircraft, CIAPR, or AECL (in the Therac case).
Copy-paste this checklist, examine the assembled materials prepared by your group, and check the items your group has completed. Then read, copy-paste, and sign the following pledge.
Group Pledge
• I certify that these materials have been prepared by those who have signed below, and no one else. I certify that the above items have been checked and that those items with checkmarks indicate materials that we have turned in. I also certify that we have not plagiarized any material but have given due acknowledgment to all sources used. All who sign below and whose names are included on the title page of this report have participated fully in the preparation of this project and are equally and fully responsible for its results.
• Member signature here __________________________
• Member signature here __________________________
• Member signature here __________________________
• Member signature here __________________________
• Member signature here __________________________
• Member signature here __________________________ | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/05%3A_Business_Ethics_Bowl/5.01%3A_Ethics_Bowl_Rules_and_Procedures.txt |
Module Introduction
This module is designed to give you a brief orientation in the Ethics Bowl competition. It is designed to complement and complete other modules concerning the ethics bowl that you will find in the Corporate Governance course.
Ethics Bowl Rules (briefly)
• The moderator will begin the competition by flipping a coin to determine which team will present first. If the team that calls wins the toss, they choose whether they or the other team go first.
• Monday: (1) Team 1 will have one minute to consult and seven minutes to give its initial presentation. The presentation must be tied to the question/task given to it by the moderator. (2) Team 2 has a minute to consult and seven minutes to make its Commentary on Team 1's presentation. Team 2 can close its commentary by posing a question to Team 1. (3) Team 1 then has a minute to consult and five minutes to respond to Team 2's Commentary. (4) Team 1 will then answer questions posed by the two peer-review teams. Each peer review team will ask a question. A quick follow-up is allowed. The peer-review question and answer session will go for 15 minutes. (5) The peer-review teams will score the first half of the competition but not announce the results.
• Wednesday: The same procedure will occur while reversing the roles between Teams 1 and 2. Thus, team 2 will present, team 1 comment, team 2 respond, and then team 2 will answer questions from the peer review panels. The peer-review panels will add the scores for the second part of the competition but will hold off on announcing the results until Friday's class.
• Friday: The two peer-review teams will present and explain their scores. Peer Review teams will take note: you're objective is not to criticize or evaluate the debating teams but to provide them feedback in terms of the four categories.
• Debating teams may trade minutes from consulting to presenting. For example, Team 1 may decide to take two minutes to consult when given their case and task. This means that they will have 6 minutes, instead of 7, to present.
• Nota Bene: Debating teams and Peer Review teams are not allowed to bring notes into the competition. You will be provided with paper to take notes once the competition starts.
• Even though the national Ethics Bowl competition allows only one presenter, debating teams will be allowed to "pass the baton." When one person finishes speaking, another can step in his or her place. It is absolutely forbidden that more than one person speaks at a time. Also, the competing team's speaking time is limited to its commentary. Once that is over, they are instructed to quietly listen. Infractions will be followed first by a warning. Second infractions will result in points being taken away.
Competition Timeline
1. Team 1 Presentation: One minute to consult, seven minutes to present.
2. Team 2 Commentary: One minute to consult, seven minutes to present.
3. Team 1 Response to Commentary: One minute to consult, five minutes to respond.
4. The question and answer session between Team 1 and the Peer Review teams will last 15 minutes (running clock). The first peer review team will have 7 minutes 30 seconds for its questions and the second will have roughly the same time.
5. In the second round, the timeline is the same while the debating teams change roles.
Advice to Debating Teams
• Tell us what you are going to do, do it, and then tell us what you have done. In other words, start your presentation with a summary, then launch into the main body of your presentation, and then conclude with another summary. This will help the listening audience understand what you are trying to do.
• Be professional, formal, and courteous. Address yourself to the other team and the peer review team. It is a good idea to stand when you are giving your initial presentation.
• Be sure to communicate your understanding of the scoring criteria. What do you and your team understand by intelligibility, ethical integration, feasibility, and moral imagination/creativity? Take time to listen to the other team and the peer review teams to gain insights into their understanding. During the commentary and the question and answer session, you will get crucial clues into what others think you have achieved and where you need further work. Use this feedback.
• Be sure to thank the peer review teams, moderators, and your opponents during and after the competition. Such formalities make it possible to penetrate to the deeper practices that underlie the virtue of reasonableness.
• Relax and have fun! You may not have the opportunity to say everything you want to say. One of the purposes behind this competition is to help you see just how hard it is to advocate for ethical positions. We almost always have to do so under serious constraints such as time limits. Also, remember that you have other forums for "getting it said," namely, your group self-evaluation and your in-depth case analysis. In these places, you will be able to discuss these issues in the kind of depth you think necessary.
Advice to the Peer Review Teams on Scoring
• Remember that all three scoring events of the competition are worth 20 points. The initial presentation, the response to the commentary and questions, and the commentary on the other team's presentation all count for the same 20 points.
• Although you have the complete rubric only for the initial presentation, you will score the other parts of the presentation based on the four criteria: intelligibility, ethical integration, feasibility, and moral imagination/creativity. You will score 1 to 5 on each criterion for a total of 20.
• Three is the middle of the road score. In other words, three is a good, average score. It is not a C--don't think of scoring as grading. Start each team off from a default of three. Then move off that default only when something exceptionally good or not so good happens. If your scores deviate much from straight twelves (36), then you are scoring too high or too low.
Ethics Bowl Scoring Criteria
1. Intelligibility includes three skills or abilities: (1) the ability to construct and compare multiple arguments representing multiple viewpoints; (2) the ability to construct arguments and provide reasons that are clear, coherent, and factually correct; (3) evidence of realizing the virtue of reasonableness by formulating and presenting value integrative solutions?
2. Integrating Ethical Concerns includes three skills: (1) presenting positions that are clearly reversible between stakeholders; (2) identifying and weighing key consequences of positions considered; (3) developing positions that integrate values like integrity, responsibility, reasonableness, honesty, humility, and justice.
3. Feasibility implies that the positions taken and the arguments formulated demonstrate full recognition and integration of interest, resource, and technical constraints. While solutions are designed with constraints in mind, these do not serve to trump ethical considerations.
4. Moral Imagination and Creativity demonstrate four skill sets: (1) ability to clearly formulate and frame ethical issues and problems; (2) ability to provide multiple framings of a given situation; (3) ability to identify and integrate conflicting stakeholders and stakes; (4) ability to generate solutions and positions that are non-obvious, i.e., go beyond what is given in the situation.
Peer Review Team Responsibilities
• Attend the debate sessions and the feedback session on Friday after the competition. Remember this is the capstone event of the course. It looks bad if you do not bother to attend.
• Your team will ask questions during the debate. This will constitute, at a minimum, one question and a quick follow up if necessary. You are not to debate with the presenting team. So your questions should not be designed to trap them. Rather, seek through your questions to explore seeming weak points, unclear statements, and incomplete thoughts. Use your questions to help you line up the debating team against the four criteria.
• Fill out the score sheet and assess the debating teams in terms of intelligibility, integrating ethics, feasibility and moral imagination/creativity.
• Lead, with the other Peer Review team, the feedback sessions. This requires that you prepare a short, informal presentation that shows your scoring and then explains it.
• Always, always, always be courteous in your feedback comments. Try to present things positively and proactively. This is difficult but practice now will serve you well later when you are trying to explain to a supervisor how he or she has made a mistake.
Media Files with Cases and Score Sheets
Score Sheet Team One: Revised_ScoreSheet_T1_V2.doc
Score Sheet Team Two: Revised_ScoreSheet_T2_V2.doc
Word file containing the 12 Ethics Bowl classes for Business Ethics Spring 2007: Ethics Bowl Cases for Spring 2007.doc
These are the cases for the Ethics Bowl Competition for the Fall Semester in the year 2007. These scenarios or decision points are taken from Incident at Morales, Hughes Aircraft Case, Biomatrix Case, and Toysmart Case: EB_ Fall07_W97.doc
This presentation was given Friday, April 27 to the Ethics Bowl teams that debated on the Therac-25 case and the Inkjet case: Debriefing_Round_2.ppt | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/05%3A_Business_Ethics_Bowl/5.03%3A_Ethics_Bowl_-_Cases_and_Score_Sheets.txt |
Module Introduction
The "Prerequisite link" included in the upper right-hand corner of this module opens the module content located at the IIT Center for the Study of Ethics in the Professions. This file, "Report on Ethics Integration Projects," was prepared by Dr. Jose Cruz-Cruz as the follow-up to a workshop he attended at the Illinois Institute of Technology on ethics across the curriculum. Directed by Michael Davis (Senior Fellow at the Center for the Study of Ethics in the Professions), the IIT EAC workshop was funded by the National Science Foundation.
Module Activities
1. Open the link to the IIT Ethics Bowl Packet
2. Read the section beginning on page 2, "The Ethics Bowl at UPR - Mayaguez"
3. Read the cases in the Appendix from page 8 to page 12
4. Prepare a position paper on each case. Since the cases terminate at a decision point, make a decision and justify it in terms of reversibility, harm/beneficence, and publicity. Then carry out a global feasibility analysis. For more on the tests and a decision-making framework, consult the module, "Three Frameworks in Ethical Decision-Making." See the link above
5. Prepare for the Ethics Bowl debate by studying the procedures and scoring criteria presented in the report at IIT
The Ethics Bowl can be divided into eight stages
1. Team 1 receives its case and gives an initial presentation taking an ethical position and providing an ethical justification
2. Team 2 makes a commentary that critically analyzes Team 1's presentation
3. Team 1 responds to Team 2's commentary
4. Fifteen minutes are allotted for the judges in the peer review teams to ask Team 1 questions. After this, the judges/peer review teams score the first half of the competition without announcing the results
5. Team 2 receives its case and makes an initial presentation in which it states and justifies its decision or position
6. Team 1 gives a commentary to Team 2's presentation. They can take a counter-position as well as reveal weaknesses in Team 2's position and justification
7. Team 2 responds to Team 1's commentary
8. Team 2 answers questions from the judges for 15 minutes
media files
The four media files open key documents for the Peer-Reviewed Ethics Bowl, held in Corporate Governance classes at UPRM. The first file provides a presentation that will help to orient you to the Ethics Bowl. The second and third files contain the score sheets, which also serve as rubrics assessing your achievements in the debating criteria of (1) Intelligibility, (2) Integrating Ethical Concerns, (3) Feasibility, and (4) Moral Imagination and Creativity. The final media file provides Ethics Bowl rules modified to fit the peer review format.
This presentation helps orient students and faculty on the Professional Ethics Bowl held at the University of Puerto Rico at Mayaguez: APPE_2004_EB_8.ppt
Scoring sheet and rubric for Team 1 in UPRM Professional Ethics Bowl: Revised_ScoreSheet_T1.doc
This is the revised score sheet and rubric for Team 2 in the UPRM Professional Ethics bowl: Revised_ScoreSheet_T2.doc
The attached document briefly describes the UPRM Ethics Bowl competition in its current Peer-Review format: EBRules_CNX_2.doc
SUPPLEMENTARY INFORMATION
Summary of Scoring Criteria
• Intelligibility includes three skills or abilities: (1) the ability to construct and compare multiple arguments representing multiple viewpoints; (2) the ability to construct arguments and provide reasons that are clear, coherent, and factually correct; (3) evidence of realizing the virtue of reasonableness by formulating and presenting value integrative solutions.
• Integrating Ethical Concerns includes three skills: (1) presenting positions that are clearly reversible between stakeholders; (2) identifying and weighing key consequences of positions considered; (3) developing positions that integrate values like integrity, responsibility, reasonableness, honesty, humility, and justice.
• Feasibility implies that the positions taken and the arguments formulated demonstrate full recognition and integration of interest, resource, and technical constraints. While solutions are designed with constraints in mind, these do not serve to trump ethical considerations.
• Moral Imagination and Moral Creativity demonstrate four skill sets: (1) ability to clearly formulate and frame ethical issues and problems; (2) ability to provide multiple framings of a given situation; (3) ability to identify and integrate conflicting stakeholders and stakes; (4) ability to generate solutions and positions that are non-obvious, i.e., go beyond what is given in the situation.
Learning Objectives
The learning objectives for this module conveniently divide into content areas and skills. The content objectives can be found in the AACSB ethics criteria of ethical leadership, ethical decision-making, social responsibility, and corporate governance. The skills objectives include the skills emphasized at the University of Puerto Rico at Mayaguez: ethical awareness, ethical evaluation, ethical integration, ethical prevention, and value realization. In addition, there are the criteria of moral creativity and moral imagination.
Content Objectives:
• Ethical Leadership: You have examined ethical leadership by looking at the moral exemplars portrayed in the module of that name. What skills and virtues do moral exemplars exhibit? How do these skills and virtues "cluster"? What can you do to exhibit moral leadership? In making and defending your decisions in the Ethics Bowl, spend time showing the peer review teams how your decisions exhibit moral leadership.
• Ethical Decision-Making: We are using a decision making framework this semester that emphasizes four stages: (1) problem specification, (2) solution generation, (3) solution testing, (4) solution implementation. Spend time during the debate to show that you know what the problem is you are trying to solve. In preparing for the debate, you have carried out a brainstorming process to generate a solution list; you will be able to show evidence of this when you do your in-depth case analysis. Solution testing you carry out when you evaluate and rank alternatives in terms of their ethics. Try not to neglect the final stage where you show the feasibility of the solution you are advocating. Show that you have thought through implementation carefully, even to the extent of uncovering the most likely obstacles to your solution.
• Social Responsibility: The Socio-Technical System grids we have worked on in class will help to uncover issues of social responsibility in the cases of the Ethics Bowl. Social responsibility requires that you step back from your decision point to look at the broader social and political implications of what you are doing.
• Corporate Governance: Many of you will quickly determine that the participant perspectives from which you are asked to make your decisions are tightly constrained by organizational problems. Companies that discourage communication, seek to pass blame down to those low on the hierarchy, and pressure employees to take legal and ethical short cuts bear much of the blame for creating the ethical problems you are required to solve. But stay focused on your agent's perspective. Formulate concrete strategies for leading organizational change from that perspective. You can talk about changing the organizational culture. Solving the problem may require reforming the "system." But do not fall into the trap of blaming the system.
Skill Objectives:
• Ethical Awareness: You will demonstrate ethical awareness by how well you identify and frame the ethical issues and problem that arise in the case you debate. If you spend time in your presentation framing the problem raised in your case and making sure the peer review team understands how you see the problem, you will do well in this category. A helpful hint: many of the cases you will be debating can be sharply specified as value conflict problems. Show the values that are in conflict and how you will go about integrating them.
• Ethical Evaluation: You have already spent time practicing ethical evaluation by using the ethics tests to assess and rank solution alternatives in the Hughes case. The tests help you to hone in on the ethical strengths and weakness of solution alternatives. When the tests converge on a solution, this is a strong sign of its ethical strength. When they diverge, this signals to you the need to reformulate the solution to cover the "ethics gaps" raised by the tests.
• Ethical Integration: You have examined the analogy between design and ethics problems. In ethics problems, we create solutions that realize, balance, and integrate the ethical specifications. We also implement these solutions over situational constraints like resource, interest, and technical constraints. Ethical Integration requires that you make clear the solution formulation process that your solution demonstrates. Make it crystal clear to the peer review teams that you have designed your solution to realize ethical considerations while respecting situational constraints.
• Ethical Prevention: This is not the prevention of the ethical but the anticipation of potential problems and the development of counter-measures to prevent these problems from arising or to minimize their impact. The earlier we address ethical problems the easier they are to solve. Taking a preventive stance toward ethical problems is the best way to promote ethics in the real world.
• Value Realization: Finally, make the move from asking how to fix things when they go wrong to how to make things continually better. As professionals, you are in the position to use your knowledge and skills to realize values of all types. Now you can put this to work to identify ethical value "gaps" and develop strategies for eliminating them.
A quick word on two additional objectives. Moral imagination requires examining a situation from multiple framings. As we have already seen in class, some of you approach problems from a social perspective. You see effective solutions lying in leading opposition, forming coalitions among co-workers, and leading organizational charges to resolve injustices. But others seek to formulate problems in technical terms. Changing the manufacturing process, pressing for technically innovative designs, and formulating situations as technical puzzles. The point here is that the one does not exclude the other, and moral imagination requires working through these and other possible framings.
As we have seen in the reversibility test, moral imagination also requires projecting ourselves into the positions of others and viewing the situation from their standpoint. This does not require abandoning ourselves to this perspective, especially when there are moral problems with doing so. But showing during the course of the debate that you have taken time to explore the situation from the standpoint of the different stakeholders, that you have taken the time to listen to and understand the objections of the other team, and that you have carefully considered the issues raised by the peer review teams is the best way to show moral imagination in the Ethics Bowl.
Moral creativity requires showing that you have taken the effort to design non-obvious solutions to the problems at hand. Going beyond the obvious requires re-framing so moral creativity requires moral imagination. But moral creativity also requires the exercise of the virtue of reasonableness. If you are confronted with a solution where values are in conflict, have you considered creative, out-of-the-box methods for integrating them? When one way of framing the problem and the situation fails to produce helpful answers, have you tried reformulating the problem? If you cannot solve the entire problem, have you tried solving a part and setting the rest aside for a more productive time? Moral creativity requires demonstration of out-of-the-box thinking on how to solve moral problems.
Additional Activities
Activities Before and After the Ethics Bowl:
• Work with and practice your ethical approaches, ethics tests, and other frameworks. They will help structure your presentation, responses to the other teams, and answers to the peer review judges' questions.
• Prepare your cases. This requires developing a format or template that makes it possible for one person to specialize on the case but facilitates disseminating the case to the rest of the team. Solution evaluation matrices help. So do concise problem statements.
• After the Ethics Bowl, you will be asked to do an in-depth analysis of the case you debated during the competition. You will find a format for this analysis in the Engineering Ethics Bowl: Follow-up In-Depth Case Analysis module, m13759.
• Finally, what did you learn while working together as a team? What kind of cooperative problems developed? How did you solve them? Did they correspond to the problems raised by the "Ethics of Team Work" module or were they different? In fact, go back over that module and see how well it prepared you for the issues that arose as you interacted with your team.
Alternate or optional activities related to this EAC module
Uploaded below are suggested or optional assessment activates for students to carry out.
Muddiest Point Assessment Activity - This assessment activity provides a global of the strongest and weakest points of the Professional Ethics Bowl: MP.doc
Module Assessment Form - This assessment form has been adapted from one disseminated by Michael Davis in the Illinois Institute of Technology Ethics Across the Curriculum Workshops. It provides a global assessment of a given module: MAP.doc
Module-Background Information
Information about the source or history of this module that may be interesting for students or instructors.
This link will take you to the official home of the Intercollegiate Ethics Bowl. It appears as a part of the web page of the Center for the Study of Ethics in the Professions at the Illinois Institute of Technology. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/05%3A_Business_Ethics_Bowl/5.04%3A_EAC_Toolkit_-_UPRM_Ethics_Bowl_-_IIT_Summer_Institute_Follow-up.txt |
Introduction
This module provides a range of assessment rubrics used in classes on engineering and computer ethics. Rubrics will help you understand the standards that will be used to assess your writing in essay exams and group projects. They also help your instructor stay focused on the same set of standards when assessing the work of the class. Each rubric describes what counts as exceptional writing, writing that meets expectations, and writing that falls short of expectations in a series of explicit ways. The midterm rubrics break this down for each question. The final project rubrics describe the major parts of the assignment and then break down each part according to exceptional, adequate, and less than adequate. These rubrics will help you to understand what is expected of you as you carry out the assignment, provide a useful study guide for the activity, and familiarize you with how your instructor has assessed your work.
Course Syllabi
Syllabus for Environments of the Organization: ADMI4016_F10.docx
Syllabus for Business, Society, and Government: ADMI6055_F10.docx
Syllabus for Business Ethics: Business Ethics Spring 2007.doc
Syllabus for Business Ethics, Spring 2008: Syllabus_S08_W97.doc
Business Ethics Syllabus Presentation - This presentation was given on the first day of class in Business Ethics, Fall 2007. It summarizes the course objectives, grading events, and also provides a PowerPoint slide of the College of Business Administration's Statement of Values: BE_Intro_F07.ppt
Rubrics Used in Connexions Modules Published by Author
Ethical Theory Rubric
This first rubric assesses essays that seek to integrate ethical theory into problem-solving. It looks at a rights-based approach consistent with deontology, a consequentialist approach consistent with utilitarianism, and virtue ethics. The overall context is a question presenting a decision scenario followed by possible solutions. The point of the essay is to evaluate a solution in terms of a given ethical theory.
Ethical Theory Integration Rubric - This rubric breaks down the assessment of an essay designed to integrate the ethical theories of deontology, utilitarianism, and virtue into a decision-making scenario: EE_Midterm_S05_Rubric.doc
Decision-Making / Problem-Solving Rubric
This next rubric assesses essays that integrate ethical considerations into decision making by means of three tests, reversibility, harm/beneficence, and public identification. The tests can be used as guides in designing ethical solutions or they can be used to evaluate decision alternatives to the problem raised in an ethics case or scenario. Each theory partially encapsulates an ethical approach: reversibility encapsulates deontology, harm/beneficence utilitarianism, and public identification virtue ethics. The rubric provides students with pitfalls associated with using each test and also assesses their set up of the test, i.e., how well they build a context for analysis.
Integrating Ethics into Decision-Making through Ethics Tests - Attached is a rubric in MSWord that assesses essays that seek to integrate ethical considerations into decision-making by means of the ethics tests of reversibility, harm/beneficence, and public identification: CE_Rubric_S06.doc
Ethics Bowl Follow-Up Exercise Rubric
Student teams in Engineering Ethics at UPRM compete in two Ethics Bowls where they are required to make a decision or defend an ethical stance evoked by a case study. Following the Ethics Bowl, each group is responsible for preparing an in-depth case analysis on one of the two cases they debated in the competition. The following rubric identifies ten components of this assignment, assigns points to each, and provides feedback on what is less than adequate, adequate, and exceptional. This rubric has been used for several years to evaluate these group projects.
In-Depth Case Analysis Rubric - This rubric will be used to assess a final, group written, in-depth case analysis. It includes the three frameworks referenced in the supplemental link provided above: EE_FinalRubric_S06.doc
Rubric for Good Computing / Social Impact Statements Reports
This rubric provides assessment criteria for the Good Computing Report activity that is based on the Social Impact Statement Analysis described by Chuck Huff at www.computingcases.org. (See link) Students take a major computing system, construct the socio-technical system which forms its context, and look for potential problems that stem from value mismatches between the computing system and its surrounding socio-technical context. The rubric characterizes less than adequate, adequate, and exceptional student Good Computing Reports.
Good Computing Report Rubric - This figure provides the rubric used to assess Good Computing Reports in Computer Ethics classes: CE_FinalRubric_S06.doc
Computing Cases provides a description of a Social Impact Statement report that is closely related to the Good Computing Report. Value material can be accessed by looking at the components of a Socio-Technical System and how to construct a Socio-Technical System Analysis.
Business Ethics Midterm Rubric Spring 2008 - Clicking on this link will open the rubric for the business ethics midterm exam for spring 2008: Midterm Rubric Spring 2008.doc
Study Materials for Business Ethics
This section provides models for those who would find the Jeopardy game format useful for helping students learn concepts in business ethics and the environments of the organization. It incorporates material from modules in the Business Course and from Business Ethics and Society, a textbook written by Anne Lawrence and James Weber and published by McGraw-Hill. Thanks to elainefitzgerald.com for the Jeopardy template.
Jeopardy: Business Concepts and Frameworks: Jeopardy1Template.pptx Jeopardy2.pptx
Privacy, Property, Free Speech, Responsibility: Jeopardy_3.pptx
Jeopardy for EO Second Exam: Jeopardy4a.pptx
Jeopardy 5: Jeopardy5.pptx
Jeopardy 6: Jeopardy6.pptx
Jeopardy 7: Jeopardy7.pptx | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/06%3A_Course_Procedures/6.01%3A_Rubrics_for_Exams_and_Group_Projects_in_Ethics.txt |
Module Introduction
Class attendance is a normal part of every college course. In the past, attendance was left up to the individual student. Now universities, adopting the responsibility of being local parents, require that teachers monitor class attendance closely by taking attendance each class and reporting students who are chronically absent. This makes use of what are termed "compliance systems": minimum standards of acceptable attendance are established and communicated to students, behavior is regularly monitored, and non-compliance is punished. In compliance approaches, the focus is placed on maintaining the minimum level of behavior necessary to avoid punishment. But this leaves unmentioned higher levels and standards of conduct. Students who miss more than X number of classes are punished by having points subtracted from their overall grade. But what constitutes outstanding attendance or, more positively, excellent participation? This module uses class attendance as an occasion to teach the different concepts of moral responsibility. After outlining blame responsibility and excuse-making, it explores responsibility as a virtue or excellence. Being absent creates its own responsibilities (1) to the teacher (you are responsible for finding out the material covered and learning it on your own), (2) to your classmates (what did your class group do in your absence and how will you reintegrate yourself into the group as an equal participant), and (3) to yourself (what habits will you change to improve your participation in class).
Where excuses come from
Understanding Morally Legitimate Excuses:
• The table below lists characteristics of what ethicists call "capacity responsibility." These conditions--presented by F.H. Bradley--describe when we can associate an agent with an action for the purposes of moral evaluation. They consist of (1) self-sameness, (2) moral sense, and (3) ownership.
• Self-sameness bases responsibility on the ability to maintain an identity over time; you must be the same person at the moment of accountability that you were when you performed the action. You cannot be blamed for actions performed by somebody else. So Jorge cannot be blamed for classes missed by Jose. Your professor should be held responsible for taking accurate attendance and not marking you absent when you are actually in class.
• The moral sense condition requires that you have the capacity to appreciate and comply with moral directives. This includes certain perceptual sensitivities (the ability to recognize elements of a situation that are morally relevant), emotional responses (that you respond to moral elements with the appropriate emotion), and the ability to shape action in accordance with moral standards. Those who lack moral sense, whether temporarily as with children or because of psychological limitations as with psychopaths are non-responsible rather than guilty or innocent. They simply lack the general capacity to be held accountable.
• Ownership gets down to the specifics of a given situation. Did factors in the situation compel you to miss class? Did you miss class because you lacked certain crucial bits of knowledge? Why were you unable to attend class and can this "why" be translated into a morally legitimate excuse. In excusing an action, you "disown" it. There are three ways to do this: a) by showing unavoidable and conflicting obligations, b) by pointing to compelling circumstances, or c) by citing excusable ignorance.
• Formally defined, compulsion is the production in an individual of a state of mind or body against the actual will. Sickness is a state of mind and body that could compel you to stay at home even though you want to come to class and take the test. Having a flat tire on the way to school could also produce a state of body (being stuck at the side of the road) against actual will (driving to class in order to take the test). With compulsion, the key test is whether the compelling circumstances were under your control. Did your tire go flat because you postponed getting a new set of tires, even when it was clear that you needed them? Are you sick and in bed now because you overdid it at the party last night? If the compelling circumstances resulted from actions that you performed voluntarily in the past, then you are still responsible.
• You also need to have the knowledge necessary to act responsibly in a given situation. Imagine that your class was being taught by a professor who claimed to be a CIA agent. He would repeatedly change the times and locations of class meetings at the last minute to keep from being discovered by enemy spies. Not knowing where (or when) the next class would be held would make it impossible to attend. Here you would get off the hook for missing class because of excusable ignorance. But suppose changes in the class schedule were announced during class by the professor, but you were absent on that day. You are now responsible for your ignorance because you should have found out what was covered while you were absent in the past. In other words, your ignorance in the present was caused by your neglecting to find things out in the past. You are responsible because voluntary actions in the past (and inaction) caused the state of ignorance in the present.
• The table below provides sample excuses given by students for absences. These are correlated with conditions of capacity responsibility such as ignorance and compulsion. Correlating excuses with conditions of imputability is one thing. Validating them is something else, and none of these excuses have been validated.
• Here are some more typical excuses offered by students for missing class. Try correlating them with the conditions of imputability to which they tacitly appeal: (1) I missed your class because I needed the time for studying for a test in another class. (2) I missed class because the electricity went out during the night and my electric alarm clock didn't go off on time. (3) I planned on going to class but got called into work at the last minute by my boss. In all these cases, you have missed class and have a reason. Can your reason be correlated with ignorance or compulsion? Were you negligent, careless, or reckless in allowing these conditions of ignorance and compulsion to develop?
• Excuses (and blame) emerge out of a nuanced process of negotiation. Much depends on trust. Your professor might excuse you for missing a class at the end of the semester if your attendance up to that point had been exemplary. He could, on this basis, treat the absence as an exception to an otherwise exemplary pattern of attendance and participation.
• But you may have trouble getting off the hook this time, if there have been several previous absences, because the new absence falls into a pattern of poor participation accompanied by lame excuses. Excuse negotiation (and blame responsibility) occur over the background of other values such as trust and honesty.
Retroactive Responsibility Table Correlation of condition of imputability with common excuses.
Retroactive Responsibility Excuse Excuse Statement (Some Examples)
1. Conflicts within a role responsibility and between different role responsibilities. I have a special project due in another class and finishing it conflicts with attending your class.
2. Overly determining situational constraints: conflicting interests. I am interviewing for a position after I graduate, and I must be off the island for a few days.
3. Overly determining situational constraints: resource constraints My car had a flat tire. My babysitter couldn't come so I had to stay home with my child. My alarm clock didn't go off because of a power outage.
4. Knowledge limitations The class was rescheduled, and I was unaware of the change.
5. Knowledge limitations I didn't know the assignment for class so I came unprepared. (Not an excuse for missing class)
Exercise 1: Provide a Morally Justifiable Excuse for Missing Class
• Offer an honest and responsible ethical assessment of the reason you were unable to carry out your role responsibility for coming to class. Note that the default here is attending class and any departure from the default (i.e., missing class) requires a moral justification
• Begin by examining whether your action can be classified as an excuse arising out of compulsion or ignorance
• Your absence may not be morally excusable. In this case, you cannot excuse your absence but still must explain it
• Remember that, following Aristotle, you must show that your action was done under and because of compulsion or under and because of ignorance. In other words, you must show that it did not arise from past negligence or recklessness
Proactive/Prospective Responsibility
Principle of Responsive Adjustment:
• Responsibility for both good and bad things often emerges as a pattern exhibited by a series of actions. If you miss one class after establishing a pattern of good attendance and active participation, then your teacher will look for something exceptional that prevented you from doing what you habitually do. But if one absence falls into a series with other absences, then this reveals a pattern and your teacher begins to classify you as someone who is chronically absent.
• So, it is not enough to offer a moral excuse to get "off the hook" for your absence. Expressing remorse, guilt, and regret does not substitute for taking active measures to avoid repeating the wrongful act. These changes or responsive adjustments clue others into whether you have learned from your past mistakes. What happened in the past was bad and you regret it; but are you willing to make the necessary changes in your future conduct to avoid repetition of the bad act?
• This is expressed by the "Principle of Responsive Adjustment" (or PRA). Stated negatively, failure to take measures to prevent past excusable wrongs from reoccurring in the future leads to a reevaluation of these past actions. Failure to responsively adjust shows that the past action belongs to context of similar bad actions indicating a bad habit or bad character. This, in turn, leads to a reevaluation of the past act; what when taken in isolation was not blameworthy becomes blameworthy when inserted into this broader context. Showing an unwillingness to learn from the past betrays entrenched attitudes of negligence, carelessness, or recklessness. (See Peter A. French, Corporate and Collective Responsibility)
Responsibility as a Virtue:
• Responsibility can be reconfigured as a virtue or excellence
• The table below describes the characteristics of a preventive stance where we begin by identifying potential wrongs and harms. Once we identify these then we take serious measures to prevent them from occurring
• Finally, responsibility as a virtue opens up the horizon of the exemplary. Pursuing excellence requires our identifying opportunities to go beyond preventing harm to realizing value
• In this context, class attendance becomes class participation. As was said in the introduction, missing a class creates a series of new tasks that arise out of your commitment to excellence in participation. These include the following:
1. What was covered while you were absent? Or better, if you know in advance that you are going to miss a class, what will be covered? How can you cover this material on your own? What can you do, proactively, to stay with the class during your absence?
2. How will your absence impact the rest of the class (especially those in your class group), and what can you do to minimize any harmful effects? Here you should notify your team members that you are going to miss class and develop plans for maintaining your equal participation in the group and class during and after your absence
3. In accordance with the Principle of Responsive Adjustment, what changes are you making to avoid absences in the future or--putting it as positively as possible--to achieve a level of excellence in class participation?
4. Note how all these items focus on improvement or betterment rather than "making up." As Dewey recognizes, the real function of moral responsibility is to take the lessons we learn from the past and use them to improve ourselves
Responsibility as a Virtue or Proactive Responsibility
Characteristic Proactive Response
Diffuse blame avoidance strategies Avoid trying to diffuse the blame for missing class on some other person or situation. For example, “I couldn’t come to class because I had a project due in another class” is not a morally legitimate excuse because it places the blame on the other class. You have not taken responsibility for your absence.
Design responsibilities with overlapping domains If you fail to participate in a group activity, describe the group’s “Plan B,” i.e., how they worked around your absence.
Extend the scope and depth of knowledge. Describe how you found out what was covered in class and document how you have learned this material
Extend power and control Describe the measures you have taken to eliminate the “responsibility gap” between you and your workgroup. For example, how did you “make up” for not participating in the activity held in the class you missed.
Adopt a proactive problem solving/preventive approach for the future Describe what measures you have taken to avoid missing classes in the future.
Guidelines for Avoiding Absences:
1. Build redundancy into your schedule. Many students develop schedules that are "tightly-coupled." This means that failures or breakdowns cannot be isolated; they tend to flow over into other areas producing a cascading disaster. A co-worker calls in sick, and your boss calls you in during the time you have a class. You miss one class and fail to study for another. (The time you set aside for study has been taken up by this unexpected job demand.) You have been working so hard to catch up that you catch a cold. Now everything becomes that much harder because you are not working to full capacity. The lesson here is to set up your schedule from the beginning with a certain amount of flexibility built-in. This could be as simple as taking four instead of five classes or working 10 instead of 20 hours per week.
2. Look for incentives or motives to come to class. One important incentive is that you may get a better grade. Teachers tend to know students who come to class better; they consider them more responsible and more committed.
3. Get proactive when you return. Instead of asking the professor, "Did we do anything important while I was absent?" consult the syllabus and a classmate to find out what you missed. Then check your understanding with the professor. "My understanding is that you discussed moral responsibility with the class and applied the framework to a case. Is this correct?" Instead of asking the professor, "What should I do to make up for what I missed?" come with your own plan. Show that you have taken responsibility for your absence by getting proactive and planning the future around realizing value.
4. Absences have an impact on your fellow students as much as on you or your instructor. If you are working in groups, find out from your peers what was covered. If your group is depending on your completing a task for the class you are missing, try to develop a "work-around." ("I won't be in class tomorrow but I am sending you my part of the group assignment via email attachment.") Let your team know what is happening with you and make sure that you keep up on all your commitment and responsibilities to the group.
Exercise 2: Getting Proactive about your absence
• Develop a plan for "getting back into the loop." What are you going to do to cover the material and activities you have missed?
• Get Preventive. Describe what you are going to do now to avoid absences in the future
• Shoot for the ideal. What can you do--above and beyond class attendance--to realize exemplary participation in your ethics class
Conclusion
Exercise #3: Getting and Staying Honest
• Below is a template that you need to duplicate, fill out, and place in the class attendance file that will be on the desk in front of the class
• Duplicate and sign the honesty pledge at the end of this module
• Students often wish to provide evidence documenting their claims regarding their absences. You may do this, but remember that this is neither required nor in the spirit of prospective responsibility
• Furthermore, be aware that you are not to provide confidential information such as personal health information or student ID numbers or social security numbers. Health issues are to be referred to generically by saying something like, “I was unable to come to class Tuesday because of health reasons”
1. Class missed (day of week and date):
2. The material covered during class:
3. Reason for missing class (please do not provide confidential information):
4. Action plan for absence: how you intend to take responsibility for the material covered while you were absent; how you intend to make reparations to your group for not participating in group learning activities for the class you missed:
5. How you plan to avoid absences in the future:
Honesty Pledge
• To realize the value of honesty, you will make the following affirmation:
• The information I have provided above is truthful, the excuses I have enumerated rigorously examined from a moral point of view, and the responsive commitments I have made above are serious, and I will take active and realistic efforts to carry them out.
Signature:_____________________________________________
Bibliography
1. Aristotle. Nichomachean Ethics, Book 3, Chapters 1-3.
2. Bradley, F. H. (1927/1963). Essay I: The vulgar notion of responsibility in connexion with theories of free-will and necessity. Ethical Studies. Oxford: Oxford University Press, 3-4.
3. Davis, M. (1998) Thinking Like an Engineer: Studies in the Ethics of a Profession. Oxford, UK: Oxford University Press: 119-156.
4. Fingarette, H. (1971) Criminal Insanity. University of California Press, Berkeley, CA: 171.
5. French, P.A. (1984) Collective and Corporate Responsibility. Columbia University Press: New York, NY.
6. Jackall, R. (1988) Moral Mazes: The World of Corporate Managers. Oxford, UK: Oxford University Press.
7. Ladd, J. (1991) Bhopal: An essay on moral responsibility and civic virtue. Journal of Social Philosophy, 32(1).
8. May, L. (1987) The Morality of Groups: Collective Responsibility, Group-Based Harm, and Corporate Rights. University of Notre Dame Press: Notre Dame, IN.
9. May, L. (1994) The Socially Responsive Self: Social Theory and Professional Ethics. University of Chicago Press: Chicago, IL.
10. Pritchard, M. (1996) Reasonable Children: Moral Education and Moral Learning. University of Kansas Press, Lawrence, KS.
11. Pritchard, M. (1998) "Professional responsibility: focusing on the exemplary", Science and Engineering Ethics, Vol 4, pp 215-234.
12. Pritchard, M. (2006) Professional Integrity: Thinking Ethically. University of Kansas Press, Lawrence, KS.
13. Stone, C. D. (1975) Where the Law Ends: The Social Control of Corporate Behavior. Prospector Heights, IL: Waveland Press, INC. | textbooks/biz/Management/Book%3A_Corporate_Governance_(Frey_and_CruzCruz)/06%3A_Course_Procedures/6.02%3A_Realizing_Responsibility_Through_Class_Participation.txt |
The purpose of this book is to help boards of directors of nonprofit organizations improve their performance after completing the online board self-assessment tool found at www.boardcheckup.com. However, it can also be used as a stand-alone resource for any board seeking to enhance its effectiveness in that it also contains the diagnostic questions on which the online tool is based.
• 1: Introduction
The approach taken here is similar to that which lies behind health checkups for individuals. Doctors usually begin by asking us to review a lengthy list of possible health issues and we check those about which we have concerns. The doctor and patient then focus their discussions on these issues. The typical process proceeds through the following three stages: (1) Understanding the symptoms. (2) Diagnosis and (3) Treatment.
• 2: The Board’s Role and Responsibilities
While virtually everyone agrees that the role of the board in nonprofit organizations is to enable them to achieve their mission, differences arise when it comes to specifying exactly what the board’s authority and responsibilities should be. In fact, this is probably the most frequently written about topic in the literature on nonprofit organization boards. What should the board’s role and authority be compared to that held by these other important positions?
• 3: The Board’s Role in Planning
It is commonly accepted “best practice” that a major role for boards ought to be thinking about the “big picture” of how the organization is doing and where it ought to be heading in the future. It is usually recommended that this big picture thinking be captured in a “Strategic Plan” which can be used as a guide by all in the organization in making specific policy decisions.
• 4: The Board’s Role in Performance Assessment
Boards of nonprofit organizations are required to exert due diligence in ensuring that the organizations they govern are achieving their missions effectively and efficiently. Quite aside from legal requirements, most boards feel an obligation to hold those who run the organization accountable for achieving results in carrying out the responsibilities delegated to them. They also wish to be able to identify and recognize what is being done well in the organization.
• 5: The Board’s Role in Fundraising
Effectively performing the board’s role in fundraising is one of the most common challenges reported by both board members and those with whom they have relationships.
• 6: The Board’s Structure and Operating Procedures
One of the major influences on how well a nonprofit organization board carries out its duties and responsibilities is the way it is organized. All boards have at least a minimum amount of formal organization and a set of policies that constrain, and support the way they operate. For example, most nonprofits have a constitution and/or a set of by-laws among which are rules regarding the role of the board, its size and composition, when and how annual meetings will be held, who votes, etc.
• 7: Effective Board Meetings
The quality of formal board meetings can make a considerable difference to a board’s success. At the very least, having to sit in on a number of poorly run meetings can destroy the commitment of even the most dedicated supporter of an organization’s cause. Meetings that are poorly organized, go on too long, go off on tangents instead of sticking to the point, feature personal conflicts or domineering individuals turn people off and can cause serious damage by leading to poor decisions.
• 8: The Composition and Development of the Board
A major component of effective boards is having the right combination of people on them and providing them with ample opportunity to learn what they need to know to be good governors. The two basic requirements for all board members is that they becommitted to the mission of the organization and have the time and energy to devote to the work of the board. A
• 9: The Informal Culture of the Board
Board culture is the collection of taken-for-granted attitudes, social norms, perceptions and beliefs about “how we do things around here” shared, usually unconsciously, by a majority of board members.
• 10: Leadership on the Board
Just as in other work groups, however, boards have both formal and informal individual leaders within them—people who have a significant influence over how the group works and how effective it is. For example, as previously discussed, some boards develop influential core groups within them and they can be a positive or negative force for change
• 11: Conclusions
The purpose of this guidebook has been to a) help you understand some of the issues that challenge the effectiveness of nonprofit boards, b) offer some explanations as to why they exist, and c) provide guidance on how to manage them so as to improve the effectiveness of the governance function. The book, and the Board Check-Up research project of which it is a part, is derived from the idea of health checkups in medicine.
• About the Authors
For the past dozen years, Vic Murray and Yvonne Harrison have worked collaboratively combining their knowledge and expertise to make research, education, and tools available to leaders in the nonprofit sector in need of them.
Thumbnail: pixabay.com/photos/mark-mark...-write-516279/
Book: Guidelines for Improving the Effectiveness of Boards of Directors of Nonprofit Organization (Murray and Harrison)
The purpose of this book is to help boards of directors of nonprofit organizations improve their performance after completing the online board self-assessment tool found at www.boardcheckup.com. However, it can also be used as a stand-alone resource for any board seeking to enhance its effectiveness in that it contains the diagnostic questions on which the online tool is based.
The approach taken here is similar to that which lies behind health checkups for individuals. Doctors usually begin by asking us to review a lengthy list of possible health issues and we check those about which we have concerns. The doctor and patient then focus their discussions on these issues. The typical process proceeds through the following three stages:
• Understanding the symptoms. The doctor and patient begin by trying to define the issues more clearly.
• Diagnosis. Effort is made to understand the causes of the problems through tests and further examinations.
• Treatment. Once the problem has been properly diagnosed, a treatment program to remedy it is begun.
While the Board Check-Up survey on which this book is based does not claim to be as scientifically rigorous as a medical examination, it is based on the same logic. It begins by having those who belong to, or relate to, boards provide their perceptions of how well the board is working by guiding them through a list of potential “health issues,” i.e. statements of possible problems, issues, or challenges that boards might encounter in their work. These statements have been derived from comments made by those who serve on boards or interact with them as well as from the work of researchers and consultants who have studied boards over the past 30 years. The process reveals both the things that the respondents feel the board is doing well in addition to those that are seen as problematic. Once issues (symptoms) have been identified, they become the focal point for discussions that explore how serious they are, what might be causing them (diagnosis), and what can be done to resolve them (treatment).
The Theory Behind the Guidelines
The conceptual framework on which the Board Check-Up is based is shown in Figure 1 below. It shows that effectiveness challenges faced by boards can be grouped in two dimensions: (a) the board’s roles and responsibilities as a governing body; and (b) the factors that influence how well the board carries them out.
Figure 1 further shows that within these two dimensions there exist nine basic sets of board effectiveness challenges. They are,
A. Effectiveness challenges related to the performance of the board’s roles and responsibilities in the governance process.
The clarity of the board’s role vis a vis management and other stakeholders in the organization’s environment;
• How well it carries out its duty to establish the organization’s mission and the broad guiding strategic plans, priorities and general policies within which the organization should operate;
• How clear and effective it is in carrying out its fiduciary role in assessing the performance of the organization and those to whom it delegates authority (e.g. the Chief Executive Officer) as well as its assessment of risks facing the organization.
• How well it contributes to ensuring that the organization has the financial resources it needs to operate and achieve its mission.
B. Effectiveness challenges related to the factors that influence the board’s ability to carry out its roles and responsibilities.
Aspects of the formal structure and operating procedures of the board such as its size, by-laws, job descriptions, committee structure, information systems, and administrative support;
The effectiveness of board meetings;
• Various aspects of the makeup of the board’s membership and how well board members are oriented and trained;
• The role played by informal, shared attitudes and beliefs about how the board should behave, commonly known as the board’s “culture”;
• The influence of two key people who provide formal and informal leadership to the board—the board Chair and the organization’s top paid manager or CEO, if there is one.
• Figure 1 recognizes that, taken together, these nine effectiveness challenges influence the performance of the organization as a whole (e.g. advancement of the mission, financial condition, efficiency, ability to learn and grow, motivation of paid staff and volunteers, and the support provided by stakeholders in the external environment).
It should be noted that boards are not the only contributors to the effectiveness of the organization.
Figure 1 shows the host of contextual factors that influence the governance process and the organization’s effectiveness. Though they may often not be aware of it, a board’s behavior may be affected by characteristics of the organization it governs—for example its history, size, and the nature of its mission. The actions of external stakeholders such as funders, regulators, and other organizations in the community or industry of which they are a part are also significant. Some of them have actual legal authority over some aspects of board responsibility while others have informal, yet powerful, forms of influence. Finally, all nonprofit organizations exist within a larger society. Countries and communities can differ widely in the political and economic climates they create. Cultural values about the nature of charity, volunteering and the role of nonprofits create different environments for the NPO’s within them (see Salamon and Anheier, 1997).
For the purposes of this book we will not enter into in-depth discussions of these contextual influences on governance effectiveness. However, it must be noted that these influences are included in the Board Check-Up survey and are a focus of the larger research study of which the survey is a part. Papers produced from this research are available to registered users of the Board Check-Up (www.boardcheckup.com). Because the focus of this book is primarily practical, it will deal with the issues that challenge boards (symptoms), why they occur (diagnosis) and the ways that boards can consciously choose to improve their effectiveness in the governance process (treatment). Those interested in the growing body of academic research on the topic of contextual influences should see the 2014 Routledge Press book, Innovative Perspectives in Nonprofit Governance, edited by Chris Cornforth and Will Brown.
Organization of this Book
As noted above, this book is intended to help boards assess their own performance and make decisions to improve the effectiveness of the governance process. Each chapter focuses on one of the nine dimensions of governance effectiveness described in Figure 1. The chapter starts with items relating to that dimension on the Board Performance Self-Assessment Questionnaire. These items represent the symptoms that indicate possible issues, problems, or challenges faced by the board. This is followed by a discussion of possible reasons that such symptoms might exist (diagnosis). The third part of each chapter looks at what might be done to alleviate the symptoms once a diagnosis is made (treatment). Included in this final part of the chapter are references to websites, books, and articles that provide additional advice and assistance on how to deal with the issues raised. | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/01%3A_Introduction.txt |
Symptoms
While virtually everyone agrees that the role of the board in nonprofit organizations is to enable them to achieve their mission, differences arise when it comes to specifying exactly what the board’s authority and responsibilities should be. In fact, this is probably the most frequently written about topic in the literature on nonprofit organization boards. Since most nonprofits also have paid or volunteer CEOs and managers, the question arises: what should the board’s role and authority be compared to that held by these other important positions?
A high percentage of agreement with the following statements indicates that there is a lack of clarity in and around the board as to what its role ought to be:
• The board seems to be unclear about what its role ought to be.
• The board and the CEO or Executive Director sometimes seem to have different ideas about the authority each should have.
• The board tends to act too much as a “rubber stamp” for decisions made by the organization’s top management.
• The board gets too involved in making decisions about operational details that ought to be made by management.
• Board members are unclear about their legal liabilities and what protection they have against them.
• A closer look at the above statements shows there are actually two basic issues involved here:
What is the board’s legal authority? There are certain duties boards must perform because they are legally responsible for the actions of the organization (as defined by those who authorize the organization to exist or give it tax exempt status). Their primary role is that of a fiduciary, which is to say that they are entrusted to look after the interests of the organization. In practical terms this translates into making sure that the organization is achieving its mission, not wasting its money and not breaking any laws.
However, it is usually not feasible for boards to make all the decisions. While retaining responsibility for the overall performance of the organization, the board must delegate authority to others such as the CEO. (If it is an all-volunteer organization with no paid CEO, it may still delegate authority to volunteer committees or office holders). Those to whom authority is delegated have the power to make certain decisions, which the board can review only in the context of assessing the organization’s overall performance. The question is, therefore, what matters should boards decide on and what should they delegate? This question is discussed under “Treatment” below.
Diagnosis
Why do boards and those who relate to them become confused about the authority of the board?
Regarding the board’s legal authority, a lack of clarity usually exists because board members are not properly informed about the laws defining that authority and legal liability with respect to board activities. Confusion and lack of clarity about the board’s responsibilities and decision-making authority arises for a number of reasons.
The most common cause is that boards fail to adapt to changes in the organization’s environment. Many nonprofit organizations start with very little money and few or no paid staff. As a result, volunteers conduct much of the work, and among the most active volunteers are board members. Meetings of boards often deal with everyday operating problems and small crises. When these organizations become more successful and are able to employ professional managers, many board members experience great difficulty in letting go of their involvement in day-to-day operations. At the same time the management team becomes frustrated over not knowing what they can decide and what they must refer to the board for decision. Once patterns of decision-making become established they form part of the board’s informal culture and thus recede into the background to the point that they are taken for granted and never questioned.
The same kind of confusion can arise when an organization experiences sudden major crises such as large funding cuts or unanticipated resignations of key staff. At such times boards often find themselves pushed into making operating decisions and don’t know how or when to relinquish this role.
In some cases, the lack of clarity exists because the CEO and key board members simply differ in their opinions about what the role of each party should be. If these root philosophical differences are never addressed directly, this situation leads to an endless series of disagreements over many issues.
Treatment
Lack of Clarity about the Board’s Legal Authority and Liability
The basic knowledge about the board’s legal authority and responsibility can be most easily obtained from a few good websites or written publications. These also provide important information about the nature and extent of a board’s legal liabilities—the grounds on which boards can be sued for failure to carry out their duties properly. Normally, providing board members with orientation and simple written materials on this subject will suffice; however, if specific circumstances suggest that the organization faces any unusual situations, lawyers with specialized knowledge of this field should be consulted. It is important to realize that the laws on the duties and responsibilities of boards and their legal liability can vary from country to country and, in federated countries such as the U.S. and Canada, from one state or province to another.
Clarifying the Board’s Role in Decision-making
The only way to deal with confusion or conflict around the role of the board is through education and discussion among all affected parties. This includes all board members, the board Chair, the organization’s CEO, and other members of the management team who have expectations about the board carrying out certain actions. It should also include key funders or stakeholders who might feel they have some kind of authority to make decisions involving the organization.
Basic board responsibilities
To clarify the board’s role, all those involved must understand the basic board responsibilities. These are described below. This material is adapted from Murray (2009).
To deal with the problem of achieving clarity regarding board roles and responsibilities, we need an understanding of what it is that boards do. The most common areas of responsibility in which boards may become involved are:
• Mission, values, goals, strategic priorities and performance assessment. Setting the overall purpose for the organization—why it should exist, who it should serve, what services it should provide, and what values and ethical guidelines it should follow in providing them. This area also includes the setting of objectives and the development of broad strategic plans for achieving them. To do this properly requires assessing how well the organization has performed in achieving the goals set for it as well as understanding the challenges and opportunities that lie ahead.
• Fiscal/legal oversight and risk assessment. Ensuring that the organization behaves in a fiscally and legally responsible manner. This includes such matters as overseeing operating and capital budgets, investments, property management and compliance with various laws applying to the organization. It also includes risk assessment—attempting to identify areas in which the organization is subjected to high risk to its assets or reputation.
• CEO selection and evaluation. Ensuring that the best person holds the position of CEO and performs it at a satisfactory level of competence.
• Community relations (also known as “Boundary Spanning”):
• Ensuring that the interests of key external stakeholders are made known inside the organization.
• Building alliances and partnerships with others that benefit the community; and
• Representing the interests of the organization to its external publics;
• Resource development. Ensuring that the organization obtains adequate funds to enable it to achieve its objectives.
• Management systems. Ensuring that the organization is managed efficiently and effectively, e.g., that it has the right administrative structures and policies, information systems, human resources policies, etc.
• Board self-management. Activities aimed at ensuring the board itself is as effective as it can be, e.g., recruiting, selecting and training its members, evaluating the effectiveness of its meetings and committees.
Roles of Board Members
To list the areas in which boards should have some kind of involvement is important, but it does not indicate how they should be involved. This is the question of the roles the board can play in the organization. It is common in writing about boards to talk only about the role of members as decision-makers. In addition, however, they may play two other critical roles: advisor and implementer. Thus there are at least three roles for board members:
Decision-maker/evaluator. The most important thing to understand about the decision-making role of the board is the concept of delegation. Except in the smallest of NPOs, the board cannot make all the decisions needed to get things done. It must trust staff and volunteers to make many decisions that it will never hear about. When the organization employs a CEO, the authority to make many decisions is delegated to that position and the CEO may, in turn, delegate some of that authority to others. The only decision the board makes about all these delegated matters is whether they all add up to satisfactory performance for the organization as a whole. This is the evaluation function of boards and it cannot be delegated. When the boarddoes make decisions, it usually occurs only at the level of the whole board meeting in a formal session in which it votes on motions put forward to it.
Advisor. In this role, board members provide information and expert advice to their board and, less formally, to others such as the CEO or other management and staff. This role is usually played at the level of board committees, which may develop recommendations for the whole board or CEO. Individual members typically derive the information and advice they provide from the following sources:
Contacts in their networks. This latter contribution—the result of board members interacting with the outside world—has only recently been recognized as a vital part of the board’s overall potential contribution (Renz, 2006; 2012)
Knowledge gleaned through their training and experience; and
Implementer. In a few instances, board members may actually carry out the activities required by the decisions they (or others) make. For example, they usually carry out the work of selecting future board members and selecting the CEO. They may also approach prospective donors for funds; participate in advocacy and community outreach efforts; or represent the organization in dealings with critical stakeholder groups. Implementation activities are usually carried out at the level of task forces or committees charged with specific governance functions such as fundraising or board recruitment. Occasionally, individual board members may get involved in implementing decisions such as approaching prospective donors to ask for contributions or presenting briefs on behalf of the organization to government bodies.
Patterns of Board Responsibility and When They are Appropriate
Understanding the kind of matters boards might get involved in and the various roles members can play is the first step to achieving clarity about what the board should do. However, the temptation is then to assume that there is a single pattern of board responsibilities and roles that is best for all NPOs. In spite of the assertions by some “how to do it” writers on boards that there is a “one best way” for all types of boards and governance situations, the limited research on what makes for an effective board suggests that there is not. Let us look at several models or common patterns of board roles and responsibilities and discuss when each may be appropriate.
The working board
There are conditions when it is quite acceptable to have board members who simultaneously participate in setting strategic directions, manage the implementation of plans and actually carry out “the work.” The term for a board like this is the working board. A successful working board can exist when the nonprofit organization is new, small, or made up of all (or nearly all) volunteers and offers services that are not numerous or complex. For example, many self-help groups, small grassroots advocacy organizations, housing and food co-operatives, collectives, and sport organizations operate very successfully with working boards (Gill, 2005).
In working boards, board members are often the most committed and knowledgeable members of the organization and have worked up to the board as volunteers or were founders of the organization. It is not surprising, therefore, that some of them bring operational concerns to board meetings. In fact, in this model of board, it may be impossible to differentiate between “strategic” and “operational” leadership issues. For example, one botched special event fundraiser or bad story about a mishandled client in the newspaper could end the organization’s existence. Almost anything and everything has the potential to be a “strategic” leadership issue. Getting established requires that the people involved are competent and have the energy to successfully wear many hats.
All that is needed to create an effective working board is to make sure that everybody is clear about who can make which decisions and who is going to do what. There should also be basic agreement about what things are the most important (priorities). In general, whole-board meetings of working boards should still focus on governance issues—planning for the future, setting broad objectives, setting priorities and assessing performance. But time at board meetings spent on apparent “details” is not necessarily wasted if the chair or others can spot the larger strategic issues that can be buried in them. In these kinds of small organizations the board can benefit by holding periodic special meetings of all active participants (such as other key volunteers and any staff) to discuss “how well are we doing in fulfilling our mission?,” and “where do we go from here?”
The working board is not appropriate under conditions opposite to those that fit it best, that is, organizations with paid staff and full-time managerial personnel who are operating programs competently. Most public institutions such as universities, hospitals and mid to large sized social service agencies are examples of the kinds of organizations that fit these conditions. Such organizations cannot tolerate the confusion created by board members trying to “micro manage” the organization’s affairs when others are better prepared to do so.
The governance-only board
A governance-only board is one that restricts itself to providing broad, strategic leadership (Gill, 2005) to the organization by focusing primarily on issues that relate to the basic strategic question of “who is to receive what services at what cost” (Carver, 2006). This means that decision-making/evaluating becomes the key role being played by the board.
The dilemma facing the large, complex institutions for whom governance-only boards are the most appropriate, and one of the reasons they can so easily become rubber-stamp boards, is that most board members are busy civic leaders who, though great supporters of the organization, have very little time to become thoroughly knowledgeable about it or the sector in which it operates (such as healthcare, education, or the arts). This makes informed debate about major strategic issues very difficult. For example, it takes a lot of expertise to know whether an organization should merge with another (or cease to exist), whether a university should open (or close) a department or whether a hospital should convert a certain percentage of its beds from active to chronic care.
The secret of creating an effective governance-only board lies in developing a shared understanding of basic levels of policy, deciding which of them are basic “strategic” or “landmark” governance issues and devising information systems that supply valid data on past performance and future needs in ways that clearly relate to them (see Chait et al, 2005 for a discussion of “landmark” governance issues).
The Mixed Model Board
Many boards in practice are neither purely working boards nor governance-only boards. They tend to be located between the two ends of the board involvement continuum. Sometimes they may become very involved in making decisions about day-to-day operations while at other times they keep their involvement limited to matters of policy and strategy. In these organizations, paid managers may make most of the operating decisions but may not have the time or expertise to handle certain functions with which they are not familiar, for example, publicity, fundraising or government relations. In such situations it might be expedient to turn to board members for expertise and implementation assistance.
Other times that a governance-only board might revert to a mixed model state is during a major crisis such as the loss of large grants, financial mismanagement, serious labor unrest or the actions of militant client groups. Insofar as the paid manager has trouble handling these situations, the temptation on the part of the board to get involved in the direct management of them can be strong; indeed managers may ask for it and it may be necessary. Once the crisis is over, however, it is easy to allow things to continue in an inappropriate mixed model state rather than reverting to the prior governance-only model.
It is possible to sustain a mixed model form of governance that can work well. In this situation, certain board members or committees take responsibility for managing specific operational leadership functions. These would typically be seen as working committees and their chairs become de facto operating managers. At the level of the whole board, effort must still be made to focus primarily on strategic issues. Insofar as possible, the operational committees and board members with specific operational responsibilities should work under the authority of the Executive Director.
The mixed model is a difficult one to implement successfully because there are so many occasions where confusion can arise, especially as the organization’s environment continues to change. The secret of success lies in exceptionally full and open communication in which all parties feel free to raise questions over gaps or overlaps in authority and responsibility. There must also be high levels of tolerance for ambiguity. For example, even though the primary purpose of meetings of the whole board should be for discussing major issues of policy and strategy, some board members will want to talk about matters pertaining to their responsibilities as operational managers. They may thus seem to be cluttering the meetings with “managerial” details and undermining the authority of the CEO. The key to success lies in training everybody—management and board alike—to recognize what is “strategic” and redirect the non-strategic matters to the CEO.
Summary
In summary, there is no “one best way” of structuring the roles and responsibilities of a board of directors that fits all situations. The board cannot avoid its legal requirement of exercising due diligence in ensuring that the organization achieves its mission, has a strategic plan and does not get into financial or legal difficulties. However, the way it gets involved in the other responsibility areas discussed above, can be highly variable. The important thing to understand is that the board is part of the whole organizational system that includes paid mangers, staff, volunteers, and external stakeholders. All have roles to play in the process of deciding what to do and then implementing those decisions. Everyone must be clear about who will do the deciding, who will have input into those decisions, who will do the implementing and what information will be obtained to assess how well the decisions have worked out.
Table 1 contains numerous links to useful information and resources to increase governance effectiveness in the area of the board’s legal authority and fiduciary responsibilities.
Table 1: Additional resources on the board’s legal authority and responsibilities
Topic
Country
Source Website
Legal Duties and Liabilities of Directors
U. S. A.
National Council of Nonprofits
http://www.councilofnonprofits.org/r...nprofit-boards
Britain
Government of the United Kingdom
http://www.charitycommission.gov.uk/...o-know-cc3/#i1
Canada
Industry Canada
www.ic.gc.ca/eic/site/cilp-p...g/cl00693.html
Carter’s Law
http://www.carters.ca/pub/article/charity/govset/A-duties.pdf
Australia
Institute of Community Directors of Australia
http://www.communitydirectors.com.au/icda/tools/?articleId=1362
Basic Board Responsibilities
U.S.A.
National Council of Nonprofits
http://www.councilofnonprofits.org/r...nprofit-boards
Britain
Know How Nonprofit
http://knowhownonprofit.org/leadersh...sponsibilities
Australia
Our Community
https://www.ourcommunity.com.au/boar...articleId=1310 | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/02%3A_The_Boards_Role_and_Responsibilities.txt |
It is commonly accepted “best practice” that a major role for boards ought to be thinking about the “big picture” of how the organization is doing and where it ought to be heading in the future. It is usually recommended that this big picture thinking be captured in a “Strategic Plan” which can be used as a guide by all in the organization in making specific policy decisions. A high percentage of agreement with the following statements would indicate that the board might be having problems with its role in the planning function:
• The board has not spent enough time establishing a clear mission and vision for the organization.
• The board never seems to have time to explore external challenges and opportunities that the organization might face.
• The board does not do a very good job of learning about the concerns of external stakeholders who can influence the organization.
• The board does not do a very good job of learning about the concerns of the communities that the organization serves.
• The board rarely holds “creative thinking” sessions aimed at trying to find new ways the organization could develop.
• The board does little to learn about innovations tried by others that might help the organization.
• The board is not provided with a clear enough picture of the organization’s internal strengths and limitations in dealing with its external environment.
• The board has not developed a clear, well-researched, strategic plan that sets out broad goals and establishes priorities for the organization.
• Plans exist on paper but they don’t get implemented at the operational level, i.e. other concerns drive what actually gets done.
Diagnosis
The main reasons that boards have difficulties with fulfilling their planning function effectively are:
• The organization faces an external environment that is too turbulent or complex to understand hence the board feels it is not possible to make plans for the future. (Note, however, that it may be possible to develop useful scenarios based on several different hypothesized futures.)
• Lack of clarity about who should play what role in the planning process. Boards are often accused of “rubber-stamping” when they think their job is simply to approve the plans brought to them by management (Chait et al., 2005).
• Lack of understanding of the planning process. This can occur because the board does not contain enough members who have experience in strategic planning, or who have not been provided with the opportunity to learn about it.
• Lack of time. This is usually due to meeting agendas that are too full of “routine” matters or short-term “firefighting” issues that do not allow the board to step back and look at the big picture.
• Structural problems. The board has not created a committee whose function it is to engage in the in-depth information gathering and analysis that is necessary for effective strategic planning.
Treatment
To treat planning problems, consider the following points:
• Decide on the role in the planning process that is best for the board given the organization’s unique characteristics (its age, size, presence of experienced senior managers, number of members with strategic planning experience, etc.). Choose between one of these three basic roles:
• Doing it all themselves, i.e. the board obtains all needed information and decides on recommended directions;
• Using a board committee with responsibilities for planning to work along with members of the management team in obtaining the needed information and creating the recommended directions;
• Having the needed information and recommendations developed by the management team (with or without the help of consultants) and presented in draft form for the board to discuss and decide upon.
• Ensure that there is sufficient time, money, and expertise for those responsible for preparing the initial draft of the strategic plan to carry out that work.
• Provide education in strategic planning to all board members who lack sufficient experience (see below for a brief outline of what is involved in strategic planning).
Always involve the organization’s CEO and other members of the management team in providing needed information on the state of the organization’s external environment and internal capacity. But, also attempt to find reliable information from independent sources on these same matters. For example, many sub-sectors within the nonprofit world have evolved associations and professional bodies that monitor and report on opportunities and potential threats in the environment. There are also usually a number of experienced consultants in each industry of whom boards should be aware.
The next section provides an overview of strategic leadership questions within the basic elements of a strategic plan, from Murray (2014).
Overview of Key Questions Addressed in a Strategic Plan
1. Mission
What is the purpose of the organization? Why does it exist? Who does it serve?
2. Values
What values should the organization uphold in the process of doing its work? For example:
• What is the underlying philosophy behind its approach to the way it seeks to achieve its mission?
• What beliefs and attitudes should be shared regarding the way the organization wants to work with the public, its clients, volunteers, staff and other stakeholders?
3. Vision
Many strategic plans contain a statement describing a vision for the organization’s future. A vision statement answers such questions as:
• What should the organization look like in 5 years?
• What will it be known for?
• What will it be doing that is different from what it does now?
• What will be its reputation among other organizations in the same field?
(Note: Many find it is better if this section is tackled after steps 4 and 5 below.)
4. The environmental context of the organization’s operations
This is a very important section that outlines the challenges and opportunities that shape the reality within which the board must work. It addresses such questions as:
• What changes are likely to occur in the next 2-3 years in the following aspects of the external world and what implications will they have on the organization’s operations:
• The economy
• The political environment
• Societal values and beliefs
• Technology
• Demographics
• Who are the critical stakeholders who influence the ability of the organization to succeed? Examples of stakeholders include those the organization seeks to serve, funders (and potential funders) of all types, regulators, potential allies and collaborators, key “competitors” for funds, or clients/audience.
For each of the key stakeholders answer these questions:
• What do they want from the organization, and how are these wants likely to change in the next 2-3 years? How much influence do they have over the organization’s ability to carry out its mission?
• To what extent do their expectations of the organization conflict with one another?
• What are the organizations that are similar in size, mission, types of programs, etc. and what are they doing that the organization might learn from?
5. The internal capacity of the organization
What are the present internal strengths and weaknesses of the organization in terms of resources, people, administrative systems and leadership capabilities? In other words, what is the organization’s capacity for influencing, or successfully adapting to, the external environment that it will likely be facing in the next few years?
6. Strategic goals and priorities
There is usually no way that any organization is able to find the time, money and people to do everything that it would like to do in an ideal world. So what should be the key strategic goals for the organization over the next two years in these major components of your operations?
(a) Programs
• Should there be any changes in the kind of people the organization serves?
• What changes are needed in the quantity and quality of the programs or services provided to those people?
• How many and what kind of additional programs (beyond those currently in place) are needed to support the mission?
(b) Resources
• What is the potential for increasing financial support from all sources to support programs priorities?
• What should be the organization’s resource development goals and which of them are most feasible to implement?
(c) Capacity building
• What changes are needed in leadership development, staffing, volunteering, information technology and other management systems to support program and resource development priorities? Which of these changes are needed most?
7. Prioritization
Among the goals identified, which have the highest priority in terms of importance and urgency?
8. Implementation
Strategic plans are often ineffective because the goals and priorities they identify do not get translated into implementable operational plans for which individuals take responsibility. Are there connections between the strategic priorities and more detailed business plans and budgets? Are these connections obvious and strong?
9. Accountability
As well, ineffectiveness can result when results are not tracked or when there are no widely accepted systems in place for doing this. This can result in an outdated or obsolete plan. To avoid this, the organization’s plan must contain agreed upon procedures for the assessment of progress and the plan must be reviewed and updated annually in the light of this assessment.
For additional guidelines on strategic planning and the board’s role and capacity to engage in it, see the resources in Table 2.
Table 2 Additional Resources on the Board’s Role in Planning
Topic
Country
Source Website
Board’s Role in Strategic Planning
Britain
KnowHow NonProfit:
knowhownonprofit.org/funding/...olve-the-board
How to do Strategic Planning
U.S.A.
Free Management Library
http://managementhelp.org/freenonpro...c-planning.htm
National Council of Nonprofits
http://www.councilofnonprofits.org/s...for-nonprofits
Zimmerman Lehman Consulting
www.zimmerman-lehman.com/strategic.htm
Britain
KnowHow Nonprofits
http://knowhownonprofit.org/organisation/strategy
Australia
Institute of Community Directors of Australia
www.ourcommunity.com.au/icda/tools/?articleId=1368
Evaluating Strategic Planning Outcomes
U.S.A.
Innovation Network
http://www.innonet.org/?section_id=64&content_id=182 | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/03%3A_The_Boards_Role_in_Planning.txt |
Symptoms
Boards of nonprofit organizations are required to exert due diligence in ensuring that the organizations they govern are achieving their missions effectively and efficiently. Quite aside from legal requirements, most boards feel an obligation to hold those who run the organization accountable for achieving results in carrying out the responsibilities delegated to them. They also wish to be able to identify and recognize what is being done well in the organization. In turn, boards are morally and legally accountable to those for whom they act as trustees. To fulfill all these accountability responsibilities requires that the board receive reliable and valid information on how things are going. The areas in which due diligence assessments need to be carried out are:
• The performance of the organization as a whole. This includes:
• Attainment of strategic plan objectives.
• Assurance of the organization’s financial and legal soundness.
• Assurance that the organization is aware of serious potential risks it may face and is mitigating them as well as possible.
• Assurance that all members of the organization (including board members themselves) are behaving ethically and in accord with the espoused values of the organization, e.g. avoiding conflicts of interest, mistreatment of clients or staff, etc.
• The performance of the organization’s CEO (paid or unpaid top management person).
• Assurance that the CEO is meeting the performance expectations of the position.
• The performance of the board itself.
• Assurance that the board is governing effectively and is meeting its own accountability objectives.
Indications that the board is experiencing challenges in this area of their responsibilities arise when a significant numbers of board members or others related to the board, such as the CEO, management team and other key stakeholders report high levels of agreement with the following statements:
• The board does not do a satisfactory job of assessing how well the organization is achieving its mission.
• The board does not get enough of the right kind of information to give it a clear picture of how well the organization is doing.
• The board does not ensure that an analysis is done of serious risks that the organization might face.
• The board does not do a very good job of ensuring that the organization’s finances are being managed soundly.
• The board does not regularly and systematically carry out assessments of the CEO’s performance (e.g. Executive Director, President, etc.).
Diagnosis
The main reasons for difficulties that boards may have in carrying out their duties in the critical area of performance assessment are as follows:
• There is lack of clarity about the amount and kind of assessments the board should undertake. Either the management and board have differing ideas about this, or the board itself is unsure what its role in performance assessment is.
• The board may wish to assess performance but it does not get sufficient information to enable it to carry it out. This could be because there are inadequate systems for gathering and reporting it (including metrics and frameworks to organize it) or because it is intentionally or unintentionally withheld from the board by the management team.
• The board does not create suitable internal structures and processes for carrying out its assessment duties, i.e. there are no board officers or committees with responsibility for gathering the needed performance data, analyzing it and bringing assessment results to the full board for proper consideration.
• The board is not adequately trained in performance management, or does not have enough members with knowledge of how to analyze and interpret performance data.
• The board has evolved an informal culture in which it believes that it does not have to take one or more of its performance assessment responsibilities seriously. For example, it may feel uncomfortable monitoring and evaluating the performance of the CEO or raising questions about the validity or amount of information it is given about the organization’s finances or reputation in the community.
Treatment
Some of the general approaches to improving the board’s ability to carry out its performance assessment responsibilities are as follows.
• The most important requirement is to develop a supportive culture for evaluation not only within the board but also in the whole organization. There must be an atmosphere of collaboration, trust and respect between the board, the top management team and, indeed, all those who control information on how well the organization is doing. If there is a feeling that information is going to be used by the board to ‘blame’ or punish somebody for doing a bad job, the process of assessment will turn into one of political game playing between the evaluators and those under evaluation. This is why boards must be willing and able to communicate positive evaluation results as much, or even more, than those that suggest problems.
• The next question, of course, is: How do you change a board’s culture when most people are not even aware such a thing exists? This is where the leadership of the board chair and the organization’s CEO becomes important. Boards are more likely to face the need to change aspects of their culture when those they respect lead them in examining their heretofore taken-for-granted assumptions about how they do things like performance assessment.
• It is also vital that board members receive training and development in performance management, including how to obtain and interpret the information provided in each of the key areas of assessment: strategic plan objectives, financial soundness, risk mitigation, CEO performance and the board’s own performance.
• Finally, it is necessary to create structures within the board that facilitate carrying out its performance assessment responsibilities. This usually means creating committees or officer positions in which the duties include gathering, analyzing and making recommendations about performance in each of the areas identified above. Leaving such matters to the board as a whole, or delegating them to the CEO and management team, will usually result in less than effective oversight.
What follows is a discussion of resources that will help boards in each of the specific areas of performance assessment identified above.
Assessing the Performance of the Organization as a Whole
As mentioned above, the major problems with evaluation of organizational performance lie in the areas of choosing suitable effectiveness criteria, developing a framework to organize criteria, and choosing the best methods of measurement and analysis.
• For information on what constitutes nonprofit organizational effectiveness see Herman and Renz (2008). Herman and Renz advance “Nine theses” to explain nonprofit organizational effectiveness. For a discussion of the subjectivity inherent in assessing effectiveness and how to deal with it, see Murray (2010).
• For a conceptual framework for understanding organizational effectiveness criteria, see The Competing Values Framework (CVF) Quinn and Rohrbaugh (1981; 1983). The CVF depicts means and ends effectiveness criteria in two dimensions (structure and focus) drawn from the four schools of organizational thought (rational goal, internal process, human relations, and open systems). It has been useful as a diagnostic and leadership development tool at the individual and group levels (see Quinn, Faerman, Thompson, McGrath, & St. Clair (2010).
• For yet another framework to help boards conceptualize, organize, and measure performance, see Robert Kaplan and David Norton’s (1996) Balanced Score Card. The BSC organizes measurements along different organizational perspectives (e.g. financial, internal operations, client/customer and learning and innovation). In a 2013 study titled Board Member Self-Perception of Organizational Governance and the Role of the Balanced Score Card, Aulgur found support for use of the BSC to help boards become clear about their role as well as overcome problems from social construction of organizational performance (i.e. what matters most). Others have found that it does not work as well in some types of nonprofit organizations (e.g. social service).
The Board’s Role in Financial Management
As stewards of nonprofit organizations, one of the board’s responsibilities is to ensure there are enough financial resources to advance the mission and work of the organization and that these resources are being spent wisely. Effective oversight in this area involves tracking the following aspects of financial management:
• Audits of past financial expenditures;
• Oversight of the adequacy of incoming financial resources and reserves (e.g. ensuring there is enough money to cover planned and unexpected expenditures); and
• Monitoring the annual budget.
Most boards are highly conscious of their responsibility for ensuring that their organization is managed in a financially responsible manner. But this is easier said than done, especially when many board members have little or no expertise in understanding financial statements, auditor’s reports, budget documents and the concepts behind financial strategies. Nevertheless, it is possible for boards to improve their competency in this vital area by:
• Conducting regular reviews of board competency in understanding the financial condition of the organization and providing training in overcoming areas in need of improvement.
• Insisting that CEOs provide all relevant financial information needed to adequately understand the organization’s finances.
• Obtaining independently generated reports on the organizations financial management, e.g. from auditors, industry associations, consultants, etc.
For research on the relationship between board effectiveness and nonprofit financial health see Hodge and Piccolo (2011). For guidance on financial management, Miller (2008) answers important financial questions, including the relationship between revenue sources and profitability. This article provides helpful information for boards considering financial decisions such as diversification of revenue streams as well as whether to fund new programs or not.
Risk Management
The concept of risk management in nonprofit organizations refers to becoming aware of actions or events which have the potential to harm the organization’s reputation in the community, its financial stability, or cause it to incur legal liabilities. Examples include risks to client or employee health and safety, high-risk investments, actions that could be construed as negative by the public, etc. The aim of risk management is to balance the possible benefits derived from taking risks against their possible negative effects.
• Good advice and a sample conflict of interest policy can be found in Gill (2005).
• Jackson (2006) contains specific guidance along with useful tools and resources.
Assessing the Performance of the CEO
One of the most important decisions a board makes concerns the selection of the CEO. Much time and energy goes into preparing the job description, recruiting and selecting the right candidate, and orienting them to the top job. Equally important, however, is the need to assess how well CEOs are working out once they are in office. For more specific guidance on the topic of performance assessment, check out the websites in Table 3.
Table 3: Additional Performance Assessment Resources
Topic
Country
Source Website
Overall Assessment of Organizational Performance
U.S.A.
Free Management Library
http://managementhelp.org/aboutfml/diagnostics.htm
Fieldstone Alliance
www.fieldstonealliance.org/cl...ion_Matrix.cfm
Innovation Network
http://www.innonet.org/?section_id=64&content_id=185
Harvard Family Research Project
http://www.hfrp.org/evaluation/the-e...tic-evaluation
Assessment of Finances and Financial Management
U.S.A.
Free Management Library
http://managementhelp.org/organizati...s/finances.htm
The Bridgespan Group
http://www.bridgespan.org/Publications-and-Tools/Nonprofit-Boards/Nonprofit-Boards-101/Fiduciary-Responsibilities-Board-Members.aspx#.U1E6DvldX-o
The Greater Washington Society of CAs
http://www.nonprofitaccountingbasics.org/reporting-operations/finance-committee-committee-chair-responsibilities
National Council of Nonprofits
http://www.councilofnonprofits.org/nonprofit-audit-guide/board-role-audit-committee
CompassPoint
http://www.compasspoint.org/sites/default/files/documents/Guide%20to%20Fiscal%20Policies%20and%20%20Procedures.pdf
Washington Secretary of State
http://www.sos.wa.gov/_assets/charit...now%20(JJ).pdf
Britain
KnowHow NonProfit
http://knowhownonprofit.org/organisa...ment/measuring
http://knowhownonprofit.org/organisa...gement/budgets
http://knowhownonprofit.org/leadersh...s-of-the-board
Funding Central
www.fundingcentral.org.uk/Page.aspx?SP=6240
Canada
United Church of Canada
www.united-church.ca/files/ha.../financial.pdf
Alberta Ministry of Culture and Community
http://culture.alberta.ca/community-...bilities09.pdf
K.D. Wray, Consultants
http://www.wrayca.com/?page_id=634
Assessment of Finances and Financial Management
Australia
Leadership Victoria
www.leadershipvictoria.org/do...heet_final.pdf
CPA Australia
http://www.cpaaustralia.com.au/~/med...-assurance.pdf
The Role of the Board Finance Committee
U.S.A.
Greater Washington Society of CPAs
http://www.nonprofitaccountingbasics...ncial-planning
National Council of Nonprofits
http://www.councilofnonprofits.org/n...udit-committee
The Board’s Role in Preventing Fraud
U.S.A.
Venables
www.venable.com/preventing-an...t-board-to-do/
Association of Certified Fraud Examiners
http://acfe.gr/wp-content/uploads/20...iness-risk.pdf
U.S.A.
Keller and Owens
www.kellerandowens.com/resour...audBooklet.pdf
Australia
Council of Social Services of New South Wales
http://www.itbusinessedge.com/slides...w.aspx?c=93089
The Board’s Role in Managing Risk
U.S.A.
National Council on Nonprofits
www.councilofnonprofits.org/r...-and-insurance
Public Counsel
http://www.publiccounsel.org/tools/p...management.pdf
Nonprofit Risk Management Center
www.nonprofitrisk.org/library...ard120307.shtm
Britain
KnowHow NonProfit
Canada
Imagine Canada
http://library.imaginecanada.ca/file...ning_guide.pdf
Carter Law
www.carters.ca/pub/checklst/nonprofit.pdf
Australia
Our Community
http://www.ourcommunity.com.au/manag...do?articleid=1
Performance Evaluation of the CEO
U.S.A.
Free Management Library
http://managementhelp.org/boards/eva...-executive.htm
Compass Point
http://www.compasspoint.org/board-ca...utive-director | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/04%3A_The_Boards_Role_in_Performance_Assessment.txt |
Symptoms
Effectively performing the board’s role in fundraising is one of the most common challenges reported by both board members and those with whom they have relationships. Dissatisfaction in this area comes in three forms:
1. A lack of clarity about the board’s role in fundraising relative to that of paid staff and/or professional fundraisers.
2. A feeling of dissatisfaction with the board’s activities related to fundraising.
3. Individual board member reluctance or lack of knowledge about how to engage in fundraising.
High levels of agreement with the following statements indicate challenges in this area:
• The board seems confused about its role in fundraising for the organization.
• The board has not approved an overall strategy for fundraising.
• The board has problems engaging in actual fundraising activities.
Diagnosis
The main reasons for dissatisfaction with the board’s role in fundraising are:
• Criteria used (formally or informally) in selecting board members do not include checking for a prospective recruit’s willingness to help with fundraising or experience with this activity.
• Potential board nominees are not informed beforehand regarding expectations of board members in the fundraising area.
• Differing expectations exist between the board’s understanding of what its role in fundraising should be and those held by the CEO and/or professional fundraising staff.
• Orientation and training of new board members does not include coverage of the board’s role in fundraising.
• There is a lack of a clear overall fundraising strategy for the organization and/or a clear structure indicating who is responsible for what in implementing the fundraising plan.
• There is lack of awareness of the range of roles and responsibilities that board members may play in fundraising.
• There is a lack of leadership within the board that helps members accept a more active role in fundraising activities.
Treatment
The first step in optimizing the board’s contribution to the generation of financial resources for the organization is to understand the full range of roles and responsibilities it could undertake. Table 4 illustrates the potential board roles and responsibilities in fundraising.
Table 4: Board Roles and Responsibilities in Fundraising
Responsibilities
Roles
Board
Committee
Individual Board Member
Approve strategy developed by others
Definitely
Never
Never
Participate in developing strategy
Possibly
Usually
Possibly
Help implement strategy
Usually
Usually
Usually
Oversee implementation of strategy
Possibly
Usually
Possibly
It can be seen from Table 4 that there that there are three possible roles for board member involvement:
1. As part of the board acting as a whole in the same way it does during official board meetings.
2. As part of a special fundraising committee containing board members. Note: It is important to understand that fundraising committees do not have to be committees of the board and, if they are, they can contain some members who are not board members. Such committees should normally only help develop plans and policies to recommend to others for approval or assist in actually implementing fundraising activities.
3. As an individual acting alone, for example as one does when making a donation to the organization or visiting a potential donor.
Down the left hand side of Table 4, it can also be seen that there are four possible levels of responsibility that can be taken up by the board:
1. Responsibility for reviewing and approving fundraising strategies, plans and policies developed by others such as fundraising professionals, a fundraising committee, etc. This is usually done at official meetings of the board as a whole.
2. Becoming involved in the creation of fundraising strategies, plans and policies, often within a fundraising committee.
3. Once plans are in place, there is the hard work of actually raising the money—holding special events, soliciting corporate sponsorships, applying for grants, running mail campaigns, asking potential big donors for support or just giving fundraisers contacts to approach. Insofar as these tasks involve the board (as they might in the case of a working board for example), they would usually be carried out through a fundraising committee or by individual board members volunteering their time.
4. Finally, there is the job of developing systems for obtaining valid data on how effective fundraising activities are, tracking the results—receiving and reviewing reports and suggesting changes if needed. This responsibility is often the job of a board fundraising committee but could, in some circumstances, be carried out by the board as a whole.
It is important to understand that there is no “one best way” when it comes to the board’s involvement in fundraising. The content in each of the boxes in Table 4 represents common practice and should not be taken as the way it ought to be in all cases. Each organization must decide for itself which responsibilities should be carried out by whom and at what level—that of the board as a whole, a committee or the individual board member. Where the board belongs on the fundraising involvement continuum depends greatly on a few factors:
• The ability of the organization to employ professional fundraisers. Such people are experts in developing plans and leading teams who will implement them. Small, new and low budget nonprofits can rarely afford this kind of support so the work has to be undertaken by volunteers and staff usually working in a committee structure. Board members can sit on committees and contribute as individuals.
• The level of commitment and experience/knowledge about fundraising among board members.
• The availability and expertise of other volunteers, external supporters and potential partners who could provide assistance in this area.
Once it is decided who should play what roles in doing what, the next job is making sure everyone is capable of performing those roles. In the case of fundraising, this can involve making the following changes:
• Developing criteria for the kind of person you want to recruit to your board so as to increase fundraising competency. If members will be expected to play a role other than general oversight, they should be ready and willing to do so. Note: It is not necessary for all board members to be fundraising whizzes but, if you want involvement, some should be.
• Provide training and development. Much of fundraising consists of learnable skills. Orientation and training for board members should address them.
• If the analysis of possible roles carried out in Table 4 reveals that a committee should be involved, be careful and thorough in defining its terms of reference so it does not tread on the toes of fundraising staff or take over the job of the board as a whole which is responsible for policy decisions made in this area of board responsibility.
For further information on the board’s role in fundraising, see the useful websites in Table 5.
Table 5: Additional Resources on the Board’s Role in Fundraising
Topic
Country
Source Website
The Board’s Role in Fundraising
U.S.A.
Nonprofit Research Collaborative
http://www.urban.org/UploadedPDF/412...ial-Report.pdf
Georgia Center for Nonprofits
http://www.gcn.org/articles/what-rol...it-fundraising
Streamlink Software
http://www.streamlinksoftware.com/bl...-Opportunities
Zimmerman Lehman, Consultants
www.zimmerman-lehman.com/spec...sibilities.htm
Guidestar
http://www2.guidestar.org/rxa/news/a...ur-boards.aspx
http://www2.guidestar.org/rxa/news/a...ndraising.aspx
http://www2.guidestar.org/rxa/news/a...ndraising.aspx
http://www2.guidestar.org/rxa/news/a...nthusiasm.aspx
Australia
BoardConnect
http://boardconnect.com.au/resources...ofits-qut.html
Fundraising Fundamentals
U.S.A.
Andrew Olsen
www.andrewolsen.net/best-practices/
National Council of Nonprofits
http://www.councilofnonprofits.org/r...ic/fundraising
North Carolina Center for Nonprofits
www.handsonnwnc.org/express/F...undraising.pdf
Ter Molen Watkins and Bandt
http://twbfundraising.com/blog/?p=381
U.S.A and Canada
Fundraising.com
http://www.fundraising.com/non-profi...ndraising.aspx
Canada
Redbird Communications
www.redbirdonline.com/blog/16...-and-awareness
Britain
KnowHow NonProfit
http://knowhownonprofit.org/funding/fundraising | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/05%3A_The_Boards_Role_in_Fundraising.txt |
Symptoms
One of the major, yet often unrecognized, influences on how well a nonprofit organization board carries out its duties and responsibilities is the way it is organized. All boards have at least a minimum amount of formal organization and a set of policies that constrain, and support the way they operate. For example, most nonprofits have a constitution and/or a set of by-laws among which are rules regarding the role of the board, its size and composition, when and how annual meetings will be held, who has voting rights, etc. In addition, most boards create their own operating manuals (or have a collection of documents) that cover such matters as how many and what kind of board committees and board officer positions will exist and so on.
Once these kinds of structures and procedures are in place they often come to be taken for granted and their influence on the way the board governs goes unrecognized. This means they are not carefully examined when boards seek to improve their own performance and orient new members.
A high percentage of agreement with the following statements indicates a board that might have formal structures and operating procedures that are inhibiting its effectiveness:
• The by-laws that provide the rules within which the board operates are in need of a thorough review.
• We don’t have a board policy manual or we have one that is badly in need of revision.
• The board seems too large and cumbersome to enable it to act as an effective decision-making body.
• Job descriptions for the positions of board members and board officers (e.g., Chair, Vice-Chair, Treasurer, Secretary, etc.) are nonexistent or not well understood.
• Administrative support for the board (secretarial assistance, record keeping, assistance in arranging meetings, etc.) is inadequate.
• The board lacks access to potentially useful information and communications technology (e.g. computers, software, internet, the web and social media).
• Most board members don’t make much use of the information and communications technology made available to them.
• Some board committees are not very useful.
• Some board committees are unclear about their responsibilities and/or authority.
• Some board officers and chairs of committees lack the training or experience needed to meet the demands of their position.
• Some committees have members who contribute very little or don’t have enough experience to be of much help.
In essence, these items can be clustered in two categories: Procedures and Structures.
1. Issues related to matters of procedure:
• The nature and extent of administrative and technical support provided to assist the board in carrying out its work efficiently.
• Position descriptions for board members and officers of the board; and
• Board manuals that contain basic information on the board’s responsibilities and operating procedures;
• The organization’s constitution and by-laws within which the board must operate;
2. Issues related to the formal structure of the board:
• Committees—number, function, authority.
• Officer positions;
• Board size;
Diagnosis
Why do boards experience problems with inadequate structures and procedures? There are three basic explanations for these problems:
• The most common is simply that boards fail to pay attention to the existing tools that have already been created to help them govern. When boards first come into existence they usually begin in a friendly, informal way. Creating a lot of rules and procedures seems unnecessary as everyone wants to focus on doing whatever they can to help the organization succeed. As the organization grows and the management of the organization professionalizes (i.e. it becomes necessary to create separate positions and introduce paid executives), the board often fails to realize that it, too, needs to become more professional. Instead, the original culture of informality tends to dominate governance practices without anyone realizing it even though it is no longer suitable for dealing with the growing complexity of the organization and its environment. The kinds of boards that are most likely to “drift” without being conscious of the need to update structures and procedures are those which do not make time for assessing their own performance and which do not provide training and development for their members on their roles as governors.
• A lack of focus on developing optimum structures and procedures can also occur when the leadership provided by the board chair and/or the CEO is not conscious of the negative impact that arises when people are unclear about what to do or get into conflicts because by-laws are confusing or absent all together. In a few cases it is possible that those in leadership positions might actively seek to dominate the board by unofficially blocking attempts to increase clarity and transparency in board procedures.
• A similar situation can arise when boards become dominated by an informal “core group” of insiders (for example a dominating Executive Committee or group of “old hands” who hold informal “backstage” meetings to predetermine board votes on contentious issues.
Treatment
Procedural Issues
Constitution and by-laws
Most nonprofit organizations that become incorporated must submit to the government body that approves incorporation a copy of their constitution and by-laws. Various publications or websites exist which provide things like sample by-laws. Note that specific requirements for the content of by-laws can vary by governmental jurisdictions—national, state or provincial.
An example of the kinds of questions that each board needs to answer for itself, based on its analysis of its own unique environment and history, is that regarding terms of office for board members and officers of the board. Generally, it is desirable to infuse boards with “new blood” at regular intervals. This can be assured by having a by-law specifying how long a board member’s term of office will be and how many times it can be renewed before the incumbent must leave the board. A clause specifying term lengths of two or three years, renewable two or three times is common. In the absence of such a statement, it is often assumed board members can serve indefinitely, which can be problematic.
There are instances, however, when specifying term limits could be unwise; for example, when it is clear that there is a relatively small pool of qualified candidates to draw from. The same problem holds true for officer positions, e.g. Chair, Treasurer, etc. Is it good for the board to have the same leadership team year after year? Generally, no, but sometimes it is difficult to replace certain people, such as treasurers. In cases like this, by-laws can be written with qualifying words like “normally the term of office for board officers will be three years.” This allows a board to make exceptions to the rule if necessary.
Other examples of by-law variations for which there is no “one best rule” and which therefore need to be thought out in the light of the organization’s unique history and environment are:
• Definitions of who can and cannot be a member of the organization and vote at general membership meetings;
• How to remove members from the board and organization;
• The authority of members—what they must approve;
• Quorums for board meetings and annual meetings;
• Matters which can be decided by members attending the annual meeting versus those that must be put to a vote of the whole membership via mail ballots, etc.;
• The nature and extent of board decisions that can be made via telephone conference calls, email voting, etc.; and how to amend by-laws
Whatever the board decides with respect to by-laws, it is helpful to have an attorney familiar with nonprofit law in the local jurisdiction advise the board on them. For example, new regulations have emerged in some jurisdictions that require board procedures to be in compliance with the law in such matters as electronic voting, auditing of financial statements, records of minutes, retention of documents and conflict of interest policies. Many legal cases concerning governance decisions have been decided on the basis of the board not following them. See the following link for a nonprofit case concerning by-laws: http://www.501c3.org/blog/why-nonpro...a-tragic-tale/
Board manual
While general guidelines on what to put in by-laws are useful, due to the number and diversity of nonprofits that exist, there are still many decisions that need to be made for which there are no universally agreed to rules of thumb. These kinds of issues should be identified and addressed in a Board Manual. This important document is invaluable for new board members to orient them to the governance role and how the board works but it is also crucial in resolving occasional disputes over how the board should handle various matters.
Position descriptions for board members and officer/committee chair positions
For many small nonprofit organizations, the idea of having written “job descriptions” for board members and officer positions such as the Chair or President, Treasurer, Vice-Chair, and Chairs of various committees may seem unnecessarily bureaucratic and formal. And indeed this might be the case especially if there is little likelihood that people might get into conflict over who has what authority After all, the desired culture most people want in a board is one of collegiality where anybody is willing to lend a hand with anything that needs doing without getting fussy over whose territory it is.
On the other hand, if no effort is made to clarify who is responsible for getting things done, even the most well-meaning team can get into trouble with things “falling between the cracks” or being duplicated. For this reason, for most nonprofits, the time required to develop, and periodically review, position descriptions is worth the effort. Position description documents, which could be incorporated into the Board Manual, should cover:
• The responsibilities of the position—the work it does;
• The authority that goes with the position—what matters the holder of the position is able to decide and what matters need to be decided by the board as a whole or other office holders; and
• The qualifications and competencies required for carrying out the responsibilities of the position.
Administrative support
One of the major conditions that can lead boards to feeling ineffective is inefficient internal administrative support—minutes are not taken or not done well, records of past decisions on who is going to do what and when are not kept, meetings are poorly organized or there is not enough support to prepare for them, etc. If budgets permit, investment in professional staff to support the board is well worth it. If there is no money for paid staff, the next best approach is to clearly define the role of the volunteer board secretary as the de facto administrator then seek a volunteer who is well organized and at least somewhat detail oriented and provide them with adequate training and the equipment and supplies needed to do the job well. Time taken to develop simple, well-organized record systems is also well spent.
Another important aspect of the internal administration of the board that is often neglected is the extent to which it makes full use of the potential of modern information and communications technology, i.e. Internet, intranet, online calendars, video-conferencing, voice over Internet-Protocol (e.g. Skype), email, social media, etc.
Boards should consider three questions when making technological decisions:
• For what purposes are modern information and communications technology (ICT) tools needed?
• Do we have the capacity to implement and support the use of them in our board and organization (e.g. can volunteers use them, be trained to use them, or do we need to hire people)?
• Which tools are most likely to return the greatest value for the investment of time and effort?
In work on ICT use by boards, Harrison (2014) concludes that the key to getting the most value out of a technology is to think of it as a means to an end in terms of meeting strategic performance objectives. Once performance objectives have been established (a committee of the board or task force could develop them) and agreed upon (at the whole board level), strategies should be implemented to achieve them. With respect to future strategies, nonprofits should consider enterprise-wide solutions to align strategic and operational work. Boards need to assess the scalability and flexibility of proposed technology in order to facilitate governance and other functions. In the governance context this means the capacity of ICT tools to meet, store documents, share information, communicate, conduct performance assessments, facilitate opinion surveys, engage constituents, etc.
Board Structures
There are three important aspects of the basic formal structure of the board that, if they are improperly designed for the board’s situation, can cause major problems: (a) the size of the board; the number and nature of formal “officer positions” within the board; and (c) its committee structure.
(a) Board size
The “how-to” books on boards are fairly consistent in warning against boards that exceed 15 or so people. This recommendation arises because the greater the number of people involved in the complex business of setting strategic direction (the board’s number one responsibility), the more difficult it will be to give them meaningful roles and arrive at a consensus on contentious issues. Conversely, the smaller the number involved, the more difficult it will be to get valid representation of the views of the community the organization is serving or, in the case of working boards, enough people to carry out the work of the board. It may also be too easy for “group think” to take hold (a feeling that one should not criticize if the majority share the same point of view) thus keeping out radical ideas for change.
Nevertheless, large boards (e.g. 20 to 30 or even more) do exist. They often occur in part because it is believed that this is the way to gain the support of a lot of influential community leaders who will be useful in raising money and for other purposes. They are also common in national NPOs that feel the need to have representation on the board from many geographical regions. However, it should be realized that it is possible to get the support of prestigious people or input from all regions without resorting to the creation of unwieldy sized boards. One of the more common alternatives is to create advisory boards or funding campaign “cabinets” or “committees.”
Even large boards can be effective, however, as long as everyone recognizes and accepts that a smaller subset of board members will probably evolve to play a leadership role. Meetings of the whole board will tend to be dominated by a “core group” and others will usually have to be satisfied with less input on issues though ample opportunity for input should always be provided. The contributions from non-core-group members will come mostly at the individual and committee levels. At these levels they can provide useful advice or contacts on request though, as noted, the same thing could be provided in other ways.
Equally problematic is the very small board (five or fewer) where there is a real risk that the board will not become aware of changing conditions that threaten the organization. They are also not very effective when the board needs to be a working board. Members tend to become overloaded with work and “burn out” can occur rapidly. However, many small boards are not necessarily a problem until a crisis hits. To cope in such situations requires the small board to ensure that it has independent sources of information and expert outside advice on how the organization is doing.
(b) Formal offices
The generally accepted recommendation is to keep formal offices few in number on the grounds that many of them have no real function other than ceremonial. At minimum, however, there must be a board leader (chair, president), and someone (usually a vice-chair) to step in if the leader cannot perform her or his duties as well as learn the ropes to take over when the current leader’s term is up. A skilled treasurer is also a very important office with the role of taking the lead in carrying out the fiscal oversight responsibility of the board. As discussed above, the office of board secretary is important because of its record keeping and document retention function. Wherever possible, however, it is usually preferable to have professional staff employed to support board leadership and administrative functions. The main point is that these functions must be performed; the actual titles used are not so important. For example, in some small, simple organizations all functions might reside in the offices of chair and vice-chair.
Other formal leadership positions are usually the chairs of the board committees discussed below. The important requirement of all formal offices is that there be clear descriptions of the duties of the office and that provision be made for training those who fill these positions. Too often office holders take up their jobs without a clue as to what is required. With luck, they can learn by on the job trial and error before a major issue arises, otherwise they can get themselves and their organization into serious trouble.
(c) Board committees
At one extreme in the “how-to” literature on boards are those writers who state that the number of committees of the board should be kept to an absolute minimum. It is argued that some committees do more harm than good because they either try to dabble in operations, thereby subverting the authority of managers, or make decisions on policy issues that are the responsibility of the whole board or the CEO. The board and committees therefore end up duplicating each other’s work and wasting everyone’s time. These are real problems, but eliminating committees is not the only approach to solving them. In fact, in smaller organizations with small budgets unable to hire paid staff to manage all its programs and functions, committees may be vital to the operation of the organization.
There are two basic types of committees:
Policy committees
These are small problem-solving groups, which can study important issues in depth and produce reports for the whole board with recommendations and supporting data. Note that they do not decide on policies, they only make recommendations to those with the authority to do so, i.e. the board as a whole.
Working committees
These are policy implementation groups which either assist paid staff in carrying out tasks that staff cannot do alone or are used instead of paid staff because none are available. Some argue that, strictly speaking, such operational committees should not be considered as committees of the board of directors, rather they should report only to managers. This is fine in theory but, in many organizations with working or mixed model boards, the best people to head such committees are already board members. Besides, in doing their work, operational committees often must make decisions that have large-scale implications. These kinds of policy issues must be recognized and brought to the whole board for discussion. Trained and sensitive board members as committee chairs may well be the best judges of whether a major operational issue has strategic implications or not.
Even in governance-only boards, some working committees may be needed at times to help with new operational activities in which the management has little experience, e.g. implementing shared services or a merger with another organization, a new kind of fundraising activity, implementation of a pay equity program, property acquisition or investment decisions.
This said there is much to support the commonly offered recommendation that standing committees (i.e. permanent committees created by the organization’s by-laws) be kept to a minimum. Too many committees with titles such as Property Committee, Program Committee, Purchasing Committee, etc., may have no clear function as either policy or working committees. Instead they waste the time of managers who have to think of things for them to do when they are not really needed, or they necessarily confuse the lines of authority of both managers and the whole board.
Many consultants urge that standing committees be replaced by task forces or special project groups to be created on an “as needed” basis with very clear terms of reference and deadlines for doing their jobs, after which they disappear. It is important to note that a big advantage of temporary task forces of the board is that well-qualified non-board members can more easily augment their membership. At the extreme, only the chair need be a board member to bring any policy issues to the board.
Should boards using the governance-only board model have any standing committees, then? Since giving strategic direction is a key board responsibility, a good argument can be made for a planning committee to work with other strategically-oriented groups in the organization (such as the management team). It would work with these other groups to help define the issues, assemble relevant information and lay out strategic options for the whole board to consider.
Often the role of taking the lead in strategic planning is played by the executive committee so it is worth saying a few words about the risks and benefits of such a committee. An executive committee is usually made up of those holding formal offices on the board (e.g. President, V. P., Treasurer, Secretary etc.) and, in some cases, the chairs of standing committees. Its formal role is usually to look after board business between meetings and set the agenda for board meetings. The pitfall with executive committees is that they can become a powerful “inner cabinet” that arbitrarily makes decisions the board should make and filters the way issues are put before the board so as to favour a predetermined position. For this reason, some board experts advise against the existence of such a committee. On the other hand, someone must perform the function of setting the board agenda and ensuring that everything that goes before the board is of sufficient importance and is well enough prepared and supported with good information. Leaving these matters solely up to the Board Chair and/or CEO increases the possibility of just these two becoming the overly powerful “inner circle.” Hence an executive committee with strictly limited powers as to what it can decide is probably a worthwhile entity especially for governance-only boards.
Because the board’s responsibility for fiscal oversight is so critical, there is also usually need for a finance committee, provided it can be kept from making de facto strategic decisions when it reviews the accounts and budgets. Organizations with unique characteristics may well identify other areas where constant operational assistance from volunteer directors is required, thereby necessitating standing committees.
Finally, most boards need help to ensure that they manage themselves well. This self-help is sometimes provided in part by a standing committee of the board such as a nominating committee. It attempts to locate the best possible people to stand as potential board members. The trouble is that the conventional nominating committee does not go far enough. Who will arrange to have new board members oriented and trained? Who will take the lead in assessing the board’s performance or deal with the cases of individual board members who fail to live up to the role expectations? In some cases, these very important matters are the responsibility of the executive committee. In others, the terms of reference of the nominating committee are expanded and it is renamed as, for example, the “Board Development” or, better, the “Governance Committee.”
Table 6 contains links to additional useful information and resources to increase the governance effectiveness of the organization through board structures and procedures.
Table 6: Additional Resources Related to Board Structures and Procedures
Topic
Country
Source Website
General Board Structures
U.S.A.
The Bridgespan Group
http://www.bridgespan.org/Publicatio...x#.U2bn0oFdX84
U.S. Internal Revenue Service
http://form1023.org/how-to-draft-non...-with-examples
The Foundation Group
http://501c3.org/blog/nonprofit-byla...dos-and-donts/
Mondaq
http://www.mondaq.com/unitedstates/x/287604/Charities+Non-Profits/New+York+NonProfit+Revitalization+Act
Canada
Public Legal Education Association of Saskatchewan
www.plea.org/legal_resources/?a=259&searchTxt=incorporation&cat=28&pcat=4
Britain
KnowHow NonProfit
http://knowhownonprofit.org/leadersh...-and-structure
Board Policy Manuals
U.S.A.
Free Management Library
http://managementhelp.org/boards/manual.htm
Canada
Industry Canada
https://www.ic.gc.ca/eic/site/cilp-pdci.nsf/vwapj/Primer_en.pdf/\$file/Primer_en.pdf
Canada
Muttart Foundation
www.muttart.org/sites/default...g_revising.pdf
Position Descriptions for Board Members and Officers
U.S.A
Free Management Library
http://managementhelp.org/boards/manual.htm
Board Committees
U.S.A.
Free Management Library
http://managementhelp.org/boards/manual.htm
Blue Avocado
http://www.blueavocado.org/content/b...ree-committees
Board Administrative Support
Canada
Ontario Ministry of Agriculture and Food
www.omafra.gov.on.ca/english/...cts/08-059.htm
Conflict of Interest Policies for Boards
U.S.A.
Nonprofit Risk Management Center
www.nonprofitrisk.org/library...rd120307.shtml
National Council of Nonprofits
http://www.councilofnonprofits.org/c...ct-of-interest
Canada
Community Sector Council of Newfoundland and Labrador
http://communitysector.nl.ca/board-d...nterest-policy
Australia
Australian Centre for Philanthropy and Nonprofit Studies
https://wiki.qut.edu.au/display/CPNS...nterest+policy | textbooks/biz/Management/Book%3A_Guidelines_for_Improving_the_Effectiveness_of_Boards_of_Directors_of_Nonprofit_Organization_(Murray_and_Harrison)/06%3A_The_Boards_Structure_and_Operating_Procedures.txt |
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