Effects of ethics - Summary Human Resources Management PDF

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Effects of a Lack of Ethics on a Business Environment In light of Ponzi schemes and company scandals, the business industry has developed a reputation for its lack of ethics. In an industry where getting ahead and making money appear to take precedence over ethical decision making, it can seem difficult to understand the importance of ethical behavior in business. A lack of ethics leads to a wealth of problems for a business. Legal Issues In the United States, federal and state governments establish rules and procedures for how a business should be run. Businesses that fail to follow federal and state guidelines often face large fines and other penalties. Larger companies sometimes decide that breaking laws and paying the fines involves lower costs than the financial gain made from breaking those laws. However, consistently breaking laws can lead to costly legal battles that outweigh the initial gain. Additionally, executives at companies who break laws and engage in unethical behavior that leads to harmful practices for employees and customers could find themselves facing criminal charges. Employee Performance A lack of ethics has a negative effect on employee performance. In some cases, employees are so concerned with getting ahead and making money that they ignore procedures and protocol. This can lead to additional paperwork and careless errors that result in the task having to be completed again. Additionally, employees who feel acting ethically and following the rules will not get them ahead in the business sometimes feel a lack of motivation, which often leads to a decrease in performance. Employee Relations When a manager or head of a business exhibits a lack of ethical behavior, he faces losing the respect of his employees. It is difficult to have a successful business without well-respected leaders. A lack of ethical behavior can also cause tension among employees, with some employees resenting those who do not play by the rules and still manage to get ahead. Unethical behavior in the workplace also has the potential to lead to a lack of trust among employees, which is detrimental to a business that relies on collaboration and a sense of community. Company Credibility If a lack of ethics in a business becomes public knowledge, that business loses credibility. While some businesses survive public knowledge of a lack of ethics through reimaging and advertising campaigns, many lose a key customer base. Even if a business recovers from news about its lack of ethics, it takes a lot of time and money to restore its image and consumer confidence. Build Customer Loyalty

Consumers may let a company take advantage of them once, but if they believe they have been treated unfairly, such as by being overcharged, they will not be repeat customers. Having a loyal customer base is one of the keys to long-range business success because serving an existing customer doesn’t involve marketing cost, as does acquiring a new one. A company’s reputation for ethical behavior can help it create a more positive image in the marketplace, which can bring in new customers through word-of-mouth referrals. Conversely, a reputation for unethical dealings hurts the company’s chances to obtain new customers, particularly in this age of social networking when dissatisfied customers can quickly disseminate information about the negative experience they had. Retain Good Employees Talented individuals at all levels of an organization want to be compensated fairly for their work and dedication. They want career advancement within the organization to be based on the quality of the work they do and not on favoritism. They want to be part of a company whose management team tells them the truth about what is going on, such as when layoffs or reorganizations are being contemplated. Companies who are fair and open in their dealings with employees have a better chance of retaining the most talented people. Employees who do not believe the compensation methodology is fair are often not as dedicated to their jobs as they could be. Positive Work Environment Employees have a responsibility to be ethical from the moment they have their first job interview. They must be honest about their capabilities and experience. Ethical employees are perceived as team players rather than as individuals just out for themselves. They develop positive relationships with coworkers. Their supervisors trust them with confidential information and they are often given more autonomy as a result. Employees who are caught in lies by their supervisors damage their chances of advancement within the organization and may risk being fired. An extreme case of poor ethics is employee theft. In some industries, this can cost the business a significant amount of money, such as restaurants whose employees steal food from the storage locker or freezer. Avoid Legal Problems At times, a company’s management may be tempted to cut corners in pursuit of profit, such as not fully complying with environmental regulations or labor laws, ignoring worker safety hazards or using substandard materials in their products. The penalties for being caught can be severe, including legal fees and fines or sanctions by governmental agencies. The resulting negative publicity can cause long-range damage to the company’s reputation that is even more costly than the legal fees or fines. Companies that maintain the highest ethical standards take the time to train every member of the organization about the conduct that is expected of them.

The Importance of Ethics in Organizations Ethics are the principles and values an individual uses to govern his activities and decisions. In an organization, a code of ethics is a set of principles that guide the organization in its programs, policies and decisions for the business. The ethical philosophy an organization uses to conduct business can affect the reputation, productivity and bottom line of the business. Leadership Ethics The ethics that leaders in an organization use to manage employees may have an effect on the morale and loyalty of workers. The code of ethics leaders use determines discipline procedures and the acceptable behavior for all workers in an organization. When leaders have high ethical standards, it encourages workers in the organization to meet that same level. Ethical leadership also enhances the company’s reputation in the financial market and community. A solid reputation for ethics and integrity in the community may improve the company’s business. Employee Ethics Ethical behavior among workers in an organization ensures that employees complete work with honesty and integrity. Employees who use ethics to guide their behavior adhere to employee policies and rules while striving to meet the goals of the organization. Ethical employees also meet standards for quality in their work, which can enhance the company’s reputation for quality products and service. Ethical Organizational Culture Leaders and employees adhering to a code of ethics create an ethical organizational culture. The leaders of a business may create an ethical culture by exhibiting the type of behavior they'd like to see in employees. The organization can reinforce ethical behavior by rewarding employees who exhibit the values and integrity that coincides with the company code of ethics and disciplining those who make the wrong choices. Benefits to the Organization A positive and healthy corporate culture improves the morale among workers in the organization, which may increase productivity and employee retention; this, in turn, has financial benefits for the organization. Higher levels of productivity improve the efficiency in the company, while increasing employee retention reduces the cost of replacing employees. Preventing Unethical Behavior Often a lack of ethics appears because of poor planning and faults elsewhere in the business. To prevent unethical behavior, set realistic goals for employees. If employees are expected to meet unreachable quotas and goals, they could engage in unethical behavior to attempt to reach those goals. Consistently monitor employee performance. Employees left unmonitored sometimes slack in their performance and take credit for completing tasks that were left uncompleted.

Properly train all employees. Untrained employees often cut corners and make excuses for not completing work up to the standards the business requires.

Advantages & Disadvantages of Business Ethics The events that led up to the economic recession in 2008 and 2009 have placed a renewed emphasis on business ethics. Questionable financial reporting, inflated executive compensation and worthless public assurances undermined consumer and investor confidence. Business Ethics Some commentators, such as Milton Friedman, believe that the "primary and only responsibility of business is to make money" while abiding by the law. Supporters of this point of view argue that companies' self-interested pursuit of profit benefits the whole of society. Profitable businesses clearly benefit shareholders, but other commentators, such as Edward Freeman, argue that businesses should also benefit other stakeholders. Stakeholders are people and groups with whom the business has a relationship. This includes shareholders, but extends out to include employees, their families, the community within which the business operates, customers and suppliers. Advantages Business ethics offer companies a competitive advantage. Consumers learn to trust ethical brands and remain loyal to them, even during difficult periods. In 1982, Johnson & Johnson spent over $100 million dollars recalling Tylenol, its best-selling product, after someone tampered with bottles of the painkiller. The company followed its credo, a set of ethical organizational values, and the result was a boost in consumer confidence, despite the contamination scare. Society benefits from business ethics because ethical companies recognize their social responsibilities. Disadvantages Business ethics reduce a company's freedom to maximize its profit. For example, a multinational company may move its manufacturing facility to a developing country to reduce costs. Practices acceptable in that country, such as child labor, poor health and safety, povertylevel wages and coerced employment, will not be tolerated by an ethical company. Improvements in working conditions, such as a living wage and minimum health and safety standard,s reduce the level of cost-savings that the company generates. However, it could be argued that the restrictions on company freedom benefit wider society. People, Planet, Profit Companies increasingly recognize the need to commit to business ethics and measure their success by more than just profitability. This has led to the introduction of the triple bottom line,

also known as "people, planet, profit." Companies report on their financial, social and environmental performance. The Dow Jones Sustainability Index benchmarks companies who report their performance based on the triple bottom line. This type of performance reporting acknowledges that companies must make a profit to survive, but encourages ethical and sustainable business conduct.

Examples of inappropriate behavior Inappropriate Computer Use Employees may use company computers to engage in unethical behavior. For example, an employee who is not permitted to use the Internet for personal reasons commits an unethical act by shopping online while at work. Random Internet surfing takes away from the time she spends on work-related activities. Employees sometimes use company email to spread inappropriate websites or videos to co-workers, some of which could be deemed offensive by the recipients. Time Misuse Unethical behavior can include "stealing" time from the company, as the company is compensating employees and receiving no productivity in return. In addition to time spent on aimless Internet surfing, time misuse can consist of extending breaks beyond the allotted time, congregating around the water cooler or engaging in lengthy gossip sessions during working time, falsifying time sheets, coming into work late or leaving early and running personal errands while traveling on company business. Sexual Harassment and Bullying An employee could commit unethical behavior by sexually harassing co-workers. This could involve making lewd comments, touching inappropriately or making unwanted sexual advances. Bullying typically involves attempting to intimidate a co-worker by making demeaning comments about him, spreading gossip or even making verbal or physical threats. In general, a bully attempts to make the workplace as uncomfortable as possible for a co-worker. In some cases, ongoing bullying can escalate into violence in the workplace. Illegal Acts Some unethical acts can also be illegal. For example, an employee who has access to a company's financial records, such as a bookkeeper or accountant, could use her access and expertise to embezzle company funds. An employee having access to personnel files, such as a human resources representative, could commit identity theft and use employees' Social Security numbers to raid bank accounts or fraudulently obtain credit cards. In cases such as the 2001 Enron scandal, top company executives used questionable accounting practices to manipulate the company's stock price for their own financial gain....