All business decisions made on behalf of the company must be go through a process of evaluation in order to determine if it is within the bounds of ethical business practices. However, not all issues and not all business decisions must go through this process. If there is no limitation set by the company, then, precious time will be wasted on continuous wrangling and faultfinding on every business decision that will be made by management. Therefore, there will be an ethical committee who will be tasked to review questionable practices or decisions made. However, there are only a limited number of issues that will be elevated for consideration by this committee. The committee will only discuss an issue if it adheres to a certain standard, and this standard is based on a framework that contains the following conditions:
The decision will have a significant effect on others;
At the same time, the said business decision has two or more open options, which prompts management to make a choice between two conflicting alternatives; and
One or more parties see the decision as an ethical issue.
Management will be able to focus on the most significant and urgent ethical issues at hand, by using this framework. Furthermore, employees and all stakeholders can engage with the company with regards to their concerns, especially those that can affect the performance and reputation of the organization.
In view of the need for the observance of ethical business conduct, it will become the policy of this organization to weave cutting-edge innovation and ethical standards in order to produce a competitive advantage over others. Thus, from the very beginning of operation, the company must instill in the hearts and minds of the workers that they must continually strive to develop solutions to business operation. The solution can be an innovative solution for the industry, which not only assures of profit but also a way to deal with environmental issues that are related to the said business operation.
Furthermore, the company must make it a policy that personnel, which is working under the administrative and accounting department, must go through regular training or attend seminars and conferences to keep abreast current issues with regards to ethical standards within this industry field, to which the company belongs. The company must invest in this area and provide the necessary funds and other resources, so that they master the current laws and other Federal requirements, especially with regards to full-time and part-time employment.
Conflicts of Interest
Conflicts within the organization will be handled based on the appreciation of the importance of the various stakeholders within and outside the company. The first thing that has to be done is that the company must clearly identify the various stakeholders, which are directly and indirectly affected by the company. Once the stakeholders are identified, management will begin to analyze the importance of each stakeholder, their contribution to the success of the company and, at the same time, their relative influence with regards to their capability to hinder and promote the progress within the organization.
The next step is to develop policies that will clearly demonstrate concern for employees. The Human Resource Management department must exhaust all available resources to develop programs for training, as well as provide ways to deal with the concerns of employees. The same policy applies for both part-time and full-time employees.
The next step is to develop policies with regards to openness and honesty. The purpose of this endeavor is to create trust within the organization. The company will develop a framework that openly communicates the success and problems encountered to their employees. If a profit sharing scheme is implemented, then, the employees can expect transparency.
The decision of management to promote openness and honesty to all stakeholders, especially to the employees must be reciprocated by the employees, and this can be accomplished through the strict implementation of standard of competence and reliability. In other words, the organization will have to lay down the required output from each worker. There must be corresponding penalties as well as rewards when the company implements a system of accountability.
The organization must be proactive when it comes to performance evaluation, such that the process begins in the search for reliable performers. The company must not simply react to absenteeism and sub-par performance. It must be part of policy to direct the HRM department to create the necessary mechanism that will enable the company to hire the best available talent. At the same time, the HRM department must ensure low turnover rate when it comes to their top talent.
The next step that has to be accomplished with regards to performance evaluation is to make it a policy not to use the same evaluation mechanism for all employees. The evaluation process must be dependent on the work description of each and every employee. There is a significant difference in the responsibilities and work output of someone in-charge of data entry when compared to someone assigned to handle marketing.
Although each evaluation process is tailor-made for different types of workers, it is the responsibility of the HRM department and line management to explain to all the workers the rationale behind such evaluative strategy. Management must clearly communicate how performance is defined, managed and rewarded. Finally, the company must work towards the following goals: 1) The employees must have confidence and trust in the performance evaluation mechanism used by the organization. 2) There must be a clear difference between regular pay and merit pay. 3) Management must establish job-related performance criteria that will be used to determine merit pay.
The HRM department is directed to develop services that will attract, develop and motivate a diverse workforce. The policy is geared towards the fulfillment of the requirements in Equal Employment Opportunity laws. The policy will be created with the end goal of developing a supportive work environment. The said policy will effectively deal with issues regarding discrimination in the workplace. The focus will be on hiring workers that fit the purpose of the company, but, at the same time, they represent the diversity in ethnic, cultural, and social backgrounds.
The workforce is, therefore, diversified, and it becomes a key priority for the company. It is the policy of the organization not only to create and establish a corporate culture that embraces diversity; management will also strive hard so that these workers are welcome and given the opportunity to succeed in this workplace.
The company will not only have to embrace the diversity of workforce, management will have to communicate to all workers and stakeholders effectively that diversity is a competitive advantage enjoyed by the company. The employees must be made to understand that diversity can help the organization to provide a higher quality of service.
A more practical approach is needed to demonstrate the commitment of the company with regards to diversity and equal employment opportunities clearly. The first thing that has to be accomplished is to focus on gender. The company will commit to a skill-enhancement program for women. The focus is on learning Information Technology related skills. All female employees will have to undergo intensive training that will last for at least three months. The female workers will be paid one hour overtime on a daily basis because they will have to stay for one hour longer after all the work has been done, in order to go through the said training program. The male workers will also have access to the same training program but the women will be the first to avail of the program. This is one of the ways to demonstrate the diversity in the workplace.
Business Ethics and Conduct
There is the popularly accepted belief in the world of business that management “primarily have a duty to maximize shareholder returns” (Smith, 2003, p.85). It is easy to understand this statement because it is the primary objective of any business organization to create profit. Nevertheless, corporate leaders and shareholders must take note of recent scandals that significantly impacted the business community. These are accounting and stock market manipulation scandals linked to Fortune 500 companies like Enron and WorldCom. There are also scandals that tainted the reputation of manufacturing firms especially those related to outsourcing and the constant drive to lower production costs. There is, therefore, a need to reevaluate corporate strategy and corporate policies.
A more thorough evaluation of business ethics and conduct will create a positive effect on overall business performance. One of the key areas that the company must look into is Corporate Social Responsibility (CSR). CSR helps the company stay focused on developing ethically acceptable standards and policies. CSR provides the framework for sustainability, acceptable practices, and responsible behavior that enhances the image of the organization.
Although the commitment to do the right thing is something that is linked to sound business management, there are those who criticize an idealized understanding of how companies should be managed in terms of business ethics. There are those who remind theorists and analysts that there is a need to strike a balance when it comes to the money-making aspect of business, as well as the responsibility of the company to do decently towards various stakeholders, especially the members of the community. This definite mindset was the cornerstone of corporate strategy at IBM and according to its former CEO T. Learson:
Business usually profits best when it serves the public interest within its ability to do so. But we can never loosen ourselves from the iron law of profit … If a corporation so diverts its energies and resources as to go broke, there is nothing it can do – nothing at all – even if its claims to have a heart and conscience as big as the world.
It is necessary to consider the insights propounded by Learson because these are valid arguments. It is imperative that corporate leaders focus on the profitability of the company. If the managers failed to enhance the capability of the company to achieve competitive advantage and make a profit, then, the organization would have to be dissolved. Thus, the company will be bankrupt and will no longer be able to sustain the sound work that they have created for the community. For example, a business organization provides employment for some of the members of the community. In case that the said organization files for bankruptcy, then, the workers will be displaced and they will have no means to support their respective families.
The importance of profitability must never be disregarded. On the other hand, a lack of commitment with regards to business ethics may result in weak brand loyalty or it may encourage CEOs and business leaders to bend the rules in order to increase the profitability of the company. In other cases, managers will be compelled to destroy the environment and treat workers with less regard.
One way to change the thinking, when it comes to the importance of business ethics and ethical conduct, is to experience a paradigm shift when it comes to the idea of stakeholders. Corporate leaders must come to the realization that stakeholders are not just the shareholders and the personnel working for the firm. The following is a new definition of a stakeholder: “The stakeholders, in a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers” (Post, Preston & Sachs, 2002, p.8). With a new understanding of what a stakeholder means, corporate leaders will realize that the members of the community that is directly affected by the business operation, the suppliers and customers can affect the performance of the company profoundly.
One way to develop a more effective and efficient framework to address business ethics issues is to establish a new corporate culture, which is defined by the following statement: “Doing the most good for your company and your cause”.
Carly Fiorina of Hewlett-Packard, said that there are many business leaders, who appreciate the importance of prioritizing business ethics and CSR, and said: “cutting-edge innovation and competitive advantage can result from weaving social and environmental considerations into business strategy from the beginning” (Kotler & Lee, 2005, p.182). This assertion makes sense because it will benefit the organization considerably, if leaders already incorporate doing what is beneficial, as part of their overall strategy and not deal with it as an afterthought.
Conflicts of Interest
Conflicts of interest can be seen between employees, workers and management as well as various stakeholders that directly or indirectly affect the performance and profitability of the company. However, there is another reason why business leaders must spend time and resources in dealing with conflicts within and without the company. It has something to do with change and organizational transformation. Change, evolution, and transformation are crucial aspects of sound business management. However, there are leaders who will not embrace change because of the potential conflicts it will generate.
According to a commentary on organizational transformation, “Change is nothing new and a simple fact of life. Some people actively thrive on new challenges and constant change, while others prefer the comfort of the status quo and strongly resist any change. It is all down to the personality of the individual and there is little management can do about resistance to change” (Mullins, 2010, p.753). Conflicts of interest must be dealt with effectively, because, without the capability to affect change, the organization will never develop a competitive advantage over others and will simply fade away into oblivion.
Conflicts of interest can derail the organization’s desire to enhance the quality of its service and performance effectively. However, there are other reasons why corporate leaders must develop effective policies that can reduce the tension and other problems related to conflicts of interest. One of the main reasons, why this company must deal with conflicts of interest is linked to the job performance of each worker (Gallagher & Tombs, 1997, p.286). It has to be pointed out that an efficient workforce can be translated to a highly profitable business venture (Gallagher & Tombs, 1997, p.286). At the same time, the effective management of conflicts of interest can lead to the efficient accomplishment of business goals.
It can be proven through numerous studies that an organization comprised of satisfied and highly-skilled workers can manufacture products and provide service with lesser production costs as compared to other business groups with disgruntled workers (Gallagher & Tombs, 1997, p.286). It is imperative that management sustains this level of efficiency. It is, therefore, necessary to consider the human element in the business strategy of the company. Conflicts of interest can also result from mismanagement of the following areas: a) job demands; b) job control; and c) social support (Tarris & Schreurs, 2009, p.125). According to one report, if there is high demand, low control and low social support, then there is a higher tendency for employees to be dissatisfied with their work (Barrick & Ryan, 2003). This is one of the key areas that business leaders must focus on, in order to deal with conflicts of interests effectively.
It is always a sound decision to improve the company’s performance appraisal process continually, in order to create a merit pay program that will inspire workers to increase the quality of their performance. Business leaders must realize, “increased worker motivation results in increased job performance” (Aamodt, 2010, p.322). However, one of the most valuable things to consider is the fact that leaders can create an effective and efficient merit pay program that can be harmonized with the company’s vision.
For example, a salary increase is supposed to be a way to communicate the appreciation of the company for a job well done. However, in most cases, the salary increase is made across the board. Thus, it is not an effective way to motivate employees. In an ideal setting, a salary increase is the direct result of a well-conceived performance evaluation process. Still, in most companies this is not the case.
A performance evaluation process must be easy to understand. A vague and confusing performance evaluation scheme linked to a merit pay program is ineffective and useless in gauging performance, as well as in motivating workers to improve their performance.
A business organization will have to understand that an effective merit pay program is only possible through the creation of a realistic and measurable evaluation of individual performance. One way to jumpstart the process is to look into the performance appraisal mechanism used by the company.
A one-size fits-all performance appraisal mechanism should be discouraged from the onset of the business operation. A medium sized company requires a systematic way of evaluating employees. The core of the evaluation strategy is the principle that employees belonging to a different department have different outputs and, therefore, different expectations.
It is also vital that management works with the HRM department, so as to eliminate subjective performance appraisal mechanisms. For example, in some firms supervisors are given a form to evaluate the performance of the workers under their authority and they do so by evaluating their work in four key areas and then rate them using a scale 1 to 5. In most cases, the areas to be evaluated upon are: quantity of work, quality of work, attendance, and attitude. It is a subjective way to evaluate employees especially when it comes to the 1 to 5-scale system. Thus, the following factors must be incorporated into the design of the performance evaluation scheme: 1) The need to develop confidence and trust in the performance appraisal process. 2) There must be a clear separation between merit pay from regular pay. 3) There is a need to establish job-related performance criteria against which merit pay will be determined.
Corporate leaders must design a performance appraisal program that is based on the specifics of worker under their employment. According to one study, “merit pay is more likely to be preferred by those in higher-level, white-collar positions; by those who are male, good performers, and achievement oriented; and by those who like to work in a climate where performance differences are emphasized and teamwork is not diminished” (Heneman & Werner, 2005, p.85). A merit pay program is an excellent idea when it comes to motivating employees to work harder. However, it may not work all the time, especially when it comes to blue-collar workers. However, this insight underscores the importance of a performance evaluation scheme that is tailor-made for a certain business organization.
Another major thing to consider is the fact that the creation of “performance standards should be closely linked to the business strategy of the corporation” (Heneman, 2002, p.385). Thus, corporate leaders must determine the core competencies or capabilities of the organization, so “the organization must be clear about what it does best – what differentiates it from its competitors”. If the company sells computer products then, it makes perfect sense develop a performance evaluation scheme that fits the vision and mission of a company that sells electronics products.
The creation of an improved performance evaluation scheme linked to a merit pay program is just the beginning of the process. The business leaders of the said firm must be able to write it down and communicate to the employees. The one who will implement the program must be able to explain the intricacies of the new system. Every employee must understand the expectations of management, and the corporate leaders, on the other hand, must also be ready to provide the necessary rewards once a certain milestone has been reached. It is imperative that management must not allow miscommunication to render ineffective a carefully developed performance evaluation scheme.
If needed, business leaders must invest in the creation of IT based performance evaluation scheme. The current performance appraisal process used by the company can be enhanced even further, with the help of IT experts ready to build an appropriate Management Information System. The purpose of the said IT-based system is to provide an efficient means to collect information that can be used to evaluation the performance of the workers.
In the present time, it is essential to have a clear understanding of diversity. It is not just on the bases of laws that require sensitivity to diversity issues, but also on the fact that businessmen need to contend with the effect of globalization. Leaders must realize the implications of smaller world due to quick enhancements in communication and transportation technologies (Steger, 2009, p.1) Diversity issues are more prominent when it comes to multinational corporations that established business operations outside its country of origin. Thus, the employees and managers had to deal with differences in culture, ethnic and other social factors. In most cases, multinational corporations had to deal with diversity issues not solely on the basis of law but more importantly on the need to develop a competitive advantage over others. It has become imperative to have a diversified workforce to deal with the requirements of their operations overseas.
However, even if a company is not a multinational company, the impact of diversity is felt especially in countries wherein there is a melting pot of culture. A clear example is the United States, which is the beneficiary of immigration for hundreds of years. A typical neighborhood in many key cities, in the United States, is populated by people of diverse ethnic backgrounds. Consider the implications of having automotive dealership in an area populated by Latinos and the company does not have a single Spanish speaking marketer on the team. Imagine the loss of business especially if a rival firm has embraced the power of a diversified workforce and able to reach out to the Latino market.
Aside from the need to deal with the challenges brought about by communities with many immigrants from Europe, Asia, and Africa, there is another reason why corporate leaders must develop clear policies with regards to diversity. In recent decades, employers are forced to contend with Equal Employment Opportunities laws in the work place. In many industrialized countries, this concept is already a vital part of labor and commercial law. The heart of these statutes is the idea that it is not right to discriminate on the basis of gender, race, and religion. The Federal government has made one of their top priorities need to develop strategies, on how to monitor and reprimand employers, who failed to follow employment laws regarding equal employment opportunities.
It is a serious problem if a company fails to comply with the standards embodied in the Equal Employment Opportunity law. One of the contentious areas is the lack of opportunities afforded to female employees. It has been pointed out that many companies lack the commitment to improve the skills of their female workforce. It is, therefore, noteworthy to point out that the company must not only comply on the basis of employment, since the spirit of the law requires continuous support for the enhancement of the skills of a diversified workforce. In other words, it is not enough to comply with the basics of the law, it is also crucial to help them achieve professional success.
Corporate leaders must make a conscious effort, so as to invest in the creation of diversified workforce. According to one report, “Research has consistently shown that diverse teams produce better results, provided they are well led. The ability to bring together people from different backgrounds, disciplines, cultures, and generations and leverage all they have to offer, therefore, is a must-have for leaders”(Ibarra & Hansen, 2011, p.71). Based on the information revealed earlier, the validity of this claim is seen in the context of globalization and immigration.
The creation of a diversified workforce is easier said than done. Business leaders must be prepared to deal with the problems that will arise because of hiring employees coming from different social, ethnic, and cultural backgrounds.