The field of ethics becomes particularly complex for international companies. What is acceptable in one location can be totally unacceptable in another. So Dr Jamie Ward asks, when and how should HR get involved?
Ethics in organisations can be defined in a number of ways: it can be about the principle of treating others well because it is the right thing to do (and perhaps it is in our interest to do so); it may concern the positive assertion of basic rights for all; or it may be related to 'utilitarianism', where the aim is to achieve the greatest good for the greatest number of people. For the purpose of this discussion, ethics is defined as an act that is right if it results in benefit for people and wrong if it harms.
But, in our world of moral relativism, where something is acceptable in one location yet totally unacceptable in another, the role of HR within the field of ethics becomes particularly problematic. Indeed, HR is often viewed as a country-specific discipline, even in global organisations.
"In our world of moral relativism, the role of HR within the field of ethics becomes particularly problematic."
For example, when it comes to compensation and benefits or the development of policies and procedures, a great deal of autonomy is given to HR managers to apply locally appropriate solutions. But the role of HR in the field of ethics becomes particularly complex in international companies, as it is no longer clear whether local solutions are always acceptable or appropriate.
Any drive for ethical consensus is fraught with difficulty
For example, wage arbitrage is often the reason for organisations to site their production facilities in another country. But should working conditions be equivalent to those in their European or North American home country? What about health and safety standards? Clearly, people cannot all be paid North American salaries, but where does the drive for lower costs finish?
It was widely reported in mid-2008 that the fashion retailer in the UK, Primark, whose business strategy is selling clothes and home furnishings cheaply, had been importing embroidered clothes from three different suppliers in India which used child labour (Primark takes action over child labour, Financial Times, 16 June 2008).
Although commentators agreed that the company handled the situation well by taking action immediately, including stopping buying from the three subcontractors and setting up a charity to help young people, the company nevertheless suffered adverse publicity as a direct result of sourcing cheap goods. Decisions regarding sourcing are often made by 'the business': operations management or purchasing, and yet in a case like this, it is clear that people management was the key contentious issue.
So, the question in an increasingly boundary-less world is: how should HR get involved in leading the ethical agenda in international organisations?
Become the leader in developing a value-led organisation
This is not just about identifying the core values of your organisation and aligning them around the world, wherever the company operates. It is about ensuring that HR takes the lead in facilitating active dialogue throughout the organisation and stimulating the evolution of globally acceptable values through regular conversations between people from different locations.
Allow local managers flexibility in the implementation of ethical frameworks
The degree to which organisations should allow flexibility in implementing their values goes to the heart of the matter. To some degree, ethical behaviour is the minimum standards that are acceptable in the organisation's home country. However, it is important to recognise that there may be local resistance to a new code of practice or approach, and managers may be unwilling to implement something that is imposed on them. Local buy-in to values is more likely to succeed where the organisation sets down the ethical framework while recognising that not all elements will have the same level of priority across all locations.
Implement social auditing
"HR is sometimes viewed as being unnecessarily rule-bound, hemmed in by the straightjacket of its own policies."
Social auditing and the production of social statements, led by the HR function, is an activity that was key to the success of The Body Shop since the early 1990s. However, measuring how the organisation shapes up against an agreed ethical framework is not an easy step: there is an expectation raised at the outset that the organisation will not tolerate unethical behaviour. HR needs to be prepared to face this challenge, whatever the economics of the situation.
Be prepared to manage exceptions
Being the custodian of the organisation's policies and procedures, HR is sometimes viewed as being unnecessarily rule-bound, hemmed in by the straightjacket of its own policies. But value-conflict is intrinsic to human behaviour, and therefore finding one universal principle to govern all action in the organisation is only part of the story. Being the organisation's champions for ethics is also about knowing how to handle the tricky situations that depart from best practice.
Become your organisation's ethical steward
It is important to recognise that HR holds the responsibility for ethical stewardship in any area that touches on people management within organisations. Going back to our original example, taking advantage of wage arbitrage may be a production or operations management decision, but ensuring the fair and ethical treatment of employees (and those of subcontractors) is an issue for HR. The lead on ethical behaviour is not something that can be delegated to other managers in the organisation.
Dr Jamie Ward is from PA Consulting Group and is an experienced business design and change management consultant specialising in the people aspects of change, including individual and organisational development, organisation design, and equality and diversity.