The harsh reality of human resources

BUSINESS PRACTICES

In late August 2013, Lucy Adams the BBC’s head of HR resigned without a pay-off.

Her decision confirmed the harsh reality underpinning the now expanded scope of HR ethical responsibility. In the parliamentary committee enquiring into BBC severance payments, she was accused of presiding over corporate fraud and cronyism for her role in six figure deals to top executives in the corporation.

No one in business, including HR, is immune to ethical concerns. Almost daily, pressures increase on business to not only behave ethically but to be seen to behave ethically. Like a stone thrown into a placid pond the ethical ripples and their implications for HR keep expanding. When it comes to business practices HR is right in the firing line.

Put simply, what has changed in recent years is there is now no part of a business where HR cannot and often should ask probing questions about ethical behaviour. This responsibility comes into sharper focus with concerns about HR’s own practices. There have been disturbing cases in the use of child labour, reneging on pension arrangements, one-sided imposition of longer working hours, increased work stress and the use of dubious hiring and firing practices.

With Lucy Adams the final verdict on the redundancy payments scandal is likely to be that as head of HR she allowed the BBC to “lose its way” in the words of the new Director general Tony Hall. The many lavish termination deals struck were “not done in accordance with best practice.”[1]

Supply chains are yet another aspect of current business practice where once HR could perhaps have pleaded either ignorance or no strong remit.  No longer. Much publicized reputation-destroying behaviour ranging from melamine tainted milk to unsafe working conditions at factories used by outsourcers like Apple in China – have cost multinational brands billions. Apart from immense reputational cost, increasingly one can legitimately ask about these situations: “where was HR when it was needed?”

For example, a survey of 747 human resource professionals by the Society for Human Resource Management (1998) found that 54% of the human resource professionals had observed conduct in the workplace that violated the law or the ethical standards of the professional’s organisation.[2]

Consequently almost every business practice now has a potentially ethical dimension. HR once perhaps on the periphery has considerable scope to probe, challenge, provide ethics information, offer advice, educate and lead. Nor is the role confined to detailed and bureaucratic processes. It is just as often about corporate strategy, including the choice of key goals and how these will be achieved.

To some extent, especially in smaller organisations, expanding HR role often arises because no one else in the organisation comes forward to focus specifically on what it means to be a responsible business. Equally, it is happening because HR professionals are potentially well equipped to focus people’s attention on business practices and “the way we do business.”

Typical practices where HR can highlight and lead on the ethical dimension include employment practices, redundancy, mergers and acquisitions, sustainability, privacy, and general ethical behaviours:

 

mindmap business practices

 Not only do many of these overlap and connect with each other, they are often contentious, complex and ambiguous. For example, HR practitioners can add an important and frequently much needed ethical dimension to employment practices. These may encompass redundancy, creating a safe working environment, and the active prevention of bullying and harassment.

Mergers and acquisitions are yet another area of vulnerable business practice where irresponsible behaviour may occur. Once, this seemed strictly a business matter and almost a no-go area for HR professionals. There was limited scope to query what were usually framed as purely financial and commercial matters.

But the legendary failures of M&A have transformed the landscape. As confirmed by many studies, most M&A disappointments arise not from inadequate and arcane financial arrangements. Instead they are more often due to the inept handling of people issues, such as problems with cultural fit or, bad practices in downsizing and restructuring.

Sustainability

Similarly it was possible a few years back to wonder “what has HR to do with sustainability?” Since then, the name of the game has definitely changed.

The prime focus and skills of HR professionals include understanding organizational process, change management and culture stewardship. These alone justify the assertion that HR should claim a leading role in developing and implementing sustainability strategy.

In sum, the HR function is often critical to achieving success in building a sustainability-driven organization.

Privacy—surveillance & control

In this burgeoning area of ethical concerns HR has a most definite role to play and indeed its own practices may also be part of the problem, not just part of the solution.

For example the increasing use of Human Resource Management Information Systems (HRMI) set out to control how people are managed. Yet they can also introduce a range of ethical management risks.

For instance, with HR and payroll functions closely linked, changes in one process can readily create issues in the other. HR professional may need to give greater attention to ensuring adequate controls to safeguard the privacy, integrity and security of employee information.[3] Previously this might have been safely relegated to the IT techies who understood the territory rather better. Now HR professionals who fail to take a direct interest in the system implications could find themselves missing important ethical concerns arising from them.

The main Ethical responsibility of HR here concerns risk assessment. —see below:

risk agenda

The sort of probing HR questions, driven by an ethical concern to promote responsible business can be wide ranging, as the contents of the above box implies. For example HR professionals may need to pose questions such as

  • Are employee details correctly entered or maintained? —if not it could lead to wrong payments, or perhaps unapproved changes to the allocation of roles and delegations.
  • Could unauthorised people have access to view and maintain sensitive HR and payroll data_–if so it could compromise the confidentiality of personnel records and may also result lead to processing fraudulent payroll payments.
  • Is access to add an employee restricted to appropriate individuals and segregated from payroll maintenance?—if not it could lead to false payments or loss of data integrity and privacy.

Ethical behaviours

Finally HR is invariably involved in promoting general ethical behaviours throughout the organisation. These include honesty, loyalty, respect, trustworthiness, and fairness. Naturally this is not an exclusive HR role, which it shares with all management and leaders in the organisation.

However, HR is often expected to take the lead in pursuing such behaviour, which can be promoted at both the macro level across the entire organisation in a strategic way, or at the more intense individual level.

What has changed in recent years is greater awareness by senior leaders that these five specific behaviours have ethical implications which can materially affect business outcomes, whether expressed as customer satisfaction, as competitive advantage or ultimately as bottom line profitability.

Conclusion

In the area of business practices HR has a seemingly ever-expanding role to play in promoting ethical behaviour throughout the organisation. This will be seen by some professionals as a positive opportunity to build HR credibility and influence.

Others though may regard the situation with less enthusiasm, perhaps daunted by the potentially wide remit and implied responsibility.

However it is clear the pressure on HR to pay closer attention to ethical business concerns is unlikely to lessen and more likely to increase in the foreseeable future.


[1] Sweney, M and O’Carrroll, BBC  Boss accused of presiding over corporate fraud and cronyism quits, Guardian, 13th August, 2013

[3] Australian National  Audit Office, Human Resource Management Information Systems Risks and Controls, Better Practice Guide June 2013

This is the sixth and final article in our series on the ethical responsibilities of human resources.

NO HIDING PLACE

is a new White Paper from Maynard Leigh Associates based on this series and available from November 2013.

no hiding place

For a hard copy White Paper send an e-mail headed WHITE PAPER to info@maynardleigh.co.uk.

To read–click here

 

 

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