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UNETHICAL BUSINESS
PRACTICES AND
EMPLOYEE RETENTION CAN'T GO TOGETHER
Dr. Kamal Kishore Jain
Would you like to
work in a company involved in unethical business practices if it
offers you the compensation package that no other company can
offer? Enron? Arthur Anderson? Global Crossing? World Com? Or any
other company involved in similar recent accounting scandals? Now
imagine that you are already working for any one of these
companies and you discover the involvement of your company in
unethical business practices. Would you like to continue with
them? Whenever these questions are posed to the students by the
author in his class of undergraduate and graduate students, the
overwhelming answer is NO.
Within a period of few weeks when Arthur Anderson firm was found
to be involved in accounting scandal, it lost hundred of its
employees and clients. Cassell Bryan-Low in the Wall Street
Journal dated 15th June stated, "For Anderson— which
was convicted on a criminal obstruction charge— it’s a case of
having lost the battle, and the war. Even before the trial ended,
Andersen’s two other assets, its staff and client list, were all
but gone." “Andersen as we know it is dead,” said Arthur Bowman,
an accounting-industry consultant in Atlanta. Even if Andersen had
been acquitted, “it could not put back together its international
organization or bring back all the people that made Arthur
Andersen what it once was, or restore the reputation it once had.”
Many firms now realize the importance of attracting and retaining
highly skilled, quality employees as a necessary component of
their competitive advantage. One of the reasons that a quality
workforce has become more important is because previous sources of
competitive advantage have become less important over time. The
selection and management of a quality workforce has become an
increasingly critical factor to organizational success.
The resource-based theory of the firm emphasizes that
organizations can develop unique resources and capabilities that
provide the basis of a firm's profitability. Clearly, if firms can
attract a larger pool of job applicants, the potential for success
is greater. If these human resources are valuable, rare, and
non-substitutable, then their potential impact is substantial.
Furthermore, if the success of a career in the new millennium
depends on knowledge-based technical specialty, capability to
manage the self, cross-functional skills, traits of flexibility,
integrity, honesty, and exceptional communication skills, then the
emphasis on attracting, selecting, and retaining the best human
resources shall not be an overstatement.
John Weiser & Simon Zidek (2000) in their research concluded that
increased corporate reputation
makes it easier to hire employees. The claim here is that firms
that have higher levels of corporate engagements will have better
reputations, and that this will encourage potential employees to
sign up with them, rather than their competitors. Another study by
Turban and Greening (1997) found that ratings of a firm’s
corporate social responsibility were related to ratings of the
firm’s reputation and attractiveness as an employer, suggesting
that such performance may provide a competitive advantage by
attracting potential applicants. A 1999 survey by Cone/Roper
found that good corporate reputation is the second most
important consideration for people when choosing an employer. All
these researches led to the development of 'social identity
theory.' Social identity theory emphasizes that one's
self-concept is influenced by membership in different social
organizations, including the company for which an individual
works. Social identity theory suggests that employees' self-image
is influenced by the image and reputation of their employers.
Working in a company that does a lot of social work and is known
for its ethical business practices contributes to the self-esteem
of the employees. Take, for example, the Target Corporation of
USA. The company has been contributing 5 percent of its pretax
profits to philanthropic purposes every year since 1946. In 1999,
the three operating divisions and the Dayton Hudson Foundation
gave more than $57 million to arts, education, and social action
causes across the United States. Major contributions were made to
programs and projects that strengthen families, promote the
economic independence of individuals, or help neighborhoods
respond to key social and economic concerns. The company has been
consistently ranked as one of the best companies to work for in
America. Anyone looking for a new job would definitely like to be
a part of the company that is adjudged as the best employer.
Talk to employees working in the companies involved in lawsuit for
unethical management practices and you may easily notice their
anguish. For example, consider the morale of employees working in
X (disguised name) company after the news that Central Bureau of
Investigation had registered cases against the company’s chairman
and vice-chairman, charging them with forgery and cheating to the
tune of millions. The author had an opportunity of talking to some
of the employees working in these companies. One of these
employees remarked that when he met people, they looked at him as
if he, and not the company, has done something wrong.
Senior managers at Shell reported that there was a
tremendous loss of morale and a significant downturn in
recruitment when Shell suffered its difficulties in Nigeria and
with Brent Spar. However, once Shell had made its commitment to be
good corporate citizen, through much greater transparency and
engagement with external stakeholders, it found that it was
suddenly swamped with potential employees interested in joining
Shell.
It can, therefore, be easily imagined that prospective job
applicants will be attracted to firms known for their responsible
corporate citizen image, because these prospective job applicants
would have more positive self-concepts if they worked for firms
with a strong image. In the social identity literature, a firm's
‘distinctiveness’ has been shown to be a significant factor in
increasing the tendency of individuals to identify with a social
group. Social identity theory suggests that job applicants have
higher self-images when working for socially responsive firms over
their less responsive counterparts.
In a research study sponsored by the Council on
Foundations, Walker Information interviewed a representative
sample of employees from a cross section of US employers. It found
that a company’s Corporate Engagement (CE) activities have a
positive affect on the average employees’ satisfaction and
loyalty. Using survey data, Fleishman Hillard (1999) found that
87% of European employees feel greater loyalty to socially-engaged
employers.
Any one who wants to join a company would like to have an idea
about the kind of company that he is going to join. Such an idea
is often based on the symptoms or signals that one gets from the
work done by the company for the general welfare of the society. A
prospective employee can easily imagine what it would be like to
work for that firm given its image. It is stated that a firm's
past provides potential applicants with signals about the
organization's value system, which influence applicants'
perceptions of working conditions and subsequent attraction to the
organization.
Ethical corporate behavior, therefore, is a very powerful tool in
the hands of companies in attracting quality workforce. Most of
the people who join a company do not have much idea about the work
culture of that organization. They often gather signals about work
culture by looking at the firm's ethical corporate behavior.
Because applicants do not have complete information about an
organization, they interpret information they receive from
press/media or from certain other quarters as signals about the
organization's working conditions. Organizational attributes
provide applicants with information about what it would be like to
be a member of the organization because applicants interpret such
attributes as providing information about working conditions in
the organization. For example, an organization's formal social
policies and programs toward stakeholders and developing social
and political issues may attract potential applicants by serving
as a signal of the organization's commitment and goals. Similarly,
a firm's policy to manage diversity or to provide day care
facilities may influence organizational attractiveness as an
employer because of what it signals about the corporation's
willingness to attract women and minorities and to promote and
treat them fairly.
Employees of the best employers display tremendous pride in what
their company does and in its products and services. The
capability of a firm's ethical behavior in helping it project as
an attractive employer suggests that it should consider not only
the moral or ethical rationale for corporate actions but also the
potential competitive advantages it may afford them.
Dr. Kamal Kishore Jain is Associate
Professor in the Faculty of Business Administration,
University Tun Abdul Razak, Malaysia.
He can be contacted at
prof_kamal@yahoo.com |
