June 19, 2018

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HR: Is It Living Up To Its Role In Promoting Corporate Ethics?

Where were the human resources managers at Enron before things escalated to a disaster level? Human Resources has many opportunities to promote ethics within all organizational environments. Whether they know it or not, HR managers play several key roles in determining the ethical climate of their organizations. This is true for a number of reasons.

HR is often the first place employees turn when they notice policy violations. Each action taken determines how employees perceive enforcement. This will affect even the most senior managers in the organization. A sensible, solid response effectively communicates the message that programs are taken seriously. It not only reinforces the action of the employee who reported the infraction, but emphasizes the meaning of the policy for others and demonstrates the company's intention to act in future situations.

Ultimately HR's activity in the area of ethics has an impact that goes beyond enforcement of basics. Even in companies where HR is uncertain how much support will be provided by senior management, they can begin by enforcing simple policies and rules. By confirming that support exists at the top to enforce these, HR establishes a base for what will not be tolerated.

Over time enforcement becomes standard practice. This presupposes that HR takes action effectively and reasonably, building a track record that makes sense to the organization. As more serious violations are discovered, these can and should be discussed with senior management. By beginning with smaller violations and working up, senior management support is virtually assured all the way. It becomes more difficult, even for senior managers who might be inclined otherwise, to do anything, but support action. Everyone becomes aware that policy violations are likely to be reported and penalized.

It's interesting to notice that typically every manager is prepared to punish minor violations by lower-level staff. It is only when bigger violations occur by senior staff that there begins to be any hesitation. This occurs for several semi-legitimate reasons.

People may feel the senior manager must have had a good excuse or, because they have respected the senior manager's actions to date, they may feel this was a simple oversight that should be forgiven. Further they are aware of the political ramifications of taking action when a senior manager is involved - and these can be serious.

By routinely obtaining support from more senior managers as violations escalate in scale, HR helps acclimatize the senior group to taking action regardless of the level of manager involved. Because it is difficult for people to act in ways inconsistent with their previous behaviour, building a track record of taking action on violations means that it is more likely for action to be approved all the way up the line consistently.

Further, by establishing consistency and logic in the enforcement of every policy, HR contributes to an environment of higher level ethical thinking across the board. Other managers will start to apply the same logic. As more people see that all policies are routinely enforced, they will be more inclined to report violations even when they are concerned or doubtful. They begin to realize they can trust HR and the organization's senior managers to act responsibly. Soon few violations go unreported.

Establishing such an environment is the best defense against executives of all levels bending the truth such as occurred in companies like Enron. While every policy should be applied with careful consideration for mitigating circumstances, vigorous application wherever it makes sense stands the company in good stead with all stakeholders and protects employees and managers alike from future problems.

Maintaining good ethics at every level is clearly a key responsibility for the human resources department. Of course, nothing can protect companies in every instance from occasional renegade acts. CEOs fall distinctly outside ordinary levels controlled by HR. However CEOs are human, too. As long as ethical issues are routinely discussed and it is clear that action is a routinely taken, even they are less likely to misbehave.

-Dave Crisp