Onus of Ethical Lapses Lies on Business Schools

Concept Paper Seminars in HRM Final Project Bushra Fatima, MBA 2k8 13 May, 2010 th Bushra Fatima, NUST Business School, 2010 2 Ethical Lapses in Businesses: Onus lies on B Schools? I joined NUST Business School two years back, after I did my engineering degree. The logical premise, I gave to justify my choice to enter a Business school was not that I was passionate about studying business administration in anyway, but was the fact that the MBA is a good add-on to my degree, ensuring better and well paying career options in the long run. In my view back then, a business school was meant to churn out managers, like so many medical and engineering schools that churn out doctors and engineers. By the end of my first semester of MBA, my perception was changed. Getting an MBA doesn’t make you a manager. Management is more of a practice, something that needs to be done outside the safe environment of Business school. According to one of my professors: â€Å"It’s like swimming; you cannot learn it by sitting cozy in an air-conditioned classroom listening to the lecture†. However, like most professions you need to understand the theory behind the practice. Hence, the case with teaching ethics in business schools and the responsibility of the institute to instill ethical values in the students is challenged. Business people act in unethical ways when they start evaluating the risk and rewards of being a moral person. Business school should teach that economic analysis is only helpful and proper when all of the options being considered are morally correct. Aristotle believed ethics was more than just learning a set of rules. Ethics was a way of living. â€Å"One becomes a lute player by playing the lute, one becomes a builder by building; likewise, one becomes courageous by doing courageous acts (a virtue for Aristotle)†¦ † Before I hold the business schools responsible for the ethical lapses that happen in the business world, let us delve into some reality check. Can ethics be taught? Studies show that MBA alters how students view businesses and their roles and responsibilities as managers. Students bring in their ethics and moral values which may be hard to transform all together but a slight change in attitudes may be infused in them during the course of study. However, even if the student learns complete theory associated with ethics, there is no guarantee that what he does outside the class would be in conformance with what he has learnt in class. Unless, the class learning is supported by a value structure of the student’s environment on campus and at home, a message of double standards is sent. That brings me to what the student really learns in the business school and what is emphasized upon during his tenure there. When a student is taught about leadership for example, the emphasis is on business leader’s gain in terms of wealth and building multibillion dollar enterprises rather than what they have contributed to the society or what change they have made for the betterment of humanity. The business schools tend to give a myopic view of success and leadership to the students equating success with monetary gain thus monetization of the concept of leadership. A profitable enterprise according to the business schools are ones which works towards increasing short term monetary gains for the shareholder instead of emphasizing on sustainable growth and benefiting all stakeholders in long term. Thus, indoctrination of money mindedness in done to the extent of poisoning the young mind to think ethics as old school philosophy which stands in the way of success. Overall business schools convey a subtle but lethal message of privilege. Bushra Fatima, NUST Business School, 2010 3 The business school teaching methodology that puts too much emphasis on case study system gives a false confidence to the student that he knows how to solve real life problems. He is encouraged to make use of the economic models without taking into account the variety of problems and issues that may arise as a result of those decisions. The application of the knowledge is taken as a means to a definite end without enabling him to do critical analysis. He is taught how to solve problems but he is not taught think about the side effects of his decisions. The cases highlight success stories and emphasize on numerical and financial aspects without focusing much on the nitty gritty humanistic details. Another problem is that each dimension of business is taught more or less in isolation. The marketing people emphasize on marketing aspects, the finance people emphasize on the financials and the human resource people see things through their own colored glass thus isolating the student from the intricate details of implications resulting from their skewed decisions. The ethics aspect in most case discussions is never emphasized and students are seldom told what not to do. It is important for the students to come up with smart solutions and strategies and they should be able to state their financial viability but nobody questions the ethical viability. For many students ethics equals to norms. Norms they say is how things are done usually which can mean that people can justify their actions just because it is largely acceptable. This leads us to the bandwagon and group think mentality which exists among students. As a society we function collectively. So if it is socially acceptable to bribe, people are going to do it without questioning morality of the action. Business schools, or for that matter any school of learning is responsible to bring a change in the trend of blind followership and enable critical thinking; thus, contributing to evolution of societies. We live in an ethically dysfunctional society. We don’t teach our children to be responsible citizens; instead we emphasize on competing and being the best. We teach children that it’s a jungle out there where survival is that of the fittest. When it comes to making a career choice, we impose that career is one which gives a better return on the money invested on education; thus, forcing them to take up careers not out of passion but out of economic need. This vicious cycle which starts at home makes young minds believe that being successful is equivalent to how much money somebody makes. The educational system also reiterates the same fact, when children are divided into art and science group, on the basis of the grades they get. Aptitude and intelligence is quantified by how much marks a kid gets. If somebody is in a profession such as teaching it is undervalued, because it pays less, and is often the perception that somebody who is a failure otherwise, ends up teaching. Little emphasis is placed on how one can benefit the society by adopting a certain profession; same is the case with people going to business schools. Business school students are there to benefit themselves. Through their induction systems business schools hunt for the overtly ambitious, people who are aggressive and who seek to reach the top at all costs. People who once out of the rigorous and fierce system seek quick success and try to win position of importance in top of the line firms. While business schools have excelled at producing graduates that demonstrate competence in engineering investment products based on complex mathematical models and implementing students exceptional ability at marketing and optimizing productivity, little has been done to enlighten the Bushra Fatima, NUST Business School, 2010 4 student as to how to use his/her acquired intellectual virtues in a manner which promotes morality. Although students leave the university environment excelling with intellectual resources, there is no attempt being made to demonstrate how these attributes can be used to habituate excellence of character. Business schools tend to minimize their responsibility to indoctrinate students with a sense of moral obligation or a proclivity towards the pursuit of moral excellence. I am not saying that being ambitious is wrong. Somebody who is taking up MBA is supposed to be ambitious but that ambition running into raw greed is dangerous. The lust for success and narrow selfish gain is when a person is forced to resort to unethical behavior. The economic models taught at most business schools take away the humanistic element and talk about bottom line and how important is it to achieve that. It infuses a dog-eat-dog attitude among students. Altruism and social responsibility is ridiculed and called soft aspects and are often ignored. The responsibility of business schools starts from the induction process of candidates. They need to assess that people they are lining up to take up positions of power are ethically sound people and are bent on doing good for all the stakeholders instead of just making money and fame for themselves. Ethical values should be made part of the selection criteria and should have more weightage than brilliant academic credentials and qualifications. This is under the premise that you cannot transform ethical values of a person by teaching him ethics in classroom. So this is a better way to take out the bad eggs in the first place. The selection committee should see that the student is willing to work for the betterment of the society and this should reflect on his profile as part of his credentials. Also the candidate’s reference checks should be made and the information given on his profile should be verified in order to make a correct character assessment. However, even if the corrective system is in place it doesn’t ensure hundred percent that ethical lapses won’t happen. As long as there is bigger personal stake involved, unethical practices will take place. One would always question what is in it for them to act ethical, when the bigger gain and recognition goes to someone who cut corners and got away with it. The importance of teaching ethics cannot be ignored as it makes us question every action’s ethical validity. However, the responsibility of business schools is not just to preach ethics in the classroom but to infuse ethics at all levels and balancing the values taught with values practiced. The prevalent belief of innocent until proven guilty gives a chance to students to play around with the system and to get away with questionable behavior. Cheating for that matter is a tolerable action until you are caught. The competition is so tough that students tend to use all means whether fair or unfair to get good grades. For them, ethical are all those actions for which they don’t end up punished. The business schools like any other professional institution should have a â€Å"Hippocratic professional code of conduct† and anybody found to be going against it should be made to pay by dismissal from the profession altogether. In Pakistan where corruption has become a norm an element of change is needed and business schools can play their role in this regard. Top notch business schools should have the power to scrap the degree of those graduates who get involved in unethical behavior such as our ex-prime minister who was an IBA graduate and was alleged of being involved in money laundering. Bushra Fatima, NUST Business School, 2010 5 The curriculum in the business schools should not teach ethics as an isolated course, focusing on philosophy, which end up making the young minds more confused. Rather, ethics should be directed to instruct students to make ethically sound decisions based on rational thought measuring the implications in the real world. Students should be aware of the examples of those who did not comply with ethics and ended up losing everything including their reputation so that they know the dire consequences and think twice before engaging in questionable behavior. The strategy class for example should teach the students not just to build a strategic direction of the company in order to maximize short term profits but also to make choices which go hand in hand with company’s values that can guide their overall culture on the basis of which sustainable growth of an enterprise is achieved. The curriculum in business schools should be such that it encourages out of the box thinking instead of limiting and confining the thought to achieving profits that are investor and company centric. Courses should enable looking at the bigger picture, looking at not short term gains but long term implications on economic, human and environmental development. The purpose of business studies should not be just to prepare students to excel in the prevalent business world but also to find faults in it and try to evolve the system for the better. Business students should be able to criticize business model’s viability, they should be able to challenge the basic assumptions and redesign and re-engineer theories, which in the first place are responsible for the current economic crisis faced by today’s world. The business school curriculum should encompass courses that ignite student’s creativity and encourage him to innovate and come up with viable solutions which benefit the society. Projects with focus on solving global problems such as energy crises or greener planet should be encouraged, as they infuse a spirit of global leadership which is meant to bring a positive change. For a developing country like Pakistan such a focus is imperative as we have been a victim of the capitalist mind set in which the wealthy have become wealthier and the poor have become poorer. We are a debt ridden country and sustainable development is answer to all our problems. So, the top notch business schools are responsible to give back leaders who are focused on creating wealth not just for themselves but create an opportunity of living a better life for millions. To sum it all, the burden of responsibility of ethical lapses of business leaders lie on business schools as the system somewhat creates an unharnessed greed for personal success. This needs to be controlled through redesigning the curriculum and the existing environment, which teaches them to be responsible and creates ethically sound leaders instead of shrewd businessmen. Bushra Fatima, NUST Business School, 2010 6 MBA: In Spirit The MBA is meant to be a holistic degree one which infuses analytical ability, provides a sound based of practical knowledge on basis of which decisions can be made. The two year MBA program is challenging and rigorous which does not only infuses a spirit of competition in the student but teaches him to collaborate and work in teams to get greater success. The program is meant to groom a student’s leadership qualities and gives him courage and knowledge to pursue his ambitions. The MBA is not an end in itself, but a means to an end. It is a degree designed to give you the ability to develop your career to its fullest potential, at an accelerated pace. What will you get out of an MBA? Aside from a powerful life experience, the MBA degree should supply three main value propositions: Skills, Networks, and Brand. Skills These include the â€Å"hard skills† of economics, finance, marketing, operations, management, and accounting, as well as the â€Å"soft skills† of leadership, teamwork, ethics, and communication that are so critical for effective management. MBA students acquire these skills inside and outside the classroom. Since MBA programs attract people from very diverse industries and cultures, a program should be able to leverage these differences and translate them into learning opportunities. Networks An MBA degree program offers access to a network of MBA students, alumni, faculty, and business and community leaders. This network can be very useful when beginning a job search, developing a career path, building business relationships in your current career, or pursuing expertise outside your current field. For example, entrepreneurs need access to capital, business partners, vendors, and clients. Artsrelated businesses need access to funding and strategic management in order to position themselves to be relevant in the marketplace. Global businesses need access to local business cultures as they expand their enterprises to new territories. Brand The MBA degree is a recognized brand that signifies management and leadership training. The particular school and type of MBA program you attend also have brand associations that can help open doors based on the school's reputation. The strength of a school's brand is based on the program's history, its ability to provide students with technical skills and opportunities for personal growth, and the reach of its alumni and industry network. A powerful brand can give you the flexibility to make changes throughout your career. Bushra Fatima, NUST Business School, 2010 7 Concluding Note I believe that MBA should not have specializations in it. It should be a holistic degree in every sense covering courses critical in making organizational strategies. There should be emphasis on leadership and ethical practices. The intent of MBA should be to give the student confidence and help him in career growth. Critical Analysis of Human Resource Management It’s a cliche for organizations in today’s modern high performance corporate world to say that â€Å"people are our greatest assets†. But today the importance of it is all the more accepted. Human capital is a competitive advantage that competitors cannot imitate. So, human resource management and the practices associated with it have become accepted by managers in all forms of organizations as one of the most important strategic levers to ensure continuing success. The Origins Traditionally known as â€Å"personnel management†, was largely an outcome of increased government regulations regarding employment conditions, discrimination, employments rights, health and safety concerns etc. In many organizations today, this older notion of personnel administration still holds sway with its emphasis on rules and regulation. The modern concept of â€Å"human resource management† finds its roots in the 19th and 20th century by the end of the industrial revolution in United States. The notion of employee welfare came into light when managers started to face issues with work force control mainly due to influx of immigrants in the workforce. During this time methods of workforce control were devised and F. W. Taylor came up with the concept of scientific management. Later Henry Ford implemented this concept in his automotive factory. He also came up with the first ever employee welfare department which ensured that no part of employee’s life effected his/her productivity in the workplace. However the methods were more personnel control oriented. By the 1960s, the notion of personnel management had become well-established with a number of clear areas of responsibility attached to it including: †¢ Selection and recruitment †¢ Training and development †¢ Pay and conditions †¢ Industrial relations Bushra Fatima, NUST Business School, 2010 8 Employee welfare †¢ Occupational health and safety. In the 1980s, the concept of human resource management began to gain ground. At the root of the new thinking about the management of people in organizations was the perception of the increasing competitiveness of the global economy. The success of large Japanese corporations in export markets for traditional western products such as cars and electronic goods in the 1970s and 80s took many western corporations by surprise. Studies of Japanese corporations emphasized the importance of effective people management in the competitive strategies of these organizations. The studies showed that Japanese employers performed far better than their western competitors in terms of labor productivity and in process innovation. The key to this success lay in the human resource management practices adopted by Japanese corporations such as Toyota and Matsushita. These practices became evident in western countries as Japanese corporations established manufacturing plants throughout Europe and North America. The human resource management practices which had been so successful in Japan were transplanted with great success to these overseas transplants. The practices included: †¢ Strict and rigorous selection and recruitment †¢ High level of training, especially induction training and on the job training †¢ Team working †¢ Multi-skilling †¢ Better management-worker communications †¢ Use of quality circles and an emphasis on right first time quality †¢ Encouragement of employee suggestions and innovation †¢ Single status symbols such as common canteens and corporate uniforms. The integration of these human resource management practices was to create an organizational culture that allowed workers to identify their own success with that of the corporation. Thus, organizational or corporate culture became an important element in understanding the competitive success of firms and was a major theme of management thinking in the early 1980s. These new human resource management practices and the emphasis on the creation and maintenance of corporate culture stood in sharp contrast to the regulatory view of personnel management that had emerged in the mid-20th century. In fact, many of the new practices were not seen as the exclusive province of the human resource manager but were viewed as the responsibility of line managers in organizations. Bushra Fatima, NUST Business School, 2010 The Criticism Although the roots of human resource management might be relatively clear historically, the term itself and the meaning of human resource management has been the subject of fierce debate amongst practitioners, academics and commentators since its emergence in the early 1990s. Some have simply substituted the term human resource management for perso nnel management and claimed that everything has remained the same. In some cases, this can be seen in the migration of job titles that took place in the last decade as the title of human resource manager has replaced that of personnel manager. Others have argued that human resource management represents a fundamentally new way of managing people at work that goes well beyond the old functional notion of personnel management and emphasizes the creation of a culture in the workplace that harnesses the commitment of individuals to the organization. Yet others, exasperated with the endless definitional debate that seems to surround human resource management, have argued that it is simply an illusion, a â€Å"hologram† behind which we may see many techniques and practices in operation but which is essentially determined by the observer. However, the notion of employee commitment is one which appears to be integral to many of the models and theories of human resource management that have appeared. This notion of harnessing the commitment of employees in organizations was first articulated strongly by Walton (1985) who described how modern organizations were moving their management styles from one based on control, to one based on commitment. Human resource management clearly encompasses the older regulatory hangovers, but goes much further in embracing the management of change, job design, socialization and appraisal as the key levers to achieve organizational success. Modern Human Resource Management The aims of human resource management today are not just integration with the business strategy of the organization, employee commitment, flexibility and quality, but takes commitment as a major integral element. â€Å"Human resource management is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques†. The main assumptions underlying the modern concept of human resource management shows how much the concept has progressed from the ld notion of personnel management. Firstly, human resource management is clearly not simply the province of the human resource manager. Line managers play a critical role in human resource management and, in fact, could be argued to be the main Bushra Fatima, NUST Business School, 2010 10 organizational exponents of people management. Second ly, human resource management is firmly embedded in business strategy. Unlike the personnel manager, the HR manager is part of the top level strategic team in the organization and human resource management plays a key role in the achievement of business success. Thirdly, the shaping of organizational culture is one of the major levers by which effective human resource management can achieve its objectives of a committed workforce. Thus, human resource management is concerned not only with the formal processes of the management of people but also with all the ways in which the organizational culture is established, re-enforced and transmitted. Challenges faced by HR as a Profession The sense that HR is somehow ‘failing to deliver’ is a central theme in the writings of a number of influential American writers. Jeffrey Pfeiffer (1997), for example, writing about the future of Human Resource Management, suggests that it would be wrong to conclude that the growing interest in HR and Human Resource Management necessarily means that the future of the HR function (in its departmental form) is bright: â€Å"My advice is to resist the temptation to believe that HR managers and staff in organizations have a rosy future or a future at all, because there are some profound problems facing human resources as a function within organizations, as contrasted with the study of human resources as a topic area that makes its viability and continued survival problematical. What has emerged so far in this critical perspective on HR is that many of the activities that HR professionals engage in appear not to be valued by managers and employees. This is because there is either no evidence that the activities actually achieve things that matter or because it is very difficult to prove that what HR does actually r esults in improvements in behavior and performance. If the latter is the reason, then the task of HR is to look carefully at the way in which it measures and evaluates effectiveness; if the problem is more to do with what HR does and how it carries out these activities, then the challenge it faces is more fundamental. The HR function is generally criticized to be an accomplice in trends such as downsizing and contingent work arrangements that are often blamed to undo much of the progress made in managing employee relationships in the past several decades. Also HR professionals are accused of showing lack of leadership in demonstrating the business impact of managing people effectively. Writers such as David Ulrich have suggested redefining HR role not by what it does but by what it delivers: results that enrich the organization’s value to customers, investors and employees. The four key roles that HR professionals need to play to deliver the contributions are as follows: ? A partner in strategy execution: This doesn’t mean that HR should take responsibility for HR and business strategy, which is rightly the domain of the chief executive, but that the head Bushra Fatima, NUST Business School, 2010 11 of the HR department should be an equal partner with other senior managers and should ‘have a seat at the top table’. An administrative expert: This is about getting the basics right and adopting a much more instrumental approach to the use of procedures. The emphasis needs to be on the efficiency of the HR department — reducing its cost base and speeding up its cycle times, without compromising on quality or effectiveness ? An employee champion: This is about HR recognizing that work intensification and an increased sense of insecurity are becoming the new reality for many people and that this is associated with weakened levels of employee commitment. This, in turn, affects the preparedness of employees to contribute more than their contracted level of effort and performance. The role of HR here is to ensure that employees remain engaged and committed, or become re-engaged, either directly through the activities of HR or by HR working with line managers to ensure that they can create a positive psychological and emotional working environment. ? A change agent: According to Ulrich (1997), this role involves HR in building the organization’s capacity to embrace and to capitalize on change. Given that change is the norm for most organizations, the ability to implement and manage the change process is seen as critical to the organization’s ability to function during the change process and to reap the benefits from the changes that have been made. Reducing resistance to change is seen as a key HR contribution. Gaps between HR Academics & Practice There's an incontestable gap between what's happening in scholarly research and what's happening in the world of practitioner. However, there's consensus among academics and research-savvy HR professionals, that HR managers who follow evidence-based principles are best positioned to optimize the success of their organizations. Still, most HR professionals have little time, interest or tolerance for reading researches. Practitioners focus on solving problems and getting tasks done in time- and pressure-packed settings. Academics explore, contemplate and pursue research that can take three years or more before culminating in a journal article. HR practitioners don’t care about the theory behind the practices. They don't care why processes, tests, or other instruments or procedures work, just that they do. If wearing plaid instead of polka dots on Tuesday’s increases retention, they'll do it. According to a business school professor, â€Å"People want to Bushra Fatima, NUST Business School, 2010 12 see cost-benefit analyses before they implement. It's not enough to know structured interviews will give you better-quality people. Practitioners want to see how it affects the bottom line. † Research and academic findings may not always have concrete outcomes. For practitioners ambiguity doesn’t help. They want concrete solutions supported with business outcomes something translated into profits, often missing in HR research. Academics tend to be interested in different subjects than practitioners. For practitioners, those subjects may be too theoretical or too esoteric, or may not be a need-to-know priority. But for academics, whose careers rise or fall on their success at achieving tenure and promotion, the topics are influenced by what the academic reward structure requires. Fault lies with HR curriculums. HR curriculums should develop the competency in all HR professionals to know what is and is not a scientifically based finding or conclusion. We need to audit our curriculums to make sure students are being taught to appreciate the importance of evidence-based management and the role of research in advancing HR. That requires basic understanding of math and statistics. Most undergraduate business and industrial psychology curriculums feature at least one course in statistics, and some observers say that should suffice. In recent years, faculty members have been reluctant to add more quantitative requirements to HR curriculums for fear of losing students. According to my observations most people choose HR because they are math-phobic. Also there is little emphasis on doing research and supporting it quantitatively. In most MBA programs graduate students are not being asked to do research or even read it. When I asked an MBA student his point of view about research, he said; â€Å"MBA students don't like reading research, so instead students are just discussing cases and practicing being a leader. The HR curriculum should be designed in a way that forces students to engage in consulting. Thus, forcing them to connect the taught courses with field knowledge and enabling them to do hands on research and get comfortable with statistics. This will force them to do analysis and make interpretations. Academics who moonlight as consultants are more likely to relate to the realities of the workplace. Encour age faculty and practitioners to develop and partner in research. Establish conferences or thinktank sessions that bring them together. Encourage exchanges. Cross attendance does occur, but not in enough numbers to create a shared comfort zone. Businesspeople should also cooperate with researchers to enhance body of knowledge and include practical aspects rather than unworkable theories. Another way to increase practical knowledge base is to support sponsored research. Corporations should invest in academics doing research that practitioners need. Experts agree that applied research should meet three criteria. It should be: ? ? ? Rigorous–conducted scientifically so the results can be validated and replicated. Relevant–directed at learning more about, furthering or solving some HR-related problem. Readable–accessible to practitioners who stand to benefit. Bushra Fatima, NUST Business School, 2010 13 Conclusion As a profession HR needs to defend its value by aligning itself with organization’s strategy and focus on achieving business strategy instead of just working as a support function. The HR academia suffers in terms of creating practical value because of its lack of collaboration with HR practitioners. The two can benefit each other and enhance body of knowledge which is far better applicable in real work environments.