Management and Employees: The Ethics of HRM and IR

Chapter 6
Management And Employees
The Ethics of HRM and IR
Group Mates
Muhammad Faizan Talpur, Jameel Ahmed Jamali, Darshan Kumar, Saqib Mehar,
Muhammad Owais Dhedi, Sajan Khwaaja
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History of Capitalism;
Different Forms of Capitalist
Production
But why go into history in the first
place?

“Keeping the past and the future
alive is one and the same thing”
(Henry Fonda)

Putter Out System
• Aim, shoot and let the ball move
freely toward the flag-hole..
• “Work Contractors assigned

Production to the Individuals
based in cottages and paid
them on a piece rate basis”
(page 142)
• In Pakistan, Clothing and Toy

manufacturing are good
examples of Putter out System

A Picture is a Thousand Word

Industrial Relations Or The
Collective Bargaining
• “Collective bargaining is an un ending process, which
legitimates trade union participation in the regulation
of capitalist market” (page 145)
• Union can take strike for the protection of labor right

but the right is limited to the dominance of Capitalist
ways.

• Why there is need of union protection ??
– Weak individual.
– Wage conflict.
• Functions
Protection of
– material rights
– Security
– Status
– Dignity

• “But is it the Interest of the Capitalist and Governments
To recognize these collective rights of labour?” (page
145)
• IR emerged because The means to achieve

accumulation was different for different people…
– For Property Owners, Lowering Costs
– For working Class, Increasing wages
Thus IR is de-legitimized in post-Fordist Capitalism

Ethics of HRM
• Business ethics teaches to follow a “lean
production” system.
• To empower individual worker to get best results.
• Capitalist employees (maximization-seeking)

should be empowered as they will discipline
themselves and lead to enhanced quality of
business !

Ethics of HRM
• Individual employees firm’s most important assets.
• Japanese HRM head is second to the CEO.
• Principles:
– Expect every individual to do a good job.
– Provide an environment in which individuals can work well
and creatively.
– Recognize personal achievements
– Treat Every Individual with Concern and respect
• This is pure Kantianism (Categorical imperative).
• Managers and employees must choose the Same end of

accumulation

IR to HRM, Or Fordist to Post-
Fordist…Why this Change?
• Unionism Can be replaced by “active participation” of
individual employees in the management process in
other words “HRM”
The Change can also be tracked to;

• Cultural Values
• Technology
• Market Imperatives
• The Choice of Organization itself..

Ethical Responsibilities of
Leadership
Ethics and Capitalism?

Choose Your Path..
• “For everyone who knew Anita, it was about much more than
that: you couldn't help but be inspired by her love of life, her
vision of the world and her passion for changing it”
(Adrian Bellamy)
Chairman, The Body Shop

Manager’s Rule
• No Private Property in Capitalism remember?
Why was that?
• Capitalist systems of production transfer control

from workers to managers.
• In Pre-capitalism, it was the self-employed

worker who decided how long they should work
and what they should produce.
• In capitalism (Fordist and Post-Fordist) manager

takes crucial decisions aiming toward profit
maximization.

How to Control?
• Etizoni (1961) Claims 3 ways of leadership control
• Coercive (use of Force and Punishment)

• Remunerative (Pay and Incentives)
• Normative and ethical (Social rewards and
Deprivations)

The Taylorist System
• Disciplining workers to ensure production on the basis of
time schedules.
• Standardized work system.
• No scope for recognizing worker as individual.
• Reasons:
– Lessens management’s dependence on individuals.
– To make workers as easily replaceable as parts of
machines.

Bureaucratic System (Rigid)
• Vertical strong hierarchic structures.
• Job descriptions are usually fixed (No re-definition required).
• Individuals have to perform special tasks according to pre-

designed steps (creativity, initiative, multiple-roles are not
encouraged).
• If standardized technologies are in use and market

uncertainties are unimportant, utilitarian/Kantian arguments
can justify this bureaucratic structuring of management.

Post-Fordism ideas
• Business ethics discourse presumes the existence of post-Fordist
organization.
• Employer-Employee relations seen as b/w individuals not groups.
• Acceptance of the atomization and disorganization is considered as

natural, irreversible and inevitable.
• Leadership is expected to stress individual initiatives and enterprise.

Organic System (Flexible)
• Needs to be adopted when Problems/Requirements cannot be
broken down along the perfect hierarchy.
• Individuals have to perform their special task in the light of their
knowledge of the tasks of the firm as a whole.
• Jobs have to be continually redefined (through interaction with
others).
• Interactions run laterally as much as vertically.
• Communication b/w ranks resembles lateral consultation rather
than vertical command.
Business ethics discourses justifies such “organic

management” formal and informal organizational structures
(page 155)

THE SHIFT
• Changing from mechanistic to organic system has its
costs:
– Disturbs intra-organizational power and resource, distributional
systems and status structures.
– Such changes will be resisted.
– Top management will need to force/persuade employees to
shift.
– Threatens the power and status of top management (including
CEO).

There is no unique, Optimal
Business Ethics system as there
is no optimal management
system (page 157)

What’s happening in Pakistan?
• Creating a post-Fordist structure is costly and impractical.
• Business families retain a strong grip on major national
firms.
• They have commitments to other values – religion,
tribal, families, etc.
• If Pakistani workers do not accept capital accumulation as
an end; They have no claim to any rights with capitalist
order!

Employee Desire/Wants
• Employees have a standard and stable
hierarchy of needs.
– Material need
– Higher need
• According to goldthorpe hierarchy of

need of employee is not fixed and is
determined by workers “orientation to
work” .

Who to admit??
• Correctly oriented workers

– Civil society.
– Competitiveness,ambition,individual
achievement .
• Incorrectly oriented workers

– Religious society

Beliefs
1. Main purpose of life is rising standards of
living.
2. Participate in capitalist production .
3. There is no alternative.

Work Participation
• Work participation differs from collective bargaining
• Worker’s participation on the other hand is the

participation of the worker in management
• Justification
- Overcome conflict.
- Overcome alienation at work place.
- Increase productivity.

No and Never!!
• Work participation is apposed by “Utilitarian”

.
– Reduce efficiency.
– Slow decision making.
– Reduces power of union.
– Un necessary and superfluous.
• Post Fordist dismiss union objection to

worker’s participation.

Who to trust?
• Management believes on their trust worthy workers.
– Integrity.
– Competency.
– Benevolence.

Fordist Rights
• It recognized the collective rights of workers.
• Trade unions were accepted as representatives of

workers’ interest.
• Unions had rights to collective bargaining and for

demanding management participation.

Post-Fordism
(Fordist rights over-rided)
• Collective agency is delegitimized.
• Every rational employee is to be a utility maximiser for
himself.
• It frees the economy from influence of associations /
groups which obstruct the operation of competitive
markets.
• P-F asserts the right to free association and the rights to
voluntarily withdraw one’s labor.

Employee Rights / Duties
• Individuality; Privacy; Freedom of conscience; Right to report
wrong.
• Individuals Join and leave the firm through contracts.
• Every employee is an agent of the firm.
• He/She is to accept the purpose and structure of the firm in return

for a wage.
• Employee’s primary moral obligation is to obey the employer.
• Right to participate in management and to organize.
• The employee must work for the achievement of the goals of the
organization and not for his personal interest.

Employee Rights / Duties
• An employee is to remain impartial (benefit the
corporation) if a conflict of interest arises.
• The individual employee must expect to be treated with

concern and respect.
• He/She should be paid a fair wage.
• That wage should be freely accepted by the employee,

and not forced upon him.
• Job design should aim at increasing meaningfulness,

responsibility and consequential awareness of employees.
Employer Rights / Duties
• The employer is to provide remuneration for the services of
the employee.
• An Employer cannot pay a wage below the ‘minimum level’

determined (not by state but) by state support payments to
the unemployed.
• Legislation has been institutionalized in most capitalist

countries that requires the employers to have a minimum
health and safety standards (at the work place).

Employer Rights / Duties
• The Employer should not force the employee into
accepting a wage.
• The employer should adequately compensate the

employee for the risk taken.
• The employee doesn’t elect the manager (employer) and

therefore has no rights to limit his authority.

Informal Rights & Obligations
• Capitalist Organization are dedicated to profit\wellbeing
maximization.
• There are conflicts between Individuals and groups
within the capitalist organization,
– Individuals are pursuing their own interest.
– Different views regarding profit maximization.
– Different views about the strategy of the firm so the
firm synchronies with the national strategy.

Cont…
• Individual seeking for prestige and power doesn't
perceive the best interest of the organization.
• Typical self-promotional tactics are:
– Blaming others for failures.
– Denying information to others.
– Promotion of one’s ideas and interests.
– Image building of himself.

Cont…
– Ingratiation and flatiery.
– Creating networks of mutual obligations.
– Acquiring control over scarce resources.
Sometimes the individual’s perception is that these

tactics won’t interfere in profit maximization, but they
will in most cases hurt others.

Cont…
• Using political tactics is justified in utilitarian point of view
if it contributes to increasing efficiency and wellbeing.
• It is unethical on utilitarian grounds if it has been
practiced for achieving personal goals and it damages
the organization.
• An employee has a utilitarian duty not to participate in
such practices.

Cont…
• Political tactics which exploit others emotions are
unethical on Kantian grounds, unless it has been
voluntarily accepted by all members.
• The use of these tactics are unethical if,
– The person doesn’t accept participation.
– If he doesn’t has any other option except leaving the
firm.
– He can’t use the same tactics against you.

Cont…
• Political tactics providing privileged to
some individuals, violate the principle of
distributive equity.
– For e.g. The trader who is also the son of the

chairman of the board.

Cont…
• According to ethics of care,
– Firms may be seen as networks of
relationships b\w individuals therefore a
caring organization should focus on the
nurturing of personal relationships.
– Authors of business ethics argue that caring
firms also have high level of efficiency.
– But there should be a balance.

Downsizing And The Employment
Contract
• Employees are loosing their jobs due to privatization and
downsizing in Pakistan.
• Business ethics recognizes that employees are not free
to choose.
• If the workers are loyal to organization they have a right
to expect fair treatment.
• Due process gives right to employee to present his point
of view.

Cont…
• Business ethics recognizes the moral rights of
employees which should be taken into account when
downsizing:
– Workers should be informed of decisions.
– Representative of workers should be allowed to
participate in the above decisions.
– The cost should in principle be borne by the owners.

Cont…
– The contractual rights of employees should be
fully respected.
– Workers should also be financially
compensated.
– Workers’ right to participate in the above
decision should also be recognized.

Whistle blowing (reporting
Malpractices)
• The Capitalist law states that

employees should keep the firms
matters secret
• Justified on both Kantian and

Utilitarian grounds
• External whistle blowing is allowed

only when internal whistle blowing
is not possible

Whistle blowing (rules for the
employees)
• Obtain accurate information about the

malpractice
• Determine personal involvement
• Alternative to public exposure
• Avoid bad faith

Whistle blowing (steps by the
organization)
• Avoid persecution or isolation
• Set up an effective multi-channel grievance and

reporting system
• Ethical training

Discrimination and Quotas
• Discriminatory Practices:
• Recruitment advertisement specifying race,
religion, gender etc
• Requiring qualification, not necessary for the job

• Promoting people of a particular social group
• Different remuneration for the same job
• Positive discrimination
 Quotas

Islamic Evaluation of Capitalist
employment
Orthodox View
• Employment intended to accumulate wealth

is condemned by the shariah
• Both haram and mushtaba (doubtful) contracts are to be

avoided (Imam Ghazali)
• Islamic trade union organizations, under the leadership

of Ulemas should be established to overthrow the
capitalist order (Hussaini, Banma)

Revisionist View
• General Interest.
• Shariah caters to welfare

of people.
• “A just wage” (Siddiqui)
• Sufficient to satisfy needs

(Chapra)
• This view after the 70’s

has shaped to justify HRM
rather than trade unions

Employer-Employee
Relationship
• Traditionally: Master : Slave
• Two Laws making and

governing bodies.
– Provisional
– Federal

July 2004 ILO Conventions
• Abolition Of Forced Labor

• Minimum Age for workers
• Freedom of Association
• Weekly Rest for workers
• Equality of treatment
• Abolition of worst forms of child labor

Employer-Employee
Relationship
• Labor Laws inherited from India at the time of
creation
• Labor laws marked as “concurrent subject”
• Pakistanis Labor force counts upto 37.15

Million

Core Provision of IRO (industrial relations
ordinance) 2002
• Worker’s representation as an enterprise

• A joint work council set up in case of 50+ employees
• 30% or more should be of labor force.
– Also taking functions of previous work council.

• Settlement of issues through negotiations
• Facilitate good and harmonious working conditions

Procedure for Appeals
• Appeals first in labor courts
• If party is aggrieved by decision of labor

court can submit an appeal in high court

Bargaining and Union Role
• Bhutto’s Regime
– Played a vital role in union movement.

– Roti Kapra Aur Makaan
– Financial sectors nationalized.
– Unions were made making these nationalized
organisation a symbol of corruption
– Politicians became union heads
– Workers remained where they were.
– Unions became stronger and productivity fell.

Result of Strong Union Crisis
• Get rid of undesired
workers.
• Employees resisted
Retrenchment
Lockouts
• Well performing firms

closed down
• Unemployment

Gradually Workers Realized
• Workers realized the problem

• Unions no longer play important role
• Emergence of HRM system
• HRM champion of all workers
• Due to HRM union’s role is now insignificant

Human Resource Management
System
• Flaws which led to HRM development
– Personnel department did not have a good
Reputation except Defense
– Political influence.
• HRM
– Systematic Approach towards management
– Rely on system rather than individuals
– Succession Planning.

HRM in Pakistan.
• The initiative goes to multi national firms

• Introduces new concepts of HRM
• Competition led HRM Into local market
• Established Employer-Employee trust

Compensation Management
• Strategy developed keeping four factors in
mind.
– Organizational goals
– Identifying potential sources
– Object of attracting qualified people
– competitiveness

Compensation Strategies
(govt.)
• Cash Payments
• Fringe Benefits
• Housing
• Subsidizing
• Long term benefits
• Pension
• Medical benefits

Compensation Strategies
(pvt.)
• Pay for performance

• Prefer short term benefits over long term
• Allowances
• Bonuses

Ethical Problems
• Minimum wage set is Rps 4600

• Increase in salaries to get employee.
• Inflated compensational packages
• Serious concern on long term compatibility

Downsizing
• Firing unnecessary employees to
reduce costs.
• Unorganized workers over organized

ones.
• Massive dismissal of employees
• Golden handshakes
• Z.A’s efforts to promote associated

norms collapsed

Conclusion
• Organizations in Pakistan
have to play a key role in
improving employee -
employer relationship, thus
maximizing utility and
pursuing their ultimate
goal.

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Chapter 6

Management And Employees

The Ethics of HRM and IR

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• “Work Contractors assigned

• In Pakistan, Clothing and Toy

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• Union can take strike for the protection of labor right

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• IR emerged because The means to achieve

Thus IR is de-legitimized in post-Fordist Capitalism

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• To empower individual worker to get best results.

• Capitalist employees (maximization-seeking)

11/01/08 Picture refrences from; www.yahoo.com, www.google.com and www.flikr.com 10

• Japanese HRM head is second to the CEO.

• This is pure Kantianism (Categorical imperative).

• Managers and employees must choose the Same end of

11/01/08 Picture refrences from; www.yahoo.com, www.google.com and www.flikr.com 11

The Change can also be tracked to;

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• Capitalist systems of production transfer control

• In Pre-capitalism, it was the self-employed

• In capitalism (Fordist and Post-Fordist) manager

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• Coercive (use of Force and Punishment)

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• Standardized work system.

• No scope for recognizing worker as individual.

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• Job descriptions are usually fixed (No re-definition required).

• Individuals have to perform special tasks according to pre-

• If standardized technologies are in use and market

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• Employer-Employee relations seen as b/w individuals not groups.

• Acceptance of the atomization and disorganization is considered as

• Leadership is expected to stress individual initiatives and enterprise.

11/01/08 Picture refrences from; www.yahoo.com, www.google.com and www.flikr.com 21

Business ethics discourses justifies such “organic

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• According to goldthorpe hierarchy of

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• Correctly oriented workers

• Incorrectly oriented workers

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• Work participation differs from collective bargaining

• Worker’s participation on the other hand is the

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• Work participation is apposed by “Utilitarian”

• Post Fordist dismiss union objection to

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• Management believes on their trust worthy workers.