hw

Employee Relations8 CHAPTER

CBP_Ferrell_Ch08.indd 212 12/9/2019 6:32:57 PM03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

213

To early skeptics, The Container Store seemed like

an odd retail concept. Who would choose to special-

ize in selling containers, shelving, and home storage

items, let alone make a profit from it? Yet with $800

million in annual sales, The Container Store manages

to do both. The Container Store is a storage and

organization retailer that sells over 10,000 products

to meet consumers’ needs, from desktop organizers

to laundry racks and closet solutions.

When cofounders Kip Tindell and Garrett Boone

started The Container Store in 1978, their vision was

to take a “solutions-based approach to retail” by

selling products that would save consumers time

and space. Throughout the years, The Container

Store gained widespread notoriety, not only for its

eclectic assortment of goods, but also for its unique

and compelling corporate culture. Perhaps most

strikingly, the retailer views shareholders as less

important stakeholders than customers and employ-

ees. Such a strong emphasis on corporate culture

over profits might appear risky, as every business

requires profits—and the goodwill of shareholders

and investors—to survive. However, rather than dam-

aging The Container Store’s bottom line, its culture

has caused the company to thrive. Six principles

serve as the foundation of the retailer’s approach:

! One great person equals three good people.

In terms of business productivity, one great

person is equal to three good people.

! Communication IS leadership. Simply put, we

want every single employee in our company to

know absolutely everything.

! Fill the other guy’s basket to the brim. Making money then becomes an easy proposition. Business is not a zero-sum game. Someone

doesn’t have to lose for someone else to win.

! The best selection, service, and price. We

work to offer a well-edited, carefully curated

collection of 10,000 products, expert advice

and service that customers delight in, and

competitive prices.

! Intuition does not come to an unprepared

mind. You need to train it before it hap- pens. Our extensive training, coupled with our employees’ life experiences, allows them to

intuitively solve all of our customers’ storage

and organization challenges.

! Serve the man in the desert. Imagine a man

lost in the desert. He stumbles across an oasis

where he’s offered a glass of water because

he must be thirsty. But if you stop to think

about what he’s just been through and what his

needs really are, you know that he needs more

than just water. He needs food, a comfortable

place to sleep, and much, much more.

! Air of excitement. Three steps in the door and

you can tell whether or not a store has it.

These principles demonstrate the importance of

both customer service and employee engagement

at The Container Store. The retailer’s founders were

determined to create a work environment where

employees can feel valued and appreciated. And

their efforts have met with success. The Container

Store has been on Fortune’s “100 Best Companies

to Work For” for more than nineteen consecutive

years. Like most retailers, the company has experi-

enced ups and downs in its 40-year history; recently,

The Container Store slipped out of the list of top

places to work. Is this a temporary glitch in their

“culture of care,” or have other companies simply

made more strides toward improving employee

relations, thus increasing the standard?1

The Container Store: An Employee-Centric Retailer

Chapter Objectives �O Discuss employees as stakeholders

�O Examine the economic, legal, ethical, and philanthropic responsibilities related to employees

�O Describe an employer of choice and that employer’s relationship to social responsibility

S hu

tt e

rs to

ck /A

na ku

m ka

C B P _ F errell_ C h08.indd 213 12/9/2019 6:32:57 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

214 Business and Society

he Container Store illustrates the extent to which some firms consider the needs, wants, and characteristics of employees and other stake-

holders in designing various business processes and practices. Although it is widely understood that employees are of great importance, beliefs about the extent and types of responsibilities that organizations should assume toward employees are likely to vary. For example, some managers are primarily concerned with economic and legal responsibilities, whereas proponents of the stakeholder interaction model discussed in Chapter 2 advocate for a broader perspective. As this chapter will show, a delicate balance of power, responsibility, and account- ability exists in the relationships a company develops with its employees.

Because employee stakeholders are so important to the success of any company, this chapter is devoted to the employer-employee relationship. We explore the many issues related to the social responsibilities that employers have to their employees, including the employee-employer contract, workforce reduction, wages and benefits, labor unions, health and safety, equal opportunity, sexual harassment, whistleblowing, diversity, and work/life balance. Along the way, we discuss a number of significant laws that affect companies’ human resources (HR) programs. Finally, we look at the concept of employer of choice and what it takes to earn that reputation and distinction.

Employee Stakeholders Think for a minute about the first job or volunteer position you held. What infor- mation were you given about the organization’s strategic direction? How were you managed and treated by supervisors? Did you feel empowered to make decisions? How much training did you receive? The answers to these questions may reveal the types of responsibilities that employers have toward employees. If you worked in a restaurant, for example, training should have covered safety, cleanliness, and other health issues mandated by law. If you volunteered at a hospital, you may have learned about the ethical and economic considerations in providing healthcare for the uninsured or poor and the philanthropic efforts used to support the hospital financially. Although such issues may have seemed subtle, or even unimportant, at the time, they are related to the responsibilities that employees, government, and other stakeholders expect of employers.

Responsibilities to Employees In her book The Working Life: The Promise and Betrayal of Modern Work, business professor Joanne B. Ciulla writes about the different types of work, the history of work, the value of work to a person’s self-concept, the relationship between work and freedom, and as the title implies, the rewards and pitfalls that exist in the employee-employer relationship. Ciulla contends that two common phrases—“Get a job!” and “Get a life!”—are antithetical in today’s society, meaning they seem diametrically opposed goals or values.2 For the ancient Greeks, work was seen as the gods’ way of punishing humans. Centuries later, Benedictine monks, who built farms, church abbeys, and villages, were considered the lowest order of monks because they labored. By the eighteenth century, the Protestant work ethic had emerged to imply that work was a method for discovering and creating a person.3 Today, psychologists, families, and friends lament how work has become the primary source of many individuals’ status, fulfillment, and happiness. Critics point to the ways in which business influences the personal choices that individuals make, not only as consumers, but as employees. As with

T

C B P _ F errell_ C h08.indd 214 12/9/2019 6:32:57 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 215

the complicated history of work, the responsibilities, obligations, and expectations between employees and employers are also fraught with challenges, debates, and opportunities. In this section, we review the four levels of corporate social responsibility (CSR) as they relate to employees. Although we focus primarily on the responsibilities of employers to employees, we also acknowledge the role that employees have in achieving strategic social responsibility.

Economic Issues The significance of the economic realm of employment is evident in the story of Malden Mills Industries, a company established in 1906 and credited with invent- ing synthetic fleece in 1981. In 1995, just a few weeks before the winter holidays, the factory and office space at Malden Mills burned to the ground, injuring many workers. In an unusual move, the company’s CEO, Aaron Feuerstein, paid full wages, year-end bonuses, and benefits to employees while the buildings were reconstructed. HR managers set up a temporary job-training center, collected holiday gifts for employees’ children, and worked with community agencies to support employees and their families.4 When economic factors forced Malden Mills through several employee layoffs in the late 1990s, employees were offered jobs at another plant and received career transition assistance. Feuerstein believed in an unwritten contract that considers the economic prospects of both employer and employees.

Several years later, Malden Mills filed for bankruptcy protection. The company’s assets were sold and the company name was changed to Polartec, LLC. Polartec started with the original synthetic fleece developed by Malden and today offers 300 different fabrics. Customers include the U.S. military, L. L. Bean, Patagonia, Jack Wolfskin, and other apparel brands around the world. While Feuerstein is no longer at the company, his product inventions and commitment to social responsibility continue to exist at Polartec, now a leader in sustainable engineering and manufacturing.5

Employee-Employer Contract As discussed in Chapter 1, the recent history of social responsibility has brought many changes to bear on stakeholder relation- ships. One of the more dramatic shifts has been in the “contract” and mutual understanding that exist between employee and employer. By the beginning of the twenty-first century, many companies had to learn and accept new rules for recruit- ing, retaining, and compensating employees. For example, although employers held the position of power for many years, the new century brought record employment rates and the tightest job market in years. Huge salaries, signing bonuses, multiple offers, and flexible, not seniority-based, compensation plans became commonplace throughout the late 1990s. However, the first decade of the 2000s reversed this trend. Business scandals in the early 2000s, the World Trade Center attacks on September 11, 2001, and the Great Recession of 2008–2009 brought a decline in lucrative employment opportunities and forced many firms to implement layoffs and other cost-cutting measures. At one point, the unemployment rate, which is the percentage of the available labor force that is currently unemployed, in the United States reached 10 percent. Pay raises, healthcare benefits, mental health coverage, retirement funding, paid maternity leave, and other benefits were reduced, or costs were shifted to employees.6

Bolstered by job growth, the U.S. economy rebounded, and by 2019, the U.S. unemployment rate was less than 4 percent. From a statistical perspective, a very low unemployment rate in a growing economy is sometimes considered full employment because of sampling error and related concerns. Full employment occurs when the available labor force is fully utilized and employers have difficulty finding employees to fill available positions. From a psychological perspective,

unemployment rate the percentage of the available labor force that is currently unemployed

full employment occurs when the available labor force is fully utilized and employers have difficulty finding employees to fill available positions

C B P _ F errell_ C h08.indd 215 12/9/2019 6:32:57 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

216 Business and Society

low unemployment rates generally make it easier for employees to change jobs and employers, seek higher wages and new benefits, and otherwise exert more stakeholder power in the employment relationship.

Regardless of the economy, employing organization, or salary and perks of a specific position, a psychological contract exists between an employee and employer. This contract is largely unwritten and includes the beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and the organizations that employ them.7 Details of the contract develop through communications, via interactions with managers and coworkers, and through perceptions of the corporate culture often formed by watching management and leadership. These interactions are especially important for new employees, who are trying to make sense of their new roles within the context of their prior beliefs and experiences.8 New employee orientation, along with ongoing training, performance evaluation discussions, internal newsletters, and company-sponsored social events, are important mechanisms for introducing and communicating the psychological contract.

This contract, though informal, has a significant influence on the way employees act. When promises and expectations are not met, a psychological contract breach occurs, and employees may become less loyal, less trusting, inat- tentive to work, or otherwise dissatisfied with their employment situation.9 On the other hand, when employers present information in a credible, competent, and trustworthy manner, employees are more likely to be supportive of and committed to the organization. Therefore, employers and employees are the two groups that contribute to the development, maintenance, and evolution of the psychological contract at work. Table 8.1 provides an overview of what is needed for employee commitment to the firm and employer promises to the employee.

An employee’s perception of how well employer promises are kept provides an ongoing psychological assessment of the employment relationship, including whether the employee will choose to leave the organization, recommend it to others, or increase commitment to the employer. Recent research has revealed that the psychological contract is dynamic over the lifetime of an employment relation- ship. Steps in the dynamic process include creation, maintenance, renegotiation, and repair. Like other relationships, intentional maintenance is important, and there may be times when perceived violations of trust, miscommunication, goal incongruency, and other disruptive situations create the need for reconciliation and repair. In the latter cases, the employer’s timeliness and responsiveness

to employee concerns is one of the main predictors of the relationship’s health in the future. Experienced managers maintain open and transparent communication, so that issues are discussed and resolved before a serious breach in the psychological contract occurs.10 The promises, or induce- ments, made by the organization are valuable to nearly all employees, but one study of over 5,000 employees indicates this rank order for their importance to employees: (1) social atmosphere, (2) career development opportunities, (3) job content, (4) work/life balance, and (5) financial rewards. This same sample ranked the organizational fulfillment of these promises as: (1) job content, (2) social atmosphere, (3) work/life balance, (4) career development opportunities, and (5) financial rewards. Based on these results, it is clear that career development opportunities deserve more attention from managers to strengthen the psychological contract and pro- vide incentives for employee retention. Organizations that are able to implement their key promises so that employees view them as fulfilled reap rewards in terms of increased employee loyalty and decreased intentions to leave and/or search for a

psychological contract largely unwritten, it includes beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and the organizations that employ them

Table 8.1 The Psychological Contract Between Employee and Employer Employee Commitment Employer Promises

Loyalty to the company Respect from management

Teamwork and cooperation

Training opportunities

Compliance with policies Opportunity to advance

Ethical leadership and behavior

Adequate benefits

Protection of company resources

Fairness in work assignments

Volunteering to address challenges

Ethical culture

Solving problems independently

Financial rewards

Trust and confidentiality Work/life balance

C B P _ F errell_ C h08.indd 216 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 217

new employer.11 Employee engagement is the connection that employees have with their employers that influences behavior, effort, and commitment. Strong employee engagement is revealed through positive interactions with key stakehold- ers, especially customers, and ultimately has a positive influence on organizational success, as discussed in Chapter 1.12

Employee engagement is an international phenomenon that has caught the attention of leaders, managers, and researchers. Recently, more than 8 million employees in 1,000 companies around the world participated in a study of employee engagement. The study used the “Say, Stay, Strive” model for measuring engagement found in Table 8.2.

The annual survey results indicated that while engagement is increasing in many parts of the world, some areas are experiencing declining employee engagement. Declines were found in several Latin American countries, including Argentina, Brazil, and Mexico. Even with these declines, employees in the region maintain a relatively high level of engagement (75 percent) compared to the global average (65 percent). In contrast, results for employees in Algeria, South Africa, Nigeria, and other African nations has improved dramatically since 2011, when 52 percent of survey respondents indicated strong engagement. By 2017, this engagement was at 66 percent, even though some of these nations have experienced economic and social instability. In all likelihood, business leaders in Africa recognized the disruptive effects of instability and implemented methods to strengthen employee recruiting and retention efforts and fortify corporate cultures to withstand external pressures.13

Just as in other stakeholder relationships, expectations in the employment psychological contract are subject to a variety of influences. This section discusses how the contract has generally ebbed and flowed over the last 100 years. Even with these overarching trends, employers should be mindful of differences that may exist in particular industries, geographic regions, job types, and employee characteristics. Table 8.3 provides examples of the methods and programs that companies prioritize and implement to fulfill aspects of the psychological contract. These examples demonstrate that there is not a “one-size-fits-all” approach for meeting the needs and expectations of employees.

Until the early 1900s, the relationship between employer and employee was best characterized as a master-servant relationship.14 In this view, there was a natural imbalance in power that meant employment was viewed as a privilege that included few rights and many obligations. Employees were expected to work for the best interests of the organization, even at the expense of personal and family welfare. At this time, most psychologists and management scholars believed that good leadership required aggressive and domineering behavior.15 Images from Upton Sinclair’s novel The Jungle, which we discuss briefly in the next chapter, characterized the extreme negative effects of this employment contract.16

In the 1920s and 1930s, employees assumed a relationship with an employer that was more balanced in terms of power, responsibilities, and obligations. This shift meant that employees and employers were coequals, and in legal terms, employees had many more rights than under the master-servant model.17 Much of the employment law in the United States was enacted in the 1930s, when legisla- tors passed laws related to child labor, wages, working hours, and labor unions.18 Throughout the twentieth century, the employee-employer contract evolved along

employee engagement the connection that employees have with their employers that influences behavior, effort, and commitment

Table 8.2 Measuring Employee Engagement: Say, Stay, Strive If they Say positive things about their organization and act as advocates

If they intend to Stay at their organization for a long time

If they are motivated to Strive to give their best efforts to help the organization succeed

Source: AON, “2018 Trends in Global Employee Engagement,” http://images.transcontinentalmedia.com/LAF/lacom/ Aon_2018_Trends_In_Global_Employee_Engagement.pdf (accessed November 19, 2019).

C B P _ F errell_ C h08.indd 217 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

218 Business and Society

the coequals model, although social critics began to question the influence that large companies had on employees and the rest of society.

In the mid-twentieth century, companies exerted a more patriarchal approach to employees, which emphasized job security along with generous benefits, retire- ment income, and continuing professional development and growth. The concept of the “company man” was born out of this time frame, with television and movies depicting white-collar men working in stable and generous middle-class jobs in exchange for company loyalty.19 In 1951, the political commentator and soci- ologist C. Wright Mills criticized white-collar work as draining on employees’ time, energy, and even personalities. He also believed that individuals with business power were apt to keep employees happy in an attempt to ward off the development of stronger labor unions and unfavorable government regulations.20 A few years later, the classic book The Organization Man by William H. Whyte was published. This book examined the social nature of work, including the inherent conflict between belonging and contributing to a group on the job while maintaining a sense of independence and identity.21

Organizational researchers and managers in the 1960s began to question authoritarian behavior and consider participatory management styles that assumed that employees were motivated and eager to take responsibility for their work. A study by the U.S. Department of Health, Education, and Welfare in the early 1970s confirmed that employees wanted interesting work and a chance to demonstrate their skills. The report also recommended job redesign and managerial approaches that increased participation, freedom, and democracy at work.22 By the 1980s, a family analogy was being used to describe the workplace. This implied strong attention to employee welfare and prompted the focus on business ethics that have been explored in previous chapters of this book. At the same time, corporate mission statements touted the impor- tance of customers and employees, and In Search of Excellence, a best-selling book by Thomas J. Peters and business consultant Robert H. Waterman Jr., profiled companies with strong corporate cultures that inspired employees toward better work, products, and customer satisfaction.23 The total quality management (TQM) movement increased empowerment and teamwork on the job throughout the 1990s and led the charge toward workplaces simultaneously devoted to employee achievement at work and home.24

Although there were many positive initiatives for employees in the 1990s, the confluence of economic progress with demands for global competitiveness convinced many executives of the need for cost cutting. A common method for

Table 8.3 Methods That Companies Use to Fulfill Psychological Contracts Company Employee Promise

Google Child care

Starbucks Two years of college tuition

The Container Store Extensive employee training and higher pay

SAS Free on-site healthcare clinic

REI Provides annual surveys to employees to get feedback on employee engagement

Salesforce.com Employee recognition and reward programs for the company’s salespeople

Wegman’s Market Strong growth opportunities in the company

W. L. Gore and Associates Flat nonhierarchical business structure

Nvidia Reimbursement for student loan debt

Baird Reverse mentoring program pairs senior leaders with junior employees

Pinterest Fertility benefits and coverage of in vitro fertilization treatments

C B P _ F errell_ C h08.indd 218 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 219

cost reduction came in the form of outsourcing, which occurs when a company hires external parties to perform tasks and functions that had been previously performed by company employees. This practice has long been associated with plans to increase efficiencies, In the late 1930s and early 1940s, business writers exalted the practice of subcontracting as a way to ensure that the U.S. government had armament and other provisions to compete in World War II. Subcontracting takes place when one company hires external parties to perform specific tasks or functions in partial fulfillment of a larger contract. During World War II, subcontracting created an economic ripple effect, as small businesses became part of the supply chain and offered jobs when the country was in a state of austerity.25 Unlike subcontracting, outsourcing is used for traditional business functions, like payroll, information technology (IT), accounting, auditing, and other services that are largely independent of a company’s core business and mission. Outsourcing is positioned as a way for companies to reduce distractions as well as costs.26

For individuals accustomed to messages about the importance of employees to organizational success, workforce reduction was both unexpected and traumatic. These experiences effectively ended the loyalty- and commitment-based contract that employees had developed with employers. A study of young employees showed that their greatest psychological need in the workplace was security, but that they viewed many employers as “terminators.”27 By the time Barack Obama became president of the United States in 2009, his administration was facing an economy in terrible condition. By mid-2009, over 8 million employees had been laid off and recessionary effects loomed large. The Conference Board, which publishes the Employment Trend Index (ETI) monthly, announced the index was declining faster than at any other time in the 35-year history of the ETI. Eight indicators contribute to the index, including claims for unemployment insurance, number of part-time workers due to economic reasons, consumer confidence, industrial production, and manufacturing and trade sales, among others.

Although unemployment went as high as 10 percent during the Great Recession, the economy slowly began to recover. In 2015, unemployment had decreased to 5.3 percent, and the number of long-term unemployed individuals had been reduced. According to economists, it had been the slowest recovery in 55 years.28 By 2019, unemployment in the United States was below 5 percent, and some states, including Hawaii, reached unprecedented unemployment rates of 2! percent.29 For a state that depends heavily on tourism, low unemployment could mean that jobs in the retail, hospitality, and travel sectors go unfilled and the overall tourist experience diminishes. However, this particular unemployment rate in Hawaii was precipitated by a decline in tourism spending that resulted in job losses.30 This is a cautionary tale on the importance of assessing the overall health of the economy by multiple indicators. Unfortunately, recovery is often slower for minorities and individuals under the age of 30. In 2019, unemployment for younger adults aged 16 to 24 was 8 percent, double the national average.31 There are concerns that the opportunities for employment based on education and skills has diminished. For example, many college graduates experience underemployment in their first jobs. Underemployment occurs when employees are engaged in work that require skills or education below the qualifications of the employee. It also occurs when an employee wishes to work on a full-time basis but can find only a part-time position. Like unemployment, time-based underemployment leads to “enforced leisure,” a situation linked to increasing levels of stress, depression, and polarization in society.32

Workforce Reduction At different points in a company’s history, there are likely to be factors that beg the question, “How can we decrease our overall costs?”33 In a highly competitive business environment, where new companies, customers, and products emerge and disappear every day, there is a continuous push for greater organizational efficiency and effectiveness. This pressure often leads to difficult

outsourcing the practice of hiring an outside individual or organization to perform tasks and functions traditionally performed by company employees

subcontracting the practice of hiring an outside individual or organization to perform specific tasks and functions in partial fulfillment of a larger company contract

underemployment occurs when employees engage in work that requires skills or education below their qualifications, or when employees want to work on a full-time basis but can find only part-time positions

C B P _ F errell_ C h08.indd 219 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

220 Business and Society

decisions, including ones that require careful balance and consideration for the short-run survival and long-term vision of the company. This situation can create the need for workforce reduction, the process of eliminating employment positions. This places considerable pressure on top man- agement, causes speculation and tension among employees, and raises public ire about the role of business in society.34

There are several strategies that com- panies use to reduce overall costs and expenditures. For example, organizations may choose to reduce the number of employees, simplify products and pro- cesses, decrease quality and promises in service delivery, or develop some other mechanism for eliminating resources or

nonperforming assets. Managers may find it difficult to communicate about cost reductions, as this message carries both emotional and social risk. Employees may wonder, “What value do I bring to the company?” and “Does anyone really care about my years of service?” Customers may inquire, “Can we expect the same level of service and product quality?” Governments and the community may ask, “Is this really necessary? How will it affect our economy?” For all of these questions, company leadership must have a clear answer that should be based on a thorough analysis of costs within the organizational system and how any changes are likely to affect business processes and outcomes. In 2016, Intel reduced its global workforce by 11 percent. This is a decision that many large technology companies are facing as newcomers in the industry gain more market share.35

In the last two decades, many firms chose to adopt the strategy that also creates the most anxiety and criticism—the reduction of the workforce. Throughout the 1990s, the numbers were staggering, as Sears eliminated 50,000 jobs and Kodak terminated nearly 17,000 people. Economic decline and financial scandals in the first decade of the twenty-first century also created a wave of layoffs. General Motors (GM) cut thousands of jobs and needed government assistance just to stay afloat. These actions effectively signaled the “end of the old contract” that employees had with employers.36 These strategies, sometimes called downsizing or rightsizing, may entail employee layoffs, reorganizations, and related measures. In other cases, a company freezes new hiring, hopes for natural workforce attrition, offers incentives for early retirement, brings in consultants to analyze workloads, or encourages job sharing among existing employees.

There are three tactics for downsizing. We have already discussed workforce reduction through layoffs, retirement incentives, buyout packages, and transfers. Another tactic is organization redesign to eliminate organizational layers or func- tions and/or merge units. The third tactic is systemic redesign, which necessitates a major culture change, the simplification of processes, an emphasis on continuous improvement, and changes in employee responsibilities.37 The reality is that some employees will lose their current positions in one way or another. Thus, although workforce reduction may be the strategy chosen to control and reduce costs, it may have profound implications for the welfare of employees, their families, and the economic prospects of a geographical region and other constituents, as well as for the company itself.

As with other aspects of business, it is difficult to separate financial consider- ations for costs from other obligations and expectations that develop between a company and its stakeholders. Depending on a firm’s resource base and current financial situation, the psychological contract that exists between an employer and

workforce reduction the process of eliminating employment positions

downsizing the process of making permanent reductions in an organization’s labor force

rightsizing the process of reorganizing or restructuring an organization’s labor force

S hu

tt e

rs to

ck /f

iz ke

s

C B P _ F errell_ C h08.indd 220 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 221

employee is likely to be broken through layoffs, and the social contract between employers, communities, and other groups may also be threatened. Downsizing makes the private relationship between employee and employer a public issue that affects many stakeholders and subsequently draws heavy criticism.38 Fundamentally, top managers must recognize the many types of costs that occur through workforce reduction. These include costs associated with future talent and leadership, company morale, shareholder and analyst perceptions on Wall Street, and rehiring needs.39

The impact of the workforce reduction process depends on a host of factors, including corporate culture, long-term plans, and creative calculations on both quantitative and qualitative aspects of the workplace. Because few HR directors and other managers have extensive experience in restructuring the workforce, there are several issues to consider before embarking on the process.40 First, a comprehensive plan must be developed that takes into account the financial implications and the qualitative and emotional toll of the reduction strategy. This plan may include a systematic analysis of workflow so that management understands how tasks are currently completed and how they will be completed after restructuring. Second, the organization should commit to assisting employees who must make a career transition as a result of the reduction process. To make the transition productive for employees, this assistance should begin as soon as management is aware of possible reductions. Through the Worker Adjustment and Retraining Notification (WARN) Act, U.S. employers are required to give at least 60 days’ advance notice if a layoff will affect 500 or more employees or more than one-third of the workforce.41 Offering career assistance and other services is beneficial over the long term, as it demonstrates a firm’s commitment to social responsibility.

External factors also play a role in how quickly employees find new work and affect perceptions of a firm’s decision to downsize. Michigan launched an initiative called Community Ventures to connect the long-term unemployed with jobs. The public-private partnership provides support and resources to participants, includ- ing a success coach who offers assistance from job placement through at least one year of employment and services such as literacy training, networking connections, and transportation. Since its beginning, the initiative has put 6,600 hard-core unemployed into new jobs.42 Those unemployed for long periods of time are likely to experience feelings of discouragement and low morale. On the other hand, indi- viduals who are reemployed quickly, whether through company efforts or market circumstances, experience fewer negative economic and emotional repercussions. In addition, employees who are kept well informed about the downsizing process are more likely to retain a positive attitude toward the company, even if they experience job loss.43

Companies must be willing to accept the consequences of terminating employ- ees. Although workforce reduction can improve a firm’s financial performance, especially in the short run, there are costs to consider, including the loss of intel- lectual capital.44 The years of knowledge, skills, relationships, and commitment that employees develop cannot be easily replaced, and the loss of one employee can cost a firm between $50,000 and $100,000.45 So although workforce reduction lowers costs, it often results in lost knowledge and experience, strained customer relationships, negative media attention, and other issues that drain company resources. Employees who retain their jobs may suffer guilt, depression, or stress as a result of the reduction in the workforce. Thus, a long-term understanding of the qualitative and quantitative costs and benefits should guide downsizing decisions. Some researchers point to the lack of empirical evidence that workforce reduction actually leads to sustainable financial gains and performance. Investors’ reactions to downsizing announcements is critical because their immediate actions could drastically reduce a corporation’s stock value and trigger other negative outcomes. A recent study recommended that in order to hedge against the devastating effects,

social contract an implicit agreement between members of society that establishes the rights and duties of each party to the agreement

Worker Adjustment and Retraining Notification (WARN)!Act a federal law requiring that U.S. employers give at least 60 days’ advance notice if a layoff will affect 500 or more employees or more than one-third of the workforce

C B P _ F errell_ C h08.indd 221 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

222 Business and Society

companies introduce workforce reduction while firm performance is still strong, concurrent with the downsizing plans of other industry players, and when the macroeconomic outlook is improving.46

Although workforce reduction is a corporate decision, it is also important to recognize the potential role of employees in these decisions. Whereas hiring and job growth reached a frantic pace by the late 1990s, a wave of downsizings in the early 1990s and 2000s meant that some individuals had embraced the reality of having little job security. Instead of becoming cynical or angry, employees may have reversed roles and began asking, “What is this company doing for me?” and “Am I getting what I need from my employer?” Employees of all types began taking more responsibility for career growth, demanding balance in work and personal responsibilities, and seeking opportunities in start-up firms and emerging industries. Thus, although workforce reduction has negative effects, it has also shifted the psychological contract and power between employee and employer. The following suggestions examine how individuals can potentially mitigate the onset and effects of downsizing.

First, all employees should understand how their skills and competencies affect business performance. Not recognizing and documenting this relationship makes it more difficult to prove their worth to managers faced with workforce reduction deci- sions. Second, employees should strive for cost-cutting and conservation strategies, regardless of the employer’s current financial condition. This is a workforce’s first line of defense against layoffs—assisting the organization in reducing its costs before drastic measures are necessary. Third, today’s work environment requires that most employees fulfill diverse and varying roles. For example, manufacturing managers must understand the whole product development and introduction process, ranging from engineering to marketing and distribution activities. Thus, another way of ensuring worth to the company, and to potential employers, is through an employee’s ability to navigate different customer environments and organizational systems. It is now necessary to participate in cross-training, show flexibility, and learn the entire business, even if a company does not offer a formal program for gaining this type of experience and exposure to a variety of job duties. In particular, cross-training expands an employee’s ability to contribute in multiple roles. Although this advice may not prevent workforce reduction, it does empower employees against some of its harmful effects. Through laws and regulations, the government has also created a system for ensuring that employees are treated properly on the job. The next section covers the myriad of laws that all employers and employees should consider when making both daily and long-term strategic decisions.

Legal Issues Employment law is a very complex and evolving area. Most large companies and organizations employ HR managers and legal specialists who are trained in the detail and implementation of specific statutes related to employee hiring, compensation, benefits, safety, and other areas. Smaller organizations often send HR managers to workshops and conferences to keep abreast of legal imperatives in the workplace. Table 8.4 lists the major federal laws that cover employer responsibilities with respect to wages, labor unions, benefits, health and safety, equal opportunity, and other areas. Most of these laws are overseen and enforced by the Department of Labor, the federal agency charged with, among other things, promoting the welfare of wage earners, job seekers, and retirees and improving working conditions and opportunities for employment. Until the early 1900s, employment was primarily governed by the concept of employment at will, a common-law doctrine that allows either the employer or the employee to terminate the relationship at any time, so long as it does not violate an employment contract or law. Today, many states still use the employment-at-will philosophy, but laws and statutes may limit

cross-training the process of ensuring that employees have the knowledge and skills to perform more than a single set of job duties

Department of Labor the U.S. federal agency charged with fostering, promoting, and developing the welfare of wage earners, job seekers, and retirees in the United States; improving working conditions; advancing opportunities for profitable employment; and assuring work- related benefits and rights

employment at will a common-law doctrine that allows either the employer or the employee to terminate the relationship at any time, so long as it does not violate an employment contract so long as it does not violate an employment contract or law

C B P _ F errell_ C h08.indd 222 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 223

total discretion in this regard.47 The following discussion highlights employment laws and their fundamental contribution to social responsibility.48

Wages and Benefits After the Great Depression in the 1920s, the U.S. Congress enacted a number of laws to protect employee rights and extend employer responsibilities. The Fair Labor Standards Act (FLSA) of 1938 prescribed minimum wage and overtime pay, recordkeeping, and child labor standards for most private and public employers. The federal minimum wage is set by the U.S. government and is periodically revised, although states have the option to adopt a higher standard. For example, the federal minimum wage was raised from $6.55 per hour to $7.25 per hour in 2009. The minimum wage has been changed over 30 times since it was first introduced in the 1930s. Table 8.5 documents many of the changes that have been authorized in the minimum wage since that time.

In 2013, the Fair Minimum Wage Act was introduced. It proposed that the federal minimum wage be raised to $10.10 per hour, but it did not pass. Various members of Congress, including the U.S. Chamber of Commerce, have proposed a $15 per hour minimum wage. Conversely, other members of the U.S. Congress and aligned opponents are worried that a substantial minimum wage increase would lead to job losses or higher prices for consumers. The nonprofit Empire

minimum wage the lowest hourly wage that may be legally paid to employees

Table 8.4 Major Employment Laws Act (Date Enacted) Purpose

National Labor Relations Act (1935) Established the rights of employees to engage in collective bargaining and to strike.

Fair Labor Standards Act (1938) Established minimum wage and overtime pay standards, recordkeeping, and child labor standards for most private and public employers.

Equal Pay Act (1963) Protects women and men who perform substantially equal work in the same establishment from gender-based wage discrimination.

Civil Rights Act, Title VII (1964) Prohibits employment discrimination on the basis of race, national origin, color, religion, and gender.

Age Discrimination in Employment Act (1967)

Protects individuals aged 40 or older from age-based discrimination.

Occupational Safety and Health Act (1970)

Ensures safe and healthy working conditions for all employees by providing specific standards that employers must meet.

Employee Retirement Income Security Act (1974)

Sets uniform minimum standards to ensure that employee benefit plans are established and maintained in a fair and financially sound manner.

Americans with Disabilities Act (1990)

Prohibits discrimination on the basis of physical or mental disability in all employment practices and requires employers to make reasonable accommodation to make facilities accessible to and usable by persons with disabilities.

Family and Medical Leave Act (1993) Requires certain employers to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for certain family and medical reasons.

Uniformed Services Employment and Reemployment Rights Act (1994)

The preservice employer must reemploy service members returning from a period of service in the uniformed services if those service members meet five criteria.

Patient Protection and Affordable Care Act (2010)

Among other provisions, makes healthcare affordable and universal so that all employees and Americans have access to it.

Source: U.S. Department of Labor, Employment Law Guide, https://webapps.dol.gov/elaws/elg/ (accessed June 15, 2019).

C B P _ F errell_ C h08.indd 223 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

224 Business and Society

Center for New York State Policy has concerns that increasing the minimum wage too much will lead to increased costs for businesses, leading to a major detrimental impact on smaller businesses.49

As demonstrated, the minimum wage remains a highly debated topic, especially since it roughly corresponds to federal poverty guidelines and not the actual cost of living. According to the Department of Labor, a two-person household with a combined annual income of less than $16,910 is at the poverty level. Employees in full-time jobs being paid at minimum wage earn just over $15,000 a year. Many workers are not earning enough to make ends meet and, along with activist groups, are calling for a living wage approach to worker compensation. Living wages take into account the costs associated with basic necessities such as food, clothing, housing, transporta- tion, and healthcare. Living wage calculators, like the one found at http:// livingwage.mit.edu/, incorporate actual costs, which vary dramatically from state to state and city to city. Advocates for a living wage point to the ethical obligations associated with employees and society.50 While many states abide by the federal standard, others, including Alaska, Arkansas, California, Florida, Massachusetts, Oregon, Vermont, and Washington have adopted a higher minimum wage. Most employees who work more than 40 hours per week are entitled to overtime pay, amounting to one and a half times their

regular pay. There are exemptions to the overtime pay provisions for four classes of employees: executives, outside salespeople, administrators, and professionals.51

The FLSA also affected child labor, including the provision that individuals under the age of 14 are allowed to do only certain types of work, such as delivering newspapers and working in their parents’ businesses. Children under age 16 are often required to get a work permit, and their work hours are restricted so that they can attend school. Persons between the ages of 16 and 18 are not restricted in terms of number of work hours, but they cannot be employed in hazardous or dangerous positions. Although passage of the FLSA was necessary to eliminate abusive child labor practices, its restrictions may become somewhat problematic when unemployment rates are extremely low. Some business owners may have even considered lobbying for relaxed standards in very restrictive states so that they could hire more teens. In addition, general FLSA restrictions have created problems in implementing job-sharing and flextime arrangements with employees who are paid on an hourly basis.52

Two other pieces of legislation relate to employer responsibilities for benefits and job security. The Employee Retirement Income Security Act (ERISA) of 1974 set uniform minimum standards to ensure that employee benefit plans are

established and maintained in a fair and financially sound manner. ERISA does not require companies to establish retire- ment pension plans; instead, it developed standards for the administration of plans that management chooses to offer employees. A key provision relates to vesting, the legal right to pension plan benefits. In general, contributions an employee makes to the plan are vested immediately, whereas company contribu- tions are vested after five years of employ- ment. ERISA is a very complicated aspect of employer responsibilities because it involves tax law, financial investments, and plan participants and beneficiaries.53

The Family and Medical Leave Act (FMLA) of 1993 requires certain

living wage an hourly wage on which it is possible to live according to minimum standards

vesting the legal right to pension plan benefits

S hu

tt e

rs to

ck /T

e rn

av sk

ai a

O lg

a A

lib e

c

Table 8.5 History of the Minimum Wage Year Hourly Wage

1938 $!0.25

1939 $!0.30

1950 $!0.75

1961 $ 1.15

1968 $ 1.60

1977 $!2.30

1981 $!3.35

1997 $!5.15

2007 $!5.85

2009 $!!!!7.25

Source: U.S. Department of Labor, “History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938–2009,” https://www.dol.gov/whd/minwage/chart.htm (accessed June 15, 2019).

C B P _ F errell_ C h08.indd 224 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 225

employers to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for certain family and medical reasons. Typical reasons for this type of leave include the birth or adoption of a child, personal illness, or the serious health condition of a close relative. However, if the employee is paid in the top 10 percent of the entire workforce, the employer does not have to reinstate him or her in the same or a comparable position.54 The FMLA applies to employers with 50 or more employees, which means that its provisions do not cover a large number of U.S. employees. In addition, employees must have worked at least one year for the firm and at least 25 hours per week during the past year before the FMLA applies.

Labor Unions In one of the earliest pieces of employment legislation, the National Labor Relations Act (NLRA) of 1935 legitimized the rights of employees to engage in collective bargaining and to strike. Collective bargaining allows a group of employees, through their unions, to negotiate employment contracts and conditions with their employers. This law was originally passed to protect employee rights, but subsequent legislation gave more rights to employers and restricted the power of unions. Before the NLRA, many companies attempted to prohibit their employees from creating or joining labor organizations altogether. Employees who were members of unions were often discriminated against in terms of hiring and retention decisions. This act sought to eliminate the perceived imbalance of power between employers and employees. Through unions, employees gained a collective bargaining mechanism that enabled greater power on several fronts, including wages and safety.55 For example, in a series of strikes against Walmart, members of the Organization for United Respect at Walmart (OUR Walmart), founded by the United Food and Commercial Workers (UFCW) union, called for the retailer to offer employees a minimum of $25,000 per year and enough hours for workers to support their families, ensure no more retaliation against those making these requests, and provide fair treatment to pregnant workers. When the strikes were ongoing, they had the following results: Walmart agreed to a $21 million settlement regarding wages in one of its warehouses, the U.S. government initiated prosecutions regarding illegal firing of workers, and the city of Portland cut ties with the retailer.

Health and Safety In 1970, the Occupational Safety and Health Act (OSHA) sought to ensure safe and healthy working conditions for all employees by provid- ing specific standards that employers must meet. This act led to the development of the Occupational Safety and Health Administration (OSHA), the agency that oversees the regulations intended to make U.S. workplaces the safest in the world. In its more than 50 years of existence, OSHA has made great strides to improve and maintain the health and safety of employees. For example, since the 1970s, the workplace death rate in the United States has been reduced by more than 60!per- cent, and the agency’s initiatives in cotton dust and lead standards have reduced disease in several industries. The agency continues to innovate and uses feedback systems for improving its services and standards. As more Spanish-speaking workers entered the workforce, officials were concerned about their understanding of the agency and their rights in the workplace. In response, OSHA translated a variety of its documents into Spanish and posted them onto a prominent place on its website.56 OSHA has the authority to enter and make inspections of most employers.

Because of its far-reaching power and unwarranted inspections made in the 1970s, the agency’s relationship with business has not always been positive. For example, OSHA proposed rules to increase employer responsibility for ergonomics, the design, arrangement, and use of equipment to maximize productivity and minimize fatigue and physical discomfort. Without proper attention to ergonom- ics, employees may suffer injuries and long-term health issues as a result of work motion and tasks. Many business and industry associations initially opposed the proposal, citing enormous costs and unsubstantiated claims. A federal ergonomics

collective bargaining a negotiating process where employees work through their unions to establish employment contracts and conditions with their employers

Occupational Safety and Health Administration (OSHA) the U.S. government agency charged with ensuring safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance

ergonomics the design, arrangement, and use of equipment to maximize productivity and minimize fatigue and physical discomfort

C B P _ F errell_ C h08.indd 225 12/9/2019 6:32:58 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

226 Business and Society

rule was established during Bill Clinton’s presidency in the 1990s but was repealed by his successor, President George W. Bush. However, the issue continues to be raised on the regulatory agenda. OSHA has focused its ergonomics efforts on developing guidelines for specific industries, including poultry processing, beverage distribution, nursing homes, and retail grocery stores. Individual states, such as Alaska, Washington, and California, have implemented their own ergonomics rules.57 Despite differences between this federal agency and some states and companies on a number of regulations, most employers are required to display the poster shown in Figure 8.1, or one required by their state safety and health agency. Gildan Activewear Inc., a manufacturer and marketer of clothing, developed a program to improve ergonomic practices and reduce injuries. The program includes access to in-house clinics, stretching and exercise sessions, and opportunities for consultation on back and shoulder health. This is particularly important because repetitive actions in the sewing industry are common and prolonged repetitive actions can lead to injury over time.58

Figure 8.1 Job Safety and Health Protection Poster

Source: Occupational Safety and Health Administration, “OSHA’s Free Workplace Poster,” https://www.osha.gov/ Publications/poster.html (accessed June 15, 2019).

C B P _ F errell_ C h08.indd 226 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 227

An emerging issue in the area of health and safety is the increasing rate of violence in the workplace. According to OSHA, 2 million workers are assaulted, and over 450 are the victim of homicide in the workplace every year.59 A 2019 survey of Fortune 1000 companies indicated that workplace violence is one of the most important security issues they face, costs up to $36 billion annually, and results in three deaths daily and thousands of injuries each year. Organizations in particular industries, including public service, law enforcement, healthcare, and transportation and delivery, are particularly susceptible to conditions associated with violence in the workplace.60

The Society for Human Resource Management (SHRM) has identified four types of workplace violence: (1) crimes committed by strangers and intruders in the workplace; (2) acts committed by nonemployees, such as customers, patients, students, and clients; (3) violence committed by coworkers; and (4) incidents involving those with a personal relationship with an employee.61 Taxi drivers, ride-share drivers, and clerks working late-night shifts at convenience stores are often subject to the first type of violence. Airline attendants are increasingly experiencing the second category of workplace violence when passengers become unruly, drunk, or otherwise violent during a flight. Nurses and customer service associates also experience verbal and sometimes physical violence from angry patients and customers.

Many instances abound of employee-related workplace violence. A worker at a lawn care company in Kansas opened fire, killing three people and injuring an additional 16. The shooter himself was shot by a police officer. In a similar incident, an engineer for the city of Virginia Beach opened fire and killed 12 people in a city building. The shooter worked for the public utilities department.62 Today, many organizations are developing emergency response plans and conducting workplace shooter training in order to decrease the number of fatalities in these types of violent situations. Although crimes reflect general problems in society, employers have a responsibility to assess risks and provide security, training, and safeguards to protect employees and other stakeholders from such acts. Companies often purchase insurance policies to cover the costs of workplace violence, including business interruption, psychological counseling, informant rewards, and medical claims related to injuries. Experts recommend that all organizations publish and communicate an antiviolence policy and make employees and manag- ers aware of warning signs of possible workplace violence by current employees, such as alcohol and drug use, visible signs of stress, disciplinary and termination proceedings, isolation, and others.63

Equal Opportunity Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of race, national origin, color, religion, and gender. This law is fundamental to employees’ rights to join and advance in an organiza- tion according to merit rather than one of the characteristics just mentioned. For example, employers are not permitted to categorize a job as only for men or women unless there is a reason that gender is fundamental to the job’s tasks and responsibilities. For example, a men’s fashion company is able to hire male models exclusively. Additional laws passed in the 1970s, 1980s, and 1990s were designed to prohibit discrimination related to pregnancy, disabilities, age, and other factors. The Americans with Disabilities Act (ADA) prohibits companies from discriminating on the basis of physical or mental disability in all employ- ment practices and requires them to make facilities accessible to and usable by persons with disabilities. The Pregnancy Discrimination Act, now more than 30 years old, was created to help protect the rights of mothers and mothers-to-be in the workplace. The act has been modified many times since its inception. As a result, the number of pregnancy discrimination complaints filed with the Equal Employment Opportunity Commission (EEOC), discussed in earlier chapters, has

C B P _ F errell_ C h08.indd 227 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

228 Business and Society

continually decreased over the years.64 Figure 8.2 depicts the number of complaints and resolutions of pregnancy discrimination cases from 2015 through 2018.

These legal imperatives require that companies formalize employment prac- tices to ensure that no discrimination is occurring. Thus, managers must be fully aware of the types of practices that constitute discrimination and work to ensure that hiring, promotion, annual evaluation, and other procedures are fair and based on merit. The spread of HIV and AIDS has prompted multinational firms with operations in Africa to distribute educational literature and launch prevention programs. Some companies work with internal and external stakeholders and even fund medical facilities that help prevent the disease and treat HIV/AIDS patients. Another component to their initiatives involves education on fair treatment of employees with the disease. Multinational companies in Mexico, for instance, produced a written commitment to eliminate the stigma and discrimination that often surrounds HIV/AIDS in the workplace.65

To ensure that they build balanced workforces, many companies have initiated affirmative action programs, which involve efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against on the basis of race, sex, or other characteristics. Coca-Cola established a program to create a level foundation so that all employees have access to the same informa- tion and development opportunities.66 A key goal of these programs is to reduce any bias that may exist in hiring, evaluating, and promoting employees. A special type of discrimination, sexual harassment, is also prohibited through Title VII.

Sexual Harassment The flood of women into the workplace during the last half of the twentieth century brought new challenges and opportunities for organizations. Although harassment has probably always existed in the workplace, the presence of both genders in roughly equal numbers changed norms and expectations of behavior. When men dominated the workplace, photos of partially nude women or sexually suggestive materials may have been posted on walls or in lockers. Today, such materials could be viewed as illegal if they contribute to a work environment that is intimidating, offensive, or otherwise interfering with an employee’s work performance. The U.S. government indicates the nature of this illegal activity: unwelcome sexual advances, requests for sexual favors, and

Figure 8.2 Growth in Filings and Resolutions of Pregnancy Discrimination Act Complaints to the EEOC

Source: U.S. Equal Employment Opportunity Commission, “Pregnancy Discrimination Charges,” https://www.eeoc.gov/ eeoc/statistics/enforcement/pregnancy_new.cfm (accessed June 19, 2019).

Receipts Resolutions 0

500

1000

1500

2000

2500

3000

3500

4000

2015 2016

2017 2018

C B P _ F errell_ C h08.indd 228 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 229

other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile, or offensive work environment.67

Prior to 1986, sexual harassment was not a specific violation of federal law in the United States. In Meritor Savings Bank v. Vinson, the U.S. Supreme Court ruled that sexual harassment creates a “hostile environment” that violates Title VII of the Civil Rights Act, even in the absence of economic harm or demand for sexual favors in exchange for promotions, raises, or related work incentives.68 In other countries, sexual harassment in the workplace is considered an illegal act, although the specific conditions may vary by legal and social culture. Until recently, Mexican sexual harassment law protected public-sector employees only if their jobs were jeopardized on the basis of the exchange of sexual favors or relations. In the European Union (EU), sexual harassment legislation focuses on the liability that employers carry when they fail to create a workplace culture free of harassment and other forms of discrimination. The EU has strengthened its rules on sexual harassment, including definitions of direct and indirect harassment, the removal of an upper limit on victim compensation, and the requirement that businesses develop and make “equality reports” available to employees.69

There are two general categories of sexual harassment: quid pro quo and hostile work environment.70 Quid pro quo sexual harassment is a type of sexual extortion where there is a proposed or explicit exchange of job benefits for sexual favors. For example, telling an employee, “You will get the promotion if you spend the weekend with me in Las Vegas,” is a direct form of sexual harassment. Usually, the person making such a statement is in a position of authority over the harassed employee, and thus, the threat of job loss is real. One incident of quid pro quo harassment may create a justifiable legal claim. Hostile work environment sexual harassment is less direct than quid pro quo harassment and can involve epithets, slurs, negative stereotyping, intimidating acts, graphic materials that show hostility toward an individual or group, and other types of conduct that affect the employment situation. For example, at one automobile manufacturing plant, male employees drew inappropriate sexually explicit pictures on cars before they were painted. This was found to be sexual harassment. An email containing sexually explicit jokes that is sent out to employees could be viewed as contribut- ing to a hostile work environment. Some hostile work environment harassment is nonsexual, meaning the harassing conduct is based on gender without explicit ref- erence to sexual acts. For example, in Campbell v. Kansas State University (1991), the U.S. District Court for the District of Kansas found repeated remarks about women “being intellectually inferior to men” to be part of a hostile environment. Unlike quid pro quo cases, one incident may not justify a legal claim. Instead, the courts will examine a range of acts and circumstances to determine if the work environment was intolerable and the victim’s job performance was impaired.71

From a social responsibility perspective, a key issue in both types of sexual harassment is the employing organization’s knowledge and tolerance of these types of behaviors. A number of court cases have shed more light on the issues that constitute sexual harassment and organizations’ responsibility in this regard.

In Harris v. Forklift Systems (1993), Teresa Harris claimed that her boss at Forklift Systems made suggestive sexual remarks, asked her to retrieve coins from his pants pocket, and joked that they should go to a motel to “negotiate her raise.” Courts at the state level threw out her case because she did not suffer major psychological injury. The U.S. Supreme Court overturned these decisions, though, ruling that employers can be forced to pay damages even if the worker suffered no proven psychological harm. This case brought about the “reasonable person” standard in evaluating what conduct constitutes sexual harassment. From this case, juries now evaluate the alleged conduct with respect to commonly held beliefs and expectations.72

sexual harassment unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature which, when submitted to or rejected, explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile, or offensive work environment

quid pro quo sexual harassment a type of sexual extortion where there is a proposed or explicit exchange of job benefits for sexual favors

hostile work environment sexual harassment a type of sexual harassment that involves epithets, slurs, negative stereotyping, intimidating acts, graphic materials that show hostility toward an individual or group, and other types of conduct that affect the employment situation

C B P _ F errell_ C h08.indd 229 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

230 Business and Society

Several firms have been embroiled in sexual harassment suits. For example, Sterling Jewelers, the parent company of Kay Jewelers and Jared the Galleria of Jewelry, is accused of discrimination against women for a period of over ten years. The class-action suit, which at one point involved about 70,000 women, could result in substantial punitive damages and fines.73 In another case, a jury awarded the victim $95 million in damages due to years of experiencing severe sexual harassment by a manager at the furniture rent-to-own store, Aarons Inc. The manager’s behavior encouraged other male employees to harass the victim as well, creating a hostile workplace. To make matters worse, the company neglected to respond to the victim when she left a message on their hotline.74

U.S. Supreme Court decisions on sexual harassment cases indicate that (1) employers are liable for the acts of supervisors; (2) employers are liable for sexual harassment by supervisors that culminates in a tangible employment action (loss of job, demotion, etc.); (3) employers are liable for a hostile environment created by a supervisor but may escape liability if they demonstrate that they exercised reasonable care to prevent and promptly correct any sexually harassing behavior and that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective measures offered by the employer; and (4) claims of hostile environment sexual harassment must be severe and pervasive to be viewed as actionable by the courts.75

Much like the underlying philosophy of the Federal Sentencing Guidelines for Organizations (FSGO) that we discussed in earlier chapters, these decisions require top managers in organizations to take the detection and prevention of sexual harassment seriously. To this end, many firms have implemented programs on sexual harassment. To satisfy current legal standards and set a higher standard for social responsibility, employees, supervisors, and other close business partners should be educated on the company’s zero tolerance policy against harassment. Employees must also be educated on the policy prohibiting harassment, including the types of behaviors that constitute harassment, how offenders will be punished, and what employees should do if they experience harassment. Just like an organi- zational compliance program, employees must be assured of confidentiality and no retaliation for reporting harassment.

Training on sexual harassment should be balanced in terms of legal definitions and practical tips and tools. Although employees need to be aware of the legal issues and ramifications, they also may need assistance in learning to recognize and avoid behaviors that may constitute quid pro quo harassment, create a hostile environment, or appear to be retaliatory in nature. In fact, retaliation claims have more than doubled since the early 1990s, prompting many companies to incor- porate this element into sexual harassment training. Finally, employees should be aware that same-sex conduct may also constitute sexual harassment.76 Sexual harassment from women to their male subordinates is yet another issue. One law enforcement officer in Texas won a lawsuit against his female boss after claiming that she frequently wanted sexual favors and touched him inappropriately.77 Table 8.6 lists facts about sexual harassment that should be used in company communication and training on this workplace issue.

Whistleblowing An employee who reports individual or company wrong- doing to either internal or external sources is considered a whistleblower.78 Whistleblowers usually focus on issues or behaviors that need corrective action, although managers and other employees may not appreciate reports that expose company weaknesses, raise embarrassing questions, or otherwise detract from organizational tasks. Although not all whistleblowing activity leads to an extreme reaction, whistleblowers have been retaliated against, demoted, fired, and subject to even worse consequences as a result of their actions.79 For example, Eddie Garcia, an energy specialist work- ing for Santa Fe County in New Mexico, was accused of grand larceny and was fired from his job after pointing out improper conduct on the part of an exclusive

zero tolerance the practice of applying penalties to even minor infractions of policy

C B P _ F errell_ C h08.indd 230 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 231

government contractor. Garcia revealed to his supervisors that the contractor had double-billed the county and was failing to obtain the required permits for work. When they did not respond, he expressed his concerns to the media, which spurred retaliation from his employer. In the end, the charges against Garcia were dropped and he was awarded $180,000 in settlement fees, but he suffered personal and professional hardship for five years as a result.80

Whistleblowers do have legal protections. The federal government and most state governments in the United States have enacted a number of measures to protect whistleblowers from retaliation. The Whistleblower Protection Act of 1986 shields federal employees from retaliatory behavior; the Sarbanes-Oxley Act provides solid protection to whistleblowers and strong penalties for those who retaliate against them; and other legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act has provisions to reward whistleblowers for revealing illegal behavior. Even with this protection, most reported misconduct to the government does not result in an investigation. Most internal and external whistleblowers are not legal experts and use their own judgment about an issue. Therefore, it is important to know the facts and conduct research before reporting.

Ethical Issues Laws are imperative for social responsibility. The ethical climate of the workplace, however, is values-driven and dependent on top management leadership and corpo- rate culture. In this section, we examine several trends in employment practices that have not fully reached the legal realm. Company initiatives in these areas indicate a corporate philosophy or culture that respects and promotes certain ethical values.

Training and Development As discussed in Chapter 6, “Business Ethics and Ethical Decision-Making,” organizational culture and the associated values, beliefs, and norms operate on many levels and affect a number of workplace practices. Organizations should value employees as individuals, not just as functional units

Table 8.6 Sexual Harassment in the Workplace Sexual harassment is a form of sex discrimination that violates Title VII of the Civil Rights Act of 1964.

Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile, or offensive work environment.

Sexual harassment can occur in a variety of circumstances, including but not limited to the following:

• The victim as well as the harasser may be a woman or a man. The victim does not have to be of the opposite sex.

• The harasser can be the victim’s supervisor, an agent of the employer, a supervisor in another area, a coworker, or a nonemployee.

• The victim does not have to be the person harassed, but could be anyone affected by the offensive conduct.

• Unlawful sexual harassment may occur without economic injury to or discharge of the victim. • The harasser’s conduct must be unwelcome.

It is helpful for the victim to inform the harasser directly that the conduct is unwelcome and must stop. The victim should use any employer complaint mechanism or grievance system available.

When investigating allegations of sexual harassment, the EEOC looks at the whole record: the circumstances, such as the nature of the sexual advances, and the context in which the alleged incidents occurred. A determination of the allegations is made from the facts on a case-by-case basis.

Source: U.S. Equal Employment Opportunity Commission, “Facts About Sexual Harassment,” http://www.eeoc.gov/eeoc/ publications/fs-sex.cfm (accessed June 15, 2019).

C B P _ F errell_ C h08.indd 231 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

232 Business and Society

to do work. Firms with this ethical stance fund initiatives to develop employees’ skills, knowledge, and other personal characteristics. Although this development is linked to business strategy and aids the employer, it also demonstrates a com- mitment to the future of the employee and his or her interests. Jiffy Lube has been listed as number one for Training Magazine’s list of top 125 employee training programs. It was selected for focused approach on training on topics including customer service, leadership, and new services. Its training program is credited with helping the organization increase approval ratings by 93 percent.81

Professionals also appreciate and respect a training and development focus from their employers. For example, the University of California, Berkeley incorporates an Individual Development Plan (IDP) component into their professional employee training program. The IDP is a one-on-one mentoring process between the employee and supervisor, in which they discuss setting specific goals, how to reach them, and overcoming obstacles.82 These organizations are enjoying many benefits from employee training and development, including stronger employee recruitment and retention strategies. Indeed, there is a link between investments in employees and the amount of commitment, job satisfaction, and productivity demonstrated by them. Happier employees tend to stay with their employer and to better serve coworkers, customers, and other constituents, which has a direct bearing on the quality of relationships and financial prospects of a firm. Leadership training is also critical, as the main reason that employees leave a company is poor or unskilled management and leadership, not salary, benefits, or related factors. In exit interviews, departing employees often mention their desire for more meaningful feedback and steady communication with managers.83

Employees recognize when a company is diligently investing in programs that not only improve operations, but also increase their empowerment and provide new opportunities to improve their knowledge and grow professionally. Through formal training and development classes, workers get a better sense of where they fit and how they contribute to the overall organization. This understanding empowers them to become more responsive, accurate, and confident in workplace decisions. Training also increases ethical decision-making skills, accountability, and responsibility, reducing micromanaging or “hand-holding.” All these effects contribute to the financial and cultural health of an organization.84 Thus, a com- mitment to training enables a firm to enhance its organizational capacity to fulfill stakeholder expectations.

Training and development activities require sufficient resources and the com- mitment of all managers to be successful. For example, a departmental manager must be supportive of an employee using part of the workday to attend a training session on a new software package. At the same time, the organization must pay for the training, regardless of whether it uses inside or outside trainers and devel- ops in-house materials or purchases them from educational providers. A study by the Association for Talent Development indicates that, on average, employers in the U.S. spend about $1,296 per employee on training every year, and employees engaged in approximately 34.1 hours of annual learning. The survey also tracked the major topics offered to employees. Over 45 percent of material fell into the following main topics: managerial and supervisory; mandatory and compliance; processes, procedures, and business practices; and interpersonal skills.85Another area that has received much attention in the United States involves support for outside education. For example, Starbucks partnered with Arizona State University to offer tuition coverage for eligible employees to earn their bachelor’s degrees.86

Diversity and Inclusion Whereas Title VII of the Civil Rights Act grants legal protection to different types of employees, initiatives in workplace diversity focus on recruiting and retaining a diverse workforce as a business imperative.87 With diversity programs, companies assume an ethical obligation to employ

workplace diversity recruiting and retaining individuals regardless of age, gender, ethnicity, physical or mental ability, or other characteristics

C B P _ F errell_ C h08.indd 232 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 233

and empower individuals regardless of age, gender, ethnicity, physical or mental ability, or other characteristics. These firms go beyond compliance with govern- ment guidelines to develop cultures that respect and embrace the unique skills, backgrounds, and contributions of all types of people. Thus, legal statutes focus on removing discrimination, whereas diversity represents a leadership approach for cultivating and appreciating employee talent.88

Firms with an effective diversity effort link their diversity mission state- ment with the corporate strategic plan, implement plans to recruit and retain a diverse talent pool, support community programs of diverse groups, hold management accountable for various types of diversity performance, and have tangible outcomes of their diversity strategy. Each firm must tailor their diversity initiative to meet unique employee, market, and industry conditions. To ensure effectiveness, many large corporations have hired chief diversity officers (CDOs) to move diversity to the forefront of decision-making, outcomes assessment, and resource allocation. By having CDOs in high-ranking positions, these firms are signaling their commitment to core values associated with tolerance, respect, and transparency. Several studies have found that companies led by women are more likely to employ CDOs than those led by men. This may be explained by the fact that women are underrepresented in corporate executive roles, and thus may have been outsiders on their way up the leadership ranks. Andrea Jung, the former CEO of Avon, reflected that she was often the only woman and the only person of Asian origin in meetings with other senior leaders.89 Jung expressed the theory of intersectionality, which considers the multidimensional nature of identity and resulting effects on social dynamics. Catalyst, a nonprofit organization, recently surveyed 1,600 people who identify as Asian, African-American, and Latino about intersectionality in the workplace, specifically as a form of emotional tax. More than half of the respondents indicated that they felt “on guard,” with women more likely to report greater stress about racial bias than gender bias at work.90

Many firms embrace employee diversity to deal with supplier and customer diversity. Their assumption is that to effectively design, market, and support products for different target groups, a company must employ individuals who reflect its customers’ characteristics.91 Organizations and industries with a populationwide customer base may use national demographics for assessing their diversity effort. Kaiser Permanente uses a dashboard to assess the links between its senior-executive compensation and diversity. It is mandatory for company recruit- ers to present diverse slates of candidates for open positions.92 As demographics in the United States continue to shift, companies are faced with reconsidering their marketing and hiring strategies, including the link between employee and customer characteristics. The sharp growth in the Hispanic population is one of the most important demographic shifts recorded. This has prompted firms to hire Hispanic employees and consultants and tailor their offerings to this demographic. Clorox and General Mills, for instance, are appealing to Hispanics with bilingual advertisements via mobile apps.93

As discussed in Chapter 1, there are opportunities to link social responsibility objectives with business performance, and many firms are learning the benefits of employing individuals with different backgrounds and perspectives. For example, at New York Life, diversity is treated like all other business goals. The company employs a CDO to create accountability and inclusion strategies with employees, suppliers, community members, and other stakeholders.94 Hewlett-Packard (HP), a multinational IT company, is committed to including people with disabilities in their workplace. The company was named Private-Sector Employer of the Year by CAREERS & the disABLED Magazine, a publication that provides career advice for people with disabilities. HP was recognized by the magazine’s readers for providing a positive environment in which to work. The company values diversity and believes that this component of their culture allows them to innovate in ways

chief diversity officer (CDO) the corporate executive responsible for diversity and inclusion initiatives and results

intersectionality theory a theory which focuses on the multidimensional nature of identity, including class, gender, and race, and its effects on social dimensions of differences

C B P _ F errell_ C h08.indd 233 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

234 Business and Society

that less diverse companies cannot do. In addition, HP designs goods and services that are informed by its diverse workforce.95 Organizations with an intentional commitment and sustainable outcomes with diversity management progress toward workplace inclusion, a culture that ensures that policies, procedures, and practices are fair, transparent, supportive, and empowering for all employees.96

Conflicting views and voices of different generations abound in the workplace, and this is the first time in history that the workforce has been composed of so many generations at one time. Generations have worked together in the past, but these groups were usually divided by organizational stratification. Many workplaces now include members of multiple generations working shoulder to shoulder. The result may be greater dissension among the age groups than when they were stratified by the organizational hierarchy. Because employees serve an important role in the social responsibility framework, managers need to be aware of generational differences and their potential effects on teamwork, conflict, and other workplace behaviors. Table 8.7 lists the four generations present in today’s workplace, as well as their key characteristics.

Baby boomers are service oriented, good team players, and want to please. However, they are also known for being self-centered, overly sensitive to feedback, and not budget-minded. People in Generation X are adaptable, technologically literate, independent, and unintimidated by authority. However, their liabilities include impatience, cynicism, and inexperience. Generation Y, whose members are also called Millennials, is a technologically savvy group. In addition, they bring the assets of collective action, optimism, multitasking ability, and tenacity to the workplace. However, they also have the liabilities of inexperience, especially with difficult people issues, and a need for supervision and structure. Members of Generation Z are relatively new to the workplace, with many still in high school and college. This generation is very diverse, aware of social justice issues, and on track to becoming the most highly educated group in the workplace.

Although generational issues have always existed in the workforce, there are some new twists today. The older generations no longer have all the money and power. Times of anxiety and uncertainty can aggravate differences and genera- tional conflict, and these conflicts need to be handled correctly when they occur. Understanding the different generations and how they see things is a crucial part of handling this conflict. The book Generations at Work: Managing the Clash of Veterans, Boomers, Xers, and Nexters in Your Workplace developed the ACORN acronym (detailed in Table 8.8) to describe five principles that managers can use to deal with generational issues.

Accommodating employee differences entails treating employees as customers and giving them the best service that the company can give. Creating workplace choices as to what and how employees work can allow change and satisfaction. Operating from a sophisticated management style requires that management be

workplace inclusion organizational (corporate) culture that ensures that policies, procedures, and practices are fair, transparent, supportive, and empowering for all employees

Table 8.7 Profiles of Generations at Work Generation Name Birth Years Key Characteristics

Baby boomers 1946–1964 Rejection of traditional values, optimistic, achievement-oriented

Generation X 1965–1980 Family-oriented, impatient, individualistic

Generation Y (Millennials) 1981–1996 Technologically savvy, greater expectations for workplace, optimistic

Generation Z After 1996 Ethically and racially diverse, aware of social justice, entrepreneurial, digital natives

Source: Michael Dimock, “Defining Generations: Where Millennials End and Generation Z Begins,” Pew Research Center, https://www.pewresearch.org/fact-tank/2019/01/17/where-millennials-end-and-generation-z-begins/ (accessed June 18, 2019).

C B P _ F errell_ C h08.indd 234 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 235

direct, but tactful. Respecting competence and initiative assumes the best of the different generations and responds accordingly. Nourishing retention means keeping the best employees. When combined with effective communication skills, the ACORN principles can help managers mend generational conflicts for the benefit of everyone in the company.97 As noted in Table 8.3 earlier in this chapter, Baird, a private financial services firm, imple- mented a reverse mentoring program so that senior leaders had the opportunity to learn from junior employees. This intergenerational program paired Millennials with executives born during the baby boom and generation X time frame. GM, Microsoft, Sodexo, UnitedHealth, and Procter & Gamble have also employed this approach, which is recommended when employees would benefit from getting to know and learning from other employees with different personal and professional characteristics. Lately, companies are investing in reverse mentor- ing as a way to cross the digital divide, where younger employees teach and inspire older employees to use technology for achieving daily tasks, as well as strategic goals. These programs may also reveal opportunities and problems that, to date, have not been communicated to those in the executive suite.98

Although workplace diversity reaps benefits for both employees and employ- ers, it also brings challenges that must be addressed. Diverse employees may have more difficulty communicating and working with each other. Although differences can breed innovation and creativity, they can also create an atmosphere of distrust, dissatisfaction, or lack of cooperation.99 For example, growth in the number of children and adults with autism spectrum disorders (ASD) has prompted compa- nies to consider the ways in which this diagnosis affects the workplace, as well as consumer interactions. Although high-functioning individuals with ASD and similar neurodiverse diagnoses are capable of productive work and contributions, they often face stigmas associated with mental health, fear, and accommodations. Recognizing the value that these individuals bring to the workplace, Ernst & Young, SAP, and other companies have instituted programs that provide an environment and job structure that supports the special talents of employees with ASD.100 As this example demonstrates, many organizations are seizing the opportunity to discuss diversity and create stronger bonds among employees with different ethnicities, religious backgrounds, beliefs, health conditions, sexual orientations, generations, gender identities, and experiences. Coupled with a commitment to authenticity in the workplace, firms engage employees in train- ing programs, community service projects, and similar initiatives that promote teamwork, relationship-building, and cohesion, and ultimately help to maximize the positive effects and minimize the difficulties associated with diversity.

Finally, the diversity message will not be taken seriously unless top management and organizational systems fully support a diverse workforce. After Home Depot settled a gender-discrimination lawsuit, it developed an automated hiring and promotion computer program. Although the Job Preference Program (JPP) system was originally intended as insurance against discrimination, the system opens all jobs and applicants to the companywide network, eliminates unqualified applicants, and enables managers to learn about employee aspirations and skills in a more effec- tive manner. JPP has also brought a positive change to the number of female and minority managers at Home Depot.101 On the other hand, Silicon Valley has been highly criticized for its apparent lack of diversity. Although many tech firms are set- ting more diversity goals, companies like Facebook have made only minimal gains. Facebook has often claimed that there is simply not enough available talent.102

In addition, some employees of companies with diversity training programs have viewed such training as intended to blame or change white men only. Other training has focused on the reasons that diversity should be important, though not

reverse mentoring organizational mentoring program where less experienced employees mentor more experienced employees

Table 8.8 ACORN: Principles for Managing Generations at Work Accommodate employee differences

Create choices in the workplace

Operate from a sophisticated management style

Respect competence and initiative

!ourish employee retention

Source: Ron Zemke, Claire Ranes, and Bob Filipczak, Generations at Work: Managing the Clash of Veterans, Boomers, Xers, and Nexters in Your Workplace (New York: ACACOM, 2000).

C B P _ F errell_ C h08.indd 235 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

236 Business and Society

the actual changes in attitudes, work styles, expectations, and business processes that are needed for diversity to work.103 Professional development initiatives to reveal unconscious bias are particularly useful for employees, including those with a deep commitment to inclusion and diversity, who may be unaware of how unconscious attitudes and associations affect both daily and long-term aspects of work, including hiring practices, job promotions, networking, and mentoring relationships. This lack of cognition about one’s own biases has led some research- ers to conclude that effective diversity training includes educating employees about implicit bias, teaching strategies to reduce bias, and motivating employees to act in more egalitarian ways.104

Work/Life Balance Just as increasing numbers of women in the workplace have changed the norms of behavior at work and prompted attention to sexual harass- ment, they have also brought challenges in work/life balance. This balance is not just an issue for women, as men also have multiple roles that can create the same types of stress and conflict.105 The work/life balance may be described otherwise, such as people who are torn between work and home on a regular basis. An employee thinking about work (or actually working) when he is at home and vice versa is ultimately struggling with multiple responsibilities.106

Because employees have roles within and outside the organization, there is increasing corporate focus on the types of support that employees have in balancing these obligations. Deloitte & Touche (now part of Deloitte Touche Tohmatsu), an international professional services firm, was forced to address issues of work/life balance when it discovered the alarming rate at which women were leaving the firm. In the early 1990s, only 4 of the 50 employees being con- sidered for partner status were women, despite the company’s heavy recruitment of women from business schools. The company convened the Initiative for the Retention and Advancement of Women task force and soon uncovered cultural beliefs and practices that needed modification. The task force found that younger employees—both male and female—wanted a balanced life, were willing to forgo some pay for more time with family and less stress, and had similar career goals. Therefore, Deloitte & Touche developed a major work/life balance initiative that included reduced travel schedules and flexible work arrangements to benefit both men and women employed at the firm. According to a survey, issues related to work/life balance, such as telecommuting, flexible scheduling, and assistance with child care and elder care, are almost equally important to male and female employees. Whereas men rarely utilized these benefits in the past, this is no longer

the case. Many midlevel executives, both male and female, are part of dual-earner couples “sandwiched” between raising children and caring for aging parents.107

Such work/life programs assist em - ployees in balancing work responsibilities with personal and family responsibilities. A central feature of these programs is flexibility, such that employees of all types are able to achieve their own definition of balance. For example, a single parent may want child care and consistent work hours, whereas another employee may need assistance in finding elder care for a parent with Alzheimer’s disease. A working mother may need access to “just-in-time” care when a child is sick or school is out of session. Employees of

unconscious bias a lack of awareness of one’s own unconscious attitudes and associations

work/life programs programs that assist employees in balancing work responsibilities with personal and family responsibilities

S hu

tt e

rs to

ck /E

liz av

e ta

G al

itc ka

ia

C B P _ F errell_ C h08.indd 236 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 237

all types appreciate flextime arrangements, which allow them to work 40 hours per week on a schedule that they develop within a range of hours specified by the company. Other employees work some hours at home or in a location more conducive to their personal obligations. SAS Institute, the world’s largest private software company, has been recognized by Glassdoor.com for its exceptional work/life balance program. The company offers employees and their families many perks supporting a balanced life, such as free access to a gymnasium, a healthcare clinic on company grounds, discounted child care, free “work-life” counseling, and more.108 Work/life balance not only enhances employee productivity, but it is also an imperative to attracting and maintaining a healthy workforce.

More than 80 million Americans suffer from symptoms of stress at work, including headaches, sleeplessness, and other physical ailments.109 To address these concerns, Americans spend more than $20 billion per year on stress-reducing goods, services, and strategies.110 Compared to Japanese and Chinese workers, however, the U.S. figures are moderate. The term karoshi, which means, “death from overwork,” became widely used in Japan. Thousands of deaths per year are attributed to overwork, such as brain hemorrhages, heart attacks, and suicides. The Japanese government passed legislations to establish support centers, assist businesses in reducing the number of deaths, and conduct more research into the phenomenon. China, as its economy continues to grow, is beginning to experience the same issue. The death toll was estimated at 600,000 employees per year, or 1,600 per day.111

Managers must become sensitive to cues that employees need to create a stronger work/life balance. Frustration, anger, moodiness, a myopic focus, and physiological symptoms are often present when an employee needs to take a vacation, work fewer hours, utilize flexible scheduling, or simply reduce his or her workload. One manager of a telecommunications firm in California returned to the workplace around 11:30 p.m. every night to send people home. Otherwise, she knew that many of them would sleep on the floor in the office.

Not only do some employees work too many hours, but they may largely ignore nutrition and fitness, friendships, community involvement, and other aspects of work/life balance.112 For this reason, many organizations offer an employee assistance program (EAP) that includes a range of services typically associated with counseling and mental health. EAPs began in the United States in response to increasing rates of alcoholism and its effects in the workplace. Today, EAPs focus on broader issues that affect employees’ stress levels, well-being, and productivity. The majority of companies with EAPs outsource them to other firms that specialize in meeting the personal needs of employees. EAPs are becoming part of an organization’s ability to be globally competitive. A shift in beliefs about work/life balance and mental health, along with changing regulations and employee demand, is prompting more and more organizations to develop these programs. Technology advancements have also spurred the online delivery of EAP services.113 These programs may also be needed when a community is faced with a crisis, such as natural disasters or violence. With the increase of mass shootings in schools, EAPs continue to be needed to assist employees and first responders dealing with significant trauma.114

There is no generic work/life program. Instead, companies need to consider their employee base and the types of support that their employees are likely to need and appreciate. James Goodnight, SAS’s founder, believes that dinnertime should be spent with family and friends, not in the office. Most employees leave by 5:00 p.m., and others participate in flextime or job-sharing arrangements. This, among other characteristics listed earlier, has resulted in the company receiving honors such as its high ranking on Fortune magazine’s annual list of the 100 Best Companies to Work For and one of Computer World magazine’s 100 Best Places to Work in IT.115

employee assistance program (EAP) workplace program that provides employees with services to improve mental health and well-being

C B P _ F errell_ C h08.indd 237 12/9/2019 6:32:59 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

238 Business and Society

Ethical Issues in HUMAN RESOURCES

The Sharing Economy: Fueled by Independent Contractors The sharing economy is a relatively new phenomenon, largely propelled by innovative and disruptive approaches to traditional business models, advances in technology, and consumer use of the internet for all types of activi- ties, including purchasing. For example, the founders of Uber wondered if there was a better and easier way for customers to find a taxi ride. They also hoped that they could hire drivers who were willing to use their personal vehicles to pick up and drive people to their destinations. The founders of Airbnb hoped that consumers would take a risk by staying in a stranger’s spare bedroom or second home instead of an expensive hotel. They started the home-sharing company when they were struggling to pay their rent in San Francisco and offered to rent air mat- tresses in their apartment to attendees coming to a large conference. While their initial offering only attracted three conference-goers, the founders persevered and built a company with over $900 million in annual revenues.

Currently, the cornerstone of the sharing economy is the independent, nonemployee status of service provid- ers, suppliers, and partners of firms such as Airbnb, Lyft, HomeAway, and Uber. These firms are often referred to as digital matching firms because they utilize technology to link service or product providers to customers. Digital matching firms have challenged the status quo in many industries where companies have traditionally relied on employees to deliver their services.

The Human Resources (HR) model of the sharing econ- omy relies on brief and electronically facilitated exchanges between the digital matching firm, customers, and sup- pliers, rather than extensive hiring and training protocols associated with best practices in HR management. Unlike traditional employees, owners and partners in the sharing economy may not be subject to thorough background and reference checks and, given a technology-mediated platform, do not have lengthy interactions with company representatives to learn the organization’s values, ethical standards, and culture. Reviews posted by customers help to assess service providers but are often limited in number and subject to credibility questions.

Current U.S. law takes a binary approach to worker classification: Either a worker depends on an organization or is self-employed as an independent contractor. New business practices by digital matching firms and others call into question this two-pronged approach. To some observ- ers, the current classification system reflects the country’s agrarian and manufacturing roots, not the service and technology economy of today.

Uber drivers complained about their worker classifica- tion after Uber implemented penalties for drivers who failed to accept a high percentage of rides offered them. Although such penalties may be effective in eliminating drivers who are not committed to timely customer service, they may also ensure that drivers cannot effectively represent multiple transportation services. These Uber drivers perceived the tactic as a way of increasing their dependency on Uber and decreasing their choices and independence.

In response to a multitude of questions and complaints, the U.S. Department of Labor recently took action to answer worker complaints about misclassification. This is a significant issue for the Department of Labor because employees improperly classified as independent contractors may not be provided workplace protections such as the minimum wage, payment of overtime, and availability of unemployment and workers’ compensation insurance coverage. These independent relationships are deemed beneficial by workers who appreciate flexibility and personal control. However, regulators are concerned that some employees may be purposefully misclassified in an attempt to substantially reduce costs and evade U.S. labor laws.

The Department of Labor recently reminded employers that the classification of workers should be based on the suffer or permit to work standard pertaining to an individual’s degree of economic dependence on the employer. Cases and decisions made by the U.S. Supreme Court and U.S. Circuit Courts of Appeals have yielded the economic realities test, which guides employers and the Department of Labor in making this determination:

" Is the work performed by the worker essential or fundamental to the business?

" Does the worker’s managerial ability affect their prospects for financial gain or loss?

" How does the worker’s financial investment compare with the employer’s investment?

" Is the worker required to exercise special skills and initiative?

" To what extent does the employer control the work?

In the absence of a new worker classification approach, critics worry that the sharing economy creates a business- sided economic model that mirrors the labor market long before there were laws affecting wages, hours worked, safety, and other conditions. Traditional competitors of digital matching firms also question the independent

C B P _ F errell_ C h08.indd 238 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 239

worker status because these firms are not required to provide or pay for overtime, sick leave, vacation leave, retirement plans, health insurance, or other benefits. Legal scholars point to privacy concerns around the data and monitoring that occurs within the sharing economy and

how this ultimately affects power and fairness for both workers and competitors. As the sharing economy con- tinues to expand, more research is needed to understand labor markets, worker classification, competition laws, and other ramifications for stakeholders.

Sources: Ryan Calo and Alex Rosenblat, “The Taking Economy: Uber, Information, and Power,” Columbia Law Review 117 (October 2017): 1623–1690; Juliet Schor, “Debating the Sharing Economy,” Journal of Self-Governance and Management Economics, 4 (2016): 7–22; Arun Sundararajan, The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (Cambridge, MA: MIT Press, 2017); Rudy Telles, Jr., “Digital Matching Firms: A New Definition in the Sharing Economy Space,” U.S. Department of Commerce, Economics, and Statistics Administration, https://www. commerce.gov/sites/default/files/migrated/reports/digital-matching-firms-new-definition-sharing-economy-space.pdf (accessed June 25, 2019); Debbie M. Thorne and Floyd F. Quinn, “Supplier Resources in the Sharing Economy: Three Regulatory Concerns,” Journal of Marketing Channels 24 (2017): 73–83; U.S. Department of Labor, “Fair Labor Standards Act Advisor,” https://webapps.dol.gov/elaws/whd/flsa/scope/ee14.asp (accessed June 25, 2019); U.S. Department of Labor, “The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors,” https://casetext.com/analysis/the-application-of-the-fair-labor-standards-acts-suffer-or-permit-standard-in-the- identification-of-employees-who-are-misclassified-as-independent-contractors-1 (accessed October 8, 2019).

Successful work/life programs, like that developed by the SAS Institute, are an extension of the diversity philosophy such that employees are respected as individuals in the process of contributing to company goals. Thus, connecting employees’ personal needs, lives, and goals to strategic business issues can be fruit- ful for both parties. This perspective is in contrast to the “employee goals versus business goals” trade-off mentality that has been pervasive. IBM implemented a work/life strategy over two decades ago and periodically conducts employee surveys to see if changes or additions are needed.116

The Silk Road Survey found that 55 percent of all applicants consider work/ life balance the most important consideration in identifying potential employers and considering job offers.117 For this reason, companies have become quite inno- vative in their approach to work/life balance. Agilent Technologies, for example, not only offers flexible work schedules and employee discounts, but also has organized sports teams, massages on site, and yoga sessions.118 Nokia is known for making employees feel cared for. Employees have noted that beyond flexible work schedules and the ability to work from home, the company encourages them to take time off and recharge.119 Such efforts demonstrate the company’s willingness to accommodate employee needs and concerns beyond the workplace.

Philanthropic Issues In later chapters of this book, we examine the philanthropic efforts of companies and the important role that employees play in the process of selecting and imple- menting projects that contribute time, resources, and human activity to worthy causes. In social responsibility, philanthropic responsibilities are primarily directed outside the organization, so they are not directly focused on employees. However, employees benefit from participating in volunteerism and other philanthropic projects. Employee volunteerism increases the level of engagement the employee feels, which contributes not only to their performance, but also to the company’s performance. The engagement is a result of many factors, including gaining a sense of purpose through volunteering, having the ability to work in positions of leadership, and gaining new skills. In addition, engaged employees are more likely to stay with the company for longer periods of time.120

Many employers help organize employees to participate in walkathons, marathons, bikeathons, and similar events. For example, Blue Cross Blue Shield companies hold an annual event called National Walk@Lunch Day. The event

C B P _ F errell_ C h08.indd 239 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

240 Business and Society

challenges employees and community members to put on their sneakers and walk at least 30 minutes at lunch. Over a six-week period, participants log their steps on the company’s Facebook page. At the end of the event, Blue Cross Blue Shield donates up to $1 per mile reported to the American Diabetes Association.121 Thus, the benefits of corporate philanthropy in the community reflect positively on the organization. There are many strategies for demonstrating community involve- ment and care. CA Technologies holds a monthlong volunteer program in which employees from all over the world spend time volunteering at nonprofits in their local communities.122

Strategic Implementation of Responsibilities to Employees

As this chapter has demonstrated, a company’s responsibilities toward their employees are varied and complex. The legal issues alone require full-time atten- tion from lawyers and HR specialists. These issues are also emotional because corporate decisions have ramifications on families and communities, as well as on employees. In light of this complexity, many companies have chosen to embrace these obligations to benefit both employee and organizational goals. This philosophy stands in stark contrast to the master-servant model popular more than 100 years ago. Today, companies are using distinctive programs and initiatives to set themselves apart and to become known as desirable employers. Low unem- ployment levels before the last recession, along with diversity, work/life balance, outsourcing, and generational differences, prompted companies to use marketing strategy and business insights normally applied to customer development in the employee recruitment and retention realm. Even in a time of economic downturn, employers will need to be mindful of keeping top talent and maintaining employee satisfaction. For example, Patagonia encourages its employees to stay physically fit. It places so much emphasis on employee satisfaction and physical fitness, in fact, that employees are allowed to go surfing in the middle of the workday.123

An employer of choice is an organization of any size in any industry that is able to attract, optimize, and retain the best employee talent over the long term. AECOM, a global infrastructure firm, recently received a perfect score on the Corporate Equality Index, measured and reported by the Human Rights Campaign Foundation. The roots of AECOM’s commitment to being an employer of choice are deep and emanate from a cross-functional and geographically diverse committee that focused on ways in which AECOM’s top management can ensure that integrity, respect, open communication, flexibility, and balance are the key values and defining qualities of every employee’s career.124 Advertising, websites, and other company communications often use the term to describe and market the organization to current and potential employees. These messages center on the various practices that companies have implemented to create employee satisfaction. Firms with this distinction value the human component of business, not just financial considerations, ensure that employees are engaged in meaningful work, and stimulate the intellectual curiosity of employees. These businesses have strong training practices, delegate authority, and recognize the link between employee morale, customer satisfaction, and other performance measures.125 Thus, becoming an employer of choice is an important manifestation of strategic social responsibility. Potential employees may look for signs that social responsibility is a top concern. College graduates may evaluate a potential employer’s socially responsible and ethical behavior when deciding on a career path. Table 8.9 shows the percentage of college students who indicated the job characteristics they considered to be the most important. The table demonstrates the kind of culture and messages companies should cultivate to attract employees.

employer of choice an organization of any size in any industry that is able to attract, optimize, and retain the best employee talent over the long term

C B P _ F errell_ C h08.indd 240 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Chapter 8 Employee Relations 241

Despite the negative effects that certain actions may have on perceptions of a company’s social responsibility, there are strategies and programs that demonstrate a proactive approach to employee relations. One traditional way to strengthen trust is through employee stock owner- ship plans (ESOPs), which provide the opportunity both to contribute to and benefit from organizational success. Under these plans, employees must take on an ownership perspective, work as a team in an environment that forges trust, and provide excellent interactions and service to customers. Such programs confer not only ownership, but also opportunities for employees to participate in manage- ment planning, which foster an environment that many organizations believe increases profits.

Several studies of companies with ESOPs cast a positive light on these plans. ESOPs appear to increase sales by about 2.3–2.4 percent over what would have been expected otherwise. ESOP companies were also found to pay better benefits, higher wages, and provide nearly twice the retirement income for employees than their non-ESOP counterparts. Some of the 7,000 “employee- owned” firms include Dunn-Edwards Paints, Publix Supermarkets, and Round Table Pizza.126 Of Fortune magazine’s “100 Best Companies to Work For”, more than half are employee-owned.127 Research has shown that the decision to become an employee-owned company enhances company performance and provides higher wealth accumulation for employee-owners. Despite the advantages of ESOPs, however, experts warn that some are potentially risky for employees, as in the case of Enron.128 Just like any other company initiative, management must take responsibility for managing an ESOP well.

Becoming an employer of choice has many benefits, including an enhanced ability to hire and retain the best people, who in turn offer a strong commitment to the company’s mission and stakeholders. The expectations of such businesses are very high because employee stakeholders often have specific criteria in mind when assessing the attractiveness of a particular employer. Some people may be focused on specific environmental issues, whereas others may be searching for a company that markets healthy and helpful products. Although top managers must decide on how the firm will achieve strategic social responsibility with employees, Table!8.10 provides guidance on eight key principles that are typically exhibited and managed by employers of choice. Although most companies have long understood the importance of attracting and keeping customers through strong branding efforts, many are relatively new to the implementation of strategies to create an employer brand.129

Finally, the global dimensions of today’s workplace shape an organization’s ability to effectively work with employee stakeholders and to become an employer of choice. Firms with offices and sites around the world must deal with a complex- ity of norms, laws, and expectations, all of which can affect its reputation at home. For example, when Nike was first accused of dealing with suppliers that used child labor in the mid-1990s, the company claimed that it was not in the business of manufacturing shoes (only selling them), and that therefore it could not be blamed for the practices of Asian manufacturers. Following media criticism, Nike publicized a report claiming that the employees of its Indonesian and Vietnamese suppliers were living quite well. The veracity of this report was tarnished by contradictory evidence produced by activists. Next, Nike started introducing workers’ rights and environmental guidelines for its suppliers. Yet some company representatives explained that any additional social responsibility initiatives would damage the competitive position of the firm.

In the late 1990s, Nike designed a suppliers’ auditing process that invited student representatives, along with other activists, to visit manufacturing plants

employee stock ownership plans (ESOPs) employment benefits programs that confer stock ownership to employees providing the opportunity to contribute to and benefit from organizational success

Table 8.9 What College Students Consider the Most Important Characteristics of a Job Characteristic Percentage

1. Job security 82.9

2. Opportunity to develop job-specific skills

82.5

3. Opportunity to develop applied skills 79.7

4. Friendly coworkers 78.8

5. Good insurance/benefits package 76.5

Source: National Association of Colleges and Employers, “Job Security Tops Students’ Wish List,” https://www.naceweb.org/talent- acquisition/student-attitudes/job-security-tops-students-wish-list/ (accessed June 21, 2019).

C B P _ F errell_ C h08.indd 241 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

242 Business and Society

and provide recommendations for improving practices. Before the company’s shift, many media reports discussed their manufacturing practices, and it is likely that some consumers and potential employees were rejecting Nike. Nike actually settled the legal case after losing a Supreme Court appeal. Nike agreed to pay $1.5 million to the Fair Labor Association to help fund worker development programs. In this case, Nike’s relationships with its manufacturing suppliers and their employees affected its ability to achieve strategic social responsibility.130 Today, Nike’s supply chain practices have improved considerably. The company has been awarded the Corporate Register Reporting Award for excellence in global reporting, demon- strating that its auditing and ethical programs for supply chains have significantly increased the transparency and accountability of the company.131

Summary Throughout history, people’s perceptions of work and employment have evolved from a necessary evil to a source of fulfillment. The relationship between employer and employee involves responsibilities, obligations, and expectations as well as challenges.

On an economic level, many believe there is an unwritten, informal psycho- logical contract that includes the beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and their employers. This con- tract has evolved from a primarily master-servant relationship, in which employers held the power, to one in which employees assume a more balanced relationship with employers. Workforce reduction, the process of eliminating employment positions, breaches the psychological contract that exists between an employer and employee and threatens the social contract among employers, communities, and other groups. Although workforce reduction lowers costs, it often results in lost intellectual capital, strained customer relationships, negative media attention, and other issues that drain company resources.

Table 8.10 Key Principles of Employers of Choice Principle Explanation

1. Organizational reputation Employees desire to work in an organization that maintains a good reputation among stakeholders.

2. Organizational culture Employees want to work in an ethical organizational culture that maintains integrity and encourages employee contributions.

3. Strong leadership Employees want to work in an environment that has strong ethical leaders who care passionately about the company.

4. Interesting work Employees want their jobs to be challenging and rewarding, not either mundane or too difficult.

5. Opportunities for growth Employees want to work in a job or industry where there are significant opportunities for career advancement.

6. Employee recognition Employees appreciate being recognized for their contributions to the company and are encouraged to continue serving.

7. Employee well-being Employees expect fair compensation, appropriate benefits, and an adequate work/life balance from their employers.

8. Social responsibility Studies have demonstrated that employees enjoy working for a company that considers the needs of stakeholders and contributes toward improving society.

Sources: Roger E. Herman and Joyce L. Gioia, How to Become an Employer of Choice (Winchester, VA: Oakhill Press, 2000); Amy Hirsh Robinson, “Are You an ‘Employer of Choice’? 3 Ways to Attract the Best,” HR Specialist 17 (March 2019): 7; Jody Ordioni, “How to Become an Employee of Choice,” ere.net, July 15, 2013, http://www.eremedia.com/ere/how-to- become-an-employer-of-choice/ (accessed June 21, 2019); Karnica Tanwar and Amresh Kumar, “Employer Brand, Person- Organisation Fit and Employer of Choice,” Personnel Review 48 (2019): 799–823.

C B P _ F errell_ C h08.indd 242 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Employment law is a complex and ever-evolving area. In the past, employment was primarily governed by employment at will, a common- law doctrine that allows either the employer or employee to terminate the relationship at any time, so long as it does not violate an employment contract. Many laws have been enacted to regulate business conduct with regard to wages and benefits, labor unions, health and safety, equal employment opportunity, sexual harassment, and whistle blow- ing. Title VII of the Civil Rights Act, which prohibits employment discrimination on the basis of race, national origin, color, religion, and gender, is fundamental to employees’ rights to join and advance in an organization according to merit. Sexual harassment is defined as unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile, or offensive work environment. Sexual harassment may take the form of either quid pro quo harassment or hostile work environment harassment. An employee who reports individual or corporate wrongdoing to either internal or external sources is considered a whistleblower and hence may have certain protec- tions. Although legal compliance is imperative for social responsibility, the ethical climate of the workplace is more subjective and dependent on top management support and corporate culture. Companies with strong ethical standards are more likely to fund initiatives to develop employees’ skills, knowledge, and other personal characteristics. With diversity programs, companies assume an ethical obligation to employ and empower individuals regardless of age, gender, physical and mental ability, and other characteristics. Inclusion efforts take diversity management one step further, by ensuring that organizational policies, procedures, and practices are fair, transparent, supportive, and empowering for all employees. Many companies are training employees to recognize their unconscious biases that affect both daily and long-term aspects of work. Work/life programs assist employees in balancing work responsibilities with personal and family responsibilities.

Employees may play an important role in a firm’s philanthropic efforts. Employees benefit from such initiatives through participation in volunteerism and other projects.

In light of the complexity of and emotions involved with responsibilities toward employees, many companies have chosen to embrace these obligations to benefit both employee and organizational goals. An employer of choice is an organization of any size in any industry that is able to attract, optimize, and retain the best employee talent over the long term. One traditional way to strengthen trust is through Employee Stock Ownership Plans (ESOPs), which provide the opportunity both to contribute to and gain from organizational success. Finally, the global dimensions of today’s workplace shape an organization’s ability to effectively work with employee stakeholders and to become an employer of choice.

Responsible Business Debate

The Pros and Cons of Hiring Convicted Criminals Issue: Should companies hire applicants with criminal backgrounds?

At age 23, Darrell Jobe, who spent his teenage years in and out of juvenile detention, decided to turn his life around. He was determined to become a better father than his own father had been. He was also committed

to becoming a productive citizen. Like most criminal offenders, however, he had a very difficult time finding an employer to take a chance on him. Eventually with the help of a friend’s father, Jobe found a job in the packaging industry. By age 35, he had launched his own business, Vericool, specializing in sustainable and environmentally friendly packaging. Vericool’s products are designed to

Chapter 8 Employee Relations 243

C B P _ F errell_ C h08.indd 243 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

replace Styrofoam and other foam packaging for ship- ments that need to stay cold, like food, flowers, and fish. In recognition of the power of second chances, Vericool employs a number of former prisoners. Not only do these individuals have a chance at employment, they also have the opportunity to become owners through the company’s stock-option plan.

Each year in the United States, more than 600,000 people are released from prison. Most of these people reenter a society that has changed, sometimes significantly, since the time they were first incarcerated. Along with adjusting to freedom and new living arrangements, repairing relationships, and dealing with other changes, many individuals begin looking for employment. While research has shown that employment is a key factor for reducing recidivism, experts estimate that formerly incarcerated individuals experience unemployment at a much higher rate than other citizens. Even after five years of release from prison, 65 percent of these individuals remain unemployed or underemployed. Poor employment prospects often have long-lasting negative effects on individuals, families, and communities.

Legal and regulatory frameworks may prevent the previously incarcerated from obtaining professional licensure. This means employment in nursing, education, and other high-demand fields is off-limits. Regulations may also disqualify the previously incarcerated from securing employment in fields that deal with vulnerable populations and law enforcement. Private employers use background checks on a routine basis, and applicants with criminal convictions are often disqualified from employment. Although federal statutes do not prohibit discrimination on the basis of criminal history, the EEOC has advised that a criminal background should not be used the sole determinant of a prospective employee’s qualifications. Instead, employers are expected to conduct an individual assessment of the criminal convictions for severity, job-relatedness, and recency.

Beyond the regulatory environment, hiring managers may have an unconscious or conscious bias toward ex-offenders. Research has shown that employers often view the previously incarcerated as untrustworthy, lacking in social skills, and more likely to steal. Some hiring managers may not believe that criminals can be rehabilitated. Concerns about safety, liability, security, and reputation also come into play, especially for firms with

strict policies prohibiting any criminal conduct by current employees. This apprehension is especially strong for individuals with criminal pasts that include violent and sexual acts.

To deter bias, a number of states have initiated “Ban the Box” programs that revise how and when an applicant’s criminal history is revealed in the hiring process. These programs require employers to remove all questions about criminal history from job applications and to ensure that applications are reviewed for qualifications, skills, and other job-specific factors. Ban the Box allows potential employers to assess and get to know applicants before a criminal history is introduced. Background checks are typically per- formed once an applicant has been chosen as the finalist.

Recently, leaders in the business community launched an initiative to change attitudes about hiring people with crimi- nal records. Well-known organizations, including Butterball Farms, Georgia-Pacific, Koch Industries, the National Restaurant Association, Uber, and the U.S. Chamber of Commerce, have signed the “Getting Talent Back to Work” pledge to give job opportunities to qualified people with a criminal background who are deserving of a second chance. The pledge is designed to end outdated and noninclusive hiring practices and to enhance the labor pool.

The pledge comes on the heels of the FIRST STEP Act passed by the U.S. Congress. The legislation emphasizes rehabilitation, education, work-release, and other pro- grams to support the successful reintegration of former prisoners. In the state of Wisconsin, the Department of Corrections already offers employers the opportunity to hire work-release participants who are nearing the end of their prison sentences. The Oneida Airport Hotel Corporation in Green Bay, Wisconsin, was an early adopter of the work-release program. The company is now an advocate, citing the business, social, and intrinsic benefits of helping ex-offenders resume healthy, stable, and pro- ductive roles.

There Are Two Sides to Every Issue 1. Because of discrimination and bias against individuals

with criminal backgrounds, employers are missing a significant opportunity to enhance their workforces as well as benefit society.

2. Because there are risks in hiring employees with crimi- nal backgrounds, employers are understandably hesi- tant to consider individuals with criminal backgrounds.

244 Business and Society

Sources: Ifeoma Ajunwa and Angela Onwuachi-Willig, “Combating Discrimination Against the Formerly Incarcerated in the Labor Market,” Northwestern University Law Review 112 (2018): 1385–1415; Barry Goldman, Dylan Cooper, and Tamar Kugler “Crime and Punishment,” International Journal of Conflict Management 30 (January 2019): 2–23; Amy Feldman, “An Entrepreneur and His Ex-Cons: Meet the Former Gang Member Who Created a $10 Million Packaging Startup That Hires Former Inmates,” Forbes.com, March 27, 2019, https://www.forbes.com/sites/amyfeldman/2019/03/27/from-bullets-to- boxes-meet-the-former-gang-member-who-created-a-15m-packaging-startup-that-hires-ex-cons/#770ce6361895 (accessed June 24, 2019); Jakari N. Griffith and Nicole C. Jones Young, “Hiring Ex-Offenders? The Case of Ban the Box,” Equality, Diversity, and Inclusion: An International Journal 36 (2017): 501–518; Society for Human Resource Management, “Getting Talent Back to Work,” https://www.gettingtalentbacktowork.org/ (accessed June 24, 2019); Margaret Waldo, “Second Chances: Employing Convicted Felons.” HR Magazine 57 (March 2012): 36–40.

C B P _ F errell_ C h08.indd 244 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

Key Terms

Chapter 8 Employee Relations 245

chief diversity officer (CDO) (p.!233) collective bargaining (p.!225) cross-training (p.!222) Department of Labor (p.!222) downsizing (p.!220) employee assistance program (EAP)

(p.!237) employee engagement (p.!217) employee stock ownership plans

(ESOPs) (p.!241) employer of choice (p.!240) employment at will (p.!222) ergonomics (p.!225) full employment (p.!215)

hostile work environment sexual harassment (p.!229)

intersectionality theory (p.!233) living wage (p.!224) minimum wage (p.!223) Occupational Safety and Health

Administration (OSHA) (p.!225) outsourcing (p.!219) psychological contract (p.!216) quid pro quo sexual harassment

(p.!229) reverse mentoring (p.!235) rightsizing (p.!220) sexual harassment (p.!229)

social contract (p.!221) subcontracting (p.!219) unconscious bias (p.!236) underemployment (p.!219) unemployment rate (p.!215) vesting (p.!224) work/life programs (p.!236) Worker Adjustment and Retraining

Notification (WARN) Act (p.!221)

workforce reduction (p.!220) workplace diversity (p.!232) workplace inclusion (p.!234) zero tolerance (p.!230)

Discussion Questions 1. Review Table 8.1 and indicate the positive effects

associated with the psychological contract’s char- acteristics. For example, what is positive about an employee’s ability to solve problems independently?

2. What is workforce reduction? How does it affect employees, consumers, and the local community? What steps should a company take to address these effects?

3. What responsibilities do companies have with respect to workplace violence? Using the categories of violence presented in the chapter, describe the responsibilities and actions that you believe are necessary for an organization to demonstrate social responsibility in this area.

4. Describe the differences between workplace diversity and equal employment opportunity. How do these differences affect managerial responsibilities and the development of social responsibility programs?

5. Why is it important to understand the profiles of different generations at work? How can managers use the ACORN principles to develop a strong sense of community and solidarity among all employee groups?

6. What trends have contributed to work/life pro- grams? How do work/life programs help employees and organizations?

7. What is an employer of choice? Describe how a firm could use traditional marketing concepts and strate- gies to appeal to current and potential employees.

8. Review the best practices in Table 8.10 for becoming an employer of choice. What are some potential drawbacks to each practice? Rank the eight practices in terms of their importance to you.

Experiential Exercise Develop a list of five criteria that describe your employer of choice. Then, visit the websites of three companies in which you have some employment interest. Peruse each firm’s website to find evidence on how it fulfills your criteria. On the basis of this evidence, develop a chart to show how well each

firm meets your description and criteria of your employer of choice. Finally, provide three recommendations on how these companies can better communicate their commitment to employees and the employer of choice criteria.

X, Y, & Millennial: What Would You Do? Dawn Burke, director of employee relations, glanced at her online calendar and remembered her appointment at 3:00 p.m. today. She quickly found the file labeled “McCullen and Aranda” and started preparing for the meeting. She recalled that this was essentially an employee-supervisor case where the employee had been unwilling or unable

to meet the supervisor’s requests. The employee claimed that the supervisor was too demanding and impatient. Their conflict had escalated to the point that both were unhappy and uncomfortable in the work environment. Other employees had noticed, and overheard, some of the negative interactions between them.

?

C B P _ F errell_ C h08.indd 245 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society

In her role, Dawn was responsible for many programs, including a new mediation initiative to resolve workplace conflicts. The program was designed to help employees develop stronger communication and conflict resolution skills. In this case, the program was also providing an intermediary step between informal and formal discipline. Today, she was meeting with both parties to discuss mediation guidelines, a timeline, their goal, and their general points of conflict.

John McCullen, 51, a buyer in the facilities department, and Terry Aranda, the director of facilities procurement, arrived separately. John had been with the company for 32 years and had started his career with the company right out of high school. Terry, 31, was hired from another firm to oversee the procurement area a year ago and had recently graduated from a prestigious MBA program. Dawn started the meeting by reviewing the mediation guidelines and timeline. She reminded John and Terry that their goal was to develop a workable and agreeable solution to the current situation. Dawn then asked for each party to explain his or her position on the conflict.

John began, “Ms. Aranda is a very smart lady. She seems to know the buying and procurement area, but she knows less about the company and its history. I am not sure she has taken the time to learn our ways and values. Ms. Aranda is impatient with our use of the new software and computer system. Some of us don’t have college

degrees, and we haven’t been using computers since we were young. I started working at this company about the time she was born, and I am not sure that her management style is good for our department. Everything was going pretty well until we started changing our systems.”

Terry commented, “John is a valuable member of the department, as he knows everyone at this company. I appreciate his knowledge and loyalty. On the other hand, he has not completed several tasks in a timely manner, nor has he asked for an extension. I feel that I must check up on his schedule and proof all of his work. John has attended several training classes, and I asked that he use an electronic calendar so that projects are completed on time. He continues to ignore my advice and deadlines. We’ve had several conversations, but John’s work has not substantially improved. We have many goals to achieve in the department, and I need everyone’s best work in order to make that happen.”

Dawn thanked them for their candor and told them she would meet with them next week to start the mediation process. As she contemplated what each had said, she remembered an article that discussed how people born in different generations often have contrasting perceptions about work. Dawn started to jot a few notes about the next steps in resolving their conflict. What would you do?

246 Business and Society

C B P _ F errell_ C h08.indd 246 12/9/2019 6:33:00 P M03/18/2020 - tp-70a028a4-6922-11ea-a484-024 (temp temp) - Business and Society