Editor's Note to Readers
Welcome to the ninth edition of Human Capital Matters (HCM) for 2015—the digest for leaders and practitioners with an interest in human capital and organisational capability. Human Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice. The inclusion of articles is aimed at stimulating creative and innovative thinking and does not in any way imply that the Australian Public Service Commission endorses service providers or policies.
Thank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters [at] apsc.gov.au. Readers can also subscribe to the mailing list through this email address.
This edition focuses on values-based work. Values have been defined as 'an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state ...' (Rokeach, 1973, p.5). That is, our values—internalised and long-held beliefs—are the fundamental drivers for our behaviour. In the workplace a values driven culture might be considered as the way things are done at work based on employees' commitment to a set of values.
Values-based work can be conceived as one approach to creating ethical 'norms' for organisational behaviour and outcomes. It is usually posed in contrast to a standards-based work climate which is dictated more by the need for compliance to external rules, regulations and laws. Values-based approaches are guided by internalised values which aim to encourage responsible, internally-driven and self-managed conduct. It is likely that all organisations exist with a mix of values-based or ethical considerations and economic and standards-based considerations, albeit in various combinations.
This edition of Human Capital Matters will attempt to trace the rationale for values-based or integrity-based approaches to work through to how it might be implemented in organisational settings; specifically how the APSC has approached the issue of a values-based culture in the APS.
The first article is a persuasive argument for the adoption of values-based approaches to work. While the author places a large part of the responsibility for ethical conduct at the feet of the organisation and particularly leadership, individual responsibility for ethical behaviour is also made clear. The author notes that compliance-driven regulations are also part of an organisation's suite of values.
The second article explores the idea that organisational efforts to influence employee values might have ethical implications of its own. This is an interesting slant on the issue of values-based approaches to work. The paper provides insight in the authors' discussion of the person-organisation 'fit' and how this is largely values driven.
The third article is a guide to building an ethical culture within organisations. The author cites the list of examples previously described in articles 1 and 2 and reinforces the need, as a matter of good business sense, to develop a values-based culture. The Institute of Management Accountants (IMA) see this as necessary to help employees deal with situations 'in the white spaces in between', those not covered by laws, rules and regulations.
The fourth article is a brief synopsis of a book written by an eminent writer and practitioner in the field of values-based organisations, Harry Kraemer Jr. The book is not available in its entirety on-line and has been included more as a bibliographic reference for an interested reader.
The fifth article is a description of the APS Values framework and the expectation that individual agencies will embed these values into their strategic plans and ways of doing business.
The final article is included as a readable and accessible discussion of the worth of considering different values perspectives when dealing with the broader community and those outside one's own profession or usual network, specifically— in this book— in a medical setting.
Other sites an interested reader may wish to peruse include:
The World Values Survey: This is a longitudinal survey, analysis of which has demonstrated that people's beliefs play a key role in economic development, the emergence and flourishing of democratic institutions, the rise of gender equality and the extent to which societies have effective government. This particular link will take you to some of the key findings of WVS6, 2015
The Sarbanes-Oxley (SOX) Act of 2002 in the USA. SOX was enacted as a reaction to major corporate and accounting scandals, perceived to be in part the result of organisational failures to embed ethically-based cultures, and included criminal penalties for misconduct.
Lynn S. Paine, Managing for Organisational Integrity Harvard Business Review, March-April, 1994
Paine starts with the premise that many organisations implement compliance-based ethics programs designed to prevent, detect and punish legal violations and argues that they need to go beyond post-violation punitive measures. 'Integrity strategies' which define a company's guiding values would help prevent ethical lapses which cause reputational damage and loss of public confidence. At the same time, Paine argues, such ethical strategies tap into 'powerful human impulses for moral thought and action'.
Citing case-studies of two US companies, Sears Auto Centers and Beech-Nut Nutrition Corporation (Nestlé), Paine describes the role of company imposed sales quotas and incentive payments in causing failures of judgement on the part of some employees. Some employees reported 'pressure, pressure, pressure' to sell unnecessary products and services, which:
(w)ithout active management support for ethical practice and mechanisms to detect and check questionable sales methods and poor work, it (was) not surprising that some employees ... reacted to contextual forces by resorting to exaggeration, carelessness, or even misrepresentation
The result was an overwhelming number of customer complaints. The ultimate cost to Sears in 1992, in settling customers' complaints, was estimated at $60 million (USD).
A similar lapse of judgement cost Beech-Nut an estimated $25 million (USD) in 1987.
Paine's argument is that neither company might be considered inherently bad. Rather, both companies were seen to lack ingrained principles that would guide ethically sound decisions.
Identifying contextual, organisational factors does not excuse individuals' responsibilities, however:
Many people resist acknowledging the influence of organizational factors on individual behavior—especially on misconduct—for fear of diluting people's sense of personal moral responsibility. But this fear is based on a false dichotomy between holding individual transgressors accountable and holding "the system" accountable. Acknowledging the importance of organizational context need not imply exculpating individual wrongdoers. To understand all is not to forgive all
Paine also argues for 'a sound, well-articulated strategy for legal compliance' in any organisation and notes that many 'integrity initiatives have structural features common to compliance-based initiatives', for example a code of conduct and training. It is also asserted however that emphasis on sanctions, especially if designed without employee consultation or if too vague, can be counterproductive and lead to employees' perception that management is covering its own back.
Compliance, Paine suggests, can be inadequate in addressing the range of ethical issues confronting most organisations today. As well, the value of compliance alone in inspiring exceptional performance is seen as questionable (italics by this author).
Paine explores, through case studies again, the benefits of management-led commitment to ethical values. The primary benefit is identified as discouraging damaging misconduct.
Lynn S. Paine is a John G. McLean Professor of Business Administration and the senior associate dean for faculty development at Harvard Business School
Maierhofer, N. I. & Colley, S. Ethical considerations for using values to manage in the workplace. Paper presented to Social Change in the 21st Century Conference, Queensland University of Technology, 29 Oct 2004
What are the ethical implications of influencing people's work values? This question is posed by the authors in the context of employers' responsibilities to employees and the wider community. This interesting slant on the issue of values-based approaches to work takes more form as the authors discuss the self-selection options available to employees as part of the 'attraction, selection and attrition' (ASA) model of employment.
In explicating the business costs to organisations of unethical conduct the authors identify three levels of costs:
- Level 1: Government fines for breaches (considered the least serious of consequences)
- Level 2: 'Clean up costs' such as legal and auditing fees; costs of an investigation and remedial action (these are considered survivable and as having minimal impact)
- Level 3: The most severe and damaging and involve social implications such as loss of reputation, customer abandonment, decreases in employee morale and increased employee turnover (Thomas, Schermerhorn and Dienhart, 2004 as reported by Meierhofer, p.4)
They also discuss 'value congruence' between the employee and the organisation. The level of congruence between employee and organisational values —termed the person-organisation fit—has been associated with positive outcomes for both the employee (increased levels of satisfaction and reductions in intentions to quit) and the organisation. This congruence is achieved in organisations by one of three mechanisms: selection, socialisation and/or development. Organisations may choose staff on the basis of the alignment of their values with those of the business. They will also socialise employees, once selected, as part of the usual induction process. Organisations can also actively intervene to change or reshape employee values through the mechanism of development programmes.
In terms of the ASA employment model, selection and development are described as active attempts on the part of the organisation to enhance values congruence:
The process of attraction ... selection and attrition will produce a restriction of range over time on a whole host of unspecified individual difference variables. Consequently, the people who remain in the organization will come to find themselves working with colleagues much like themselves because the 'fit' is better (Denton, 1999, p.1 as reported by Meierhof, p.5)
During the socialisation process, the passive organisational mechanism to enhance value alignment, employees may 'self-select' either in or out of the organisation based on their perceptions—described by Meierhof as 'translation'—of the value congruence. Socialisation of new employees occurs through exposure to management/leadership, as well as policies, procedures and practices employed by the agency. Such exposure signals the organisation's expectations, not necessarily ethical ones, of employee behaviours and conduct.
As part of the socialisation process also employees will also learn to regulate their behaviours in accordance with the clues provided by significant others such as a manager. This is the mechanism of social learning theory (SLT; Bandura, 1977). SLT highlights the important role of managers and leaders in ensuring values are transplanted to enhance a collective 'mindfulness' on the part of all employees.
While the role of managers and leaders in transplanting 'right' values is undeniable, Meierhof and Colley also report three ways in which organisations encourage unethical behaviours: co-optation; incrementalism and compromise.
The socialisation process involves a degree of passivity and the removal of the need for conscious decision-making for the employee. Socialisation processes work to induce an employee to 'go-along' with organisational norms. Of course if the ethical fit is not good there is still the 'active' option of quitting though for many employees this may not be a realistic option. This underscores the ethical question posed originally by the authors.
Meierhof and Colley conclude:
Most work that has considered managing by values assumes a morally responsible approach ... The espoused values of an organisation will typically be morally responsible with some balance of moral and economic focus. Strategies that aim to increase the malleability of people's values through ... management mechanisms may make people more susceptible to potential negative influences of values. Furthermore, values statements about the values of the organisation may foster the distance that people use to justify the gap between their behaviour at work and home. Perhaps values statements shouldn't be about the organisation but individuals and should extend to general behaviours not just work behaviours. More importantly values statements should be values practices—a point not new but perhaps more pertinent than ever (p.12)
Naomi Meierhof and Sarah Colley were both representing the School of Management at QUT at the time this paper was presented
Institute of Management Accountants, Statements on Management Accounting, Leadership, Strategies & Ethics, Values and Ethics: From Inception to Practice, USA 2008
The IMA's SMA starts with the notion that approaches to values and ethics management should be based on principles rather than a set of rules. The paper, like those by Paine and Meierhof, reinforces the need for organisations to align organisational and employee values. It cites recent case-studies where failure to align values has resulted in significant negative impact for corporations though extends this to suggest that failure to align values results in unmotivated employees. Such employees, so the paper asserts, can have a disastrous effect on a business by 'poisoning the atmosphere', undermining stakeholder relationships and reducing the collaboration required for knowledge transfer and innovation. None of these potential outcomes can be quantified, yet all are typical human responses when employees feel distant from the values of the organisation.
The SMA proposes a schematic framework for the creation of a system of ethical conduct incorporating three phases (see page 8): design and development; deployment; and, measurement. Each phase is supported by specific suggestions for assessment and review (e.g., focus groups, surveys, gap analysis between employees' perceptions of what currently exists and management ideas about what 'should' exist). The measurement phase incorporates disciplinary approaches and procedures based on monitoring and feedback. Ethics by (leadership) example is prioritised in the framework. A detailed 'how-to' guide is provided for implementation.
A final word of warning is offered by the authors:
Readers should recognize that effective implementation of an ethical culture requires a consistent management philosophy and that it is not a short-term program to 'fix the ethics issue'
The IMA acknowledged the work of Nick A. Shepherd, FCMC, FCCA, CGA of EduVision Inc. on whose work this SMA was based.
Kraemer, H.M. Jr (2011) From Values to Action: The four principles of values-based leadership. Jossey-Bass, San Francsico
This book has been included for its topical content though not all the book is available on-line without purchase. It may be of interest for some readers. Kraemer identifies four principles of values-based leadership: self-reflection; balance and perspective; true self-confidence; and, genuine humility. Each is discussed in chapter-length detail within the context of work-life balance.
Harry Kraemer is a Clinical Professor of Strategy at Northwestern University's Kellogg School of Management and former chair and CEO at Baxter International, a health-care company.
Australian Public Service Commission, Strengthening a values based culture: A plan for integrating the APS Values into the way we work, Commonwealth of Australia, Canberra, 2015
This paper was produced by the APSC to assist agencies in integrating the revised APS Values of 2013 into their organisational culture and the day-to-day work of all employees. The underpinning premise is that values form the foundation of public service and guide judgement in serving public interest. Values are also seen to provide a unifying force for as disparate an organisation as the APS and to reinforce the professionalism of the Service.
APS agencies that have their own value statements are expected to reflect the overarching 2013 APS Values:
- Impartial: the APS is apolitical and provides the Government with frank, honest and timely, evidence-based advice
- Committed to Service: professional, objective, innovative, efficient and collaborative
- Accountable: open and accountable to the public
- Respectful: respects all people, their rights and their heritage
- Ethical: demonstrates leadership and trustworthiness and acts with integrity
The Values are underpinned by Commitment, Leadership, Assurance and Management Systems. Against each of these 'building blocks' is a checklist of possible actions that each agency might use to ensure that the values are embedded.
In 2013 a comprehensive review of the APS in regard to integrity and ethics was published in the State of the Service Report. This review was essentially an update about the changes in the ethics infrastructure governing the APS. In subsequent years APS employees have been surveyed about their views on the APS Values and Code of Conduct. Agencies have been requested also to report on the number of investigations into suspected breaches of the Code of Conduct. The data about their employees' perspectives are available to each agency that participates in the State of the Service Employee Census.
Fulford, K.W.M., Peile, E., & Carroll, H., (2012) Essential Values-Based Practice: Clinical Stories linking Science with People, Cambridge University Press, New York
In a series of medically-oriented case-studies the authors describe the role of values in patient treatment. It is accessible and informative reading. The premise for the book is that most failures to achieve desired results in medical practices are not a failure of evidence-based practice. Rather, 'the most likely reason things go wrong is a failure of values-based practices'. That is clinicians fail to ascertain the relevant values perspectives and act on them in a coherent and purposeful manner, informed by values as well as evidence. The attached appendixes include a summary and definitions and a possible teaching framework.
Fulford, Peile and Carroll are respectively: Emeritus Professor of Philosophy and Mental Health, University of Warwick Medical School, UK; Emeritus Professor of Medical Education, University of Warwick Medical School, UK and General Practitioner, Aberdeenshire, UK