CHAPTER 16

Ethical and Legal Issues of Performance Management

INTRODUCTION

Compliance with the ethical issues by any organization is possible when they balance the bottomline and the social welfare. Such a process of balancing may not always be without conflict, because
of the differences in the stakeholders interest. Obviously for this reason, organizations feel
constrained in the process of balancing opposing objectives. Being multi-dimensional, an
organization has to meet such opposing expectations of stakeholders, who even encompass society,
culture, religion, diversity issues, religions, socio-politico-economic issues, or for that matter any
possible issues which may have direct or indirect linkages with the organizational activities.
DEFINITION AND CONCEPTS

Ethics are moral principles about what is good, defensible, and right. Although operationally ethics
need to be integrated with our behaviour and actions, we often treat ethics as an afterthought. Ethics
and ethical reflection need to be integrated through all organizational practices. A common
philosophical definition of ethics is the science of conduct or values of management. Moral values
such as respect, honesty, fairness, and responsibility are important constructs of ethics. Application
of such ethics is ensured by organizations by adopting some code of ethics. Thus, ethics includes
the fundamental ground rules and organizations give an informed choice to the employees to
understand whether something is right or wrong.

ETHICAL PERSPECTIVE IN PERFORMANCE APPRAISAL SYSTEM

The American Heritage Dictionary elaborates the term ethics as certain set of principles of right
conduct, moral values, philosophy, and rules or standards that govern the conduct of a person or the
members of a profession. Ethical issues become more challenging in human resource management
issue, which encompasses performance management as well. Performance evaluation, generally,
consists of multiple factors like punctuality, attitude, conforming to dress codes, good interpersonal
relations with the customers, peers, and subordinates, language, neatness, congeniality, and finally
the performance output, among other things.

OBJECTIVES OF PERFORMANCE MANAGEMENT ETHICS

The overall objective of performance appraisal is to provide an honest assessment of performance

and to mutually develop a plan to improve the individual's effectiveness. Prerequisites for the same
are to make people understand where they stand in terms of their performance achievement. To
ensure compliance with the performance ethics, structured performance objectives are laid down,
keeping the following points in the backdrop:
Adequate definitions of the objectives and the purpose of the organization.

 Issues of priority, like values or achievement of performance goals.

How the employees contribute to the achievement of organizational results.
Focus of the organization in terms of achieving the performance

CODE OF ETHICS AND CODE OF CONDUCT

Code of ethics and code of conduct specify the ethical standards that a group (e.g., staff or a
professional group) should follow in order to continue as a member of the group. They are generally
formally stated and members are required to accept them as part of their membership of the group
while accepting employment/membership. Values vary between individuals and across cultures.
Hofstede's four value dimensions (1980) help us understand cultural value clashes. Long-term
versus short-term values affect many aspects of organizational life. The four key ethical principles
are egalitarianism, utilitarianism, individual right, and distributive justice.

IMPLEMENTING CODE OF ETHICS IN THE WORKPLACE

Once a decision is made to develop a code ethics or a code of conduct for an organization, the next
step is to decide what it will include, what it will aim at, and who will prepare it. Carter McNamara,
in the guidebook, The Ethics Toolkit for Managers, points out codes should not be developed out of
the human resource or legal departments alone, as is too often done. Rather, he says, All staff must
see the ethics programme being driven by top management.
The Institute of Business Ethics recommends these general steps to be followed in the initial
planning phase:
Find a championpreferably a very senior level management person.
Get endorsement from the chairman and the board.
Find out what bothers

ETHICAL DILEMMA IN PERFORMANCE MANAGEMENT

In the process of performance evaluation, the following ethical dilemmas are experienced by
performance reviewers.
Emphasis on trait-oriented and subjective performance evaluation criteria, which are
difficult to quantifyIt is always desirable to use objective criteria for performance
evaluation. Subjective evaluation often becomes discriminatory. Using the SMART
approach, and so also BARS (behaviourally anchored rating scales), many subjective
performance attributes can be quantified (Barrett, 1966, Campbell et al., 1970, and Smith
and Kendall, 1963).
Ambiguous performance standards and KPIsThis restraints accurate assessment of
performance. Performance standards need to be quantitative; time bound,

LEGAL ASPECTS OF PERFORMANCE MANAGEMENT

Performance management and decisions thereupon, per se, is the prerogative of management, unless
it prejudices the interest of the appraisee. Prejudicing of interest occurs when decisions on
promotions, pay raises, and other career development of the employees are taken by the
organizations, affecting their interests. The premise of prejudicing the interest of employees,
however, is the perception of the employees. Hence legally, it is the onus of employees to
substantiate that their interests have been prejudiced. In India, we have many labour law provisions

to enforce the mandatory requirements that the performance evaluations, or for that matter any
work-related behaviour be based on objective, job-related