ROLE OF BUSINESS ETHICS IN KEEPING STAFF MOTIVATED

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Ethical policies have improved in most industrialized countries over the past 20 to 30 years. However the situation in developing countries is relatively unclear largely because of record-keeping and reporting mechanisms.

Pakistan is among the developing countries of the world where the banking industries have flourished a lot over the past few years. As the Pakistan's situation regarding ethical policies then in the past twenty years or so "the population issue" has been added to the world's agenda not simply as the subject of scientific study and public discussion but also impinging on policy intervention.

INTRODUCTION OF THE STUDY

Business Ethics:

Issues like problems regarding ethics, moral and basic ethical principles are addressed by a practical form of ethics often known as business or corporate ethics. These ethics are applicable on all the conducts of business and individuals working in it, we can say that these ethics have a wider scope in business environment. Ethical issues of technical, medical, legal and business natures are dealt by broader filed of ethics that is applied ethics. The extent to which business is seemed to be at odds with non-economic social values represents the limits and amount of ethical problems of business. In the past, between 1980s and 1990s, a dramatic change was observed in business and academic organization in regard of business ethics.

Overview of issues in business ethics

General business ethics

Primary object of the business is determined by general business ethics being overlapped with the main idea of business. When a company is claiming that the interest and rights of their stakeholders are at the of their priority list but at the same time focusing interests of anyone else this particular attitude will be considered unethical.

What are the ethical rights and duties of a corporation and its investors;

Issues regarding the moral rights and duties between a company and its shareholders.

Moral values regarding businesses working under same industry e.g. negative industrial intelligence, hostile takeovers.

Problems regarding leaderships; social entrepreneurships of corporate; governance of corporate.

Organization's assistance in politics.

The exploitation of ethical strategies of company as a selling tool.

OBJECTIVES

To investigate whether good business ethics increase employee performance and motivation.

To study the various ethical policies of MCB Bank Limited.

To find out how and to what extent management is involved in employee guidance and their motivation.

Literature Review

There is a clear relationship between ethics in business and business ethics for the latter is at one and the same time, commentator, critic, philosopher and prophet on the former. This literature review employs the phrase ethics in business in its title, but draws upon various philosophical and empirical literature sources to identify and discuss key issues within the field. Business ethics, is informed by rich and multiple sources including the literatures of philosophy (ethical, theological and legal), political economy, psychology, business and economics, and, importantly, day-to-day practice. The conjunction of philosophical arguments with everyday human practice, often within fraught and contradictory contexts, provides opportunities for new insights into the possibilities for moral agency at a variety of levels. Just as conceptions concerning the role and status of work have changed dramatically through time (as discussed below), so arguments relating to the virtuous life, bounded morality, the ethicality of competing economic and social systems, and the possibilities and desirability of universal (global) ethics add, at the very least, new contexts in which to debate classical ethical theories. At best, they might even influence the way particular classical theories are viewed. Business ethics embraces all of the theoretical perspectives mentioned above: while not being reducible to any of them & its object is the study of the morality and immorality as well as the possible justification of economic systems. (De George, 1987, p.204).

The business community has focused its attention on ethics too.

Increasingly popular is the notion that "good ethics is good for business" (Enderle, 1997; Desai & Rittenburg, 1997; Abratt, Nel & Higgs, 1992; Tsalikis & Fritzsche, 1989; Solomon & Hanson, 1985). Conversely, being unethical can also prove costly, as in the case of Exxon and the Valdez disaster; Union Carbide and the Bhopal catastrophe in India (Shrivastava, 1987); Shell Oil and its alleged environmental infringements in Nigeria (Longstaff cited in Macken, 1997; McElvoy, 1996); and BHP and its environmental negligence in Ok Tedi (Barker and Oldfield, 1999; Barker, 1995).

Which variety of incentive is most effective at fostering employee motivation? Do non cash incentives work as a long-term business strategy? Phipps, Bazley & Povey (2007) suggest that non-compensatory, team-related rewards, such as the corporate-funded group dinner or activity day are incentives which have been successful in boosting staff motivation levels. The goal of such incentives is to lower the burdens on the corporate payroll budget whilst also creating an internal organizational culture built on positive peer relations and team-building methodology. However, the authors indicate that if the non-cash incentive does not appeal to the members of the lower-level staff, it can actually de-motivate the workers. Other modern companies have turned toward the utilization of luxury incentive packages as a means to boost employee motivation, such as offering premium wine gifts or offering a prize package of modern technologies such as presenting a DVD player or digital camera as a non cash incentive (Philiotis, 2007). The cons to such incentives include the production of negative employee responses in relation to perceptions of corporate frugality. Essentially, if the company procures inexpensive merchandise, the company will appear cheap and create a long-lasting negative impression. Additionally, Philiotis further suggests that companies must be careful when determining whether luxury food items can be considered valuable alternatives to cash, as a diverse, multi-ethnic organizational staff may consider the contents of the gift package to be incongruent with lifestyle preferences or personal beliefs. Thus, from a diversity viewpoint, some varieties of non-cash rewards, if not planned properly to fit staff ideals, can be de motivating elements with long-term implications in regards to employee perceptions against their employer. Daniels (2000) supports the idea that the design of the non-cash incentive is directly correlated to increases or decreases in staff motivation levels. This professional acknowledges that some varieties of non-cash rewards can actually work against day-to-day motivation if incongruent to the needs of the organizational staff. However, Daniels does appear to herald the importance of non-cash motivational incentives by citing that the nature of the work (such as job design and levels of personal autonomy) is far more important as a determinant of productivity than that of cash received for performance. Strategic Direction (2006) offers that companies might consider flattening their organizational structure, in terms of reducing multiple layers of middle management, as a means to boost motivation. This falls into the category of increasing worker job-related autonomy by eliminating continuous managerial oversight and intervention. Eliminating multiple management layers theoretically provides employees with a sense of personal belonging and security in a method that is proposed as superior to cash incentives based on trends in the contemporary worker regarding the fulfillment of various inherent psychological needs. Messmer (2007) supports this notion by suggesting that increased responsibilities, off-site team-building exercises, and frequent performance-related recognition are effective non-cash motivational tools. Despite the aforementioned viewpoints regarding the suitability of non-cash motivational incentives, Ritter & Taylor (1997) offer that today's workers have no real, measurable difficulty in landing comparable jobs in markets which function both efficiently and quickly, thus it is important to ensure that cash-related incentives are congruent with the competitive business environment. Essentially, the authors suggest that it is only compensatory rewards, due to employee perceptions of ease of company exit in favor of new salary opportunities that can sustain employee commitment and longevity to the firm without seeking new employment incentives.

Incentive (1989) offers that 1/3 of today's companies use cash incentives as a means to boost staff motivation, which might suggest that companies are recognizing that cash rewards are the most viable methodology for improving internal staff satisfaction levels. The authors indicate a variety of other non-cash incentives which have been known to build positive motivation, however the underlying human drive is the receipt of cash as a means to create perceptions of equity, trust and mutual reward. This would tend to illustrate that only cash incentives really manage to fulfill the psychological needs of employees over that of non-cash incentives.

It is important to note that under some circumstances an increase in productivity might not necessarily lead to an increase in employment. Take for instance a case in which worker productivity rises faster than does the demand for the goods that the workers produce. The supply of the good being produced rises relative to the demand for it and therefore the price of the good tends to fall. This fall in price will offset the effect of higher productivity on the value of goods produced by workers. Depending on the extent of the price changes, there may be no change in the value of additional workers and the firm's demand for labor will not increase - the firm neither hires more workers nor increases wages. In this case the benefits of higher productivity are captured by the consumer, who enjoys goods of the same quality and quantity but at a discounted price. However, it is also important to remember that because of these price dynamics consumers will have more to spend on all other goods and service. This will lead to an increase in demand and will tend to push up the prices of those other goods, interestingly enough, when those prices raise, the demand for labor at firms producing those goods rise, which pushes up employment and wages at those firms.

It may also be the case that the gains from productivity simply increase the profits of the firm. If there is no way through which the firm can increase revenues and if wages are inflexible, the firm may reduce the number of workers it employs and thus reduce overall labor costs. In such a case productivity increases are simply captured by the firm in the form of higher profitability.

A number of scholars have observed that, while in theory wage increases should match productivity increases; this has not always been the case in the United States. Research in this area has produced several explanations for the presence of a wage productivity gap and sparked a lot of debate about the best way to measure trends in labor productivity and wage growth.

Zavodny (1999) estimates her regression, focusing on how her union related variables influence the wage productivity and compensation productivity gap, using ordinary least squares (OLS) with data on sixty-two manufacturing industries in the wage-productivity gap regression and sixty-five industries in the compensation-productivity gap regression. Her results demonstrate that the difference between productivity gains and wage or compensation increases is smaller in industries with higher initial unionization rates. The coefficients from her regression indicate that if the unionization rate at the beginning of a five-year period were to fall by 1 percentage point, the difference between productivity growth and wage growth over the next five year would increase by 0.23 percentage points. Also, a 1 percentage point decline in the initial unionization rate is associated with a 0.21 percentage point increase in the difference between productivity growth and compensation growth over the next five years. These results suggest that more-unionized industries experience smaller increases in the wage-productivity gap, and consequently, that the lower unionization rates today might account for the failure of increases in wages and compensation to match productivity growth. Yet, the wage-productivity gap and the compensation productivity gap do not raise significantly faster in industries with declining unionization rates. As such, Zavodny concludes that the decline in the unionization rate plays at most a minor role in the rise in the gap between productivity and wages or compensation (Zavodny 1999).

Cashell (2004) argued in his article "Impact of wages on productivity: Examine the Wages productivity gap" that is first important to discuss the theoretical mechanism through which wage increases are expected to follow productivity increases. Cashell provides a good overview of the theory behind productivity and wage growth. He begins by considering the behavior of an individual firm operating in a competitive economy that has little influence on market conditions, sells its good at prevailing prices, and hires workers at prevailing wages. His model assumes diminishing marginal productivity - each additional worker hired is less productive that those hired before. This is because it in the best interest of the firm to hire the most productive workers first, implying that each additional worker is not as capable. Also, without additional investment in capital each additional worker reduces the ratio of capital per worker. A profit-maximizing firm will continue to add to its labor force as long as the contribution to output produced by the last worker hired (the price of the good times the quantity produced) exceeds the cost of his labor (the wage rate times hours worked). Of course, if the productivity of each additional worker declines, then so will the value of the worker's additional production, the profit-maximizing firm will stop adding to its labor force when the value of the output of the last worker hired equals the cost of the additional labor. However, if some event, such a technological innovation, raises the productivity of all the workers at a firm, then each worker is able to produce more than before and thus the total value of the output each worker can produce will increase. As such, the last worker hired produces more than just enough to cover.

If the firm continues hiring as long as the value produced by each additional worker is greater than the additional labor cost then increases in productivity will increase the firm's demand for labor as hiring more labor is profitable for the firm. And ceteris paribus, an increase in the demand for labor will tend to push up the wage rate. Therefore, increases in labor productivity increase labor income. Of course, once the firm again reaches the inflection point at which additional labor cost is more than value of the incremental goods produced, it will stop hiring.

It may also be the case that the gains from productivity simply increase the profits of the firm. If there is no way through which the firm can increase revenues and if wages are inflexible, the firm may reduce the number of workers it employs and thus reduce overall labor costs. In such a case productivity increases are simply captured by the firm in the form of higher profitability.

RESEARCH HYPOTHESIS

Hypothesis is the expected result of what is the outcome of the investigation. These might be the expected result or null hypothesis, which is used in the statistical test to check the reliability.

In my research the hypothesis is,

Ho: Corporate ethical policies do not effect in keeping the employee motivated and performance.

H1: Corporate ethical policies effect in keeping the employee motivated and performance.

THEORETICAL FRAMEWORK

Productivity studies analyze technical processes and engineering relationships such as how much of an output can be produced in a specified period of time.

It is related to the concept of efficiency. While productivity is the amount of output produced relative to the amount of resources (time and money) that go into the production, efficiency is the value of output relative to the cost of inputs used. Productivity improves when the quantity of output increases relative to the quantity of input. Efficiency improves, when the cost of inputs used is reduced relative the value of output. A change in the price of inputs might lead a firm to change the mix of inputs used, in order to reduce the cost of inputs used, and improve efficiency, without actually increasing the quantity of output relative the quantity of inputs. A change in technology, however, might allow a firm to increase output with a given quantity of inputs; such an increase in productivity would be more technically efficient, but might not reflect any change in locatives efficiency.

The data can be collected by two ways.

Qualitative data:

It refers to the use of numerical data or measurable elements, such as days, units of volume, cost etc. It is based upon the hard fact and therefore provides information.

Quantitative data:

It refers to opinions, views, attitudes and feelings and as such additional analysis which cannot be obtain by qualitative data. (University of Sunderland)

I shall use qualitative method to collect data for the research, which is based on the perceptions of managers, Perception of employees / line staff, Impact of ethical policies on the performance and motivation of employees.

Tools of research use for the data collection will be personal interviewing with MCB Bank staff.

RESEARCH METHODOLOGY

There are two methodologies by which theory is developed"

Inductive Methodology

Deductive Methodology

Induction theory is more likely to come from a kind reasoning that draws generalized conclusions from a finite collection of specific observations. It is not rigid as the deductive methodology in that it allows alternative theories to be suggested to explain events. In general it is based upon collecting data and then develponig a theory based upon the data analysis.The methodology I shall use is inductive. I shall collect the data and then on the bases of that data I shall have analysis.

In deductive, it refers to specific data obtained from a general theory. The theory leads to predictions about what is likely going on. For example, a hypothesis follows this as it is a theory-based prediction. A problem of deductive research is the biased imposed on people as one is more likely to see what they want to see in order the prove their theory and fail to see other circumstances which could have led to the results obtain.

SAMPLING TECHNIQUES OF THE RESEARCH

What do I mean by sampling is the use of simple random technique of sampling. While selecting a book, we read some pages or lines or related topic of the research and selected the sampling techniques.

Data Collection Sources:

Data will be collect from MCB Bank Limited at branch level.

Data Collection Tools / Instruments

The present research will be a survey type cross sectional quantitative research. In order to select the sample from the target population i.e. MCB Bank Limited "Non-probability convenience (purposive)" sampling technique will be used.

Subjects / Participants

In the given research study, the population will be all employees of MCB Bank Limited.

The sample will consist of both males and female, upper, middle and lower level staff from the target population. According to the designations of the respondents their qualifications, professional experience, age will vary.

The number of female staff in the population will be very small but their efficiency of work is greatly affected.

Field work/Data Collection

A questionnaire will be designed to collect the necessary information. The questions type will be close ended. A cover letter highlighting the purpose of the study and instructions to fill in the questionnaire and a demographic data sheet will be prepared and attached with the questionnaire as well.

Data Processing & Analysis

Available research software MS Excel and manual calculation will be uses while making analysis on the data collected for the proposed research study if needed. Statistical and arithmetical formulae will be applied as per demand and need of the study. Statistical tables and graphical representations will also be drawn.

Financial resources:

Financial resources will be required for the prepration of questionnaier material and traveling.

TIME SCALE AND GANTT CHART

Time in Weeks

Activities

1

2

3

4

5

6

7

8

Introduction

Background of the study

Review of previous studies as literature review

Research design

Data collection

Analysis of data

Rough draft

Final draft

Printing and binding

EXPECTED OUTCOMES

This study explains the corporate ethical policies which results into the efficient employee's performance? Answer can perhaps be found considering the level of difference that exists between employees' and employers' perceptions on various issues or factors involved. The problem can be solved by formulating a proper policy that covers ethical issues of the workplace comprehensively.

The basic conclusion that can be drawn is that organizational culture and specific appropriate policies has a great effect on the efficiency of employees of the organization.

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