The India Way: Lessons for the U.S.
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Most prominent that brought down
companies – Enron, WorldCom, Adelphia,
and Global Crossing.
 Not quite bad enough – Xerox, Sunbeam,
Waste Management, Tyco, Health South,
etc.
 The calamity was caused by “failure in
leadership” in both financial services and
government.
(3) There are now alternative business models
that can lay claim more successful.
“Stakeholder” Model
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Dominant model in the US in the early 1980s
Asserts that business has many groups with an interest
or stake in its operations, and that the interest of these
different stakeholders have to be balanced
o Pushed aside by theoretical arguments emanating
from the field of finance, which then played out in the
sphere of public policy beginning in the 1980s.
Contemporary US Model
o Asserts that maximizing shareholder value is the
primary goal of business – the only goal of
contemporary business
o Elements that are different from other practices
elsewhere:
(1) Business strategy – focuses attention outside the
firm in the search for opportunities and, to a
lesser extent, in a related search for competencies
through mergers and acquisitions and joint
ventures.
(2) Restructuring – when markets or strategies
change, companies lay-off employees to cut costs
and hire new ones to redirect the business toward
new markets or to meet new skills.
 Ability to restructure – key to
competitiveness
(3) Efforts to harness the motivation and abilities
of employees – focuses mainly at the top, with
financial incentives (via equity) offered to
executives and top managers – in turn, they figure
out how to motivate the rest of the workforce,
with threat of job loss typically an important part
of the mix (factor).
o Recent and Important Challenges:
(1) It has not worked well for employees
 Because employees are no longer seen as
explicit stakeholders whose interests have to
be balanced against those of shareholders.
 Compared to previous decades, jobs are
much less secure, wage growth is markedly
lower, and at least by some measures,
employee attitudes toward their jobs and
their employers are worse.
(2) Corporate governance has been plagued in
recent years by a sharp increase in
malfeasance.
 An unending stream of corporate financial
scandals that began in the mid-1990s –
executives manipulating finances to improve
share prices and pad their own pockets.
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Country with the second-fastest growth rates in the world
over the past decades.
GDP has risen 9% per year – several times that of the US
and nearly that of China.
Became one of the most favored destinations for direct
investment – behind China but ahead of US.
Infrastructures are less developed than in most Western
nations – but value of exports has increased by 2.5 times
from 2004 – 2008
Indian companies have become international acquirers –
able to compete with the best enterprises and operating well
beyond the boundaries of India.
Shares great many traits with the US:
o Democratic principles
o Associated arrangements of civil society (free press,
a strong and independent judiciary, a highly diverse
population, open capital and labor markets)
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Indian companies see their most important goal as
serving a social mission.
Indian companies take the management of human
capital.
The persistence of engaged employees contributes to a
uniquely Indian approach to problem solving – Jugaad.
Business strategy is eternal and rests on innovations in
the companies’ value chains – less interested in acquiring
competencies through mergers and acquisition.
Maximizing shareholder value was placed fourth – Indian
business unlike the US
Indian Business Leader Priorities
1) Chief input for business strategy
2) Keeper of organizational culture
3) Guide or teacher for employees
4) Representative of owner and investor interests
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5) Representative of other stakeholders (e.g., employees
and the community)
6) Civic leadership within the business community
7) Civic leadership outside the business community
Corporate Governance
o Distinctive feature – the determination to balance the
interest of the firm’s diverse stakeholders, all the
groups that have a claim on what the company does.
o Emphasis on the interest of the broader community,
which extended from the immediate vicinity of the
business out to encompass the entire nation.
o Problem/special concern – the rights of the minority
shareholders
o Tunneling – concentrated majority ownership and
holding company structures create incentives to shift
assets inappropriately across companies
o “The Tata Group is less rules-based and more
values-based. We have always believed you really
cannot frame rules for corporate governance” – Tata
Steel
o Nonexecutive directors – take more of a strategic
partnership role with company executives, and less of
a shareholder monitoring or rules-based role.
o Protecting shareholder value is not ignored – but
Indian directors incorporate the concerns of a range
of constituencies in reaching board decisions in
partnership with management.
Mission-driven
o Sense of mission
 Central to the distinctiveness of the Indian
model
 A social goal for the business that goes beyond
making money and helps employees wee a
purpose in their work.
 Social mission – the purpose of the business,
not a separate act of charity – extends to
helping India and its citizens.
o “fortune at the bottom of the pyramid”
 Emphasizes busines opportunities among the
poor; but making money is never presented as
the primary objective
o They put their money where their mouth is with
respect to mission.
The Motivation for Mission
o Driver for the sense of mission – the priority and
value placed in India on service to others and the
widely held belief that one’s goal in life should extend
beyond oneself, especially beyond one’s material
needs
o Vanaprastha ashrama – third of the four stages of
Hindu life; focuses on the search for meaning, helping
others, and a gradual withdrawal from the competitive
business world – neatly coincides with the typical age
(over 50) of senior business leaders.
o Desiring leaders – humane, compassionate, and
generous – the preference that fit nicely with the
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aspect of national culture manifesting service to
others as a source of motivation.
o Mission fits the altruistic norm – “Corporate social
responsibility and good governance are related to the
state of the development of the country” (Srinivasan,
director of Tractors and Farm equipment)
o Driven by necessity – The rapid growth of the Indian
market and the inadequate scale of health and
education systems have forced companies to develop
healthcare and classes for their own talent.
o Social investments pays off as well
 “Our history in corporate social responsibility
has enhanced the group brand” – Tata Steel;
was proved invaluable for recruiting and
retaining employees
 The perception of a company’s social
responsibility is one of the main factors in
retaining talent.
 Acting responsibly may also pay off especially
in dealing with regulator – obtaining industrial
licenses and environmental clearance in India
can depend on being known for public
responsibility.
o Mission as a business goal affects relationship with
customers.
 Individuals have long memories – doing good
things for people when they have no money
and are not customers can redound to a
company’s advantage when those individuals
do have money and are in the market for your
products.
o Social mission is a powerful way to motivate
employees.
 the connection individuals see between the
tasks they perform and the overall product or
outcome of the organization is an important
source of positive employee outcomes
 the effects of task significance on job
performance are much more powerful when
they contribute to helping others, and social
impact more generally can lead to
performance outcomes that are orders of
magnitude greater
Social Mission vs the US Model
o US Model – disadvantage
 difficult for most people to see making money
for shareholders as a goal that is personally
meaningful
 led executives to concentrate on the interests
of their own enterprise and devote less
attention to the welfare of the community or
society
o Focus of mission may relater to differences in
leadership style
o Multifactor Leadership Questionnaire (MLQ) –
most widely used assessment of leadership in US
o Transformational Style – Indian business leaders
rank highest in practices that fall under this style
o
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(inspirational motivation, idealized influence,
intellectual stimulation, and individual consideration)
Transactional side – Indian leaders are quick to use
contingent rewards (rewards based on performance),
but less prone to manage by exception or look for
mistakes. (American leaders more likely to use this)
Indian companies – built employee commitment by
creating a sense of reciprocity with the workforce, looking
after their interests and those of their families and
implicitly asking employees to look after the firm’s interest
in return.
To translate commitment into action, the business leaders
went to extraordinary lengths to empower employees in a
way that often conflicted with historical and cultural
norms, giving them the freedom to plunge into problems
they encountered and create their own solutions.
Business leaders directed their attention to building
organizational culture, their number-two priority, which
shows employees how to behave, and to demonstrating the
connection between employee competencies and business
strategies.
Training
o They invest heavily in their employees, especially
their new hires.
o Design management – trains people to use both sides
of the brain (visual and aesthetic side, and the logicalrational) (Pantaloon – leading retailer)
Employee Appreciation
o Measure of priority on the employees – comes from
what they tell shareholders and the broader
community about the employees’ operation
o Common mention of human resource issue:
(1) Most common – thanking employees of their
contribution
(2) to highlight individual employees – typically
for their special contributions or sometime for
their life experiences
(3) mentions of employee capabilities and efforts
to train and develop employees
(4) to discuss contributions employees were
making to the broader community
They see employees as key to building the organizational
capabilities that drive competitiveness – the reason they
invest in their employees
To Americans – the purpose of employee learning was to
better execute existing strategies
o “Learning” seemed more like training, designed to
improve performance on existing tasks.
They take pains to protect those investments in employees
(like Japanese companies)
o (Mahindra Group) contemplated and decided not to
lay off workers because they knew there were five
family members who would suffer alongside – put
these employees in the company gardens and claim
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that the company now has some of the finest gardens
in India
Employee Empowerment and Transparency
o Having motivated and skilled employees might not
matter if they were not given the opportunity to use
those skills.
o Mind-Tree’s innovative methods to give feedback
to employees:
 Snapshots – monthly updates that describe the
competitive environment and the state of the
company
 All Minds Meet – a regular open house with
the company’s leadership where all questions
are tackled on the spot
 People Net intranet – grievances are
addressed
 Petals - a blogging site
Integrity Policy (Mind-Tree) – (transparency and rolemodeling) posts on its Web site accounts of ethical failures
and violations of company policies, and the lessons the
firm has learned from each
 The idea is that by acknowledging mistakes,
especially those made by leaders, the company
encourages others to admit theirs and to follow
its lead in making changes.
“Single-status” policy (Sasken Corporation) – highwater mark for a culture of openness and flat hierarchy;
means that all employees, from entry-level to Mody
himself, are treated identically—same offices, same travel
policies (coach class), same criteria for compensation (no
separate executive compensation policies)
Jugaad
o ability to improvise and find a way around problems,
often using trial and error method.
o The unique cultural context of learning to work in a
tough, resource-constrained country where the ability
to make do and improvise with what little was
available
o In modern corporations, this phenomenon plays out
through motivated and committed employees
hammering away at tough problems, persistent until
they find creative solutions and workarounds.
o Having a sense of mission and social goal – helps
employees see a purpose in their work that goes
beyond their immediate self-interest, beyond the
achievements of the firms and its owners.
o Creative adaptation, not weary resignation – central
to the Indian approach to management.
o Adjust – also spoken in various local accents in India;
used in a wide range of situations, usually with a
plaintive smile;
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Doing More with Less, Strategically
o Tata Nano – the pint-sized car built by Ratan Tata
of Tata Motors, India’s largest maker of automobiles
and trucks
o Conventional market strategy - – staying away from
low end of the market, where Japanese quality and
prices dominated.
o Price point – 100,000 rupees per car of $2500 –
achieved through jugaad concept
 Deep frugality, a willingness to challenge
conventional wisdom, and a single-minded
determination by Tata’s top managers to work
through the many constraints and challenges of
operating in the Indian environment.
o Open distribution innovation – (termed by Business
Week) the method could create not only the world’s
least expensive automobile but also its largest selling
one
 Kits of components are to be sold en masse for
assembly and distribution by local entrepreneurs
 providing the tools for local mechanics to
assemble the car in existing auto shops or new
garages created to cater to rural customers
 “creating entrepreneurs across the country
that would produce the car …, my idea of
dispersing wealth”
o Narayana Hrudayalaya – hospital group; founded
by Devi Shetty; to help the thousands of Indian
children who need cardiac surgery and cannot afford
it
o ICICI Bank – similar for rural banking by K.V.
Kamath; alternative, far less costly avenues for
reaching the poor, ranging from nonprofit
microfinance groups to using local fertilizer
distributors as agents
Strategy from Within – fourth
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the source of comparative advantage as coming from
deep inside the company, from motivated employees, new
and better ideas, and superior execution
Strategy in these companies comes from internal
capabilities.
The source of the distinctiveness of the India Way and the
ability to focus the business on solving hard problems rests
heavily on the management of people:
o They invest in them,
o use social mission to create motivation,
o empower them, and
o tap into the cultural aspect of jugaad to hammer away
at hard problems until they break through.
“Chief input into the strategy process” - most important
task; the CEOs monitor and maintain the infrastructure of
their organizations, the firms’ architecture and culture and
systems for investing in and engaging their employees
Strategy
o a staff-function in US but number-one priority for the
Indian CEOs or the CEOs involvement
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viewed as a set of enduring principles, an approach to
business that they can encode into the firms’
responses to market opportunities
o allows for improvisation and flexibility in unit-level
practices while incorporating interventions and inputs
from the CEOs into the strategies of various
businesses.
The India Way companies are more likely to stick with
their traditional customers and take on the long-term,
persistent challenges those customers face.
Customer relationships were the area of largest net decline
for U.S. CEOs, and their increased focus was all on factors
outside the firm
Indian leaders report the biggest declines in their time in
the area of day-to-day management, giving more
autonomy to lower management
“Speed, flexibility, and adaptability to change”
o (US) below “consistent execution of strategy”
o (India) the heart of strategy and the greater priority
Key Elements of Strategy:
o Adaptability
o Improvisation (jugaad)
o Doing more with less
The process of driving strategy through core principles,
especially social mission, also helps these companies find
opportunities where no one else was looking.
The India Way model created responded to the remarkably
different environment for business offered up by the
economic reforms and more open markets after 1990.
The India Way is unique, but the set of practices that
comprise it are not necessarily dependent on the Indian
context.
The India Way should serve as a model for other countries
in part because it addresses the intense pressures for greater
social responsibility but most importantly because it is
succeeding in the competitive environment with a
competitive advantage that appears to be sustainable in the
long run.
Not all Indian business leaders are saints, not all Indian
companies pursue the practices we describe here, and that
even for these leading companies, we may be describing
their best attributes.
The India Way offers a compelling example of a model that
succeeds financially while succeeding socially.
Strategic Human Resource Management as Ethical
Stewardship
 (Ulrich & Beatty) Critical contribution made by human
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Ethical Stewardship – a model of governance that honors
obligations due to many stakeholders and that maximizes
long-term organizational wealth creation
Ethical issues in HRM – key factors in aligning and
guiding organizational success
Strategic focus of HRS – more effective when aligned with
an organization’s mission, purposes, values, and structure
Most effective HRPs
o add value to their organization’s effectiveness by
linking people, strategy, values, and performance
o (linking) critical to the maximization of performance
outcomes in a world that is increasingly dependent
upon the initiative, creativity, and commitment of
employees to succeed.
Goals of effective organizations:
o Not simply instrumental or outcome oriented
o Also normative, or value-based
o achieve their greatness because of their commitment
to values and principles which guide employees and
which create strong and effective employee cultures.
3 Key Functions (Becker & Huselid, 1999):
(1) A management culture aligned with the corporate
strategy
(2) Operational and professional excellence in
conducting key tasks
(3) A human resource structure focusing on human
resource managers as business partners to other
departments
o are interrelated
o Organizational cultures can enrich human lives as
well as increase profitability
o Integrating key human resource functions to reframe
an organization’s internal environment results in
significantly higher organizational outcomes and
financial performance that is superior to what firms
can attain by implementing individual human
resource program elements piecemeal.
“High involvement, high performance, or high
commitment management practices” – enormous
economic returns can be obtained through the
implementation of these
Execution – the key to effective organizational change
HR Architecture
o the systems, practices, competencies, and employee
performance behaviors of SHRM
o a key element to “building sustainable competitive
advantage and creating above-average financial
performance”
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resources in accomplishing strategic goals – required that
they fill the roles of coach, architect, facilitator,
conscience, and contributing leader—rising from the status
of subservient “partners” to substantial “players”
3 Key Change Factors for the Successful
Transformation of HR function:
(1) Focus on cost-effectiveness
 Reframing the human resource function to
deliver services at a reduced cost made the
HRM function more financially accountable
(2) Merger of the HRM function with the strategic
role
 Aligning core processes—the key tasks
performed by organizations—so that when
systems mesh rather than conflict the entire
organization is able to utilize people
efficiently and effectively.
(3) Development of new knowledge
 organizational culture, financial performance,
and goal achievement were interdependent
elements of successful organizations—and
that valuing people and treating them well
improved the bottom line.
Successful HRM – “involves designing and implementing
a set of internally consistent policies and practices that
ensure that employees’ collective knowledge, skills, and
abilities contribute to the achievement of its business
objectives”
The “decision science” of HR – how to measure the added
value of employee contributions.
HRPs acknowledge that they can earn a place at their
organization’s strategic policy making table only if they
understand the “decision science” of HR and help create
organizational programs and systems that reinforce desired
employee behaviors
Leaders as stewards – who owed a complex set of duties
to stakeholders; these duties achieve long-term wealth
creation which ultimately benefits all stakeholders and
honors the obligations owed by business to society.
 “Covenantal” – the nature of duties of organizational
leaders; suggesting that the relationship that organizations
owed to employees as akin both a contact and a sacred
obligation.
 Ethical Stewardship
o The honoring of duties owed to employees,
stakeholder, and society in the pursuit of long-term
wealth creation”
o A theory of organizational governance in which leaders
seek the best interests of stakeholders by creating high
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trust cultures that honor a broad range of duties owed
by organizations to followers.
o Stewardship role – value-based, principle-centered,
and committed to the welfare of all stakeholders.
o “Win-win or No Deal” – the duty of leaders is to
optimize outcomes, rather than setting compromise
position that overlooks opportunities.
Ethical obligations of organizations – neither idealistic
nor soft.
Responsibility of organizations – fully disclose critical
information and to clearly identify threats facing an
organization as well as the accompanying implications of
those threats upon employees.
Treating employees as “owners and partners” in the
governance process and emphasized that in the highly
competitive global that relationship encompassed sharing
honest and extensive communication (Block)
“(t)he first task of the leader is to define reality”—a
reality that included an obligation to tell all of the truth to
employees, rather than withholding key information that
might treat the employees as mere hirelings. or the means
by which the firm achieved its goals.
Moral position of ethical stewardship – organizational
leaders have the obligation to pursue long-term wealth
creation by implementing systems that strengthen the
organizational commitment of each stakeholder.
Ethical stewards in HRM:
o Demonstrate the insights of great organizations that
transform their companies into human and humane
communities which emphasize inclusion, shared
partnership,
empowerment,
and
leader
trustworthiness.
o Transforming culture occurs when followers believe
that systems will enable employees to achieve desired
outcomes and that social contacts will be honored
o Also achieved by treating employees as “yous” or as
valued individuals and organizational partners rather
than as “its” or mere organizational commodity with
a human form.
If the HRP is to function as an ethical steward in the
modern organization:
o she/he must combine a profound knowledge of the
operations of the firm
o an understanding about how to implement systems by
which organizations can maximize human
performance
o an understanding of the empirical value and
cost/benefit contribution of high-performance
systems
o the ability to communicate effectively to top
management and Boards of Directors in a convincing
manner so that those policy makers will adopt policies
and systems essential for creating integrated and
effective HRM systems that support organizational
goals
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Transformational Leadership
o “Transformative leaders” – HRPs should be; who
honor a broad set of ethical duties in their role as
ethical stewards.
o Demonstrate this principle when they combine a
commitment to helping both individuals and
organizations to achieve unprecedented excellence.
o had a positive impact on followers’ development and
performance
and
the
accomplishment
of
organizational priorities.
o “elevate the desires of followers for achievement and
self-development while also promoting the
development of groups and organizations”
o Jim Schwappach – a leader who was effective at
listening deeply to others and involving others in
developing solutions that empower employees while
greatly increasing the effectiveness of an organization
in accomplishing organizational goals.
o Empowering employees maximizes commitment and
enables employees to become a source of strategic
competitive advantage that competitors rarely can
duplicate.
o Empowering employees maximizes commitment and
enables employees to become a source of strategic
competitive advantage that competitors rarely can
duplicate
o The ability of transformational leadership to
simultaneously pursue both individual needs and
organizational goals has long been considered a
critical element of organizational success and is
widely regarded as an important characteristic of
high-performance organizations.
Charismatic Leadership
o “Charismatic leaders” – ethical stewards to the
degree that they personally inspire other to achieve
worthy goals.
o “an attribution based on follower perceptions of their
leader’s behavior”, and reflects the followers’
“perception of their leader’s extraordinary character”
o Characterized by high emotional expressiveness, selfconfidence, self-determination, freedom from internal
conflict, and a conviction of the correctness of the
leader’s own beliefs.
o Inspiring leaders appeal to common ideals and
animate an organization’s vision in a way that
resonates deeply within the hearts of others.
o They recognize that it is in resonating with people at
the emotional level that creates the greatest personal
commitment.
o Elmar Toime – implemented high trust practices
based upon close relationship with individual
employees; transformed New Zealand Post “from a
typical government bureaucracy to a profitable stateowned enterprise and the most efficient post office in
the world”
o
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Honors the duties of ethical stewardship by
encouraging the hearts of employees.
o That ability to create high commitment and high trust
is at the heart of high performing organizations
and is a key responsibility of effective leadership.
Principle-centered Leadership
o Incorporates foundations of ethical stewardship to the
degree that it seeks to integrate the instrumental and
normative objectives of an organization while being
congruent with universal principles demonstrated by
effective leaders
o Leadership – the most successful when it adheres to
a patterned set of well-accepted principles of
effectiveness and respected moral values.
o practiced “from the inside out” at the personal,
interpersonal, managerial, and organizational levels.
o They earn trust based upon their character and
competence
o Great leaders sustain their credibility based upon
their consistency in modeling correct principles and
in honoring values that demonstrate personal
integrity.
o They recognize the virtuous outcomes supersede
adherence to rules and that moral purposes
complement best practices in achieving stewardship
goals.
o They model organizational values and recognize that
effective leadership is ultimately the integration of
both ends and means.
o Proctor and Gamble – created a strong principlebased culture based on core values and a core
ideology.
o Principle-centered leaders and ethical stewards –
develop a knowledge of guiding principles that
characterize great organizations, and help
organizations to create aligned organizational
cultures that match actual behaviors with espoused
values – a key element in establishing and
implementing human resource systems that earn
employee commitment and trust
Servant Leadership
o Build trust and inspire the confidence of others.
o at the heart of ethical stewardship and exemplifies
its depth of commitment to serving the individual.
o Depree – one of the most highly regarded advocates
of servant leadership – organizational leaders had the
ethical responsibility to be “a servant and a
debtor” to employees by establishing policies that
demonstrate the organization’s commitment to the
welfare of each employee.
o “Valuing individuals and developing people, building
community, practicing authenticity, and providing
leadership that focuses on the good of those who are
being led and those whom the organization serves”
o Great leader is a servant first because the
commitment to serving others is his identity “deep
down inside”
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Honors each individual as a valued end, rather than
simply as a means to organizational outcomes
o They put the needs, desires, interests, and welfare of
others above his or her self-interest while also
honoring duties owed to the organization.
o Herb Kelleher & Sam Walton – known for valuing
employees as critical to the success of their
organizations and for adopting a leadership
philosophy incorporating principles of servant
leadership – balanced a consideration for employees’
welfare with a recognition that treating employees
well increases their commitment in return.
o Servant leaders and ethical stewards - demonstrate
a commitment to the “welfare, growth, and
wholeness” of stakeholders – makes leaders credible
and trustworthy
Level 5 Leaders
o They demonstrate their fierce commitment to the
success of the organization while creating systems
that recognize employee contributions and give credit
to employees for achieving an organization’s success
o demonstrate a leadership insight that willingly shares
both power and the credit for accomplishments
while accepting personal responsibility for
organizational failures
o leaders of the organizations that evolved “from good
to great” were typified by high commitment coupled
with great personal humility.
o They avoided the counterfeit leadership qualities of
egoistic self-interest that typified high profile leaders
in many organizations.
o They were not “I-centered” leaders who pursued
self-serving goals or who viewed themselves as the
upfront personification of their organization’s success
o They tended to be described by those who worked
with or wrote about them as “quiet, humble, modest,
reserved, shy, gracious, mild-mannered, selfeffacing, understated, did not believe his own
clippings; and so forth”
o Possessed a “ferocious resolve, an almost stoic
determination to do whatever needs to be done” to
serve the organization and to make it great
o Most successful women leaders who “seem to care
more about the sustained success of their
organization than their own legacy”.
o They are transformative in demonstrating humility
about their own accomplishments, giving credit to
others in their organization for success while
accepting full responsibility for the errors made by an
organization and working unceasingly to address
those errors.
o Level 5 leaders and ethical stewards – create human
resource systems and processes that are fully aligned
with the normative and instrumental goals of the
organization while giving employees credit for their
role in the accomplishment of those goal – balance the
needs of the organization with a commitment to the
best interests of its stakeholders and create reward
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systems that also reward employees for contributing
to organizational success.
Covenantal Leadership
o they help organizations create new knowledge which
enables firms to create and maintain competitive
advantage and constantly improve
o integrates the roles of the leader as a servant, role
model, a source of inspiration and as a creator of new
insight and meaning
o encompasses the pursuit of a noble purpose, often
described as rising to the level of a contractual or
even a sacred duty
o They seek not only to enhance the skills and abilities
of those with whom they associate, but also to
“unleash the great human potential which is often
dormant and silent” in organizations
o Striving to serve both individuals and the
organization, sharing knowledge, inspiring by
personal example, and learning with others,
covenantal leadership is attuned to the importance of
continuous learning.
o Incorporates ethical stewardship’s commitment to
creating new solutions to problems, creating new
wealth and value, and working for the welfare of
stakeholders.
o Possess the ability to help people to discover new
truths and achieve the best within themselves at both
the individual and organizational levels, enabling
organizations to optimize wealth creation and honor
their role as covenantal leaders and ethical stewards
o Bob Branchi – taught a delivery driver that his value
as an individual and his role in the organization were
also important in the organization’s success - thereby
helping that individual not only to share in the
organization’s accomplishments but also to redefine
himself.
o Vital role of knowledge creation in firms – important
element of the human resource architecture and have
advocated the importance of adopting a learning
organization culture to create a sustainable
competitive advantage.
o They focus on individuals, empower them to increase
their level of commitment to themselves and to the
organization, and create opportunities for creating
new knowledge and insight that benefits both the
organization and the individual.
o As ethical stewards – they help their organizations
add value to the lives of individuals and organizations
o Leaders who demonstrate high commitment to others
and to their organizations “authentic” and praise the
trustworthiness and integrity of those who lead
unselfishly and effectively.
o Described their accomplishments as balancing
“value and virtue” in creating cultures where
employees feel empowered to take risks and achieve
unprecedented results.
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“Good” is not good enough and is, in fact “the enemy of
the great”
Challenge for today’s leaders – to move from
“effectiveness” to “greatness” – to optimize the potential
of the modern organization.
Stereotype Threat at Work
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Diversity
o a fact of organizational life; increasing percentages of
African Americans, Hispanics, and Asians in the
American workforce, an aging population, expanding
female labor force participation
o first identified in the mid-1980s
o were heralded as an opportunity for organizations to
become more creative, to reach previously untapped
markets, and in general to achieve and maintain a
competitive advantage.
Employee diversity
o Does not necessarily boost creativity, market share,
or competitive advantage
o If left unmanaged – more likely to damage morale,
increase
turnover,
and
cause
significant
communication problems and conflict within the
organization
“Managing diversity”
o Has become the sought-after managerial skill
o Concerns about effective diversity management –
spawned an industry of diversity training programs,
diversity videos, and diversity consultants.
o Most attention has focused on the organizational
decision marker – the manager who is prejudiced
against certain groups who allows these prejudices to
influence how he or she treats employees
o Individual-level
prejudices
–
become
institutionalized or embodied in organizational
policies
and
practices
that
systematically
disadvantage some employees.
o Efforts to reduce discrimination:
 Hiring nonprejudiced managers
 Redesigning biased selection, appraisal, and
promotion
 Generally eradicating stereotypes from
managerial decision making
o Eliminate stereotypes in decision making = create an
organization where all employees can flourish and
advance.
o Stereotypes still exist in the broader society –
resulting in stereotype threat.
The fear of being judged and treated according to a
negative stereotype about members of your group
Have a negative effect on employee feelings and behavior,
making it difficult for employee to perform to his/her true
potential.
Can result in employees working harder, but not better –
performance declines
places certain demands on the manager of diverse
employees — demands to create conditions that minimize
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the occurrence of stereotype threat, so that all employees
can perform effectively
Stereotype threat in educational arenas – an issue for high
stakes testing; hang on scores from:
o Scholastic Aptitude Test (SAT)
o Graduate Record Examination (6RE)
o Graduate Management Achievement Test (GMAT)
 Without the “right” scores, a student won’t be able to
get into the best college for his or her chosen field
Being evaluated can raise anxiety for everyone.
Apprehension in these kinds of situation is a common
phenomenon – little anxiety can even boost performance
Anxieties can be heightened for those employees who are
members of a negatively stereotyped group.
Stereotype Threat
o the fear of being seen and judged according to a
negative stereotype about their group, and the concern
that they might do something that would
inadvertently confirm the negative stereotype
o describes the psychological experience of a person
who – while engaged in a task, is aware of a
stereotype about his or her identity group, suggesting
that he or she will not perform well on that task
o can have a disruptive effect on performance –
resulting in the individual confirming the very
stereotype he or she wanted to disconfirm
o places an additional burden on members of the
stereotyped group
o “In the spotlight”
 Feeling (of stereotyped group) where their
failure would reflect negatively not only on
themselves as individuals, but on the larger
group to which they belong
 “It’s like you have something to prove, and you
don’t want to mess it up and be a negative
reflection (on black women)” (Beyonce)
Research shows that the negatively stereotyped group
underperforms when the stereotype is seen as relevant to
the task.
Stigma conscious
o Members of racial and ethnic minorities, members of
lower socio-economic classes, women, older people,
gay and bisexual men, and people with disabilities
o Members of these groups can be very aware of the
social stereotypes other people associate with their
group
o This phenomenon does not apply only to people in the
disadvantaged group – even members of high-status
groups can experience stereotype threat
Stereotype threat can affect all of us – each of us is a
member of at least one group about which stereotypes exist

“Mediating” explanations
o Several different answers to the unresolved question
“why does stereotype threat have this negative impact
– on short-term performance”
o Dominant explanation – anxiety
 Anxiety increases a person’s motivation and
effort – stereotype threatened participants are
very motivated to perform well, and sometimes
they try too hard or are too cautious in
performing
 Anxiety decreases a person’s motivation and
effort – stereotype threatened participants lose
confidence that they can perform well, and in a
self-fulfilling way this undermines performance

.2 Conditions needed for Stereotype Threat to emerge:
o Task difficulty
o Personal task investment
Stereotype Relevance of the Task: What does it take to
perform well?
o ST is situation specific – felt in situations where one
can be “judged by, treated and seen in terms of, or
self-fulfill a negative stereotype about one’s group”
o occur when doing well on the task requires an ability
on which, according to the stereotype, the person
performing the task has a deficit
o the stereotype relevance of the task has often been
created by telling participants that the task is a direct
“test” of the stereotyped ability
o Beliefs about the traits necessary for jobs can also be
organization specific.
o The potential for stereotype threat exists any time
employees’ beliefs about the particular traits needed
for good job performance are linked to stereotypes
about groups.
Task Difficulty: Why is this so hard?
o ST is most likely to influence performance on very
difficult tasks – those that are at the limits of a
person’s abilities.
o Easier tasks – doesn’t have much negative effect
o Experiencing frustration with task accomplishment
is an important trigger for stereotype threat.
o Simple tasks – little frustration – the person is doing
well and knows it.
o Difficult tasks – progress is not so smooth – think
how others will explain their difficulty.
o Member of the stereotyped group – stereotype is
also likely to come to mind as a potential explanation
that others might use.
o A negative dynamic operates between task difficulty
and stereotype threat.
 Difficult task – evokes concern over
performance – concern has a greater impact on
the performance of difficult task.
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Difficult jobs – require concentration and focus;
all of one’s cognitive/mental resources must be
directed toward accomplishing the work.
 Performance detriments occur when resources
are diverted toward worrying about one’s skills
and how one will be viewed by others
 Difficult tasks trigger stereotype threat and are
most affected by it.
o Difficult, complex, and challenging tasks
 ST most likely to occur
 Creates a dilemma for managers
o Task Difficulty
 Not just a fact in many (especially professional)
jobs, it is a desired condition
 Good way to develop employees – giving
demanding assignments to new hires
 Early demanding experiences predict later
career success.
 a trigger for stereotype threat because people try
to explain their difficulty to themselves: on a
stereotype relevant task, where the context
reinforces the stereotype, they are more likely to
think of the stereotype as a potential explanation
 resulting anxiety and distress then disrupts
performance
o “Stretch” assignments
 Assignments for which an employee is not yet
fully qualified, “stretching” the employee’s
skills and abilities
 Used as developmental tools throughout a
person’s tenure
 Needed for skill development, but managers
must be aware of the extra potential for
stereotype threat these assignments must
involve for stereotyped employees, and
counteract this risk
o New and unfamiliar tasks – may be more at risk for
stereotype threat than routine, familiar ones.
Personal Task Investment: How important is this to
who I am?
o Personal task investment
 Refers to how important doing well on the task
is to the individual’s self-esteem and identity.
 Skill is a part of how they define themselves –
such invested people, doing well in that task
domain is important for their self-esteem and for
feeling good about themselves
o People who are personally invested in the task
 Most likely to be most influenced by stereotype
threat – they are the ones who really care about
their performance.
 more negatively affected by stereotype threat
than those without such personal task
investment
 they are invested in the task they are good at.
 “the most capable members of stereotyped
groups tend to be the most adversely affected in
their performance by stereotype threat”
o
Important reminder for managers:
 The employees who care about their work and
really want to do well are generally the ones that
a manager is least likely to worry about since
they are the ones he or she thinks will succeed
on their own, and thus don’t need coaxing,
coaching, or extra attention.
o
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Stereotype relevance
o The most important condition for ST
o ST only occurs when the stereotype seems relevant to
performing the task.
o Created by the way the researchers described the tasks
in a laboratory setting.
o In work settings, can be signaled and reinforced by
the diversity (or lack thereof) of people who are
currently performing the job.
Token
o Termed used Rosabeth Moss Kanter
o Describe individuals who are different from others on
a salient demographic dimension – race, sex, or age
o feel very “visible”—that they stand out from the rest
of the group
o view tokens in terms of their distinguishing
characteristic: as the woman or the Asian
o numerical differences reinforce the relevance of the
stereotype for performance in the setting – or being
the “only one” suggests that the stereotype is true,
and therefore it is relevant to job performance
These conditions make stereotype threat more likely for
members of negatively stereotyped groups:
o The employee is invested in doing well, on:
o A difficult, stereotype relevant task, where:
o The context reinforces the stereotype
Positive Effects of Stereotype Threat:
o Being able to channel those feelings – a strong
motivation to disprove a negative stereotype about
your group can increase persistence and
determination to succeed
o a desire to prove one’s ability can be a powerful form
of motivation, most effective in improving
performance and persistence on simple tasks that are
familiar to the performer
o If you know how to perform a task, this kind of
motivation can help you to perform better (it can
either help you or work against you)
Repeated exposure to stereotype threat - may have
serious, and primarily negative, side effects.
o Accompanied by physiological reactions (increase in
blood pressure, contribute to chronic health problems
such as hypertension)
o Associated with lower job satisfaction
o May lead a person to disengage (or “disidentify”)
with the performance domain

could be one cause of turnover for women and
racial/ethnic minorities in professional and
managerial jobs
“Ways to eliminate stereotype threat – changing the
conditions that produce the effect
Only solution under the individual’s control (the worst)
o By disidentifying with the affected task domain –
acting opposite to it
o costly for both the individual who gives up a valued
part of the self, and for the organization that loses an
engaged and motivated employee
Strategies for reducing Stereotype Threat:
(1) Provide a successful task strategy
 Effort alone couldn’t boost performance
 Teach affected employees behavioral
strategies for improving performance and
counteracting
negative
stereotypes
–
addresses task difficulty
 When using stretch assignments, managers
should set goals, and help employees develop
strategies toward attaining them
 “sink or swim” attitude – common;
detrimental for stereotyped threatened
individuals
(2) Reduce the stereotype relevance of the task
 Personally invested employee faces a difficult
task
 By refuting or diminishing the stereotype
relevance of the task
 being told explicitly that there were no gender
differences would reduce the relevance of the
stereotype to the task, and hence reduce
stereotype threat
 emphasizing characteristics shared by both
groups – highlight characteristics important
for performance – stressing common
characteristics of employees that are relevant
for performing the task
(3) Provide an alternative explanation for task
difficulty
 Search for explanation of difficulty
 “Warm up” – allows a better assessment of
their true ability level on the actual test
 Managers certainly shouldn’t lie to their
employees to give them an excuse for task
difficulty and poor performance.
 Remind employees about real-life factors that
might be constraining their performance
(e.g., a difficult client, limited resources, or a
tight deadline)
 Telling employees that you know stereotype
threat can happen, and that they should be
aware of it, gives them a different attribution
for their difficulty and anxiety (it’s not the
stereotype, it’s the stereotype threat).
(4) Change the context
 change the context by removing people from
token situations.
 presenting a role model who contradicts the
stereotype – by boosting the salience and
visibility of role models
 If context does not reinforce stereotype,
therefor stereotype does not come to mind
 Employee performs task without stereotype
threat disruption
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2 major Objectives of Diversity Management
Programs:
o To change managers’ attitudes – to reduce negative
attitudes, stereotypes, and prejudice against members
of different groups
o To change managers’ behaviors – how they select,
appraise, and develop employees
These Objectives Ignore 2 Realities:
o Changing attitudes and reducing stereotypes is a longterm endeavor
o While increasing the objectivity of the measurement
and decision is necessary, the presence of stereotype
threat means that performance itself may convey
biased information about a person’s true ability.
2 Principles that are currently downplayed in most
diversity management efforts:
(1) Acknowledge stereotypes and address them
directly.
(2) Shift the focus from the manager to the
environment.
The Ethics of Human Resource Management
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Employees – most important [most valuable, greatest] asset
Old Romans Days tools of production:
o “dumb tools” – uses of plows, shovels
o “semi-speaking tools” – used of animals
o “speaking tools” – used of slaves
HR Managers who wish to be ethical - must manage
humans not as resources but as autonomous individuals
with legitimate rights and interests.
Kantian Ethics
o HR managers are faced with the Kantian ethical
question of how to ensure that their treatment of
employees, applicants, and former employees
respects their autonomy.
Stakeholder Ethics
o HR managers are required to consider the interests of
employees, applicants, and former employees
o Stakeholder (Clarkson) – are persons or groups that
have or claim ownership, rights, or interests in a
corporation and its activities, past, present, or future
Fairness and Justice
o Managers who judge ethics by fairness or justice
must apply these principles to all stakeholders,
ensuring that the least well-off are not disadvantaged
and have a voice in decision-making processes.
Utilitarian Ethics
o Utilitarian HR managers need to consider the
outcomes of their decisions on everyone, including
employees, applicants, and former employees.
Virtue Ethics
o Recommend developing habits that contribute to the
flourishing of individuals and the community.
HR managers should consider the claims these ethical
theories make on their behavior when striving to be ethical
in their roles.
Terms like “fairness”, “stakeholder”, and “duty” – are
used in the context of invoking ethical principles derived
from various theories discussed elsewhere in the volume.
(1) Discernment: The HR manager must determine the right
course of action in complex situations.
(2) Conflict with Professional Judgment: A conflict between
the HR manager's professional judgment of what is right
and their responsibility to fulfill employer requests.
(3) Conflict of Interest: - or appearance of conflict of interest
– Situations where the HR manager's personal interests
conflict with their role as an agent of the employer.
 Recognition of ethical issues – the common challenge
with all three problems
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“Ethical” situations - involve virtue or moral courage—
the HR manager simply has to refuse to do that which is
not right and choose to do what is
Finding ways to increase their abilities to recognize
moral issues – one challenge of HR managers
o by setting aside time for reflection, discussing issues
with other managers, reading ethics-related material,
and listening to employee concerns.
o Resource Allocation: Allocating time and resources
to ethical reflection becomes an ethical issue itself, as
HR managers must balance this with their other
duties.
o increase their abilities to discover hidden motives
and activities.
“Right action” – discerned by the HR manager, is
sometimes translated into policy and procedure, to provide
guidance to other managers and information to employees
Policies and procedures
o help HR managers ensure fairness by making the
decision-making process more consistent and
transparent
o can also detract from HR managers’ recognizing
some ethical issues, because policy may be applied
without regard for changes over time or for individual
situations
o Employee Involvement: One approach to address the
dilemma of policy application is to involve
employees in reviewing HR policies and practices
regularly.
Professional Associations
o Where HR managers can turn for guidance
o Codes of ethics established by professional
associations of human resource managers require
certain levels of integrity, obedience to the letter and
spirit of the law, contribution to the organization and
the profession, loyalty, and confidentiality
Legal Obligations – it is assumed that HR managers have
an obligation to obey the law unless the law itself is
immoral. It also acknowledges ethical challenges when
laws are violated or when laws and morality do not align.
4 Basic Functions:
o To recruit
o To train
o To motivate
o To retain
o Terminating - usually after failing somehow at one of
the other four functions
Compensation - used to recruit applicants and to motivate
and retain employees

Labor Relations - affect recruiting, training, motivating,
retaining, and terminating employees
(1) Recruitment – looking for someone who can do the job
well and, in some cases, for someone who shows promise
for being promoted.
 HR managers are expected to outline minimum
qualifications, set an entry salary range, advertise the
position, refer applicants to hiring managers, and
review selection decisions in a way that balances the
organization’s resources with the likelihood of finding
a well-qualified person.
 Ethical challenge: to balance individuals’
expectations of (and rights to) equal opportunities with
the organization’s obligation of resource stewardship.
(a) Minimum Qualifications: needs a clear idea of
qualifications needed to perform job duties;
establishes the minimum knowledge, skills, and
abilities a person must have to be considered for the
position
o Setting minimum qualifications – an ethical
decision, often approached as merely a strategic
one.
o Too high - result in applicants unwilling to accept
either the position or the salary offered
o Too low - will result, at best, in applications from
so many people that extensive secondary
screening procedures will be required and, at
worst, in signaling to the most desirable applicants
that they need not apply because they will be
judged over-qualified
o Special request – ensuring that the qualifications
don’t exclude the hiring manager’s preselected
favorite candidate—that further complicate the
process of determining what qualifications to
require
(b) Entry Salary Range
o Practical consideration – what the current labor
market demands
o Ethical Consideration: whether to take steps to
increase the salaries of the existing employees or
change the job classifications of the new
employees
o “Comparable worth”
 An HR manager with limited resources is
unlikely to conduct studies assessing the
“worth” of jobs, but failing to do so because
one wants to avoid legal liability would be,
in Kantian term, not produced by a “good
will.”
o Advertising
 omitting a salary or salary range may simply
be an effort to save on advertising costs
 A position can be advertised very narrowly,
such as by handing a vacancy announcement
to one person, or very broadly, by putting a
sign in the window, a link on a web page, an
ad in the paper, or a commercial on
television
 Promise keeping – adhering to the
organization’s stated values
 Important Considerations:
 Intentionality of bias (Kant’s notion
of good will) – important consideration
in determining when the inevitable bias
caused by the choice of advertisements
is significant enough to render the
process unfair
 Potential effect of the choice of
advertisement on society
o Outsourcing
 An issue currently in the forefront or
business ethics
 HR manager must clearly understand the
anticipated outcomes regarding all of the
stakeholders:
employees,
potential
employees, local communities, external
communities, and stockholders
(c) Selection – final step in the recruitment process; to
select among the applicants for a position.
o Important, and sometimes listed as a separate
function of HR Managers
o Often performed by hiring managers after the HR
department has collected applications
o and eliminated the people who clearly don’t
qualify
o Screening – can be performed by HR staff; they
may add a set of preferred qualifications that are
more stringent than the minimum qualifications
posted in the advertisement; may use written or
performance tests.
o “as a favor” - having a CEO or other senior staff
member send people to be interviewed
o A common complaint from applicants is that they
submitted applications and “never heard back”
from the employer – perception of unfairness
o “At will” contracts – not morally permissible
o Conflict of Interest – not fraught with large
conflicts of interest for HR managers – there is
usually a separation between functions of the HR
and the hiring managers.
(2) Training and Development – divided into 2 types:
(a) General Training – they see themselves as paying for
training that an employee can then take to a competitor
and use against them
(b) Safety Training – they are obliged to ensure that all
employees are aware of any safety hazards associated
with their jobs or their work environments
o Special case – protection against potentially
contagious diseases, such as AIDS and hepatitis
o should be designed to prevent or reduce
transmission of disease, whether or not the
infection status of a person is known.
o
Second special case - balancing an employee’s
right to make decisions about undertaking risk and
the employer’s responsibility to protect others
from harm
(c) Values Training - they see it as an attempt to
indoctrinate them into a particular religion or to
brainwash them
o should also recognize that new employees may
intend to be ethical but may be less sophisticated
than experienced employees in evaluating the
implications of various behaviors
o Religious beliefs – fuel corporate profits,
employers have sought to select employees with
some set of religious or quasireligious beliefs or
to create it in them
o “rules for all” – some values, such as
participative management, tolerance, and
diversity, create internal inconsistencies when
organizations attempt to require them
(d) Career Development – use mentoring programs to
foster career development, pairing new (or at least
junior) employees one-on-one with employees with
significant experience
o includes succession planning, in which the
organization identifies employees who are
prepared (or have the potential to be prepared) to
step into vacancies as key staff retire, are
promoted, or otherwise leave their positions.
o to prepare the designated employees for eventual
vacancies and does not provide such training to
those deemed not promotable
(3) Motivation – seek to align employees’ goals with those of
the organization
 “work off the clock” – skip their breaks
(a) Compensation – to align the interests of employee
and employer, they can also create conflicts of interest
(b) Performance Appraisal System
(c) Employee Monitoring – to measure productivity, to
prevent theft, or to protect others – through
videotaping, capturing keystrokes, reviewing e-mail,
tapping telephones, collecting specimens for drug
testing, or tracking locations
(d) Climate and Culture
(e) Charitable Contribution Campaigns
(f) Job Design
(g) Terms and Quality Circles
(h) Progressive Discipline
(4) Retention
(a) Benefits
(b) Balance
(c) Compensations Systems
(d) Employee Complaint Mechanisms
(5) Termination
(a) Dismissal
(b) Layoffs
(c) Resignation
(d) Death