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Business Ethics in Performance Evaluation


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Weaknesses in traditional performance evaluation methods - An Ethical Challenge

11BM60041- Partha Pratim 11BM60048- Sumitpal Singh 11BM60058- Shilpa Taneja 11BM60110- Rana Vishal Singh

Weaknesses in traditional performance evaluation methods - An Ethical Challenge
Abstract/Situation Description The standard performance appraisal does not adequately address employer concerns in maintaining ethical and legal compliance. Globalization and increasingly stringent antidiscrimination legislation necessitates the need for an effective performance appraisal system. “(Some) 90 percent of performance appraisal processes are inadequate.” – survey As demonstrated in the important California Supreme Court case of Guz vs. Bechtel National Inc., a laid off employee with lengthy service may offer in evidence a poor performance evaluation record against an employer in an attempt to prove age bias. Although Guz was unsuccessful with the age bias claim, the court opined that plaintiffs with long service may prevail if there is sufficient evidence that the employer’s proffered reasons for layoffs are pretextual. The implied warning by the court to employers is that pretextual use of performance evaluations may paradoxically become evidence against them to prove illegal retaliation or discriminatory intent. In another case, Robert Shaner was a computer programmer in Synthes. In August of 1992, he was diagnosed with multiple sclerosis (MS). However, he did not disclose his ailment to the company until November 1993. On April 13, 1994, Shaner filed an EEOC charge alleging disparate treatment. On April 19, 1995, Shaner went on medical leave. He was terminated after six months pursuant to company policy. Shaner alleges he received poor evaluations after he informed Synthes that he had MS. In Pascoe v. Mentor Graphics Corporation the plaintiff, age 62, alleged that he was treated differently and terminated based on his age. The Pascoe case demonstrates the increasing willingness of courts to examine adverse performance evaluations to determine whether or not employers’ stated reasons for layoff are merely a pretext to avoid age discrimination claims. The employee in Schipani v Ford Motor Co. claimed that Ford Motor Company breached its contractual duty to objectively evaluate. The court held that the employer has a duty to exercise reasonable care in PAs, and that breach of such duty would give rise to a cause of action in tort for negligence. All these situations related to unfair performance evaluations due to age discrimination, employer’s negligence, discrimination due to disability, employee defamation etc. can have ethical ramifications that may cause frustration, cynicism and alienation among managers and employees. Many have unfavourable perceptions of the performance review process, citing concerns related to politics, unfair treatment and lack of honesty.

Why this topic? Our primary motivation for choosing this topic is a simple fact-based rationale. The average pre-MBA work experience of our group is approximately 2.5 yrs. A group discussion on topics to research on brought about various workplace issues & perspectives but the group almost unanimously agreed that the issue of Performance Appraisal in corporate is often muddled with political & motives which can really point a finger at the ethical fabric that runs through the organization. Some secondary research did yield incidents in work environment of well-known MNCs that further cemented our belief that this issue is important from the perspective of Corporate Governance and needs to be dealt with by application of some important theories being taught in Business Ethics.

Stakeholders Human resources are the most important resource to run an organization. Time and again, most successful business leaders have attributed the primary reason to success to the ‘Men at work’. A motivated workforce can help realize the true potential of business goals utilizing the organizations resources optimally. Motivation is driven by rewarding & incentivizing the workforce for its efforts continually and making available the necessary opportunities and resources which bring considerable value to the employees. Performance appraisals thus form an integral part of a building a motivated workforce and it should never be mired with unethical practices. Thus invariably, all the stakeholders of an organization, by default become the stakeholders of this topic of case development. Employees, Shareholders, Society, Country or region, government are all affected by the performance of a business which is directly linked to performance of workforce.

Main Ethical concerns or issues The ideal performance evaluation process is valid, consistent, objective, job related, and “evidence based”, i.e. supported by reliable documentation. Unfortunately, performance evaluations frequently fail to meet these essential criteria for several reasons. Reasons for failure include the fact that persons doing the appraisals are not prepared, serious, nor honest. Evaluators frequently use unclear and ambiguous terms, and/or lack knowledge of the performance standards. The employee being evaluated may not receive ongoing feedback regarding performance. Common weaknesses among the foregoing traditional approaches include tendencies of evaluators to be overly subjective, overly critical, or too lenient. Sometimes, major miscommunications occur in performance review sessions due to basic differences in ethical orientation.

Research Methodology As a part of our study we will be doing both primary and secondary research. We will conduct a survey as a part of primary research and study some analyst reports on performance management as a part of secondary research to support the following questions: 1. Do managers set the performance criteria? 2. Are employees satisfied with the performance management system? 3. Is performance management system biased with respect to following attributes? a. Age b. Gender c. Religious preference d. Diversity e. Physical disability or any illness 4. Do managers take feedback from other employees? 5. Do managers take employee’s input on accomplishments and performance? 6. Do managers give a negative performance evaluation to get even with an employee for a reason unrelated to job performance? 7. Do managers evaluate critically or leniently? 8. Did employee ever file defamation claim against employer?

Ethical theories used We will use the following theories in our study:

 Ethical absolutism and Ethical relativism: We will see whether managers rate employees based on policies set by the companies or based on performance of employee.

 Utilitarianism: We will see the cost benefit analysis managers perform performance evaluation. This will give us the motive why managers inflate or deflate the ratings.

 Egoism: Manager might rate an employee based on personal perception or may try to nurse some grudges in appraisal, we will see whether manager take into account personal feelings or not.

 Kant’s theory: Kant [1930]’s writings in Ethical Duties toward others on truthfulness can be mapped to discussion of performance appraisal.

 Ethics of rights and justice : In the performance appraisal basic rights of human being should not be violated , and person should be given the right to defend himself , we will see whether performance appraisal system ensures non violation of rights and fair treatment to everyone or not.

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