Good Kellog Final Essay Example

Introduction

Business ethics is a dedicated branch of ethics focusing on how moral principles are valid to business organizations and conduct of its employees.
The organizational group involved in determining future wages and designing recruitment policies and selection criteria is the human resource department of the organization. The issue started when the organization showed interest in employing more part-time and temporary employees in the company as compared to the permanent employees. The purpose was to remain competitive in the environment by reducing the cost of wages. Hence, new temporary employees will be working at comparatively lower rates (Walker, 1987). This was an alarming situation for the permanent employees of the organization because originally company had the right of employing 30 percent temporary workers but now the company was focused on pushing the limit to 100 percent. Employees fear that they will lose their perks and will be asked to work at very low rates or will be entirely replaced. But the company claims that existing employees will remain unaffected. Ethical conflict is losing permanent employees despite of their hard earned services and replacing them with low cost workers for keeping the company cost effective (Jacoby and Mitchell, 1986)

Ethical Conflict

Since beginning of an era of recession in 2008, employers have focused on reducing costs by cutting employees wages and compensation plans and in this way pressure is shifted to employees. This leads to the rise of two-tier system by moving away from defined benefits and towards defined contribution plan. Two-tier system creates two categories of employees performing same task but with different wage plan because the employees hired after a particular date will be paid less as compared to already existing employees. The effectiveness of this system can be judged by Budd’s model of three categories involving efficiency (of work assigned), equity (fair treatment with all employees) and voice in relationship (the ability to participate in decision making) (Jacoby and Mitchell, 1986).

Legal Implications

The situation has two legal implications; one is related to permanent employees that if they will be in lesser number then they may bargain the right of fair treatment against the organization. Secondly, paying lesser for the same task performed raises the issue of human rights that a special group of people being treated unfairly at workplace just because they belong to a separate group and were hired after a specific date, which has no logical implication. The United States Supreme Court has this law of giving all employees equal bargaining right against unfair treatment. There is Labor Relation Act as well (Walker, 1987). The major legal issue related to two-tier system is that whether it violates equal protection of human rights through unfair treatment at workplace (Jacoby and Mitchell, 1986).

Societal Pressure

The issue however leads to a huge societal unrest especially in permanent employees of the organization that despite of long services in the organization, the organization is only concerned about itself at the time of adversity. Because, if the organization wants to cut their expenses short keeping in view recession then the employees are also going through sturdy time as well.
With some legal implication as well it is a case of business ethics mainly where company is bound to behave ethically well toward its senior permanent employees (MacNeil, 2013). So it is an unethical act.

Leadership Role of Organization

The company leadership may have avoided this issue by following steps:
Showing maximum resistance to permanent prevalence of two tier system and try to sustain original wage rate for all employees in the long run.

Before adopting it as a strategy, the lower rates should be negotiated with workers and seek their acceptability.

Take employees in confidence that top rates will be restored after the company has passed through recession period.
Keeping a regular check on the system enforced to find out any unhappy employee and compensate them by proper communication.
Longer progression schedules to high rate should be negotiated.
Recommendations
According to my own point of view, the company should consider the case of American airline in 1983 when they opted for the same two-tier employment system and within few years the situation had gotten worse. The afore-mentioned system raises conflicts among workers, insecurity and increased rate of turnover, that all lead to unhealthy working environment. Moreover, the company’s lockout is not being bargained in good faith, where the company is only concerned about its own competitiveness and not the well-being of its employees. The company could have asked for reducing permanent employees job-related benefits during the period of financial crunch. This treatment of old employees that company has suggested will only accumulate panic and hateful feelings for the organization. Even the new hirers will not come with the idea of being committed to the organization in the long-run and as we know reduced turnover and committed employees have always been a priority of every organization.
The ethical decision making in business should follow a series of steps before formulating the final decision and its implementation comes next. While considering ethical approach of utilitarianism, Kellogg should not be taking such a decision that make their old employees think that they had opted for a wrong organization to give so many years of their lives. The utilitarianism states that the benefit/welfare of whole community should be taken into consideration prior to decision making. If company’s employees are not happy with the decision, it should be skipped and alternatives must be searched for. Or instead of imposing decisions on employees, the company could have taken their permanent employees in trust about their critical decision. The statement of company’s logic for lying off employees portrays the company image as purely profit-driven organization, with no concern to its employees. Another ethical model that could be implemented is the model of justice, which states that company should be treating all employees (new and old) with same compensation plan. If company is focusing on low waged temporary employees for performing same tasks then it is an injustice to the new hire. However, if the company replaces old permanent employees with new ones then it will violate the fair treatment rule as well (Bailey and Berhardt, 1996).

Conclusion

Concluding the whole discussion, importance of ethics in business decision making cannot be negated. In today’s business world all organizations strive to keep their stakeholders happy and that serves to be their most precious competitive advantage. Retaining competitive advantage at the expense of losing experienced employees is not a wise decision. Two-tier wage settlement occurs as a result of an excess to potential employees in the market where employer sees that gap can easily be filled with the benefits of cost reduction. But even in USA this process is not seen to be permanent. It only exists temporarily or as an extension. In circumstances where job turnover is less then such system can be easily adopted. But in situations where turnovers are massive, the company should be taking precautions before implementing this system. A possible explanation for adopting this system may be employing the increased number of unemployed individuals in market and reducing burden of wages as well (Steven, 1984).
The current law fails to help the party experiencing detrimental situation and there is little political involvement as well. The labor unions play their role in raising the voice of employees. Even then the unions when make compromising agreements with the organization management, they are blamed. In Kellogg case, such big layout for the reason of surviving at competitive advantage is not going to add any good in company’s image. It may happen that old employees are afraid of some rumors about losing their jobs but the organization has clearly stated that existing employees will not be disturbed. This means that company is focusing on reducing wage rate at $6 per hour for the new entrants, so it happens to be a two-fold ethical issue because the new entering employees will be performing the same task for relatively cheaper rates (Bailey and Berhardt, 1996). Whenever the economy passes through these ups and downs, just like the great depression of 1930s or the era of recession today, it ultimately leads to layoffs and very low wage rates. But this is a temporary process and once organizations get out of these the rates go back to their initial stage. The only need is to stay ethically strong in these circumstances and work through ethical policies and decisions.

References

Bailey, T. R., & Bernhardt, A. D. (1996). In Search of the High Road in a Low-Wage Industry. IEE Brief.
Jacoby, S. and Mitchell, D. (1986). Management attitudes towards two-tier pay plans. Journal of labor research, 7, pp: 221-237.
MacNeil, M. (2013). Two-Tier Workplace Compensation: Issues and Remedies.Canadian Labour and Employment Law Journal, Forthcoming.
Steven, F. (1984). Pay cuts before the job even starts. Fortune.
Walker, J. R. (1987). Two-tier wage systems (No. 51). Industrial Relations Centre, Queen's University