Management Development ForumVolume 2 - No. 1(99)
Giving Management the Rope to Hang Us: The Ethics of Using Worker-Generated Information to Lay Off Employees
Roland E. Kidwell Jr. and Philip M. Scherer
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Giving Management the Rope to Hang Us: The Ethics of Using Worker-Generated Information to Lay Off Employees

Roland E. Kidwell Jr. and Philip M. Scherer


Introduction

In the last half of the 20th century, information has become the key currency in which the organization and its employees trade. Corporations of the new millennium will pay much more for knowledge and brain power than for the brawn and machine power they needed in the past. The challenge for managers of these organizations is obtaining that information – much of it provided by their employees – and using it in an effective, efficient, and ethical manner.

Ethical issues in information include the means by which information flows to the organization’s power structure and the way important knowledge is used (Snapper, 1997). Both managers and rank-and-file employees can selectively control information, and executives see such control as ethically acceptable on the part of managers but ethically questionable on the part of subordinates (Dulek, Motes, & Hilton, 1997). Subordinates might take a different view as to the ethics of the situation, particularly if the information is used to hurt them.
Guided by the philosophy of late 19th century scientific management, organizations and their managers have systematically collected information from their workers through personal or technological observation. With the establishment of quality management in recent years and the resulting empowered workforce, that has changed. Organizations now expect employees to generate and provide knowledge and information on a regular basis to aid problem solving and to help in plotting the organization’s strategic direction. Regardless of the method used, management has considered collecting, managing, and using information from employees as a neutral practice, failing to account for the ethical and moral aspects of information control (Dulek et al., 1997).

This article addresses that shortcoming by examining management’s use of the information generated by employees and the ethical concerns it creates, especially when organizations decide to lay off employees and restructure their operations. The long-term and short-term ethical considerations of the use of employee-generated information are examined, particularly the decision by employees to share their specialized knowledge with management, and management’s decision to use the information to the possible detriment of the employees.

Three Cases in Information Sharing and Layoffs

Case 1: A not-for-profit hospital establishes a program of continuous quality improvement that empowers managers, nurses, aides, and other employees to make important decisions, execute them, and improve the efficiency of the organization. Information flows freely from both the upper echelons to the operational areas where it is needed, and from the rank-and-file to top management as the hospital implements the program to meet national accreditation requirements. At the same time, changes in the health care industry and other competitive forces dictate that the hospital restructure operations and reduce its workforce. Hospital management uses the information obtained through its continuous improvement program to decide which employees to lay off during the restructuring.

Case 2: A medium-sized company shifts from a traditional management approach to one that reflects the values of quality improvement as the organization adapts its strategy to compete in the global marketplace. Workers and managers respond enthusiastically as the company’s market share grows through its quality agenda, and the employees reap the rewards of higher productivity and morale, higher wages, and performance bonuses. These positives last several years until the company’s inability to enter or maintain foreign markets negatively affects the company’s domestic operations, which leads company officials to restructure operations and lay off 10 percent of its workforce. Again, information that surfaced through the implementation of the quality program is used to make decisions on who is to be released by the company.

Case 3: A Fortune 500 corporation sets up a quality management program and maintains reasonably high profit levels over a period of years. The strategic managers observe that the external environment may be deteriorating in the near future and look for ways to increase efficiencies. The company collects information from its employees and decides to outsource several elements of the company including maintenance, security, and cafeteria services. Employees in these areas are laid off based upon information they provided to the organization. Increased hiring occurs in departments more closely tied to the organization’s core competence. Record profits continue.

Management Systems, Layoffs, and Ethical Implications

These three cases indicate that quality and continuous improvement programs can enhance the competitive position of both non-profit and for-profit organizations and the well-being of managers and workers. These programs can also be used to decide which programs, positions, and people are to be eliminated or retained when organizations are strategically challenged due to changing economic conditions. In each case, sharing of information and enhancement of knowledge are important elements of continuous improvement. Top managers provide information to people at lower levels of the organization to enhance their ability to make important operating decisions. Lower levels of employees (including lower levels of management) share their evaluations of processes, design a system that delivers products and services correctly, and initiate continuous improvement.

Because it appears to be collaborative and people-centered, quality management in all of its various forms is seen by many as an improvement over traditional management systems, e.g., scientific management. Indeed, it has been argued that quality management is the epitome of ethical business practice because the high moral behavior it encourages focuses on empowering employees, making defect-free products, and emphasizing customers and other stakeholder interests (Raiborn & Payne, 1996). Ethical behavior has been described as a natural result of an operation driven by quality (Roth, 1993).

Ideally, these general statements make intuitive sense, but they must also be subjected to scrutiny. An in-depth analysis of quality programs at several companies found that among the reasons the programs failed was the inconsistency between a quality program and other strategic initiatives taking place at the same time, such as restructuring and layoffs (Krishnan, Shani, Grant, & Baer, 1993). It has been recognized that empowering employees can result in cuts to an organization’s workforce, but it is important that the reasons why layoffs occurred be explained clearly to employees so as to maintain trust within the organization (Gandz & Bird, 1996).

Linkages between employee information sharing and ethics may be particularly suspect if organizations pursuing quality programs lay off employees in times of record profits and a booming economy. For example, there have been more than 4.6 million job cuts announced in the 1990s, with 1998 having the largest number of job-cut announcements ever (Laabs, 1999). These cuts occurred during the largest peacetime economic expansion in history, a time when quality improvement programs were instituted throughout U.S. industry. One of the country’s largest quality management advocates and practitioners, clothing manufacturer Levi Strauss & Co., announced in 1999 that it would close half of its North American plants and lay off 30 percent of its workforce in the United States and Canada (Frost, 1999).

This is not to say that quality improvement programs at Levi Strauss and other places are a sham designed to obtain information from workers to cut the number of company jobs. Many organizations have used quality programs to run their operations more efficiently, and this sometimes means jobs will be lost, often at the recommendation of empowered employees. However, many of the organizations that made huge job reductions in the early 1990s, including IBM, AT&T, Boeing, Sears, and Xerox, have since hired in other areas, indicating either shifts in business strategy or restructuring plans that were poorly conceived at the outset (Laabs, 1999).

Of course, workforce reductions frequently occur in management systems that do not stress a quality-based approach. Under scientific management, managers direct workers in the “one best way” (Kanigel, 1997). Frederick Taylor, an engineer often called the father of scientific management, identified the “very essence” of scientific management as cooperation between the management and the workers (Taylor, 1911, p. 158). However, later management scholars saw Taylor’s focus on the “rule of knowledge” as the basis of scientific management (e.g., Locke, 1982, p. 22). Scientific management involved a deliberate and elaborate effort by management to study the tasks of the individual workers and modify their activities in an ordered way to improve productivity.

Scientific management depends on experts gathering knowledge to enhance production efficiencies, but it can hide ulterior motives. Quality management involves the workforce in process improvement while apparently being more honest with employees (Deming, 1986). However, quality management can be quite similar to scientific management if an agenda of cutbacks via dismissing workers exists.

Whether or not quality management is in place, employees may willingly provide unique knowledge to management. The issue examined in this article is how employees and managers might regard provision and use of information and knowledge from workers, considering the cases described earlier. Five ethical frameworks are used for this purpose: egoism, utilitarianism, deontology, relativism, and virtue. By considering these perspectives in sequence, an ethical analysis is framed in terms of self-interest, goals, rights, situations, and universal ideals.

Five Ethical Frameworks

An Egoism Perspective

Egoism, as an ethical system, defines right and moral behavior as that which maximizes the self-interest of the individual (Ferrell & Fraedrich, 1997). Examples of self-interest goals include physical well-being, employment, a satisfying career, wealth, or a happy family life. Opinions regarding the most ethical decision would vary among individuals because of their different preferences, but the egoist believes that the ethical course of action is to immediately pursue whatever benefits one’s self. An extension of egoism, enlightened egoism (also termed rational egoism), takes a long-range perspective and allows actions that benefit others to be considered ethical because they help achieve the ultimate goal of the egoist.

If management approaches moral behavior from an egoist perspective, it would undertake any action that enhanced its self-interest. Short-term egoism might lend itself to a cutthroat point of view: one that would lead managers to obtain whatever information was necessary from the workers, voluntarily or involuntarily, and use it to serve management’s interest. However, management should not be seen as a bloc but as a collection of individuals whose self-interest calculus would be different for each person.

From a similar viewpoint, workers would consider an attempt to hide information to be ethical if they thought that giving such information to management would not help them or, worse yet, would hurt their standing. On the positive side, if workers believed they would receive important considerations that enhanced their self-interest for providing the information, they would furnish it. Again, workers should be viewed under egoism as individuals and not as members of a collective.

Interestingly, workers dating back to the time of Frederick Taylor’s research attempted to hide information from managers, and managers under Taylor’s system tried to obtain it (Kanigel, 1997, pp. 170-175, 520-521; Taylor, 1911). Management used the rationale that workers’ self-interest would be served because they would make more money once management determined the most efficient production means and transmitted them to the workers. Even in a quality management system, workers and managers recognize that it may be in their self-interest to withhold information, and thus view their actions as ethical. One difficulty experienced by organizations attempting to implement quality is resistance to change and hoarding of information by middle managers who fear a loss of status if workers are empowered.

When an enlightened egoist perspective is employed, both managers and workers are more likely to recognize it to be in their long-term interest to exchange information, and employees might provide information to improve decision making and problem solving in return for long-term employment and other rewards. Workers and managers satisfy long-term goals such as employment and higher living standards through cooperation, and shareholders receive long-term profits due to the information exchange.

In each of the three cases described earlier, it would be difficult even to establish the programs if ethical behavior is based on pure egoism. No one in such a system would be expected to sacrifice short-term gain by exchanging information in the pursuit of long-term employment, efficiencies, or profit. This indeed is seen as one of the difficulties in establishing quality programs that last: too much emphasis on short-term results at the expense of long-term improvement (Krishnan et al., 1993).

Taking an enlightened egoism approach would allow the short-term sacrifice to be made by both managers and workers in exchange for attainment of long-term goals. Information would be provided by the workers in the expectation of long-term gain. Managers would use the information to improve the organization’s position vis--vis the environment.

A contrast in ethical judgment by management and worker occurs under enlightened egoism if the information that is generated is used to lay off workers, which occurs in all three of the cases. Management believes it is behaving ethically, but the workers who lose their jobs or are otherwise damaged disagree; management in the workers’ view is acting unethically.

A Utilitarian Perspective

Utilitarianism, broadly defined, is concerned with pursuit of desired consequences, as is egoism, but utilitarians seek the greatest good for the greatest number of people, rather than the greatest good of the individual (Ferrell & Fraedrich, 1997). The greatest benefit for all of those affected by a decision is the major concern of utilitarianism; if this occurs, the decision is considered ethical.

In the three cases described above, management would argue that its behavior was ethical because it was saving the jobs of most of the workers by using the information provided by the workers, a pure case of the greatest good for the greatest number. The workers might agree if they perceived that the actions of the managers using the information they provided would benefit most of them by saving the jobs of the majority. In each instance, the organization could argue that its actions were ethical because the organization was allowed to survive by using the information provided by the workers. Survival of these organizations benefits the largest number of key stakeholders, including shareholders, managers, employees, customers, and the community.

Utilitarian efficiency was the key goal of scientific management. Management and its efficiency experts focused on gathering information about work tasks and work activities, distilling this information into knowledge about the most efficient means to perform a task, dispensing this knowledge as information from management to workers, and hiring and training workers based on needs highlighted through study. Rewards went to the workers who improved productivity by following the methods designed by management to the greater good of all. That is the way Taylor and his adherents perceived it.

On the other hand, critics saw it merely as a ruse to deskill the workers, to speed up the work process and to enrich capitalists at the workers’ expense (e.g., Braverman, 1974), or as a management system that was not implemented properly (e.g., Edwards, 1979, p. 101). Criticism of scientific management is laced with questions about hidden agendas, the ethics of the system, and whether it does indeed satisfy utilitarian goals.

A Deontological Perspective

Deontology focuses on the rights and duties of individuals and on the intentions associated with a particular behavior rather than its consequences (Ferrell & Fraedrich, 1997). The major concern of the deontological perspective is that equal respect must be given to all people, no matter whether it costs the loss of some greater good for all of those who are affected by a decision.

In the first and third cases, a deontological approach would tend to judge the actions of management with moral disfavor. Management’s intent is the key factor. Organizations that embark simultaneously on a quality program and a restructuring program are questionable because the inherent shading of intentions are probable. In the case of the hospital, the senior managers’ behavior was probably unethical from a deontological perspective, even though from a utilitarian perspective the managers might argue that they used the information to save the hospital from extinction, and to save the jobs of everyone else. The issue in this case is this: were all informed of the risk from the start? If the managers were well informed, they should have known that a simultaneous quality program and a restructuring program are strategically inconsistent. Yet, employees are not likely to be aware of this conflict.

In the case of the Fortune 500 company, the organization’s intent was to enhance its competitive position first and foremost. It had no interest in the rights of individual workers who were providing the information that was eventually used to outsource and eliminate their jobs. Therefore, the company’s actions would be seen as unethical from a deontological viewpoint.

In the case of the medium-sized company, the organization had started a quality program that was very successful. The initial intent was not directed at downsizing; only some years later was the firm faced with changing economic and competitive conditions. New strategy had to be considered. In instances such as this, the information gained through the quality program is probably not off limits because the intent of seeking the information was not to pursue layoffs but to improve the station of managers and workers alike.


A Relativist Perspective

Taking a relativist position, definitions of ethical behavior are derived subjectively from the experiences of individuals and groups. Relativists attempt to achieve a group consensus on what is considered a correct and ethical action. As situations change or as group membership changes, a behavior once viewed as ethical may be viewed as unethical, or vice versa (Ferrell & Fraedrich, 1997).

In all three cases, management might believe it was ethical to obtain information from the workers in an effort to enhance the organization’s competitive position. Workers might have taken the same perspective initially, depending upon the circumstances. In the hospital and Fortune 500 cases, the workers’ opinions of the ethics of management’s actions might change because the information they provided to management was used to hurt them. In the mid-sized company case, workers’ ethical perceptions might be colored to a great degree by utilitarian concerns and the fact that the transmission of worker information to management resulted in correct decisions that saved the jobs of most of the workforce. In this case, the ends justified the means, which is an apparent credo of moral relativism.

In each case, the ethical judgments of managers and workers taking a relativist perspective might shift as situations changed over time or as group membership changed. The workers who retain their jobs in each of the three cases might see more ethical behavior in management’s actions, whereas those who lost their jobs might not hold similar opinions.

A Virtue Ethics Perspective

In a virtue ethics, or universalist, perspective, ethical decisions go deeper than moral or situational reasoning. Virtue ethics proposes that what is ethical in a given situation is both what is considered moral by conventional methods as well as what a person with good moral character would deem appropriate (Ferrell & Fraedrich, 1997). Elements of virtue might include faith, conviction, and honesty whereas nonvirtuous elements might include lying, cheating, and stealing.

Within a perspective of virtue ethics, much depends upon the view toward character of those involved in making the decision, whether they possess bedrock values that will not be compromised under any circumstances. Managers who hold honesty and trust to be important values would not obtain information from employees for one purpose and use it for another purpose if they wanted to maintain ethical behavior under a virtue perspective. Workers with the same values would hold the same views if management misused the information. Workers with those values would also provide complete and accurate information with the hope that their managers would use it with integrity and for the purpose for which it was intended.

If management is honest with the workers in making the layoff decisions in each case, its behavior would be seen as moral. If management was dishonest, as in Case 1, perhaps, its course of action would be considered less moral. Workers would judge the actions to be moral based upon their own perspective of the importance of good character.

Social Responsibility, Shareholders, and Stakeholders

In addition to the ethical perspectives taken by the management of the organization or by the employees who are affected by its decisions, another concern is the stance on social responsibility taken by the key stakeholders of the organization beyond the managers, employees, and shareholders.

It may not matter what ethical position management takes in justifying the moral correctness of its use of employee-generated information to lay off employees if key stakeholders see its actions from a different ethical stance or if they view its actions as socially irresponsible. Management may be fulfilling its economic and legal responsibilities (Friedman, 1970), which form the key bases of corporate social responsibility (Carroll, 1991). But management may not be perceived by the public as being ethical or as a good corporate citizen through its actions. The question to be resolved is whether the organization’s actions most fairly allocated the benefits and costs among the stakeholders.

In the case of the hospital, it may make sense economically and legally to use the information generated by employees to assist in layoffs, but the larger community of stakeholders may not support such an action by an avowed community pillar such as a non-profit hospital. Adverse reaction among external stakeholders might result in a drop in community support and community utilization of the hospital.

In the case of the medium-sized organization, the customers and the community may react negatively due to a jaundiced, suspicious view of business and in particular foreign competition and the global marketplace. These perceptions could be formed through media presentations of the global economy and the company or from other sources, but the community and customers might decide to do business elsewhere if they view the company’s actions as socially irresponsible, even if a more objective reading would see them as just and ethical.

Finally, the Fortune 500 company may be following key strategic concepts for success by concentrating on developing its core competencies and using employee-generated information to outsource nonessential activities (Quinn & Hilmer, 1996). But the reaction of the community, the customers, and the media to the concept of outsourcing has not been uniformly positive, particularly when information provided by workers may have been used to eliminate their jobs. Compare this scenario to the use of sweatshop labor overseas by U.S. companies. Some customers boycott and protest companies that do this while others enjoy the lower prices.

The key point is that society’s view of responsible business practices should influence the actions of management and workers. Even though managers and workers see their actions as ethical in terms of information generation, sharing, and use, their positions may not matter if important external stakeholders see their actions as socially irresponsible.

Conclusion

This article has offered some ideas regarding the ethical uses of employee-generated information. We hope it may provoke additional discussion and debate. At the very least, it should be clear that information collected from employees and used by management is not a value-neutral phenomenon, no matter how it is used and no matter whether employees consent to provide it or it is gathered without their knowledge.

For the purposes of this discussion, we have generally assumed that managers and employees are acting within the same ethical perspective but are affected differently and thus draw different conclusions about the others’ ethical behavior. However, it may also be true that managers and employees are observing the same result but judging it from a different ethical perspective and again arriving at a different conclusion. Even in the event that both parties agree to the ethical nature of a decision, other stakeholders will come to their own independent conclusions about the ethics of a particular decision.

Other factors that may color moral responses to the use of the information go beyond position inside or outside the organization, intentions, and effects. Gender and age have been shown to be of extreme importance in how information control is practiced and viewed from an ethical standpoint (Dulek et al., 1997). This might also be true of the use and control of employee-generated information, and it is a topic for future research.

Although this article focused only on use of information in layoffs, there are many other areas of organizational operation where the ethical uses of employee-generated information are relevant. These include peer evaluation, 360-degree performance appraisal, training and development activities, participatory compensation plans that feature a mix of group and individual rewards, and privacy issues.

Many organizations’ employee involvement programs stress a greater use of shared power. A defining feature of such programs is that employees pass information and knowledge along to management. In each case, the potential for misuse of this information is present along with related ethical concerns.

As employee input through empowerment, involvement, or participation becomes integral to the successful strategic operation of the organization and as information emerges as a corporation’s most important commodity, it is crucial that the ethical implications regarding the gathering and use of information and knowledge provided by employees continue to be examined.

References

Braverman, H. (1974). Labor and monopoly capital. New York: Monthly Review Press.

Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39-48.

Deming, W. E. (1986). Out of the crisis. Cambridge, MA: MIT.

Dulek, R. E., Motes, W. H., & Hilton, C. B. (1997). Executive perceptions of superior and subordinate information control: Practice versus ethics. Journal of Business Ethics, 16, 1175-1184.

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Quinn, J. B., & Hilmer, F. G. (1996). Core competencies and strategic outsourcing. In H. Mintzberg, & J. B. Quinn (Eds.). The strategy process (3rd ed.) (pp. 63-73). Upper Saddle River, NJ: Prentice-Hall.

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Snapper, J. W. (1997). Ethical issues in information. In Werhane, P. H. & Freeman, R. E. (Eds.). The Blackwell encyclopedic dictionary of business ethics (pp. 235-237). Cambridge, MA: Blackwell.

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Roland E. Kidwell, Jr. is an assistant professor of management in the Department of Commerce, College of Business, Niagara University. He has a Ph.D. from Louisiana State University in Baton Rouge. His research interests include employee work teams, electronic monitoring, quality issues, and ethics. His research has been published in such journals as Academy of Management Review, Journal of Management, and Business Horizons. He has worked in the private sector as a newspaper reporter and editor.

Philip M. Scherer is professor of economics and chair of the Department of Commerce, College of Business, Niagara University. He has a Ph.D. from the University of Missouri, Columbia.


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