Discuss how ethical approaches to HRM can help maintain a positive psychological contract. Support your answer with reference to at least two HRM related ethical issues. The aim of this essay is to discuss how ethical approaches such, as Health and Safety and Corporate Social Responsibility can help maintain a positive psychological contract; why ethical approaches to Human Resource Management are important and how they impact employee- employer relationship. “Psychological contracts have been defined as a deal in the mind and is an individual’s understanding of what they owe an employer and what they can expect from the employer over time” (Rosseau 1989). Carbery et al (2013) described Human Resource Management as “managing people in a way that both maximises and rewards the contribution that each person makes to the organisation”. This topic is important because a psychological contract is not a written contract, it is more of an agreement between employers and employees and if employees feel that this agreement has been breached then it is going to alter their relationship with their employer thus impacting the business negatively. One ethical approach that is going to be addressed is Health and Safety. It is very important that health and safety regulations and standards are maintained strictly in a workplace as employees will feel confident that fewer accidents will occur, resulting in a more empowered workforce and in turn improving the morale of the employees. According to Abraham Maslow’s Hierarchy of Needs, safety needs are regarded as basic needs.” Now more than ever employers are expected to provide a range of safety, health, and wellbeing provisions and proactively manage this important element of the employment relationship” (Carbery et al, 2013:177). If employers did not give their staff reassurance that the place they are working in is safe, it will directly affect the psychological contract, as it is something employees would have expected to be provided to them with the job. Frederick Herzberg, introduced the Two- Factor theory of motivation which stated that good working conditions are regarded as a hygiene factor and when in place will lead to overall general satisfaction of employees but it will also aid to prevent dissatisfaction from employees. An ethical approach to health and safety can help maintain a positive Psychological Contract as it will result in a happy and satisfied workforce. Although the Psychological Contract is not a formally written contract, it can still be broken and result in various negative impacts. For example, if employees are under the impression that health and safety regulations are being violated they are not going to be pleased so managers need to remember that this relationship may deteriorate “but it is still the manager’s job to take responsibility for maintaining them” (CIPD,2017). An example of Health and Safety being neglected occurred in Northumbria University where two male students were admitted to intensive care after overdosing on caffeine. “They almost died when they drank the equivalent of 300 cups of coffee at once during a sport experiment. (ITV News, 2017)” There was no proper risk assessment for the experiment in place which resulted in the young teens who suffered “potentially life-threatening conditions.” The technicians did not have enough information or training to have supervised such practical experiments on humans. This shows how careful businesses would need to be when making decisions for the long and short term as one small mistake can affect everything. That one mistake that Northumbria University had made has now impacted them in the long run as students who wish to study there and are currently studying there, have had a major shock that something like this has occurred in the university. This consequence had been dealt with appropriately however the psychological contract that the teens may have had has obviously been broken which will leave them having much less trust and faith in the university. Cox et al. (1998) suggested “that the main influence on employee attitudes to safety was how committed they perceived the management of the organisation to be towards safety” (Carbery et al 2013: 185). To maintain a positive psychological contact, senior management should promote a positive organisational safety culture within the business by providing continuous training opportunities which gives employees a sense of belonging, ensuring that they know they are going to be well looked after. Furthermore, it is not just physical health that is regarded under health and safety, but also mental health. There are certain jobs that come with a lot of pressure for example, being a pilot or a surgeon and this pressure can impact an employee’s performance if something were to go wrong. Senior management can implement different types of training and procedures such as having an on call councillor which staff can regularly go and see. This will allow them to relieve any pressures that they may be facing and give them a different option on how to cope with the stress. This will strengthen the psychological contract between employees and employers as employees will feel valued and appreciated that they are being considered in the business even if their problem is not a psychical one. They will have more respect for their senior managers and it will tighten their bond as it proves to employees that their employers care about their well-being. Managers should ensure that Health and safety is a culture in the business rather than just an approach, as employees view it as a moral obligation which will lead to all members of staff having the same understanding. It has been highlighted that “there has been an increasing awareness for the need of safe working practices driven by recognition of the considerable costs associated with accidents and unsafe working behaviours” (Carbery et al 2013:177). Due to this, managers will make sure that there are procedures in place to prevent accidents from occurring as it will accumulate a large cost whereas if the accident didn’t occur, they’d be able to invest the capital elsewhere into the business. To aid in preventing accidents, managers can provide safety statements to all parties stating hazards, measuring duties of all staff, providing information about safety representatives which can help ensure appropriate steps are taken in identifying and prioritizing risks and guarantee every member of staff is informed and involved which should be done annually and at the induction of new staff members. Another ethical approach that is going to be addressed is Corporate Social Responsibility (CSR). CSR is a business philosophy that emphasises that firms should behave as good citizens; not only by complying to the law but “also considering the effects that their activities have on society” (Surridge et al 2015:123). Carroll (1991) organised different social responsibilities into a pyramid which consists of four different layers which are economical, legal, ethical and philanthropic responsibilities. It is important that CSR is carried out in businesses as it essentially acts as the foundation of the business and aids in portraying what the business stands for. CSR does not only present one area of a business but a business as a whole and can help improve businesses image and reputations. Employees tend to join businesses based upon what they stand for e.g. being ethical, thus allowing them to generate a positive contribution to society. However, employers have to make sure that employees are still being treated fairly at work; that every employee has equal opportunities in the business whilst the business maintains their other responsibilities such as minimising noise and pollution in the area. This then increases their motivation and in the long-term, aids in boosting productivity. CSR is important in maintaining a positive psychological contract between employees and their employers and senior managers should remember “that it is better to prevent breaching the psychological contract rather than trying to repair the damage afterwards if it were to be breached” (CIPD,2017). It would be easier for employers to build a strong psychological contract and make sure that both parties needs are understood so that there will be a less chance of damaging the contract in the future. Corporate Social Responsibility would affect employees directly if it goes against what they stand for. There is a social contract between businesses and society involving mutual obligations that society and businesses have recognised that they have to each other, which can result in being profitable in the long term. The employees would most likely be working at the business because they agree with what the business values are and would rather be representing a business that is not affiliated with a bad name. Ensuring that the business has a good reputation for CSR will enhance the chances of attracting the best employees to come and work for the business. There is a lot of controversy when it comes to CSR. For example, The Body Shop was accused by London Greenpeace, of anti-union practices, low pay, exploiting indigenous people, fuelling consumerism and misleading the public. The Body Shop are a cruelty free brand (The Body Shop, 2017) but “yet was sold in 2006 to L’Oréal, which is a company known to test on animals” (Carbery et al, 2013:230). This type of behaviour from businesses can cause a lot of confusion and self-doubt with employees as they won’t be too sure of the company they are working for. Adams (1965) presented the Equity theory which is based upon employee perceptions of organisational fairness and justice. “If an employee is providing the company with loyalty, time, effort and flexibility they would expect the business to provide them with benefits, recognition and security, so what they input they receive similar as an output from the business” (Smith et al 2012:69). If employees are giving their all to a business but the business is not treating them right or is going against what they initially stood for they are going to start rejecting business ideas as they don’t agree with them. The employee may believe that there is a breach in the psychological contract which will affect the commitment and engagement of the employee causing them to become demotivated and unhappy, leading to a fall in employee engagement. “Employee engagement is the degree to which some individuals form an attachment to an organisation” (Smith et al, 2012:70). If employees are not engaged appropriately with the business it will lead to the business becoming less profitable as employees are not going to be working to the best of their abilities. On the other hand, if employees are engaged appropriately which will lead to a more optimistic attitude in the work place, which can aid in self-development of each employee. In conclusion, ethical approaches to HRM can help maintain a positive psychological contract as long as both parties have an understanding of what they want and are expecting from each other. Health and Safety generally has a positive impact on the psychological contract when both parties are able to respond to each other’s needs effectively which results in less disputes occurring. In the event where Health and Safety is not maintained, it will of course have a negative impact on the psychological contract as employees will deem it as the managers not caring for their wellbeing which may result in a high labour turnover. Distributive justice is “concerned with giving all members of society a fair share of the benefits and resources available through equality” (Maiese, 2003). As long as all employees are being treated fairly within the business, and are receiving the same treatment from senior management will aid in achieving and maintaining a positive psychological contract. Corporate social responsibility also has a positive impact on the psychological contract as it is going beyond abiding the law. Businesses will have an image of what they would want their business to portray, and implementing CSR within the business can aid in achieving long term strategic goals through the support of the public. The decisions made using CSR can be viewed as ethical and justifiable through procedural justice, “which is concerned with making and implementing decisions according to fair processes that ensure fair treatment” (Maiese, 2003). If firms are consistent with their behaviour towards CSR, it will allow them to generate a strong support system as other parties ae going to be more likely to accept the different outcomes even if they don’t like them.