Ethical Employment in an Uneasy Economy

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Author John Towler, Ph.D. & Mark Towler MA

No matter how bad an economy is (or when it takes a down turn) ethics are always important to observe in business.

This article was written before the current credit crisis and resulting layoffs in 2009, however, much of this article still holds true today.

Today’s employers have never had it so good. Thanks to the burst of the high-tech bubble, there are record numbers of skilled workers looking for work – ANY work. Skilled workers who used to command high salaries and massive signing bonuses are now willing to work long hours for much, much less. After years of fighting to get good people, employers can now pick and choose the best candidates and offer them compensation packages that would have been sneered at two years ago. It’s an HR manager’s dream, but it’s also an environment rife with pitfalls that can turn it into a potential nightmare.

There are three mistakes that some companies make when there’s a glut of available skilled labor. All of them lead to dreadful problems.

The Shopper’s Dilemma

The slightest hint of an open position today results in hundreds, even thousands of resumes. Highly qualified (or even overqualified) applicants knock down your door for the chance to earn less than they were making at their last job. What an opportunity to hire the cream of the crop! If there’s even the tiniest bit of uncertainty about a candidate, there are dozens more just waiting to take his or her place. But this buyer’s market often backfires on employers. Hiring managers eliminate potential candidates for the slightest imperfection. Even if they’re satisfied that they have the right candidate, they have others review the applicant. Even worse, they make unethical and unprofessional demands of the candidates. Here’s an example of how one Seattle telecommunications firm played with an applicant and led him on for more than three months.

The candidate had telephone interviews with the hiring manager, his director and two potential coworkers. Then they asked him to provide an example of his work by performing a complex technical analysis for them. It was made clear that this was necessary if he wanted to be considered for the position. Several weeks and more interviews later, he was called by the COO who wanted to evaluate his attitude and work ethics. A few weeks later, the HR manager informed him that they decided not to hire him and that he was the third candidate that’s been put through this process.

This company wasted a great deal of everyone’s time and effort. The process was unprofessional and completely subjective. The applicant was supposedly evaluated on his technical abilities, problem-solving skills and his attitude and work ethics, but a simple, easily-administered pre-employment test could have evaluated all of these things and provided a qualitative basis for comparison with other applicants. Instead, people with little or no training in human resource evaluation rendered useless, subjective opinions.

How do employers avoid the Shopper’s Dilemma? By setting clear and qualitative minimum requirements for new positions and by testing candidates to see if they meet those requirements. There are many tests that do an excellent job in these areas.

Getting What You Pay For

When supply exceeds demand prices fall. This is equally true for skilled labor and salaries. There is no need to pay a big salary to attract people when hundreds of applicants are fighting over every job. Today it is possible to hire people for half of what they would have demanded last year. Hungry workers who have exhausted their options are seriously considering compensation packages they wouldn’t have touched two years ago. Some employers are only too happy to take advantage of the situation.

But this is a spectacularly bad idea with very serious long-term consequences. Skilled workers have feelings and they remember all too well what they used to be worth. They may not have any choice when it comes to taking a big cut in pay, but they’ll definitely resent the employer who takes advantage of them. This resentment may not seem important to some employers, but the long-term repercussions can be very costly.

Employees hired like this are unhappy and have little reason to like their new company. This will only get worse when they realize that other employees with similar skill sets are earning more than they are. The result is lower productivity from the new workers and nonexistent loyalty. Even worse is the effect that these workers will have on the rest of the workforce. It only takes one unhappy employee to infect the overall morale and productivity of an otherwise satisfied workforce. The existing workers reason that if the company is willing to take advantage of new employees, what kind of future treatment can they expect? It won’t be long before the existing employees begin to worry about being replaced by someone who will work for less.

Hiring skilled employees at significantly lower salaries damages a company’s reputation.. Networking groups and Internet sites are seeing explosive growth as more and more people get laid off. The hiring process is no longer a private matter between a firm and the candidates. It is an open exchange that will likely be discussed by hundreds of other people. If candidates feel that they have been taken advantage of, they will ensure that everyone in their networks know exactly what these businesses are trying to do. Unemployed technical workers have established a website (www.f***thatjob.com ) specifically to mock unethical employers who try to do this. A company whose job descriptions are featured as the daily example can expect more hate mail than serious applicants. This won’t stop people from applying, but it will put them on their guard and makes it harder to find workers. Many excellent employees won’t apply to firms with bad reputations.

Good companies avoid the temptation to undercut salaries. Skilled workers aren’t stupid – they know that they can’t demand the same high salaries they got a few years ago. Work with your new hires to ensure that their compensation packages are realistic in the current economy. This doesn’t mean you have to pay top dollar. If the compensation level is not flexible, see what other perks can be offered to soften the blow of what your new hire may perceive as a pay cut. Can you promise stock options or future bonus opportunities? How about extra vacation days or flexible scheduling? Can your new employee work from home one day a week? If you have no other options you can defuse a potential time bomb by communicating with your new employees. Make sure they understand why you can’t pay them what they used to earn and emphasize the possibilities for growth at your business. Employees will work hard to make a business a success if they know that they may reap some of the benefits, even if it happens at a later date. Finally, make sure your job descriptions are realistic and reflect the available salary. You won’t get a lot of candidates applying for low-paying jobs that require years of specialized education – and if you do, they aren’t going to be happy workers.

Illusionary Loyalty

The old saying “any port in a storm” applies to the business world. Workers are unlikely to look for a job when the economy is poor and their current job is stable – even if they’re not happy. This creates an illusion of high employee satisfaction. But poor economic times usually result in significant cost cutting. Employees often bear the brunt of these measures and may find themselves working harder to cover for laid-off co-workers. This has an effect on morale, but it won’t be immediately noticeable because employees don’t want to rock the boat. They know their friends are out of work. They know the economy is in rough shape. They know that they’re lucky to be employed. But that doesn’t mean they’re happy. Worse yet, many new hires are likely to feel the same way. They may feel underpaid, overworked or that their skills are underutilized, but they took the job because they need to put food on the table and they’re not about to complain.

What does this mean to an employer? If everyone’s too scared to leave then there is no need to worry, right? Wrong. Unhappy employees hurt productivity and cost money. Employee satisfaction is linked directly to customer satisfaction. If workers are unhappy, customers will be too. Worst of all is the fact that unhappy employees feel absolutely no obligation to be loyal to their employers. The percentage of employees who are looking for new jobs and who would leave in a heartbeat if they got better offers is far, far higher than it was even a few years ago.

The solution to the problem of illusionary loyalty is actually quite simple. While it is natural to focus on the bottom line during troubled times, don’t forget to keep track of employee satisfaction. You need to keep your finger on the pulse of your employees to understand how they feel about the company. This can be done through employee attitude surveys. Don’t hire new employees who are only looking for a safe berth to weather out the current economic storm and avoid hiring overqualified candidates. Employee ethics, work habits, skills and even predictions of the probability that an employee is likely to remain with the firm can be assessed by various standard pre-employment tests.

Economies are cyclical and the job market won’t stay depressed forever. Ethical enterprises with strong employee loyalty will always attract highly qualified skilled workers. When things improve, the companies with bad reputations and low employee morale and loyalty will experience a sudden brain drain. In today’s knowledge-based economy, this doesn’t just mean fewer hands to do the work – it means the brightest minds, most valuable assets and even trade secrets may disappear without warning.

Ethics and professionalism are never out of fashion when it comes to dealing with people. But ignoring them leads to problems that last longer than any economic downturn.

John Towler is a Psychologist and the founder of Creative Organizational Design. Please send comments about this article to jtowler@creativeorgdesign.com. For more information, please contact us. Mark Towler, M.A. is a marketing manager with over ten years of experience in international marketing and marketing communications for small, home-based businesses, medium-sized enterprises and major international corporations. His breadth of experience ranges from management consulting to high tech and telecommunications. He has been involved in marketing programs for Microsoft, Nortel Networks and, Lucent Technologies. He can be reached at marktowler@comcast.net

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