Should HR be the Moral Compass of Your Organization?

Who holds the moral reins at your organization?

If you can’t answer that question, you’re running a terrible risk. Ethical and legal dilemmas are par for the course at any successful company. The question is not if you will face them, but what will you do when you do.

In fact, handling tricky ethical issues is all about risk management.

Take retaliation, for example. After an employee reports misconduct, they are often at risk of retaliation. According to research from the Ethics & Compliance Initiative (ECI), retaliation occurs on average about 36% of the time, worldwide. In the U.S., it’s significantly worse than average: 53% of the time. In other words, more than half the time that an employee reports misconduct by a colleague or boss in the U.S., the employee will face retaliation. That, in turn, can leave the company liable not just for the original misconduct but also to legal action by the employee who was wrongly targeted.

One of the ECI’s recommendations is to establish a “high-quality ethics and compliance program.”

But which business unit should oversee such a program? HR admittedly faces some challenges in this area. HR’s loyalties can easily be divided between employees, employers and legal obligations, and it should be noted that HR professionals – particularly generalists – may not be explicitly trained in matters of ethics: when many HR professionals confront ethical questions, they “seem not to know what to do, or even how to think about such matters,” James O’Toole, director of the Neely Center for Ethical Leadership at the University of Southern California, told the Society for Human Resource Management (SHRM).

Yet HR is likely to find itself at the nexus of ethical dilemmas even if it has not been designated to have oversight.

That’s because employees who want to report misconduct may have nowhere else to turn. Further, HR may necessarily be involved in producing ethical standards and policies for the organization. The Federal Sentencing Guidelines for Organizations (FSGO) provide a framework for organizations to build a compliance and ethics program, and numerous recommendations would necessarily involve HR, including:

• Creating written standards and policies relating to ethical behavior
• Providing training on both those policies and ethics in practice
• Including ethics in performance reviews; and
• Making provisions for disciplining and, as appropriate and legally required, reporting misconduct.

As a result, even if your HR department is not the primary authority designated for ethical reporting and action, you must make sure its staff is at least prepared to handle the questions associated with it.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.