Tag: HRM in Global Perspective Mumbai University BMS Notes

University of Mumbai BMS Notes

Dealing with Cultural Shock

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According to Anthropologists, cultural shock involves anxiety and doubt caused by an overload of unfamiliar expectations and social cues.

Because of differences in culture, an employee posted outside his or her home country will experience confusion, alienation, disorientation, and emotional upheavel. This is known as culture shock. An executive transferred from India to Korea, for example, would experience anxiety because of alien culture, foreign langauge, unaccustomed climate and unfamiliar food habits. But the anxiety is less when s/he is posted to Singapore where one comes across large number of Indians and hotels run by Indians.

Many employees of multinational corporations do not know how to deal with a cultural adjustment process. This experience can be painful and devastating. At its extreme, it can prevent growth and self-actualisation. When an individual’s psychological security is threatened, the consequences may not be healthy for him, his family, or the organisation represents.

Managerial responses vary across cultures. Specific behaviours depend upon attitudes managers hold about employees. Managerial responses are shaped by the cultures of the land. Managers in Japan, for instance, strongly believe that a manager should be able to answer any question s/he is asked. On the other hand, Swedish managers have the least concern for knowing all the answers. In France, the manager’s role is thought to be that of an expert, whereas in the U.S. the manager is viewed as a problem solver.

Managerial behaviour is rapidly changing, particularly among European managers. In general, these managers are becoming better educated, career-oriented, more willing to work co-operatively with labour, more willing to delegate, and more cosmopolitan.

Factors causing culture shock

Language

Despite having a good grasp over the language spoken in your study country, it will be a new experience altogether when you interact with the locals in real-life. The country may have some local slangs as part of their daily language which you will get used to over time. For example, Canadians call $1 a loonie and $2 a toonie; and one of the most common coffees here is a Double-Double.

A different way of living

You realise it fairly quickly that your way of life has completely changed. This newfound independence can be very overwhelming. With a sudden change in your routine life, it can get difficult to understand how to cope without it. Since every decision you make will impact your life directly, it is important to be responsible and take control. For instance, if you do not cook your meal or do your laundry or buy groceries or finish your projects, nobody else will.

Weather Conditions

In Canada, you might experience a new degree of cold during winters. Similarly, in the UK, you’ll experience more rains than you expected, while in Australia, you’ll experience winters and summers at different times of the year than what you are used to. Such factors can also be stressful as any change in climate may impact your health when you are least expecting it. You’d be surprised however, that life in these countries never stops because of the weather conditions and neither should you.

New Societal rules

There are always some unspoken, well-understood rules in every society, such as your new environment. These rules have a direct impact on the day-to-day functioning of the society. For instance, when in Canada, it is common to say “thank you” or “sorry” too often at very minuscule of things. If not, you might be considered rude, despite you not intending to. In Australia, a stranger may call you a mate, even if meeting for the first time.

Academics

Every country has a different education system and with it comes a new structure, teaching methodologies, scoring patterns, project works, deadlines, scholarships, etc. Sometimes, there is just too much information to put together and get used to at once. Don’t get overwhelmed with this new information and try to understand each slowly to be able to adapt to it.

Missing home or food

It is obvious to miss home or your cuisine you’ve grown on. The best way to deal with it is to find shops or restaurants that offer the things you like. You can also learn to cook and invite friends over so it doesn’t make overly homesick. Better still, pick up your phone and make those calls home.

Poor Time management

Being an international student, it is important to manage time properly. For example, if you miss a given deadline for a project, you might lose valuable grades. Sometimes, due to the lack of schedule (either too much to do or excess free time), your schedule may go for a toss. It is helpful to prioritise your activities and strike the right balance between work and recreation time.

Common symptoms of culture shock

Homesickness

It is common to miss your home country and the people you’ve left behind. It also happens if you are unwilling to adapt to your new conditions, trying to stick as close to the things you did back home. It is best to adapt and let yourself discover new things and build new memories.

Anxiety, Depression or Loneliness

These symptoms are fairly common to experience early on when you are still in the process of adjusting to the new environment. The seriousness may vary depending on the individual.

Disturbed sleep patterns

It is normal to have a disturbed or distinguished sleep pattern (earlier due to jet lag, later on due to difference in time zone). However, this may extend further due to extensive thinking, stress, lack of confidence, or related reasons.

Decreased productivity

Due to the inability to cope with stress, some students find it difficult to perform academically or professionally. Sometimes, students face issues with understanding the new education system. It is important to identify what is causing this distress and deal with it.

Various Stages of culture shock

Stage 1: Excitement

This is when you arrive into the country, with an eagerness of meeting new people, starting a new program, exploring new places, etc. This stage offers the opportunity to explore as much as you can to get to know about the societal norms.

Stage 2: Shock

This is when your excitement settles down and you understand new responsibilities and tend to isolate yourself. This is a stage of self-realisation and an opportunity to plan your approach. Remember, it’s okay to be stressed, but don’t let it get to you. Talk to someone if required to.

Stage 3: Acceptance

This is when you start getting used to the cultural norms. It could be the longest stage as you start adjusting to your new life, make new friends and have a better vision of your goals. It helps to connect with people who’ve had similar experiences to get some advice.

Stage 4: Adaptation

This is when you’ve adapted to your new society and are an active part of it. In fact, you are aware enough to guide your fellow mates, newcomers from your experiences. You are no longer affected by the cultural differences and focus on a positive, brighter future.

University of Mumbai BMS Notes

International HRM Scope/Functions

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Scope

Human resource activities

HR activities in an IHRM context involve procurement, allocation, and utilization of workforce. These functions in turn cover all the six activities of human resources management, that is, human resource planning, hiring, training and development, remuneration, performance management, and employee relations.

Countries of operation

The countries of operation in an IHRM perspective involves the host country in which the overseas operation is located, the home country that houses the headquarters of the company, and other countries that supply labour and finance.

Origin of employees

The origin of the workforce of an international business can be classified into three types; parent country nationals, host country nationals, and third country nationals.

Functions

On-the-Job Training

Even when an organization hires skilled employees, there is normally some level of on-the-job training that the human resources department is responsible for providing. This is because every organization performs tasks in a slightly different way. One company might use computer software differently from another, or it may have a different timekeeping method. Whatever the specific processes of the organization, human resources have a main function in providing this training to the staff.

The training function is amplified when the organization is running global operations in a number of different locations. Multiple sessions in numerous international locations may be called for, although online webinars and training tools can sometimes effectively reach anywhere on the globe. Having streamlined processes across all locations makes communication and the sharing of resources a much more manageable task.

Recruitment and Onboarding Process

Attracting, hiring and retaining a skilled workforce is perhaps the most basic of the human resources functions. There are several elements to this task including developing a job description, interviewing candidates, making offers and negotiating salaries and benefits. Although a complex task for any business, it is made more complex in the international arena due to differences in educational systems from one country to the next and, of course, difference in languages.

Companies that recognize the value of their people place a significant amount of stock in the recruitment function of HR, no matter where in the world hiring takes place. There is good reason for this having a solid team of employees can raise the company’s profile, help it to achieve profitability and keep it running effectively and efficiently.

Benefits and Compensation

While the management of benefits and compensation is a given for human resources, the globalization of companies in the twenty-first century has meant that HR must now adapt to new ways of providing benefits to an organization’s employees. Non-traditional benefits such as flexible working hours, paternity leave, extended vacation time and telecommuting are ways to motivate existing employees and to attract and retain new skilled employees. Balancing compensation and benefits for the organization’s workforce is an important HR function because it requires a sensitivity to the wants and needs of a diverse group of people.

Ensuring Legal Compliance

The final function of human resource management is perhaps the least glamorous but arguably of utmost importance. Ensuring legal compliance with labour and tax law is a vital part of ensuring the organization’s continued existence. The federal government as well as the state and local government where the business operates impose mandates on companies regarding the working hours of employees, tax allowances, required break times and working hours, minimum wage amounts and policies on discrimination.

Continuing Professional Development

Closely related to training is HR’s function in professional development. But whereas training needs are centred around the organization’s processes and procedures, professional development is about providing employees with opportunities for growth and education on an individual basis. Development often entails moving an employee between departments so that he or she gains skills in multiple areas. For an international operation, this may also mean moving employees across boundaries.

Many human resource departments also offer professional development opportunities to their employees by sponsoring them to visit conferences, external skills training days or trade shows. The result is a win-win: it helps the employee feel like she is a vital and cared-for part of the team and the organization benefits from the employee’s added skill set and motivation.

University of Mumbai BMS Notes

Significance of IHRM in International Business

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Due to the growth of internationalisation and global competition, the role of International Human Resource Management (IHRM) in those Multinational Corporations (MNCs) grows in significance.

Employers rely on IHRM to deal with global HR challenges.

IHRM refers to the human resource management concepts and techniques employers use to manage the HR challenges of their international operations, including acquiring, training, appraising and compensating employees, and attending to their labour relations, health and safety, and fairness concerns.

IHRM and domestic HRM share similar core functions, including recruitment, selection, employee learning and development, diversity and equality, and remuneration.

International human resource management functions cover many different activities related to a business organization’s employees and contractors. The first and most important is the staffing needs of the company whether staff members are company employees or outside contractors. Other functions include recruiting and training employees, ensuring that they are performing at expected levels or better, handling performance issues and making certain that personnel and management policies conform to laws and regulations. International human resource management is also involved in how the company manages employee compensation and benefits, employee records and personnel policies and practices.

The primary difference between domestic human resource management and international human resource management is the added knowledge and responsibilities required due to foreign operations. These typically include language (in non-English speaking offshore organisations), the local and national regulations and laws governing business operations within a foreign country; currency exchange rates, career outlooks, company benefits and incentives and, perhaps most important. The ethics and etiquette expectations of foreign business contacts. International human resource management people must understand these differences clearly and stand ready to keep other company people informed of them to prevent embarrassing situations and unintentional ‘affronts’ from occurring

Basic human resources are a management activity while human resources development is considered a profession. The latter is targeted more specifically to developing personnel inside organisations through career development, organizational development and training activities. Both functions have undergone very-significant evolutions during the past several decades so that they now play major roles in staffing, managing and training people so that the will perform in an optimum manner for the organisation. Today, international human resource management is the fastest-growing subset of HR due to the growing trend for global business operations.

To achieve a competitive advantage in the global market, effective exploitation of human resources is of significant importance. To be in competition and have sustainable advantage it is necessary to manage internal resources in efficient way. For sustainable advantage in competition, creation of value is important, but it should be rare, it must be inimitable, and must be non-sustainable.

For the sustainable competitive advantage, human resources are the most important factor as it is inimitable, non-substitutable as well as valuable and rare.

Valuable

For sustainable competitive advantage, resources must be valuable. The demand for labor is different in different firms and it is more different across the countries than it is within the countries due differences in availability of capital, difference of labor practices and social and cultural norms which are related to the work. The labor supply is also different across countries than within the countries due to difference in hygiene, health care, nourishment, training and educational opportunities. As competition becomes more global, there is an opportunity for creating value through human resources.

Human resources must have control, information, awareness, recognition and rewards to be the source of competitive advantage.

Rare

To be source of sustainable competitive advantage the resource should be rare. Human skills are distributed normally in the population and are rare. Human resources vary in worth, and different jobs require different skills and finding these skills are rare. International firms have and can draw more labor pool; they have great potential for developing the valuable and rare resources than the domestic firms which draw from only labor pool.

Inimitable

It will be more difficult to imitate the resources in the presence of causal ambiguity and social complexity.

  • Causal ambiguity: Exists when their imperfection in understanding of the link between a firm’s resources and competitive advantage. If the firm which is in the competition is not able to identify the human resources which are responsible for competitive advantage, they cannot imitate the advantage. Causal ambiguity is caused mainly due to team production. When the work is done in team, it becomes difficult to identify who had contributed maximum to achieve the goal.
  • Social complexity: It may arise from the transaction-specific relationships. The competitive advantage can be gained due to complex social situation. Even when the relationships are too complex, it is better to consider the value of relationship which may be due to the human transactions. The value can be developed due to the knowledge and trust which had been developed over the time. Human interaction may lead to social complexity.

In the global competition, the social complexity and causal ambiguity act as a barrier to imitation. It becomes difficult for the outsiders to understand the competitive advantage due to differences in customs and norms. The imitation becomes impossible due to religion, culture and political alliances.

Non-substitutable

To stay in the competitive global environment there should be no good substitute available. Finding the good substitute is the difficult task. Human resources are the factor which can be transferred across the technologies, products and markets. Human resources are thus valuable. If the firm has obtained high level of learning capabilities then providing good training ensures that resources do not becomes out of date.

University of Mumbai BMS Notes

Reasons for Emergency of IHRM

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International Human Resource Management (IHRM) involves ascertaining the corporate strategy of the company and assessing the corresponding human resource needs; determining the recruitment, staffing and organizational strategy; recruiting, inducting, training and developing and motivating the personnel; putting in place the performance appraisal and compensation plans and industrial relations strategy and the effective management of all these functions from an international perspective.

Economic Diversity

Economic diversity is expressed in terms of per capita income of different countries where a global company operates. Economic diversity is directly related to international compensation management, that is, paying wages/salaries and other financial compensation to employees located in different countries. One of the basic principles of paying to employees is that “there should be equity in paying to employees.” However, putting this principle in practice is difficult for a global company because its operations are located in different countries having different economic status. In such a situation, some kind of parity should be established based on the cost of living of host countries.

Language Diversity

Language is a medium of expression but employees coming from different countries have different languages. Though English is a very common language, it does not serve the purpose adequately as it does not cover the entire world. While employees coming from different countries may be encouraged to learn the language of the host country for better dissemination of the information, it does not become feasible in many cases. An alternative to this is to send multilingual communications. It implies that anything transmitted to employees should appear in more than one language to help the message get through. While there are no hard-and-fast rules in sending such messages, it appears safe to say that such a message should be transmitted in the languages the employees understand to ensure adequate coverage.

Workforce Diversity

Workforce is the building block of any organization but there is workforce diversity in global companies. Based on their place of origin, employees of a typical global company can be divided into the following groups:

  • Parent-country national: Permanent resident of the country where the company is headquartered.
  • Host-country national: Permanent resident of the country where the operations of the company are located.
  • Third-country national: Permanent resident of a country other than the parent country and the host country.

Further, workforce diversity can be seen in the context of employee mobility from one country to another country for performing jobs. On this basis, an employee can be put in one of the following categories:

  • Expatriate: A parent country national sent on a long-term assignment to the host-country operations.
  • Inpatriate: A host-country national or third-country national assigned to the home country of the company where it is headquartered.
  • Repatriate: An expatriate coming back to the home country at the end of a foreign assignment.

Cultural Diversity

Culture is one of the most important factors affecting HRM practices. However, when we consider international perspective of HRM, we find cultural diversity across the globe, that is, culture of two countries is not alike. Cultural diversity exists on following dimensions:

Individualism and Collectivism. Individualism is the extent to which people place value on themselves; they define themselves by referring themselves as singular persons rather than as part of a group or organization. For them individual tasks are more important than relationships. Collectivism is the extent to which people emphasis the good of the group or society: They tend to base their identity on the group or organization to which they belong. At work, this means that relationships are more important than individuals or tasks; employer-employee links are more like family relationships.

Power Orientation. Power orientation, also known as orientation to authority, is the extent to which less powerful people accept the unequal distribution of power; people prefer to be in a situation where the authority is clearly understood and lines of authority are never bypassed. On the other hand, in culture with less orientation to power, authority is not as highly respected and employees are quite comfortable circumventing lines of authority to accomplish jobs.

Uncertainty Avoidance. Uncertainty avoidance also known as preference for stability, is the extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous situations. In many countries, people prefer unambiguity while in many other countries, people can tolerate ambiguity.

Masculinity. Masculinity, also known as assertiveness or materialism, is the extent to which the dominant values in a society emphasize aggressiveness and the acquisition of money and material goods, rather than concern for people and overall quality of life.

Time Orientation. Time orientation dimension divides people into two categories: long-term orientation and short-term orientation. People having longterm orientation focus on future, prefer to work on projects having a distant payoff, and are persistent and thrift. People having short-term orientation are more oriented towards past and present and have respect for traditions and social obligations.

Factors

  1. The nature of IHRM may be restricted by government policies and legal regulations in the host country.

This is especially felt in developing countries, where management and technical training within the host country’s educational system is rudimentary and the local government views the presence of MNCs as a means of developing local expertise.

  1. Culture, particularly national culture at the headquarters, plays a role in determining IHRM practices. Culture may affect HQ decisions in two ways:

(a) Some cultures are simply more comfortable than others in taking an ethnocentric approach to management.

(b) The mix of cultures in the subsidiaries of an MNC and the level of cultural difference among the subsidiaries of an MNC will restrict the IHRM approach taken.

  1. MNCs with extensive international experience have had the opportunity to develop more diverse methods of maintaining coordination and control over their foreign operations.
  2. The method used to establish operations in foreign locations may also affect HR policies. For example, HR practises in the acquired/ merged operation will reduce the wholesale exportation of home-country HR systems into the subsidiary.
  3. An MNC opening subsidiaries in developed countries face a much different IHRM challenge than one opening subsidiaries in developing countries. Developed countries have well educated staff having technical and management experience.

Therefore, there is the opportunity to develop polycentric or geocentric IHRM strategies. Whereas in developing countries a more centralised IHRM strategy is necessary.

For technologically sophisticated products, or services, the need to maintain specific production standards and quality controls necessitates a greater degree of centralisation of IHRM functions at the MNCs headquarters. Whereas in some products like food items, the host-country tastes have to be looked into to succeed in the local market.

University of Mumbai BMS Notes

Objectives, Evolution of IHRM

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An organization gains competitive edge when it has an efficient pool of employees. In addition, we know that a large number of organizations conduct their businesses across national boundaries. Therefore, there is an increasing need of managing global employees. The effective management of global employees is a major determinant for the success or failure in international ventures. It has become a challenge to procure, train, and retain employees for global organizations. IHRM plays a very crucial role in terms of managing employees belonging to different geographical locations and countries.

Objectives of International Human Resource Management

Within present business scenario, there are larger number of organisations conduct business beyond national boundaries. The differences in organisational environment across nations have encouraged to determine and develop international HR staffing and practices. At global scenario, it is needful to study about HR hiring, staffing developing, compensating and appraising HR for better utilisation of people.

International Human Resource Management is the process of managing people in international ventures and involves activities in at least two nations.

It is fact that the success of business and trades are depends on the skills and quality of human resources and how effectively these resources are managed and utilised at international level.

  1. It enhances to develop managerial skills, organisational knowledge and technical abilities of HR managers and employees.
  2. To develop more and better handle of global business operations.
  3. To manage and secure the performance, compensation and career path of employees.
  4. To manage and organise cross cultural counselling and language training programme.
  5. To develop more feasible understanding of work practices at global levels.
  6. To raise and develop better and new performance management of human resources.
  7. To get more and more opportunities within global HR scenario.
  8. To develop better and competitive HR strategies in global competitive scenario.
  9. To reduce the cultural differences as amicable for cultural environment.

Activities and Cultural Dimensions of International Human Resource Management

Managing human capital is undoubtedly the most challenging task for any manager and for the human resource department. The knowledge-based economy and knowledge workers have meant that a lot is at stake when it comes to managing people. The internationalization puts additional challenges and issues in managing employees.

The complexity is far greater and issues are many times delicate since expatriation often means relocation of the employee’s family as well. The focal areas of priority of HR also changes with the stage of internationalization.

There are three majors international HRM activities; Procure, Allocate and Utilize. In effect these three major activities of IHRM covet all the six activities of domestics HRM i.e., HR planning, Employees Hiring, Training and Development, Remuneration, Performance Management and Industrial Relations.

International HRM involves employees of three countries; Parent country or the home country (where a company’s headquarters might be located), host country (where company’s subsidiary may be located) and third country (Other countries that may be sources of labour or finance).

International Staffing:

Staffing is a challenging function. Finding the right set of people has never been easy. However, when it comes to international operations, the complexity of staffing increases many folds. Deciding on the mix of local employees to expats is not an easy decision to make. Several factors may impact the same.

Then cost is another major consideration. Cost of finding an international employee and hiring that person if often very high. Such cost aspects demand even more careful consideration and selection. Errors in selection could be tremendously costly for the firm. Expat compensation and tax laws are huge consideration in international staffing. Tax treaties between certain countries ease income tax obligations of an expat.

Such treaties may make it easier to hire from certain countries, while it may difficult to hire from others since the compensation may not work out in the favour of the expat. Environmental factors may also affect international staffing. Political environment may change with government regimes and may favour or disfavour expat movement.

Cultural Challenge:

Difference in national cultures of expats poses a challenge in hiring and assimilating international staff. A lot of pre-departure training for the expats is focused on cross cultural training. Cultural fitment of the expats plays a important role in the success of the projects and international assignments. Multi-national companies often develop hiring strategy and training interventions to cope up with this cultural challenge.

Geert Hofstede work on cultural dimensions is an authoritative repository on national cultures and how cultures differ across countries. Hofstede defines six cultural dimensions to qualify a national culture (Hofstede, Cultural Dimensions). A comparison across these dimensions also helps distinguish one national culture from the other.

Evolution of Global Human Resources Management

Domestic HRM is typically defined as a broad typology that covers three areas: Work relations: the way work is organized, the division of labor and the deployment of workers around technologies and production processes; Employment relations: the arrangements governing such aspects of employment as recruitment, training, promotion, job tenure and the reward of employees; Industrial relations: the representational aspirations of employees and the ‘Voice systems’ that may exist. This encompasses issues such as work consultation, employee involvement practices, work councils and Collective Bargaining.

Domestic HRM has not developed in isolation, but rather in the context of industrial change and economic development. As such, HRM represents a set of responses to the dramatic and continued effect that industrialization has had on society and the world of work.

Evolution of International Human Resources Management

The next step in the evolution of Human Resource Management is the International Human Resources Management (IHRM). According to Morgan, IHRM is becoming increasingly complex as new types of employees and their unique attributes are considered as part of the IHRM activities. Numerous new issues have arisen given the diversity of employees in an international context i.e., the expatriates, host-country nationals (HCN), third-country nationals, and, most recently, the in-patriates.

The complexity of operating in different countries and employing different national categories of workers is a key variable that differentiates domestic and international human resource management, rather than any major differences between the HRM activities performed. According to Napier there are critical issues that IHRM needs to traditionally focus on which include: Issues facing employees in terms of transferring expatriates overseas; IHRM function and its attendant activities; and, the types of factors (firm level and otherwise) that may influence IHRM.

Evolution of Strategic Global Human Resources Management

The present level in the evolutionary process of human resource management, which complicates the human resource functions and systems much more, is strategic Global Human Resource Management (SGHRM). Viewing the human resource functions in a SGHRM context exacerbates the international human resource issues due to the co-ordination efforts required to implement the strategy of the corporation. In today’s global business environment, global organizations must utilize all possible sources of competitive advantage, of which human assets are one of these sources. The success or failure of an organization in a global context will be determined by its managerial capabilities, and the development of globally sophisticated managers is a major challenge in order to obtain global competitiveness.

Virtually any type of international problem, in the final analysis, is either created by people or must be solved by people. Hence, having the right people in the right place at the right time emerges as the key to a company’s international growth. If we are successful in solving that problem.

An example of one of the issues in SGHRM is where to focus the location of the workforce. The location of the workforce is an important strategic consideration, but one that is all too often given only limited attention. Frequently, decisions are based purely on quantitative attributes of the decisions, such as trade-off transportation costs, economies of scale and other explicit cost-based variables. This quantitative practice, however, can lead to sub-optimal results, as decisionmakers tend to focus only on factors that are easily quantifiable. Important qualitative issues are frequently neglected and are often central to supporting or creating a global competitive advantage. For example, location dictates the level of knowledge embedded in the workforce; as such, it can affect the ability of firms to implement skill-based process technologies or it can limit the effectiveness of quality programs. SGHRM practices.

Evolution of Human Resource Management

Managing Slaves:

Slaves comprised an important source of manpower in almost all ancient civilisations. They could be sold and purchased like commodities. Their main purchasers were the wealthy rulers, landlords, tribal chiefs and effluent businessmen. The purchasers of slaves had a rather complete control over their slaves.

The masters of the slaves took a variety of arduous work from them such as carrying heavy loads, rowing ships and boats, construction of buildings and forts, digging canals, cattle-rearing and tillage of soil. The remuneration or compensation for their efforts comprised mainly food, shelter and clothing. The slaves were dealt with iron hands. They were subjected to strict supervision, and non-compliance of the orders of their masters or supervisors was generally punishable with physical tortures, and occasionally with mutilation of their limbs and even death sentence for grave offences.

Managing Serfs:

Serfdom was widely prevalent in the feudal societies of the pre-and early medieval era. Serfs were engaged by landlords mainly in agricultural operations and allied activities. The landlords would usually give them a piece of land for their habitat and often, some land for their own cultivation. In many cases, a paltry sum of money was advanced to them in order that they could remain attached to their masters.

In lieu of these facilities, the serfs and their family members were required to serve their masters. The work assigned to serfs mainly comprised – tillage of soil, cattle-rearing, domestic work and similar other activities. Many landlords would also give them a meagre amount as wages, whether in cash or in kind. Usually, serfs could become free after returning to their masters the habitat, the piece of land and advances with interest. They could also be transferred to some other landlord on payment.

Under serfdom, some measure of personal relationship existed between the landlords and the serfs. Many landlords often tried to solve their genuine grievances and extended some help to those who were in distress. The feudal lords also occasionally gave some economic inducements to their serfs in the form of additional supply of food-grains and some money for their increased productivity and good behaviour.

Although the management of serfs was based on the principle of authoritarianism, the element of human treatment was often found in their relationship. With the abolition of the feudal system, serfdom also came to an end. However, some remnants of the past can still be found even today, especially in rural areas. The bonded labour system in India is comparable to the system of serfdom prevalent in European countries during the medieval period.

Managing Indentured Labour:

The system of indentured labour emerged primarily with the flourishing of mercantilism and advent of industrial revolution. The discovery of new lands through sea and land routes led to a substantial increase in the demand of European goods abroad, and at the same time, gave a fillip to the establishment of industries in the continent.

As a consequence, trade flourished leaps and bounds, and the mercantilists, taking advantage of the expanding markets, tried to accumulate as much wealth as possible. In their quest for maximising wealth, the mercantilists would offer attractive inducements to the artisans and skilled craftsmen for accelerating production of goods in demand. The artisans and craftsmen responded and they started engaging an increasing number of apprentices and hired labourers to cope with the demand of the products.

From industrial revolution era to the present era, various stages to development of management of human resource practices may be classified as follows:

  1. Industrial revolution era; 19th century
  2. Trade union movement era; close to the 19th century
  3. Social responsibility era; beginning of the 20th century
  4. Scientific management era; 1900-1920s
  5. Human relations era; 1930s-1950s
  6. Behavioural science era; 1950s-1960s
  7. Systems and contingency approach era; 1960 onwards
  8. Human resource management era; 1980 onwards

Human Relations Era:

Around 1920s, management researchers gave a close look at the human factor at work and the variables that affected people’s behaviour. Before that, Hugo Munsterberg wrote a book on ‘Psychology and Industrial Efficiency’ which suggested the use of psychology in the field of personnel testing, interviewing, attitude measurement, learning, etc.

This brief period was termed as ‘Industrial Psychology Era’. In 1924, a group of professors from Harvard Business School, USA, began an enquiry into the human aspects of work and working conditions at Hawthorne plant of Western Electric Company, Chicago.

They conducted researches from 1924 to 1932 and arrived at the conclusions that productivity of workers depended on:

(i) Social factors at the workplace

(ii) Group formation and group influence.

(iii) Nature of leadership and supervision

(iv) Communication

They concluded that in order to have better productivity, management should take care of human relations besides the physical conditions at the workplace. Consequently, the concepts of social system, informal organization, group influence, and non-logical behaviour entered the field of management of personnel.

Management Notes

Difference between Salary and Wages

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Salary

Salary is a fixed regular payment, typically paid on a monthly basis, for the performance of work or services. Unlike wages, which are often calculated on an hourly or weekly basis, salaries provide employees with a consistent and predetermined amount of compensation, regardless of the number of hours worked.

Components:

  1. Base Salary:

The core, fixed amount of money paid to an employee on a regular basis, forming the foundation of the overall salary. Reflects the employee’s role, responsibilities, and experience.

  1. Bonuses:

Additional monetary rewards provided to employees, often based on performance, company profits, or specific achievements. Motivates employees and aligns their efforts with organizational goals.

  1. Allowances:

Supplementary payments intended to cover specific expenses or costs related to the job, such as housing, transportation, or meals. Addresses the financial impact of job-related requirements.

  1. Benefits:

Non-monetary compensation, including healthcare, retirement plans, and other perks, provided to enhance employees’ overall well-being. Contributes to employee satisfaction and work-life balance.

  1. Overtime Pay:

Additional compensation for hours worked beyond the standard workweek, often calculated at a higher rate than the regular hourly pay. Compensates employees for extra effort and time invested in work.

  1. Performance–Based Incentives:

Variable payments linked to individual or team performance, encouraging employees to achieve specific goals or targets. Aligns compensation with results and fosters a performance-driven culture.

  1. Profit Sharing:

Sharing company profits with employees, providing them with a stake in the organization’s financial success. Aligns the interests of employees with the overall success of the business.

  1. Commissions:

Payments based on sales or revenue generated by an employee, common in roles with direct sales responsibilities. Rewards employees for their contribution to revenue generation.

  1. Retirement Benefits:

Contributions made by the employer to retirement plans, such as 401(k) or pension schemes. Supports employees in building financial security for their post-work years.

  • Stock Options:

The right to purchase company stock at a predetermined price, offering employees a share in the company’s ownership. Aligns employees’ interests with the company’s long-term success.

  • Education and Training Support:

Financial assistance provided by the employer for the education and skill development of employees. Promotes continuous learning and professional growth.

  • Health and Wellness Programs:

Initiatives and benefits aimed at promoting employees’ physical and mental well-being. Enhances employee health, productivity, and job satisfaction.

  • Vacation and Leave Benefits:

Paid time off from work, including vacation days, holidays, and other types of leave. Supports work-life balance and employee well-being.

  • Severance Pay:

Compensation provided to employees upon termination of employment, often based on factors like length of service. Offers financial support during transitions and provides a safety net for employees.

  • Other Perquisites (Perks):

Additional benefits or privileges provided to employees, such as company cars, memberships, or flexible work arrangements. Enhances the overall employment experience and contributes to employee satisfaction.

Wages

Wages refer to the compensation paid to an employee for the hours worked or services rendered, often calculated on an hourly, daily, or weekly basis. Unlike salaries, which provide a fixed amount irrespective of hours worked, wages are directly tied to the time spent on the job.

Components:

  1. Hourly Rate:

The amount paid for each hour worked by an employee. Forms the basic unit for calculating wages based on time.

  1. Overtime Pay:

Additional compensation provided for hours worked beyond the standard workweek or regular working hours. Compensates employees for extra effort and time beyond the standard working hours.

  1. Piece-Rate Pay:

Compensation based on the number of units produced or tasks completed. Directly links pay to productivity and output.

  1. Commission:

A percentage of sales or revenue earned by an employee, common in sales roles. Rewards employees based on their contribution to generating business.

  1. Tips and Gratuities:

Additional payments received by employees, often in service industries, as a form of appreciation from customers. Augments income and is often based on customer satisfaction.

  1. Holiday Pay:

Compensation for hours worked on recognized holidays. Encourages employees to work during holiday periods and compensates for the disruption to personal time.

  1. Shift Differentials:

Additional pay for working shifts that fall outside regular daytime hours. Compensates for inconveniences associated with non-standard working hours.

  1. Bonuses (Variable):

Additional payments beyond regular wages, often tied to performance, project completion, or other achievements. Acts as an incentive and recognition for exceptional contributions.

  1. Piecework Bonuses:

Additional payments for meeting or exceeding production targets in piecework arrangements.  Motivates employees to achieve or surpass production goals.

  • Travel Allowances:

Compensation for work-related travel expenses, such as mileage or transportation costs. Addresses additional costs incurred while traveling for work.

  • Uniform or Tool Allowances:

Payments provided to cover the cost of uniforms, tools, or equipment required for the job. Supports employees in meeting job-specific requirements.

  • Incentive Pay:

Additional compensation tied to achieving specific targets, often related to productivity or efficiency. Encourages employees to meet or exceed performance expectations.

  • Danger Pay:

Additional compensation for employees working in hazardous conditions or environments. Recognizes the risks associated with certain jobs.

  • Call-out Pay:

Compensation for employees called in to work outside their regular schedule, often applicable to on-call positions. Compensates for the inconvenience of being available on short notice.

  • Benefits (Limited):

Some wage-related benefits, such as health insurance or retirement contributions, may be provided, but to a lesser extent compared to salary packages. Enhances the overall compensation package, albeit on a more limited scale compared to salaried positions.

Difference between Salary and Wages

Basis of Comparison

 Salary

Wages
Payment Frequency Monthly Hourly or Weekly
Consistency Fixed, stable Variable, fluctuates
Calculation Basis Annual rate / 12 Hourly rate x Hours worked
Overtime Compensation Typically included Paid separately
Employment Level Often for salaried employees Common for hourly workers
Work Hours Impact Irrelevant to pay Directly affects earnings
Benefits Often includes benefits Limited or no benefits
Professional Positions Common for white-collar jobs Common for blue-collar jobs
Skill-Based Reflects skills and qualifications Often skill-independent
Administrative Work Common for managerial roles Common for administrative roles
Unionization Less common for unionized jobs Common in unionized settings
Job Complexity Reflects job responsibilities May not directly reflect complexity
Job Stability Generally perceived as stable Can be influenced by job market
Performance Impact Less direct impact on pay Directly impacts pay through hours
Perception in Society Often associated with higher status May not carry the same status

Management Notes

Basis for Compensation Fixation

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Compensation refers to compensating any damage, loss or mental harassments, wages or salaries as reward for physical and/or mental efforts to perform any agreed task or job. But the concept of equity in remunerating any work or task has forced us to perceive wages and salaries as compensation, because people work efficiently only when they are paid according to their worth or feel satisfied with the remunerations. Besides basic salaries or wages, companies are forced to view the benefits and services to justify the positional and esteem needs of employees and to provide adequate cushion for inflations. Though the cost of human resources is estimated at between 2% to 20% of the operating cost (depending upon the type of industry), to retain the employees or to avoid job-hopping, some of the industries are even forced to adopt varying scales and benefits.

Compensation is the reward that the employees receive in return for the work performed and services rendered by them to the organization. Compensation includes monetary payments like bonuses, profit sharing, overtime pay, recognition rewards and sales commission, etc., as well as non­monetary perks like a company-paid car, company-paid housing and stock opportunities and so on.

Apart from the basic financial pay the employees receive paid vacations, sick leave, holidays and medical insurance, maternity leave, free travel facility, retirement benefits, etc., and these are called benefits.

The Fixation or determination of compensation involves considering various factors and elements to arrive at a fair and competitive remuneration package for employees. The basis for compensation fixation may vary across industries, organizations, and job roles. The Combination of these factors, tailored to the specific needs and priorities of the organization, forms the basis for the fixation of compensation. Organizations often develop a comprehensive compensation strategy that integrates these elements to attract, retain, and motivate a talented and satisfied workforce.

  • Market Conditions:

Aligning compensation with prevailing market rates for similar positions in the industry or geographic location. Ensures competitiveness in attracting and retaining talent.

  • Job Evaluation:

Systematically assessing the relative value of different jobs within the organization based on factors like skills, responsibilities, and complexity. Establishes internal equity and aids in determining appropriate compensation levels.

  • Industry Standards:

Considering compensation benchmarks and practices established within a specific industry. Helps organizations stay competitive and in line with industry norms.

  • Organization’s Financial Health:

Evaluating the financial capacity of the organization to sustain and afford the proposed compensation structure. Ensures that compensation is aligned with the organization’s financial resources.

  • Employee Performance:

Linking compensation to individual or team performance, often through performance appraisals and merit-based systems. Rewards and motivates high-performing employees, fostering a performance-driven culture.

  • Cost of Living:

Adjusting compensation based on the cost of living in a particular region or country. Accounts for variations in living expenses and ensures fair compensation.

  • Skill and Experience:

Recognizing the level of skills and experience possessed by an employee. Differentiates between entry-level and experienced employees, reflecting their contributions.

  • Legal Compliance:

Ensuring compliance with local, state, and national labor laws and regulations related to minimum wage, overtime, and other compensation standards. Mitigates legal risks and ensures ethical employment practices.

  • Union Agreements:

Adhering to terms negotiated and agreed upon in collective bargaining agreements with labor unions. Reflects the terms and conditions established through negotiations with employee representatives.

  • Market Positioning:

Positioning the organization’s compensation strategy relative to competitors in the talent market. Influences the organization’s attractiveness to potential employees and helps in talent acquisition.

  • Employee Benefits:

Including non-monetary benefits, such as health insurance, retirement plans, and other perks, in the overall compensation package. Enhances the total rewards offered to employees, contributing to their overall well-being.

  • Job Complexity and Risk:

Recognizing the complexity and level of risk associated with specific job roles. Reflects the nature of the job and the skills required, influencing compensation levels.

  • Retention and Succession Planning:

Considering the organization’s long-term talent strategy, including the retention of key employees and planning for future leadership needs. Aligns compensation with strategic workforce planning goals.

  • Employee Value Proposition (EVP):

Evaluating the overall value proposition offered to employees beyond monetary compensation, including career development opportunities, work-life balance, and organizational culture. Considers factors that contribute to employee satisfaction and engagement.

  • Global Considerations:

Adapting compensation practices to account for variations in economic conditions, cultural norms, and legal requirements in different countries for multinational organizations. Ensures consistency and compliance across diverse geographic locations.

Management Notes

Effect of Various Labour Laws on Wages

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Labour laws play a pivotal role in shaping the employment landscape and influencing wage structures within a country. These laws are designed to regulate the relationship between employers and employees, ensuring fair treatment, safe working conditions, and just compensation. The impact of labour laws on wages is multifaceted, encompassing aspects such as minimum wage regulations, overtime pay, equal pay for equal work, and various other provisions aimed at protecting workers’ rights. Labour laws wield substantial influence over wage structures, seeking to establish a balance between the interests of employers and the rights of workers. While these laws are crafted with the intention of promoting fairness, equity, and worker protection, their impact is subject to various challenges. Striking the right balance between regulation and flexibility, addressing regional disparities, and adapting to evolving workforce dynamics are ongoing challenges for policymakers and businesses alike. Nevertheless, a well-crafted and effectively enforced legal framework is essential for fostering a work environment where wages are just, working conditions are safe, and the rights of workers are upheld.

Minimum Wage Regulations:

Intended Benefits:

  • Fair Compensation:

Minimum wage laws are enacted to ensure that workers receive a baseline level of compensation deemed necessary for a decent standard of living. This promotes economic justice by preventing the exploitation of vulnerable workers.

  • Poverty Alleviation:

Setting a minimum wage helps lift workers out of poverty, providing them with the means to cover essential living expenses. This has broader societal implications, contributing to poverty reduction.

Challenges:

  • Impact on Small Businesses:

Critics argue that higher minimum wages can impose financial burdens on small businesses, potentially leading to job cuts or increased prices for goods and services.

  • Regional Disparities:

Minimum wage regulations may not adequately account for regional variations in living costs, creating challenges in finding a one-size-fits-all solution that addresses the diverse economic landscapes within a country.

Equal Pay for Equal Work:

Intended Benefits:

  • Gender Pay Equity:

Labour laws promoting equal pay for equal work aim to eliminate gender-based wage disparities. This contributes to gender equality in the workplace, fostering a fair and inclusive environment.

  • Fair Treatment:

The principle of equal pay extends to all forms of discrimination, ensuring that employees are not subjected to wage disparities based on race, ethnicity, or other protected characteristics.

Challenges:

  • Data Accuracy and Transparency:

Implementing equal pay measures requires accurate and transparent data on employees’ roles, responsibilities, and compensation. Some organizations may face challenges in collecting and disclosing this information.

  • Subjectivity in Job Evaluation:

Determining what constitutes “equal work” can be subjective, and variations in job roles may complicate efforts to ensure equal pay. Standardizing job evaluation methodologies is a complex task.

Overtime Pay and Working Hours:

Intended Benefits:

  • Fair Compensation for Extra Effort:

Overtime pay regulations are intended to compensate employees for working beyond standard hours. This ensures that employees are fairly rewarded for their additional efforts.

  • Limiting Exploitative Practices:

Labour laws prescribing limits on working hours and overtime seek to prevent exploitative practices and promote a healthy work-life balance. This contributes to employee well-being and job satisfaction.

Challenges:

  • Operational Constraints:

Industries with fluctuating workloads may face challenges in accommodating strict working hour regulations. Flexibility in working hours may be crucial for certain sectors.

  • Compliance Monitoring:

Ensuring compliance with overtime regulations requires effective monitoring mechanisms, which can be resource-intensive for regulatory authorities.

Collective Bargaining and Trade Union Laws:

Intended Benefits:

  • Negotiating Power for Workers:

Collective bargaining laws empower workers to negotiate wages and working conditions collectively. This enhances their bargaining power, leading to more equitable agreements with employers.

  • Labour Market Stability:

By providing a structured framework for negotiations, collective bargaining laws contribute to labour market stability, reducing the likelihood of widespread strikes or industrial unrest.

Challenges:

  • Power Imbalances:

In situations where there is a significant power imbalance between employers and workers, collective bargaining may be challenging. This is particularly relevant in industries with limited unionization.

  • Potential for Disruption:

While collective bargaining aims for mutually beneficial agreements, disputes can arise, leading to work stoppages and disruptions that impact both workers and employers.

Social Security and Benefits:

Intended Benefits:

  • Worker Well-being:

Labour laws pertaining to social security and benefits, such as healthcare, retirement plans, and disability insurance, aim to enhance the overall well-being of workers.

  • Attracting and Retaining Talent:

Competitive benefit packages can attract skilled workers and contribute to employee retention. Labour laws often prescribe minimum standards for these benefits.

Challenges:

  • Financial Strain on Employers:

Mandating certain benefits can place a financial burden on employers, especially smaller businesses. Striking a balance between worker welfare and business viability is crucial.

  • Changing Workforce Dynamics:

The rise of the gig economy and non-traditional employment arrangements poses challenges in adapting social security and benefit regulations to accommodate diverse work structures.

Child Labour and Forced Labour Laws:

Intended Benefits:

  • Protecting Vulnerable Populations:

Laws prohibiting child labour and forced labour are designed to protect vulnerable populations from exploitation. These regulations prioritize the well-being of children and individuals subjected to coercion.

  • Ethical Business Practices:

Compliance with child labour and forced labour laws is integral to promoting ethical business practices. Organizations adhering to these regulations contribute to global efforts against human rights abuses.

Challenges:

  • Enforcement and Monitoring:

Effectively enforcing laws against child labour and forced labour requires robust monitoring systems, especially in industries where such practices may be prevalent.

  • Global Supply Chain Complexity:

Addressing child labour and forced labour becomes complex in global supply chains, where products may pass through multiple jurisdictions with varying regulations and enforcement capacities.

Management Notes

Social Issues in Retailing in India

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Retailing in India, like in many other countries, is influenced by a variety of social issues that impact both the industry and consumers. These issues often reflect the broader social and cultural context of the country.

Addressing these social issues requires a holistic approach from retailers, encompassing ethical business practices, cultural sensitivity, and responsiveness to changing consumer dynamics. By aligning their strategies with the social fabric of India, retailers can build stronger connections with their customer base and contribute positively to society. This involves not only understanding the diverse needs of consumers but also actively participating in social initiatives that align with the values of the community.

  • Diversity and Cultural Sensitivity:

India is a diverse country with multiple languages, cultures, and traditions. Retailers need to be sensitive to this diversity in their marketing strategies, product offerings, and customer interactions. Cultural insensitivity can lead to backlash and negatively impact a brand’s image.

  • Consumer Behavior and Preferences:

Consumer preferences in India can vary significantly across regions and demographic segments. Retailers must stay attuned to evolving consumer trends, preferences, and purchasing behaviors to tailor their offerings and marketing strategies effectively.

  • Gender Sensitivity:

Gender plays a significant role in shaping consumer behavior. Retailers need to be aware of gender-related social issues and promote inclusivity in their marketing and advertising. Creating gender-neutral spaces and products can be essential for attracting a diverse customer base.

  • Economic Disparities:

India faces economic disparities, with a significant portion of the population belonging to lower-income segments. Retailers need to balance their product offerings to cater to diverse economic groups. Strategies like affordable pricing, value for money, and inclusive marketing are crucial.

  • Ethical Sourcing and Fair Trade:

There is an increasing awareness among Indian consumers about the ethical sourcing of products and fair trade practices. Retailers are under scrutiny to ensure that their supply chains adhere to ethical standards, and they are expected to be transparent about their sourcing practices.

  • Digital Divide:

While there is a growing trend of digitalization in urban areas, rural parts of India may still face challenges related to digital access and literacy. Retailers need to adopt strategies that cater to diverse digital maturity levels among consumers.

  • Changing Lifestyle and Aspirations:

India is experiencing a significant shift in lifestyle and aspirations, especially among the younger population. Retailers must keep pace with changing consumer expectations, including a demand for international brands, experiential shopping, and lifestyle products.

  • Health and Wellness Trends:

There is an increasing awareness of health and wellness in India, leading to a growing demand for organic, sustainable, and health-conscious products. Retailers need to adapt to these trends by offering healthier options and providing transparent information about product ingredients.

  • Social Media Influence:

Social media plays a substantial role in shaping consumer opinions and trends. Retailers need to have a robust social media strategy to engage with consumers, manage brand perception, and stay connected with the younger demographic.

  • Sustainability and Environmental Concerns:

Environmental consciousness is on the rise, and consumers are increasingly looking for sustainable and eco-friendly products. Retailers need to incorporate sustainable practices in their operations, such as reducing packaging waste and promoting environmentally friendly products.

  • Inclusivity and Accessibility:

Retail spaces and services need to be inclusive and accessible to people with disabilities. Ensuring that stores are wheelchair-friendly, providing assistance for visually impaired individuals, and offering inclusive product ranges are important considerations.

  • Rural-Urban Dynamics:

Retailers need to recognize the unique dynamics between rural and urban consumers. While urban consumers may seek convenience and a wide range of products, rural consumers may have different preferences and purchasing patterns.

Management Notes

Ethical Issues in Retailing in India

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Ethical issues in retailing are critical considerations that impact the relationships between businesses, consumers, and the broader society. Maintaining ethical standards is not only a legal requirement but also essential for building trust, ensuring fair practices, and sustaining a positive reputation.

Ethics in business have become an essential topic of discussion. In retailing, retailers want to earn maximum profit by providing satisfaction to their customers with ethical means. Some certain laws and regulations govern the retail sector.

Following these laws are important and beneficial for the organizations. In this article, you will learn about ethical behavior in the retail sector and its importance.

Ethics can be defined as the moral principles for the behavior of a person or an organization to conduct activities. Business ethics tell the difference between right and wrong activities. However, ethical conduct in business is not as simple as it seems. There are various complexities when It comes to ethical conduct.

Ethical order ensures a sense of order and justice in an organization. The concepts like Corporate Social Responsibility is introduced in the retailing sector. The CSR is related to the ethical expression to conduct business. Retailing is the end unit of the Supply chain.

Customers directly interact with retailers. Therefore, it is important that retailers act ethically as they impact the lives of many people. Ethical practices are not only moral responsibility of a retailer, but it has great importance for the retail business. Let us learn about them one by one.

Adopting an ethical approach in retailing is not only a legal obligation but also a strategic imperative. Ethical behavior builds trust with consumers, fosters a positive workplace culture, and contributes to the long-term sustainability and success of a retail business. By addressing these ethical issues, retailers can demonstrate a commitment to integrity, responsibility, and the well-being of both consumers and the broader community.

Fair Pricing and Transparency:

Deceptive pricing practices, hidden fees, and misleading discounts can erode consumer trust.

  • Ethical Approach: Retailers should ensure transparency in pricing, avoid misleading promotions, and provide clear information about product costs.

Product Quality and Safety:

Selling substandard or unsafe products can harm consumers and damage a retailer’s reputation.

  • Ethical Approach: Retailers must adhere to quality standards, conduct product testing, and promptly recall defective items.

Supply Chain Ethics:

Unethical practices within the supply chain, such as exploitation of labor, child labor, or environmental violations, can tarnish a retailer’s reputation.

  • Ethical Approach: Retailers should implement ethical sourcing policies, ensure fair labor practices, and promote sustainable and responsible supply chain management.

Employee Treatment and Fair Labor Practices:

Unfair wages, poor working conditions, and lack of employee benefits can lead to ethical concerns.

  • Ethical Approach: Retailers should prioritize fair wages, provide a safe and healthy work environment, and offer employee benefits to promote overall well-being.

Customer Privacy and Data Security:

Mishandling customer data, privacy breaches, and unauthorized use of personal information can lead to ethical violations.

  • Ethical Approach: Retailers must prioritize customer privacy, implement robust data security measures, and adhere to data protection laws.

Truth in Advertising:

False or misleading advertising can deceive consumers and harm a retailer’s credibility.

  • Ethical Approach: Retailers should ensure that advertising is truthful, accurate, and does not exaggerate product capabilities.

Inclusivity and Diversity:

Discrimination or lack of inclusivity in hiring practices or product representation can be ethically problematic.

  • Ethical Approach: Retailers should foster diversity and inclusion, both in their workforce and in the representation of various demographics in marketing and product offerings.

Environmental Sustainability:

Irresponsible environmental practices, such as excessive packaging or contributing to pollution, raise ethical concerns.

  • Ethical Approach: Retailers should adopt sustainable practices, reduce environmental impact, and promote eco-friendly products.

Social Responsibility:

Neglecting social responsibility, such as community engagement or charitable initiatives, can be viewed as ethically irresponsible.

  • Ethical Approach: Retailers should actively engage in socially responsible activities, supporting community initiatives and contributing to social causes.

Ethical Marketing:

Manipulative marketing tactics, such as false scarcity or exploiting emotional triggers, can be ethically questionable.

  • Ethical Approach: Retailers should prioritize honesty, integrity, and authenticity in marketing, avoiding manipulative practices.

Fair Competition:

Unfair business practices, such as price fixing or collusion, can harm competition and violate ethical standards.

  • Ethical Approach: Retailers should compete fairly, adhere to antitrust laws, and avoid engaging in anti-competitive behavior.

Product Endorsements and Reviews:

Deceptive product endorsements or fake reviews can mislead consumers.

  • Ethical Approach: Retailers should encourage genuine customer reviews, avoid deceptive endorsements, and maintain the integrity of product recommendations.

Importance of Ethics in Retail

  • Build a Positive Image in society

People who have not much knowledge about the business ethics and rules of business conduct usually prefer to associate with those organizations which have a positive image in society.

Take the example of an IT company Infosys. Infosys is known for its charitable work, good corporate governance, and social responsibility initiatives such as providing scholarship to deserving children and providing medical help to poor elderly people.

People, when learning all about this they built a positive perception about the company.

  1. Ethics helps in satisfying human needs

People, whether they are employee or customers, want to associate with an organization which works with honesty and in a fair manner.

Therefore, the following ethical practices are important if you want to retain customers as well as employees for a long period of time.

  1. Ethics plays an important role in decision making

In everyday life, retailers need to take important decisions for the well-being of the organization. If an organization believe in ethical practices, it tends to make decisions which are in favor of the organization, its employees as well as customers.

A retailer can take fierce decisions in the absence of ethical practices. For example, an organization which does not follow ethical practice can take fierce decisions to tackle competition.

  1. Bringing People together

Employees love and respect organization whose actions are influenced by ethical practices. The organization which practices ethics will never only think about its own but also think about its employees and customers. In this way, a healthy relationship establishes between employees and the owner.

A healthy relationship is important for the well-being of the organization. A happy employee will never betray his organization and consistently take actions to make his organization successful.

  1. Makes society a better place to live

Society will become a better place to live if everyone follows ethical practices. A society where everyone thinks about themselves and take selfish decisions is not a suitable place for people to live. There will always be contradictions between the people.

However, we know very well that no two people can be the same. There will always be people who will indulge in unethical practices. At that time, ethical laws come into action and restrict unethical practices.

  1. Long-term profits

Organizations which practices malice activities might get profit for short period of time, but can’t retain that success for longer period of time and, on the other hand, Organizations which are driven by values and ethics are expected to be profitable for a long time though they might lose money in a short time.

For example, the Tata group faced a great loss of business in the initial 1990s,’ but soon it turns into one of the most profitable organization by not indulging into unethical practices. The company is one of the most successful companies in India and also known for its ethical conduct in business.

In simple words, it can be said that ethics shows the path of right doing to the organization and let it make decisions which are both in favor of its employees as well as customers.

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