The Hierachy Gap: the Importance of Creating Value in Lower Level Employee Essay

Executive Summary The research centers on how value affects the organization when they focus on the lower level employees’ interest, fairness, transparency, and create opportunities to advance. The results being better product service retaining valuable employees and improving stakeholders’ value. A failure to governance has lead to the collapse of trust in the stakeholders with the economic recession. The main argument is that taking care of the bottom line means better treatment of lower level employees who increase profits in organizations and increase value for stakeholders.

It is important to examine the importance of managing human capital as carefully as financial capital as a scarce strategic resource because ninety percent of profits and stakeholders value is created by lower level employees. Over many centuries, the often the overlooked lower level employees have done their jobs with little regards to monetary value from top executives. The ethical leadership focuses on what values we place for our human capital. If an organization is serious about creating value that is long term then top management needs to invest in the frontline workforce.

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The managerial model is outdated in understanding corporate relationships. The model for today’s global organization is the enterprise strategy which guides all our stakeholders’ relationships. Therefore all employees are working jointly with top management as good citizens. This is why the overall success lies in commitment to lower level employees. Introduction What is an organization’s social responsibility to its lower level employees to create value for its stakeholders? How important is it to examine the importance of managing human capital as carefully as financial capital as a scarce strategic resource?

How can employee evaluations be fair and transparent? Does clarifying the corporate code of conduct assist in the lower level employees’ behavior? Should top management take pay-cuts in troublesome economic times? Should there be a link between top managements’ bonuses and other incentatives with the productivity of the corporation’s lower level employees? If the leaders are not adequately addressing key issues under a stakeholder’s framework the result can be costly, disrupt the organization mission and vision, and undermine the trust of primary and econdary stakeholders. Many organizations realize they could help their business’ success by connecting to their communities and improving relationships among primary stakeholder such as the lower level employees. Culture and leadership play a key role in providing continuous advocacy and what steps management needs to take for a more ethical pathway. With the growing numbers of global corporations, high importance is place on the code of ethics. The frontline employees are equally but separate part of the organization framework.

Under the traditional business model, the employees were not considered owners. Therefore, they had little power except under unions and government laws. The old traditional business hierarchy is engraved in many executives who still make the mistake of focusing on the shareholders, board members, and financiers. The important stakeholders are able to make a global impact on the value of the organization. In a strategic venture, true value and increase profitability can be achieved with the teamwork of lower level employees and top management.

Traditional Management Framework: Shareholders Capitalism In the traditional management framework, top management had to be concerned about profitability. This was the measurement of value in a singular format. Top management shared financial reports to shareholders and board member for over a century. (See appendance 1) Employees can receive mix messages regarding the culture of the organization. The old formal mindset position of the organization is to conduct business in a manner that creates the highest ratios on profitability.

Pressure by stockholders leads the management to increase productivity and sales, can in fact; result in a conflict with the organizations position on lower level employees’ value. Business as usual creates a framework of dishonesty. Employees are last and least in the pyramid. The model interprets that the lower level employees are expendable resource because the managerial model is inwardly focused. The mistrust can have serious undermining effects on any efforts the organization has to guide employees’ behavior and can contradict organizational value or mission statements.

The result is a negative consensus of the company’s once strong labor capital. As the ethical culture diminishes, a loss in value confidence in the way the business treats employees. The hierarchy view only serves to enhance the degradation of the stockholders and board members market share. The organization is overvalued to make the stockholders and board members happy. New Stakeholder Framework: Stakeholder Value base Marketing The stakeholders view combines a resource base view along with a marketing base view which creates a social-political framework.

Today’s highly competitive business environment must develop an ethical culture to withstand the ever increasing scrutiny by customers, governmental regulatory agencies, and their competition. In order for companies effectively to navigate through the ethical minefields, a strong code of ethics must be developed, implemented and enforced. Ethics in the workplace and sometimes the lack thereof can significantly influence the success of an organization. Effective leaders often approach ethical dilemmas by identifying alternative actions and their consequences on stakeholders.

The changing roles in business and the globalization created a new mind concept on how value is created (see appendance 2) In the modern markets the primary and secondary stakeholders are the center of business. In the last three years, corporate leaders cut jobs, wages and benefits; especially health and retirement to retain sustainability. And at the same time top management officials receives lucrative bonuses and /or severance pay for achieving high profits at the cost of their human capital. Fired corporate executives and top level employees left with large sums of income.

Stakeholders took action against unethical corporate behavior. These ethics on value and corporate social responsibility in the workplace are part of evaluation on case studies regarding organizations’ ethical dilemmas regarding the questionable business practices in outrageous bonuses for CEOs and top executives without being tied to performance. Should stakeholders get involved in placing a cap on what executives can make in relationship to their employees and performance? What strategic planning could effectively encourage and reward employees’ teamwork?

What foundations have been put into place to prevent the consequences of a flawed evaluation system? There is a responsibility in the organization to create opportunities and comparable worth in pay for their lower level employee under the stakeholder view model. The Problems with not creating value for employees Does corporation have a social obligation to the lower level employees? Recently, when the problems with the commission or profit margins programs were brought to the attention of stakeholders and the public, the top management teams were faced with several ethical and moral issues.

Most organizations, already faced with lagging profits, needed to appease the publics’ low opinion of organizational behavior and restructure the way the organization function. Top management should immediately compose a new mission and vision statement for the organization to accompany the new code of ethics and diversity plan. The organization needs to set standards for the employees to keep their jobs or offer in-house training for higher levels positions. If possible, top management could take a cut in pay like Paul Levy did for Beth Israel lower level employees so that they would not be dismissed during the hard economic times. See reference 3). Organizations must strategically research for new sources of growth and innovation. Also, communicate to lower level employees that ideas are open for everyone to submit. Appoint stakeholder advocates with trained corporate social responsibility (CSR) team and division project managers as direct chain of command to be the one on the front lines when questions and concerns are raised. Management should prioritize issues and suggestions before solutions are drafted. Reports should go directly to corporate leadership teams for final decisions about improving value for the stakeholders.

This leaves no gray areas for interpretation on how the organization will reach goals and the bottom line. Once the standards are set for top management to lower level employees, then, incentive programs should require balance scorecards for overall satisfaction. This will insure rewards are not received by anyone succeed as a team or fail as a team. I would suggest decentralized steps to insure that the best employees are hired and retained adding value to stakeholders. Corporate actions can be performed to redirect toward a stakeholder balance recovery and add value to lower level employees.

Once that is complete the organization needs to take the following steps: •Survey the employees and analyze the feedback •Management needs to be visible to the employees (walk the floor like in the example Lincoln Electric management) •Analyze jobs and identify sources of conflict •Hold regular staff meetings •Monthly and annual training of employees and new hires •Alternative reward system •Stress on competency and efficiency over bottom line profit from top management to lower level employees •Formal process for reporting ethics violations

These are strategic ways to create value for the organizations’ stakeholders. As Nelson and Trevino (2004) stated: Ethics is an integral part of the organization’s overall culture. Therefore, designing an ethical organization means systematically analyzing all aspects of the organization’s ethical culture and aligning them to support ethical behavior and discourage unethical behavior. This kind of analysis and alignment requires a substantial and sustained effort over a long period of time and the full involvement of senior executives (p. 225 ¶ 2). . Employee evaluation system

Nobody likes performance reviews. Subordinates are terrified they’ll hear nothing but criticism. Managers, for their part, think their direct reports will respond to even the mildest criticism with employee behavior such as stonewalling, anger, or tears. As a result, everyone keeps quiet and says as little as possible. That’s unfortunate, because most people need help figuring out how they can improve their performance and advance their careers. There are many possible reasons for the wage discrepancy, including experience, length of time in the job market, geographic area and job performance.

Sex discrimination is also a potential reason, and a primary cause of the comparable worth issues in the workplace. To address what we consider to be legitimate concerns about the different wage determination structures; fairness, transparency and balance evaluations we must understand where the value is located in the organization basic framework. The stakeholders’ role is a difficult task in this problem because the everyday routine process of management are not questioned and evaluated as a top priority.

Assumptions are made by stakeholders and top management that the organization has dedicated employees at every level. Organizations’ executives and stakeholders would be best served to re-evaluate their company’s ethical culture and take the necessary action to fortify the basic ethical principle standards to protect the lower level employee. According to Trevino and Nelson (2004), “Roles are strong forces for guiding behavior, and workers are assigned roles that can powerfully influence their behavior in ethical dilemma situations.

Roles can reduce a person’s sense of his or her individuality by focusing attention on the role and the expectations that accompany it” (p. 175, ¶4). What happens when the person’s behavior in the job role requires him or her to perform unethical actions? Most people accept a job with knowledge of the expectations and demands the job requires. Sometimes this means putting aside personal values to perform the desired tasks. Roles can either support ethical behavior or lead to unethical behavior.

Managers should ask themselves if what they are asking the employee to do is ethical or unethical behavior (Trevino & Nelson, 2004). Laying the Groundwork What if organizations could expand their market share by using corporate social responsibility to improve lower level employees’ value? There are many motivational avenues. One way is to flatten the architectural structure so that workers are treated like owners. Management shall clarify the corporate code of conduct to assist in the lower level employees’ behavior.

From a report “Taking Care of Bottom –Rung Employees is good Business” by Geri Stengel, President of Ventureneer, A new study shows the importance and benefits of treating lower level employees with value and how to retain good employees. Here are his findings: “The benefits that proved useful to both employer and employees fell into five categories, some of which are more suitable to large corporations and some of which can be implemented by even the smallest business. 1. Support employee health – Sick employees can’t come in to work; if they do, they are less efficient and make others sick.

Absenteeism costs money. 2. Train and provide career opportunities – When companies offered training and promoted from within, they experienced lower turnover, greater efficiency, and easier recruitment. The employees who were promoted tended to be better managers because they knew what the jobs below them required. Support for such things as learning English as a second language led to greater efficiency as workers communicated better. Everyone works harder when advancement is possible. 3. Offer incentives – Incentives may be higher pay, profit-sharing or more autonomy in their work.

A small, socially responsible baking company (they donate to nonprofits and are environmentally conscious) instituted a stock-option program. In one year, the research found, sales increased by 74 percent and stock options increased in value by 40 percent. 4. Engage line workers and act on their recommendations – Offer rewards for spotting errors or good suggestions. Employee suggestions can save far more than the award program costs. The lower-level worker sees things, important things that never come to the attention of the executive office. 5.

Ensure that companies and communities grow together – A community with good schools can provide better workers: Support schools. A reputation for paying fair wages may minimize negative community reaction to new stores or factories. ” Conclusion: If you do not provide for your lower level employees in a stakeholders framework be ready for a host of negative recognition. There must be a link between top executives’ incentatives with corporate profitability. The management social responsibility must be accountable and engage their employees in every aspect of the organization.

The organization needs to review the current ethical system to maintain sustainability and stakeholders, value. Fairness and transparency protect the lower level employees in employment policies, practices and government policies. The need for a flatter organization will assist in providing the need for achievement, recognition and a job that is continuously challenging. Organizations must re-evaluate their corporate code of conduct periodically and reinforce the company code of ethics. Examining the details of how the workplace works for lower level employees takes innovations and strategic planning.

Top management can save money while protecting the lowest-paid employees. Organizations are no longer built by traditional framework but by the people within the company. Leaders trust and know their employees’ value to the company. A company’s human capital is its most value asset because competitors cannot copy the unique abilities, knowledge and skills. Empowering the lower level employees brings teamwork and increases value. Treat them as owners. These are workable ideas that could be done to avoid unethical treatment in harsh situations in the future.

References: Beth Israel Agrees to go without to Save Jobs (2009,March 12). http://www. boston. com/news/local/massachusetts/articles/2009/03/12/a_head_with_a_heart/ Jennings, M. M. (2008, March 3). Business ethics: Case studies and selected readings (6th Ed. ). South-Western Publications. p. 505 Nelson, K. , ; Trevino, L. (2004). Managing business ethics: Straight talk about how to do it right (3rd ed. ). New York: Wiley APPENDANCES: GRAPHS 1. Business Model: hierarchy view /e 2. Basic two – tier stakeholder map


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