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Journal of Human Values

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Ethical Issues in Change Management: An Empirical Study


A. Uday Bhaskar, Kanika T. Bhal and C.S. Venkata Ratnam
Journal of Human Values 2003; 9; 19
DOI: 10.1177/097168580300900103
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Ethical Issues in

Change Management:
An Empirical Study
A. UDAY BHASKAR
KANIKA T. BHAL
C.S. VENKATA RATNAM

This research

was conducted to study the ethical issues involved in managing change-related issues and
whether people in organizations perceive them to be ethical. Besides assessing peoples perceptions
of ethicality, it also explored the reasons people give for judging a situation as ethical or unethical. Research
was conducted using scenarios involving ethical dilemmas related to lay offs, skills obsolescence, misinformation and preference for younger over older employees. Results show that the respondents were divided
over three situations, namely, lay offs, misinformation and preference for younger employees. The issue of
skills obsolescence was considered unethical by most. The reasons given for judging a situation were different,
implying that the ethical and unethical were not treated as two ends of a continuum.

assess

Introduction

coping mechanisms, like cost cutting


through employee downsizing and organizational
restructuring. They also often replace old technology for achieving operational efficiency. The
complexity of organizational, regulatory and
technological changes confronting most organizations has made organizational change and
adaptation a central research issue in the last
decade of the twentieth century. Organizations
many

Organizations across the globe are facing phenomenal changes. These changes are exemplified
by the global integration of business, transnational flow of capital, fast-changing technology,
frenzied competition, and frequent ups and downs
in business cycles among other things. In response to those changes, organizations develop

A. Uday Bhaskar is Research Scholar, DMS, Indian Institute of Technology (IIT) Delhi, Hauz Khas, New Delhi 110 016.
Kanika T. Bhal is Associate Professor, DMS, IIT Delhi. E-mail: kanika@dms.iitd.ernet.in.
C.S. Venkata Ratnam is Professor, International Management Institute, B-10 Qutab Institutional Area, Tara Crescent,
New Delhi 110 016.

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20

need to be flexible and adaptive to the changes


in the environment not only to gain competitive
advantage, but also to survive in order to be able
to alter the basic processes in

conducting business

cope with the chan1


market
environment.
ging
Hence, the way an organization functions
needs a re-look, and the structures, systems and
the institutional mechanisms need to be adapted
according to the needs of the changed situation.
Managing change is relatively successful while
dealing with systems and process change, but
managing change at the people level is very crucial and often not given enough importance. A
major source of competitive advantage for modem organizations is their intellectual capital, and

and

develop adaptability to

organizations are expected to develop strategies


keeping people central to any change process,
thereby making it difficult for competitors to
replicate.3
Very often the change processes meant to
strengthen an organization actually weakens it
by leaving employees confused and resentful
when the management actually needs their commitment the most. Change creates a lot of chaos
and sensory load on the employees affected,
which in turn generates a resistance to the change
initiative.4 Organizations often exaggerate the
positive outcomes and distort negative ones in a
dogmatic pursuit of business ends, subscribing
to the notion that only profits matter and not
people. The recent advances in technology have
seen a progressive use of the technical devices
and increasing dependence on technology.
However, this has led to a significant decrease in
and erosion of the human component in all trans-

actions.5 Organizations need to be concerned


about the feelings of people and they are to be
moderated. Organizations that have pursued
business goals vis-A-vis their people have been
demonstrated to be highly successful. By
coupling radical change with more organic

modifications, Jack Welch, former chairman of


GE, had carefully buttressed the organizations

stability, thereby making major changes more


feasible. As people have a value system, culture
and ethical disposition that contribute to the
effectiveness of organizations, the feeling of
being cared for by the organization enhances
commitment, and improves morale and motivation of employees. This leads to increased
efficiency.
Typically, a change process is initiated with
material forces like technology, the market and
developments in the economy. But when the
material aspect changes, there have to be concomitant non-material changes too for the process
to be effective. Every social entity has its own
customs, forms of approved conduct and morality, wherein certain actions and goals are valued
but others are not. It has comprehensive beliefs
and cultural values that provide legitimization for
particular objectives and ways of living. When
the material aspect of the organization changes,
it either challenges the current set of norms and
ethical beliefs or throws up newer challenges that
have not been relevant till then. Thus, change
situations require moral and ethical analysis to
implement the change in the social context.
Morality is related to the ethical beliefs that individuals have. The subject matter of ethics is morals or morality, which are individual or group
standards of right and wrong or good and bad.
Ethics involves an examination of these morals
used by individuals and groups, and their applicability in real-life situations. Hence, it is the individuals or the groups logic, norms or principles
used in decision making that is at the heart of
ethical behaviour.77
Ethics are the continuing reflection on the
moral significance of action by means of which
communities and individuals relate customs and
conduct to values and beliefs. Ethics can be defined as a set of principles prescribing a behaviour

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21

that can explain what is good and right or bad


and wrong; and may even outline moral duty and
obligations.8 Unethical conduct is not simply an
individual decision, but is also a reflection of
institutional culture, and the role of individual

values cannot be overemphasized. Group, organizational and cultural ethics together influence
the personal set of values that one adopts to define
ones own code of ethics, and this code of ethics
can exert a major influence on his/her behaviour
in the organization. 10 Increasingly, it is becoming
clear that excellence in managing and performance demands attention to corporate culture and
values, and that policy making requires ethical
insight and moral courage as well as technical
know-how and organizational skills.
Ethical theories mainly concern themselves
with identifying the bases for judging the ethical
content of an act. The earliest understanding of
ethical theories is divided into two fundamental
types, teleological and deontological.&dquo; According to the teleologists, the consequences of
an action or practice determine its moral worth.
The most widely studied teleological theory is
utilitarianism. According to utilitarianism, an
action or practice is right if it leads to the greatest
possible balance of good consequences or to the
least possible balance of bad consequences for
all the people involved. Deontologism emphasizes that the concept of duty is independent of
the concept of good, and the actions are not justified by their consequences. Besides good outcome there are other factors as well that determine
the rightness of the action. For example, the
fairness of distribution, a personal promise, or a
contractual relationship like parent-child, business affiliations and contracts, and friendship,
which are non-consequential but enrich the moral
life.
Managing change generates a lot of ethical
issues related to the approach to change, target
of change, the managers responsibility and

change. 12 Ethical issues arise


recognize the conflicting
goals and values they are pursuing, which are
incompatible with that of the members of the
organizations. The degree of openness surrounding the change process, prior information
about the change and the degree of participation
of the employees in the process. Some researchers
have given a lot of importance to communication
in managing change, and have suggested that
change is often perceived as a communication
problem and can be resolved by making people
understand the change clearly and the part they
play in its implementation. Communication is a
vital tool to reach people while explaining the
change and making people ready for the benefits
and costs of change, and ensuring their commitment to the change.3
Does the organization have a hidden agenda
for the planned change that guides the managerss
behaviour in selecting the change approach?
Whatever be the driving force for restructuringgrowth, maturity, decline, merger, acquisition,
alliances, changes in ownership, technology, products, processes, materials, customer preferences-the short-term implication for employees
is downsizing.4 A lay-off strategy comes in
handy because it reaffirms faith in the remaining
employees after the lay-off exercise since their
morale and motivation is crucial for the productivity of the organization,5 because employees
spinning dark fantasies about their workplace are
not productive employees. Anderson 2001 an-

manipulation

of

when managers fail to

nounced the results of a survey, conducted in con-

junction with Vault, Inc., showing the way


companies handle lay offs and its impact on
corporate brand as well as their future ability to
attract employees. Forty-nine per cent of those
surveyed felt that the lay off was done in a manner
inconsistent with the companys values. Consider
this: employees working for a technology company after returning from lunch found that they

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22

could not switch on their computers.6 A second


shift supervisor reports to work on new years
eve, having turned down three separate invitations to parties, to be told he is no longer needed.
Regrettably, events like these suggest companies
have not come that far from the practice that made
fire a verb used to describe a termination, placing the persons desk outside the workplace and
setting it afire. Technological changes too can
be classified as competence enhancing or com-

petence destroying. Competence-enhancing

adjustments, which build on the existing knowhow within the organization, tend to consolidate
industry leadership. Adoption of radically differ-

technologies or competence-destroying ones


gets coupled with major changes in distribution
of power and control, and might have ethical
ent

ramifications.&dquo;
So how do people make ethical change decisions ? To approach the inescapable fact of downsizing humanely and ethically, what kinds of
things do we need to take into account? What
strategies should we use? Who should do the
planning? What should be the timing of the action
and what factors should affect it? Who should
know what and when they should know it? How
should those leaving and those staying be
affected? What public face should be put on the
action? These questions dominate the thinking
of ethicists and practitioners alike. This paper
is a beginning into understanding peoples perceptions of ethicality in different change-related
situations and also the logic they give for their

perceived ethicality or unethicality.

Objectives
The research was conducted to study the ethical
issues involved in managing change-related
issues and assess whether the people in organizations perceive them to be ethical or unethical.
As mentioned earlier, it is not enough to assess

of ethicality; the research


the logic that people give.

peoples perceptions
also aims to

assess

Methodology
The focus of the study was to find out the perceived ethicality in managing change related to
technological and business cycles. The study was

conducted through a questionnaire survey of professionals working in public, private and multinational companies (constituting 38 respondents)
and the MBA students of IIT Delhi, some of
whom were also working executives (17 respondents). Thus, a total of 55 respondents constituted
the sample for the survey. The average age of
the respondents was 29.43 years and the average
experience was 9.1 years. Nineteen respondents
were from the private sector (Indian), nine from
MNCs, three from the government and eight from
the public sector. Sixteen respondents were students with no work experience. Those with work
experience belonged to different functional areas.

The Questionnaire
A structured questionnaire was used for the
survey. It contained four hypothetical situations/
scenarios pertaining to managing change in
organizations. Each scenario was followed by one

whether the respondents


considered it ethical or unethical. The second
question related to their reasons for the perception. Since it contains both open-ended and closed
questions, the respondents could site the logic
behind such perceived ethicality and unethicality.
The scenarios are briefly described in the fol-

question assessing

lowing paragraphs.
Scenario One:

Lay Offs

This is a situation where the organization uses


the intranet as a medium to communicate lay offs

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23

Results and Discussion

employees. The respondents have to consider whether the organizations action is ethical.
The respondents are required to tick the appropriate response as either unethical or ethical. And
they also have to give reasons to justify their
choice.
to its

The data gathered from the survey was subjected


to both and

Scenario Two: Skill Obsolescence


This is a situation where the management adopts
a new technology without giving formal training
to its employees and expects them to use this new
technology. It has even asked them to leave if
they are unable to do so. The respondents view
the action of the management and key in their
responses by ticking either right or wrong and
set out their rationale.

quantitative and qualitative analysis.


Quantitative analysis includes the chi-square test
and, qualitative includes content analysis of the
collected data on the reasons that the respondents
gave for deciding whether an activity was ethical
or unethical. It has been mentioned by psychologistsg that it is not only the act of choosing a
right or wrong answer that is important, what is
more important is the reasons behind the choice.
To test whether the respondents perceived a
situation as ethical or unethical chi-square tests
were conducted for all four sections. Subsequently, the reasons that the respondents gave for perceiving the situation as ethical or unethical were
tabulated and the content was analyzed to identify
the key themes.

Scenario Three: Disinformation


This situation is a classic case of organizational
restructuring, and these changes lead to anxieties
and fears among employees of job losses, changes
in employment conditions, etc. The organization
willingly exaggerates favourable information and
hides the negative ones. How do the respondents
perceive such selective filtering of information?
Respondents have to key in their responses as
ethical or unethical, and cite reasons for doing

Scenario One:

Lay offs

As mentioned earlier, this scenario was related


to the issue of lay offs. Table I indicates that
there is no significant difference between people
viewing this situation as ethical and unethical (as
25 respondents have said the action is ethical and
30 unethical). There is a clear dilemma in this
situation. Then we looked at the reasons cited
for perceived ethicality or unethicality separately.

so.

Table 1

Scenario Four. Preference for


Older Employees

Younger over

This situation is a classic case of mergers and


acquisitions, where cadre formation was carried
out, which actually placed older Indian employees in lower grades as per years of service. It was
explored whether this action of the management
was considered fair in the minds of the respondents and the reasons behind such consideration.

Chi-square Test for Scenario One

An equal number of respondents perceived the


situation to be ethical and unethical. When the

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24

issue

was

were

asked to

explored further and the respondents


give reasons for their perception
(sample responses are contained in Table 2), it
seemed that the two sets of responses evoked different reasons. Reasons for considering it ethical
included issues of supremacy of organizational
goals over those of the individual, business reasons and helping those who get left behind. On
the other hand those perceiving it as unethical
feel that giving out notices on the intranet and

respondents are apportioning the blame to


something external, like the managements
failure to train the workforce while upgrading
technology. Most of the respondents felt that it
was the responsibility of the management to
impart the skills to employees; also that skillenhancing technologies are more likely to yield
positive behavioural outcomes. Some respond-

the manner in which it is done is incorrect. Clearly, it seems that people do not object so much to

their perception that management action is


ethical is justified.

ents also believed that the management has a mala


fide intention to get rid of the unwanted lot and
un-

Table 2

Sample Reasons for Ethical and Unethical Responses for Scenario

the lay offs as to the process through which it is


done. It this case the means seem to be a problem.

One

Table 3

Chi-square Test for Scenario Two

Scenario Two: Skill Obsolescence


This scenario relates to the decision of the management for technology upgradation with no
corresponding training to the workforce to use
this new technology. Table 3 shows that 48 respondents out of a sample of 54 viewed the action
of the management as unethical. The difference
was assessed using chi-square, which was highly
significant. This indicates that the situation is
distinctly perceived as unethical.
The reasons the respondents gave for their
decisions are contained in Table 4. Here, the

Scenario Three: Misinformation


This is a situation where management selectively
filters information and only cascades favourable
information employees, thereby concealing the
harsh outcomes as a consequence of organizational

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25
Table 4

Sample Ethical and Unethical Responses to Scenario

restructuring. Table 5 shows


sample of 51 respondents felt

that 23 out of a
the action of the
management as ethical and the remaining 28 respondents saw it as unethical. The chi-square test
shows that there is no significant difference
between the two perceptions. Almost equal numbers perceive it as ethical or unethical. Clearly,
there is a dilemma and it may be interesting to
look at the logic that people gave for their decisions. It is interesting to note some of the sample
reasons that people give for their perception are
contained in Table 6. Those who perceive it as
fair give reasons like it may help the organization
in the longer run and in times of uncertainty.
Whereas those who perceive it as unfair feel that
the individuals right to information has been
flouted. Those who perceive it as ethical are
focused on the organization, whereas those who

Two

it as unethical are focused on the individual. Thus, though the individuals right is
flouted, the organization is expected to benefit.

perceive

Table 5

Chi-square Test for Scenario

Three

Scenario Four: Preference for


Younger Over Older Employees
This is a typical case of acquisition wherein after
acquisition cadre formation takes place. These
new cadres of expatriates put older employees in

Table 6

Sample Ethical and Unethical Responses to Scenario Three

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26

junior grades and they are demotivated.

Results
obtained showed that there was a divided opinion
as to whether the managements action was ethical. Twenty-two respondents perceived the managements action unfair out a sample of 50, and
28 felt that it was fair. The chi-square (Table 7)
results show that there is no significant difference,
which implies that it is a dilemma situation.

Citi-square

The

are

on

Conclusion
There were some interesting findings in the study.
Out of the four scenarios on which responses were
sought in terms of ethical or unethical perception,
there was a dilemma in three scenarios. In Scenario One, relating to lay offs, respondents stressed
more on the process rather than on the outcome.
They did not perceive the action of the management as unethical per se since the other extreme
is not ethical, and ethicality and unethicality do
not lie on a continuum. Scenario Two is perceived

Table 7
Test for Scenario Four

the respondents gave for their


contained in Table 8. Respondperceptions
ents who perceived this as fair seem to be more
inclined subscribe to the emerging concept of
employability rather than blaming the management for such an action. They also subscribed to
the notion of equity where rewards are distributed
according to the contributions made. Respondents
who perceived the situation as unfair seem to
have a degree of respect for age and seniority,
especially in Indian conditions wherein age and
experience are considered to be virtues. Clearly,
two different lines of logic of distributive justice
reasons

in operation. Those viewing it as fair focus


the capitalistic logic of equity, whereas those
perceiving it as unethical focus on traditional
socialistic logic, which is a combination of equity
and need.
are

to be unethical as the

majority of the respondents


perceived that the management had a hidden
agenda to prune unwanted people. Even a shortterm focus of the

management may stimulate

organizational members to think like that. In


Scenario Three, interestingly, the focus was on
the organizational level by those respondents who
perceived it as ethical. Those perceiving it is as
unethical focused more on the individual. Mere
change in the focus of the respondent either at
the individual or the organizational level does
not necessarily mean that the organization is ethical or unethical in its conduct. Scenario Four is

Table 8

Sample Ethical and Unethical Responses to Scenario Four

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27

again a case of a dilemma, reflecting a combination of the capitalistic logic of equity and the
traditional socialistic logic combining both equity
and need.
Since ethicality and
two extremes

on a

unethicality

are

not the

continuum, therefore, organ-

izations have to focus on some fundamental


issues for not being unethical, but this would not
necessarily mean that the organization is considered ethical. To be considered ethical it is expected to take care of higher order issues. Great

pains are to be taken by successful managers to

that employees are fully aware of the presthat necessitate decisions. The explanation
of the reasons behind a closure is an important
element in the management of meaning. A decision that is an outcome of acceptable criteria is
itself acceptable. With the current concern for
incorporating ethics in business, it is important
that businesses incorporate it as an important
dimension in decision making as it is likely to
influence not only the people working for the
organization but also customers and stockholders
in the long run.

ensure
sures

NOTES AND REFERENCES

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Kotter, Leading Change: Why transformation efforts fail, Harvard Business Review, 2000.
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Advantage through People,

MIT Sloan

Management

Review, 2002, 43(2).


4. E.

Abrahamson, Change without Pain, Harvard Busi-

ness

Review, 2000.

5. S.K.

Chakraborty, Rising Technology and Falling


Journal of Human Values, 1997, 3(1).
Ethics,
6. Anderson Study, 2001. Available at http://www.
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7. K.T. Bhal, Ethical Decision Making and the Use of
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8. V.E. Handerson, The Ethical Side of Enterprise, MIT
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9. M.K. Mc Cuddy, K.E. Reickardt and D.L. Schroeder,
Ethical Pressures: Fact or Fiction? Management

Accounting, 1983, 57-61.


Organizational Behaviour: People and Process Management (Illinois: Richard D. Irwin, 1984).
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10. Dunham,
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Hellriegel, J.W. Slocum (Jr) and R.W. Woodman,


Organizational Behavior (Cincinnati, OH: SouthWestern College Publishing, 2001).

12. D.

13. This discussion is taken from Beckhard and Pritchard,


Communication in the Context of Change, Harvard
Business Review, 1992; and Jick, Ethics and Culture,
Journal of Business Ethics, 1993, 59-67.
14. C.S. Venkata Ratnam, Globalization and Labour
Management Relations (New Delhi: Response Books,

2002).
15. S. Robbins, How to Communicate Layoffs, Harvard
Management Communication Letter, Article, 2001.
16. T. Nashville, Downsizing with Dignity, EBSCO Host:
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17. For detailed issues of technology and social change,
see S.R. Barley, Technology as an Occasion for Structuring : Evidence from Observations of CT Scanners and
Social Order of Radiology Department, Administrative
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of managerial issues; see A.D. Chandler (Jr), The Visible
Hand: The Managerial Revolution in American
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18. L. Kohlberg, Moral Stages and Moralization: The
Cognitive-Developmental Approach, in Thomas
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Theory, Research and Social Issues (New York: Holt,
Rinehart and Winston, 1976), 31-53.

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