UNIT 2

FROM MECHANICS TO SOCIAL RESPONSIBILITY

There is usually something to be gained by taking a look at the past. We can

often determine more correctly the direction in which we are headed if we view it from
the perspective of past of past events, and we can often manage to avoid actions that have
been proved, by past experience, to be mistaken. For the student of management the past
helps to give a clearer conception of the present status of the subject. For these reasons, in
this chapter we shall present a brief summary of selected significant aspects of the history
of personnel management.

MECHANICAL APPROACH TOWARD PERSONNEL

Industrial management in this country has done an excellent job in the mechanical
and electronic implementation of production. For over a century managers have applied
the principles of interchangeable parts, transfer of skill from human to machine, and
operational specialization to machinery, layout, and the general plant. This has been
accomplished with a high degree of success. It is not surprising, therefore, that the same
basic mechanical approach should be applied to labor. If machines can be made more
productive by extreme specialization, so can people. Jobs can be created requiring such
little ability that bodies, properly numbered, can be interchanged readily. Just as we try
to purchase machinery and plant with the lowest direct outlay, so we can hire labor as
cheaply as possible and junk them for better when necessary, so we can use and discard
human labor.
This basics approach, which we have labeled “mechanical,” has also been called
the “commodity approach” or the “factor-of-production concept.” These titles are
descriptive of the attitude that assumes that labor must be classified with capital and land
as a factor of production to be procured as cheaply as possible and utilized to the fullest.
The fact that a human being is involved in this factor is of little significance. In effect,
we are adopting a closed-system stance or strategy in our approach to the to the
management of personnel. We assume that personnel are controllable, predictable, and
interchangeable. The firm is sheltered from outside forces such as government or labor
unions that might attempt to “interfere” with the mechanistic approach to personnel.
Related to this attitude was the “scientific management” movement, which also adopted a
rationalistic, deterministic, and closed-system approach to the management of the
enterprise. Its recognized founder, Frederick W. Taylor, introduced such techniques as
motion study, time study, incentive wages, and specialized foremanship in the pursuit of
technical efficiency. As he stated, “Each man must learn how to give up his own
particular way of doing things, adjust his methods to the man new standards, and grow
accustomed to receiving and obeying directions covering details, large and small, which
in the past have been left to his individual judgment.” Man is viewed as an excessively
simplistic human system who only strives to avoid pain and obtain money, the
“economic-man” model.
Since labor is human, with multiple complex motives, the mechanic approach
usually results in the creation of various management problems-personnel problems.
Many of these problems are quite old and have their beginning with the original adoption
of this approach toward labor. Without implying that these are the only such problems,
we believe that this presentation should assist in providing some perspective for the
personnel function as performed in the present. The selected problems are (1)
technological unemployment, (2) security, (3) labor organization, and (4) pride in work.
Some indication will be given of how the problems arose, what management did about
them using the mechanical approach, and what the consequences were of such proposed
solutions.

Technological Unemployment
Loss of jobs through the development of new machines or new techniques of
work is termed “technological unemployment.” Labor is replaced either by machines or
by management innovations that result in more work being done by fewer people. The
mechanical approach of management toward technical problems pays off in the
immediate sense. In that same sense the losses to labor are obvious. Reactions of labor
in the past were not greatly different from those of today to similar events-fear and
resistance. Yesterday there were riots and attempts to sabotage the new machinery.
Today there are more subtle types of resistance, such as slowdowns and union-negotiated
introduction of laborsaving devices.
What are some of the proposed solutions to the personnel problem of minimizing
that adverse effects of technological changes? First, it should be pointed out that for over
a century industrial managers in general did not particularly worry about the problem and
that they mechanically laid off the employee. This was the free-enterprise system, in
which employees looked after themselves. But growing public dissatisfaction with the
manner in which this problem was being ignored stimulated the proposal of some
individual solutions. A few isolated companies, such as Procter and Gamble, advance the
philosophy of sharing part of the company’s profits with employees in order (1) to allow
workers to benefit from the company’s improved position and (2) to provide some
additional funds to help tide the worker over in case of unemployment. This solution was
not widely accepted, to say the least, though the Procter and
Gamble plan, started in 1886, exists to this day. A few companies, such as Nunn-Bush
Shoe Company, Hormel Company, and again Procter and Gamble, proposed the idea of
guaranteeing an annual wage for all eligible employees. Though they might work a short
week or be laid off entirely, covered employees would continue to receive pay for a
limited time, a year being, in most plans, the maximum. These employer-initiated
guaranteed annual wage plans did not spread. In 1935 the federal government in the
Social Security Act imposed a responsibility on private industry for partially financing
the out-of-work employee through unemployment compensation. Funds collected from
taxing employers are available to eligible persons seeking work. In the 1950s we had the
union version of the able to eligible persons seeking work. In the 1950s we hade the
union version of the guaranteed annual wage as an imposed solution to this problem. In
most instance, this means an employer-financed supplementation of the unemployment
compensation, which would raise the total amount paid to the employee to over 50
percent of the base wage. It should be noted that these plans cover all types of job losses
other than discharge for cause and organized strikes. Perhaps the two most common
reasons for job loss are technological change and layoff due to the reduction in the need
for output.
 All the above-cited plans-profit sharing, unemployment compensation, and
guaranteed annual wages-will be discussed in this text. Out purpose at this point is to
demonstrated (1) that we are dealing with a very old personnel problem. (2) that the
problem was long ignored by private industry, (3) that the problem will not take care of
itself through relying on the usual long-run economic adjustment, and (4) that solutions
imposed form without, by government and labor unions, will fill the void left by private
industry. Few thinking people oppose these technological improvements, but many are
concerned with the manner and timing of their introduction in order to minimize the
short-run effects on employment.

Security
It is evident that decreased economic security is also a current problem that results
partially from other problems, such as technological unemployment, and in turn creates
still other problems, which lead to the creation of labor organizations. The
mechanization of production creates the factory system. With the forming of factories,
labor must move from a predominantly agricultural environment to the locale of a city.
The tool or machine assumes greater importance, and the worker is often relegated to the
position of machine tender. The uncertainty of steady employment, coupled with the
problem of coming old age, works to produce a greater feeling of economic insecurity.
Granting the increase in the insecurity of employees, we might ask why
management should be concerned, in a free competitive society. Such unconcern was at
one time the attitude of industry in general, a philosophy that was consistent with the
mechanical approach. This reaction to the problem proved to be wrong, and outside
forces stepped in to impose certain solutions. In the first place, the workers insecurity
led to the formation of labor unions in order that they might acquire a measure of control
over some of the factors bearing on economic security. Second , the government again
entered the picture with legislation requiring the recognition of labor unions to protect
employee interests, requiring that retirement income be provided through Social Security,
and protecting employee ownership rights in private pension plans.
This is not to say that many private employers are not today voluntarily installing
various programs to promote employee security. But it is apparent that both unions and
government feel that private enterprise by itself will not do enough. Increased employee
security can be rationalized on the basis that it contributes to increased employee
productivity.

Labor Organization
Management’s indifference to the requirements of its personnel contributed
heavily to the creation of labor unions. When unions were actually formed, various
techniques were utilized to destroy them. Labor organizations grew at a very slow pace
through the nineteenth century because of such factors as the following:

1. Periodic economic depressions, during which union members broke ranks to

obtain any kind of employment.
2. Immigration, which supplied workers willing to take less than union members.
3. The frontier, which always beckoned when things got rough with an Eastern
employer.
 4. The public attitude, which was generally opposed to labor organization,
considering it antagonistic to private property rights and freedom of the
individual.
5. The attitude of all branches of government, which was a reflection of the
public attitude cited above.
6. The expenditure of union energy and funds for “uplift” unionism concerned
with political reform, rather than with the “business” unionism of dealing with
employers for better wages, hours, etc.
7. The aggressive efforts of most management in actively combating the efforts
toward unionization.
These factors constituted a decided brake on the labor movement. As each was
modified or eliminated, the membership of unions tended to grow.
The first attempt at national organization that met with any degree of success was
the ill-fated knights of labor, a union that accumulated over 700,000 members in the
1880s. This organization had in it several defects that led to its early demise. Among
them were (1) a highly centralized form of control under one man. (2) a heterogeneous
membership, which included wage earners of ail types and even some small employers,
and (3) a great interest in “uplift” unionism. The American Federation of Labor, formed
in 1886, profited by these mistakes and established a labor organization which lasts to
this day. The federation based its form of unionism on the organization of homogeneous
groups of employees along craft lines. The fact that it was formed as a federation is an
indication of a decentralization of authority. In addition, the basic policy of the AFL was
to refrain from direct participation in politics, a policy which was followed until the
1940s, when the passage of the Taft-Hartley Act jarred the organization away from this
philosophy.
Almost from its inception, the American Federation of Labor dominated the labor
movement. During these years, industrial management was well aware of the efforts
being made to halt the spread of unionism. A large number of these attempts involved
force and violence. One interesting example should demonstrate the attitudes of union
and management and the types of activity utilized by both sides in these contents.
The steel industry in 1892 had a union of skilled workers, the Amalgamated
Association of Iron, Steel and Tin Workers. It was a fairly strong union. The
Homestead, Pennsylvania, plant of the Carnegie Steel Company had been struck by this
union even though relations between company and union had been fairly friendly prior to
this time. Andrew Carnegie, who had stated that he was wholly in favor of unions, was
away in Europe and had left the factory in the hands of the plant manager, Henry Frick.
A wage cut brought on the strike, whereupon Frick shut down the entire plant and
prepared to protect it. The workers seized the mill property. Frick rose to the occasion
by hiring some 300 Pinkerton detectives, whom he armed with Winchester rifles and
placed on two barges, which were towed up the Monongahela River near the plant
property. For 1 full day a battle that would have done credit to almost any small war
raged on the banks of the Monongahela. The strikers tried to sink the barges with
cannons, and when this failed, they poured oil on the water and set in afire. The
detectives, with three dead and several wounded, surrendered and were marched out of
town. Frick then appealed to the Governor of Pennsylvania for aid, and 1 week later the
state militia took over the town. With this protection the company reopened the pant and
started to bring in outside personnel. It was estimated that only 800 out of nearly 4,000
strikers got their jobs back. So thoroughly was the job done that it was not until the
1930s that another effective union was established in steel.
By 1916 there were approximately 3 million members of labor union. During the
next 4-year period, the number was almost doubled, because of wartime prosperity and
favorable government attitudes. As usual, the movement suffered during the ensuing
short depression and managed to stabilize again at about 3 million during the 1920s.
With some further losses during the Depression of the 1930s, the membership stood at
less than 3 million in 1933. Twelve years later, there were approximately 15 million
union members. The most powerful factors contributing toward this increase were the
favorable public attitudes, wartime prosperity, and passage in 1935 of the Wagner Act,
the Magna Charta of labor. Collective bargaining was pronounced our national policy,
and the right to organize was protected. Management’s authority over another function
was reduced and rigorously regulated.
In 1980, union membership stood at 22.4 million, a figure which is comprised of
approximately 58 percent blue-collar and 42 percent white-collar employees. Most of the
current membership are in unions affiliated with the American Federation of Labor-
Congressman of Industrial Organizations (AFL-CIO); the rest are in nonaffiliated unions
such as the Teamsters, United Auto Workers, United Mine Workers, and various local
independents. Approximately 21 percent of the total labor force is organized into unions.
This represents a decline from a high a 27.1 percent reached in 1953. It is evident,
however, that despite this decline, turning back is impossible; the labor union is here to
stay as a definite factor in our economy. We do not suggest that since unions have come
this far, management should accept them completely. Such acceptance is neither
desirable nor legal. But it should be evident that this problem of labor organization is one
of the foremost of our time and requires more constructive thinking than has been evident
in the past.

Decreased Pride in Work

Tightly designed organization structures and precisely planned work systems have
played a role in lessening the freedom of the individual organization member. On the
operative level, the increasing transfer of skills to machines has often left the worker with
either a task of machine tending or no task at all. For managers, introduction of
computers and data processing systems has served to regulate more closely their
activities. Chris Argyris has suggested that industrial management in general has tended
to under-estimated the intelligence, resourcefulness, goodwill, and creativity of the
American worker. He contends that jobs have been designed that call for docility,
passivity, submissiveness, and short-term perspectives. In his terms, the net result is
psychological failure. We should, therefore, be concerned with a resulting absence of
individual pride in accomplishment engendered by traditional structures of organization
and operation.
As we consider this problem, we should first ask if pride in work is necessary. So
long as the employee grinds the work out day after day, regulated by a system of
production and managerial controls, why worry? Yet, when a problem is ignored, certain
solutions are contributed by others which may not be the most desirable. This work
situations, as we have briefly described it, is essentially the plight of the mass production
worker. The CIO split from the AFL in 1936 for the specific purpose of representing this
group of employees. The practice of ignoring the many requirement of the mass
production worker has led to more unionization. The CIO, of course, later rejoined the
AFL to form the AFL-CIO in 1956.
There are no laws or union demands that require management to create employee
pride in work. The management with a mechanical approach toward labor has to interest;
consequently, it can see no need and therefore no possible profit in considering the
employee’s psychology. Further analysis of this problem has led many to change their
minds and, thus, their approach to labor. If stimulated, employees can often utilize their
talents to make greater contributions than the minimum required. There is a large,
relatively untapped reservoir of ability, loyalty and interest.
Various other problems of personnel could be classified as a part of this series.
But we feel that the essential point has been made-that management has played a large
part in creating many of our modern personnel problems and that these problems have
been too long ignored. Much of the progress made concerning these and similar
problems has taken place within the last 20 years. Personnel management is a youthful,
skilled profession dealing with some old and ingrained problems.

PATERNALISM
Although not all firms and managers held with the mechanical approach toward
labor, it was fairly predominant in our economy up until the 1920s. Then suddenly there
was a drastic reversal of form by a substantial segment of industrial managers. Some
believe that a different approach was created by a fear of labor union growth, for during
World War 1 the union membership almost doubled in number. Employees had
demonstrated that they could escape from the managerially engineered closed system. As
employers observed the breakdown of total control, they attempted to reclose the system
by demonstrating to undertake “voluntarily” a number of humanistic activities that they,
the “fathers” felt that the employees needed.
Paternalism is the concept that management must assume a fatherly and protective
attitude toward employees. The cold, impersonal attitude of the commodity concept is
now replaced by a personal, and sometimes superpersonal, attitude of paternalism. The
1920s were the period during which personnel management became known as the glamor
field of management. Here is where the need arose for the “backslapper,” the
“personality boy,” and the person whose sole qualification was “liking people.” During
this time very elaborate personnel programs were developed, emphasizing such activities
as company stores, company homes, recreational facilities, and the like. If the objective
of this approach was to contain unions, it succeeded for a time, since the labor movement
actually decreased in membership during this period. If the objective was that of buying
employee loyalty and gratitude. It failed, since the employees considered themselves
adults rather than children.
We do not believe that merely supplying many benefits, such as housing,
recreation, and pensions, makes a management paternalistic. Of firms that offer identical
benefits, one might be properly labeled paternalistic and the other might not. To be
paternalistic, two characteristics are necessary. First, the profit motive should not be
prominent in management’s decision to provide such employee services. They should be
offered because the management has decided that the employee needs them, just as a
parent decides what is good for the children. This is not to say that the services may not
prove to be profitable, but profit is not the prime reason for their installation. Second, the
decision concerning what services to provide and how to provide them belongs solely to
management. The father makes the decision that he feels is best for the child. If a firm
offers a program of employee services because (1) it feels that such treatment of labor is a
sensible and profitable undertaking that will advance the entire organization, or (2) the
employees request and participate in the establishment of such programs, or (3) the labor
union demands such programs, then that firm cannot properly be labeled paternalistic.
It is interesting to note that the paternalistic era coincided with the initiation of a
second school of management thought. Just as the first, scientific management,
developed in conjunction with the mechanical approach, the second school grew out of a
series of lengthy experiments at the Hawthorne plant of the Western Electric Company
beginning in 1924. This school, variously titled “human relations” and “behavioral,”
encouraged the adoption of a new model of the person to simplistic social person.
Developing employee morale was viewed as a certain means to higher productivity. The
interests of humans and organizations were deemed to be substantially identical. The
impact of this school of thought, populated primarily by psychologists and sociologists,
was felt primarily in the 1940s and 1950s. Just as the scientific management philosophy
exacerbated certain human problems within the organizations, the softer, human relations
programs did not meet the requirements of organizational effectiveness in the
exacerbated certain human problems with the organization effectiveness in the experience
of many managers. The problem is, instead a highly complex one.

SOCIAL SYSTEM APPROACH

Paternalism died largely during the Depression of the 1930s, though certain
managements still claim to utilize this basic approach even today. Having learned
through experience of the values and dysfunctions of both prior approaches, managers
and researchers began to realize that the management of personnel is no simple process.
The pendulum has moved from its extreme simplistic positions to a more complex
location involving analysis of multiple and often conflicting forces. We shall term this
third view of personnel management a “social system” approach. In brief, the
organization, or firm, is viewed as a complex central system operating within a complex
environment which can be termed an “outer extended system.” Managers recognize that
the central system cannot be closed and directed in a mechanic fashion. Options are
available to central system members, both within the boundaries of the firm and on the
outside with the aid of such external units as labor unions, government, and various
public group.
There are many and varied definitions of the term system. The definition by
Beckett- “A system is a collection of interacting system”-is perhaps most accurate,
though confusing.” A system is a conglomerate of interrelated parts, each of which in
turn can be viewed as a subsystem. Our central system, the firm, is a part of a larger
system generally known as the “economic system.” The economic system is a part of the
political system of our nation. Our country is a part of the political system of the world.
The world is a subsystem of the solar system, which in turn is a subsystem of a largely
uncharted space system. Thus, when we state that a system is a collection of interacting
systems, we are emphasizing the inevitable interconnectedness and relationships that
management must consider if it is to develop viable programs of personnel management.
The major components of any one system are (1) inputs from the outer
environments; (2) a processor component, consisting of people, functions, and physical
factors, which transforms these inputs into another set of utilities (e.g., steel into
automobiles, ill patients into healthy people, uninformed students into knowledgeable
citizens); (3) a set of outputs desired by members of the outer environment; and (4) a
nerve system, usually designated “management,” which regulates the inputs, processor,
and outputs. One of the significant subsystems of the processor is termed “personnel.”
Though located within the boundaries, modern managers recognize that they do not have
total control over the talents and attitudes of their employees, thereby requiring an open-
systems strategy of adaptation, negotiation, persuasion, and compromise. Each
individual employee is a complex human system. Employees tend to develop
friendships, cliques, and study of individual needs, as well as of informal group
processes, can lead to personnel programs that help to align central system objective
(outputs) with the goals of the personnel component. It should also be noted that the
subsystem of “management” has been divided, as suggested in the preceding unit, into
the functions of planning, organizing, directing, and controlling. After plans have been
developed, the processor is designed and populated through the organizing function.
Direction provides the initiating impulses for the processor to begin operation, while
control works from the feedback of information concerning the nature and level of
ensuing operations. Thus, the management component is also a subsystem.
Consideration of the members of the outer extended system provides the basis for
a third school of management thought. An exclusively scientific or exclusively
behavioral approach to managing gives away to one that has been termed “contingency”
or “situational” management. If the outer system members are powerful, the central
system will have to adapt and accommodate; if less powerful, the central system can try
to close and operate on the basis of rational efficiency. And, as indicated above, if
internal personnel have important powers of knowledge and cooperation, management
must adapt and accommodate; if they possess less power because of substitutability,
management may move closer to scientific processes. There is no one way to manage
that is applicable to all situation. Thus contingency managers recognize that other system
members, internal and external, possess powers that are important to the well-being of the
enterprise.

TOWARD THE SOCIAL ROLE OF THE BUSINESS FIRM

In recent decades, there has been a growing concern about a redefinition of the
proper role of the business firm within our society. That this is a problem is
demonstrated by various surveys of public opinion concerning the design and operation
of the business system. Over one-half of the public believe that the bad features of our
business system either equal or outweigh the good. The public estimate of the level of
profits per dollar of sales is 28 cents; the actual amount is less than 5 cents. In addition,
the general public has a low opinion of the caliber of business ethics. Though 70 percent
contend that business has an obligation to help society even if it means less profit, less
than half would accept that executives have a social conscience.
 Inasmuch as the business system is a subsystem or organized society, the modern
business executives must be concerned with societal expectations. Executive decisions
concerning the direction and operation of business organizations have social
consequences that can no longer be ignored. We have become increasingly concerned
with the preservation and enhancement of (1) our physical resources on this planet, and
(2) our human resources. Concerning the first, it has become only too apparent that our
physical resources of air, land, and water are being seriously threatened by uncontrolled
pursuit of economic goals. Second, with the labor union movement of the 1930s and
1940s and the civil rights movement of the 1950s and 1960s, society has demonstrated its
marked interest in how business utilizes its citizens are employees. The personnel
manager has an important and inescapable responsibility in helping the firm’s
management to recognize, define, and fulfill enlarged concept of its social role.

Bases of Social Responsibility

If one grants that the business firm is a subsystem of the economy, which in turn
is a subsystem of the total society, it still remains to determine the nature and extent of
that firm’s social obligation. Normative statements of what business ought to do with
regard to social responsibility will not ensure that action will be undertaken. There are a
number of rationales or theories upon which social action can be based. Among these
are:
1. Long-run profit maximization and social responsibility are substantially similar
concepts.
2. The changing ethics of business managers are in concordance with the changing
norms of society.
3. Firms will prepare a list of goals in order of priority with noneconomic social
values being includes.
4. firms will be socially responsible to the degree they perceive power threats in the
environment.
With respect to the coincidence of a long-term view of profit and social
responsibility, it has been stated. “The longer the range a realistic business projection is,
the more likely it is to find a sound ethical footing.” When Henry Ford II explained
Ford’s extensive hard-core unemployed hiring and training program to stockholders, it
was justified on the basis of preventing future riots to Detroit. When insurance
companies undertook extensive investments in slum reconstruction, they explained to
their stockholders that they were opening up future markets for life insurance. When
money is contributed to private educational institutions, stockholders are told that the
firm’s management is helping to develop professional employees for the future. All of
these implications are logical, but exclusive benefit to the spending firm is difficult to
prove.
There is some evidence that firms that are more socially active tend to be more
profitable as well. Of the companies listed as Fortune’s “Top 500” in 1973, 80 were
selected as being significantly higher net income as measured as a percentage of sales,
percentage of stockholder equity, and earnings per share. A second study suggests that
excessive activity in the social area can be almost as detrimental to profits as too little
activity. Those firms with a medium level of social activity provided a return on
investment of 16.1 percent. This compared with a return of 10.2 percent for those with
little activity and 12.3 percent for those with a great many social programs. A highly
plausible basis for the coincidence of profits and social activity is that the factor
underlying both is superior, sophisticated, and intelligent management. Those who can
solve technical and economic problems can also work out an effective relationship with
members of the outer extended system.
The sociological view of a movement toward greater business social
responsibility rests upon the impact of changing cultural values upon the firm’s
managers. It is contended that as concern for physical and human resources spreads
throughout society, individual managers’ conscience and codes of ethics will lead them to
make more socially responsible decisions. A more usable basis for injecting a greater
measure of social responsibility into decision making is the contention that managers may
preach “profit maximizing” but they practice “profit satisficing”. Rather than exacting
the last possible dollar profit out of each decision, one strives for a reasonable level that
will satisfy significant members of the outer environment, such as stockholders, financial
institutions, and so on. The manager then utilizes remaining resources in pursuing social
values of lesser priority such as hiring the hard-core unemployed utilizing the physically
handicapped, or locating new plants in underdeveloped ghetto areas. Hired professional
managers are more likely to user a profit satisficing approach than are owner-managers.
The latter are more inclined to manage the firm using a more restricted number of goals.
The final basis is considered by many to be the only realistic approach to the
concept of social responsibility. The firm will be socially responsible to the degree to
which it perceives power threats from others in the system. There are significant and
powerful groups operating in the environment of the business firm. Labor unions and
governmental units are perhaps the most powerful. Consumer groups, led by such as
Urban League and the National Organization of Women, try to bring pressure upon those
in authority.
A problem of increasing concern in this country is the private company’s
responsibility to employees and communities when deciding to close down a plant. In
many countries of the world, severe financial penalties are imposed upon firms in the
form of substantial payments to employees for jobs lost. Plant closing legislation has
been introduced into the United States Congress. Though none has been passed as yet,
on bill would require a 1-year notice of a closing, give displaced workers the right to
transfer to a new company location at company expense, provide employee severance
pay equal to 85 percent of annual wages, and require companies to pay 100 percent of
one year’s tax loss to the community.
Managers will assess the power of each group and its potential threat to
organization activities. They will attempt to reduce these threatening forces by such
actions as (1) stockpiling products to reduce the effect of labor union strikes, (2) lobbying
government officials and securing business personnel appointments to governing
commissions, (3) advertising to influence customers, (4) appointing a few minority
members to the firm’s board of directors, (5) developing multiple sources of materials
supplies to reduce influence of particular vendors, (6) retaining earnings to reduce power
of financial institutions, and (7) seeking stockholder proxies in order to control board of
directed elections. To some, many of these actions designed to reduce central system
dependencies are antagonistic to a broader view of social utility. However, two points
can be made. First, the basic requirements of all social systems involved this movement
toward control and predictability this is a source of much efficiency and effectiveness.
Second, there is no way that they system can be entirely closed and made completely
rational; we can never eliminate all of the contingencies. Thus, powerful others will
always have impact on the decision processes of private managers. When managers go
too long without responding, they risk the possibility of new legislation, new institutions,
and perhaps even a new system.

Obligations of the Personnel Manager

Since society’s expectations regarding appropriate treatment of its citizens are
constantly changing, the personnel manager occupies a unique position in the firm. With
respect to defining and fulfilling this enlarged social role, here or his obligations are
primarily three in number: (1) ensuring that expectations concerning the quality of work
life are met, (2) ensuring that the organization is in compliance with appropriate laws and
regulations affecting employees, and (3) participating in the design and execution of
periodic social audits.
Beyond adequate compensation and a safe work environment, there is evidence of
a growing demand for challenging and interesting jobs, according respect for personal
privacy, permitting greater individualism in dress and life-style, and assistance in
planning lifelong careers. As indicated in the preceding unit, a type of “corporate
constitutionalism” is beginning to enter private enterprises when the executive’s power to
make unilateral decisions is restricted. The employee does not give up his or her societal
citizenship when entering the organization. There will be increasing expectations in
terms of “due process” in deciding upon layoffs and discharges, freedom of speech in
regard to revealing unsafe or illegal organizational activities, and the right to not reveal
personal information of no concern to the organization. It has been suggested that firms
should be measured in terms that will reveal the quality of work life, such as absenteeism,
turnover, alcoholism, drug addiction, and mental illness. If “acceptable levels” are
exceeded, firms should be fined or taxed just as they are when they excessively pollute
the air or water. Of course, measuring and determining what are acceptable levels would
be very difficult tasks. In addition it is not al all certain that the quality of work life is the
only possible cause for alcoholism, drug addiction, and mental illness.
Though some firms successfully ignore threats issuing from failures to improve
the quality of work life, they are much less able to avoid the uniform measures imposed
by governmental legislation. Each year, a greater obligation is placed upon the personnel
manager to ensure organizational compliance with a host of laws and governmental rules
concerning hiring, training, compensating, and utilization of various special groups in our
society. Personnel management is increasingly becoming a legalistic process as society
has become impatient with voluntary social action. And though a personnel manager
would prefer to acquire higher status through the initiation of sound voluntary programs,
in fact is that today’s elevated status of the field owes much to the intervention of
government.
Finally, the modern organization will display a concern for periodic auditing of
social activities, both voluntary and required. Because of the coverage of human
resources, the personnel manager has a significant role to play in its design and
execution. A social audit is defined as “a commitment to systematic assessment of and
reporting on some meaningful, definable domain of a company’s activities that have
social impact.” Its uses are to provide internal information to management which aids in
decision making and to provide external information to the public in response to
pressures upon the enterprise to be socially responsible.
Four possible types of audits are currently envisaged: (1) a simple inventory of
activities, (2) compilation of socially relevant expenditures, (3) specific program
management, and (4) determination of social impact. The inventory is generally the
place where one would start. It would consists of a simple listing of activities undertaken
by a firm over and above what is required for ordinary operation. For example, one firm
itemized the following social activities: (1) minority employment and training, (2)
support of minority enterprises, (3) pollution control, (4) corporate giving, (5)
involvement in selected community projects by firm executives, and (6) a hard-core
unemployed program.
A step forward in sophistication would be an attempt to itemize the costs incurred
in theses socially oriented activities. Such expenditures would be more impressive to
external publics but more depressive to internal managers without some indications of
offsetting benefits. One utility company determined that it had spent $30,000 in 1 year in
the human resources area, with an additional $90,000 being allocated to pollution control.
Further documentation was provided in such areas as: (1) emission levels of particulate
matter, sulfur oxides, and nitrogen oxides for coal, oil, and gas used, (2) temperatures of
water received and discharged from the plant, (3) workdays lost due to employee injuries
and illnesses, (4) number of minority and female employees hired and trained, and (5)
charitable contributions.
In the program management approach, each separate project is researched to
ascertain not only its expenditures but also its outputs, in terms of specific management
objectives. In the Bank of America, for example, the Small Business Administration
Minority Enterprise Program is evaluated in terms of additional costs incurred for this
type of loan, compared with a projected goal of new successful minority enterprises
established. The Student Loan Program would involved a comparison of the costs of the
lower rate of interest received wit a goal concerning numbers of young people financed in
college. This “Management by Objectives” approach permits managerial determination
of the degree of success without invading the issue of the impact of goal accomplishment
upon the welfare of society.
The ideal social audit would involve determination of the true benefits to society
of any socially oriented business activity. Obtaining date for this ultimate impact not
only is extremely difficult but involves decisions requiring value judgments. What is the
value of a hard core unemployed program to the community? Is it greater or less than the
value of a program to promote minority business enterprise? Program management
evades this issues by accepting a program as generally good on the basis of logic or
pressure, and then evaluating it against specific program objectives. This does not deal,
however, with the development of an overall, balanced, and integrated program that
could issue from an analysis of social impact. Given the embryonic stage of development
in which we find the social audit, management should be willing to settle for less than
this ultimate form.
SUMMARY

Both the attitudes toward personnel and the philosopher of managing them have
evolved through history.
The social system, approach to personnel is part and parcel of a larger system
approach to management. Research has demonstrated that is it often possible to develop
personnel programs that can simultaneously satisfy the needs of individuals, groups,
managers, and the total organization. In other instances, such perfect alignment is not
possible. Open system analysis and development of strategies characterized by
discussion, confrontation, negotiation, and compromise will be required to manage
conflicts that inevitably develop.
The task is further complicated by the forces that can be brought to bear
significant others in the outer environment. There forces have become more numerous
and powerful and have led to increasing recognition that the private business firm has a
social responsibility. Successful performance of the economic role is no longer sufficient
in and of itself.
Whether one believes that long-run profit maximization and social responsibility
are substantially similar concepts or that power analysis will ultimately force socially
desirable behavior, it is certain that modern managers will pay more attention to the
protection and enhancement of both physical and human resources. The personnel
manager has an obligation to do more than ensure that the company is in compliance with
the numerous laws detailing social minimums. Concern grows regarding improving the
quality of work life within the firm for all employees, whether a special protected group
or not. Corporate constitutionalism may soon require tolerance for dissent, participation
in decision making, judicial review for complaints, and freedom to pursue individual
lifestyles. These additional obligations in no way decrease responsibility for providing
the enterprise with a competent and capable work force making possible the effective
accomplishment of traditional economic goals.

BRIEF CASE ( Present your analysis using the Case Analysis Format)

One Monday morning, Dr. King happened to notice that the water in his
swimming pool was not circulating. Having had an unending amount of difficulty with
the pool pump, he had severed relation with Acne Pool Company almost a year ago. His
new company had immediately replaced the pump, and he had trouble-free service ever
since. On investigating the situation, he discovered that the switch by the motor had not
been turned investigating the situation, he discovered that the switch by the motor had not
been turned on. He flipped it on and immediately blew out all the fuses. Looking more
closely, he discovered that the motor was not his! Someone had taken the new motor and
replaced it with another. Reasoning that only a pool company would do such a thing, a
little detective work among the neighbors revealed that an Acme truck had been in his
driveway about 4 days ago. On calling Acme, the secretary, after some delay, admitted
that a mistake had been made. A worker had misread the address on the work order.
Inasmuch as the severing of relationship with Acme a year ago had not been amicable.
Dr. King told the secretary in no uncertain terms that the motor had better be returned
that very day.
On returning home that evening, it was immediately apparent that the motor had
not been replaced. Calling Acme the next morning, Dr. King demanded to speak to the
manager. He told the manager that if the “stolen property” was not returned that day, a
complaint would be filed with the police. The motor reinstalled that afternoon.
Two days later, Dr. King received a letter from Acme apologizing for the error,
but upbraiding him for his behavior during the episode. In part, the letter read: “We are
a good, community-minded employer, and it has been our policy to employ the culturally
disadvantaged. The worker who made the mistake on your motor is an older, minority
worker who is gradually losing his eyesight. In view of this, we feel that your impatience
and ill humor are inconsistent with modern management practice”. Dr. King flung the
letter down in disgust, saying “Well, that’s one brand of ethics!”

Questions:
What does Dr. King mean by the term “brand of ethics”? What are the “brands” involved
in this case?
How does a firm reconcile the conflicting demands of social responsibility and the
economics of competition.