The Combined Use of Formal and Informal Ethics Training in the Indian IT Companies

Pratima Verma and Siddharth Mohapatra


Business ethics has at best seen as an oxymoron by companies and never been of true concern for them. The widespread acceptance of Milton Friedman’s ideology, that is, ‘the business of business is business’, has immensely influenced them as it is in alignment with their traditional motives of profit making. This ideology has been considered as the legitimate purpose of business, important to create shareholder value, and necessary to remain competitive, which have given enough reasons for corporations to ignore ethics. Interestingly, this very act of ignoring ethics has resulted in numerous scandals, briberies, dotcom bubbles-and-bursts, financial and accounting scams, economic instabilities, corruption, and so forth concerning corporations, which have forced them to realize that ‘High Road Strategy’ (Ghaye & Gunnarsson, 2009) is a better way of doing business as doing so espouses ethical and sound strategies for

P. Verma (h) • S. Mohapatra Alliance University, Bengaluru, India e-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

© The Author(s) 2017

S. Raghunath, E.L. Rose (eds.), International Business Strategy, DOI 10.1057/978-1-137-54468-1_17

long-term sustainability and growth. They also realize the need to seriously consider the concept of ‘social contract’ by Rousseau (c.f. Gildin, 1983), which implies that contracts have obligations, opportunities, and advantages for both sides, involving business and society. This concern has permeated into the corporate world at all levels, and it is increasingly being accepted that operating ethically can indeed lead to good business in the long run. Companies with strong ethical values are associated with greater commitment to quality, customer loyalty, employee commitment, and profitability. Moreover, it has been observed that creating an organization that encourages exemplary conduct may be the best way to prevent damaging and damning misconducts (Paine, 1994). Business ethics is also considered as inevitable for organizations as it prescribes what we should be in terms of what we are as human beings (Pattan, 1984).

Furthermore, ethics programs have been critiqued for tightening the administrative control over a range of behaviors (Weaver, Trevino, & Cochran, 1999), which may weaken employees’ ability and motivation to exercise their own moral judgments, especially in novel situations (Stansbury & Barry, 2007). It is opposed for being ‘the specter of indoctrination, a politicization of ethics, and an atrophy of competence’ (Stansbury & Barry, 2007). Ethics programs that are value-based inspire employees to follow and practice it; compliance-based programs, however, discourage them to use their moral judgment. Here it is interesting to observe that both views are congruent in the perspective that business ethics seeks to improve human conditions (Michalos, 1988) and any dissension is most likely related to the way it is handled. Ulrich (1997), in this regard, recommends that business ethics must be seen as fundamental reflections for management and if this fundamental aspect is confused with ‘given’ conditions it would lead to halting the ethical reflection and, ultimately, to ‘ethical suicide’ (based on the translation given by Beschorner, 2006). This is the basic consideration of our research, that is, to shed further thoughts on the positive impact of ethics training.

Inspired by positive correlation between organization’s core values, ethical perspectives, and profitability, there have been arguments for the implementation of ethics codes which, it is argued, helps in ethical dilemmas in business involving greater complexity and unique situations (Arlow & Ulrich, 1980), enhances ethicality in culture (Ferrell & Gresham, 1985), provides behavioral norms and values to organizations (Hunt, Wood, & Chonko, 1989), offers roadmap for individual conduct at work, and has positive impact on individuals’ attitude and behavior (Hunt et al., 1989) . However, merely creating ethics codes does not guarantee that employees would be aware of their contents (Stevens, 1994). Their main purpose should be to educate employees about their purposes (Benson, 1989), which can best be done by communicating them to employees (Baum & Kling, 2004). The importance of communicating ethical codes, in the process imparting ethics training, has been advocated in this regard (e.g., Benson, 1989; Murphy, 1995; Weaver, 1993). Ethics training gives a clearer stand of organizations’ position on various ethical situations (Schwartz, 2001) and helps to avoid legal problems (Ferrell, John, & Linda, 2011). Scholars also see this as an alternative to ‘inspired ethical environment’ in organization, because it is easy to control the employees’ actions through ethics training (Valentine, 2009).

Given the importance and potential impact of training on organizations, and the costs associated with the development and implementation of training, it is important that both researchers and practitioners have a better understanding of the relationship between design and evaluation features and the effectiveness of training and development activities. Scholars, on several occasions, have advocated the same. Shandler (1996) calls for reengineering the training function. Spender (1994) urges for more dynamic epistemology for business ethics education for its proper implementation. Ellis (1965) proposes that maximizing training outcomes need the use of variety of training styles and stimuli. Here it is pertinent to mention that learning is not bounded by the type of methodology or tool used; it can take place in varied settings, whether formal, non-formal, or informal. More specifically, ethical knowledge is necessary for ethical reasoning, experiential ethical knowledge is necessary for moral sentiments, and practical ethical knowledge delivers ethical praxis (Park 1998). Appraising the same, organizations are not only following traditional methods of training but also imbibing new initiatives in ethics training; distribution of ethics newsletter, pamphlets, posters, online assistance, role play, videos, workshops, and so on are done to increase employees’ attention toward business ethics instead of using traditional pedagogy.

It has been posited that informal ethics training in the form of moral discourse is ‘good conversation’ (Waters, 1988) , which caters to the three categories of its use namely, problem solving and other functional and nonfunctional usages of moral discourse (Bird, Westley, & Waters, 1989). Learning is further activated with informal training as it makes an employee to ‘feel’ it (Barber, 2004), which usually is absent in formal training. Informal training helps in development of tactic skills that are useful for effective performance; Frazis, Gittleman, and Joyce (1998) posit that employees find it easier to recall the contents of informal training and it is an important way to acquire job-related skills. Informal training does not mean unintentional acts but it involves the indirect control of the management; it is rather an impromptu way of learning at minimum cost. Employees do not sense the pressure of (formal) learning. Additionally, informal training is a step toward building the community of practice or CoP (Lave & Wenger, 1991) as it facilitates the development of groups where members interested in ‘ethics’ do share information and experience, learn from each other, and that helps them to accomplish their personal and professional goals. This helps in elevating an organization’s performance in the social capital dimension.

The above aspects were reinforced while doing primary investigation about ethics training in Indian IT companies; a project manager in a company informed during our telephonic discussion that their ethics training consists of variety. We asked her to send a mail, which was as follows (the company’s name is changed to X):

We have both formal as well as informal ethics training:

  • 1. Posters all around mentioning how X considers it seriously.
  • 2. Forced screen savers in computers emphasizing ethics. They also display at times details of frauds that have been identified in the past and their consequences.
  • 3. X has always given a clear message that if anytime any unethical thing is reported to have been committed by an employee, s/he would be terminated at the same very moment.
  • 4. We attend a 30 minutes online session once in a year where we are shown some scenarios of corporate world and what should be the right response from our end in those situations.

Considering the above discussion, we predict the following: (a) ethics training has a positive impact on the perception of importance of ethics, individual ideology, and organizational ethical values; (b) the perception of importance of ethics is an antecedent of individual ideology as well as organizational ethical values. They have been considered in the theoretical model—Perception of Ethics Training in Employees and Organization (PETINEO). We also predicted that the impact of first and second predictions will have varied impact on ethics training, depending on the category of training used—formal, informal, or both. We describe below the theoretical basis for our predictors. We also discuss the details of our empirical study, the importance of doing contextual research, and the reason for choosing the Indian IT sector.

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