Human Resource Systems and Ethical Climates: A Resource-Based Perspective

HUMAN RESOURCE SYSTEMS
AND ETHICAL CLIMATES:

A RESOURCE-BASED PERSPECTIVE
L A X M I K A N T M A N R O O P, PA R B U D YA L S I N G H , A N D
SOUHA EZZEDEEN
We know very little about how ethical climates are built and the potential
role of a firm’s HR system in facilitating the development of this resource.
The resource-based view (RBV) of the firm suggests that human resource
systems directly influence a firm’s performance through the development
of resources that are deeply woven in a firm’s history and culture. How this
occurs though has not been thoroughly considered in the research literature.
Drawing on the theoretical insights from the resource-based view of the firm,
this article explores how HR systems can foster the development and main-
tenance of five types of ethical climates. In so doing, this article improves our
conceptual understanding of why ethical climates may be seen as having
strategic value for firms and how HR systems may influence that value. In
addition, it contributes to theory by extending the domain of the resource-
based view of the firm by exploring its integration with the varied types of
ethical climates. © 2014 Wiley Periodicals, Inc.
Keywords: competitive advantage; ethical climate; HR systems; resource-

based view
Introduction organizational resource, little attention has

been devoted to understanding the strategic
I
n recent years, scholars grounded in the worth of ethics, in general, and of ethical
resource-based view (RBV) of the firm climates, in particular. Specifically, we know
have attempted to demonstrate both very little about how ethical climates are
conceptually and empirically that orga- built and the potential of a firm’s HR system
nizational resources can create strategic in facilitating the development of this
value for a firm (e.g., Barney, 1986, 1991). resource. Indeed, the resource-based view
These value-creating resources include orga- suggests that human resource systems can
nizational culture (Barney, 1986), learning directly influence a firm’s performance
(Fiol & Lyles, 1985), routines (Nelson & through the development of resources that
Winter, 1982), entrepreneurship (Rumelt, are intricately woven in a firm’s history and
1987), and ethics (Litz, 1996), among others. culture (Barney, 2001; Reed & DeFillippi,
While ethics has been regarded as a valuable 1990; Wright & McMahan, 1992). How this
Correspondence to: Laxmikant Manroop, Heller College of Business, Roosevelt University, 430 S Michigan Ave,
Chicago, IL, 60605, Phone: 847.619.4241, E-mail: lmanroop@roosevelt.edu.
Human Resource Management, September–October 2014, Vol. 53, No. 5. Pp. 795–816
© 2014 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI:10.1002/hrm.21593
796 HUMAN RESOURCE MANAGEMENT, SEPTEMBER–OCTOBER 2014
occurs though has not been thoroughly con- There has been a noticeable lack of attention
sidered in the research literature, prompting in the literature devoted to substantiating the
calls for more research exploring the influ- strategic effects of HR systems on ethical cli-
ence of HR systems on ethical climates mates. As such, this study also contributes to
(Lengnick-Hall, Lengnick-Hall, Andrade, & the literature by improving our conceptual
Drake, 2009). Thus, drawing on the theoreti- understanding of how different HR system
cal insights from the RBV, this article explores configurations can create different work cli-
how HR systems can foster an ethical climate. mates that might eventually hold strategic
In so doing, this article contributes to the value for firms. In so doing, this conceptual
literature in several ways. study advances theory and provides a plat-
First, although researchers have exam- form on which future empirical research may
ined the role of human resource management be based.
in organizational ethics (e.g., Buckley et al., To that effect, the article is organized into
2001), as well as the link between strategic four main parts. The first part of the article
HRM and firm performance (e.g., Becker & reviews the relevant literature on the resource-
Huselid, 1999), few studies have attempted to based view of the firm to provide a contextual
explicate connections between HR framework for examining the influence of HR
practices and climate sustenance. systems on ethical climates. In the second
This article
This article makes a notable con- part, we examine the various components of
contributes to tribution to both the strategic a typical HR system and its strategic role in
HRM and the ethics literature an organization. We then propose a typology
theory by extending by exploring this understudied that highlights the relationship between ethi-
relationship. cal climates and HR systems, and their asso-
the domain of the
Second, while the RBV has ciated outcomes within the context of the
resource-based made significant inroads into stra- resource-based view of the firm. Following
tegic management research and this, we use Victor and Cullen’s (1987, 1988)
view of the firm practice, there has been a surpris- ethical climate framework to discuss five ethi-
ing lack of attention devoted to cal climate types—specifically instrumental,
by exploring its studying the resource-worthiness caring, independence, law and code, and
integration with of a firm’s ethical climate. Litz rules, and show how HR systems can enhance
(1996) lamented this omission their development to create value for the
the conceptual by noting that “capacities to per- firm. The final part of the article synthesizes
ceive, assess, and respond to the the major issues of the preceding theoreti-
framework of an social and ethical dimensions of cal debate by discussing the implications for
daily corporate life apparently are research and practice.
ethical climate.
not worthy of being considered
resources in the fullest sense of the Applying the Resource-Based View
word” (p. 1355). Thus, this article contributes
of the Firm to Ethics
to theory by extending the domain of the
resource-based view of the firm by exploring The RBV theory posits that success is deter-
its integration with the conceptual frame- mined by the resources a firm controls and
work of an ethical climate. the uniqueness of these resources relative to
Third, with a few notable exceptions (e.g., other firms (Amit & Schoemaker, 1993). To
Gilley, Robertson, & Mazur, 2010; Lindfelt & the extent that these firm-specific resources
Tornroos, 2006; Sanchez & Sotorrio, 2007), are valuable, rare, non-substitutable, and
previous studies examining ethics have imperfectly imitable, they can be a source of
mainly focused on the moral obligation of competitive advantage (Amit & Schoemaker,
organizational members and their ethical 1993; Barney, 1991; Reed & DeFillippi, 1990).
responsibilities toward the firm’s various con- A definition of competitive advantage is fun-
stituents (Petrick, Wagley, & Von der Embse, damental to our understanding of the RBV.
1991; Tseng, Duan, Tung, & Kung, 2010). Barney (1991) defines competitive advantage as
Human Resource Management DOI: 10.1002/hrm

HUMAN RESOURCE SYSTEMS AND ETHICAL CLIMATES 797
“when a firm is implementing a value creat- (Evans & Davis, 2005; Wright, Dunford, &
ing strategy not simultaneously being imple- Snell, 2001). In accordance with this argu-
mented by current or potential competitors” ment and following Bowen and Ostroff
(p. 102). Consistent with this definition, a key (2004), we posit that HR systems can play a
premise of the RBV is that competitive advan- key role in shaping an ethical climate, which,
tage occurs when firm resources are both het- in turn, affects employee attitudes and behav-
erogeneous and immobile. Resources are iors and, subsequently, performance.
heterogeneous when they are unevenly dis- In what follows, we identify the features
tributed and deployed across firms (Conner, of HR systems and discuss the relationships
1991). Resources are immobile when they are and complex interactions among the various
not easily obtained or reproduced by competi- components of the system, which, in the col-
tors (Barney, 1991). Resources possessing these lective, can influence an organization’s ethi-
characteristics create value for a firm. cal climate.
Barney (1991) and others (e.g.,
Brenneman, Keys, & Fulmer, 1998; Litz, 1996) The Resource-Based View of the
suggest several intangible resources that are
Firm and HR Systems
deemed “socially complex” and particularly
important in producing competitive advan- Much of the research in the strategy literature
tage. One of these resources is ethics. In line has adopted the RBV of the firm in conceptu-
with the RBV, an ethical climate is heteroge- alizing HR systems (Becker & Huselid, 1998;
neous and dynamic; that is, it is not a fixed, Evans & Davis, 2005; Lepak, Liao,
objective entity but a “living organism,” Chung, & Harden, 2006; Wright An ethical climate,
characterized by high levels of specificity et al., 2001). Consistent with this
and social complexity (Barney, 1991, 2001), view, HR systems consist of poli- like reputation, is
thus creating a strong barrier to imitation. An cies and bundles of HR practices
ethical climate, like reputation, is built not aimed at influencing employee built not bought;
bought; that is, it cannot be traded on the climate perception in order to
that is, it cannot
marketplace, thus making it more difficult to elicit the desired employee behav-
duplicate than physical resources (cf. Branco ior (Bolton & Houlihan, 2007; be traded on the
& Rodrigues, 2006). Jiang et al., 2011; Wright &
Drawing on signaling theory, Branco and McMahan, 1992). Although there marketplace, thus
Rodrigues (2006) posit that ethical values can is no consensus in the literature as
making it more
signal to external constituents that a firm is to what these HR practices are
trustworthy, credible, and reliable. In this (Combs, Liu, Hall, & Ketchen, difficult to duplicate
regard, ethical climate can be a key driver 2006; Dyer & Reeves, 1995; Wright
of external stakeholders’ “positive reactions & Gardner, 2003), most scholars than physical
towards the firm vis-à-vis its competitors, agree that they include the follow-
thus positively impacting on firm success” ing categories: comprehensive resources.
(Galbreath, 2005, p. 82). In addition, because staffing, training and develop-
an ethical climate is an intangible resource, it ment, performance appraisals, and reward
is difficult and costly to create, as it tends to be systems (e.g., Becker & Huselid, 1998; Bolton
historically contextualized, path-dependent, & Houlihan, 2007; Evans & Davis, 2005;
socially complex, and causally ambiguous Wright et al., 2001). There are, of course, vari-
(Barney, 1991). Given these characteristics, it ations and gradations within the categories.
would be reasonable to expect, therefore, that For example, within training and develop-
an ethical climate, as an intangible resource, ment, there could be practices related to pro-
is more likely to be a source of competitive fessional growth (T. N. Martin & Hafer, 1997),
advantage than physical resources. It is gen- career advancement (Wallace, 1995), promo-
erally argued that HR systems indirectly con- tional opportunities (Katou & Budhwar,
tribute to firm performance as the systems 2006), fairness of promotion (Harel, Tzafrir, &
directly influence organizational resources Baruch, 2003), and so forth.

In accordance with the SHRM literature, employees embrace and the behaviors they
we believe that HR practices do not operate manifest. Consistent with this logic and
completely independently of one another building on Wright et al. (2001), we argue
but work together in a complementary or that HR systems influence climate percep-
synergistic manner within the HR system to tion such that employee contributions can be
achieve a common goal (Delaney & Huselid, maximized. Depending on the goal of the HR
1996; Wright et al., 2001). Thus, we consider systems, we suggest that different configura-
the configuration of HR practices in the sys- tions of HR practices may foster different cli-
tem operating as a bundle to produce greater mate types.
effects on ethical climate perceptions than Central to the RBV perspective is the
individual practices working independently notion of vertical and horizontal alignment
(Lepak et al., 2006). For example, employees or fit (Wei, 2006). HR systems can enhance
are more likely to perceive a stronger caring the value of resources to the extent that HR
climate when a firm employs a configuration policies and practices are aligned with busi-
of HR practices emphasizing concern for oth- ness strategy (vertical fit), and these policies
ers, participative decision making, and team- and practices are coordinated across subfunc-
based pay, in aggregate, rather tions (horizontal fit) (Lacoursiere, Fabi, &
than a single practice emphasiz- Raymond, 2008). We argue that the potential
In accordance with
ing just one of these outcomes. for HR systems to enhance a firm’s ethical cli-
the SHRM literature, It should be noted as well that mate will be higher when there is synergy or
the administration of HR practices “fit” among various HR system components
we believe that HR is guided by the appropriate HR (with one another, and with corporate strat-
policies (Becker & Gerhart, 1996; egy) because optimal fit is rarer and more
practices do not
Jiang et al., 2011). Following difficult to imitate than HR systems lacking
operate completely Wright and Boswell (2002), we these attributes (Gerhart, 2007). However, for
define HR policies as a “firm or fit to be successfully enacted to produce the
independently of business unit’s stated intention desired result in a firm requires top manage-
about the kinds of HR programs, ment support (Lado & Wilson, 1994). Senior
one another but
processes, and techniques that managers not only have an important role to
work together in a should be carried out in the orga- play in strategy implementation and design
nization” (p. 263). Stated differ- of HR systems to support corporate strategy
complementary or ently, HR policies “provide the and values, but to also impose their influence
guidelines for action” (Jiang et al., on the configuration of HR system compo-
synergistic manner 2011, p. 3). Continuing with our nents to shape employee attitude and behav-
within the HR earlier example, therefore, foster- ior accordingly (Bolton & Houlihan, 2007;
ing a caring climate would require Wei, 2006). Indeed, top manager support
system to achieve a a compensation policy that sup- strengthens consensus and creates a shared
ports team-based pay, a staffing perception about what is appropriate behav-
common goal. policy that supports hiring based ior (Bowen & Ostroff, 2004).
on individual values of concern
for others, and a decentralized management Ethical Climate: Definition, Types,
policy that encourages participative decision
and Relationships With HR Systems
making.
In line with previous research (e.g., Conceptually, the notion of an ethical cli-
Ballou, Godwin, & Shortridge, 2003; Fulmer, mate reflects a set of organizational norms,
Gerhart, & Scott, 2003; Wright et al., 2001), policies, practices, and procedures embedded
we posit that HR systems will influence ethi- in organizational life (K. D. Martin & Cullen,
cal climates by articulating and reinforcing 2006). According to Cullen, Parboteeah, and
the values and behaviors the organization Victor (2003), such climate comes about
desires from employees. In other words, cli- when organization members believe that eth-
mate perceptions will shape the values that ical behavior is an expected standard for

decision making in the organization. Victor these five types to determine how HR systems
and Cullen (1988) define an ethical climate as can enhance their development.
“prevailing perceptions of typical organiza-
tional practices and procedures that have eth- Climate-Enhancing Human Resource
ical content” (p. 110). Research suggests that
Systems
an important factor that may influence
behavior among employees is the ethical cli- Building upon the foundation set out in the
mate of an organization (DeConinck, 2010; previous sections, and drawing on the defini-
Schepers, 2003). For instance, when an tions provided for HR systems (Lado & Wilson,
employee is faced with an ethical dilemma, 1994) and ethical climate (Victor & Cullen,
his/her decision would be influenced by the 1988), we broadly define climate-enhancing HR
organization’s ethical climate. Thus, it makes systems as a set of distinct but interrelated HR
sense for organizations to reinforce desired activities—including practices, policies, pro-
ethical behaviors through its HR systems. cedures, routines, and rewards—that promote
Victor and Cullen (1987, 1988) proposed ethical organizational behavior. According to
a two-dimensional typology rooted in ethi- Mossholder, Richardson, and Settoon (2011),
cal philosophy and Kohlberg’s (1967) theory HR systems can promote ethical climates by
of moral judgment to examine the differ- both “symbolically signalling and directly
ent types of ethical climates. The dimension communicating key organizational values
dealing with moral judgment posits three and behaviours” (pp. 35–36). This can be
stages of reasoning: egoistic, benevolent, and accomplished insofar as HR systems are able
principled. In the egoistic climate, company to create what Bowen and Ostroff (2004) refer
norms foster the pursuit of self-interest. In to as a “strong situation” in which employees
the benevolent climate, company norms are share a common understanding of “what is
oriented to foster the interest of others within important and what behaviours are expected
the group. In the principled climate, company and rewarded” by the organization (p. 207).
norms promote behaviors that are motivated Drawing on Mischel’s (1973, 1997) work,
by personal values and convictions indepen- Bowen and Ostroff (2004) explicate that
dent of situational outcomes. The second strong HR systems can create a “strong situa-
dimension in Victor and Cullen’s typology tion” by communicating powerful messages
is associated with locus of analysis and has that are distinctive, consistent, and oriented
three levels of reference—namely, individual toward producing consensus among employ-
(i.e., self), local (i.e., groups), and cosmopoli- ees regarding the most appropriate and
tan (i.e., organizations). Through these two expected behaviors. According to the authors,
dimensions, “organizational values are trans- a strong climate occurs when HR systems cre-
lated into action, which are subsequently ate an environment that causes every
reflected in various work outcomes” (K. D. employee to “see the situation similarly”
Martin & Cullen, 2006, p. 177). Together through clear and distinct messages [distinc-
the two-dimensional typology yields nine tiveness], “induces uniform expectancies about
different ethical climate types: self-interest, responses, provides clear expectations about
company profit, efficiency, friendship, team rewards and incentives for the desired
interest, social responsibility, personal moral- responses and behaviours [consistency], and
ity, company rules and procedures, and laws induces compliance and conformity through
and professional codes. Using factor analy- social influence [compliance]” (Bowen &
sis, Victor and Cullen (1988) collapsed the Ostroff, 2004, p. 213). Taken together, HR sys-
nine ethical climates into five climate types: tems characterized by these features can help
instrumental, caring, independence, law and produce strong ethical climates (Bowen &
code, and rules. Since these five climate types Ostroff, 2004). Building upon this theoretical
are found in most empirical research (K. D. foundation, we explain below the process by
Martin & Cullen, 2006), and in the spirit of which HR systems can produce each of the
parsimony, we limit this study to examining varied types of ethical climates.

Instrumental Climate and HR In the same vein, HR systems can intro-

Systems duce training and development programs to
shape employee expectations and knowledge,
The instrumental ethical climate is rooted in skills, and abilities (KSAs) toward enhancing
Kohlberg’s (1981) egoistic criterion that efficiency and cost savings following organi-
emphasizes the maximization of self-interest zational entry. Evans and Davis (2005) posit
whereby individuals evaluate moral choices that training and development programs
in terms of personal consequences, needs, are intended to cause individuals to behave
and exchange of favors. For those embracing in a predictable manner when performing
an instrumental orientation, ethical behav- job duties. Such programs (administered to
iors should lead to personal rewards and the employees sharing similar organizational
avoidance of punishment, and rules will be goals) will not only create a more productive
followed insofar as they are self-serving. and efficient workforce oriented toward com-
Extending this theory to the work context, pany interest, but also enable employees to
Victor and Cullen (1988) suggest that employ- achieve goals that meet their own needs as
ees who perceive an instrumental climate well. The outcome of goal congruence and the
infer that organizational norms effort and motivation to pursue those goals
and expectations encourage ethi- can be enhanced through appropriate com-
For those embracing
cal decisions geared to serve the pensation practices based on pay for perfor-
an instrumental interest of the organization (e.g., mance, including, for instance, gain sharing,
corporate profit) or to provide per- profit sharing, and performance incentives.
orientation, ethical sonal benefits (e.g., personal gain). Evans and Davis (2005) note that “gain shar-
HR systems can play a key ing plans and management by objectives
behaviors should strategic role in articulating and align individual goals with organizational
lead to personal promoting ethical norms and goals” (p. 767). While linking pay to perfor-
expectations required of employ- mance can heighten an instrumental climate,
rewards and ees. On this note, Winstanley and a feedback and performance management
Woodall (2000) assert that HR system administered through the HR system
the avoidance holds the moral stewardship of will directly communicate and reinforce the
of punishment,
organizations. For example, selec- values and behaviors necessary to cultivate
tive staffing techniques can be an instrumental climate. Thus, performance
and rules will be used to identify applicants who appraisal programs will reflect the extent
are compatible to the organiza- to which employee interests are aligned
followed insofar tion in terms of person-organi- with company interests, and offer appropri-
zation (P-O) fit (C. J. Collins & ate rewards to support common interests
as they are self-
Clark, 2003). A selective staffing through an appropriate pay-for-performance
serving. system screens job applicants on policy (Jiang et al., 2011).
job-related criteria (Evans & Davis, The degree to which HR systems are able
2005) such that individual goals to foster an instrumental ethical climate will
are aligned with organizational goals. Such depend on the systems’ ability to achieve
alignment can foster an instrumental climate internal fit or consistency (horizontal align-
because norms and expectations encourage ment) among the various HR policies and
employees to pursue interests that are com- practices, and the extent to which the policies
mon to both themselves and the organiza- and practices are aligned with business strat-
tion (Ambrose, Arnaud, & Schminke, 2008). egy (vertical fit) to elicit the desired attitudes
The P-O fit alignment creates a strong bond and behaviors among employees. Thus, for
between organizational identity and employ- example, instrumental climate is promoted
ees’ identity, and has been shown to influ- through a configuration of P-O fit, training
ence employees’ attitudes and behaviors, as to enhance required KSAs to pursue efficiency
well as organizational functioning (Ambrose beneficial to employees and the organization,
et al., 2008; Bowen & Ostroff, 2004). and a pay-for-performance reward system

that is reinforced through a performance a caring climate fosters an atmosphere in

management program. Similarly, in terms of which employees have a genuine interest in
vertical fit, if the organization has a strategic one another’s welfare, as well as that of others
goal of customer service, then its HR systems within and outside the organization who
can foster an instrumental climate by align- might be influenced by their decisions (K. D.
ing HR policies and practices to offer relevant Martin & Cullen, 2006). It also involves the
customer service training and provide service- “organizational collective” and can foster a
based bonuses to employees to facilitate goal sense of community in an organization
congruence (Bowen & Ostroff, 2004). (Victor & Cullen, 1988, p. 107) where employ-
The strength of an instrumental climate ees perform over and above expectations.
is linked to the configuration of interrelated Such caring attitudes and behaviors are
sets of HR practices. In the context of the unique and firm-specific because they are
SHRM-RBV perspective, it is the synergistic deeply embedded in the collective psyche of
effect of interdependent and aligned practices employees and manifested in such outcomes
that produce a strong HR system in terms of as the organization work climate and culture.
consistency, distinctiveness, and consensus Hence, they can create value for the
(cf. Bowen & Ostroff, 2004). When employ- organization.
ees perceive the HR system as being strong, An organization’s HR system
and when senior managers reinforce this per- can facilitate a caring climate When employees
ception through support and collaboration, to the extent that it plays a sig- perceive the HR
then it is more likely to influence employee nificant role in supporting poli-
attitudes and behaviors in favor of the desired cies, practices, and strategies that system as being
ethical climates. Thus, the onus is upon encourage employees to show con-
senior managers to define the parameters of cern for others such as employees strong, and when
an instrumental ethical climate. This can be and customers (Burke, Borucki, &
senior managers
done through demonstrating actions geared Hurley, 1992). First, by employ-
toward advancing organizational goals such ing consistent staffing techniques reinforce this
as cost control and efficiency, and supporting based on the individual value of
appropriate HR practices and policies to that caring for others as well as other- perception through
effect. oriented values concerned with
support and
issues of corporate social respon-
Proposition 1: Selection based on P-O fit, train- sibility (Evans, Davis, & Frink, collaboration, then
ing for awareness of efficiency and cost savings, 2011), HR systems can promote an
compensation practices based on pay for perform- environment in which employees it is more likely to
ance, and performance management systems that build quality relationships with
recognize and reward employee-organization goal others (cf. Evans & Davis, 2005). influence employee
congruence, in aggregate, are likely to foster an in- Quality relationships allow indi- attitudes and
strumental climate. viduals to develop genuine con-
cern for others and interpersonal behaviors in favor of
fairness (Brown & Trevino, 2006),
Caring Climate and HR Systems the desired ethical
resulting in mutual understand-
The underlying moral criterion for a caring ing that is “devoid of egocen- climates.
ethical climate is benevolence theory tric motives” (Malloy & Agarwal,
(Kohlberg, 1981), which underscores a sin- 2010, p. 6). Such altruistic atti-
cere concern for others (K. D. Martin & tudes and behaviors help foster a caring cli-
Cullen, 2006). Right and wrong behaviors are mate (Kanungo & Conger, 1993).
measured in terms of social relationships and In addition to selective staffing, train-
responsibilities. Thus, according to Kohlberg ing in interpersonal skills can cultivate open
(1984), correct behaviors are defined by other communication, shared understanding, and
people’s expectations and by actions oriented trust among employees (Whitener, 1997).
toward helping them. Applied to organizations, Likewise, performance-related training is

equally important to enhance the delivery (Liao & Chuang, 2004). Productivity output
of services required to benefit external cli- has been found to relate to investors’ atti-
ents (Liao & Chuang, 2004). These features tudes and satisfaction (Elmuti, Grunewald, &
are a function of individual competencies Abebe, 2010).
(i.e., KSAs) in the performance of job-related A caring climate is further enhanced when
activities (Evans & Davis, 2005), that are the organization administers a performance
oriented toward maintaining relationships management program in which employees
and putting the interests and support of “see” how incentives are disbursed, and what
others ahead of “their own self-interest and type of performance (i.e., based on shared
advancement” (Whitener, 1997, p. 399). tasks and goals) is rewarded. Thus, perfor-
Therefore, training in interpersonal skills mance appraisal and feedback systems are
and performance of job-related duties should designed to recognize and reward how well
facilitate the development of a caring ethical employees participate and cooperate with
climate (Malloy & Agarwal, 2010; Ratherd & other people’s work efforts (Mossholder et al.,
Fleming, 2008). 2011) and the quality of customer service
Compensation practices can also influ- provided (Liao & Chuang, 2004).
ence a caring ethical climate. Research supports the view that HR sys-
For instance, group-based incen- tems help shape employee climate perceptions
Training in tive pay encourages employees and concomitant behavior in the workplace
interpersonal skills to develop positive relationships (Gelade & Ivery, 2003; Zacharatos, Barling, &
and promotes less self-interest Iverson, 2005). For example, Rousseau (1995)
and performance of and greater mutual trust among argues that HR systems perform a signal-
employees (Evans & Davis, 2005). ing function by sending messages that help
job-related duties It also encourages employees to employees make sense of their work environ-
should facilitate
help one another while respecting ment. HR practices such as selective staffing,
individual effort (Mossholder et internal promotion, employee development,
the development al., 2011), all of which are condu- team-based work design, fairness in perfor-
cive to a climate of caring. Toward mance appraisals, and group-based rewards
of a caring ethical this end, Heneman and Hippel indicate to employees the extent to which
(1995) proposed that group-based the organization values their contributions
climate.
pay systems should be designed to and cares about their well-being (Chuang &
recognize employee contributions Liao, 2010; C. J. Collins & Smith, 2006). In
to the group, including cooperation with a recent study using a sample of 76 Japanese
other group members. Such a system, accord- firms, Takeuchi, Chen, and Lepak (2009)
ing to C. J. Collins and Smith (2006), may over found empirical support that HR practices
time strengthen trust and integrity among implemented in the establishment were posi-
employees as they “develop norms that rec- tively associated with employees’ perception
ognize contributions and impose sanctions of a caring climate. In line with the norm of
for social loafing” (C. J. Collins & Smith, reciprocity (Gouldner, 1960), such a climate
2006, p. 547). On this note, Bamberger and motivates employees to serve customers as
Levi (2008) argue that a shared perception of well as help one another.
caring is stronger in situations where group- Returning to the notion of fit, we posit
based pay is allocated based on norms of fair- that the HR practices described here must be
ness and equality. This does not imply that internally consistent and aligned with one
incentives are equal regardless of individual another and with organization strategy in
performance, but rather suggests the balanc- order to bring about both task- and person-
ing of group and individual rewards. Group- focused helping. On this note, Mossholder
based incentives encourage helping behavior et al. (2011) argue that consistent practices
among employees and are also associated within HR systems create a situation in which
with quality and customer service (Blackburn “employees’ behaviours are more predictable,
& Rosen, 1993) as well as productivity output allowing for adaptation, task coordination,

and a greater likelihood of future effective Independence Climate and HR

helping” (p. 42). This can be accomplished Systems
insofar as HR practices and systems produce a
strong, distinct, and consistent message that This climate suggests that individuals are
signals to employees the desired behavioral guided to make choices based on their under-
expectations (Bowen & Ostroff, 2004). For standing of personal values (Kohlberg, 1981).
example, if employees are selected based on People tend to move beyond established rules
the values of helping and collaboration but and laws and are guided by self-chosen ethi-
are rewarded for individual performance, cal principles of justice, morality, and the
confusion about HR system goals could sur- rights of the human being (i.e., a higher level
face. Mossholder et al. (2011) notes that of moral development from a Kohlbergian
“under such conditions ambiguity would be perspective; Parboteeah & Cullen, 2003).
manifested regarding appropriate helping They perceive that decisions with moral out-
behaviour” (p. 46). The extent to which HR comes need to be based on personal values
systems can inculcate in the collective psyche and convictions with minimum influence
of the workforce a shared perception and from the organization itself. In an organiza-
understanding of the organizational policies, tional setting, a climate of inde-
practices, and procedures relating to a caring pendence fosters individual
climate, the more likely they are to develop freedom and responsibility among The extent to which
attitudinal and behavioral changes consistent employees to behave ethically HR systems can
with such a climate. toward customers and clients.
In addition, the influence of senior man- Such moral conduct, expressed in inculcate in the
agers is important in cultivating a caring cli- social interaction with firm con-
stituents, becomes part of a shared collective psyche
mate among employees (Wittmer & Coursey,
1996). This can be accomplished by building mind-set (e.g., values and beliefs) of the workforce a
relational rather than transactional relation- that is unique only to that partic-
ships with employees and with one another ular firm. shared perception
(cf. Lengnick-Hall, Beck, & Lengnick-Hall, HR systems can play a key
2011). Relational relationships are more role in enhancing this resource and understanding
conducive to helping behavior and can fos- by supporting behaviors congru-
of the organizational
ter trust, cooperation, and knowledge shar- ent with sound individual judge-
ing among employees (Mossholder et al., ment, and ethical and moral policies, practices,
2011). Managers can also encourage a car- reasoning that are reflective of
ing climate by engaging in “role model- organizational norms and prac- and procedures
ing” through collaboration and sharing of tices. First, extensive staffing
relating to a caring
“information in routine interactions with procedures that select candidates
employees” (Mossholder et al., 2011, p. 47). based on a set of principled ethi- climate, the more
Additionally, senior managers may also foster cal values that are consistent with
a caring climate by developing a partnership a prevailing culture of respect for likely they are to
orientation with junior managers in the form human rights regardless of orga-
develop attitudinal
of a fluid team-based work system and allow nizational context may encour-
this system to cascade down the organiza- age a climate of independence. and behavioral
tion hierarchy to include all employees (cf. For instance, principled values
Lengnick-Hall et al., 2011). such as justice, moral integrity, changes consistent
and good judgment can be built
Proposition 2: Consistent selection based on the into the selection process that fit with such a climate.
individual values of concern for others, training with the prevailing ethical culture
in interpersonal skills, group-based incentive pay, of the firm. Specifically, HR can administer
and performance management systems that rec- integrity tests and conduct appropriate back-
ognize and reward employee helping behaviors, in ground checks to screen potential employees
aggregate, are likely to foster a caring climate. for unethical tendencies (D. Collins, 2006).

In addition, shortlisted candidates can be In addition, performance management

asked to describe their individual ethical val- systems that incorporate expectations for
ues. These strategies signal which candidates ethical decisions that are made in the best
suit the prevailing ethical culture of the orga- interest of the organization and its various
nization. Research also suggests that the ethi- stakeholders, and evaluate such behavior sig-
cal culture of an organization can influence nificantly in promotion and compensation
the employment decisions of job candidates decisions, can help to encourage and support
(Buckley et al., 2001). Thus, when an organi- a climate of independence. In this case, the
zation signals its espoused culture best interest of the organization, in the con-
through the selection process, it is text of an independence climate, is based on
Performance
more likely to attract people who principled ethics (as compared to the finan-
management share similar values; likewise, per- cial bottom line). An anecdote provided by
sons who do not share those val- Cullen et al. (1989) is a classic example of an
systems that ues will self-select out (Buckley et independent action that organizations might
al., 2001). want to encourage. In the example, a friend
incorporate
Beyond selection, providing offers a stockbroker illegally acquired insider
expectations for relevant training that focuses on information. From the firm’s perspective,
core ethical values and beliefs this act is both illegal and unethical. But the
ethical decisions reflective of a principled climate stockbroker must exercise good judgment in
of independence will underpin a deciding whether or not to use the informa-
that are made in
high degree of integrity and ethi- tion. The broker working in an organization
the best interest cal behavior among employees in which HR policies and practices emphasize
(Weber & Green, 1991; Wimbush, high regard for the firm’s constituents would
of the organization Shepard, & Markham, 1997). not use the information and, most probably,
Research has found that training would advise the friend to desist from such
and its various not only raises people’s ethical activities. Performance management systems
stakeholders, awareness in various situations could be geared to encourage and reward
(Beauchamp & Bowie, 1997), but such behaviors. Such an independent deci-
and evaluate also influences their decision-mak- sion by the stockbroker is consistent with an
ing process when faced with ethi- independence ethical climate and attests to
such behavior cal dilemmas (LeClair & Ferrell, what Kohlberg (1984) refers to as “sound rea-
2000). It also creates an expecta- soning principle.”
significantly in
tion that the organization will Taken together, the foregoing HR prac-
promotion and support employees who exhibit tices are more about “complementing” indi-
those values (Zoubul, 2009). viduals holding certain ethical values (e.g.,
compensation Complementary to the organi- justice, respect of human rights, etc.) char-
zational entry and training efforts, acteristic of the independence climate. The
decisions, can help
HR systems may also roll out a thrust is about finding a match whereby indi-
to encourage and financial incentive program that vidual values align with organizational val-
is directly tied to independence ues. Thus, the organization is not seeking to
support a climate of ethical behavior, such as a one- change a person; the HRM system is designed
time cash bonus for exercising to find individuals with complementary val-
independence.
sound judgment in the interest ues and then use practices that support and
of stakeholders, leading to greater empower these matching individuals. K. D.
productivity and lowering of production costs Martin and Cullen (2006) describe the inde-
(Miceli, Near, & Dworkin, 2009). Incentives pendence climate as being at the intersection
may also take the form of gain sharing, “such of the individual and principled dimensions
as a percentage of savings recovered as a of the typology; that is, a climate of indepen-
result of internal whistle-blowing (e.g. where dence being one of individual responsibility
embezzlement is caught)” (Miceli et al., 2009, yet within the context of principled ethical
p. 385). ideas such as justice and respect.

For HR practices and policies to foster a Law and Code Climate and HR
climate of independence, they have to be Systems
coherently implemented to stimulate the
desired behaviors reflective of the organiza- This climate type is based on the view that
tion climate (cf. Mossholder et al., 2011). firms support ethical decision making based
For example, if the firm has a strategic goal on external codes such as accepted religious
of innovation in which a high premium is texts (e.g., the Bible), the law, or a profes-
placed on autonomy and independence, sional code of conduct (Wimbush & Shepard,
then ethical behaviors in line with such a 1994). These external codes are thought to
strategy must be promoted by the HR sys- influence employees’ ethical decision making
tem. Additionally, we argue that a climate of and behavior (K. D. Martin & Cullen, 2006).
independence will emerge when the combi- For example, consistent with societal expec-
nation of HR system elements and practices tation of fairness and respect, which is codi-
is seen by employees to be strong (i.e., dis- fied in laws and regulations, it is expected
tinct, consistent, and with consensus; Bowen that employees would comply with those reg-
& Ostroff, 2004). In other words, HR practices ulations as encapsulated in company policy.
and systems must be understandable such Leung (2008) argues that such
that employees can accurately interpret the policies would explain employ-
Managers should
situation and act accordingly. ment practices and take stands
In addition, managerial behaviors need against discrimination and other provide employees
to be congruent with HR practices and poli- unfair practices.
cies geared toward promoting a climate of A firm’s human resources with the flexibility
independence. Toward this end, managers system can enhance a law and
and latitude to
should provide employees with the flexibility code climate by disclosing uni-
and latitude to make decisions in the inter- versal principles and professional make decisions
est of justice, morality, and respect for human codes to all of its members (Elci
rights, regardless of organizational context. & Alpkan, 2009), particularly in the interest of
Also, managers must themselves demonstrate in organizations that are heav-
such attitudes and behaviors in their deal- ily regulated such as auditing justice, morality, and
ings (D. Collins, 2010). When senior manag- and accounting, engineering, respect for human
ers exhibit these characteristics, employees and medicine. Professional codes
are more likely to view them as “formally shape a firm’s culture and identity, rights, regardless
sanctioned behaviours” (Bowen & Ostroff, as well as influence the attitudes
and behaviors of employees and of organizational
2004, p. 209) and will do likewise (D. Collins,
2010). It is the concept of legitimate author- the ways they interact with stake- context.
ity (Barnard, 1968) that inspires employees holders. Scholars have suggested
to look to managers for cues to appropriate that firms that strongly embrace
behavior (Sims & Brinkmann, 2002). Thus, professional codes are more likely to be per-
the attitudes and behaviors of managers not ceived by stakeholders as ethically compliant.
only communicate strong messages about the Ethical compliance is embedded in organiza-
organization ethical climates, but also moti- tional processes and is therefore difficult to
vate employees to behave accordingly. duplicate by competing firms (Barney, 1991).
In this regard, HR policies and practices
Proposition 3: Consistent selection based on the must be designed to select job candidates
values of personal moral judgments, training based on traits of compliance with profes-
employees in core ethical values, compensation sional codes (Ambrose et al., 2008). These
practices based on gain-sharing incentive pay, values can be assessed through ethics scales
and a performance management system that rec- administered during pre-employment test-
ognizes and rewards individual moral judgment, ing (Reidenbach & Robin, 1990), as well as
in aggregate, are likely to foster an independence through face-to-face interviews where short-
climate. listed candidates could be asked to describe

the ethics of their previous work culture (D. link performance incentives and bonuses to
Collins, 2006). Thus, selection based on the behaviors associated with those dimensions.
tendency to comply with professional codes For example, if compliance with industry
increases the likelihood that new employees standards is important to the organization,
will display attitudes and behaviors associ- then HR systems should reward compliance
ated with those values. with appropriate performance-based incen-
In addition, training for conformity to tives and bonuses, and sanction noncom-
professional codes provides the opportunity pliance with reprisal. Research suggests that
for employees to learn more about how ethi- when ethical criteria are built into perfor-
cal values can impact their work activities mance appraisal systems, they create ethical
and organizational performance (D. Collins, expectations in the minds of employees and
2010), thus leading to more reliable and make ethical behaviors relevant and reward-
predictable behavior (Combs et al., 2006). ing (Selvarajan & Cloninger, 2008). Likewise,
According to Evans and Davis (2005), “reli- there is evidence to support the notion that
able and predictable behaviour is a function of reprisal for noncompliance with a profes-
individual competence (i.e., KSAs) to perform sional code of conduct is effective in chang-
job duties” (p. 765). Competence ing attitudes and behaviors (Garoupa, 2000;
in work activities also leads to Weaver, 1995). Thus, we posit that effective
Research suggests
clarity of understanding about the performance appraisal, as a component of HR
that when ethical moral aspect of business problems systems, can enhance a law and code ethical
and the codes available to deal climate.
criteria are built with those problems (D. Collins, For HR systems to effectively influence a
2010). This competence and law and code climate, the practices operat-
into performance understanding acquired through ing within the system must function in uni-
appraisal systems, training, therefore, can enhance a son with one another and with firm strategy
law and code ethical climate. (Mossholder et al., 2011; Wei, 2006). Thus,
they create ethical Compensation practices that for instance, a law and code climate might be
motivate employees to act in promoted through a combination of meth-
expectations in the accordance with professional ods used to tease out attributes respecting
codes will also affect a law and code professional regulations, training to reinforce
minds of employees
climate (Elci & Alpkan, 2009). For an attitude of compliance, and performance-
and make ethical example, linking individual per- based pay tied to upholding professional
formance-based pay and bonuses codes that is reinforced through a perfor-
behaviors relevant to legal and professional stan- mance management program. Similarly, with
dards of an industry will lead to respect to vertical fit, if the organization’s
and rewarding.
behaviors that are focused less on strategic goal is service quality, for example,
self-interest and more on mutual then its HR systems can cultivate a law and
interest (Evans & Davis, 2005). In addition, code climate by encouraging delivery of ser-
offering a salary increase in a merit system vice quality in line with prevailing profes-
for refusing to compromise professional stan- sional standards. It is this synergistic effect
dards (e.g., health and safety) that would put of interdependent and aligned practices that
other employees at risk, thereby protecting produces a strong HR system (consistent,
the public image of the firm, may also fos- distinctive, and with consensus). Guzzo and
ter a law and code climate. Research shows Noonan (1994) posit that all HR practices
that pay practices tied to compliance with (and systems) send signals to employees.
professional codes reinforce ethical behaviors These signals can be misinterpreted when the
(Miceli et al., 2009). message is not clear, when practices and poli-
In addition to compensation, HR systems cies disconnect, and when training is absent,
may introduce performance appraisal sys- thereby causing the intended purpose of the
tems that incorporate the ethical dimensions HR system to break down (Stanton, Young,
associated with a law and code climate, and Bartram, & Leggat, 2010).

Senior managers must commit to high and policies govern and reinforce specific role
ethical standards when applying HR system behaviors that fit with firm strategy over
components as they relate to issues such as time, and enable the firm to get the best out
conflict of interest, improper use of company of their employees in changing competitive
information, insider trading, political contri- conditions (Wright et al., 2001). Thus, the
butions, compliance with industry standards, specificity and uniqueness of rules and poli-
and so forth. On this note, Armstrong and cies to a particular firm and their ability to
Francis (2008) suggest that senior managers influence specific role behaviors can be a
need to demonstrate “through both their value-creating asset.
words and actions absolute commitment to A firm’s HR system can contribute to a
that code and consistency in its execution” rules climate by formally specifying and out-
(p. 18). This is an essential requirement for lining procedures for monitoring, reward-
creating a strong law and code ethical climate ing, and reinforcing desired organizational
because it allows employees to form accurate behavior (Raiborn & Payne, 1990; Weaver &
attributions and judgment about the man- Trevino, 1999). First, selecting job candidates
agement teams’ compliance relating to laws based on the trait of authoritarianism is con-
and professional codes, and standards such as ducive to a rules climate. Research
governance principles (cf. D. Collins, 2010). has demonstrated that individuals
A firm’s HR system
with traits of authoritarianism are
Proposition 4: Consistent selection based on the more likely to follow established can contribute to
propensity to comply with professional codes, authority, and prefer work envi-
training in core ethical norms and professional ronments characterized by exist- a rules climate by
codes, and compensation practices based on per- ing, traditional social conventions
formance-based pay and merit bonuses, as well as (Nicol, Rounding, & MacIntyre, formally specifying
a performance management system that rewards 2011). Customizing the recruit- and outlining
compliance and sanctions noncompliance, in ag- ment and selection process, there-
gregate, are likely to foster a law and code ethical fore, to identify this trait would procedures
climate. be important in determining a job
candidate’s sense of fit with a rules for monitoring,
climate work environment (Nicol,
Rules Climate and HR Systems rewarding, and
2007; Nicol et al., 2011).
Whereas law and code climate refers to legal Following organization entry, reinforcing desired
and professional standards as embodied in training employees for awareness
national, state, or local legislature (law and of rules and procedures is impor- organizational
code) outside the organization, rules climate tant in fostering a rules ethical
behavior.
refers to policies and procedures (rules) within climate. Research suggests that
the organization (Wimbush et al., 1997). It is training affects employee compe-
rooted in Kohlberg’s (1981) principle of moral tence (e.g., KSAs) and impacts their behaviors
development and is often characterized by a in predictable ways (Barney, 2001; Evans &
strong, pervasive set of rules or standards Davis, 2005; Wright et al., 2001). Thus, train-
such as a code of conduct to guide behavior ing for a rules climate must go beyond teach-
(Aquino & Becker, 2005; K. D. Martin & ing employees “a set of rules” to actually
Cullen, 2006). In such a climate, rules are motivating them to perform in accordance
applied uniformly, and employees are more with those rules so that they can add value to
likely to trust and collaborate with one the organization (Jiang et al., 2011; Trevino
another because they expect others to do the & Weaver, 2003). One way of moving train-
same (Pearce, Branyiczki, & Bigley, 2000). In ing to actual behavioral change is through
the work context, rules and policies are con- applicable compensation practices and per-
sidered unique organizational capabilities formance management systems. Indeed,
that are routinized and embedded in the Appelbaum, Deguire, and Mathieu (2005)
actions and practices of the firm. These rules argue that through awareness of ethical rules,

organization members learn how to behave, likely to engage in that same behavior (Beu
and these behaviors must be rewarded. Thus, & Buckley, 2004). In sum, the foregoing argu-
linking ethical performance to pay produces ments suggest that HR policies and practices,
positive behavioral changes because employ- encapsulated within HR systems, can pro-
ees are able to directly relate compliance with mote a rules climate by positively influencing
a reward (Miceli et al., 2009; Trevino, Weaver, employee attitudes and behaviors.
Gibson, & Toffler, 1999). Knowing, therefore, However, the components of the HR
that the organization rewards them for com- systems must work in harmony with one
plying with ethical policies and procedures, another as well as with the firm strategy to
and knowing what these rewards are encour- produce the desired effect. When HR prac-
ages employees to be more ethical. tices are inconsistent with a rules climate,
In addition to compensation, performance employees act based on what is most benefi-
management systems can also reinforce a cial to them. Beu and Buckley (2004) argue
rules climate by incorporating ethical crite- that rules can be sidelined when HR practices
ria that recognize and reward employees for are designed to reward other imperatives
complying with organizational rules and pro- that are in conflict with a set of ethical rules.
cedures. For instance, performance Consider, for instance, pay practices that
appraisals can document whether reward employees for achieving unusually
When employees employees comply with a code of high targets. Bach and Armstrong (2010) note
“see” senior ethics, display behaviors and atti- that such practices create an environment for
tudes consistent with the organiza- unethical behavior because they emphasize
managers’ support tion ethical culture, and contribute goals more so than means, thereby increasing
to ethics-based initiatives, and link the risk of employees crossing the boundary
of HR systems these behaviors to compensation between acceptable and unacceptable behav-
practices (D. Collins, 2010). At ior. It is, therefore, imperative that HR system
in the form of
the same time, systems must be attributes be coordinated across subfunctions
collaboration with put in place to sanction noncom- and aligned with the appropriate strategic
pliance with organizational rules objectives of the firm to foster a strong rules
HRM professionals, and procedures (Schwartz, 2004; climate. Likewise, when employees “see”
Trevino et al., 1999). According to senior managers’ support of HR systems in
it builds consensus
Beu and Buckley (2004), such an the form of collaboration with HRM profes-
and promotes approach works because employ- sionals, it builds consensus and promotes
ees know through disclosure of relevance with respect to goal attainment,
relevance with information what is expected of and enhances the legitimacy of authority of
them and understand the conse- HR professionals who enact the policies and
respect to goal
quences associated with unethical practices (Bowen & Ostroff, 2005). This per-
attainment, and behavior. Deterrence theory sug- ception of agreement and support is likely to
gests that undesirable behaviors influence employee attitudes and behaviors
enhances the are inhibited in direct proportion in favor of the organization’s rules climates.
to the severity of the punishment
legitimacy of associated with such behavior Proposition 5: Consistent selection based on the
(Buckley, Wiese, & Harvey, 1998). trait of authoritarianism, training for aware-
authority of HR
Similarly, vicarious learning the- ness of rules and procedures, and compensation
professionals who ory (Bandura, 1986) posits that practices based on individual performance-based
the observance of punishment pay and merit bonuses, as well as a performance
enact the policies creates punishment expectan- management system that rewards compliance and
cies by the observer and discour- sanctions noncompliance with rules, in aggregate,
and practices.
ages undesirable behavior. Taken are likely to foster a rules climate.
together, these theories suggest
that employees who witness the punishment For illustrative purposes, Table I displays
of other employees for misconduct are less the various types of ethical climates along

TABLE I HR Systems Components and Exemplars of Ethical Climates Configurations

HR System Instrumental Caring Independence Law and Code Rules
Components Climate Climate Climate Climate Climate
Recruitment Emphasis on Emphasis on Emphasis on Emphasis on Emphasis on
and Selection P-O fit concern for personal moral compliance with authoritarianism
others judgment professional codes
Training Focus on Focus on Focus on Focus on ethical Focus on rules
efficiency and interpersonal ethical values norms and codes and procedures
cost savings skills and beliefs
Compensation Pay for Group-based Gain-sharing Merit bonuses Merit bonuses
performance incentives incentive pay (performance- (performance-
based) based)
Performance Evaluate for Evaluate Evaluate Evaluate for Evaluate for
Management employee- for helping for exercise compliance compliance
firm goal behavior of moral
congruence judgment
with the corresponding HR system compo- purpose, thereby reducing transaction and
nents. It is likely that multiple configurations monitoring costs (Ghoshal &
of HR systems can be generated through Moran, 1996). Such logic is consis-
A climate that is
which a particular ethical climate emerges. tent with strong HR systems
Although we did not discuss all the config- resulting in collective action characterized by
uration possibilities, the ones illustrated are toward achieving organizational
expected to foster the corresponding ethical strategic goals. Similarly, a climate strong adherence
climates. that is characterized by strong
to institutional and
adherence to institutional and
Discussion and Concluding professional codes of ethics might professional codes
increase legitimacy in the eyes of
Comments
various stakeholders and thus of ethics might
The development of a conceptual framework contribute to an overall and more
to show how different configurations of HR enduring positive image and repu- increase legitimacy
systems can influence different ethical cli- tation (Buckley et al., 2001). This in the eyes of
mates is a useful starting point in demonstrat- is an interesting avenue for future
ing how important ethical capabilities could research, and we encourage schol- various stakeholders
be in creating value for a firm and, ultimately, ars in the HRM and strategic man-
driving firm success. Scholars in both the agement fields to explore these and thus contribute
strategic management and ethics literature possibilities to find out what firm
to an overall and
have suggested that a firm’s competitiveness outcomes might be produced by
and, ultimately, its long-term survival might which climates. more enduring
be determined by how well its HR systems The strategic value or resource-
facilitate and sustain a climate of ethics that worthiness of ethical climates positive image and
are then translated in responsible employee hinges upon the uniqueness and
reputation.
behaviors (Kim & Miller, 2008; Leung, 2008). synergistic nature of HR system
Although this study did not specifically attributes (Lado & Wilson, 1994)
address how an ethical climate might impact to relay unambiguous and enduring mes-
firm outcome, we can see how this could hap- sages to organization members (cf. Bowen
pen. For example, in an ethical climate envi- & Ostroff, 2004) but highly ambiguous and
ronment characterized by a shared complex messages to competitors. Becker
understanding of means and ends, employees and Huselid (1999) note that the strate-
are more likely to work toward a common gic effects of HR systems evolve through

unique historical paths and maintain inter- on corporate governance, ethical/unethical

dependence and synergy among components decision making, and principles governing
within the system that competitors cannot right and wrong (Tseng et al., 2010) toward
easily duplicate. It is through this ambiguity a more strategic and management-oriented
and uniqueness of the HR system attributes focus. Thus, ethics has been elevated to the
that the firm is able to enhance and sustain status of a valuable, intangible organizational
its ethical climates. Additionally, HR sys- asset that holds the potential to generate
tem attributes must also be aligned with the value-creating strategies for firms. We suggest,
appropriate strategic objectives of the firm therefore, that future strategic HRM research
(Lado & Wilson, 1994). This combination should explore ethics from this perspective.
strengthens the uniqueness and ambiguity of Third, the ideas presented in this article pro-
the HR systems that would further frustrate vide a platform upon which future empirical
any attempts at duplication. Thus, the ambig- research on the HR system–ethical climate
uous and subtle nature of these interactions— relationships may be based and tested.
configuration of HR practices, organizational Our proposed framework also entails a
resources, and employees’ behavior—fosters a number of practical implications. First, HR
strong ethical climate. systems could be viewed as one part of the
Further, a resource-based per- larger system within an organization that
spective offers important con- promotes an ethical climate. Yet, as we have
Ethics has been tributions to understanding the suggested, HR systems cannot operate in
elevated to process through which HR systems isolation of the larger system. On this note,
can foster ethical climates, with Weaver, Trevino, and Cochran (1999) argue
the status of a important implications for both that systems that are decoupled from cen-
research and practice. First, this tral operational processes are mere “window
valuable, intangible article demonstrates the resource- dressings.” Conversely, systems that are inte-
worthiness of ethical climates by grated with daily operations, such as the HR
organizational
theorizing how ethical climates systems we proposed, convey the message
asset that holds the can be strategic and value-laden that ethics are taken seriously. This notion of
when supported by the right con- integrated systems also ties to the role of lead-
potential to generate figuration of HR systems. In this ership in creating a strong HR system for eth-
regard, it expands the current ics. Indeed, in his classic work The Functions
value-creating
horizons of RBV theory by pro- of the Executive, Barnard (1968) asserts that
strategies for posing that ethical climates, like one of the fundamental roles of leaders is to
other resources, can create stra- create a moral framework for subordinates.
firms. We suggest, tegic value by directly impacting Similarly, Weiss (1998) posits that leaders
the collective behaviors of orga- are seen as the primary conduit through
therefore, that future
nizational members. Collective which the ethical climate of an organization
strategic HRM behavior is a function of ethical is articulated. In addition, Bird and Waters
climate through which employees (1989) argued long ago that moral leadership
research should diagnose situations (Cullen et al., must be built into the “fabric of organization
2003) and form a shared under- life” in order to promote an ethical climate.
explore ethics from standing of how to behave. This Second, in terms of practice, HR systems can
this perspective. process is both intangible and be instrumental in helping an organization
embedded in the collective psyche move toward an ethical approach in con-
of the organization, thus making ducting business that may result in beneficial
it difficult to imitate or replicate by a com- outcomes. For example, managers can con-
peting firm. Second, by looking at the con- figure HR systems to discourage unethical
nections between HR practices and ethical behavior through an open and confidential
climate sustenance through the lens of the reporting system that encourages, protects,
RBV, the article highlights the importance of and rewards whistleblowing, thus prevent-
business ethics beyond the traditional focus ing financial wrongdoing and protecting

the interests of stakeholders. Toward this embrace ethical principles are significantly
end, Schminke, Arnaud, and Kuenzi (2007) more successful than organizations that do
expressly state that developing and promot- not. Finally, our framework underscores the
ing ethical climates require substantial man- importance of ethical climates as valuable
agerial attention, and HR systems should be and socially complex resources that cannot
proactive in creating and supporting desired be captured solely in organizational docu-
ethical norms. Doing so may generate a sig- ments but can be exploited by the organi-
nificant benefit because, as Hosmer (1994) zation in its dealings with customers and
so eloquently argued, organizations that employees.
LAXMIKANT MANROOP is an assistant professor of human resource management in

the Heller College of Business at Roosevelt University in Chicago, Illinois. His research
interests include strategic human resource management, job search, performance
management, and industrial relations. His work has appeared in several high-impact
journals, such as Human Resource Management, the International Journal of Human
Resource Management, Human Resource Management Review, and the British Journal
of Industrial Relations, among others.
PARBUDYAL SINGH is a professor and director of the School of Human Resource

Management at York University in Toronto, Canada. Dr. Singh’s research covers emerg-
ing issues in human resource management and labor relations. He has written more than
90 refereed publications, many in top journals such as Industrial Relations (Berkeley),
the British Journal of Industrial Relations, the International Journal of Human Resource
Management, Leadership Quarterly, Human Resource Management, the Journal of
Business Ethics, Organizational Psychology Review, Management International Review,
Human Resource Management Review, and the Journal of Vocational Behavior. He is a
coauthor of Managing Human Resources (7th Canadian edition), a leading textbook in
Canada.
SOUHA EZZEDEEN is an associate professor of human resource management at York

University’s School of Human Resource Management. Her research interests focus on
topics at the intersection of managerial and professional work, work-life balance, and
career and family issues of professional and managerial women. Her work has appeared
in journals such as Psychological Reports, Organizational Dynamics, and the Journal of
Leadership Studies, and has been cited in global media sources such as the Wall Street
Journal and the Financial Times. She is also an award-winning educator, teaching in the
areas of recruitment and selection, work-life balance, and current issues in HRM.
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HUMAN RESOURCE SYSTEMS

AND ETHICAL CLIMATES:

Keywords: competitive advantage; ethical climate; HR systems; resource-

Introduction organizational resource, little attention has

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Instrumental Climate and HR In the same vein, HR systems can intro-

Human Resource Management DOI: 10.1002/hrm

that is reinforced through a performance a caring climate fosters an atmosphere in

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

and a greater likelihood of future effective Independence Climate and HR

Human Resource Management DOI: 10.1002/hrm

In addition, shortlisted candidates can be In addition, performance management

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

TABLE I HR Systems Components and Exemplars of Ethical Climates Conﬁgurations

Human Resource Management DOI: 10.1002/hrm

unique historical paths and maintain inter- on corporate governance, ethical/unethical

Human Resource Management DOI: 10.1002/hrm

LAXMIKANT MANROOP is an assistant professor of human resource management in

PARBUDYAL SINGH is a professor and director of the School of Human Resource

SOUHA EZZEDEEN is an associate professor of human resource management at York

References workplace behaviour. Corporate Governance, 5,

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

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