Ethics scandals and corrupt practices can ruin a business. Can good judgment and ethical decision-making be taught in business schools? While these schools are now trying to incorporate ethics education, few studies have examined the effectiveness of such courses. This study focuses on the influence of successful outcomes on perceptions of ethical behavior. Is a successful person more likely to be considered ethical, regardless of other factors? A statistical analysis of responses from 175 people who were working and also pursuing master's degrees in business supported the hypothesis that a comprehensive course with an ethical focus mitigated bias in judging the ethical standing of others.
Ethical behavior has interested business researchers for decades (e.g., Akaah and Lund, 1994), but recent ethical scandals in major organizations worldwide (e.g., WorldCom, Adelphia, Parmalat, WIPRO, Sanlu Group) have brought business school curricula under intense scrutiny. Masters of business administration programs have been subject to criticism for failing to develop critical competencies such as decision-making (Rubin and Dierdorff, 2009) and for fostering amoral theories based on opportunistic behavior and lack of trust (Ghoshal, 2005). Business organizations and society alike are demanding that business schools examine their curricula and work toward graduating managers who will perform their jobs in an ethical manner. The primary accrediting organization for business schools has responded to this demand and has indicated that schools should ensure that all students understand the symbiotic relationship between business and society (AACSB International, 2004). Business students themselves also are interested in having classes explore issues related to corporate social responsibility (Net Impact, 2006). Many of the 2009 graduates of the Harvard Business School took a voluntary student-led pledge to "serve the greater good" (Wayne, 2009).
Yet, the effectiveness of education to improve ethical judgment and performance remains in doubt. Many suggest that a business school course is unlikely to make students more ethical decision-makers (Giacalone and Thompson, 2008). However, the differences in the day-to-day ethical judgments of those who have completed required courses covering ethics are not well understood. Much research in ethics has tended to be either prescriptive or focused on surveys regarding perceptions or opinions of ethical performance. Empirical research has often been correlational and exploratory (Tenbrunsel and Smith-Crowe, 2008). Theoretical work has consisted primarily of developing models that propose various personal and organizational variables as the determinants of ethical behavior (Akaah and Lund, 1994). It has been argued that the influence of organizational context is often unrecognized and unappreciated by researchers (e.g., Johns, 2006). Yet, relatively little research has examined whether or not completing a course on ethical decision-making can reduce organizational influences and improve ethical judgment and performance.
Our research addresses this gap in the literature. In particular, this study examines whether or not ethics education reduces the influence of performance outcomes and results in improved ethical judgment. Performance outcome, that is, whether or not an employee is considered successful or unsuccessful on the job, has been found to bias ethical judgments (e.g., Selvarajan and Cloninger, 2009). Those considered successful have been judged to behave more ethically than those deemed unsuccessful. In other words, employees' performance levels have been found to influence judgments of whether they are ethical or not. Furthermore, the respondent's personal beliefs do not affect this finding. That is, the evidence suggests that organizational influences (e.g., job performance levels), can override respondents' personal ethical systems. Since personal ethics are developed over a lifetime, this finding raises the question of whether or not ethics education can help students improve their ethical reasoning skills sufficiently so that their ethical judgments overcome the influence of job performance levels. Specifically, this research tests if a single comprehensive course that includes substantial attention to ethics can accomplish this task. Or simply put, can ethics education reduce job performance outcome bias?
This research is important for theory and practice. From a practical perspective, job performance appraisals are used by most organizations to improve job performance. Yet job outcomes (performance levels achieved by employees) have been shown to bias the ethical judgments. In particular, employees who receive positive appraisals are judged to be more ethical than employees who receive negative appraisals. If ethics education reduces bias and improves ethical judgment, implications for businesses seeking to hire ethical managers are significant.
From a theoretical perspective, this research is important because it systematically examines whether or not ethics education can mitigate the influence of job outcome bias. Performance appraisals are subject to the cognitive limitations (Selvarajan and Cloninger, 2009; Cardy and Dobbins, 1994), and given their prevalence, the influence of job outcome bias on ethical judgments is likely to be common. Yet job outcome bias is relatively unstudied. Also, unlike the previous ethics research examining undergraduates (e.g., Neubaum, Pagell, Drexler, MckeeRyan and Larson, 2009), this research examines ethical judgments of graduate students who are full-time employees, are generally older, and have more experience than undergraduates entering the field of management. The judgments of full-time employees are of greater practical interest and relevance in the field of management, and ethical judgments of older individuals have frequently been found to differ from those of younger individuals. Finally, systematic examination of the influence of bias may shed light on the mixed findings of prior studies regarding the influence of education on ethical judgment. Therefore, this research provides new empirical evidence evaluating the relationship of ethics education to performance appraisal systems, and can be used to help build better theories.
Theoretical Foundations and Hypotheses
Performance appraisals and ethics
Researchers have recommended recently that ethical behavior be explicitly incorporated into performance appraisals (Buckley, 2001; Weaver and Trevino, 1999), suggesting that incorporating ethical dimensions into performance appraisal systems will help integrate ethical expectations into formal role identities. Yet many organizations primarily reward other measures of performance, especially financial, regardless of ethical or unethical behavior. Although research remains limited, theoretical evidence suggests that job performance outcomes influence ethical judgments (e.g., Selverajan and Cloninger, 2009).
Ashkanasy, Windsor, and Trevino (2006) found that perceptions that an organization rewards unethical behavior or punishes ethical behavior influences employees' decision-making. Other studies have found that respondents judged those with successful job performance outcomes to have exhibited more ethical behaviors than those who had unsuccessful job performance outcomes (Selvarajan and Cloninger, 2009). Furthermore, the ethical judgments in these studies were consistent regardless of the respondent's personal ethical beliefs.
Education and ethics
Arguments on the effectiveness of ethics education vary. Some research finds that integrating ethics into the curriculum is significant and decreases tolerance for unethical behavior (e.g., Lopez, Rechner, Sundaramurthy and Olson-Buchanan, 2005). Hartman (2006) suggests that ethics education can help students think critically about their values and how to put them into practice. In other words, ethics education can help students better assess complex situations and realize that being ethical is in their own best interests.
Alternatively, Neubaum, et al. (2009) found the moral philosophies of undergraduate business students and nonbusiness students were similar as they progressed through four years of college, and that seniors were more likely than freshman to expect businesses to behave ethically. This finding is consistent with O'Fallon and Butterfield's (2005) review of the literature that indicates that more education, employment, or work experience is positively related to ethical decision-making, but that the type of education has little or no effect.
Organizations support and undermine ethical judgment
On the other hand, some make the argument that managers already know what is ethical, and know that they should be ethical (e.g., Velthouse and Kandogan, 2006), but that ethical judgments are undermined by organizational behavior. Moral reasoning may be context-specific and only weakly linked to behavior (Svanberg, 2008). Evidence suggests that organizations can support or oppose ethical behaviors (Hartman, 2006; Shelley, 1994). Organizations can foster an ethical environment or one in which customers, suppliers, or employees are treated dishonestly or unfairly (Shelley, 1994). In the latter, rationalizing unethical actions may be easy.
Similarly, some organizations require managers to meet unrealistic performance goals (Shelley, 1994), and meeting an immediate financial goal is rewarded while ethical behavior is not. In these organizations, ethics simply doesn't 'fit' into managers' daily tasks (Velthouse and Kandogan, 2006:153).
Ethical judgments are subject to biases
Given that unethical behavior can take a variety of forms, ranging from convenient disregard of company policies to breaking civil or criminal law, improving the ethical judgments of employees is vitally important to an organization. Although evidence suggests that more education generally improves ethical judgment (O'Fallen and Butterfield, 2005), ethical judgments are subjective. The ethical nature of behavior is seen as a social reality (Payne and Giacalone, 1990) rather than as an objective fact, and is subject to biases arising from cognitive limitations of the person rating the performance. Biases degrade decision outcomes (Doerr and Mitchell, 1998).
The performance appraisal literature suggests that performance judgments (positive or negative) can be biased by outcomes achieved by the ratee, the characteristics of the respondent (e.g., education) as well as trait inferences made by the respondent (e.g., Cardy and Dobbins, 1994). From a schematic perspective (e.g., Neisser, 1967), a worker who achieves excellent work outcomes may be placed in a successful-performance cognitive category by the respondent. Thus, an outcome schema may influence the evaluation of the performer's ethical nature. Unethical behavior may be ignored, discounted, or reinterpreted as consistent with the schema of a high performer. This is consistent with research that finds people tend to rate the ethical nature of a successful employee more favorably than that of an unsuccessful employee (Selvarajan and Cloninger, 2009; Cardy and Selvarajan, 1997).
Improving ethics education
Recently, researchers have called for business courses to emphasize ethical and social responsible behavior as an aspirational standard for business and as a strategic way to earn greater long-term benefits for the firm (Kashyap, Mir, and Iyer, 2006). As an aspirational standard, ethical and socially responsible behaviors are expected much in the same way that the Hippocratic Oath is an aspirational standard for the medical profession, that is, an ideal that should be pursued regardless of other rewards. On the other hand, from a strategic perspective courses should seek to convince students that ethical and socially responsible behavior increases the likelihood of short- and long-term advantages for themselves and the firm. The twofold approach is posited to be more meaningful for students.
In this thinking, a comprehensive business and society course with a significant ethics component can be expected to improve ethical judgments by providing a body of information, ethical tools and reasoning methods, and a variety of relevant cases and examples to which students can refer as they make ethical judgments. Education may increase a person's capacity for ethical reasoning (Svanberg, 2008), and education focused explicitly on improving ethical reasoning should improve ethical judgment. Therefore, this research posits that education, specifically a comprehensive business and society course with an extensive focus on ethics, will improve ethical judgment such that the respondents' ethical judgments are less biased by job performance outcomes.
Hypothesis 1. Ethical judgments of students who complete a comprehensive business and society course will be less biased by job outcomes than ethical judgments of students who have not completed the course.
Rater characteristics have been found to significantly affect performance judgments (Cardy and Dobbins, 1994). In the appraisal literature, rater characteristics such as personality and ability have been recognized as potentially important influences on ratings (e.g., Lee 1988). Many studies have reported that age appears to be positively correlated with more ethical decisions. In O'Fallon and Butterfield's (2005) review of 37 studies on the effect of age and ethical decision-making, 10 found a positive relationship and six a negative relationship, but 14 reported no significant differences based on age. They concluded that the relationship between age and ethical decision-making is complicated and not necessarily captured by previous studies. This is likely true, but studies continue to find that age appears to be related to improved ethical judgments. Therefore, to focus more effectively on the influence of education on bias and improve our confidence in the results, this study will also examine if the students' age influences the relationship between ethics education and ethical judgments, or if there is an interaction effect between age and education. However, it will not make a hypothesis with respect to student age, although there is a general expectation that older respondents are likely to make better ethical judgments due to their greater work and life experiences.
All students in the program used in the study were required to take the business and society class, so the sample was not biased by self-selection. In other words, students who took the class were not necessarily more interested in ethics or social responsibility than those who took the class for other reasons (e.g., it fit their schedule).
The convenience sample consisted of 175 (90 men and 85 women) with an average work experience of 9.1 years. The average age of the respondents was 30.9 years. The respondents were employed in organizations ranging from large firms employing more than 1,000 to smaller firms employing fewer than 100. The respondents were all pursuing master's degrees, primarily in business at a Southwestern University. There were 82 participants in the after condition and 93 participants in the before condition (before and after taking a course).
The basic material for this research was a vignette that described the performance of a fictitious sales person. The respondents randomly received one of four written vignettes (ethical-high performer, unethical-high performer, ethical-low performer, unethical low-performer).
An example of the vignette is in the Appendix. Each vignette contained 10 critical incidents describing a salesperson's ethical or unethical behavior. The critical incidents represented five of the six dimensions (two incidents for each dimension) of ethical behavior. The six dimensions of ethical behavior (personal use, bribery, deception, padding expense accounts, passing blame, and falsification) were based on the research by Newstrom and Ruch (1975) and Akaah and Lund (1994).
Ethical behavior was manipulated by providing ethical or unethical incidents for each of the four ratees. The "ethical" ratees had ethical incidents and "unethical" ratees had unethical incidents for all the dimensions of ethical performance. In addition to critical incidents of ethical behavior, the vignettes also contained summary statements regarding sales performance outcomes. The summary statements were drawn from the dimensions of sales performance (salesmanship, product knowledge, and ability to initiate/utilize sales innovations) identified from research in marketing (Bush, Bush, Ortinau, and Hair, 1990; Lucas, 1985). These statements summarized the salespersons' outcomes for each of these dimensions. For example, a ratee with poor outcomes was described as failing to close sales on the salesmanship dimension. In addition to these summary statements, the overall performance of each ratee was described as successful or unsuccessful, as appropriate; a successful ratee was described as a star performer who consistently exceeded all performance targets and an unsuccessful ratee was described as a dismal performer who never achieved performance targets.
In summary, ethical behavior was manipulated by providing unethical or ethical critical incidents for each of the four ratees. Job performance outcomes were manipulated by providing performance outcome descriptions for the sales performance dimensions and by summarizing the level of success or failure in the overall performance description. A total of four ratee vignettes were formed by crossing the two levels of ethical behavior (ethical or unethical) with the two levels of outcomes (success or failure).
Validity and reliability of the vignettes
Scale development work (Cardy and Selvarajan, 2004) confirmed the dimensions and effectiveness of the ethical and unethical incidents. In brief, the development work generated a six-dimension behavioral scale for assessing ethical judgment using the behaviorally anchored rating scale (BARS) procedure outlined by Bernardin and Beatty (1984). For each of the six dimensions, the authors generated critical incidents representing ineffective, average, and effective ethical behaviors. This is a variation from the BARS procedure outlined by Bernardin and Beatty (1984), in which students generated critical incidents. Retranslation was conducted by 47 undergraduate student raters who indicated the dimension to which each of the critical incidents belonged. Finally, the effectiveness of the items surviving the retranslation process was evaluated by a separate group of 84 student raters. Based on the effectiveness levels of items, behaviorally anchored rating scales were constructed for the six dimensions of ethical behavior. Each scale had approximately five behavioral anchors spanning the range of each scale. Further details can be found in Cardy and Selvarajan (2004).
In addition, the dimensions of ethical behavior used in this study roughly correspond to the types of misconduct observed most frequently in organizations. In a national business ethics survey of 1,500 employees, the Ethics Resource Center (2003) found that the most often observed misconducts were lying, withholding needed information, abusive or intimidating behavior toward employees, and misreporting actual hours worked.
The rating scales included (a) a 12 item behavioral observation scale (BOS), (b) one 7-point global ethical rating scale, (c) one 7-point global performance rating scale, and (d) a 16-item, 7-point Likert scale for measuring individual differences in ethical beliefs (Daniel, Elliot-Howard and Dufrene, 1997).
The behavioral observation scale contained a 12-item checklist on which participants were asked to print Y (yes) or N (no) depending on whether the sales person had exhibited the specific behavior. Ten of these items represented the 10 critical incidents provided in the vignette. Two items served as "lures" to calculate false alarm rates (explained later on). This scale was used for calculating the dependent measure "bias."
A scale developed by Daniel, Elliot-Howard, and Dufrene (1997) was used for measuring individual differences in ethical beliefs. This scale included five dimensions of ethical beliefs: personal integrity issues, corporate integrity issues, individual rights issues, environmental issues, and international issues. For this study, the items representing the three most relevant dimensions, namely, personal integrity issues, corporate integrity issues, and individual rights issues, were used. Sample items for this scale include: "It's acceptable to use investment resources from questionable resources," and "It's acceptable to restrict legal actions by damaged customers." The alpha reliability for this 16-item scale in the present study was 0.77.
The signal detection measure of "bias" was used as the dependent measure for this study. Signal detection measures have been used extensively in determining judgment accuracy (e.g., Larson, Lingle and Scerbo, 1984; Lord, 1985; Snodgrass and Corwin, 1988; Sulsky and Day, 1992).
Sulsky and Day (1992) define bias as "the probability of saying "yes" to an item when faced with a recognition task under conditions of uncertainty." That is, bias is a function of the probability of saying "yes" to lure items (items not presented in the ratee description vignette but appearing in behavioral observation scale). Bias is measured by the following formula recommended by Snodgrass and Corwin (1988):
Bias = false-alarm rate/[1-(hit rate-false alarm rate)]
Higher scores on this index are associated with more lenient decision criteria. A hit rate is the proportion of items correctly identified as observed, and a false alarm rate is the proportion of items incorrectly identified as observed. Since bias is undefined for hit rates of 1.0 and corresponding false-alarm rates of 0, the following corrections recommended by Snodgrass and Corwin (1988) were used:
HR' = [hit-rates +0.5]/[no. of relevant items +1]
FAR' = [false-alarm rates +0.5]/[no. of relevant items +1]
Snodgrass and Corwin (1988) recommend the routine use of this correction in analyses using signal detection theory.
The participants were randomly assigned to one of the four experimental conditions (success, unethical; success, ethical; failure, unethical; failure, ethical). The packet of materials given to the participants included one ratee vignette, one set of rating forms, the ethical belief scale, and a demographic data form. Participants were instructed to read each vignette carefully and fill out the various rating forms. They were
specifically asked not to look back at the description of the salesperson while they were filling out the rating forms.
This research hypothesized that ethical judgments of students who complete a comprehensive business and society course will be less biased by job outcomes than ethical judgments of students who have not completed the course. In addition, to focus more effectively on the influence of education on bias and to improve our confidence in the results, this study also examined if the student's age influenced the relationship between the ethics education and ethical judgments, or if there was an interaction effect between age and education. We did not make a hypothesis with respect to student age, because evidence remained mix, but expected older respondents would make better ethical judgments due to greater work and life experiences. Our findings follow.
To test for before and after effects, that is whether or not the students who had completed the course demonstrated improved ethical judgment (less bias) than students who had not completed the course, we used analysis of variance. The mean bias score for the before condition was 0.53, and the mean bias score for the after condition was 0.41. Analysis of variance showed that the bias scores between these two conditions was significant (F (1,171) = 3.96; (p<0.05). Therefore, the hypothesis that the bias score would be less for the after condition compared with the before condition was supported.
In summary, students who had completed the course demonstrated better ethical judgment than students who had not completed the course. Performance level still influenced ethical judgments, but judgments by students completing the course were significantly less biased than those of students not completing the course.
To examine if the student's age influenced the relationship, we used analysis of variance to examine the direct effect and the interaction effect. This showed that both the age and the interaction between age and ethical education were not significant (the corresponding statistics are: F(1,171) = 2.43, p>0.05 and F(1,171) = 0.53, p>0.05), respectively. Completing the course had a significant effect, but age did not.
However, post hoc analysis of mean bias scores for the relatively younger students in the sample showed a change in bias score from 0.58 to 0.48 for the before and after conditions, and for the relatively older students, the bias score changed from 0.43 to 0.39. Younger students for the purpose of post hoc analyses meant younger than the median age of 31. Although age was not significant, it is interesting to see that the effect of teaching ethics course on ethical judgment had more positive influence on younger students than older students. For a sample of younger students, the influence of age might have been significant and is an area for future research, as discussed later.
Discussion and Conclusions
This research examined whether or not ethics education can improve ethical judgments by mitigating the bias due to job performance outcomes. The results support the hypothesis that a single comprehensive business and society course with a focus on ethics can mitigate bias. The ethical judgments of students who completed the single course were less biased by job performance levels compared with students who had not completed the course.
Contribution to research
Our findings imply that education, even a single course emphasizing business ethics, can improve a person's capacity for ethical reasoning. It adds to the research indicating that education improves ethical judgments (e.g., Neubaum, et. al. 2008). It also suggests that education may be even more influential in improving the ethical judgment of younger students since bias was reduced more for younger students than for older students (although not statistically significant). These are important findings for educators and point to the need for additional research into the efficacy of education for improving ethical judgment. The preliminary finding that education reduces the impact of organizational influences also calls for further study, but is a hopeful sign that ethics education can improve ethical judgment even in the face of organizational obstacles, such as rewarding unethical performers.
Contribution to practice
This research also has important, practical implications for organizations. Although ethics education may be useful, organizational influences remain important. The ethical judgments of students who completed the single course were less biased by job performance levels, but were still influenced by successful or unsuccessful job performance. This implies that in an organizational culture where winning is all important, the culture may excuse unethical behaviors, and other organizational values such as creeds of corporate conduct may be more likely to be ignored. The obvious conclusion for practicing managers is that to build an ethical work place, they probably should strive to reward ethical behavior and punish unethical behavior as well as strong or weak performance.
Organizations cannot rely solely upon education to support ethical judgments. Education can help eliminate bias and improve ethical judgments, but cannot entirely overcome organization influences. Managers who take a relatively more lenient view of unethical behaviors for successful subordinates, it could perpetuate a success-breeds-acceptance culture, regardless of the educational background of subordinates. Managers should structure their organizations to support an ethical environment. They should seek to counter the influence of outcomes on ethical judgment by collecting ethical ratings from multiple sources (e.g., peers, and customers). Perhaps nonmanagerial appraisals are more sensitive to the process of ratee performance than to its outcomes. Customers, in particular, may be more focused on process than outcomes. Peers may also be more focused on a teammate's work process since it is directly observable.
Limitations and future research
One limitation of this research is that it used a business and society course that included studies of ethics, corporate social responsibility and citizenship, and strategy. Future research may wish to examine and compare the effectiveness of courses focused strictly on ethics, or citizenship, or the strategic benefits (e.g., reputation) in limiting bias. In addition, one of the authors designed and teaches the course in which the after data were collected. However, the other author designed the experimental vignettes independently. Nevertheless, future research may wish to examine the effectiveness of different instructors for the same course.
Another limitation is that this research focused on one organizational influence, job performance appraisal outcomes. Other organizational variables, such as top management leadership and peer reviews of job performance, should also be examined.
Future research should examine how institutional support for business and society or ethics education within the school influences the effectiveness of the course, that is, how seriously ethics and corporate social responsibility are taught and reinforced throughout the program. A study of over 200 full-time MBA programs found a lack of institutional support for ethics education (Evans and Weaver, 2005).
Another area of future research should focus on other rater characteristics, such as personality and cognitive moral development that could moderate the relationship between job outcome and ethical judgment bias. Another rater characteristic, age, continues to be associated with improved ethical judgment, but the findings are often not significant, indicating that the relationship of age to ethical judgment is likely to be more complex. Similarly, in this research the dependent measure of judgment bias has to do with observation, not with evaluation of the quality of the ratee's performance, and requires more study.
Finally, the potential for on-the-job rater training specific to the organization rather than in a university or college setting also could reduce the influence of ratee performance on judgments concerning ethics. The development of norms and evaluation practice, similar to frame-of-reference training (Bernardin and Buckley, 1981), also might reduce the influence of job performance outcomes. However, the present studies provided direct and adequate information for clear and independent judgments of ethical behavior. Students who completed the course did appear to be less influenced by job outcomes than those who had not completed the course, and all students were full-time employees.
Example Vignette. The Successful, Unethical Performer.
WRITTEN DESCRIPTION OF THE SALES PERSON
This sales person has been working in sales under your supervision for the past three years. This person has been one of the STAR PERFORMERS. This person's performance during the past year has been EXCEPTIONAL. Further, this sales person has always exceeded company targets and is one of the TOP EARNERS of sales commissions/bonuses.
This sales person:
1) Is thoroughly familiar with the products of the company.
2) Has initiated lots of new sales/promotion ideas.
3) Persists on tough accounts.
4) Has thorough knowledge of special promotions/campaigns of the company.
5) Has very good knowledge about the products of the competition.
6) Has strong ability to close the sale.
7) Overstates the amount spent on taxi fares, car mileage, tips and the like.
8) Makes personal long distance calls using company telephone.
9) Often stirs up trouble among co-workers so that they are diverted by the interpersonal problems and he/she can focus on getting ahead at their expense.
10) Gives preferential treatment to influential customers to gain personal favor.
11) When dealing once with a customer who was ready to order a top-of-the-line product, the salesperson saw that the customer who was about to order a top-of-the-line product would be better off with a less expensive product and informed the customer about the better alternative.
12) Promptly informed a customer that he or she had received an inferior quality product and replaced it.
13) Succeeded in obtaining a huge order by giving the purchasing agent a gift worth $10,000.
14) Incurred $1,000 in expenses on a business trip but reported expenses for $2,000 for reimbursement.
15) Hoards free samples meant for customers for personal use.
16) Makes sexist/racial remarks about co-workers.
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Peggy A. Cloninger, University of Houston-Victoria
T. T. Seivarajan, University of Houston-Victoria
Dr. Cloninger, past recipient of a Kauffman Center for Entrepreneurial Leadership grant, focuses her research on integrating strategy, ethics, and issues related to business and society. Dr. Selvarajan pursues research in the areas of performance appraisal, ethical performance appraisal, and cross-cultural issues in human resource management. Both authors are associate professors of management.…