Below is a fictionalized case study that presents dilemma faced in real organization. And written by me is a recommended solution to the problem. This has been published in Business Manager HR Magazine April 2019 edition
The Unethical HR
P. Mohan Reddy , the works director was not happy to see an email in his mailbox after coming from routine meeting of all managers and taking a review of manpower planning and continuous inflow of people to cater the plant needs. The main issue was of failure of providing sufficient man power supply by HR to different departments on daily basis. The manufacturing facility was new so the recruitment drive was on full swing.
Initially the company thought of a policy of outsourcing many activities through agencies to cater maximum needs and keep a stable minimum numbers of employees on permanent rolls. But after joining of new Recruitment Manager Shiva prakash from last one year, the policy was changed. On his suggestion, management agreed to increase employees’ numbers slowly on co. rolls to maintain the minimum inventory of head counts. Shiva was appointed by the corporate office with some reference of one of the independent board director.
Shiva prakash was devoting his maximum time with placement vendors to acquire maximum people to appoint them on co. permanent rolls.
The mail before Mr. Reddy was sent by Maintenance manager. He expressed his uneasiness about growing rate of attrition of people appointed on permanent Rolls. Maximum duration of employees was less than six months. His last line was much disturbing. He mentioned that the some boys had revealed that the same vendor providing us the manpower approached them for better opportunities and also poached them for some other organisations. The people crisis was rather becoming more and more complex. It was becoming a challenge for Mr. Reddy. Till now he left everything on Shiva prakash . But after reading mail, he decided to get involved and go deeper to find out the reasons behind all this. He called Shiva prakash to discuss the issue. Here is the conversation:
Reddy: Shiva what is this happening? Why we are not able to stable the employees inventory. Why so much attrition?
Shiva: sir, it is demand and supply issue. We are at very remote location. People join us, stay for some time and then leave as soon as get other opportunity.
Reddy: But we have increased the base salary rate and other allowances also as advised by you. What more you want to do ?
Shiva: I will ask placement vendor to be more serious and send us the candidates who are willing to stay back for long time.
Reddy: Everything is not right in your process. Call that vendor. I would like to meet him.
Shiva: Ok Sir.
Even after one week, placement vendor did not come to meet Mr. Reddy. This raised his eye brows.During this time, Reddy got message from one HR officer assisting Shiva in recruitment process. He wanted to meet Reddy not in plant but at his residence. It was not normal. Things were looking messed up. He responded –“Send context of meet at my personal mail Id from your personal mail. Then will meet.”
Reddy got the mail in the same night. “ Sir, Everything is not right in Recruitment. I am no more involved in recruitment now. Things are not transparent. Mr. Shiva and other female colleague only are doing all activities. Shiva does not trust me more . He is deeply involved with the placement vendor. I am never allowed to talk to him. He does everything of his own. I can share much if you permit to meet.”
Reddy Replied back. “Come 2maro morning before leaving for plant.”
HR officer, Sumit who was recruited by Reddy was in his first job. He belonged to well educated family. His father was senior bureaucrat. Many times sumit demonstrated his integrity and commitment towards organisation. Initially when he was assisting the administration, He caught scrap vendors loading/carrying material in collision with security guard at the post, which was not purchased by them. He compelled the vendor to unload the truck and re-segregated the scrap material. Rajni was appointed by Shiva.
When Sumit met Mr. Reddy at his residence and exposed Shiva, it was like a bombing. Sumit revealed that shiva was favouring the vendor unreasonably. He diluted the agreement terms also. Earlier, the vendor was responsible for providing free replacement if the candidate leaves within six month. Now the condition has been diluted to three months. Earlier the payment terms were of three months. Now it has been reduced to one month only. The persons who are approaching directly to Co. for possible employment opportunities are discouraged and advised to come through vendor. In many cases Shiva shared the information of direct applicants to vendor and asked him to contact them and send their CVs through him. Sumit also requested that he can further investigate and takeout more details if Reddy permits him to do so. Reddy assured him that nothing will happen and he should continue watching him and his activities.
Reddy came to office, asked the finance manager to provide him the details of payments made to placement vendor during last one year. He was surprised to see the whopping payment figure. It was touching 10 million. He decided to put Shiva under surveillance. He engaged a private vigilance agency. After fifteen days the agency shared his report of findings. It ran like this:
“The Placement agency named Metaphor executive search agency address provided was of a residential flat. There is no display board. People of the area do not know about any such business activity being carried out from the flat. Neighbourers revealed that an old couple resides there. The proprietor of the placement agency is relative of Mr. Shiva. The account statement obtained from bank unofficially in confidence reveals the interesting pattern of funds flow. Whenever the payment from the company was credited in the account of the agency, It was transferred to another account in the different branch of the same bank. The ultimate beneficiary in which amounts were used to be transferred belonged to one woman, who happened to be the wife of Shiva. Rajni,the female employee working in the HR assisting in recruitment activities was spotted with Shiva in the restaurants and malls of the city far away from factory location during last fifteen days. The relationship reflected was not of a boss and a subordinate.”
Agency also enclosed the photographs of Shiva and Rajni while in restaurants and malls, bank statements of the agency, and his wife where amounts were transferred.”
Next morning , Before Reddy could think of any action against Shiva after discussing with corporate office and his confident managers, Shiva came running to meeting room where Reddy was discussing some other issues with different managers in meeting room. He was perplexed. He said that that the female employee working in HR department has given a complaint of sexual harassment against Sumit and the issue was very sensitive. He tried to molest her in the office when they were alone. Shiva put the written complaint before Mr. Reddy. Shiva said that she was standing outside meeting room and wanted to see you sir. She is insisting that she will report the matter to the police.
Questions for Discussion and Solutions
1. Discuss the functional style and behavioural traits of Shiva vis-a vis of Mr. Reddy.
P Mohan Reddy seemed to be systematic & organised in his working style who obviously knows his work well & is deeply entrenched in it. He also appears to be a senior pro in his functional role as works director. The fact that he became alert of suspicious activities in hiring process once the attrition rate was pointed out by maintenance manager, seeing the enormous amount paid to a single placement agency vendor in last one year, dilution of T&C in agreements with vendor and also hiring of a vigilance agency for reporting of fraudulent activities states so. However one could point out that Mr. Reddy should not have given complete authority to Shiva to handle all recruitments & policy and decision making in that regards. Some level of control or regular reporting system had to be put in place by Mr. Reddy for Shiva. This was one of the lapse in the processes that has led ultimately to this fraudulent practices. However Mr. Reddy could also be forgiven on his part for this lapse as Shiva was recruited by reference of an independent board director.
Shiva Prakash appears to be a fraudulent employee whose sole objective is to make money using the company’s resources for his personal gains. He is also observed to be involved in extra-marital affairs in spite of having a family. Ethical behaviour or following ethical practices is not in the DNA of Shiva. Shiv Prakash cannot be trusted. The fact that he was devoting maximum time to recruitment activities by co-ordinating with his relative who ran the placement agency inspite of him being at a managerial position and not allowing his juniors to do so states the fact. Also due to lack of degree of control in work reporting to superiors, he misused the complete freedom & authority given to him to change recruitment policies, recruitment agreements with the vendors for his personal gains. Needs of the company were never his prerogative
Shiva Prakash’s acts are also very short-term minded. For how long, this will continue, one doesn’t know. It will be very difficult for Shiva Prakash to find another job after he is suspended from his current organisation once his fraudulent activities are found out, reported and acted upon.
2. Discuss the people processes of the organisation? Were they correct or some review is required if so, what would you suggest?
Definitely, lots of review is required in the people processes of the organisation and also in other processes like finance, legal and vendor empanelment. First of all, Finance should have questioned as to why an enormous amount like 10 million is paid to a single placement agency Metaphor Executive. Finance should have questioned HR or atleast brought it to notice of Reddy since he is Director. Finance should not just be processing payments arbitrarily. Finance should be proactive
All agreements with vendors including HR related should have by Finance / Legal’s stamp of approval too on it. Because ultimately Finance is going to make payment & legal will come in the picture if there is some issue like the one as reported by the vigilance agency. So they should also be aware of it in the first place. The recruitment manager or for that matter HR should not be the sole approving authority. It’s too much of a risk. There has to be a maker-checker system.
There also seems to be absence of an authorised signatory process to sign all legal documents / T&C with vendors. Usually companies appoint a senior person to sign all external agreements / documents on behalf of the management / directors. But here it seems that it didn’t exist. Shiva made use of this process lapse to empanel his relative as an executive search firm. He only became the approving authority. Both maker and checker.
Also if Shiva had tendency of unethical & fraudulent behaviour, why wasn’t his previous employment reference check & background verification done. If this was done properly or had it been in place, then perhaps the organisation would have known his past history and maybe not hired Shiva in 1st place itself and all these issues that have happened as a result of it could have been avoided.
It is to be noted that the case study mentions that Shiva Prakash was hired with the reference of an independent director by the corporate office. So what is the company HR’s hiring and selection policy if a candidate is referred by a director / management, will that candidate be given preference or should merit and need based selection be the sole criteria?
There also seems to be absence or lack of employment service rules that an employee should sign on the day of joining an organisation. The employment service rules should mention that the person in responsible function is strictly prohibited in entering into business contracts on behalf of the company with relatives. Basically, there should not be any conflict of interest which was seen here.
Lastly, there also seems to be lack of whistle blower policy in the organisation wherein one can report fraudulent activities happening without any fear or malpractice happening to the whistle-blowing person that was seen in the case of Sumit being reported for sexual harassment by Shiva on behalf of female employee’s working in his dept. This means that employee’s working under Shiva are involved with him in his activities or might be doing it because he is their boss and has told them to do so or for fear of being exposed and nailed. Also why Sumit had to visit residence of Reddy and report the unethical behaviour of Shiva. Ideally, the company environment and culture should be such that one can work freely and report any wrong doings in the office itself. Shiva would have come to know Sumit has visited residence of Reddy and would have thus become suspicious. Hence in order to protect himself and his co-workers who are working in tandem with him, he counter levelled charges of sexual harassment against Sumit to protect his wrong doings.
3. What do you suggest, how Reddy should handle the situation move forward step by step now and come out as successful leader in a crisis?
There are two situations that Reddy has to handle now. Firstly, to expose the fraudulent activities by Shiva Prakash. Reddy has gone about systematically for that. He got information from maintenance dept. Based on that he verified the attrition report and reasons underlying it. Following that trail, he took details from Finance that further confirmed his doubts. He then had an independent agency conduct probe against Shiva Prakash who submitted their report.
Secondly, Reddy has to handle the counter allegation move by Shiva Prakash of sexual harassment against Sumit who had exposed his unethical behavior in the first place itself. Reddy can’t be seemed biased against Sumit also just because he has got proof against Shiva Prakash. For the sexual harassment complaint, it should be referred to the committee that the company would have setup or have in place as per POST Act, 2013. Reddy should also furnish the information that he has got about Shiva Prakash’s other activities to that committee so that they are aware of the background and credentials of the complainant too in the first place and so as to take an informed decision.
Regarding the fraudulent activities information collected by Reddy about Shiva Prakash, depending on the policies of the company, Reddy should forward it to the Corporate Office who will look into it and arrive at a decision. Reddy has done his duty as works director. The corporate office has to act upon it.
Sumit should be supported by Reddy and the company in his hour of crisis since he has done the whistle-blowing act in the best interests of the company against his departmental colleagues. Reddy should ensure that Sumit doesn’t become the scapegoat in these two incidences. The trail of information collected by Reddy against Shiva Prakash including the report by private agency should aid the case of both Reddy and Sumit.
