TAKE CONTROL OVER THE CODING PROCESS:

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TAKE CONTROL OVER THE CODING PROCESS:

Updating the code of ethics at VvAA group BV, a case study.

Masterthesis, MscBA, Specialisation Human resource management University of Groningen, Faculty of Economics and business

March 23, 2011

MATHIJS SIJPERDA Studentnumber: 1328719

Van Royenlaan 30a 9721ER Groningen Tel: (0)507521205 E-mail: M.C.P.Sijperda@gmail.com Supervisor/ University A. Schilder Supervisor/Internship G. Pasman

VvAA group BV. Utrecht

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ABSTRACT

The code of ethics is often used to communicate the rules of conduct and the basic principles of the company, but too often these codes are underutilized. The paper describes a case study at VvAA group BV, a Dutch advisory and insurance company in the health care industry, who want to upgrade their code of ethics. Based upon an ethnographic approach, the paper investigates what this upgrade should entail by addressing both the quality of the content and the coding processes in practice. Results of desk research and open interviews (n=15) show that the current code of ethics is disconnected to the actual coding processes that take place in practice. The upgrade entails that the content of the code has to be reconstructed based upon a participative effort to identify the value‟s and norms that are already present within the organizational culture of VvAA. A concept code is constructed to illustrate how this upgrade should look like.

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1. INTRODUCTION ... 4

2. THEORETICAL BORDER ... 7

2.1 The formal code of ethics ... 7

2.2 The content of the business code ... 8

2.3 The coding process ... 10

2.3 Assessing the quality of the business code ... 15

2.4 Management summary ... 20

3. RESEARCH DESCRIPTION ... 22

3.1 Assignment description ... 22

3.2 Methodology ... 23

3.3 Analysis ... 26

4. RESULTS PER DETERMINANT ... 27

4.1 Stakeholder expectations ... 27

4.2 External characteristics... 29

4.3 Macro & Meso codes ... 32

4.4 Corporate characteristics ... 33

4.5 Objectives with the code and the developmental process ... 35

4.6 Content of the general code of ethics ... 37

4.7 Sub- codes ... 41

4.8 Implementation and administration process ... 44

4.9 Internal context ... 46

4.10 Manager and employee characteristics ... 49

4.11 Objectives for a „new‟ code of ethics ... 52

5. CONCLUSIONS ... 54

5.1 Quality of the current code of ethics ... 54

5.2 Potential strengths of the VvAA code of ethics ... 56

5.3 Suggestions for an update of the code ... 59

5.4 The concept code ... 61

6. DISCUSSION ... 62

REFERENCES ... 65

APPENDIX A: INTERVIEW FRAMEWORK ... 68

APPENDIX B: SUMMARY OF INTERVIEWS ... 71

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1. INTRODUCTION

“A little philosophy inclineth man's mind to atheism, but depth in philosophy bringeth men's minds about to religion”. Francis Bacon (1561-1626)

It has almost been a decade ago when a global shift became apparent, from manufacturing economies to service and knowledge economies that drastically changed the nature of work (Ulrich, 2008). Today managers cannot simply expect from their workers to execute predetermined tasks and roles (Ulrich, 2008). Instead they heavily rely on their workers to adapt and change the nature of their work and methods to effectively respond to new demands in the market environment (Grant & Parker, 2009). Over the years more decision making autonomy and responsibility is delegated to lower levels in the company that call for „more‟ proactive attitudes from workers and managers (Tissen, 2010). Not only have jobs become more socially embedded and proactive in nature, workers themselves also become increasingly aware of their added value to the work process (Grant & Parker, 2009). At VvAA group BV, a Dutch non profit insurance and advisory company for health care professionals, this change in work ethics is interwoven in the company‟s history.

The origin of VvAA group BV goes back to 1924 when five medical specialists start a private association to arrange their own car insurance. At that time the insurance company demanded that people who used their car intensively had to pay a 25% extra fee due to an increased risk of accidents. The founders of VvAA did not agree and started their own car insurance for medical specialists. Based on mutual trust, and the loyalty of members to the association, it was possible to lower the costs of the car insurance and to say „no‟ to the demands of the insurance company. It is the essence of what VvAA stands for: connecting health care professionals to establish a professional platform that is used to exchange knowledge and to fulfil specific business needs (Senior member of the association, 2010). Based on this principle many new members from multiple disciplines (e.g. doctors, dentists and veterinarians) joined the association that grew out to become an exclusive family with 2000 members in the ‟40, and already 10.000 members in the ‟601

. Over the years the exclusive association opened up to all health care and para-health care professions and has a total member count of 110.000 today. These members can turn to VvAA group BV for all their business needs referring to non-medical issues. The association VvAA is the owner of VvAA

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group BV that consists of multiple non profit initiatives in the field of banking, finance, insurance, taxes, legal advice, business solutions, counselling, mediation and a travel agency (annual report, 2009). VvAA group BV currently provides services and products based on a number count of approximately 800 „personal advisors‟ from multiple locations across the Netherlands.

VvAA has always been a solid company based on the support of loyal members of an exclusive association. But the uprising of technological advancements and globalisation changed the health care industry to a large extend:

“Till the ‟60 VvAA was the central meeting point for the majority of Dutch medical professionals. It was an exclusive association that exchanged knowledge between professionals in a time where communication devices were underdeveloped and large hospitals did not exist as they do today. Over time VvAA evolved into a business initiative due to the fact that the health care industry evolved. For example the fact that dissatisfied patient could sue their medical specialist gave rise to a need for high quality legal counselling and specific insurances to cover up possible risks of conduct.” (Senior member of the association VvAA, 2010)

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customer satisfaction (e.g. cost-effectiveness, modernisation, high quality products). For the HR department this change program had serious consequences, because the way work was organised needed to change from a “sit and wait” attitude to a more proactive customer focus. For example the corporate structure was flattened, the complete HR department was reorganised, a new organisational culture was initiated, new ICT systems were implemented, a new performance based incentive system was implemented and multiple adjustments were needed to align policies and procedures with the organisational strategy. VvAA initiated a strong customer focus that delegates more responsibility for output to all employees and managers of VvAA. From 2006 till today senior and line management have given much attention to this shift in attitude based upon workshops, talent programmes, a mentor program, new commercially educated recruits, and recently also a management climate measurement has been performed.

For the HR department a reorganisation was necessary to modernize its practices and policies (e.g. e-hrm, incorporating flexibility into work designs, new performance based remuneration system). Part of this modernisation referred to modernisation of internal communication to ensure that all employees and managers become aware of what is expected from them. At VvAA a general code of ethics exist that was implemented in 2002/2003 next to multiple sub-codes that date from 2006 in order to communicate the basic principles and rules of the company. But beside publishing them on the intranet of the HR department, it is unclear to the HR department what to do with them in general. As a HR advisor formulates it: “it‟s like a big labyrinth without clear directions”. Often HR advisors are confronted with workers who claim that they are not aware of their personal responsibilities at work (e.g. failing to set personal goals with the manager, filing non-work related declarations, personal usage of organisational property). But HR advisors claim that they cannot rely on the existing codes to address possible issue‟s and dilemma‟s in a direct manner. While most of the reported incidents are not that astonishing, it was a clear sign that the current code of ethics needs to be upgraded to provide more clarity about what is expected from workers.

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2. THEORETICAL BORDER

The basic problem of the HR department refers to the fact that they currently do not posses the knowledge or expertise to determine what the upgrade of their code should entail. The first aim is therefore to provide clarity about the nature of the code of ethics, and more specifically: “What qualities should a code of ethics posses in order to guide the behavior of workers and managers in practice?”. The current chapter aims to answer this main question according to the following sub questions: What is the formal code of ethics?; What do companies often describe in their code of ethics?; In which way do companies establish the content of a code? And; How does one assess the quality of a code of ethics?

2.1 The formal code of ethics

The first sub question refers to what the formal code of ethics is in order to clarify the subject for this research. The nature of the formal code of ethics will be discussed in the context of business practices to adopt a single working definition.

2.1.1 The nature of the ‘formal code of ethics’

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„business code‟ is more appropriate than „code of ethics‟ for it represents how a company incorporates the different external standards into business conduct. The business code is part of the house of codes by translating normative standards into day to day conduct, but also incorporates instrumental norms such as a dress codes or etiquette (Kaptein & Schwartz, 2008). In the corporate landscape of today one can encounter different names for these business codes that vary in scope and content (e.g. corporate code of ethics, integrity code, code of conduct, business principles). Kaptein & Schwartz (2008) propose an integrative definition of the business code in order to establish a single working definition:

“A business code is a distinct and formal document containing a set of prescriptions developed by and for a company to guide present and future behavior on multiple issue‟s of at least its managers and employees towards each other, the company, external stakeholders and/or society in general” (p. 113).”

2.1.2 Conclusion

The formal code of ethics is a communication device that communicates a non-instrumental normative standard based upon fundamental moral principles. On an organizational level the term „business code‟ is more appropriate to represent the business standard of a company that captures both instrumental and non-instrumental standards. A business code contains

prescriptions developed by and for a company to guide present and future behavior on multiple issue‟s of at least managers and employees towards each other, the company, external stakeholders and/or society in general.

2.2 The content of the business code

The current paragraph addresses the sub question concerning what other companies often describe in their business code. This is a specific request from the HR advisor in order to create a benchmark for the VvAA code of ethics.

2.2.1 Business codes of the 200 biggest companies in the world

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business code refer to the specific dilemma‟s and situations workers and managers can face during their day to day practices (see KPMG, 2009). Kaptein (2004) studied the content of the business codes of the 200 biggest companies in the world and identified four distinctive information layers (see figure 1).

Figure 1: The code pyramid (Kaptein, 2008, p29)

1) The first information layer describes what the organisation stands for and outlines its general strategic objectives (Kaptein, 2008a). It is „the roadmap to success‟, the „raison d‟etre‟ of a company, „the corporate philosophy‟, „a point of departure‟, but moreover constitutes the standard all decisions and actions are weighed against (Fisher & Lovell, 2009).

2) The second information layer of the pyramid consists of the core principles that are

identified as the drivers of success (Kaptein, 2008a). They are the underlying principles which ground all business conduct and outcomes (Kaptein, 2004), and are deeply routed in an

organisational culture (Kaptein, 2008a). They are often already guiding the actions of employees and managers as deeply ingrained principles (Kaptein, 2004).

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4) The fourth information layer consist of concrete rules and norms that derive from the layers above (Kaptein, 2008). The rules and norms clarify what is expected of employees in their engagement with one another and the treatment of organisational assets (Kaptein, 2004). While the first three layers refer to employee conduct on behalf of the company the fourth layer refers to employee conduct versus the company (Kaptein, 2008a).

5) When companies need to address specific topics in more detail they often use sub-codes to provide more clarity (Kaptein, 2004). These sub-codes are not a specific layer of the business code, but moreover support the content of the business code by illustrating how to apply the business principles to a specific topic (Kaptein, 2008a). When codes only apply to a specific department or stakeholder it becomes a departmental code or stakeholder statute next to the business code (Kaptein, 2004).

Next to the existence of a mission and vision statement company‟s often discuss two or three of the remaining information layers in a coherent manner (Kaptein, 2004). The specific content of the business code is tailor made and reflects the corporate characteristics of a company (Verkerk & Leerssen, 2005; KPMG, 2009).

The business code often contains four information layers that represent the specific issue‟s and dilemma‟s an organisation faces or gives attention to during day to day practices. The mission and vision of the company provides the direction of the organisation; core values ground all business conduct and become part of the organisational culture; business principles derive directly from core values and govern the relationships with stakeholders, and; rules and norms clarify what is expected from employees in their engagement with one another and the treatment of organisational assets. The topics discussed in the business code align with the organisational strategy and the needs of managers and workers according to the issues and dilemma‟s they face.

2.3 The coding process

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2.3.1 Three levels of analysis

The coding processes that take place in practice are complex and capture three levels of analysis (Fisher & Lovell, 2009). The organisation is part of a larger institutional configuration where the legal system, the distribution of political power, and the degree of economic development are major components that influence business practices (Van luijk, 2002). The organisation has multiple relationships with all kinds of individuals, groups and organisations that are all (in)directly connected to the organisation (Fisher & Lovell, 2009). These connections represents the interdependencies between the organisation and multiple stakeholders (e.g. suppliers, customers, employees, trade unions, competing companies, non-governmental organisations) who all protect and promote their own interests (Freeman, 1987). Fisher & Lovell (2009) depict the formal and informal pressures an organisation faces today: 1) macro pressures; 2) the meso pressures; and 3) the micro pressures (see figure 2).

Figure 2: Formal and informal pressures for ethical behavior (Fisher & Lovell, 2009, p. 38).

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third pressure for ethical behavior comes from stakeholders that promote and protect their interests. These are non-governmental organisation‟s (NGO‟s) or quasi-governmental organisations3, societal pressure groups, suppliers and major customers who monitor for example the agreements, codes, international standards or covenants between the public and private sector (Florkowsky, 2006). These agreements or other initiatives are joint procedures to render a certain standard that promotes or protects the interests of stakeholders and fundamental rights of human beings without over-regulating a free market environment (Fisher & Lovell, 2009).

2) On an organisational level a coding process takes place when management addresses the tensions between stakeholder and organisational interests („dilemma of dirty hands‟) in order to govern internal and external pressures for ethicality (Kaptein & Wempe, 1998; Kaptein, 2008a). Overall the organization wants to keep its hands „clean‟ to keep their „license to operate‟ (Stohl et al., 2009). The task of management is to “define and give life to an organisation‟s guiding values, to create an environment that supports ethically sound behavior, and to instil a sense of shared accountability among employees” (Paine, 1994, p111). Organisations often initiate an ethics program to control the behaviors of managers and workers according to the standards they commit to that acts out as a management control system (Weaver & Trevino, 1999). Such a control system often consists of formal ethics codes, ethics committees, ethics communication systems, ethics officers, ethics training programs and disciplinary processes (Weaver & Trevino, 1999). Traditionally the legal and audit staff have a prominent role when ethics needs to be addressed due to the external influences that often give rise to the construction of an ethics program (Weaver & Trevino, 2001). Today HR departments often collaborate with ethics and compliance departments with regard to enforcement (investigations, disciplinary actions) and education (training and communicating ethics policies), but less mutual support was reported to promote the embedding of ethics in the organisational culture (Berenbeim, 2010).

3) On an individual level another coding process takes place when employees face the top down communication efforts of management in relation to their own interests and expectations („dilemma of entangled hands‟) (Fisher & Lovell, 2009). An organizations acts out through individuals who have interests and expectations that may not always with

3

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the interests and expectations of the company (Kaptein, 1998). Bottom up input for example is expected from employees to report misconduct (e.g. ethics hotline), but may not always be in the best interest of the individual (Fisher & Lovell, 2009). The business code can function as a self regulating instrument (Schwartz, 2001), but requires both internal reflection of individuals to evaluate the ethicality of business practices (Fisher & Lovell, 2009). Next to the communication efforts of management individuals also face minimal standard of professionalism that is communicated directly through professional codes (Kaptein & Wempe, 1998).

2.3.2 Two developmental cycles

Fisher & Lovell (2009) argue that both management and individual are expected to reflect upon the ethicality of business practice instead of waiting till ethical behavior is externally imposed (cycles in „management box‟ and „individual employee box‟).

1) The „first‟ developmental cycle refers to the integrity with which the organization reflects upon notions of ethicality (Fisher & Lovell, 2009). Management sets the premises of an organizational ethical climate based on the policies, procedures and practices that an organization rewards, supports and expects (Schneider & Reichers, 1983; in Kuenzi & Schminke, 2009). According to the four levers of control framework (Simon, 1995) management is responsible to balance the weights between four levers: a principle based system, a boundary system, a diagnostic system and an interactive system (see figure 3).

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To be in „control‟ all levers have to be addressed (Simon, 1995), but scholars point out that especially the „living dialogue‟ is a central characteristic of an ethical organizational culture (Fisher & Lovell, 2009; Kaptein, 2008b; Messikomer & Circa, 2010; Verbos et al., 2007).

2) The second cycle represents the development of individual commitment to organizational principles and norms as a balance between personal and organizational interests (Fisher & Lovell, 2009). The basic assumption is that each employee has an implicit code of ethics that emerges over time based upon the reciprocity of person-context interactions (Kaptein & Wempe, 1998; Reynolds, 2006). Due to the reciprocity of interactions employees create expectancies or behavioral prototypes that provides them direction and makes other people‟s responses predictable and meaningful (Cialdini & Trost, 1998). Norms are not external constraints, but internalised standards that is shared between at least two individuals (Cialdini & Trost, 1998). Doing “the right thing” is therefore not about effortful and consciousness reasoning to increase the rationality or ethicality of decisions, but moreover to justify the actions in accordance to internalised self-concepts (Haidt, 2001; Blasi, 2004). The justification to internalised concepts is an iterative process in which individuals automatically or consciously evaluate the expectancy value of existing beliefs (Bosma & Kunnen, 2001). Based on identity development theory Bosma & Kunnen (2001) assume that individuals become committed to beliefs when they have proven to hold explanatory power in relation to person-context interactions (see figure 4).

Figure 4: An schematic presentation of the development process of commitments (Bosma & Kunnen, 2001)

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A match between a person-context interaction („transaction‟) and an existing belief will strengthen the commitment to this belief. A mismatch („conflict‟) will lead to a situation where an individual will try to explore new information in order to assimilate it into existing beliefs. If new information can not be assimilated („failure‟) the individual will try to accommodate a „new‟ belief. If this is not possible due to the strength of the commitment to a belief it will weaken. Conflict („creating awareness‟) can lead to a situation where new information is assimilated, but in the case of accommodation beliefs first need to lose their strength before a new belief can be accommodated (Bosma & Kunnen, 2001).

The establishment of values and norms is a process that takes place within an organisation along three levels of analysis. The first coding process takes place between a macro level pressures and the organisation. The organisation interacts with external stakeholders and society in general to establish a business standard that incorporates mandatory and non-mandatory requirements a company commits themselves to. The second coding process takes place between the organisation and internal stakeholders referring to managers and employees. The organisation communicates the business standards to lower levels in the organisation, but also ensures that these standards are internalised by managers and employees to „control‟ behavior. This internalisation of values and norms is an iterative process of person-context interactions in order to strengthen expected behavior.

2.3 Assessing the quality of the business code

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2.4.1 Assessing the quality of ‘good’ content

According to the working definition of a business code (§2.1.1) the ultimate goal is to guide present and future behavior on multiple issues. Guiding behavior however is broad concept that is multi –determined by a diversity of individual characteristics, context factors and issue characteristics (see Kish-Gephart et al. 2010). Studying the content in isolation therefore does not justify the actual quality of the code in practice (Kaptein, 2004). External best practice standards (e.g. AA1000, ISO9000, SA8000, Global Reporting Initiative) address the (universal) sustainability of business practices that focus on „assurance systems‟ such as planning, accounting, auditing and reporting, embedding and stakeholder management (Fisher & Lovell, 2009). Next to the universal standards the content of a business code also has a relativistic standard in relation to the perceptions of employees and managers who actually have to work with the code (Kaptein, 2008a). The „target group‟ or „objective‟ of a code is therefore important to keep in mind in order to asses the quality of the content of the code (Kaptein, 2004). For a code to be able to guide behavior Kaptein (1998) has identified four main qualities of „good‟ content: 1) comprehensiveness, 2) authenticity, 3) morally justifiability, and 4) manageability.

1) Comprehensiveness refers to the quality of a code to address the specific dilemma‟s and issues employees and managers can face during day to day activities (Kaptein, 2008a). A code is also bound to the exclusion of self-evident statements in order to prevent an overload of information (Kaptein, 2004). A balance between the information layers will weaken the perception that the code is a „list of rules‟, or merely contains hollow phrases (Kaptein, 1998).

2) Authenticity refers to the specific way the company addresses issue‟s and dilemma‟s (Kaptein, 2008a). Standards and principles should be appealing to employees and managers in order to motivate them to act in accordance with the code (Kaptein, 2008). Most companies face comparable issue‟s and dilemma‟s, but it is the way they address these issue‟s and dilemma‟s that gives rise to a corporate identity and distinctiveness (Messikomer & Cirka, 2010).

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4). Manageability refers to the quality of a code to be used by employees and managers in practice as a self regulating instrument (Kaptein, 2008a). It is to be accessible and approachable for all employees and managers, but also realistic and coherent to provide clarity about expected behavior (Kaptein, 1998). Employees and managers must have the opportunity to comply with the code and the ability to understand what is expected in specific situations.

The key elements of each quality have been summarized in table 1 and can be used as a first assessment of the quality of the code‟s content (Kaptein, 2008a).

Table 1: Characteristics of good content (Kaptein, 2008, p. 66 )

Qualities Elements

Comprehensive Relevant and current issues Meaningful (most important issues) Correct layers of the code pyramid

Authentic Striking and appealing (Motivating) Tailor- made and unique

Coherent Fluent (flow)

Morally justifiable Legally watertight

Compatible with other codes

Defensible towards stakeholders (ethically sustainable)

Manageable Readable and accessible Well structured and clear Internally consistent

Realisable in practice (realistic)

2.4.2 Assessing the quality of coding- and implementation processes

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conflicting results are linked to varying definitions of key terms, deficiencies in empirical data en methodologies used, and moreover a lack of theory. In order to improve the quality of empirical studies they propose an integrated research model of code effectiveness that captures the process, content and implementation of business codes (see figure 5).

Figure 5: An integrative research model for the effectiveness of business codes (Kaptein & Schwartz, 2008, p.118)

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2.4 Management summary

The current paragraph summarizes the conclusions of each sub question and concludes about the main question: “What qualities should a code of ethics posses in order to guide the behavior of workers and managers in practice?”.

2.5.1 What is the formal code of ethics?

The formal code of ethics is a communication device that communicates a non-instrumental normative standard based upon fundamental moral principles. On an organizational level the term „business code‟ is more appropriate to represent the (normative) business standard of a company. A business code contains prescriptions developed by and for a company to guide present and future behavior on multiple issue‟s of at least managers and employees towards each other, the company, external stakeholders and/or society in general.

2.5.2 What do companies describe in their code of ethics?

Overall companies describe four information layers in their business code: The mission and vision statement determines the direction of the organisation, the core values ground all business conduct, business principles govern the relationships with stakeholders, and rules and norms clarify expected behavior from employees in their engagement with one another and the treatment of organisational assets. Sub codes are used to address a specific topic in more detail.

2.5.3 In which way is a code of ethics established by a company?

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assumed that person-context interactions play an important role to strengthen or weaken the commitment to principles.

2.5.4 How does one assess the quality of a code of ethics?

The quality of the business code is determined by multiple factors that refer to the quality of the content and the coding- and implementation processes. The quality of good content has four main qualities: comprehensiveness, authenticity, morally justifiability and manageability. The coding and implementation processes refer to the connections between three levels of analysis and the internal dialogue to evaluate business conduct. When addressing the quality of the content or coding processes it is important to take the „target group‟ or objectives of a code into account. Next the developmental process is important to address in order to determine how the code was established. The informal implementation starts from day one, but the formal implementation takes place after the actual establishment of the business code to strengthen its values and norms over time. Effectiveness of the code is therefore determined by establishing good content and embedding of its content after the establishment.

2.5.5 General conclusion

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3. RESEARCH DESCRIPTION

The current chapter presents an overview of the research framework to investigate how VvAA can improve the content of their code. The first paragraph addresses the initial assignment, the second paragraph describes the nature of the research followed by research methods used to address these questions.

3.1 Assignment description

Based on the literature study it becomes clear that the initial assignment to construct an upgraded version of the code can not be achieved by a single person (Kaptein, 2008a; Messikomer & Cirka, 2010; Verbos et al., 2007). Multiple work sessions are for example needed to identify the values and norms of a company, but also to strengthen the commitment to a business code based upon true aspirations for the future from higher management (Messikomer & Cirka, 2010). Also the subject to be upgraded is better understood as a ´business code´ instead of a ´code of ethics´ due to the aspirations of the HR department to guide behavior for both instrumental and non/instrumental purposes. In collaboration with the HR manager and all HR advisors the initial assignment has therefore been reformulated:

“Construct a concept of an upgraded version of the business code that incorporates both guiding principles and clear boundaries illustrating what the business code could look like after a construction program.‟

The main conclusion of the literature study is that in order to asses the quality of a business code it is important to look at the quality of the content in relation to coding- and implementation processes. The main research question is therefore formulated as followed:

“What should an upgrade of the VvAA code of ethics entail in relation to the quality of the current content and the determinants of code effectiveness it is expected to codify?

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reflection of the current business code can be accomplished with high face validity. Such a reflection according to the framework of code effectiveness offers the opportunity to make reliable comparison between the content of the code and the determinants that the business code is expected to codify (Kaptein & Schwartz, 2008). In line with the determinants of the integrative model and the timeline of the internship the sub questions used to answer the main research question are formulated as:

1. Which stakeholder interests are communicated to new recruits during the introduction day?

2. What are the main external developments that influence the execution of the organisational strategy according to finance and control representatives?

3. What are the main macro- and meso codes that target VvAA group BV as an holistic entity?

4. What are the main corporate characteristics of VvAA group BV according to the legal advisor of the board?

5. What are the objectives of the current code? 6. In which way is the current code established?

7. What does the current code describe according to the four layers of the code pyramid? 8. Which sub-codes have been established by VvAA group BV that refer to all managers

and employees?

9. What are the current implementation and administration processes for the business code? 10. Which policies exist to strengthen the content of the business code?

11. To what extend is the business code used in practice to guide the decision making of employees and managers?

12. What should the objectives be for a new code of ethics according to all participants of the interviews?

3.2 Methodology

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3.2.1 Role of the researcher

The research is conducted during a 5 month internship at the HR department of VvAA group BV. The researcher is part of the research environment and therefore an action focussed research paradigm is adopted. The researcher acts out as an ethnographer who enters into unknown territory and moves throughout the organisation without predetermined instruments (Verkerk & Leerssen, 2005). “Organisational ethnography focuses on the culture of an organisation and tries to link overt behavior into meaningful patterns” (Verkerk & Leerssen, 2005, p.26). The advantage of an ethnographic approach lies within the opportunity to observe a company from within in an informal manner that lowers the chance of social desirability (Verkerk & Leerssen, 2005). By studying business codes from within an organisation a researcher can identify deep routed patterns and „painful truths‟ that can not be captured by questionnaires or interviews (Verkerk & Leerssen, 2005). A case study can add to the understanding of the processes within an organisation that is currently understudied in business ethics literature (Helin & Sandström, 2007; Helin & Sandström, 2010; Messikomer & Ciska, 2010). The paper describes each determinant in a chronological order based on desk research and interviews next to observations, experiences and perceptions that align with the time frame of the internship.

3.2.2 Boundaries

The researcher has the freedom to investigate all sub questions and all methods available, but specific boundaries are set in collaboration with the HR manager to incorporate a clear focus upfront:

1. According to the working definition of the business code (see §2.1.1) the area of investigation is bound to the „formal traces‟ and „informal traces‟ that refer to VvAA group BV as a holistic entity. Traces that represent coding activities within a single department do not fall under the working definition of the business code and are assumed to be unrelated to the coding process of prescriptions that refer to all employees and managers.

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3. Employees are not to be approached by questionnaires about the construction of a new business code. The HR manager wants to wait till the actual construction process of a new business code to discuss the content with employees. “Little is known about the actual situation in practice concerning the way the business code functions” (HR manager, May 2010).

4. To discuss the functioning of a new business code the finance and control department must be consulted first in relation to legal aspects and internal governance (HR advisor, 2010).

5. The researcher is free to gather information about VvAA by the use of the intranet, but will be restricted to information that is open to HR personnel.

6. The research will not address the embedding practices (e.g. institutionalisation and monitoring) that support a business code, nor does it report on the costs of a possible development program.

7. Due to the restriction to use questionnaires, the low amount of participants (n=15) and the preliminary nature of this case study the paper adopt a full qualitative approach. Overall a qualitative approach is interpreted as more appropriate than quantitative methods in order to obtain preliminary data (Schwartz, 2001).

3.2.3 Predefined methods

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To increase the level of manageability (e.g. need to arrange interviews during the holydays) and to secure the validity and reliability of open interviews ten participants are selected upfront. The HR advisor selected 10 participants based on the following criteria: the participant has a managerial or coordinative function, minimal two years of service, a central position at their department and knowledge about the application of codes within their department. Participants consist of finance and control representatives (n=4), and one manager per department (n=7)4. The group of Finance & control representatives consists of the compliance officer, the risk manager, the coordinator internal audit and the legal advisor of the board; and the management group consist of one manager per department consisting of three line managers and four senior managers. Participants are heterogeneous in nature based on their different functions, age groups (30-60), years of service (2-20) and gender (males n= 10, female n=1). All participants were invited by e-mail to participate in an interview of one hour. They are informed about the nature of the research and the confidentiality of the interview results.

An open interview method is chosen based on an interview framework of ten questions (See appendix A) to secure the informal nature of these conversations. Such a qualitative approach is more appropriate than a quantitative approach for a preliminary research (Schwartz, 2001). The general conclusions of the interviews are communicated to the HR manager and HR advisors. Interviews will be summarized into core beliefs and perceptions of participants to represent the perceptions and beliefs that exist within their group.

3.3 Analysis

By filling in each determinant of the integrative model (Kaptein & Schwartz, 2008) an overview emerges of the current business code of VvAA. A qualitative comparison will then be performed between the determinants that are captured by the current content according to the checklist of good content („strengths‟) and the determinants that are not yet captured by the current content („potential strengths‟). The results of the interviews will be analysed by a qualitative comparison between groups to answer question 11 and 12.

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4. RESULTS PER DETERMINANT

The current chapter describes the application of the integrative model to VvAA group BV. Each determinant will be discussed in chronological order that aligns with the time path of the internship. The chapter will end with the objectives for an upgrade of the code of ethics.

4.1 Stakeholder expectations

According to the literature study the „first‟ coding process takes place between the macro level and the meso level. It is expected that the reflection on the ethicality of business practices by management results in managerial philosophy of business conduct (Simon, 1995). The first determinant is discussed from the perspective of a new recruit who is introduced to the organization and describes the information that is provided by entry.

4.1.1 Question

Which stakeholder interests are communicated to new recruits during the introduction day?

4.1.2 Methods

 Desk research (source: information package new recruits).  Observations during the introduction day (1st week May, 2010);

4.1.3 Description of findings

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that corresponds to professional norms”, “they chose for VvAA because it is the best advisor available that can ease their lives concerning non medical issues” (Director VvAA group BV). The director mentions past events to describe what it means to work for a real member organization (e.g. special jazz night for members and employees, a traditional car race last year, collaboration with AMREFF flying doctors5). Next the HR advisor clarifies the organizational structure and depicts it as a circle with multiple layers: members represent the core, departments surround this core and supporting departments represent the external core. The figure looks like an eye that focuses on members. The HR manager clarifies the HR strategy that focuses on passion, professionalism and performances. Members are put into the spotlight concerning the quality of output („performance‟), adhering to professional norms („professionalism‟) and the open culture as a driving force („Passion‟). Four messages are salient: “when we perform, but also have fun at the same time we can carry out this enthusiasm to increase customer satisfaction”; “Customer satisfaction is our definition of high quality output that is measured by a feedback system (FEEDEX)”; “everyone is expected to contribute to achieve the highest quality of our products”, and; “VvAA provides career opportunities and education programs, but you are personally responsible to take these opportunities”. In the following hours the director of the member association tells about what employees can expect when they work with members, then an employee representative introduces the works council, consultants tell about their experiences with members, and the day ends with pairs who visit each department for „a speed date‟. For more information employees are told to approach their manager or to consult the intranet of VvAA group BV.

New recruit learns about the organization during the introduction by the use of storytelling. Members, employees, society in general and institutions that provide professional norms are the stakeholders that are repeatedly addressed during this day. The interests of members refer to customer satisfaction based on high quality products and services and the ease of having one personal advisor to address all non medical issues. The interests of employees are focused at satisfaction that is based on respect, fun at work, career opportunities and a variety of benefits to support personal development. Interests of society in general refer to the adherence to legislation and professional norms, but also to share knowledge and expertise with organizations as AMREFF flying doctors to increase health care practices in the world.

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4.1.4. General remarks

The introduction day clarifies what VvAA is all about and is the first experience with the organizational culture. Member satisfaction is the driver of success that grounds all business activities, but it did not become clear what members actually treasure the most. It is mentioned that members have a good salary and spent money on high quality products, but in the case of a junior member of the association this may not be the whole story. A document is missing that explicitly formulates what is expected from a new recruit.

4.2 External characteristics

The next determinant of the integrative model refers to the external developments that influence VvAA business practices. The organization strategy will first be explored to provide a context for the discussion of external developments. Also the first predefined interviews are arranged with the risk manager, the compliance officer and the internal audit coordinator who are responsible for the internal governance strategy of VvAA.

4.2.1 Sub-question

What are the main external developments that influence the execution of the organisational strategy according to finance and control representatives?

4.2.2 Methods

 Desk research to clarify the organizational strategy and external developments (source: annual report, 2009; annual plan of internal audit / risk management / compliance, 2009 and 2010; Risk taxonomy VvAA, 2010).

 Open interviews („predefined interview‟) to address the function of the business code in relation to external and internal developments (risk manager, compliance officer, internal audit coordinator).

4.2.3. Description of findings

First the organizational strategy is addressed by consulting existing documents on the intranet of VvAA group BV The annual report of 2009 is first consulted and describes that:

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The organizational strategy of VvAA deploys three pillars for 2010:

1). “Strengthening the functionality of VvAA as a strong member organization in the heart of the health care industry, with member satisfaction as its core driver”;

2). “The development and realization of new services and products leading to organizational growth”; 3). “Cost reductions to improve the price/quality balance of our advisory services and supply” (p. 11).

The aim of VvAA group BV is to provide „knowledge‟, „services‟ and „certainty‟, according to the personal and business needs of members of the association, based on a non-profit motive (annual report, 2009). The annual report describes a growth strategy for 2010 that align with the three pillars mentioned above:

1). „Knowledge and innovation‟ (e.g. „establishing new initiatives that align with demands of members‟; „to gather, to unite and to disperse knowledge‟);

2). Growth of volume and sales (e.g. „Growth of revenue is not an end in itself, but a mean to increase the cost efficiencies of services and products‟, p. 13);

3). Industrial relations („establishing and evaluating collaborations with suppliers that can increase the added value of products‟; „increase knowledge sharing externally and internally‟; „radiating the identity of VvAA as a true member organization‟).

The risk manager is the first participant of the predefined interviews. He argues that VvAA group BV has a “sound and well established organizational strategy”, but notes that: “higher management finds it difficult to communicate this strategy throughout the organization”. VvAA group BV consists of eleven different business initiatives (annual report, 2009), that are divided into eight daughter companies/departments (life assurance company, accident insurance company, tax and accountancy company, legal advisory company, business development company, banking services, travel agency, and MEDIRISK6). Next to these main companies four service departments exist (HRM, facilities, front office and ICT) and eight staff disciplines of finance and control. Each department within VvAA group BV incorporates different disciplines with their own business context that influences the execution of the organizational strategy (Risk manager, 2010). They all face different external

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developments in their area of expertise, face different pressures of ethicality in their area of expertise and differ in business activities and personnel (e.g. legal advisors, accountants, insurance advisors).

The external developments that affect all departments in the same manner refer to the uncertainty of the political climate and social developments (Annual report, 2009). The risk manager mentions that the political climate for example has consequences for the health care industry (e.g. „marketisation within the health care industry‟, „electronic patient file system‟, „economy measures‟), but also influences the financial sector at the same time (e.g. „government involvement‟, „stringent supervision federal bank/AFM‟). Also the bankruptcy of the DSB bank has had a great impact on the way business practices are perceived by society next (annual plan of internal audit / risk management / compliance, 2009). The risk manager explains that also health issues such as the Mexican flue increased the awareness to pay attention to the health of employees and managers.

The organizational strategy of VvAA group BV aligns with the material and immaterial needs of members. The organizational strategy aims to achieve organizational growth referring to knowledge and innovation, increasing cost efficiency and strengthening industrial relations. Each department faces different external developments that are specific to their area of expertise, but overall the current political climate is identified as the main source of uncertainty.

4.2.5 General remarks

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not influence the content of the VvAA code of ethics that applies to every employee and manager (Kaptein & Schwartz, 2008).

4.3 Macro & Meso codes

The macro and meso codes are directly connected to the stakeholders expectations (Fisher & Lovell, 2009), and should be linked to the business code to be effective (Kaptein & Schwartz, 2008). Based on the findings so far it is expected that each department faces specific macro and meso codes. The aim is however to identify codes that apply or influence VvAA group BV as a holistic entity.

4.3.1 Sub-Question

What are the main macro- and meso codes that target VvAA group BV as an entity?

4.3.2 Methods

 Desk research (source: annual report internal audit/risk management/compliance, 2009 and 2010; code of conduct insurance companies; code of conduct privacy);

 Interview with compliance officer (June, 2010).

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The industry code is established in 2002/2003 and describes the basic norms of social responsible conduct for insurance companies. The code describes seven core values: reliability, professionalism, solidarity, social responsibility and transparency and elaborates on them by approximately seven to ten business principles. The code states that each company is responsible to adhere to these values and principles and incorporating them into business practices. Additional codes are provided by the industry to strengthen these seven core values (e.g. „gedragscode verwerking persoonsgegevens‟, „gedragscode hypthecaire financieringen‟, „kwaliteits code rechtsbijstand‟). The legislation concerning financial supervisions („wet financieel toezicht‟) is not a macro code, but does incorporate important legal requirements for VvAA that are coded or directly communicated to departments. According to the compliance officer these codes and guidelines all originate from Dutch legislation or European requirements to protect the rights of consumers and suppliers (Compliance officer, 2010).

Overall there are codes that target VvAA group BV, but due to the large diversity of departments there isn‟t a single macro or meso code that refers to all departments. Moreover legislation is identified as the main source of coding activities that are supported by normative standards of an industry or profession.

4.3.5. General remarks

The integrative model depict the influence of macro and meso codes to the business code, but it is not possible to identify macro and meso codes that actually apply to all employees and managers. The link between external codes and the business code moreover represents a coding process to meet up with the standards of different industries (Kaptein & Wempe, 1998). It must be said however that this industry code has not been updated since its establishment. In the face of recent development where

4.4 Corporate characteristics

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What are the main corporate characteristics of VvAA group BV?

4.4.2 Methods

 Interview (predefined interview) with the legal advisor of the board (Juli, 2010)  Desk research (source: annual report 2009)

The legal advisor supports the fact that VvAA group BV is a collection of business initiatives, but adds that all disciplines are also responsible for their own businesses: „They only operate under the same flag‟. The basic idea of VvAA group BV is to unifies a diversity of disciplines that all focus on health care and para- health care professionals („niche market‟) (Legal advisor, 2010). The legal advisor uses the analogy of a cooperation to explain the corporate characteristics. In sum, suppliers become member of an exclusive cooperation with existing supply channels and in return add expert knowledge, services and products to the cooperation. For VvAA group BV the line of products and services increases, but at the same time it also offers the opportunity to split overhead costs and to realize scale advantages. Thus, while each department is relatively small on their own account, as a cooperation VvAA group BV can generate scale advantages in order to compete with larger companies (legal advisor, 2010). For members the cooperation has the advantage that all products and services are provided by experts „under one roof‟. The open culture is important to strengthen collaborations between departments, to share knowledge between all disciplines, to incorporate a customer focus and to create a professional and „healthy‟ work environment (Legal counselor, 2010). The main departments have their own director who is a member of the management board (total of eight members). The head of the board consists of two directors of VvAA group BV The non-executive board consist of four representatives of the association VvAA group BV and three external experts. The works council consists of eleven members who are part of multiple committees (annual report, 2009).

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The time schedule jumps from June to July due to the fact that an appointment with the legal advisor of the board could not be planned earlier in time. The main reason for this appointment was to discuss the objectives of the business code, but this interview progressed to the corporate characteristics of VvAA group BV in relation to what the objectives should be of the code. The comparison with a cooperation clarifies the corporate structure and characteristics of each department. A code of ethics that applies to every worker and manager must cover all companies that are actually independent companies under VvAA group BV. The fact that each department has its own codes becomes more logic, but still the VvAA code of ethics should be the common ground to build on.

4.5 Objectives with the code and the developmental process

The main context factors for the business code have been clarified in broad terms that provides the context for the quality of the current business code. First the objectives of the code will be described next to the findings concerning the developmental process.

4.5.1 Sub question

What are the objectives of the current code? In which way is the current code established?

4.5.2 Methods

 Desk analysis (source: general code of ethics VvAA group BV)

 Interview HR manager (July, 2010), Hr advisors (May, 2010), legal advisor of the board (July, 2010).

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ethics, p.1). Line managers are expected to communicate the content of these codes and to ensure that employees live up to its content. The code states that “violations of the code can result in disciplinary measures”. In a nutshell employees are expected to:

 “adhere to existing legislation and regulations”

 “Not to do business with persons or companies that are involved in illegal activities or activities that can be interpreted as social irresponsible conduct”

 “To handle information carefully”

 “To prevent a conflict of interests between personal- and organizational stakes”

The objectives of the code are formulated as followed:

1). “To guide behavior”;

2). “Rendering trust among members/clients by describing what VvAA stand for and what they can expect from VvAA employees;

3). “Creating the opportunity for workers and managers to monitor their own behavior in accordance with expectancies of the company, co-workers and towards customers”;

The code of ethics is addressed to all employees (‟medewerkers‟) and seemingly focuses on the way employees approach one another:

“As much as VvAA attaches value to the adherence of norms in relation to its clients, concerning integrity and professionalism, VvAA finds it of greatest importance that employees act with professionalism and integrity towards each other” (code of ethics, p. 1).

The introduction does not mention how the current content of the code has been established or who is the owner of the code. There is for example no name or picture that clarifies who is actually addressing the reader of this code. Also none of the participants however could tell anything about the establishment of the code. It is assumed that the code was established by a single person (Legal advisor, 2010).

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Most of the information concerning the establishment derive directly from the introduction of the code. On first sight the objectives seem straightforward (e.g. guiding behavior, providing clarity), but when none of the participants can actually describe what the objectives are it becomes problematic. It signals that the objectives as described within the code are not shared among those who have to communicate the code‟s content to employees. Moreover it can be questioned to what extend management commits themselves to the objectives of the code of ethics. The objective to rendering trust among members is not doubted, but using the code as an instrument to do so is. The formulation of the objectives contains the word „customers‟, but within the organizational culture of VvAA the word „member‟ is deemed appropriate. When an employee uses the word „customer‟ when referring to a member her or she will be corrected instantly by colleagues.

4.6 Content of the general code of ethics

The current paragraph addresses the content of the general code of ethics according to the four information layers that are often found in business codes (see §2.2.1).

4.6.1 Sub question

What does the current code describe according to the four layers of the code pyramid?

4.6.2 Methods

 Desk research (source: general code of ethics, 2002/2003; foundations social policy, 2003)

On the intranet page of the HR department a worker can download all codes and policies that are lined up on the same page. On first sight it is impossible to differ between a policy or a code, and moreover what document to address when a worker wants information about expected behavior on a specific topic. The following lineup is encountered on the intranet page under „codes‟:

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2006 Code of conduct internet and e-mail („VvAA Gedragscode internet and e-mail gebruik‟) 2006 Code of conduct handling stock information („Gedragscode koersgevoelige informatie VvAA‟) 2008 Guidelines concerning integrity („Richtlijnen integriteit gevoelige functies‟). 2009 In-employment screening policy („In-employment screening‟)

At the page concerning the work environment („vitaliteit‟) more information can be found about sexual intimidation, the complaints policy and impartial negotiators („vertrouwenspersoon‟):

1998 Sexual intimidation and bullying at work („seksuele intimidatie en pesten op het werk‟)

The general code of ethics has been addressed in §6.5 concerning its objectives that communicated the „foundations of social policy‟ as its basic premises. The social policy consists of three pages that describes basic considerations („uitgangspunten‟) as a result of “discussions about values and norms, external developments in the health care industry and how we manage the relationships with each other and customers‟. The goal of this document is to communicate the principles („uitgangspunten‟) that represent „a balance between organizational interests and personal interests‟ (foundations social policy, p1). The social policy claims that “internal and external developments force the us [HR department] to adjust this policy continually. The dynamic nature of this document is hereby out in the open” (Foundations social policy, p1.). This document starts with ten basic considerations about the relation between the organization and the employee. The document then elaborates on these basic considerations according to fifteen statements. The goals and elaborations are:

1. The social policy is connected to the organizational strategy; -all are expected to contribute to the mission of VvAA -Loyalty and motivation.

2. The social policy seeks a balance between personal goals and the goals of the organization; -to provide clarity about the organizational structure and responsibility structures.

-to communicate the importance of personal responsibilities

3. It is expected that each employee contributes to organizational goals;

-All are expected to contribute to the performances of the organization and each other, knowing that the organization needs to innovate and modernize its practices continually.

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4. When goals are out of balance both parties have the duty to find a new balance; -To provide information about organizational changes in an early stage. -To communicate about changes of the social policy.

5. Respect is the central concept that describes the nature of our relations towards each other;

-Providing a healthy work environment where workers can give their opinion based on an open culture. -Management styles aim to support the workers in order to function optimally (e.g. task delegation, to show commitment, to support a feeling of trust and to support a business like spirit).

-Adhering to the general code of conduct.

6. People differ in their aspirations, their capacities and attitude. This will be taken into account when addressing career opportunities, recruitment policies, promotions and work design;

-Establishing a market conform package of labor conditions. -By using objective standards to reward performances of employees

7. Every employee has equal opportunities in spite of age, gender, sexual nature, skin color, nationality or religion;

8. Participation, thinking along, and commitment to the organization will be positively valuated and stimulated; -Employees will get room to manure according to personal responsibilities. To protect the voice of

employees by providing adequate consultation opportunities.

9. Management is responsible for the execution of the social policy. It is their responsibility to protect the balance between social and economical goals;

10. Employees have a spirit of enterprise („ondernemingsgerichte opstelling‟).

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Table 2: Core values applied to three area‟s (VvAA code of ethics, p.2)

The code of ethics consists out of two chapters according to the core values, with four paragraphs each that represent the applied areas. Each paragraph then summarizes the main elements that are described as “behavior rules and guidelines”. Each key concept is accompanied by approximately 6 to 8 elements. For example:

1. RELIABILITY/INTEGRITY

1A. MEMBERS AND CLIENTS

The key concept is trust. Trust is accomplished by:

-adhering to you promises. If you are not going to succeed then notify the „customer‟. -not supporting illegal activities. Report these to your supervisor.

-prevent a conflict of interests. Max amount of gifts is set at 50Euro per relation/year. -…………..etc.

The code of conduct concludes with a list of ten core principles from a first person plural perspective (e.g. “we keep to our promise”). These rules derive from key principles, but also incorporates statements that have not yet been mentioned. For example “We refrain from sexual intimidation”, and “we communicate business like, open and honest”.

The business code of VvAA consists of two documents: foundations social policy and the general code of conduct VvAA. The mission statement is mentioned as a starting point for expected behavior that is further elaborated according to fifteen basic assumptions about the social policy of VvAA. According to the social policy employees must acknowledge that they will live up to the content of the code of ethics. This code of ethics describes two core values, reliability & integrity and professionalism, that are applied to four areas, members & clients; services and products; employees and management; and the organizational in total. These

A. members/clients B. services and products C. Employees and management D. organization 1. Reliability& integrity Trust (1a) Needs (1b) team performance (1c) Solid (1d)

2. Profesionalism expert knowledge (2a) best fit (2b) task orientation (2c) Continuity (2d)

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combinations between a value and the applied area result in eight key concepts. These key concepts are elaborated on by formulating 6 to 8 behavioral rules and guidelines. In total the business code of VvAA group BV describes a value statement with a link to the mission of the company, the business principles on behalf of the company and rules and norms that apply to the relation between employees.

The business code of VvAA may be outdated, but its statements in relation to moral principles as equality and fairness have not lost their importance over time. Moreover the two documents have not been addressed since their establishment in 2002/2003 while they clearly state that the social policy for example has a dynamic character. Due to the fact that the social policy has not been reflected on by management, its meaningfulness can be questioned. It is however striking that considerations within this document such as “establishing an open culture” aligns with the objectives of VvAA today. HR professionals however claim that they have not adjusted this document over time. The code of conduct summarizes principles and rules that are seemingly mixed up. The code is not comprehensive, but seemingly is restricted to the application of a core value within three broad contexts. Moreover these applications describe outcomes such as “preventing…” or “make sure that….”, but do not seem meaningful in deciding how to accomplish these outcomes. In total 36 positive expectations are present within the general code of conduct, but none lay down objective behaviors about „what to do‟ or „not to do‟ when dilemma‟s arise.

4.7 Sub- codes

Sub codes are expected to support the content of the code is the next determinant to address. Nine codes and/or policies are identified next to the two documents addressed above. The current paragraph identifies the sub-codes and clarifies its nature.

Which sub-codes have been established by VvAA group BV so far that refer to all managers and employees?

4.7.2 Methods