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Hot topic: HR and the Sports Direct scandals

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After an expose of the appalling working conditions in its warehouses, Sports Direct's share price plunged

But what is to blame for a culture of endemic mistreatment – including paying below the minimum wage – consumers hunting for the cheapest products, or bad business practices? And what is HR's role in fixing it?

Simon Webley, research director at the Institute of Business Ethics, says:

"How does a company find itself in a situation like Sports Direct? Trust seems to have completely broken down between employer and employees.

We as consumers must take some culpability – our craving for cheaper products means that something has to give in order to maintain margins. After the unethical supply chain practices of the 1990s were discredited the focus has now moved to squeezing staff with zero-hours contracts and poor HR practices.

However, not all companies use these practices to fulfil the desire for cheap products. JD Sports does not use zero-hours contracts and yet is forecast for a 10% profit rise this year; Sports Direct has issued a profit warning. A reputation tarnished is hard to recover, not just with customers but with suppliers. For a retailer that can be critical; if key brands go elsewhere customers will surely follow.

The desire to change and improve must be a strategic one, supported by the board and senior management. A poor ethical culture can be so ingrained that treatment of staff may just be considered ‘the way we do business’. If employees are viewed suspiciously and treated like potential fraudsters this is likely to become a self-fulfilling prophecy – ‘the Golem effect’.

Giving workers the tools to ‘do the right thing’; trusting them to make choices in line with values; respecting them when they speak up – these produce a ‘Pygmalion effect’. If people are seen and treated considerately it influences behaviour positively.

HR has a central role in promoting and supporting an ethical culture. It is ideally placed to identify what cultural and ethical issues are affecting staff. And HR is responsible for systems and processes. If these are based on the golden rule – treat others as you would wish to be treated – HR can contribute to developing a positive ethical culture that will influence how a business is run."

Check back tomorrow for part two of this Hot Topic