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North Central Business Journal News

ORGANIZATIONAL JUSTICE
(August 2000 issue)

by Sandra Kay Neal, Ph.D.

     Fairness is an important issue to employees.  Lack of fairness is the primary reason employees give for quitting a job.  To reduce this problem, it is helpful to understand the many ramifications involved with fairness.
     There are three aspects to fairness:
  1. Outcomes, such as pay.
  2. Procedures used to determine outcomes.
  3. Manner in which people are treated in regard to these procedures.

      Each of these aspects is important, but research has shown that procedures and treatment are actually more important than outcomes.  People will accept outcomes which are personally distasteful as long as the procedure used to arrive at that outcome, and the manner by which they were treated by that procedure, are fair.  A good example of that is how people will accept a jury’s decision which goes against them as long as the court process was fair.

     Yet most employers focus primarily on outcome fairness.  When employees grumble about the company being unfair, employers immediately look at all that they provide for their employees in terms of compensation and benefits, notice how generous they are, and then dismiss the complaints as baseless.

 Instead, when employees become disgruntled about fairness, it is helpful for employers to look for problems in the procedures or manner in which decisions affecting employees are made.

    When employers make decisions, they attempt to be as fair as possible.  But they neglect to bring the employee into the decision-making process.  Research has shown that when employees are at least informed of how the decision was made, so that they know the employer considered all the pertinent issues, they will more easily accept the outcome, even if they don’t like it. 

     For instance, there was a company in which two of three plants lost a major customer.  The executives spent long hours looking at every conceivable way to deal with the lost revenue and ensure that all the employees kept their jobs until they could find new customers.  They decided that the fairest way was for everyone, including themselves, to take a 15% pay cut for six months.

     In one of the plants, the president made an announcement over the in-plant broadcast system, telling the employees of the decision, and briefly stating that it was done to be as fair as possible to the employees.  In the second plant, the president met with the employees in the cafeteria for an open question and answer session that lasted as long as the employees had questions.  He showed them the financial charts the executives had used.  He showed them all the various possible plans the executives had considered and explained thoroughly why all the other options had been eliminated.

     During the six-month period of the 15% pay cut, the employees from the first plant started stealing from the company and turnover doubled.  In the second plant, there was no change in theft or turnover rate.  Both plants had the same “unfair” outcome – a 15% pay cut.  The difference was in the manner in which the unfair outcome was explained.  Procedure and treatment are more important than outcomes.

     If employees are complaining about unfairness, employers would be well served to consider how outcome decisions are communicated to the employees.  Focus on procedures and treatment, not just outcomes. 
 

Sandra Kay Neal holds a Ph.D. in Industrial/Organizational Psychology and has 19 years experience helping organizations solve human resource issues.  Her company, Synergistic Organizational Solutions, specializes in aiding small businesses.  Dr. Neal can be reached at sos_hr@localaccess.com.




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