The Strategist

I trust you: Four sides of fairness inside company

08/19/2022 - 03:47

Trust is the currency of business, and companies need to build strong relationships with different parties. Fairness is one of the reasons for trust, including in business.

Being fair to employees is difficult because the consequences are often indirect and not immediately apparent. To learn more about what unfair treatment of employees leads to, European researchers conducted an experiment.

They set up a call center and recruited 195 people. Then they fired a few employees to see if it would affect the productivity of the rest. Companies conduct similar "experiments" in real life all the time, but in this case, the researchers wanted to see how unfair layoffs would affect other employees.

They randomly selected 20% of the employees to be fired. The team was told that the selection was random and that such measures were necessary to reduce costs. The productivity of those who stayed was immediately reduced by 12%. The figure doesn't seem too bad, but imagine what a drop in profits that would lead to in real life.

After studying the question, the researchers concluded that the "survivors" were most outraged by the randomness of the choice, which they found completely unacceptable. This was only a scientific study, but such layoffs are all too common in life as well.

Executives should take note of the results. A drop in productivity will affect the company's performance and profits. It's not as noticeable as a drop in stock price or sales volume, so unfairness to employees is easier to hide or ignore.

Four categories of fairness

Jason Colquitt is a management researcher who has worked on the problem of managing employees from a fairness perspective. In 2001, he established four categories of organizational fairness that have been widely used ever since:

The first category is procedural fairness, that is, fairness in decision making: consistency, accuracy, and the voice of those affected by the decision.

The second category is informational fairness: how clearly managers justify their actions and how honest they are in communicating with their subordinates.

The third category is distributional fairness: assessing how fair the results of decisions and actions are. This is what infuriated participants in the study with layoffs: the decision on such an important question of whether a person would keep their job or lose it was based on a random choice.

The fourth category is fairness in dealing with people, that is, how company representatives treat individuals and groups in face-to-face interactions.

Analyze which of these is required and ensure that your company's work processes are based on fairness to build a stronger business.

Based on The Power of Trust: How Companies Build It, Lose It, Regain It by Sandra J. Sucher, Shalene Gupta