As a leader, why is fairness important in your organisation?

As a business leader, if you hear the word justice, you probably think about legal procedure – perhaps a time when you have been wronged and have needed to resort to litigation to solve a dispute and seek a settlement. Whilst this type of justice is important, it is hopefully not something you need to think about, in your business, too often. However, there is a type of justice that absolutely should feature on your agenda on a daily basis – organizational justice.

What is organizational justice?

To put it simply, this is the sense of fairness that your employees feel whilst working in your business. And there are many advantages of them perceiving a high level of fairness – it can lead to more satisfied and committed employees. As you know, having such employees can result in many benefits for you as an organization.[1]

The types of justice: distributive, procedural and interactional

Behavioural research has considered justice in organizations since the 1950s. It was rooted in something called equity theory, which said individuals invest in relationships proportionate to what they get out of them. Where there is a mismatch between what is put in, and what comes out – there is distress or discomfort. An individual adjusts their behaviour, as a result, to redress the balance. In other words, if someone feels that they are being treated inequitably by an organization, they are likely to reduce their commitment and effort.[2] Through further research, equity theory has evolved into a more principle-based concept called distributive justice. Without the strictness of measuring the inputs and outputs associated with relationships in equity theory, distributive justice examines the perceptions of fairness of outcomes.[3] So, in a workplace setting, whether I am treated fairly versus others – for example, when it comes to promotion, pay increases or assignment to the most interesting or highest status tasks.

Procedural justice has foundations in research on traditional justice from the 1970s.[4] Studies showed that where the procedure of justice was followed in a courtroom setting, those involved were more satisfied with the outcome. Procedural justice in legal cases involved six dimensions: (1) consistent at different times and to different people, (2) prevention of bias, (3) accuracy of the evidence presented, (4) the right to appeal, (5) the right to proper representation and (6) high ethical standards for those involved. Extensive research has shown that, similar to the courtroom, procedural justice – having fair corporate policies and proper process – leads to many positive benefits.[5]

Further development in organizational justice research came in the 1980s with the concept of interactional justice.[6] This found that employees consider the interpersonal or relational treatment they receive from authority figures, like their boss. In particular when it comes to two dimensions – whether they are treated with dignity and respect, and whether they are provided with complete information about what is happening in the organization. Where an individual is not treated with dignity and respect, or where relevant information is withheld, this is demotivating for the person.

All three types of organizational justice have been shown to be important and can impact the effectiveness of your organization, and ultimately its profitability.

What does organizational justice mean, in practice, in your business?

The three different components demand different things, in reality:

• For distributive justice, it is about ensuring fair outcomes for employees – for example where a subjective decision is required, such as a promotion, a compensation review, in deciding who is assigned to the best accounts or who gets to go on the exciting business trip.

  
  

• For procedural justice, there need to be clear and transparent policies and procedures, so even if someone doesn’t like the outcome, they can see that a proper process has been followed. This avoids nepotism, favouritism or discrimination.

• Finally, for interactional justice, it is about receiving the right human contact, even building relationships with those who take the decisions. In arriving at outcomes, it is about communicating with respect and clarity. It is about ensuring that information is not withheld and there is fairness about how you hear about things. In other words, ensuring that one group of people, or select individuals, are not favoured.

The case for maximising organizational justice in your business

There is clearly effort involved in ensuring that justice exists in your business, so why bother? Firstly, there is an ethical dimension – even in the ancient writings of Plato and Aristotle, the benefits of justice and fairness were extolled both for individuals, and broader society. It is arguably a sign of a responsible business, and it can strengthen your reputation.

Beyond this, it is simply good for your business and its employees.  In their review of 183 separate studies, the psychologists Colquitt, Conlon, Wesson, Porter and Ng [7] found strong evidence for the following:

• Much higher levels of acceptance of decisions taken: Employees are more likely to respect the decisions that have been taken, and also are more likely to respect those who have taken the decision

  
  

• Higher levels of job satisfaction for employees: Employees report that they are more satisfied and fulfilled in their jobs

  
  

• Higher levels of organizational commitment: Higher levels of commitment can translate into greater productivity, lower absenteeism, better teamwork and higher levels of work ethics

  
  

• Lower levels of intention to leave: Employees are more likely to stay with you, avoiding the disruption and cost of turnover

  
  

• Some positive effects on job performance: There is evidence for moderate increases in individual job performance

Beyond these significant themes, individual studies have shown positive results, in environments where organizational justice is high:

• A study of 447 accountants and internal auditors showed that they were more likely to report financial fraud [8]

  
  

• A study of 4,410 UK Police officers offered better service to members of the public, whilst another study in the US showed that offices were less likely to be corrupt [9, 10]

  
  

• A long-term study of 1,519 workers in the Netherlands showed they were less likely to develop symptoms of depression [11]

  
  

• In the context of high schools in Virginia, US, it led to higher level of organizational commitment from teachers leading to better performance by students [12]

  
  

• Levels of wasting time in the workplace on the internet (cyber-loafing) were lower, as employees exercised more self-control [13]

Specific challenges for family businesses

Creating a climate of organizational justice has particular challenges for family businesses. At the heart of the issue is the presence of employees that are family members, and those who are not. This can cause perceptions of injustices.

As a business owner, you do – of course – have the right to favour members of your own family. You might choose to invite a son, daughter, niece or nephew for an internship, or for them to join permanently after university graduation. They may enjoy preference when it comes to promotion, higher salary, rotation through different departments or flexible hours. As the business is discussed informally – say, around the dining table, at home – they may enjoy informational advantages and will likely be able to speak into your business strategy and decisions. [14]

The downside from all of this is the potential perception of unfairness and injustice from non-family members. In order to counter the negative effects of this on organizational culture and job satisfaction, it is important to consider:

·       Fair and transparent corporate policies on employment of family members, specifying the basis on which they can join and progress. Even if you determine that you wish to offer preferential treatment to family members, it should at least be clear on what basis. You will, then, create clarity and procedural justice

·       Fair and transparent family policies on employment of family members, so from family member to family member there is similar fairness, and appropriate management of their expectations. Such policies should also highlight the responsibilities of family members who join the business (e.g. application qualifications and process, conduct, expectation of progression, use of privileged information)

·       In particular, where there is a succession situation for a concrete role, a fair process with: (1) clear job description and person specification, (2) transparent assessment process, and (3) involvement of non-family members in process can support perceptions of justice

·       It is important that a family member receives regular performance appraisal on the same basis as others in the business, especially if their line manager is a non-family member. This creates a culture of justice and accountability

In the end, as a business owner, you will want your business to operate as effectively as possible – with satisfied and engaged employees. This requires you to ensure that both family members and non-family members perceive justice and operate in an environment of accountability. Ultimately, this will maximise your success and profitability.

Conclusion

As a business leader, you can create a climate of organizational justice. Doing this will offer many benefits – greater acceptance of decisions taken, higher levels of job satisfaction and organizational commitment with lower levels of employees’ intention to leave, with the greater potential for job performance. In particular where you lead a family business, ensuring fairness for non-family members is critical. We urge you to seize this opportunity and make organizational justice a key priority in your business. At Enodo, we are here to help you consider these issues.

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References

[1] Greenberg, J., Organizational justice: The dynamics of fairness in the workplace. 2011.

[2] Adams, J.S., Inequity in social exchange, in Advances in experimental social psychology. 1965, Elsevier. p. 267-299.

[3] Greenberg, J., Setting the justice agenda: Seven unanswered questions about “what, why, and how”. Journal of Vocational Behavior, 2001. 58(2): p. 210-219.

[4] Thibaut, J.W. and L. Walker, Procedural justice: A psychological analysis. 1975: L. Erlbaum Associates.

[5] Barrett-Howard, E. and T.R. Tyler, Procedural justice as a criterion in allocation decisions. Journal of Personality and Social Psychology, 1986. 50(2): p. 296-304.

[6] Bies, R.J. and J.F. Moag, Interational Justice: Communication Criteria of Fairness, in Research on Negotiations in Organizations, R.J. Lewicki, B.H. Sheppard, and M.H. Bazeman, Editors. 1986, JAI Press: Greenwich. p. 43 - 55.

[7] Colquitt, J.A., et al., Justice at the millennium: a meta-analytic review of 25 years of organizational justice research. Journal of applied psychology, 2001. 86(3): p. 425.

[8] Seifert, D.L., et al., The influence of organizational justice on accountant whistleblowing. Accounting, Organizations and Society, 2010. 35(7): p. 707-717.

[9] Wolfe, S.E. and A.R. Piquero, Organizational justice and police misconduct. Criminal justice and behavior, 2011. 38(4): p. 332-353.

[10] Myhill, A. and B. Bradford, Overcoming cop culture? Organizational justice and police officers’ attitudes toward the public. Policing: an international journal of police strategies & management, 2013.

[11] Ybema, J.F. and K. Van den Bos, Effects of organizational justice on depressive symptoms and sickness absence: a longitudinal perspective. Social science & medicine, 2010. 70(10): p. 1609-1617.

[12] Burns, W.T. and M.F. DiPaola, A study of organizational justice, organizational citizenship behavior, and student achievement in high schools. American Secondary Education, 2013: p. 4-23.

[13] Restubog, S.L.D., et al., Yielding to (cyber)-temptation: Exploring the buffering role of self-control in the relationship between organizational justice and cyberloafing behavior in the workplace. Journal of Research in Personality, 2011. 45(2): p. 247-251.

[14] Barnett, T. and F.W. Kellermanns, Are we family and are we treated as family? Nonfamily employees’ perceptions of justice in the family firm. Entrepreneurship Theory and Practice, 2006. 30(6): p. 837-854.