Hard to Be Fair

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BEST PRACTICE

Everyone knows that being fair costs little and pays off handsomely. Then why do so few executives manage to behave fairly, even though most want to?

Why It’s So Hard to Be Fair
by Joel Brockner

W

hen Company A had to downsize,it spent considerable amounts of money providing a safety net for its laid-off workers. The severance package consisted of many weeks of pay, extensive outplacement counseling, and the continuation of health insurance for up to one year. But senior managers never explained to their staff why these layoffs were necessary or how they chose which jobs to eliminate. What’s more, the midlevel line managers who delivered the news to terminated employees did so awkwardly, mumbling a few perfunctory words about “not wanting to do this” and then handing them off to the human resources department. Even the people who kept their jobs were less than thrilled about the way things were handled. Many of them heard the news while driving home on Friday and had to wait until Monday to

learn that their jobs were secure. Nine months later, the company continued to sputter. Not only did it have to absorb enormous legal costs defending against wrongful termination suits, but it also had to make another round of layoffs, in large part because employee productivity and morale plummeted after the first round was mishandled. When Company B downsized, by contrast, it didn’t offer nearly as generous a severance package. But senior managers there explained the strategic purpose of the layoffs multiple times before they were implemented, and executives and middle managers alike made themselves available to answer questions and express regret both to those who lost their jobs and to those who remained. Line managers worked with HR to tell people that their jobs were being eliminated, and they exharvard business review

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pressed genuine concern while doing so. As a result, virtually none of the laid-off employees filed a wrongful termination lawsuit. Workers took some time to adjust to the loss of their former colleagues, but they understood why the layoffs had happened. And within nine months, Company B’s performance was better than it had been before the layoffs occurred. Although Company A spent much more money during its restructuring, Company B exhibited much greater process fairness. In other words, employees at Company B believed that they had been treated justly. From minimizing costs to strengthening performance, process fairness pays enormous dividends in a wide variety of organizational and people-related challenges. Studies show that when managers practice process fairness, their employees march 2006

respond in ways that bolster the organization’s bottom line both directly and indirectly. Process fairness is more likely to generate support for a new strategy, for instance, and to foster a culture that promotes innovation. What’s more, it costs little financially to implement. In short, fair process makes great business sense. So why don’t more companies practice it consistently? This article examines that paradox and offers advice on how to promote greater process fairness in your organization.

The Business Case for Fair Process
Ultimately, each employee decides for him or herself whether a decision has been made fairly. But broadly speaking, there are three drivers of process fairness. One is how much input employees believe they have in the decision-

making process: Are their opinions requested and given serious consideration? Another is how employees believe decisions are made and implemented: Are they consistent? Are they based on accurate information? Can mistakes be corrected? Are the personal biases of the decision maker minimized? Is ample advance notice given? Is the decision process transparent? The third factor is how managers behave: Do they explain why a decision was made? Do they treat employees respectfully, actively listening to their concerns and empathizing...
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