When workers believe they are treated unfairly, employee engagement, performance and retention suffer. Being transparent about decision-making relative to promotions, pay and policies is important. Also crucial are personal integrity, leadership visibility and communication efforts.
In one way, employees are predictable: They compare what they get and how they are treated with what others get and how they are treated.
"We're emotionally wired to care about fairness," says Ben Dattner, principal of Dattner Consulting in New York and the author of The Blame Game.
Fairness is a difficult term to define, however, says Eden King, an assistant professor at George Mason University in Fairfax, Va., where she studies discrimination and equity in the workplace.
"It depends on who you ask; everybody has their own perception [of fairness]," she says, noting that most people don't question fairness when it works to their advantage.
"We don't have as much of a problem about being overpaid as being underpaid," she points out.
In the workplace, fairness issues generally revolve around individual outcomes such as pay or benefits. But the issue may also arise at the group or organizational level -- when new policies are initiated, for example.
Perceived Inequities
Dattner says employees will naturally make comparisons between their pay, benefits and treatment to others -- both within and outside the organization. If an employee feels that they are contributing more than their colleagues, but perceive that their colleagues are receiving greater rewards, there will be a perception of unfairness or inequity.
"Research shows, interestingly," he says, "... that employees may be satisfied with less money if they feel that the decision-making was fair" and not based on favoritism, politics or bias.
Perceptions of inequity have a clear impact on retention, engagement and performance, says Tom McMullen, Chicago-based Hay Group's U.S. reward service leader.
A recent study using Hay Group's employee-opinion research database, he says, finds the top factors that drive employees out of organizations include a strong element of perceived unfair treatment, relative to other employees. Those issues are career-development opportunities, compensation, work climate, manager/supervisory conflict, lack of challenging work, direction of the organization and lack of recognition.
The study further indicates that perceptions of fairness have eroded over time.
"While we've made some in-roads over the last couple of years, it's still lower than historical levels over the last 10 years," says McMullen.
This is clearly a concern for organizations as the impact of perceived unfair treatment is corrosive, he says, and may create a climate of distrust and hostility, erode performance and commitment to the organization, increase unionizing activity, and increase voluntary turnover and absenteeism.
Clearly, none of these are outcomes HR leaders or other organizational leaders wish to see in their organizations.
Monitoring the Pulse of Perceptions
In open-ended responses to Hay Group's question of "What has eroded perceptions of fairness?", about one-third (34 percent) of employees blamed the poor economy, which has resulted in pay cuts and pay freezes, while 19 percent cited inconsistent application of policies, favoritism and exceptions.
"You could argue that the economy is outside of our control, which might be relatively good news," says McMullen. But, the other perceptions are certainly within the power of HR to impact, he says.
Max Caldwell, managing principal of New York-based Towers Watson's global workforce effectiveness practice, says "perceptions of fairness, particularly related to pay and pay-for-performance, tend to be viewed pretty poorly" in his organization's global employee surveys as well.
"People generally think that they deserve more and are worth more, and I think there is general suspicion about the degree to which organizations really differentiate on the basis of salary increases, merit increases and bonuses," he says.
It's important, therefore, for organizations to monitor the perceptions among their own employees, he says.
Dattner suggests using these questions to gauge employee views:
* Does this organization strive to be as fair as possible?
* Do people get promoted based on merit and performance?
* Is credit and blame assigned fairly in this organization?
* Do I feel fairly compensated for the work that I do?
* Would I describe this organization as generally more fair than other places I have worked?
* Is compensation determined in a subjective and unfair manner?
* When unfair situations emerge, does the organization work to remedy them promptly?
* Does the organization recognize and reward people who expend extra effort?
"A lot of organizations," says McMullen, "don't do an adequate job of really understanding what their employees really value."
Survey results as well as feedback gleaned through direct interactions with employees can help point to areas for improvement that may involve policy changes, experts say. Often, however, an area that needs improvement relates to communication. (See Hay Group's recommendations for combating perceptions of reward equity among employees here.)
The Absence of Information
Increasing communication works particularly well to combat perceptions of unfair treatment, according to 62 percent of respondents in Hay Group's survey.
"Often," Caldwell says, "perceptions of fairness may be just that -- just misperception. People may not fully understand the value of what they have or they may have mistaken notions about how the organization is really executing on things, like the way performance ratings are assigned or how bonus payouts are allocated or how candidates for promotion are evaluated."
In the absence of information, employees will form their own opinions, experts say.
Being as transparent as possible about the way decisions are made is important for HR, says George Mason University's King. That presupposes, of course, that the decision-making process is fair and based on clear and objective standards, she says.
HR leaders also must be proactive in situations that may result in negative perceptions, King says, noting that talking to employees about an issue "respectfully can reduce the negative consequences of that action. It doesn't cure everything, but it can help buffer some of the negative consequences."
It's a cycle of workplace life: Transparency in decisions and leadership results in trust; trust is an important foundation for nurturing a climate of perceived equity; and trusting employees are high-performing employees.
Caldwell notes that "one message that comes back [in survey results] over and over again in these high-performing companies and that drives many other things -- perceptions of fairness, trust, engagement -- is leadership. It's really striking. We keep seeing this again and again."
Interestingly, it's the "softer dimensions" of leadership that seem to matter most -- personal integrity, leadership visibility and communication, he says.
"When you have that cadre of leaders [who] are perceived as people of integrity who believe what they say, and they do what they say," Caldwell says, "they're creating an environment of high performance where you tend to see people feeling better about their rewards, their work experience and their own prospects with the company."
Thanks to Lin Grensing-Pophal / LRP Publications / HRE Online
http://www.hreonline.com/HRE/printstory.jsp?storyId=533339271
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