(Written by guest blogger, Dave Gregory)
In his Harvard Business Review article titled “Why it’s so Hard to be Fair,” Joel Brockner presents several studies on processing fairness. According to several studies, processing fairness pays enormous dividends in a wide variety of organizational and people related challenges from minimizing costs to strengthening performance. In two case studies, Brockner compares how Company A spent significantly more money than Company B in similar restructures. Company B practiced process fairness and within 9 months was operating more efficiently and effectively generating greater profits whereas Company A spent more money through their restructuring process. After nine months they were sputtering due to low productivity and morale, their legal costs defending against wrongful termination suits were significantly higher than Company B. In most areas Company A & B looked very similar prior to their restructures, following the restructure process one exceeded financial expectations and the other failed.
Process fairness is more likely to generate support for a new strategy, foster a positive culture, unleash innovation, and deliver greater financial performance. What’s more, it costs little financially to implement. The three drivers of process fairness are:
1. How much input do employees believe they have in the decision-making process;
2. How employees believe decisions are made and implemented; and
3. How managers behave.
In driver #1, “How much input do employees believe they have in the decision-making process,” employees must feel that their opinions have been requested and given serious consideration. Ultimately, each employee decides whether or not they have been included in the decision-making process. The importance of ensuring people feel included in the process is critical to process fairness.
In driver #2, “How employees believe decisions are made and implemented,” employees must believe decisions are made and implemented in a fair process. They will look for answers to these questions:
o Are the decisions consistent?
o Are the decisions based on accurate information?
o Can mistakes be corrected?
o Is personal bias minimized?
o Is ample notice provided?
o Is the decision process transparent?
Driver #3 “How Managers Behave,” focuses on two questions:
1. Do the managers explain WHY a decision was made?
2. Do they treat employees respectfully, actively listening to their concerns, and empathizing with points of view?
The Business Case for Process Fairness
Process fairness reduces costs of employee theft and turnover, decreases legal costs incurred by defending wrongful termination suits, and diminishes costs associated with helping employees cope with the stresses of reorganizations.
Process fairness is distinct from outcome fairness, which refers to employees’ judgments of the bottom-line results of their exchanges with their employers. Process fairness doesn’t ensure employees will get what they want; but it does mean that they will have a chance to be heard.
Take the case of someone passed over for a promotion in a reorganization. If she feels that the chosen candidate was qualified, and if her manager has had a candid conversation with her about how she could be more prepared for the next opportunity, chances are she will be more engaged and productive than if she believes there was bias involved in the selection of the candidate or of she receives no guidance on how to move forward.
According to Duke’s Allan Lind and Ohio State’s Jerald Greenberg, who led a study of nearly 1,000 people in the mid-1990’s, they found that less than 1% of the people filed wrongful termination lawsuits when they felt a high degree of process fairness was utilized in their reorganization. Whereas, 17% of the terminated employees filed wrongful termination lawsuits when they felt a low amount of process fairness was utilized in their reorganization.
In 2013, Workforce Magazine, part of the Human Capital Media group, wrote “The reality is that defending a discrimination or other employment lawsuit is expensive. Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment (which, much more often than not, is the case), the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial.”
The cost of implementing process fairness, even in an organization not currently practicing it, is fractions of these costs. Another reason to implement process fairness, simply put, it’s the right thing to do. The benefits of employee engagement alone make process fairness the smart financial decision.
Implementing Process Fairness in Reorganization
Implementing process fairness in your reorganization might seem daunting, especially when it comes to measuring someone’s performance and potential. Eliminating bias in these scenarios becomes even more difficult when two or more organizations are reorganizing together in a merger or acquisition situation. Human nature is to protect the people within your tribe. This bias creates difficult conversations between decision-makers and often is the reason process fairness fails.
Organizations who use a bias-free human capital assessment process to measure potential have found their employees feel a higher degree of process fairness. In the Alorica and EGS acquisition (read more about it here), we utilized The Attribute Index™ from Innermetrix Inc. to measure potential in every Human Resources employee. Coupled with performance reviews, this potential and performance measurement allowed employees to feel and see the transparency of process fairness.
The use of bias-free human capital assessments built trust, led to more candid conversations about the new roles and expectations for employees, created commitment to the decisions and allowed the reorganization leaders to demonstrate accountability to employees and other business leaders. This created significant cost savings and improved the speed of reorganization allowing synergies to be recognized sooner than planned exceeding financial expectations.
For more information about implementing process fairness in your organization, contact us:
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