2008 Forum

Controls, Fairness, andCommitment inOrganizations

Gipsie B. Ranney

In2:InThinking Network2008 ForumApril 17 – 22

gbranney@comcast.net

2

The Psychological Contract

Argyris (1960)

Unwritten expectations between anemployee and the employingorganization

Employee’s expectations include:

sense of dignity

sense of worth

fair treatment

opportunities to learn and grow

Employer’s expectations of theemployee include:

loyalty

commitment

3

Breach of Psychological Contract

Not as expected:

•opportunities for promotion

•career guidance & mentoring

•competitive pay

•participation in decision making

•well-defined job responsibilities

•reasonable work load

•adequate resources to perform job

•recognition of accomplishments

Adapted from

Kickul, J. (2001), “When Organizations Break Their Promises:Employee Reactions to Unfair Processes and Treatment,” Journal ofBusiness Ethics, 29, 289-307.

4

Organizational Justice

Perceptions of fairness in the workplace

Types:

Distributive – perceived fairness of decision outcomes; .e.g., pay, allocation

of resources

Procedural – perceived fairness of procedures (process) used to make decisions.

Interactional – perceived fairness ofenactment of decisions by authority

figures

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Criteria

•Equity – relative contributionrewards inputs

•Competition - outcome

•Equalityperceived as fair in allocation of loss

pay reductions (equal %)shared across all levels

•Needslayoffs

allocation of outplacementresourcesscheduling of individual layoffs

budget reductions – long term view

Distributive Justice

equal

6

Procedural Justice

Indicators of the presence ofprocedural justice

•consistency over time

•unbiasedness•accurate information collected andused

•mechanisms in place to correctflawed decisions

•opinions of groups affected takeninto account

•“voice”

•decision control - “choice,”autonomy

•conform to prevailing standards ofethics or morality

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Interactional Justice

Interactional Justice

•Informational – adequate andhonest explanations

•Interpersonal – courteous,respectful treatment

Indicators of absence of interpersonaljustice

•derogatory judgments

•deception

•invasion of privacy

•inconsiderate or abusive actions

•public criticism

•coercion

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Opportunity: Informational Justice

•advance notice of decisions /announcements

•explanations that can be perceivedas legitimate

•apologies, statements of regret

•acknowledgement of mistakes

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Example “Can’t let that happen again!”

Getting a Company Car to Go on a Trip

Fill out use form

Get managerto sign form

Turn in form

Pick up car keys

Find car

Start car Need gas?

Go back in plant

Drive to pump

Put gas in car

Go backin plant

Turn in gaspump key

Start trip

Check outgas pump key

Return tocar

Returnto car

Yes

No

Source: Kit Schessele

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Opportunity: Organizational Policies

Was the policy introduced in reactionto a possible special cause event?Would some other action have beenpreferable?

Does the policy communicatemistrust?

Is the policy based on anoverstatement of the likelihood of alawsuit?

Does the policy offend the dignity ofthe employee?

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Punishment

Punishment as a social event

•may serve to uphold social norms

•may signal appropriate andinappropriate behaviors

•may deter misconduct

•may create perceptions of thesupervisor and the organization as justor unjust

Adapted from

Trevino, L.K. (1992), “The Social Effects of Punishment in Organizations:A Justice Perspective,” The Academy of Management Review, 17(4),p. 647-676.

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Punishment

To ensure procedural justice,

•use a court system

•have a judicial board

Clarify what constitutes a firing offense

Train managers

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Opportunity: Performance Evaluation

Fairness determinants

•solicitation of input

•consistent application of standards

•degree of evaluator’s familiaritywith the employee’s work

•two-way communication duringinterviews

•opportunity to challenge / rebutevaluation received

Adapted from

Greenberg, J. (1987), “A Taxonomy of Organizational JusticeTheories,” The Academy of Management Review, 12(1), 9-22.

Note: performance evaluations areinherently unfair and should be abolished

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Opportunity: Selection

Communications with applicant

•open and honest

•timely

Inform the applicant

•realistic job previews

•realistic preview ofopportunities for advancement

•recognition of uncertainty

Fairness and accuracy of tests andother selection devices

Establish and maintain standardsfor moral character

Provisional employment

Mentoring

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Opportunity: Downsizing

•conduct system-wide analyses oftasks and personnel beforedownsizing (cause the work to goaway before the people go away)

•fairness in order of layoffs

•outplacement

good references

contact with recruitment agencies

permission to use organization’sresources to hunt jobs

training in special skills

counseling

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Opportunity: Change

Procedural context:

“If employees believe the process offormulating an initiative has been fair, theyare more likely to accept and adopt thechanges it involves.

Procedural fairness [means that] people havehad a chance to voice their opinions … theybelieve their views have been consideredcarefully and they have had a genuineopportunity to influence the design androllout of the initiative.

Procedural legitimacy is equally critical. Itmeans that employees believe the changeinitiative fits with the tenets of what thecompany stands for and how work should bedone.”

Source:

Roberto, M.A. and Levesque, L.C. (2005), “The Art of Making ChangeInitiatives Stick,” MIT Sloan Management Review, 46(4), 52-60.

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Opportunity: Change

Accounts

Accounts are explanations given bymanagement for actions that result indisappointing outcomes for employees.

•Causal accounts – explain the causes thatcompel a change

•Ideological accounts – argue for a changebased on higher-order values

•Referential accounts – aimed at changingthe frame of reference; e.g., things couldbe worse or things will be better in thefuture

•Penitential accounts – apologies fordamage and for mistakes

Accounts provide for informational justice.

Adapted from:

Cobb, A., Folger, R., and Wooten, K. (1995), “The Role Justice Plays inOrganizational Change,” Public Administration Quarterly, Summer, 135-151.

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Narrow Objectives

With intervention

Without intervention

Sales

Sales

Time

Time

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Organizational Control

Coordination of the activities of subunits of theorganization in order to attain the aims of theorganization as a whole.

Needs for specialization and coordination presenta dilemma.

One approach:

encourage subunits to operate as separate entities;

define performance criteria so that when subunits operate solely in accordance with their

individual criteria, they collectively perform inthe best interest of the organization as a

whole;

use reporting, appraisal, and rewards to achieve subunit performance

– the “defined criteria” approach

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Organizational Control

Another approach: coordination by feedback andmutual adjustment; highly adaptive; performancecriteria for the organization as a whole

Adapted from

Baumler, J. (1971), “Defined Criteria of Performance inOrganizational Control,” Administrative Science Quarterly, 16(3),340-350.

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Baumler’s Experiment

Baumler conducted a laboratoryexperiment - volunteers participatedin a business game

Two factors were manipulated:

degree of interdependence ofparticipants

with or without defined criteria

Findings:

defined criteria reduced theamount of communication betweenparticipants

defined criteria successful onlywhen there was minimalinterdependence

defined criteria detrimental whenthere was strong interdependence

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Trust

Trust is evolutionary

conditional unconditional

Unconditional trust fundamentallychanges the quality of theexchange relationship

Source:

Jones, G. and George, J. (1998), “The Experience and Evolution ofTrust: Implications for Cooperation and Teamwork,” The Academy ofManagement Review, 23(3), 531-546.

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Trust

Effects of Unconditional Trust onInterpersonal Cooperation and Teamwork

•willingness to go beyond jobdescription

•high confidence in others

•people want to help each other

•willing to seek help

•free exchange of knowledge andinformation

•subjugation of personal needs andego for the greater common good•high involvement

Adapted from: Jones and George (1998).

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Betrayal of Trust in Organizations

•By supervisors

coercive or threatening behavior

withholding promised supportblaming employees for his or herown mistakesfavoritismimproper dismissalmisuse of private information

•change of rules “after the fact”

•stealing of ideas

•wrong or unfair accusations

•broken promises

•lyingAdapted from

Elangovan, A. and Shapiro, D. (1998), “Betrayal of Trust inOrganizations,” The Academy of Management Review, 23(3), 547-566.

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Opportunity:Clarify Betrayal of Trust

Cascade of discussion

These constitute betrayals of trustand must be eliminated from day-to-day work

Each higher level is a model forlower levels

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Opportunity: Less Churning

Churning of managers reducesopportunities for development of trustbeyond conditional

“Plug &play” view of managementtaught in schools of business (don’tneed to know much, if anything,about the work and how it is done)

conditional trust

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Trust and Distrust AreMultidimensional

Adapted from: Lewicki, McAllister and Bies (1998).

Undesirableeventualities expected& fearedHarmful motivesassumedInterdependencemanagedParanoia

CasualacquaintanceLimitedinterdependenceBounded, arms-lengthtransactions

LowNo hope,faith,confidencePassivityHesitance

Trust but verifyRelationships highlysegmented & boundedOpportunities pursuedbut vulnerabilitiesmonitored

High valuecongruenceInterdependenceOpportunitiespursuedNew initiatives

HighHope, faith,confidenceAssuranceInitiative

HighFear, skepticism,cynicism, vigilanceWariness andwatchfulness

LowNo fear,skepticism,cynicism, vigilanceLow monitoring

Trust

Distrust

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The Manager as Model

The manager has an obligation tobe trustworthy.

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A Virtuous (or Vicious) Cycle

+ Employee perceptionof management’srespect for rights anddignity

Employeecitizenshipbehavior

Fair treatmentof employees

Employee trust inmanagement

Managementtrust in employees

+

+

++

Trust &Fairness

Time

Recognition+

+

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The Organization in Its Environment

External organizational actions thatcan affect its relationships with itsemployees:

unfair / dishonest treatment ofcustomers

unfair / dishonest treatment ofsuppliers

cheating investors, dishonestpublic statements

breaking laws

damaging the physicalenvironment

Movement into other countriesbrings further responsibilities tounderstand and respect culturalnorms and values

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Beyond Ethics

Moral, not just ethical, behavior bythe organization.

The absence of unethical behaviordoesn’t imply highly principledbehavior, integrity.

Values enacted, not just espoused.

Taking responsibility, not just beingaccountable.

Responsibility for the lives ofemployees, their families, theircommunities.

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Sources

Ambrose, M. and Schminke, M. (2003), “Organization Structure as aModerator of the Relationship Between Procedural Justice, InteractionalJustice, Perceived Organizational Support, and Supervisory Trust,” Journalof Applied Psychology, 88(2), 295-305.

Argyris, C. (1960), Understanding Organizational Behavior, Dorsey Press.

Bagdadli, S., Roberson, Q., and Paoletti, F. (2006), “The Mediating Role ofProcedural Justice in Responses to Promotion Decisions,” Journal ofBusiness and Psychology, 21(1), 83-102.

Baumler, J. (1971), “Defined Criteria of Performance in OrganizationalControl,” Administrative Science Quarterly, 16(3), 340-350.

Beer, M., Eisenstat, R., and Spector, B. (1990), “Why Change ProgramsDon’t Produce Change,” Harvard Business Review, November –December, 158-166.

Bowen, D., Gilliland, S., and Folger, R. (1999), “How Being Fair withEmployees Spills Over to Customers,” Organizational Dynamics, Winter, 7-23.

Brass, D., Butterfield, K., and Skaggs, B. (1998), “Relationships andUnethical Behavior: A Social Network Perspective,” The Academy ofManagement Review, 23(1), 14-31.

Bright, D., Cameron, K., and Caza, A. (2006), “The Amplifying andBuffering Effects of Virtuousness in Downsized Organizations,” Journal ofBusiness Ethics, 64, 249-269.

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Sources

Byrne, Z. (2005), “Fairness Reduces the Negative Effects ofOrganizational Politics on Turnover Intentions, Citizenship Behavior, andJob Performance,” Journal of Business and Psychology, 20(2), 175-200.

Cobb, A., Folger, R., and Wooten, K. (1995), “The Role Justice Plays inOrganizational Change,” Public Administration Quarterly, Summer, 135-151.

Deming, W. Edwards (2000), The New Economics, 2nd Ed., MIT Press.

Elangovan, A. and Shapiro, D. (1998), “Betrayal of Trust inOrganizations,” The Academy of Management Review, 23(3), 547-566.

Erdogan, B., Liden, R., and Kraimer, M. (2006), “Justice and Leader-Member Exchange: The Moderating Role of Organizational Culture,”Academy of Management Journal, 49(2), 395-406.

Gilliland, S. (1993), “The Perceived Fairness of Selection Systems: AnOrganizational Justice Perspective,” The Academy of ManagementReview, 18(4), 694-734.

Greenberg, J. (1987), “A Taxonomy of Organizational Justice Theories,”The Academy of Management Review, 12(1), 9-22.

Greenberg, J. (1990), “Organizational Justice: Yesterday, Today, andTomorrow,” Journal of Management, 16(2), 399-432.

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Sources

Hagen, J. and Choe, S. (1998), “Trust in Japanese Interfirm Relations:Institutional Sanctions Matter,” The Academy of Management Review,23(3), 589-600.

Hardin, R. (1996), “Trustworthiness,” Ethics, 107(1), 26-42.

Hopkins, S. and Weathington, B. (2006),”The Relationships BetweenJustice Perceptions, Trust, and Employee Attitudes in a DownsizedOrganization,” The Journal of Psychology, 140(5), 477-498.

Jones, G. and George, J. (1998), “The Experience and Evolution of Trust:Implications for Cooperation and Teamwork,” The Academy ofManagement Review, 23(3), 531-546.

Kabanoff, B. (1991), “Equity, Equality, Power, and Conflict,” Academy ofManagement Review, 16(2), 416-441.

Kickul, J. (2001), “When Organizations Break Their Promises: EmployeeReactions to Unfair Processes and Treatment,” Journal of Business Ethics,29, 289-307.

Kim, W.C. and Mauborgne, R. (1997), “Fair Process: Managing in theKnowledge Economy,” Harvard Business Review, July-August, 65-75.

Konovsky, M.A. (2000), Understanding Procedural Justice and Its Impacton Business Organizations, Journal of Management, 26(3), 489-511.

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Sources

Korsgaard, A., Sapienza, H., and Schweiger, D. (2002), “Beaten BeforeBegun: The Role of Procedural Justice in Planning Change,” Journal ofManagement, 28(4), 497-516.

Levanthal, G.S. (1980), “What Should Be Done with Equity Theory?” inSocial Exchange: Advances in Theory and Research, Plenum.

Lewicki, R., McAllister, D. and Bies, R. (1998), “Trust and Distrust: NewRelationships and Realities,” The Academy of Management Review, 23(3),438-458.

Mayer, R., Davis, J., Schoorman, F. (1995), “An Integrative Model ofOrganizational Trust,” The Academy of Management Review, 20(3), 709-734.

Mishra, A. and Spreitzer, G. (1998), “Explaining How Survivors Respond toDownsizing: The Roles of Trust, Empowerment, Justice, and WorkRedesign,” The Academy of Management Review, 23(3), 567-588.

Morrison, E., and Robinson, S. (1997), “When Employees Feel Betrayed: AModel of How Psychological Contract Violation Develops,” The Academy ofManagement Review, 22(1), 226-256.

Pettit, P. (1995), “The Cunning of Trust,” Philosophy and Public Affairs,24(3), 202-225.

Reb, J., Goldman, B., Kray, L., and Cropanzano, R. (2006), “DifferentWrongs, Different Remedies? Reactions to Organizational Remedies afterProcedural and Interactional Injustice,” Personnel Psychology, 59, 31-64.

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Sources

Roberto, M.A. and Levesque, L.C. (2005), “The Art of Making ChangeInitiatives Stick,” MIT Sloan Management Review, 46(4), 52-60.

Schein, E. (1996), “Culture: The Missing Concept in Organization Studies,”Administrative Science Quarterly, 41(2), 229-240.

Schminke, M., Ambrose, M., and Cropanzano, R. (2000), “The Effect ofOrganizational Structure on Perceptions of Procedural Fairness,” Journalof Applied Psychology, 85(2), 294-304.

Sheppard, B. and Sherman, D. (1998), “The Grammars of Trust: A Modeland General Implications,” The Academy of Management Review, 23(3),422-437.

Thibault, J. and Walker, L. (1975), Procedural Justice: A PsychologicalAnalysis, Erlbaum.

Thompson, M. and Heron, P. (2005), “The Difference a Manager CanMake: Organizational Justice and Knowledge Worker Commitment,”International Journal of Human Resource Management, 16(3), 383-404.

Trevino, L.K. (1992), “The Social Effects of Punishment in Organizations:A Justice Perspective,” The Academy of Management Review, 17(4), p.647-676.

Whitener, E., Brodt, S., Korsgaard, M.A., and Werner, J. (1998),“Managers as Initiators of Trust: An Exchange Relationship Framework forUnderstanding Managerial Trustworthy Behavior,” The Academy ofManagement Review, 23(3), 513-530.