Ten years ago, companies were downsizing and laying off workers by the millions. Today, the economy is booming, unemployment is low, and workers are departing in droves — except that this time, they’re quitting for jobs offering more pay or stock options or fancy perks or all of the above.
“What I see that is particularly relevant nowadays is how the social contract has changed between organizations and their workers, largely negating reciprocal commitment,” says associate professor of Terry Cobb.
Employers, he says, are now reaping the consequences of a shift in workplace culture that was spurred by the massive layoffs of a decade ago. People would work all their lives for companies like GE or GM, says Cobb. The tradition was to remain loyal to an organization in exchange for good pay and benefits and the prospect of long-term employment and career advancement.
During the late ’80s and early ’90s, however, companies in many industries had to change radically to survive. To compete in a changing global marketplace, they had to become more efficient and productive. In many cases, restructuring meant shedding jobs.
Job slashing was often necessary from a business perspective, but many companies went about it the wrong way from the human perspective, says Cobb, whose research specialty is organizational justice — what people see as fair or unfair and the consequences of those beliefs.
“The processes used by management to downsize, rightsize, and re-engineer were often perceived to be grossly unfair and arbitrary,” Cobb says. “Managers were seen as treating their people as simply another resource — to be thrown away like out-of-date office supplies when you didn’t need them. The survivors as well as the victims of downsizing got that message very plainly. And their children got the message too. People woke up and decided that they owed no loyalty to the organization.”
“Dilbert” cartoons became popular, Cobb adds, undoubtedly because they struck a chord in their portrayal of management’s attitude toward workers as uncaring and dictatorial.
Today, in the tight labor market, Americans are job-hopping in considerable numbers, jumping ship for better pay and perks. Some companies are so anxious to retain employees that they are offering them, according to U.S. News & World Report, massage therapy and “concierge” assistance with such chores as picking up dry cleaning, walking dogs, and planning vacation travel. Other companies, according to the Wall Street Journal, are so eager to hire that they are plying luxury cars and Caribbean vacations as signing bonuses or job-fair door prizes to lure new graduates, especially those with sought-after business and information technology skills.
Hard-pressed employers may feel they need to resort to such gimmicky blandishments to get workers to sign up or stay put. But Cobb says that creating and maintaining a fair and just workplace, though hardly flashy, would do more to attract and retain employees.
“When the social contract is only about money, why shouldn’t people seek out the highest bidder for their services?” Cobb asks. “But would you move to an organization with a reputation for being unfair and arbitrary? Some of us would, but not most of us. Most of us are looking for something beyond being bought.”
Cobb says that research has shown that “when individuals believe they have been treated fairly, they trust their organization and their leaders more, and are more loyal and committed to them.” Not only that, but workers also develop the kinds of attitudes and behavior needed for their organization to tackle change successfully. “They are more likely to accept changes required of them, to adjust more effectively to the accompanying stresses, and to be better ‘organization citizens.’”
All workplaces, Cobb says, have to deal with change. “As organizations develop new missions and priorities, they have to address shifts in policies, procedures, and resource allocations. Because these changes cause stress, strain, and loss, issues of fairness and concerns about fair treatment will inevitably arise.”
Organizational justice itself is a relatively untrodden area in the field of organizational development, Cobb says. Though management scholars in this field have long held an “intense ethical interest in the fairness of change, they have not adequately explored the very practical role that justice can play.”
Those who specialize in organizational justice distinguish among its three forms: distributive, procedural, and interactional justice.
Distributive justice refers to the “bottom line” of justice — was the outcome of a decision fair? These kinds of fairness issues, Cobb says, often come up during pay raise decisions, layoffs, transfers, retraining, promotions, and demotions. “They are also likely to arise in times of organizational change because new missions, policies, and procedures require changes in the structure of power and authority, and in the responsibilities and financial support of different programs.”
Procedural justice focuses on how the decision is made — were the procedures used to set goals or to investigate a grievance fair? Distributive justice focuses on the “ends,” procedural justice on the “means.” Cobb says that studies show that even when workers don’t like a particular outcome — being laid off, for example — “they exhibit less negative behavior when they perceive their layoffs as fairly decided.”
Interactional justice focuses on the behavior of the organization’s leaders — how they carry out policies and procedures and treat those who are subject to their authority, decisions, and actions. Do supervisors allow workers to have a voice in decision making? Do they adequately communicate the ground rules of change? Are they seen as fair or biased?
Leaders seen as fair, Cobb says, “command more trust, respect, and commitment.” In one study, he compared supervisors who were regarded as fair or unfair in situations where they recommended higher or lower pay, based on merit, for work performed. He found that unfair supervisors commanded little commitment, even from higher-paid workers. Fair supervisors, on the other hand, commanded much more commitment — even from those who were paid lower.
“Workers chose to remain with the supervisor who enacted procedurally fair behavior,” Cobb says, “and they chose to leave the supervisor who did not — regardless of the supervisor’s assessment of their performance and the pay outcome associated with it.”
Echoing Cobb’s findings, a recent Gallup study of two million employees at 700 companies revealed that most workers rate having a caring boss higher than money or fringe benefits. The study, reported in the New York Times, also found that employees’ productivity and their length of stay at their companies were determined by their relationship with their immediate supervisor.
Building and maintaining a just workplace, “is a difficult job in the best of times, but even more so in times of change,” Cobb says. While there are no panaceas, he says, there are solid guidelines that leaders can follow to promote change that is seen as fair.
First and foremost, management must communicate with workers on the rationale and direction of the change. Open communication, especially when the ground rules are being altered, is a fundamental aspect of procedural justice, Cobb says. Leaders need to keep workers informed about revisions in strategic plans, goals, policies, and procedures. Allowing participants in the change to play a direct role in setting the agenda, he says, can help ensure the success of the restructuring and will yield results that are seen as fairer.
Though everyone will face adversity, some will gain by the change and others will lose or bear greater hardship. “For those who gain,” Cobb says, “the message must be clear and organization-wide: their gains come from the sacrifices of others and they have obligations to them and the larger organization.
“There are no ‘privileged people’ in change. Those who are laid off need as much help from the organization as it can give.”
Different people, he says, will have different needs in a lay-off situation. “Management should pay as much attention as possible to this distributive criterion of fairness.” Older workers, for example, may experience more discrimination in the job market or require more skills upgrading than younger workers. Younger workers may need more help with health insurance for their children.
“Efforts to identify and respond as much as possible to the needs of victims as well as survivors of downsizing can help reduce the ill feelings and conflicts frequently associated with such losses.”
More attention should also be given to retraining, says Cobb. “Change is hard, and learning new job roles is stressful. The more workers see that resources are being allocated to retraining, the more likely they are to see that the adjustments demanded are fair, that the organization is concerned for them, and that it values not only their current contributions, but their future contributions as well.”
As for interactional justice, Cobb says, leaders often tend to dissociate themselves from the problems and hardships that accompany change. This distancing erodes worker trust and commitment, he says, and can result in attitudes and behavior that undermine the restructuring. “When leaders take responsibility for their actions and explain the reasons behind decisions and directly address employee sacrifices and losses, the change effort is more likely to be seen as just, and resistance more likely to decrease.”
Justice, Cobb says, is at the heart of every social system, including the workplace. Perceptions of justice and fairness in one’s organization, he says, always have impact.
“If you treat people fairly and are seen as fair, not only will people remain, but even people who leave will have less negative feelings about you. Knowing that your organization is a just one, that you’ll be treated fairly — that’s something worth sticking around for.”