Fair Process: Managing in The Knowledge Economy

FAIR PROCESS
MANAGING IN THE KNOWLEDGE ECONOMY
Presented by
Group 1
Introduction
 Distrust among employees about manager’s ability to make good decisions or act with
integrity compromises their motivation
 This issue is important now more than ever because knowledge-based organizations are
totally dependent on the commitment and ideas of employees
 Executives must create processes that help build employees’ trust
 Employees will commit to a manager’s decision – even one they disagree with – if they
believe that the manager has followed a process that was fair
 Outcomes matter, but no more than the fairness of the processes that produce them
 People want to know that they had their say – that their point of view was considered even if
it was rejected. Eg: Case of London woman
What is Fair Process ?
 People are sensitive to signals conveyed through a company’s decision making
process
 Decision making process can reveal a company’s willingness to trust and seek
ideas
 Fair process is not the same as democracy or consensus
 Giving every idea a chance
 Fair process pursues the best ideas whether proposed by many or one
Fair process view aids in understating seemingly irrational
behaviours
Volkswagen was developing its Puebla, Siemens-Nixdorf Information was in
Mexico, manufacturing site in 1992. VW's financial trouble in 1994. SNI CEO Gerhard
low-cost Mexican plant was well positioned Schulmeyer established clear yet stringent
to reclaim the lucrative North American guidelines for making choices. Ideas were
market. Workers didn't comprehend why solicited from everyone and everyone
their leaders made the decisions they did. understood how decisions would be made.
They felt misled and staged a large protest. SNI has undergone a change unprecedented
in European company history in just over
two years and employee satisfaction doubled
despite the radical and difficult changes.
The cases demonstrate the enormous power of fair process—fairness in the making and
carrying out of decisions. Fairness in the process has a significant impact on attitudes and
behaviors that are crucial to great performance.
The Three Principles
 Engagement
 Involving individuals in decisions that
affect them
 Ask for inputs
 Refuting other ideas and assumptions
 Respect individuals and their ideas  Expectation Clarity
 What are the new targets and
 Better decision and commitment
milestones
 Who is responsible for what
 Explanation  No political jockeying and favoritism
 Explanation for decisions made  More focus on job
 Powerful feedback loop for enhanced
learning
 Allows employees to trust manager’s
decisions
The Price of Unfairness
• Retributive Justice: They want not only the fair process restored, but
they also want the persons who violated it punished as well.
• Even when decisions are advantageous for them or the organization,
people may want to reverse unfair decisions.
• An unfair method might elicit such strong emotional responses.
• Managers should be aware that retaliation can be highly costly.
Fair Process in the Knowledge Economy
 Managers should adapt to knowledge based economy to improve their companies output.
 Creating and sharing knowledge are intangible activities that can neither be supervised nor
forced out of people.
 People need to be cooperative to share and acquire knowledge.
 The conventional management levers still have their role to play, but they have little to do with
encouraging active cooperation. They operate in the realm of distributive justice or outcome
fairness.
 The psychology of fair process, or procedural justice, is quite different. Fair process builds trust
and commitment, trust and commitment produce voluntary cooperation, and voluntary
cooperation drives performance, leading people to go beyond the call of duty by sharing their
knowledge and applying their creativity.
Why the idea of fair process is rarely practiced in companies?
 Managers confuse fair process with fair outcomes
 Few managers who focus on process might identify only one of the three fair-
process principles (mostly engagement) and they stop there
 Fair process represents a threat for managers who believe that knowledge is
power and that the only way to retain power is by keeping their knowledge to
themselves
 Belief that people are concerned only with what’s best for themselves i.e., they
are outcome oriented
Thank you!

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FAIR PROCESS

MANAGING IN THE KNOWLEDGE ECONOMY

 Executives must create processes that help build employees’ trust

 Fair process is not the same as democracy or consensus

 Giving every idea a chance

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