The role of justice in reward management

Professor Stephen J. Perkins (co-author, CIPD annual reward management survey)

How can we begin to interpret findings from the 2017 CIPD reward management survey around fairness and transparency? Theory-informed commentary helps us by referring to issues that may be understood using the ideas of distributive, procedural and interactional justice. The first of these has tended to get the most publicity – questions of fairness or its absence in how rewards are divided between employee levels (execs. and the rest, say), or related to demography, particularly gender.

Distributional justice refers to the extent to which an individual feels positive or negative towards an outcome affecting them, such as results of a pay review or bonus award, when comparing their experience against others. Research in the international HRM field tells us that employees tend to be mostly exercised when drawing comparisons between their own circumstances and those of immediate peers

The suggestion, then, is that when managers are talking to people whose appraisals and reward decisions they are accountable for, they need to invest time building trust with subordinates that the judgements that have been made about them – absolutely and relatively – are consistent with policy and fair.

We can draw links with the developments in performance management: although we don't know what workers themselves may perceive, survey responses indicate some discontent among organisations concerning the quality of the feedback between line managers and their staff following the outcomes of reward management decisions.

Through our expert practitioner panel held to inform the findings from the CIPD reward management survey, the belief was surfaced that, in the public sector, provided managers work ‘mechanistically’ in applying policies, employee contentment remains satisfactory.

However, when there is a need for more judgement to be exercised, as may be the case when assessing competencies and future potential, scope for grievance may become more pronounced. There may be significant problems around distributional justice building up, if our survey findings are reliable, given the reluctance of many organisations for their managers to engage with employees in open dialogue regarding how they have fared compared with others.

If distributive justice theory is right, other than perhaps in overall terms in response to media headlines about CEO pay, comparison between an individual and someone at a higher level in the hierarchy is less important than peer-based comparisons. But it seems that work is needed here. As emerged in dialogue with the expert practitioner panel, HR specialists at least are exercised by the need for greater attention to developing managerial capacity as well as competence in handling these sophisticated conversations well. And of course, if the expansion in organisations characterised by the idea of a network exchange is as pronounced as my next blog on the reward survey findings suggests, then the position could become even more pressing.

Network exchange, briefly, means that given the interconnectedness of how work and performance is organised today, the binary ‘effort-reward’ exchange (reward for an employee’s contribution to getting work done) needs to be re-imagined, to include a variety of influences at multiple levels – for example, the corporate governance regulatory environment, connected in turn to performance and market-driven reward determination processes.

We can push the theoretical envelope around workplace justice a little further, to encompass not just distributional issues but also those concerned with the application of procedures and in addition the ways in which interaction at the micro- or interpersonal level occurs between mangers and their team members. Effort is required to ensure ‘procedural justice’ and ‘interpersonal justice’ is done, and seen to be done, when managing performance and reward decisions. This is where the call for attention by the reward specialist community to secure commitment among top corporate management to resource investment is evidenced, given discontent reflected in the survey findings as already discussed above.

The practitioners that we spoke with recognised the need to move beyond simply concentrating attention on the design of reward. Effective application of procedural checks and balances, and helping individual managers to self-monitor the ways in which inter-subjective perceptions come into play in their dialogue with subordinates around performance and reward are needed. In both formal and in the increasingly informal conversations being encouraged within network exchange organisational contexts. This is probably the most challenging of all, given that factors of personality and temperament are involved. Therefore, both training and ongoing mentoring of line managers to help them understand how their orientation towards colleagues affects outcomes are needed.

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