Awards - fairness and justice Flashcards
What is an award?
A special type of non-financial incentive where value comes from public recognition rather than material benefits. The symbolic value may substitute for the material value
What are the two main types of awards?
Confirmation awards – Automated, pre-specified intervals, based on clear criteria.
Discretionary awards – Given ex post, based on managerial discretion, often a surprise.
Why do awards create value?
Less likely to crowd out intrinsic motivation, and might in fact support leading to crowding-in.
Can increase autonomy, competence, and relatedness (especially discretionary awards)
Symbolic value can substitute for material value.
Use as “role model” to encourage desired behavior.
culture: celebration of desired norms
How can companies ensure value capturing of awards?
a condition for value capture is that employees cannot appropriate the award’s value by using it to achieve higher wages in the labor market or leave the company in favor of another.
Companies must capture the value of awards by:
Strengthening employee loyalty through recognition.
Creating relational bonds.
Using discretionary awards, which signal commitment and reduce the risk of employees leveraging awards for external job offers.
What is the risk of value destruction with awards?
- crowding-out (especially with monetary prizes and defined measures, less for discretionary awards)
- reinforce overconfidence
- demotivation of non-recipients
- distortion and manipulation (confirmation awards especially)
- social comparison costs (unfairness/injustice)
How can companies mitigate award-related fairness issues?
Use a mix of confirmation and discretionary awards.
Include group-based awards to encourage team spirit.
Involve co-workers in the decision process for fairness.
What is organizational justice?
Employees’ perception of fairness in workplace decisions, categorized into distributive, procedural, and interactional justice.
What are the three types of organizational justice?
Distributive justice – Fairness of outcomes (pay, rewards).
Procedural justice – Fairness of decision-making processes.
Interactional justice – Respectful & honest treatment.
What are 3 allocation rules that can lead to distributive justice (appropriate distribution)
Equity – Rewards based on contributions.
Equality – Equal treatment for all.
Need – Support based on individual needs.
What is the “fair process effect”?
Employees are more likely to accept negative outcomes if they perceive the process as fair.
What 2 kinds of interactional justice do we discuss?
Informational justice: truthful and adequate justification when things go bad.
Interpersonal justice: the respect and dignity we show others
How does fairness impact value creation?
Builds trust & commitment.
Enhances job performance.
Encourages organizational citizenship behaviors.
Improves customer satisfaction & loyalty
What is external equity, and why does it matter?
Employees compare their compensation to external job market standards, which can impact retention and lower motivation if perceived unfairly
How do performance appraisals ensure fairness?
By incorporating procedural justice through:
Adequate notice of expectations.
Just hearing (employee voice in evaluation).
Judgment based on evidence rather than bias.
Discuss equity vs. equality in regards to rewards
Equity allocations, which rewards performance, can increase individual effort – however, the resulting inequality can be disruptive (destroy group coherence)
Paying everyone the same amount is also not the answer. Equality distributions can boost group harmony, but they bring troubles of their own
