HUMAN RESOURCE MANAGEMENT DECISIONS

Stephen W. Gilliland and Layne Paddock Department of Management, University of Arizona

In an effort to incentivize performance, Global Technology Design Systems ties employee healthcare premium contributions to performance evaluations. Employees whose performance far exceeds expectations do not pay any premiums, whereas those with marginal evaluations and below pay 100% of the premium.Performance levels between these extremes pay 25%, 50%, or 75% of the premium, depending on performance.

Abroc values individuality and respects employees’ and their families’ specific needs.In addition to allowing employees the freedom to schedule their work hours around family and other non-work demands, employees’ family needs are taken into account when annual raises are distributed; those with greater needs typically receive larger raises.

These fictitious examples highlight how principles of justice that are commonly applied in one area (e.g., performance appraisal or work-scheduling) may appear inappropriate and unfair when applied to a different human resource decision (e.g., health benefits and raises). Why is it unfair to allocate health insurance premiums based on merit, but fair to allocate performance evaluations and salary increases on this basis? Why is it fair to provide benefits such as family-friendly leave policies based on individual need but unfair to allocate raises based on need?

Organizational justice research shows many practical implications of treating employees in a fair manner. Perceptions of fairness lead to positive organizational attitudes and behaviors, including increased job satisfaction, organizational commitment, and organizational citizenship behaviors (Colquitt, Conlon, Wesson, Porter, & Ng, 2001). In contrast, if an employee perceives unfairness he or she is less likely to demonstrate these positive

International Review of Industrial and Organizational Psychology 2005 Volume 20. Edited by Gerard P. Hodgkinson and J. Kevin Ford

150 I NTERNATIONAL R EVIEW OF I NDUSTRIAL AND O RGANIZATIONAL P SYCHOLOGY 2005 outcomes and more likely to exhibit negative attitudes and behaviors. Result-

ing negative behaviors include sabotage (Giacalone & Greenberg, 1997) and theft (Greenberg, 1990). For this reason, behaving in an organizationally just manner is beneficial to managers and organizations.

Theories that define types of organizational justice and allow for predictions about these types commonly identify three steps: an event or element in the environment, an individual’s appraisal of this event according to a set of rules, and an evaluation of whether the event is fair (Cropanzano, Rupp, Mohler, & Schminke, 2001). This basic model is simple but theories of justice differ in the ‘type of elements they emphasize (e.g., elements of the outcomes, the process, or interpersonal treatment), the types of rules that are applied (e.g., rules of consistency, equity, voice), and the structure of the justice appraisals that emerge (e.g., procedural justice, interactional justice, informational justice)’ (Cropanzano et al., 2001, p. 3). In part these differences between justice theories are explained by basic distinctions between justice types.

Distributive justice was the first justice type introduced and reflects the study of outcomes or, more specifically, outcome fairness (Adams, 1965; Deutsch, 1969). The second type of justice, procedural justice, or process fairness, was distinguished from distributive justice as reflecting the fairness of procedures that result in outcomes (Leventhal, 1976; Thibaut & Walker, 1975). Researchers then distinguished a third type of justice, interactional justice (Bies & Moag, 1986) that addresses the interpersonal and informational aspects of exchanges around procedures and outcomes. Finally, recent evidence supports the use of interpersonal and informational justice as separate types of justice (Colquitt, 2001). Careful distinction between justice types helps to clarify what type of element is being emphasized, the appropriate theoretical rules that apply, and the basic structure of the justice appraisals that emerge.

However, some researchers have suggested that the predictive value of justice types vary depending on organizational context (e.g., Greenberg, 1996). They question how individuals think about justice in the workplace (Cropanzano, Schminke, & Paddock, 2003). Do individuals think about how fair outcomes, procedures, and interpersonal treatment are by averaging over the justice of specific HR policies or are individuals’ perceptions of fairness specific to these policies? For example, does an employee view an organization with a very fair hiring process and a somewhat unfair process of merit increases as being moderately procedurally fair based on a combination of the hiring and the merit increases procedures. Or, do perceptions remain specific to these HR decisions (fair hiring but unfair merit procedures). Recent empirical evidence suggests that individuals’ perceptions of distributive and procedural fairness, and to a lesser extent interactional fairness, are HR-function-specific rather than justice-type-specific (Cropanzano et al., 2003). When individuals think about these types of fairness, they do so in

O RGANIZATIONAL J USTICE ACROSS H UMAN R ESOURCE M ANAGEMENT D ECISIONS 151 part in terms of specific organizational functions (e.g., how fair is my pay)

rather than justice types averaged across all organizational functions. This evidence suggests it is possible that what happens in practice—how individuals actually think about organizational justice—does not coincide with the categorizations of justice normally used. Researchers should take care when investigating the fairness of HR functions to pay heed to which of these are being investigated and not to focus only on justice types. Further, we argue that justice researchers should take care to differentiate among these HR functions for several reasons.

First, some HR decisions typically rely on a specific justice principle. For example, the uniformity of work schedules given to most white-collar employees is consistent with the distributive equality rule. Violation of typical justice aspects in these contexts may elicit greater perceived injustice from participants than occurs in situations in which this type of justice is not typical. The examples provided at the beginning of this chapter highlight this injustice. Consequently, generalizing the importance of equality ob- tained in response to work schedules to other HR decisions (e.g., allocation of bonuses) does not make sense.

Second, most justice research has focused on justice types (e.g., procedural) and the relative importance or interaction effects of these justice types (e.g., procedural by distributive interactions). It is possible that differences between HR decisions may be more important in defining fairness reactions than differences across justice types. That is, through the almost singular focus on justice types and the development of measures related to these justice types, we may have overemphasized the importance of distinguishing types of justice.

Third, in looking at the importance of different elements of distributive, procedural, and interactional justice, it is necessary to understand the underlying causal agent (i.e., individual manager vs. organization) of the HR function being reviewed. Specifically, past research has hypothesized and found support for fairness perceptions depending on a causal agent. For example, Greenberg (1986a, b) found that distributive justice differed as a function of whether an individual or the organization was the cause of inequity. Most likely, employees view either a manager or the organization as more responsible for each type of HR decision. Assuming this is the case, the importance of different justice aspects may systematically vary depending on the party viewed as responsible for the HR policies.

Finally, considerable research has demonstrated the relationship between organizational justice and important employee outcomes such as commitment, turnover, and citizenship behavior (Colquitt et al., 2001). These results are used to demonstrate the importance or robustness of the organizational justice construct. It is possible and likely that the outcomes associated with organizational justice vary across different HR functions. For example, we expect that turnover is more likely to follow injustice in a

152 I NTERNATIONAL R EVIEW OF I NDUSTRIAL AND O RGANIZATIONAL P SYCHOLOGY 2005 promotion decision or pay raise than injustice in a hiring decision. We need

to systematically study this variation across functions to understand when and how justice concerns impact different employee outcomes.

For these reasons, we believe distinguishing between HR functions is important in understanding fairness perceptions. We present HR functions, including hiring, performance appraisal, compensation, benefits, and termi- nation, and for each we examine the importance of distributive, procedural, and interactional justice aspects. In doing so we use existing research to make predictions about which justice types and rules are most important for each policy. We do not intend our list of functions to be exhaustive, rather we have identified important functions that are likely to demonstrate interesting variation across justice types. More importantly, we offer evidence that aspects of each justice type vary in importance depending on the HR policy under consideration. Propositions concerning important aspects of each justice type for each HR policy are developed. After summarizing these predictions, we offer theoretical and practical implications, limitations, and future directions. However, first, we begin by providing a more thorough review of existing justice types and defining rules for each.

HUMAN RESOURCE MANAGEMENT DECISIONS