Today’s business leaders pride themselves excessively on irreproachable ethical conduct. In the workplace business ethics became apparently the top priority of almost every corporation: integrity, accountability, respect, transparency and fairness. In regard to employees, fairness involves providing equal opportunities to everyone and not discriminating against them based on their race, gender, religion, sexual orientation, or any other personal characteristic. It also encompasses providing fair compensation and benefits to employees, ensuring their safety and well-being, and creating a positive work environment that supports their growth and development. In light of the flamboyant rhetoric of many business leaders, portraying themselves as paragons of equity and fairness, it is worth delving into the concept of fairness toward employees and how it is actually applied in practice.
Since appeals to equality, fairness and equity are among the most commonly used defense lines in business for both business leaders and employees, it is worth establishing a common understanding with a definition of the concepts. Let’s define equal as the same or exactly alike; fair as just or appropriate under the circumstances and equity as the quality of being fair and impartial.
Our capitalistic world view already sets fairness above equality, and it is widely accepted that you have to treat people differently to be fair. We accept that high-performing employees receive a higher paycheck than an average performer and we lay off non-performers without even spending a second on pondering about the consequences our decisions have on the fired individual—it’s fair after all. Executives receive tremendous cash compensation and perks (business class travel, company car, private insurances, corner office, newest office equipment, etc.) while the average employee struggles to sustain their family with only limited benefits such as a used computer, minimum health insurance, a smartphone and a discount on the fee for the gym.
Some businesses leaders see the value of fairness as a process of decision making, not in the outcome. It is all about positive decisions about the business which serve exclusively its stakeholders, including employees. In other words, as long as leaders themselves believe that they make fair decisions they are free from responsibility toward their workforce. Hence, they willingly accept discontent and inequitable ramifications on their employees—that’s life and we all know that life’s not fair.
Acknowledging that fairness overrides equality in business, the former is subject to various limitations. First, fairness is a relative concept based on a comparison. Let’s assume employees A and B are both M&A directors, whereas employee A generated success fees of EUR 2m and employee B only retainers summing up to EUR 300k in a given financial year. At first glance, we can agree that employee A deserves a higher bonus than employee B. However, what is fair to one person can be considered unfair by another, which leads to the second limitation: people have different approaches to fairness. Employee B may have hired exceptional people, contributed to the cohesion of the team or initiated tremendous sales for other business units which makes them feel that their performance was equal or even better than employee A’s. Let’s replace employee B with business executive C, who supervises employee A. Executive C might be lavishly rewarded for a significant profit of their business unit they have not directly contributed to, whereas even a 12-months’ salary bonus for employee B would not even be close to 10 percent of the success fee directly generated by them. The question of fairness thus also relates to the question of to whom one is compared to. Based on the above considerations, an absolute statement about fairness might be attainable, a measurement of what would be fair or equitable pay, however, is merely impossible.
Not surprisingly, due to the inherent subjectivity of fairness, business leaders and HR departments do not fall short of implementing a wide range of incentive schemes, often involving highly sophisticated variable payment structures tied to the fulfillment of key performance indicators (KPIs). The broad consensus is that adhering to processes, protocols, and rules would reduce ambiguity and subjectivity. However, this well-intended approach has two significant downsides. First, a countereffect of putting people back into boxes, thereby diminishing the importance of the individual. Second, it contributes to an ever-growing number of rules and procedures that employees have to follow. Complex rules and regulations have the insidious potential of atomizing the individual, instilling confusion, anxiety, and frustration. With employees in this vulnerable state of mind, leaders can easily implement all kinds of unreasonable measures with the approval by the majority of their workforce. Psychologists refer to this phenomenon as “mass formation”—a highly effective technique used in totalitarian regimes and, more recently, during the COVID-19 pandemic.
Even accepting the usefulness of KPIs, they provide at best delusional objectivity as they can be easily manipulated and hardly monitored. How can one unambiguously allocate sales to a single individual when multiple people were involved in a pitch? Can a project manager really control the profitability of his projects when the staffing is done by a direct superior? Who can verify whether an executive met a client or just a friend for lunch? My personal observation was that after the implementation of incentive schemes, people spent a significant amount of time engineering their KPIs rather than focusing on their jobs. One of the most absurd KPIs I have ever encountered was the number of client meetings which had to be proved by the client’s business card. This led immediately to the exchange of business cards between the workforce and even people spending extra hours stealing business cards from their colleagues. In essence, the entire scheme proved to be inefficient and contributed to everything but fair compensation at the end of the financial year.
As mentioned earlier, there is a constant duality of fair and unfair, in other words what may be fair to one person may be unfair to the other. This is aggravated by the competitive nature of people in the workplace, no one would hardly care about a fair treatment of others as long as he or she believes that they are treated fairly. The existing ambiguity has created a business environment of conflict driven by situational and personal interpretation placing fair or unfair at great risk. Business leaders seldom take the time to think and communicate personally the most important decision for their employees each year—a compensation letter from the HR department with their signature suffices. There is almost no conversation and hardly any self-reflection as to the reasonableness of their salary decisions, up until the moment an employee comes with a counteroffer from a direct competitor. With the acceptance of a pay raise to silence the employee a toxic process continues to the detriment of any kind of equity or fairness.
I recall personnel evaluations and salary reviews as some of the most time-consuming tasks during my time as an executive. I spent weeks deliberating to determine fair compensation for the employees under my direct supervision, all in the pursuit of fairness. Although I knew in advance that most people would likely be disappointed with their pay, I made a conscious effort to set aside my personal biases in order to find fair and equitable compensation. I was fully aware that my decisions would occasionally lead to frustration and, in many cases, a sense of being treated unfairly. However, simply acknowledging in my conversations with each employee that my decision might not have been entirely fair, and listening carefully to their responses, often had an alleviating effect on them.
French writer and politician Victor Hugo once said, “Being good is easy, what is difficult is being just.” I would even go further, asserting that it is impossible. The implementation of policies and procedures revolving around KPIs sows in many instances more confusion than it contributes to a fairer compensation. It further spurs unhealthy competition and destroys individuality. The conclusion comes with an appeal to business leaders not to hide behind policies, protocols and procedures and commend themselves on being fair, rather than accepting the limitations of fairness. The application of their best possible judgment under the circumstances, paying undivided attention to their employees at least once a year in a personal discussion will help. If we bring humanity back into the corner offices on executive floors, we can certainly create a better and fairer working world.
Autor: Lars Wiechen
Lars F. Wiechen este un business executive, fost partener coordonator pentru consultanță financiară cu peste 20 de ani de experiență în finanțe și consultanță. A lucrat în Germania și Europa Centrală și de Est pentru trei dintre cele mai mari firme multinaționale de consultanță și se află în prezent în România. De-a lungul carierei sale, Lars a prezentat un interes deosebit în subiecte de leadership și gestionare a relațiilor interpersonale pe toate nivelurile unei organizații de afaceri. Ca membru și observator atent al grupurilor de executivi, precum și al proceselor de luare a deciziilor, Lars a reliefat diferite modele de comportament necesare pentru a crește exponențial și a prospera în mediul de afaceri. Lars are un master în administrarea afacerilor și a obținut numeroase acreditări și certificări internaționale în evaluare și contabilitate. Este un vorbitor public dedicat și autor a numeroase publicații pe probleme tehnice și de leadership. Un fan pasionat al sporturilor, Lars joacă în mod regulat tenis. Este pasionat de muzica clasică și în timpul liber cântă la pian. Vorbește fluent germană, engleză și română.
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