Chapter 15 HRM and Service Fairness: How Being Fair with Employees Spills Over to Customers

1. Chapter 15HRM and Service Fairness: How Being Fair with Employees Spills Over to Customers David E. Bowen, Stephan W. Gilliland and Robert Folger

2. Humans possess a need for justice • How this affects HR and organizations • Fair treatment of employees in decisions surrounding their selection, performance appraisal and rewards • Fair treatment of customers in both service delivery and service recovery • How fair treatment of employees can lead to fair treatment of customers

3. Service Fairness • Service businesses frequent employee-customer encounters “moments of truth” • Customers are often physically present • Intangibility of services makes employees the prime target of customers’ fairness perceptions • If firms treat their employees fairly they, in turn, will treat their customers more fairly

4. Fairness: The Employees’ View of HRM Practices • Perceived fairness is one of the only ways that employees can evaluate HRM practices: the user’s perspective is largely driven by desires for fair and equitable treatment • Employees’ perceptions of HRM fairness are related to their acceptance of and satisfaction with HRM decisions

5. Fairness: The Employees’ View of HRM Practices • Fair treatment can also foster: • employee commitment • employees’ emotional attachment to their organization • employees’ demonstrating commitment • “good citizen” behaviors

6. Fairness: The Customer’s View of Service Delivery and Recovery • Customers care about fair treatment regarding: • Service delivery • What the business does to try to recover when customers perceive failures in service delivery • Customers expect service companies to: • Deliver the promised service dependably a consistently (reliability) • Offer clean, comfortable facilities (tangibles) • Give prompt service (responsiveness) • Be competent and courteous (assurance) • Extend caring, individualized attention (empathy)

7. Service Recovery • Entails making the customer “whole” again • Customers are even less tolerant of unfair treatment the second time around • Keeping promises is the essence of a mutually beneficial service relationship

8. Consequences of Fair Service • Enduring relationships • Small gains in customer retention, e.g., 5% increases, can lead to 75-100% gains in profitability • Complaint handling leads to customer trust and commitment

9. Managing to be Fair: the Proper Mix of Justice Principles • Each party’s evaluation of the outcomes received (distributive fairness) • Judge procedures that determine outcomes (procedural fairness) • Judge how such procedures are implemented (interactional fairness) • Procedural justice and interactional justice can make an otherwise unfair negative decision (distributive fairness) • *Justice principles associated with fair HRM • Justice principles associated with fairness in the hiring and selection. Table 15.1 summarizes pages 269-276.

10. Fair HRM Supports Fair Service • Significant statistical correlations between employee satisfaction and customer attitudes • Service employee attitudes have a significant influence upon customer attitudes: “spillover effect” • “Organizational citizenship behaviors” (OCBs) are the key variable in fair HRM leading to fair service. OCBs are positive actions taken by employees, even though they are not formally specified in job descriptions and performance appraisals, nor even formally stated as a basis for rewards

11. Fair HRM Supports Fair Service • Figure 15.1 p. 277 • OCBs are critical in service encounters; no one can specify in advance the full range of things that a service employee might have to do in response to unpredictable customer requests • Procedural and interactional justice are more important than distributive justice when it comes to developing good organizational citizens

12. Four basic lessons to be drawn from the myriad justice principles • Realistically preview, then honor, your business’s “psychological contract” with its employees--and customers • Train managers and employees who have customers contact employees in how to honor the “justice principles” displayed in table 15.1

13. Four basic lessons to be drawn from the myriad justice principles • Balance flexibility and consistency in the design and implementation of procedures • Everyone should be treated equally • Ensure that responding to unusual requests does not create unfairness for other employees and customers. • Determine when consistent application of formal, standardized rules and procedures is more desirable than flexibility and individualized attention

14. Four basic lessons to be drawn from the myriad justice principles • Share lots of justice-relevant information with employees and customers • Explaining the reasoning behind decisions • Openness will be helpful • The summary lesson is that managing to be fair to service employees and their customers requires more than “looking fair,” it requires “being fair”