Article Synopsis: Fair process: managing in the knowledge economy
Written by: W. Chan Kim and Reneé Mauborgne
The principal theme of the article is that lack of engagement with employees of an organisation is a huge, unrecognised problem. It results in lack of trust of senior management (to make good decisions or act with integrity) and impacts negatively on motivation. However, the good news is that executives can build processes to build trust. One strong method is to involve employees in, and make transparent, decision processes. Under those circumstances, employees will even commit to management decisions and strategies – even if they do not agree with it – if they believe the process has been fair.
The analogy used is of a women receiving an unfair parking offence. She was determined to go to court and fight the fine. However, on arrival, the judge dismissed her case without even hearing it and she was allowed to leave with no fine. Instead of being thrilled that she had got off (and without even a fight), she was furious and frustrated that she had not received “justice”. So although she liked the outcome, she did not like the process – and ended up unhappy.
The article goes on to explain that economists assume that we are rational people who are focussed on the outputs – and that assumption has been built into management tools such as incentive systems and organisational structures. But we human beings are not that simple – and we do care about the process as well. This is particularly important in the knowledge economy where value creation depends upon ideas, innovation and knowledge sharing. Fair process allows managers to achieve difficult and painful goals while gaining voluntary cooperation. Without it, even simple goals are tough to reach if fair process is not done, or seen to be done.
The article then uses a number of examples to prove the point and then suggests three principals to obtain fair process:
Engagement – involving individuals in the decisions that effect them by asking for inputs and allowing them to refute the merits of one another’s ideas and assumptions. It communicates management’s respect for individuals and their ideas. Encouraging refutation sharpens everyone’s thinking and builds collective wisdom. Engagement results in better decisions by management and greater commitment from all involved in executing those decisions.
Explanation – where everyone involved should understand why final decisions are made as they are. Explanations makes people confidant that decisions were made impartially and in the best interests of the company.
Expectation – clarity where once a decision has been made, managers state the new rules of the game. Employees must know by what standards they will be judged and the penalties for failures. To achieve fair process, it matters less what are the new policies and rules and more that they are clearly understood.
A critical point is that fair process is not attempting to make decisions by consensus and does not set out to make everyone happy. What it does is give every idea a chance to be put forward and accepted or not based on its merits. It does not mean that managers forfeit their right to make decisions or have to run some type of democratic process. The decision still lies in the hands of the management team – they are simply able to select the best option no matter where it came from or how many people put it forward.
Within the paper, there is a subsection on the price of unfairness. If a fair process policy has to be put in place because of a reaction from employees – it is almost too late. The organised protest will probably be looking for fair process AND retribution on those that did not demonstrate it previously. They will probably also be insisting on detailed and often inflexible processes to ensure that fair process is shown in the future – such is the emotional power that unfair process can provoke. Therefore managers who view fair process as a limitation on their freedom or resent that they need to gain input from their employees need to be aware that the retribution that they might receive is likely to be far more than the cost of implementing fair process.
The article gives other strong examples and reminds the reader that this is particularly important in professional services and other knowledge industries where we are dependent on voluntary cooperation of people to share and use their brain power.
Finally, partly in recognition of this need for fair process need, combined with the critical fact that maximisation of the brainpower and ideas of your staff is a high value-creating activity, Genesis have developed a solution: INSTRAT, to assist organisations to do this. In conjunction with a technology company: THOUGHTstream who harness the power of the web and “crowdsourcing” techniques, we have compiled a product that will help you to maximise the input from your employees and put in place “fair process” practices.For further discussion about the contents of the article or information about INSTRAT, please contact Simon Gifford at email@example.com