Lehman Brothers - Collapsed
FannieMae - Nationalised
Freddie Mac - Nationalised
Merrill Lynch - Taken Over
HBOS - Taken Over
Warchovia - Taken Over
Fortis - Nationalised
Bradford & Bingley - Nationalised

When you look at this list, it really drives home the seriousness of the current economic climate. Confidence in the money markets is at its lowest for nearly twenty years. It is also feasible to say that the confidence felt by employees in riding out the storm is also severely shaken. Now, more than ever in recent memory, it is critical that financial institutions are seen as fair, transparent and objective in their people decisions.

Over the coming months, several of the largest financial institutions (and indeed many other organisations in a similar position) are going to find themselves either with too many employees following a merger or take-over and/or the need to downsize to ensure survival. Either way, tough decisions will be made over who stays and who goes. And the process by which these decisions are made can have significant impact on a company's continued survival.

Following massive organisational change, staff performance, team morale, employee well-being and talent retention are all impacted. The way in which an organisation handles such change will dictate the direction this impact takes.

From the late 1980s onwards (roughly around the time of the last major UK recession), psychologists were playing around with the idea of equity and justice. More specifically, they made a distinction between distributive justice and procedural justice. The former concerns whether people believe they have received (or will receive) fair rewards. The latter concerns whether people believe the procedures for allocating rewards are fair.

To provide an example, if a person perceives their pay to be less than other individuals in similar positions in other organisations, then they are likely to perceive distributive injustice. However, if they believe that their own employer is allocating the organisation's limited funds fairly within the organisation, then they will likely perceive procedural justice. In real terms, the employee is likely to be dissatisfied with their pay, but highly committed to their organisation. That is to say, fairness is of critical importance.

Now let's consider this information in light of the current economic crisis. More so than ever, it is critical that the tough decisions made by an organisation are seen as fair. In terms of distributive justice, a drop in salary may leave many dissatisfied. However, the process by which this decision is made (i.e. procedural justice) can go a long way in mitigating these feelings of dissatisfaction and enhancing feelings of commitment. In turn, employees tend to demonstrate more of what are known as organisational citizenship behaviours (such as helping others, going beyond the call of duty, participation and engagement) and less counterproductive behaviours (such as unauthorised absenteeism, workplace theft and bullying).

So, where does this leave us?

Employee's perceptions of fairness at the current time will be particularly important. As company's look to reduce headcount, the process by which decisions are made over an individual's future with the business will have a significant impact on the subsequent performance of such individuals.

It is critical that organisations employ objective, valid, fair, inclusive and most importantly transparent selection procedures when looking at who is to stay and who, unfortunately, is to go.

Whether the approach is based on appraisal data, competency-based interviewing, assessment centres, or the like, organisations are morally obliged to ensure the process is:

Based on clear, observable and justifiable criteria critical to the role in question;

Built on a foundation of accurate, objective and behaviourally-anchored evidence collection and collation;

Realistic, robust and acceptable to participants;

Inclusive, transparent and avoids any adverse impact to different groups;

And finally, cost effective.

It is also important to point out that this is not simply an ethical driver; this also makes sound business and political sense. Such procedures have repeatedly been shown to be better predictors of future success than less robust alternatives. Likewise, with the current media attention, all eyes are on organisations to show they can be fair and transparent with their people.

In the current climate, fear of the unknown will be rife. People will be looking for security and a feeling that all is fundamentally fair in the world. Organisations going through major change will play a big part in driving this fairness. If you treat those around you with justice and equity, you ensure a committed and motivated workforce to help weather the current financial storm and sail on into calmer waters.



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