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A Model of fair process and its limits

Author: Wu, Yaozhong ; Loch, Christoph ; Van Der Heyden, LudoINSEAD Area: Technology and Operations Management Series: Working Paper ; 2007/06/TOM Publisher: Fontainebleau : INSEAD, 2007.Language: EnglishDescription: 31 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: Fair Process research has shown that people care not only about outcomes, but also about the process that produces these outcomes. For a decision process to be seen as fair, the people affected must have the opportunity to give input and possibly to influence the decision, and the decision process and rationale must be transparent and clear. Existing research has shown empirically that fair process enhances both employee motivation and performance in execution. However, work to date has not addressed why fair process is so often violated in practice and why, in these instances, the hoped-for benefits are not pursued. This paper breaks new ground by analytically examining the subtle trade-offs involved: We develop a model of fair process in a principal-agent setting, rooted in psychological preferences for autonomy and fairness. We show that indeed fair process will not always be used, and explain why the hoped-for benefits may be insufficient to convince management to use fair process.
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Fair Process research has shown that people care not only about outcomes, but also about the process that produces these outcomes. For a decision process to be seen as fair, the people affected must have the opportunity to give input and possibly to influence the decision, and the decision process and rationale must be transparent and clear. Existing research has shown empirically that fair process enhances both employee motivation and performance in execution. However, work to date has not addressed why fair process is so often violated in practice and why, in these instances, the hoped-for benefits are not pursued. This paper breaks new ground by analytically examining the subtle trade-offs involved: We develop a model of fair process in a principal-agent setting, rooted in psychological preferences for autonomy and fairness. We show that indeed fair process will not always be used, and explain why the hoped-for benefits may be insufficient to convince management to use fair process.

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