IVEntrepreneurshipAnalysis
Fairness in the Workplace: Distribution, Procedure, and Treatment
Many owners believe that being fair means distributing justly. Research shows that employees pay at least as much attention to how a decision comes about and how it is communicated to them. This analysis explains the three sides of fairness.
Key takeaways
- Fairness has three sides: the outcome, the procedure, that is, whether things follow comprehensible rules, and the treatment, that is, the respect and explanation with which a decision is communicated.
- A meta-analysis of 183 studies shows that each of these sides contributes independently to the judgment of fairness (Colquitt et al. 2001).
- In 116 family-run small and medium-sized enterprises, employees experienced more fairness when personnel rules were applied consistently, especially employees without family ties.
- The fairness audit checks recurring decisions such as pay, vacation, and promotion against five rules for fair procedures.
Why fairness is so easily violated in a small business
In small businesses, much is decided on the spot. The owner hands out vacation, raises, and interesting tasks often by feel, and usually means well. Nevertheless, the impression quickly arises that some are favored. One colleague gets the bridge day, another the raise, and no one knows why. Such impressions are rarely a big issue, but they accumulate.
This analysis therefore pursues the question: What do employees experience as fair, and how can an owner make decisions so that they are not only meant to be just but are also perceived that way?
To answer it, I first clarify the terms, then introduce the model of the three sides of fairness already described on this blog for separations, and summarize what studies show. Then I weigh two views and describe an audit for recurring decisions.
What does fairness in a business mean?
Fairness here means employees' judgment of whether they are treated appropriately. Research speaks of organizational justice. The word judgment is important: it is not about whether a decision is objectively just, but whether it is experienced that way by those affected. That sounds like a side issue, but it is the core. A decision that is just but seems unfair has the same consequences as an unjust one.
How people judge the outcome is described by Adams's equity theory, which the article conducting salary conversations introduces. According to it, everyone compares the ratio of what they contribute to what they receive with the ratio of a comparison person. If the comparison turns out unfavorably, a sense of unfairness arises, and people try to restore balance, for instance through less effort.
Added to this is an idea that Kroon, Kramer, and Kox (2024) take up from the research: the fairness heuristic. Early in an employment relationship, for instance during hiring and onboarding, employees form a basic judgment of whether their employer is fair. This judgment then works like a shortcut with which they interpret later decisions. Whoever is once considered unfair finds it harder to be believed even when making a fair decision.
The thinking model: three sides of fairness
Research on justice in organizations distinguishes three kinds of fairness. The article letting an employee go decently describes them, following van Dierendonck and Jacobs (2012), as follows: outcome fairness concerns what stands at the end. Procedural fairness concerns the path: whether selection follows uniform rules, without bias, and with the opportunity to correct errors and contribute one's own view. Interactional fairness concerns the treatment: the dignity and respect with which the news is delivered and how clearly it is explained.
Some researchers divide the third side further. Colquitt, Conlon, Wesson, and colleagues (2001) distinguish between respectful treatment and the explanation of the decision, arriving at four sides. For a small business this changes little: respect and explanation belong together, but one should check both. A friendly tone does not replace a justification, and a justification does not replace respect.
| Side | The employee's guiding question | Example: vacation planning |
|---|---|---|
| Outcome fairness | Do I get what I am due by comparison? | Who gets the bridge days, and is that appropriate by comparison? |
| Procedural fairness | Do the same rules apply to everyone, and can I have a say? | Is there a known rule, such as rotating priority, and a deadline for requests? |
| Interactional fairness | Am I treated respectfully, and do I understand the decision? | Is a refusal communicated personally and with reasons? |
For procedural fairness there is a well-known list of rules that goes back to the psychologist Gerald Leventhal (1980). According to it, a procedure is considered fair if it is applied consistently, is free of self-interest, rests on accurate information, allows corrections, lets those affected have their say, and is compatible with prevailing ethical standards. The definition above summarizes the core of these rules.
An everyday analogy: at a football match, most spectators accept even a defeat if the referee applies the same rules to both sides, listens to the players, and makes his decisions recognizable. A victory through a biased referee feels hollow even to the winners.
What studies show about fairness in the workplace
Colquitt and colleagues (2001) evaluated 183 studies on justice in organizations in a meta-analysis. The different sides of fairness were moderately to highly related to one another, but each contributed something of its own to the overall judgment of fairness. They were related to job satisfaction, commitment to the company, the evaluation of supervisors, voluntary effort, withdrawal, and performance. Fairness is therefore not a single lever but a bundle whose parts do not replace one another.
Particularly revealing for small businesses is a study by Kroon, Kramer, and Kox (2024) with 713 employees in 116 family-run small and medium-sized enterprises. The authors describe why personnel rules are often applied inconsistently there: little time and money, a paternalistic leadership style, a familial culture in which rules are reluctantly formalized, and the tendency to treat family members differently. Their finding: the more consistently personnel rules were applied, the more fairness employees experienced.
Two details deserve attention. First, the association was stronger for employees without family ties than for family members. The authors explain this by the fact that family members formed their basic judgment of fairness already in the family, while the other employees formed it only in the business. Second, inequalities in rules concerning motivation, that is, pay, incentives, and appraisal, weighed most heavily. How family and business are cleanly separated is described in the article running a family business.
Source: Colquitt et al. (2001); Kroon, Kramer, and Kox (2024)
Fairness is also closely linked to trust. A survey of 277 employees of small and medium-sized technology companies (Gao and Wang 2025) found that all sides of fairness mediated the relationship between respect for the supervisor and employees' trust and sense of belonging. How trust develops in a team is described in the article trust in the team.
Two views: equal treatment or individual justice?
The first view relies on equal treatment. Fair is whoever applies the same rules to everyone. Exceptions invite suspicion of favoritism, and in a small business no exception goes unnoticed. In favor of this view are the findings of Kroon and colleagues: consistent rules strengthen the experience of fairness, especially among employees who are not part of the family.
The second view relies on individual justice. People and situations differ. Whoever imposes the same vacation rule on an employee with a sick child as on everyone else acts formally equally, but not fairly. Small businesses are attractive employers precisely because they can respond to individual cases.
Equal treatment
- The same rules for everyone
- Protects against suspicion of favoritism
- Easy to understand
- Risk: rigidity in hardship cases
Individual justice
- Consideration of the particular situation
- Uses the closeness of a small business
- Humanly convincing
- Risk: arbitrariness and favoritism
I consider both views compatible if one separates the levels. The rule should be the same for everyone; the exception should itself follow a rule. An exception is fair if its reason is named, if the same reason would justify the same exception for anyone else, and if the other employees have it explained to them, as far as possible without violating privacy. Arbitrariness does not begin with the exception, but with the exception without a reason.
An exception is fair if it would be granted to anyone in the same situation.
The fairness audit: five rules for recurring decisions
From the model and Leventhal's rules, an audit can be derived that suits the decisions that come up again and again in a business: pay adjustments, vacation allocation, promotion, assignment of tasks, training. It does not check the outcome in the individual case but the procedure behind it.
- Consistent: the rule applies to everyone, exceptions have a named reason.
- Known: employees know in advance by which criteria decisions are made.
- Justified: the decision rests on information that can be checked, such as figures, deadlines, or appraisals.
- Voice: those affected can contribute their view before the decision.
- Correctable: there is a way to have a decision reviewed if someone considers it wrong.
The worked example shows how such an audit can turn out for three types of decision. Notably, precisely the decisions with the greatest effect on motivation often meet the fewest rules.
Worked example: the values are freely chosen. Vacation allocation follows a known rule with a deadline, pay and promotion are decided by feel. According to Kroon and colleagues, inequalities in pay weigh most heavily.
Collect decisions
List the five types of decision that affect your employees most.
Run the audit
Check each against the five rules and note which are missing.
Start with the weakest
For the decision with the fewest points, write down a rule with criteria and procedure.
Make the rule known
Present the rule to the team, explain the reason, and name the way to have a decision reviewed.
Check the treatment
At the next decision, make sure to communicate it personally and with reasons, especially a refusal.
What follows beyond the individual case
Fairness is not a soft topic but a question of procedures. Whoever wants to improve it does not start with appeals, but with the procedures by which money, time, and opportunities are distributed in the business. This fits a distinction made in the article responsibility for employees: the same standards for pay, tasks, and promotion, which everyone can know, belong to what an owner owes, not to what they give voluntarily.
Fairness also has effects beyond the business. Negotiations with customers and suppliers follow similar rules: whoever justifies an offer comprehensibly and declines respectfully keeps the relationship, even if the outcome disappoints. What research knows about fairness in negotiations is covered in the analysis what research knows about negotiation.
The limits belong here as well. The meta-analysis mostly summarizes studies from larger organizations. The study on family businesses is a one-time survey from one country and shows associations, not causes. And not every sense of injustice can be removed by procedures. Some dissatisfaction has reasons outside the business. But a fair procedure protects against legitimate criticism being overlooked.
Conclusion: what do employees experience as fair?
We set out to ask employees experience as fair and how an owner makes decisions so that they are also perceived that way. The answer comprises three sides: an outcome that is appropriate by comparison, a procedure following consistent, known, and correctable rules, and treatment that is respectful and explains the decision. The studies show that each of these sides counts independently and that, precisely in small and family-run businesses, the consistency of rules is decisive.
For an owner, this does not imply a duty to be rigid. Exceptions remain possible if they themselves follow a rule. For this week, it is enough to check one recurring decision, such as the pay adjustment, against the five rules of the fairness audit.
Employees rarely forget what they received. They forget even more rarely how it was decided.
Frequently asked questions
What does fairness in the workplace mean?
Fairness means employees' judgment of whether they are treated appropriately. Research distinguishes three sides: outcome fairness, procedural fairness, and interactional fairness, that is, respectful treatment and the explanation of decisions.
What is procedural justice?
Procedural justice concerns the path to a decision. A procedure is considered fair if it is applied consistently, rests on accurate information without bias, allows corrections, and gives those affected the opportunity to contribute their view.
Why is fairness important for small businesses?
Because in small businesses every unequal treatment is visible and rules often remain informal. A study of 713 employees in 116 family-run companies shows that employees experience more fairness when personnel rules are applied consistently.
May an owner make exceptions?
Yes, if the exception itself follows a rule: its reason is named, the same reason would justify the same exception for anyone else, and the other employees understand it, as far as possible without violating privacy.
How do I make decisions in the business fairer?
By checking recurring decisions such as pay, vacation, and promotion against five rules: consistent, known, justified, with voice, and correctable. Start with the decision that meets the fewest rules, and communicate decisions personally and with reasons.
Sources
- Colquitt, J. A.; Conlon, D. E.; Wesson, M. J.; Porter, C. O. L. H.; Ng, K. Y. (2001): Justice at the millennium: A meta-analytic review of 25 years of organizational justice research. Journal of Applied Psychology, 86(3), 425-445.
- Kroon, B.; Kramer, A.; Kox, J. (2024): Perceived organizational justice in family SMEs: The challenge of HRM consistency. Applied Psychology: An International Review, 73(4), 1603-1625.
- van Dierendonck, D.; Jacobs, G. (2012): Survivors and Victims, a Meta-analytical Review of Fairness and Organizational Commitment after Downsizing. British Journal of Management, 23(1), 96-109.
- Gao, H.; Wang, G. (2025): The Power of Justice: Mediating Roles Between Respect for Supervisors and Employees' Sense of Belonging and Trust. SAGE Open, 15(3), 1-21.
- Adams, J. S. (1965): Inequity in Social Exchange. In: Berkowitz, L. (ed.): Advances in Experimental Social Psychology, Vol. 2. Academic Press, 267-299.
- Leventhal, G. S. (1980): What Should Be Done with Equity Theory? New Approaches to the Study of Fairness in Social Relationships. In: Gergen, K. J.; Greenberg, M. S.; Willis, R. H. (eds.): Social Exchange. Plenum, 27-55.
