In the Downturn, 3 Tips for Business Leaders to Make Tough but Fair Decisions

COLLEGE PARK, Md., April 23, 2020 /PRNewswire/ -- The sharp economic downturn accompanying the coronavirus pandemic has organizations challenged to make tough-but-fair decisions that won't lead, long term, to a mass exodus of talent. Debra Shapiro, the Clarice Smith Professor of Management at the University of Maryland's Robert H. Smith School of Business, says business leaders must do three things right during a hardship.

Shapiro cites her recent research that she says underscores the significance of the level of fairness employees perceive in their workplace – especially during times of hardship. "Employees' perceptions of fairness and ultimately their continued commitment to their company are significantly influenced by how a company's management explains the decisions that impose hardships. And that includes 'organization-wide hardship,' such as layoffs, furloughs, pay-freezes and pay cuts – measures that countless employees are now experiencing."

There are things that business leaders can do, Shapiro says, to keep workers from feeling like they are being treated unjustly during times of hardship.

Name the challenge: Organizations should explain the necessity for the organization-wide hardship, Shapiro says. This necessity during the global pandemic is illustrated each time management (or societal leaders) blame "the virus," or "the invisible enemy."

Set a window of time: Employees are likely to perceive an atmosphere of fairness and continued organizational commitment during times of organization-wide hardship if they are assured that the hardship's duration will be relatively short, rather than long, Shapiro says. Such assurances, Shapiro says, are difficult to provide when a remedy is beyond management's control, as is the case with COVID-19. Worker protests at Amazon and others may thus be partly explained by the ambiguity in the duration of current organization-wide hardship, she says. Management should focus on communications that reduce ambiguity, laying out specific plans to ease employee hardship caused by cost-saving actions. Such moves help heighten employees' perceptions of fairness and inspire continued support, Shapiro says.

Keep the updates flowing: Consistency of information sources available to employees are essential. It helps team members feel committed and see decisions as fair. If information consistency is lacking, employees will be more likely to question the necessity for the hardships they endure.

"Are all news sources in agreement, for example, about what types of jobs are 'essential' and, thus, which employees should or should not be allowed to work from home, be provided 'PPE' (personal protective equipment) while working onsite, et cetera?" asks Shapiro. "If not, then this is another reason that likely explains worker protests during the current global pandemic."

This global pandemic is inflicting hardships on everyone – on an entire economy of organizations. Companies must strive to communicate decisions effectively to employees and customers – some of whom might be future employees or investors – to ensure their responses are perceived as fair.

"The quality of explanations that company leaders provide for hardships imposed on workers during this global pandemic will greatly influence how supportive employees and customers will be after the economy begins to return to normal and organizations call everyone back," says Shapiro.

"There is no favoritism in circumstances of organization-wide hardship. Expressions such as, 'We are all in this together,' illuminate the fact that everyone is equally struggling to survive circumstances beyond their control, and hence, equally victims."

Shapiro explains that, although shared hardship tends to heighten perceived fairness, it also raises a conundrum in how management can explain their need to impose organization-wide hardship without causing alarm to employees about their organization's future viability. That's because employees who fear for their organization's future viability are likely to contemplate finding employment elsewhere, or to quit outright.

Shapiro says that managing this conundrum requires management to communicate with their employees compassionately and optimistically, but also honestly, because employees' sources for news are plentiful in today's internet-linked economy.

Go to Smith Brain Trust for related content at http://www.rhsmith.umd.edu/faculty-research/smithbraintrust and follow on Twitter @SmithBrainTrust.

About the University of Maryland's Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty masters, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Contact: Greg Muraski at [email protected].

SOURCE University of Maryland's Robert H. Smith School of Business

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