Procedural Fairness

Procedural fairness is fairness that focuses on process, or the fairness of the means used to achieve decisions (Greenberg, 1987). According to Laventhal (1976a), procedural fairness theory can be viewed as the extension of equity theory that has been applied in the domain of allocation processes (Greenberg, 1987). Laventhal (1980) argues that fairness of the decision process can be seen from the procedural fairness of the decision process. That is, procedural fairness refers to fairness of the processes that lead to a decision outcome. Furthermore, Laventhal (1980) argues that decision-making should follow procedural rules, as follows.

1. Consistent: the decision process must be consistently applied across time and persons.

2. Representative: the decision process must reflect the values, concerns and perspectives of all affected parties.

3. Correctable: the decision process must have provisions for correcting “bad” decisions.

4. Accurate: the decision process must be based on accurate information. 5. Non-Bias: the decision process should be free of bias from the decision-

maker(s).

6. Ethical: the decision process must conform to accepted norms of morality and ethics.

On the other hand, Korsgaard and Roberson (1995), define procedural fairness as the perceived fairness of the procedures used to make allocation decisions. This definition is similar to prior researchers who defined procedural fairness as the degree to which those affected by allocation decisions perceived them to have been made according to fair methods and guidelines (Folger and Greenberg, 1985; Greenberg, 1990b; Lind and Tyler, 1988; Tyler and Bies, 1990).

Folger (1987) found that both procedural fairness and distributive fairness are independently related to attitude towards the decision and the organisation. However, fairness researchers believed that regardless of the perceived fairness of the decision itself, fair procedures will result in more positive behaviour

(Korsgaard and Roberson, 1995). Therefore, procedural fairness can promote positive behaviour towards decisions that might be otherwise viewed negatively. Prior research has examined the approach to promote procedural fairness based on the six rules of procedural fairness proposed by Laventhal (1980). One way to promote procedural fairness was via the methods of monitoring16 (Niehoff and Moorman, 1993). They examined the relationship between methods of monitoring and organisational citizenship behaviour and the possibility of fairness as the mediator of the relationship. Laventhal (1980) suggested that one of the most important components to enhance procedural fairness was the gathering of accurate and unbiased information. Niehoff and Moorman (1993) stated that one way to achieve this task is by monitoring. Furthermore, they argued that there are three reasons why methods of monitoring can influence procedural fairness perception. The three reasons are: 1) gathering information about performance can influence subordinates’ perceptions of the fairness of decision because they believe that the leader is making decisions based on accurate information (the accuracy rule); 2) performance monitoring can provide the leader with broader knowledge in order to make unbiased decisions (the non- bias rule); and 3) monitoring can help the leader to make unbiased decisions across people and over time (the consistency rule).

In their study, Niehoff and Moorman (1993) conducted a survey with the employees and general managers of a national movie theatre management company that operated 11 theatres. The employees completed a survey describing their perceptions of distributive and procedural justice and monitoring methods of their general manager. The results showed that observation as a method of monitoring had direct and negative effects on the dimensions of employee organisational citizenship behaviour. However, the method has a positive effect on the dimensions of organisational fairness perceived by employees. Since the employees perceived the process of monitoring using observation method as fair, this eventually had a positive effect on organisational

16 _{The methods of monitoring examined by Niehoff and Moorman (1993) were: observation;}

citizenship behaviour. Therefore, the relationship between observation as a method of monitoring and organisational citizenship behaviour was mediated by the perceptions of fairness.

Another approach that has been shown to promote the perceived fairness of decision process is participation. There are many studies that have been done on the effects of participation in the organisational fairness domain (see, for example, Kanfer, Sawyer, Early and Lind, 1987; Paese, Lind and Kanfer, 1988; Greenberg, 1986a, Lind, Kanfer and Early, 1990; Korsgaard and Roberson, 1995; Shapiro and Brett, 1993; Thibaut and Walker, 1975; Cropanzano and Greenberg, cited in Mossholder, Bennet and Martin, 1998; Tyler, 1990; Greenberg, 1990b; Organ and Moorman, 1993; Lind and Tyler, 1988; Tyler and Lind, 1992; Muhammad, 2004; Brownell, 1982; Ross, 1994; Dunk, 1989; Lau, Low and Eggleton, 1995; Lau and Tan, 1998; Lau and Lim, 2002b). These prior studies found that the level of participation will have different effects on behaviour; however in general, they concluded that participation can enhance the perceived organisational fairness. In line with prior research, this present study will examine the effects of participation to promote organisational fairness. However, unlike prior research, this present study will examine the divisional manager’s participation in the development of BSC as performance measurement which is used in the performance evaluation process. The literature review relating to participation will be presented in the sub-section 3.2.5.

In the present study, procedural fairness is defined as the fairness of the process

to develop performance measures – financial and non-financial measures – that

are finally used in the performance evaluation process. In the context of the BSC, the financial measures can fulfil the consistency characteristic because it can be consistently applied across time and persons or divisions. On the other hand, non-financial measures embody the representativeness characteristic because they can reflect the values, concerns and perspectives of each division. The other characteristics of the procedural rules of decision-making can be fulfilled from both financial and non-financial measures of the BSC.