At work, the best bottom line is an evenhanded one

Companies that treat employees with respect and fairness are more productive and grow faster, observers say.

By Marilyn Gardner | Staff writer of The Christian Science Monitor

from the April 14, 2008 edition

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Over the past four or five years Nancy Albertini, an executive recruiter, has seen an encouraging shift in the way companies treat their employees. Instead of routinely favoring executives and ignoring the needs of other workers, she finds, some are adopting more egalitarian attitudes.

"For the most part, I see fairness in the workplace," says Ms. Albertini, chairman of Patterson Blackstone, an executive search firm in San Jose, Calif. "Companies today, more than ever before, are thinking about how employees are treated and how they can treat them fairly."

In an uncertain economy, when executives face hard decisions about where to make cutbacks, that attitude becomes crucial. It runs counter to stereotypes portrayed on TV programs such as Donald Trump's "The Apprentice," where the boss glories in being tough, firing people, and squeezing every penny out of suppliers. Research from the Wharton School of Business and the University of Minnesota finds that many managers aren't purely mercenary in their business dealings. They care about fairness and understand that it can maximize their profits.

Albertini and other workplace specialists trace some of the shift toward greater fairness back to 2003, when American Airlines union members accepted $1.6 billion in annual concessions. The carrier's then-president, Don Carty, spoke of "shared sacrifice." But when details of hefty executive bonuses and pension protections became public, employees were outraged. Where, they wondered, was the shared part of the sacrifice? Mr. Carty was forced to resign.

Today, Albertini says, some CEOs are paying attention to situations like that. At the same time, she and others acknowledge that exceptions exist.

Keith Ayers, a business consultant, witnessed one such exception recently when he listened to a group of executives arguing about how big their bonuses should be. In more stable times, the conversation might have been unremarkable. But with the economy flagging, those executives face challenges, including the need to reduce staff.

"A lot of executive teams think it's fair that they get their bonus and their share options even if they have to cut costs, lay off employees, and cut salaries," says Mr. Ayers, president of Integro Leadership Institute in West Chester, Pa. "They may think it's fair that they don't lose out because they put in long hours. But if employees have to sacrifice, then it's not fair. They lose their trust in management and become disengaged."

New figures on executive pay, compiled by the compensation research firm Equilar, are likely to further erode some employees' and shareholders' trust. They show that compensation for CEOs at 200 companies averages $11.7 million. Bonuses average $2.8 million.

An 'open-book culture'

Still, fairness takes other, nonmonetary forms as well. Firms that win coveted places on lists of "best companies to work for" often maintain an "open-book culture" by making decisions transparent and keeping employees informed, says Judith Bardwick, author of "One Foot Out the Door." Cutting costs in such companies is a shared task. "Ideas about how to do it trickle down from executives and percolate up from employees. The honor of the organization is reflected consistently, even in layoffs."

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