What is Organizational Justice and Compensation ?
Compensation satisfaction represents an important construct to organizations and to the field of human management, because is serves as a critical mediator between an organization’s compensation policy and relevant behavioral and attitudinal outcomes, job performance, turnover and deviant behaviors have been found to be important outcomes of the effect of (procedural) justice in compensation management.
Organizational justice is a behavioral sciences concept that refers to the perception of fairness of the past treatment of the employees within an organization held by the employees of that organization.
Compensation and justice are distinct but related construct, yet the strength of this relationship shows the potential value of applying justice theory to help predict compensation satisfaction consequences. Organizational justice theory has its origin in enquiry theory. Individuals make two separate, but related, types of fairness judgments relevant to compensation satisfaction. One relates to what they are paid and one concerns how they are paid. The first of these judgments is referred to as distributive justice. Distributive justice concerns the perceived fairness of rewards received. This perception of fairness is not simply determined by the amount received, but by what is received to some referent other. This is common point that justice theory shares with equity theory, however, justice theory goes further to suggest that people also determine fairness by the adequacy of their compensation relative to their expectations, needs, or general societal norms.
Organizational justice theory does not solely focus on the outcomes received but on how the outcomes are determined equally important to employees. This type of justice called procedural justices, which is concerned with the perceived fairness of the methods used to determine the amount of rewards. The concept was first developed in the Mid-1970s when Thibaut & Walker(1975) studied the legal system. They found that it was not simply the verdict and sentence that to perceived fairness, but how the decisions are reached, that have an impact on fairness perceptions. But addressing procedural concerns, organizational justice diverges from both discrepancy and equity theories, because discrepancy and equity theories purpose that only outcomes determine fairness perceptions and satisfaction.
Procedural justice has been positively related to organizational citizenship behavior perceived organizational support, trust in supervisor, organizational commitment, and job performance.
This simultaneous consideration of procedural and distributive justice is referred to as the two-factor model. According to this model of organizational justice, procedural and distributive justice is related constructs but may have different consequences. Procedural justice is most often linked to system satisfaction while distributive justice is most often related to outcome satisfaction. Procedural justice has been found to impact effective reactions and behaviors focused on the organization as a whole (e.g., organizational commitment, organizational citizenship behaviors), while distributive justice impacts reactions and behaviors related to the specific job(e.g., job satisfaction). The differential impact of the type of justice has impact ramifications for organizations. If an organization is trying to increase commitment to the organization, managers should focus efforts on increasing perceptions of procedural fairness, but if they wish to increase job satisfaction, increasing perceptions of distributive justice should be the focus.