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.

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."

In a Deloitte survey on ethics in the workplace, released last week, 84 percent of respondents say that openness by leadership also contributes to a more ethical workplace culture.

But fairness is not always easy. "Most of us would like to treat employees fairly, but unfortunately we find it easier to treat people the same," regardless of their performance, says Bill Catlette, cofounder of Contented Cow Partners, business consultants in Collierville, Tenn.

He once ruffled feathers by singling out an employee who had not used any sick days in 15 years. He rewarded the man with an airline ticket to the Caribbean. Although the ticket cost only $200, the gesture rankled a woman in the human resources department. "She kept asking me what I was going to tell other employees," Mr. Catlette says. Yet other employees were happy for their colleague. He cautions, "If you treat stars and slugs the same, the stars may stay, but they curtail their effort."

Fairness and layoffs

The most successful companies and leaders frame business not simply as a series of financial transactions but as a series of relationships, says Clinton Korver, author of "Ethics for the Real World." He adds, "The only way to build relationships is to treat people well, especially during difficult times such as layoffs."

Today many firms offer outplacement services to help terminated employees find new jobs. Sometimes the primary motive is to avoid litigation or promote the company's image, but the result is to treat employees fairly and compassionately, says Rachelle Canter, author of "Make the Right Career Move."

Ronald Humphrey, professor of management at Virginia Commonwealth University in Richmond sees a link between empathy and good leadership. "Empathy can help you get the job done," he says. "It can help you understand your employees and motivate them better."

He points to Ukrop's, a supermarket chain in Richmond known for outstanding service. "They get that by treating employees right," Professor Humphrey says. "If you're being treated badly by your own management, you're going to have to fake the smile. Customers are good at picking up on inauthentic emotional displays. If a manager is supportive and helps workers, they're going to be in a good mood, and customers are going to respond to that."

Yet Humphrey cautions mana­gers against being "mindlessly empathetic" to everyone. "Sometimes you have tough decisions to make. If an employee is constantly tardy, is this an occasion to discipline or to show support to meet personal needs? Sometimes the right solution would be to discipline or terminate, if they can't do their job right."

Whatever the challenge, Catlette, the business consultant, finds reason for optimism. "The world is less forgiving, less trusting, less innocent than it used to be, but deep down, people are still pretty decent at the core," he says. "They're trying hard. Miscreants in the boardroom get all the attention. People who are stand-up citizens, who run a good clean business, never get heard about. Organizations that treat people with respect and fairness and concern grow faster, are more productive, and generate a lot more wealth."