224. Inequity Aversion: That’s Not Fair! A Behavioral Economics Foundations Episode

Today we are digging in on inequity aversion – which is featured in chapter 12 of my new book, What Your Employees Need And Can’t Tell You, titled “That’s Not Fair!”  Fairness is a fascinating topic and one that is really important in business. We strive to have fair standards in our business practices, in how we pay our employees, and in the offers we provide to customers…but should everything always be perfectly “fair”?  Does it have to be fair? And…what the heck is “fair” anyway? Who decides what is fair? (and is that fair?) Tune in to hear all about it. You will also get to hear why fairness is like air, and what a bunch of capuchins can teach us about work (and why your employees might be ready to throw cucumbers). Listen in to learn all about inequity aversion, why it matters to business, and some tips for how to keep this from being a big problem in your work. Show Notes: [00:40] Today we are digging in on inequity aversion – which is featured in chapter 12 of my new book, What Your Employees Need And Can’t Tell You, titled “That’s Not Fair!” [02:32] Inequity aversion is a pretty easy concept on the surface. We want things to be equal (unless we are the ones getting the benefits…then we tend to be a little more lax in our demands for equality, right?) [03:19] I want to point out that fair and equal are not the same, and furthermore, equality is not the same as equity – remember this is inequity aversion, not inequality aversion. Equality means that everyone is given the same resources and opportunities. Equity recognizes that not everyone has the same circumstances and therefore provides resources in a way that can help receive an equal outcome. [06:02] What is “fair” and who gets to decide? One of my favorite quotes on this is from Mathew Liebermann who said, “Fairness seems a bit like air—its absence is a lot more noticeable than its presence.” [08:22] When we realize we aren’t being treated or paid fairly – or even if we just suspect that something isn’t fair everything else can come to a grinding halt. [11:25] According to a Bloomberg article and research by Joblist of 15,000 workers who quit during this time, 40% said the job market was more difficult than they expected, 20% miss people at their old company (and many of them didn’t think that was going to impact them as much as it did), 17% said their new job is not what they hoped for, 16% realized their old job was better than they realized, and 9% have found themselves in a company with bad culture and management. 14% of those surveyed who had quit their jobs said they regretted it. [14:01] One thing we do know is that we pretty universally dislike and reject things that are unfair, the problem (as you are seeing here) is that what is fair is relative. [16:54] This brings up another interesting facet of inequity aversion – because we hate the inequitable, unfair and unequal, we will sometimes put ourselves in harm's way or give ourselves a worse outcome to keep someone else from getting an even better one. [19:07] A perceived slight from years back could combine with confirmation bias and the focusing illusion so one employee is sabotaging themselves and your team to keep someone in their or another department from “winning” anything. [21:00] Whenever there is a question of fairness, motivation will tank. We become distracted and disengaged regardless of whether we are intrinsically or extrinsically motivated. Incentives and motivation are so important when we think about job performance. [22:01] When it comes to our aversion to inequity, the best thing to do is to make sure your practices and policies (whether it is pay or anything else) are, of course, fair, and equitable to begin with. [23:37] Remember, of course, that something may not be equal and still be fair and equitable. [24:52] Start by asking what you are trying to achieve. [26:12] Next, what are your priorities? [28:04] Understanding the why behind the decision is really important. Some people might still feel slighted, but that is ok you just need to align that with your priorities and the different groups you are working with. [29:18] You have to be looking for the worst way this could be interpreted and what you might have missed. Who aren’t you thinking about? What aren’t you thinking about? Do not skip this step. [30:01] Don’t rush something out and expect people will give you the benefit of the doubt–it doesn’t often work that way. [30:50] Be as open, clear and transparent as you can be with as much as you can. This doesn’t mean you need to publicize how much everyone makes, but you can explain what the wage bands are for each role and why, or if there is an algorithm to determine who gets a bonus or what their base level salary will be or where the cap is, make that publicly known. [32:06] Once you can make it equitable, explainable, AND transparent, it allows the focus to come off of the external motivations and incentives (those grapes and cucumbers) and focus instead on the purpose of their work and hopefully doing a job they love. Everything becomes easier when people aren’t concerned about fairness, inequality, or inequity. Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show.  I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let’s connect: [email protected] The Brainy Business® on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on LinkedIn Melina on LinkedIn The Brainy Business on Youtube Join the BE Thoughtful Revolution – our free behavioral economics community, and keep the conversation going! Learn and support The Brainy Business: Check out and get your copies of Melina’s Books.  Get the Books Mentioned on (or related to) this Episode: Drive, by Dan Pink Power of Regret, by Dan Pink What Your Employees Need and Can't Tell You, by Melina Palmer How to Have Difficult Conversations About Race, by Kwame Christian Top Recommended Next Episode: Game Theory (episode 62) Already Heard That One? Try These:  Availability Bias (episode 15)) Herding (episode 19) Social Proof (episode 87) Confirmation Bias (episode 75) Focusing Illusion (episode 89) Optimism Bias (episode 34) Cobra Effect (episode 220) Counterfactual Thinking  (episode 68) Prefactual Thinking (episode 71) How to Have Difficult Conversations About Race, with Kwame Christian (episode 221) Other Important Links:  Brainy Bites - Melina’s LinkedIn Newsletter  Monkey’s Reject Unequal Pay Why Monkeys (and Humans) are Wired for Fairness Millions of Americans Regret the Great Resignation Anomalies: The Ultimatum Game