Arabian Journal of Business and Management Review (OMAN Chapter)
Vol. 3, No.2;Sep. 2013
The Relative Importance of the Dimensions of Organizational
Justice at Iranian Public Organization's Compensation
System
Naser Mirsepasi (Professor)
Department of Public Management, Science and Research Branch, Islamic Azad University,
Tehran, Iran
Gholamreeza Memarzadeh (Assistant Professor)
Department of Public Management, Science and Research Branch, Islamic Azad University,
Tehran, Iran
Hosein Alipour (Assistant Professor)
Department of Public Management, Science and Research Branch, Islamic Azad University,
Tehran, Iran
Esmail Ghaderi (PhD Student)
Department of Public Management, Science and Research Branch, Islamic Azad University,
Tehran, Iran
Abstract
As human resources have become viewed as more critical to organizational success, many
organizations have realized that it is the people in an organization that can provide a competitive
advantage (Gratton, 1998, pp: 13-14). Some ways that human resources become a competitive
advantage are through attracting and retaining employees with unique professional and technical
capabilities, investing in training and development of those employees, and compensating them in
ways that keep them competitive with their counterparts in other organizations (Barney & Wright,
1998, pp: 31-46).The aim of this study is to find the relative importance and prioritization of
organizational justice dimensions in Iranian public organization's compensation system. The
research method is a descriptive one-and simple stratified random sampling was applied in selecting
the sample population and then based on Morgan's sample volume formula 150 questionnaires were
distributed. The validity of the study was confirmed through using expert support and
questionnaires, reliability and measuring Cranach's alpha (=./83). For data analysis the relative
importance technique was applied. The finding of this research indicate that distributive justice
(2=./295) has the highest relative importance and has the greatest effect on the effectiveness of
human resources management in the research findings some recommendations are provided to
improve the justice perception in compensation system in public organizations.
Keywords: Human Resource Compensation System, Distributive Justice, Procedural Justice,
Interactional Justice, Informational Justice
INTRODUCTION
Compensation decisions must be viewed strategically. Because so many organizational funds are
spent on compensation-related activities, it is critical for top management and HR executives to
view the “strategic” fit of compensation with the strategies and objectives of the organization. The
changes in the global marketplace for products and services have led to organizational changes in
business philosophies, strategies, and objectives. Increasingly, organizations are recognizing that
compensation philosophies must change also (Mathis & Jackson, 2007, p.418). People want to be
treated fairly in all facets of compensation, including base pay, incentives, and benefits. This is the
concept of equity, which is the perceived fairness of the relation between what a person does
(inputs) and what the person receives (outcomes). Inputs are what a person brings to the
organization and include educational level, age, experience, productivity, and other skills or efforts.
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What a person receives from the organization, or outcomes, are the rewards obtained in exchange
for inputs. Outcomes include pay, benefits, recognition, achievement, prestige, and any tangible or
intangible reward received. Individuals judge equity in compensation by comparing the effort and
performance they give with the effort and performance of others and the rewards those others
receive. But it must be stressed that these comparisons are personal and based on individual
perceptions, not just facts. A sense of inequity occurs when the comparison process results in an
imbalance between input and outcomes (Cobb and et al, 1997, pp: 1020-1040). It is important for
HR professionals and managers to develop, administer, and maintain compensation programs that
are perceived equitably by employees. The consequence of an equitable compensation program is
that individuals are more likely to be attracted to and take jobs in organizations where employees do
not voice widespread concerns about equity. Greater loyalty, less turnover, and higher commitment
to achieve organizational performance objectives are more likely if employees believe they are
compensated fairly and will share in the growth of the organization. Also, the organization must
have policies, procedures, and administrative support systems that are viewed as job-related and are
not manipulated by favoritism or personality preferences of managers and supervisors. Finally,
external equity is crucial if the organization is going to compete effectively in the labor market.
Increasingly in many labor markets, some employers are finding it difficult to attract and retain a
workforce with the necessary capabilities to compete in a global marketplace. Regularly tracking
external pay data and updating pay structures are integral to ensuring external equity in any
organization (Mathis & Jackson, 2007, pp: 427-428).
LITERATURE REVIEW
Nature of Compensation
Compensation is an important factor affecting how and why people choose to work at one
organization over others. Employers must be reasonably competitive with several types of
compensation in order to hire, keep, and reward performance of individuals in the organization.
Types of Compensation
Rewards can be both intrinsic and extrinsic. Intrinsic rewards often include praise for completing a
project or meeting some performance objectives. Other psycho- logical and social effects of
compensation reflect the intrinsic type of rewards.
Extrinsic rewards are tangible, having the form of both monetary and nonmonetary rewards.
Tangible components of a compensation program are of two general types (Table1). With the direct
type of compensation, monetary rewards are provided by the employer. Base pay and variable pay
are the most common forms of direct compensation. Indirect compensation commonly consists of
employeebenefits.
BASE PAY The basic compensation that an employee receives, usually as a wage or salary, is
called base pay. Many organizations use two base pay categories,hourly and salaried, which are
identified according to the way pay is distributed and the nature of the jobs. Hourly pay is the most
common means of payment based on time; employees who are paid hourly are said to receive
wages, which are payments directly calculated on the amount of time worked. In contrast, people
who are paid salaries receive payments that are consistent from period to period despite the number
of hours worked. Being salaried typically has carried higher status for employees than being paid
wages. Some organizations haveswitched to an all-salaried approach with their manufacturing and
clerical employees in order to create a greater sense of loyalty and organizational commitment. But
they still must pay overtime to certain employees in jobs covered by federal and state pay laws.
VARIABLE PAY Another type of direct pay is variable pay, which is compensation linked directly
to performance accomplishments. The most common types of variable pay for most employees are
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bonuses and incentive program payments. For executives, it is common to have longer-term
rewards such as stock options. Variable pay, including executive compensation.
BENEFITS many organizations provide numerous extrinsic rewards in an indirect manner. With
indirect compensation, employees receive the tangible value of the rewards without receiving the
actual cash. A benefit is an indirect reward, such as health insurance, vacation pay, or retirement
pensions, given to an employee or group of employees as a part of organizational membership
(Mathis & Jackson, 2007, pp: 416-417).
Table 1: Components of a Compensation Program
COMPENSATION
DIRECT
Base Pay
•Wages
•Salaries
Variable Pay
•Bonuses
•Incentives
•Stock options
INDIRECT
Benefits
•Medical insurance
•Paid time off
•Retirement pensions
•Workers’ compensation
Compensation Responsibilities
Compensation costs are significant expenditures in most organizations. For in- stance, at one large
hotel, employee payroll and benefits expenditures comprise about 50% of all costs. Although
compensation costs are relatively easy to calculate, the value derived by employers and employees
is more difficult to identify. To administer these expenditures wisely, HR specialists and other
managers must work together. A typical division of compensation responsibilities is illustrated in
Table (2). HR specialists usually guide the overall development and administration of an
organizational compensation system by conducting job evaluations and wage surveys. Also,
because of the technical complexity involved, HR specialists typically are the ones who develop
base pay programs and salary structures and policies. Operating managers evaluate the performance
of employees and consider that performance when deciding compensation increases within the
policies and guidelines established by the HR unit (Mathis & Jackson, 2007, p. 418).
Table2: Typical Compensation Responsibilities
HR Unit
Managers
•
Develops
and
administers
compensation system
• Conducts job evaluation and wage
surveys
• Develops wage/salary structures and
policies
• Attempt to match performance and rewards
• Recommend pay rates and increases based on
guidelines from HR unit
• Evaluate employee performance for compensation
purposes
Strategic Compensation
Compensation decisions must be viewed strategically. Because so many organizational funds are
spent on compensation-related activities, it is critical for top management and HR executives to
view the “strategic” fit of compensation with the strategies and objectives of the organization. The
changes in the global marketplace for products and services have led to organizational changes in
business philosophies, strategies, and objectives. Increasingly, organizations are recognizing that
compensation philosophies must change also. The example of Bayer Corporation illustrates this
alignment. Thecompensation practices that typically exist in a new organization may be different
from those in a mature, bureaucratic organization. For example, if a firm wishes to create an
innovative, entrepreneurial culture, it may offer bonuses and stock equity programs so that
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employees can participate in the growth and success of the company, but set its base pay and
benefits at relatively modest levels. However, for a large, stable organization, highly structured pay
and benefit programs may be more common.
Compensation Philosophies
There are two basic compensation philosophies, which should be seen as opposite ends of a
continuum. At one end of the continuum in Figure (1) is theentitlement philosophy; at the other end,
the performance-oriented philosophy.
Entitlement Orientation The entitlement philosophy can be seen in many organizations that
traditionally have given automatic increases to their employees every year. Further, most of those
employees receive the same or nearly the same percentage increase each year. Employees and
managers who subscribe to the entitlement philosophy believe that individuals who have worked
another year are entitled to a raise in base pay, and that all incentives and benefit programs should
continue and be increased, regardless of changing industry or economic conditions. Commonly, in
organizations following an entitlement philosophy, pay increases are referred to as cost-of-living
raises, whether or not they are tied specifically to economic indicators. Following an
entitlementphilosophy ultimately means that as employees continue their employment lives,
employer costs increase, regardless of employee performance or other organizational competitive
pressures. Market comparisons tend to be made within an industry, rather than more broadly
considering compensation in firms of all types. Bonuses in many entitlement-oriented organizations
are determined very paternalistically and often do not reflect operating results. Instead, the CEO or
owner acts as Santa Claus at the end of the year, passing out bonus checks that generally do not
vary from year to year. Therefore employees “expect” to receive the bonuses as another form of
entitlement.
Performance Orientation Where a performance-oriented philosophy is followed; no one is
guaranteed compensation just for adding another year to organizational service. Instead, pay and
incentives are based on performance differences among employees. Employees who perform well
get larger compensation increases; those who do not perform satisfactorily receive little or no increase in compensation. Thus, employees who perform satisfactorily should keep up or advance in
relation to a broad view of the labor market for their jobs, whereas poor or marginal performers
should fall behind. Bonuses are paid based on individual, group, and/or organizational performance
results. Few organizations are totally performance-oriented in all facets of their compensation
practices. However, breaking the entitlement mode is increasingly occurring in the organizational
restructuring common throughout many industries. A study of public-sector HR managers found
that there is a desire and need to shift toward more performance-oriented compensation practices in
many public-sector organizations.How fast that occurs, given the historical traditions and the
strength of public-sector unions, remains to be seen (Murphy and Gebhart, 1998, pp: 68-78).
FIGURE 1: Continuum of Compensation Philosophies
EntitlementPerformance
•Seniority-based
• No raises
for length of service
•No raises for longer-service poor
performers
•Market adjusted pay structures
•Broader industry comparison
•Across-the-board raises
•“Guaranteed” movement of scales
•Industry comparisons only
•“Santa Claus” bonuses
Strategic Compensation Design
Designing a compensation system for an organization requires knowledge of the strategic issues
facing the organization and the culture of the organization. Organizations today are facing more
pressures and greater demands for flexibility from their managers and employees. As Table (3) on
the next page notes, compensation strategies used in organizations have shifted. Organizations that
are more static have fixed salaries, limited participation in bonuses, and other features clearly
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focused internally. However, dynamic, rapidly changing organizations have more varied
compensation systems that reward current performance and growth (Mathis & Jackson, 2007,
p.420).
Table 3: Changing Compensation Strategies
Yesterday
Today
Tomorrow
•Fixed salary
•Variable pay as add-on to salary
•Low fixed salary, more
variable pay
•Bonuses/perks for executives •Variable pay emerging
only
throughout the organization
•Variable pay common
throughout organization
•Fixed benefits, reward long
tenure
•Flexible benefits
•Portable benefits
•Company-based career
"moving up”
•Industry-based career "moving
around”
•Skill-based career, interim
employment
•Hierarchical organizations
•Flatter, team-based organizations
•Networked “virtual”
organizations
•pay plans "Cookie cutter”
•Total compensation(Look at
benefits, too)
•Customized, integrated pay
systems; pay, benefits,
intangibles
Variable Pay: Incentives for Performance
Variable pay is compensation linked to individual, team, and/or organization performance.
Traditionally also known as incentives, variable pay plans are attempts to tie additional tangible
rewards given to employees for performance beyond normal expectations. The philosophical
foundation of variable pay rests on several basic assumptions:
 Some jobs contribute more to organizational success than others.
 Some people perform better than others.
 Employees who perform better should receive more compensation.
 A portion of some employees’ total compensation should be given to reward abovesatisfactory performance.
 Contrast the assumptions above with a pay system based on seniority or length of service:
 Time spent each day is the primary measure of short-term contribution.
 In the long term, length of service with the organization is the primary differentiating factor
among people.
 Differences in individual contributions to the organization are recognized through different
base pay levels.
 Giving additional performance rewards to some people but not others is divisive and
hampers employees working together (Mathis & Jackson, 2007, p. 458).
Types of Variable Pay
Variable pay plans can be established that focus on individual performance, team or group
performance, and on organization-wide performance. An important feature of variable pay plans is
that incentives increase the degree of cooperation in teams, whereas individual incentives do not.
Individual incentives are given to reward the effort and performance of individuals. Some of the
most common means of providing individuals variable pay are piece-rate systems, sales
commissions, and bonuses. Other means include special recognition rewards such as trips or
merchandise. Two widely used individual incentives focus on employee safety and attendance. One
of the difficulties with individual incentives is that an employee may focus on what is best
individually and may block or inhibit performance of other individuals with whom the employee is
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competing. That competition particularly occurs if only the top performer or winner receives
incentives. This is one reason why team or group incentives have been developed. When an entire
work group or team is rewarded for its performance, more cooperation among the members is
required and usually forthcoming. However, competition among different teams for rewards can
lead to decline in overall performance under certain circumstances. The most common types of
team orgroup incentives are gain sharing plans where employee teams that meet certain goals share
in the gains measured against performance targets. Often, gain sharing programs focus on quality
improvement, labor-cost reduction, and other measurable results (Frazee, 1997, pp: 21-24).
Organization incentives reward people for the performance of the entire organization. This
approach reduces individual and team competition and assumes thatall employees working together
can generate better organizational results that lead to better financial performance. These programs
share some of the financial gains to the firm through payments to employees. The payments often
are paid as an additional percentage of each employee’s base pay. Also, organizational incentives
may be given as a lump sum amount to all employees, or different amounts may be given to
different levels of employees throughout the organization. The most prevalent forms of
organization-wide incentives are profit-sharing plans and employee stock plans. For senior
managers and executives, variable pay plans often are established to provide stock options and other
forms of deferred compensation that minimize the tax liabilities of the recipients. Figure (2)show
some of the programs under each type.
FIGURE 2: Types of Variable Pay Plans
Individual
•Piece rate
•Sales commissions
•Bonuses
•Special recognitions
(trips, merchandise)
•Safety awards
•Attendance bonuses
Organizatio
Group
•Gain sharing
•Profit sharing
•Employee stock options
•Quality improvement
•Executive stock options
•Labor-cost reduction
•Deferred compensation
Types of Benefits
Many different types of benefits are offered by employers. As Figure 3 indicates, some of the
benefits are legally mandated by federal, state, and local laws. Employers have little choice but to
pay for these benefits.
Mandated benefits are those benefits which employers in the United States must provide to
employees by law. Social Security and un- employment insurance are funded through a tax paid by
the employer based on the employee’s compensation. Workers’ compensation laws exist in all
states. In addition, under the Family and Medical Leave Act (FMLA), employers must offer unpaid
leaves to employees with certain medical or family difficulties. Other mandated benefits are
available through Medicare, which provides health care for those ages 65 and over. It is funded in
part by an employer tax through Social Security. The Consolidated Omnibus Budget Reconciliation
Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA) mandate that
an employer extend healthcare coverage to employees after they leave the organization, and that
most employees are able to obtain coverage if they were previously covered in a health plan.
Mandated benefits have been proposed for many other areas, but as yet none of the proposals have
been adopted. Areas in which coverage has been proposed are as follows:
• Universal health-care benefits for all workers
• Child-care assistancelth Care Family-Oriented
• Pension plan coverage that can be transferred by workers who change jobs
• Core benefits for part-time employees working at least 500 hours per year a major reason for these
proposals is that federal and state governments wantto shift many of the social costs for health care
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and other expenditures to employers. This shift would relieve some of the budgetary pressures
facing governments to raise taxes and cut spending.
Voluntary Benefits Most of the other types of benefits are provided by employers voluntarily in
order to compete for and retain employees. By offering additional benefits, organizations are
recognizing the need to provide greater security and benefit support to workers with widely varied
personal circum- stances. By offering more benefits, employers hope to strengthen the ties between
the organizations and employees as valuable human resources. Also, as the workforce ages and
more individuals retire, financial security in retirement is an issue that employees and employers are
addressing. In addition, with the changes in work and jobs emphasizing flexibility and choice, both
workers and employers are seeing benefits choices as necessary. As a result, flexible benefits and
cafeteria benefit plans have expanded. The following sections describe the different types of
benefits that were shown in Table4 (Mathis & Jackson, 2007, pp: 494-495).
Table4: Benefits Classified by Type
Government Mandated
Security
Workers’ compensation
Unemployment compensation
Supplemental unemployment benefits
(SUB)
Severance pays
Retirement Security
Social Security
Early retirement options
Pre-retirement counseling
Disability retirement benefits
Health care for retirees
Pension plans
Individual retirement accounts (IRAs)
401(k) and 403(b) plans
Employer Voluntary
Health Care
Family-Oriented
COBRA and HIPAA provisions
Family and Medical Leave Act
Medical
Dependent care
Dental
Alternative work arrangements
Vision care
Time off
Prescription drugs
Psychiatric counseling
Military reserve time off
Wellness programs
Election and jury leaves
HMO or PPO health-care plans
Lunch and rest breaks
Financial, Insurance and Related Holidays and vacations
Funeral and bereavement leaves
Life insurance
Social and Recreational
Legal insurance
Tennis courts
Disability insurance Financial
Bowling leagues
counseling
Service awards
Credit unions Company-provided Sponsored events (athletic and
car and expense account
social)
Educational assistance
Cafeteria and food services
Recreation programs
Justice
It's often difficult to assess the ability, integrity, and benevolence of authorities accurately,
particularly early in a working relationship. What employees need in such circumstances is some
sort of observable behavioral evidence that an authority might be trustworthy. Justice provides that
sort of behavioral evidence because authorities who treat employees more fairly are usually judged
to be more trustworthy. As shown in Table (5), employees can judge the fairness of an authority's
decision making along four dimensions: distributive Justice, procedural Justice, interpersonal
Justice, and informational Justice.
1- Distributive Justice
Distributive Justice reflects the perceived fairness of decision-making outcomes. Employees gauge
distributive Justice by asking whether decision outcomes such as pay, rewards, evaluations,
promotions, and work assignments are allocated using proper norms. In most business situations,
the proper norm is equity, with more outcomes allocated to those who contribute more inputs. The
equity norm is typically judged to be the fairest choice in situations in which the goal is to
maximize the productivity of individual employees.
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However, other allocation norms become appropriate in situations in which other goals are critical.
In team-based work, building harmony and solidarity in work groups can become just as important
as individual productivity. In such cases, an equality norm many be judged more fair, such that all
team members receive the same amount of relevant rewards. The equality norm is typically used in
student project groups, in which all group members receive exactly the same grade on a project,
regardless of their individual productivity levels. In cases in which the welfare of a particular
employee is the critical concern, a need norm may be judged fairer (Levering & Moskowitz, 2007,
pp: 94-114).
2- Procedural Justice
In addition to judging the fairness of a decision outcome, employees may consider the process that
led to that outcome. Procedural Justice reflects the perceived fairness of decision-making processes.
Procedural Justice is fostered when authorities adhere to rules of fair process. One of those rules is
voice, which concerns giving employees a chance to express their opinions and views during the
course of decision making (Folger, 1977, pp: 108-119). A related rule is correct ability, which
provides employees with a chance to request an appeal when a procedure seems to have worked
ineffectively. Research suggests that voice improves employees' reactions to decisions, largely
because it gives employees a sense of ownership over the decisions that occur at work. In fact,
employees value voice even when it doesn't always result in the outcomes they want or when their
appeals didn't always reverse the decisions that were made (Korsgaard & Roberson, 1995, pp: 657669). Why? Because employees like to be heard the expressions of opinions is a valued end, in and
of it, as long as employees feel those opinions were truly considered.
Aside from voice and correct ability, procedural Justice is fostered when authorities adhere to four
rules that serve to create equal employment opportunity. The consistency, bias suppression,
representativeness, and accuracy rules help ensure that procedures are neutral and objective, as
opposed to biased and discriminatory. These sorts of procedural rules are relevant in many areas of
working life. As one example, the rules can be used to make hiring practices fairer by ensuring that
interview questions are unbiased and asked in the same manner across applications. As another
example, the rules can be used to make compensation practices fairer by ensuring that accurate
measures of job performance are used to provide input for merit raises.
3- Interpersonal Justice
In addition to judging the fairness of decision outcomes and processes, employees might consider
how authorities treat them as the procedures are implemented. Interpersonal Justice is fostered when
authorities adhere to two particular rules. The respect rule pertains to whether authorities treat
employees in a dignified and sincere manner, and the propriety rule reflects whether authorities
refrain from making improper or offensive remarks. From this perspective, interpersonal injustice
occurs when authorities bad-mouth employees; criticize, berate, embarrass, or humiliate them in
public; or refer to them with racist or sexist labels (Bies,2001,pp:85-108).
Indeed, research indicates that violations of interpersonal Justice Rules reduce employee's job
satisfaction, life satisfaction, and organizational commitment while increasing feelings of
depression, anxiety, and burnout (Tepper,2000,pp:178-190).
4- Informational Justice
Finally, employees may consider the kind of information that authorities provide during the course
of organizational decision making. Informational justice reflects the perceived fairness of the
communications provided to employees from authorities. Informational justice is fostered when
authorities adhere to two particular rules. The justification rule mandates that authorities explain
decision- making procedures and outcomes in a comprehensive and reasonable manner, and the
truthfulness rule requires that those communications be honest and candid. Although it seems like
common sense that organizations would explain decisions in a comprehensive and adequate
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manner, that's often not the case. Ironically, that defense mechanism is typically counterproductive
because research suggests that honest and adequate explanations are actually a powerful strategy for
reducing retaliation responses against the organization (Shaw et al, 2003, pp: 444-458).
In fact, low levels of informational justice can come back to haunt the organization if a wrongful
termination claim is actually filed. How? Because the organization typically needs to provide
performance evaluations for the terminated employee over the past few years to show that the
employee was fired for poor performance. If manager refrained from offering candid and honest
explanations on those evaluations, then the organization can't offer anything to justify the
termination (Orey, 2007, pp: 52-62).
Table 5: The Four Dimensions of Justice
Distributive Justice Rules
Description
Equity vs. equality vs. need Are rewards allocated according to the proper norm?
Procedural Justice Rules
Description
Voice
Do employees get to provide input into procedures?
Correct ability
Do procedures build in mechanisms for appeals?
Consistency
Are procedures consistent across people and time?
Bias suppression
Are procedures neutral and unbiased?
Representativeness
Do procedures consider the needs of all groups?
Accuracy
Are procedures based on accurate information?
Interpersonal Justice Rules
Description
Respect
Do authorities treat employees with sincerity?
Propriety
Do authorities refrain from improper remarks?
Informational Justice Rules
Description
Justification
Do authorities explain procedures thoroughly?
Truthfulness
Are those explanations honest?
(Colquitt and et al, 2010, p.127)
METHODOLOGY
With respect to aim, this study is a functional one regarding the data collection method, the present
study is a descriptive one and a subcategory of survey research. In this study the researcher
describes and studies the dimensions and indicators of organizational justice in Iranian public
organizations' compensation system. For studying these factors, it is necessary to describe the
indicators of organizational justice in this domain and also study the present conditions of these
indicators in the public organizations. Thus the appropriate method for doing this descriptive
research was surveying.
Society and Statistical Sample
The statistical society involved in this study was a group of people and units sharing at least a
feature. The population being studied here was Iranian public organizations. Statistical sample is a
limited number of the entire statistical population that represents the main features of the larger
community. The present studies statistical sample 96 people, was measured based on Morgan's
chart using the following formula. In this study 150 people were considered.
Z 2   P  Q 1 .96 2  .05  0 .5
2
n

 96
d2
0 .12
In this formula, sampling was done with %95 of assurance, bearing in mind %5 of possibility for
error.   0.05 ،   0 . 025 ‫ و‬Z (0 . 025 )   1 .96
2
The amounts P and Q were considered with a caution %50. The possibility for the error of
measuring tool was considered as %10. Sampling was done using a stratified and random approach.
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The stratified method was applied in determining the organization (ministry) to be studied and the
random method was applied in selecting the employees for answering the questionnaires.
The ranking of Iran's executive organizations based on the total score of general and
specific indicators of 1390
Management and Human Resources Development vice-presidency"Shahid Rajaee Project"
Rankin
Rate of general indictors (Score
Name of the Ministry
Sample size
g
roof 1000)
Ministry of the Energy
1
716/99
25
Ministryof Education
2
676/11
25
Ministry of Housingand Urbanism
3
657/61
25
Ministry of Commerce
10
593/91
25
Road & Transportation Ministry
16
569/68
25
Ministry of Welfareand Social
18
457/75
25
Security
Sum
150
Methods of Data Collection
In order to collect information two approaches were applied: Field and Library. For providing the
review of related literature and offering the primary model of the project library approach was
applied and field approach was used for measuring the study's variables and exam.
Data Collection Tool
Data collection tool used in the present study was questionnaire. For getting to know the
dimensions of organizational justice of the Iranian public organizations' employees in the field
compensation systemimprovement a research- made questionnaire was applied.
Human Resource
Management
Dimensions
Distributive
Justice
Procedural
Justice
Compensation System
Interactional
Justice
Informational
Justice
Questionnaire's Validity and reliability
103
Index
Equity vs. equality vs.
need
Distribution
Bias suppression
Correctability
Representativeness
Effectiveness
Standardization
Accuracy
Empowerment
Consistency
Respect
Propriety
Feedback
Justification
Truthfulness
Number of
Questions
6
8
3
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By validity we mean that the measurement tool must measure the intended feature correctly. In
other words validity determines that how far the designated tool can measure intended feature. For
testing the appropriateness and quality the following measures were done: The present study enjoys
a much higher validity through knowing the nature and function of the research, preserving the
respondents' mentalities and interests, paying attention to questions writing, selecting the best
method for answering, removing ambiguities from the questions (through helps offered by advisors
and readers) and paying attention to surveying collected information and their analysis. In this way
the main questionnaire was prepared and utilized through the guidance of advisor, reader and other
professors in the department of management. By reliability it is meant that how similar, exact and
reliable are the finding of the study, if the studied feature is measured with the same questionnaire
and conditions. A questionnaire's reliability must have a correlation coefficient of at least ./70. In
the present study Cranach alpha was used to measure reliability coefficient. Cranach alpha is
measured according to the average of the internal correlation of a series of questions that assess a
concept. The closer the Cranach alpha is to 1, the greater the validity of the internal consistency is.
The reliability of a questionnaire must have at least Cranach alpha which is./70 and this measured in
the distributed questionnaire for the stud's variables as follow.
Reliability
****** Method 1 (space saver) will be used for this analysis ******
R E L I A B I L I T Y A N A L Y S I S - S C A L E (A L P H A)
Reliability Coefficients
N of Cases = 60.0
N of Items = 71
Alpha = .8308
ANALYSIS DATA
Johnson, J.W (2000) proposed an alternative solution to the problem g correlated variables. Green
et al (1978) attempted to relate the orthogonal variables back to the original variables by using the
set of coefficients for deriving the orthogonal variables from the original correlated predictors.
Because the goal is to go from the orthogonal variables back to the original predictors, however, the
more appropriate set of coefficients are the coefficients that derive the original predictors from the
orthogonal variables. In other words, instead of regressing the orthogonal variable on the original
predictors, the original predictors are regressed on the orthogonal variable. Because regression
coefficients are to the uncorrelated variable rather than to the correlated original predictors, the
problem of correlated predictors is not reintroduced with this method. Johnson termed the weights
resulting from the combination of the two sets squared regression coefficients epsilons (). They
have been more commonly referred to as relative weights (e.g., J.W.Johnson, 2001), which is
consistent with the original use of the term used by Hoffman (1960, 1962). A graphic representation
of J.W. Johnson's (2000) relative weights is presented in Figure (1-5). In this three-variable
example, the original predictors (x ) are transformed to their maximally related orthogonal
counterparts(Z ), which are then used to predict the criterion (Y). The regression coefficients of Y
on Z are represented byβ , and the regression coefficients of x on Z are represented byλ .
Because the Z s are uncorrelated, the regression coefficients of x on Z are equal to the
correlations betweenx onZ . Thus, each squared λ represents the proportion of variance in Z
accounted for by x (J.W.Johnson, 2000). To compute the relative weight forx , multiply the
proportion of variance in each Z accounted for by x by the proportion of variance in Y accounted
for by each Z and sum the products. For example, the relative weight for x1 would be calculated as
Figure (1-5) Graphic Representation of J.W. Johnson's (2000) Relative Weights for Three
Predictors
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Run MATRIX procedure:
MGET created matrix CR.
The matrix has 5 rows and 5 columns.
The matrix was read from the record(s) of row type CORR.
RSQUARE
.578
Raw Relative Weights
X1 .295
X2 .134
X3 .084
X4 .065
Relative Weights as Percentage of R-square
X1 51.0%
X2 23.2%
X3 14.5%
X4 11.3%
------ END MATRIX ----Distributive
Justice
./476
./430
./295
Procedural
Justice
./134
Human Resource
Compensation System
./420
./385
./317
./084
Interpersonal
Justice
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Human Resource Compensation System
Informational
Justice
Interpersonal
Justice
Procedural
Justice
Distributive
Justice
Dimensions of justice in the
organizations with high
performance
0.057
0.072
0.102
0.269
Dimensions of justice in the
organizations with low
performance
0.024
0.032
0.057
0.138
Optimization
0.065
0.084
0.134
0.295
CONCLUSION AND IMPLICATIONS
Compensation is an important factor affecting how and why people choose to work at one
organization over others. Employers must be reasonably competitive with several types of
compensation in order to hire, keep, and reward performance of individuals in the organization.
Organizations need to be fluid to move as markets move. That necessitates a more flexible approach
to compensation. Compensation systems in organizations must be linked to organizational
objectives and strategies. But compensation also requires balancing the interests and costs of the
organization with the expectations of employees. A compensation program in an organization
should have four objectives:
Legal compliance with all appropriate laws and regulations
Cost effectiveness for the organization
Internal, external, and individual equity for employees
Performance enhancement for the organization
For organizations, compensation costs must be at a level that both ensures organizational
competitiveness and provides sufficient rewards to employees for their knowledge, skills, abilities,
and performance accomplishments. Balancing these facets so that the organizations can attract,
retain, and reward the performance of employees requires considering several types of
compensation. In this study based on the data analysis' findings of the relative importance in human
resources' compensation system in Iranian public organizations distributive justice enjoys the
highest importance (2=./295) and is was followed by procedural justice (2=./134), interactional
justice (2=./084), and information justice ( 2=./065). Due to the importance of distributive justice
and indicators of procedural justice (which include: equity vs. equality vs. need and distribution) the
organizations must do the following to increase the level of distributive justice:
 Make the compensation system simple and understandable: Another equity issue concerns the
degree of openness or secrecy that organizations allow regarding their pay systems. Pay information
kept secret in “closed” systems includes how much others make, what raises others have received,
and even what pay grades and ranges exist in the organization. A growing number of organizations
are opening up their pay systems to some degree by informing employees of compensation policies,
providing a general description of the basis for the compensation system, and indicating where an
individual’s pay is within a pay grade. Such information allows employees to make more accurate
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equity comparisons. It is crucial in an open pay system that managers are able to explain
satisfactorily any pay differences that exist.
 Competency Based Pay: Paying for competencies rewards employees who are more versatile and
have continued to develop their competencies. In knowledge-based pay (KBP) or skill-based pay
(SBP) systems, employees start at a base level of pay and receive increases as they learn to do other
jobs or gain other skills and therefore become more valuable to the employer. Under a KBP or SBP
system, press operators increase their pay as they learn how to operate the more complex presses,
even though sometimes they may be running only two-color jobs. The HR Perspective describes
research on such a plan. When an organization moves to a competency-based system, considerable
time must be spent identifying what the required competencies are for various jobs. Then each
block of competencies must be priced using market data. Progression of employees must be
possible, and they must be paid appropriately for all of their competencies. Any limitations on the
numbers of people who can acquire more competencies should be clearly identified. Training in the
appropriate competencies is particularly critical. Also important to a competency-based system is a
means for certification of employees who have acquired certain competencies. Further, a process
must exist for verifying that employees maintain competencies. In summary, use of a competencybased system requires significant investment of management time and needs a continuous
commitment by top management.
The Fair Labor Standards Act (FLSA): It requires most organizations to pay a minimum wage and
to comply with overtime provisions, including appropriately classifying employees as exempt or
nonexempt and as independent contractors or employees.
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