In an age when diversity and equality have become such dominant issues in society and in business, I couldn’t help but wonder how this concept impacts sentiments toward fairness in business. Not necessarily the specific issue of diversity and equality which we know to be critical, but more generally the concept of equity and fairness in business relationships.
Ultimately this boils down to leadership; within, among and across teams.
There are of course other bedrock aspects to stronger business relationships that emerge from our studies, such as honesty, truth, trust and respect. But I’d like to focus here on fairness in business relationships.
The meaning of fairness
When it comes to business relationships, there are various definitions of fairness floating around. I like to think that fairness in business means treating partners, teams and the people that comprise them, with a standard of performance that is consistent and based on equality.
It means transparency – giving customers a fair value for money.
It also means providing a non-discriminatory work environment where employees have equal opportunities to benefits and good working conditions. Treating community members and business partners with the same level of fairness you expect from them is also important.
Not surprisingly, much study has been done on this subject by behavioural psychologists, but the constant reference seems to be Adams’ Equity Theory.
The Equity Theory
A workplace and behavioural psychologist, John Stacey Adams developed his job motivation theory in 1963.
According to this article on the MindTools website, the theory acknowledges that subtle and variable factors affect an employee’s assessment and perception of their relationship with their work and their employer.
Adams contended that employees become de-motivated, both in relation to their job and their employer, if they feel as though their inputs are greater than the outputs.
Employees can be expected to respond to this is different ways, including de-motivation (generally to the extent the employee perceives the disparity between the inputs and the outputs exist), reduced effort, becoming disgruntled, or, in more extreme cases, perhaps even disruptive.
What has this to do with client-agency teams?
While Adam’s Equity Theory focuses on individuals within a company, at Aprais we believe the same principles apply to teams – either within the same company or across companies such as is the case in a client-agency relationship.
We wondered if there’s a way to quantify the business benefit from being fair? After all, the drive to reduce agency costs is often seen as a hallmark of marketing procurement success. Instinctively, we felt this to be a counter-productive strategy.
There are many possible ways to view fairness in a business relationship. We decided to investigate this issue in terms of the client’s approach to agency compensation and how this affects the client-agency relationship overall and the perceived value a client receives from the agency.
Financial empathy in business relationships
Not entirely surprisingly, our study revealed that financial fairness in business relationships rewards both parties. Analysis of the more than 23,000 client-agency evaluations in our database, revealed that marketers who are rated highly by their agencies in terms of financial regard, in turn rate their agencies 20% higher for agency staff allocation.
This indicates that clients who adopt a fair approach to agency remuneration perceive better value from the relationship with their agency. Win-win.
Agreeing a scope-of-work that is clear and adhered to, is the foundation of fair financial treatment.