The interactive effects of centralization on the relationship between justice and satisfaction.

The current study examines the effects of centralization on the relationship between organizational justice and job satisfaction using referent cognitions theory as a theoretical foundation. The sample consists of 489 members of the National Association of Purchasing Managers. Results indicate that the relationships between procedural, distributive, and interactional justice and job satisfaction are stronger under conditions of high centralization. Directions for future research and implications for managers are discussed.

Keywords: justice; satisfaction; centralization

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Researchers have long acknowledged the relationship between organizational justice and a variety of outcomes. These outcomes have included increased commitment, job performance, organizational citizenship behavior, job satisfaction, and decreased turnover intentions (Cohen-Charash & Spector, 2001). More recently, researchers have begun to expand their understanding of organizational justice by focusing their attention on identifying antecedents (e.g., Schminke, Ambrose, & Cropanzano, 2000) and by exploring the role of justice as a moderator (e.g., Siegel, Post, Brockner, Fishman, & Garden, 2005). For example, Schminke et al. (2000) examined elements of organizational structure as predictors of justice. They found that size, formalization, and centralization relate differently to the three types of justice: procedural, distributive, and interactional.

In recent years, decentralization has been touted as beneficial to reaching organization goals, making better use of employee skills and abilities, permitting more rapid response to environmental change, and providing greater employee development and satisfaction (Alexander, 1991; Daft, 2003). However, organizations must balance the gains and losses that come with decisions on authority delegation. With decentralization comes additional expense: more formal training for decision makers, the cost of performance and reporting systems to provide top management with information about decision effectiveness, and possible duplication of functions. In addition, many firms have managers resist due to both loss of control and the inconsistency of firm responses that come with decentralization (Poitevin, 2000).

The primary purpose of the present study is to extend the research efforts of Schminke et al. (2000) by exploring the role of centralization as a moderator in the justice--satisfaction relationship. Specifically, it is our contention that the strength of the positive relationship between justice and satisfaction (Cohen-Charash & Spector, 2001; McFarlin & Sweeney, 1992) will vary according to the level of centralization of decision making in the organization. We begin with an overview of the justice literature and a discussion of centralization. This is followed by an introduction to referent cognitions theory (RCT), which is used as the guiding theoretical framework.

Justice

Research generally recognizes three distinct forms of organizational justice: distributive, procedural, and interactional. Distributive justice was the first to be widely researched and refers to the perceived fairness of the distribution of outcomes (Greenberg, 1990). Procedural justice refers to the perceived fairness of the process used to determine outcomes. These outcomes consist of organizationally prescribed benefits such as pay and promotions. Interactional, the most recently recognized form of justice, focuses on the quality of the relationship between the supervisor and the subordinate. High interactional justice reflects feelings that the subordinate is treated with respect and dignity by his or her supervisor. All three forms of justice have been found to be positively related to multiple aspects of satisfaction, including job, pay, supervisor, management, and union. Other significant attitudes include increased commitment and trust and decreased intentions to turnover (Cohen-Charash & Spector, 2001).

Given the established relationships between all types of justice and these outcomes, much of the practical implications have focused on enhancing perceptions of justice to improve attitudes and behaviors. In a unique approach, Schminke et al. (2000) discussed the broader social context as a means of influencing perceptions of fairness. They suggested that the architectural systems within organizations can have a profound effect on perceptions of fairness. Organizations can be designed in a way that allows for participation in decision making as well as voice and due process. These organizational structures are considered systemically fair and should lead to greater levels of perceived justice (Sheppard, Lewicki, & Minton, 1993). Specifically, Schminke et al. found that participation in decision making (i.e., low levels of centralization) lead to higher levels of procedural justice. In addition to being a predictor of justice, centralization can also be viewed as a moderator of the relationship between justice and satisfaction.

Centralization

Centralization refers to the hierarchical level in the organization at which decisions are made (Childs, 1973). Centralization differs from formalization in that the latter refers to the extent to which rules, policies, and procedures exist and guide employee behavior (Hodge, Anthony, & Gales, 1996). In highly centralized organizations, decision-making power is concentrated at the upper levels, thereby reducing each member's level of authority (Childs, 1973). In highly decentralized organizations, the power to make decisions is relegated to the lower levels, and employees have discretion in their activities. Accordingly, the importance of subordinates would be increased through decentralization and would be decreased through centralization (Fayol, 1916). As a core management principle, Fayol viewed centralization as the degree to which it occurs in organizations but did not make a judgment as to whether more or less centralization was appropriate; rather, the challenge for managers was to find the fight degree of centralization that best maximized the organization's outcomes and provided satisfaction for the employees. Over time, management theorists began to advocate decentralization, and empowering employees was seen as a structural method for improving motivation as well as firm performance (McGregor, 1960). The underlying assumption was that by removing tight controls and allowing employees to make decisions regarding their own activities, they would be satisfying social and egoistic needs. Furthermore, their energies would be directed toward the goals of the organization. Although some contemporary research supports the links between decentralization and firm performance (Chang & Harrington, 2000) and employee satisfaction (Bhargava & Kelkar, 2000), other research has demonstrated that under certain conditions, centralization is positively related to firm performance (Richardson, Vandenberg, Blum, & Roman, 2002) and managerial performance (Chang & Harrington, 2000). For example, taking a contextual approach, Richardson et al. examined the relationship between centralization and firm performance under a variety of conditions using a sample consisting of more than 400 health care treatment centers. They used a longitudinal design and found that the condition (i.e., growing or shrinking) and percentage of professionals employed moderated the centralization-firm performance relationship such that the highest level of financial performance occurred for centers in a growth phase with high centralization. Growing centers with low centralization had the lowest financial performance. Furthermore, treatment centers with a high degree of professionals performed better in a centralized environment than in a decentralized environment. Giving professionals too much decision making latitude had a negative effect on performance. In terms of employee attitudes, their post hoc analyses revealed no significant relationship between decentralization and satisfaction. Hence, as suggested by Richardson et al. recently and Fayol (1916) historically, no one best way exists in terms of centralization, and a contingency approach may be most appropriate (Fleurke & Hulst, 2006).

RCT

Folger (1986) suggested RCT as a substitute for equity theory, which better explains the processes by which individuals both evaluate and respond to organizational justice and injustice. The basic premise underlying RCT is that people make comparisons between what actually is and what might have been under different circumstances. These imagined alternatives can be better than reality (i.e., high referent cognition) or perhaps worse (i.e., low referent cognition) than reality. Resentment exists under a high referent cognition situation (e.g., when an individual believes he or she could have done a far superior job if he or she were in charge). Resentment is minimized if the individual believes that he or she would have been no better off regardless of who was in charge. A second element of RCT is the likelihood of amelioration (Folger, 1986). If the individual believes that things will get better in the future, he or she will not be as upset. Finally, RCT also recognizes the reason for the current state of reality. Folger refers to this element as justifications. Perhaps the poor work performance was because the supervisor was new or inexperienced. Assuming this is a good reason (i.e., high justification), less resentment would occur. Hence, resentment would be maximized when there is low justification combined with high referent cognition. Resentment is minimized when there is high justification and low referent cognition ("I could not have done better, and there is a good reason why this level of performance occurred"). RCT incorporates both outcome (i.e., distributive) and process (i.e., procedural and interactional) components of justice. RCT has been used as an explanation in research examining the relationship between justice and turnover (Aquino, Griffith, Allen, & Hom, 1997; Goldman, 2003) as well as justice and satisfaction (McFarlin & Sweeney, 1992). RCT can also be used to explain the interactive effects of justice and centralization on job satisfaction.

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