Robbins & Judge (2007, p. 186) defines Motivation “ as the processes that account for an individual’s intensity, direction, and persistence of effort towards attaining a goal”. Equity theory comes under process theory which gives the perception whether the individual is going to work hard or not depending upon the rewards and possible outcomes. This paper discusses and describes the equity theory of motivation with its implications to managers in the light of a real organizational example.
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Analysis: John Stacey Adams, a workplace and behavioural psychologist,” articulated a construct of equity theory on job motivation and job satisfaction in 1965″ (Okpara, 2006, p. 226). “ In equity theory individual make comparisons of their job inputs (for example efforts, experience, education, competence) and their outcomes (for example salary level, raises, recognition) with those of referent others and then respond to eliminate any inequities”(Robbins & Judge, 2007, p. 205).
This theory states that “ an individual who perceives that she or he is being treated unfairly in comparison to others will be motivated to act in ways that reduce the perceived inequity”(Campling, Poole, Wiesner, Schermerhorn, 2006, p. 394). An individual should feel a fair balance of what he/she puts into the jobs and what he/she gets out of it. Adams called these as inputs and outcomes (Okpara, 2006). Individuals are more likely to be motivated when they feel fairly or equitably treated. And when they are unfairly treated they are highly prone to the feeling of disaffection and demotivation.
In equity theory the most crucial feature is comparison. In equity theory employees make comparisons of their job inputs (efforts) and outcomes (rewards) with relevant others. According to Robbins & judge (2007) there are four referent comparisons that an employee can use: 1) Self- inside: The Employee will compare his or her experiences in a different position inside the employee’s current organization 2) Self- outside: The Employee will compare his or her experiences in a situation or position outside the employee’s current organization. ) Other ” inside: The employee will compare with another individual or group of individuals inside the organization. 4) Other-outside: The employee will compare with another individual or group of individuals outside the organization. Employees might compare themselves to friends, neighbours, co-workers or colleagues in same organization or other organization. Employee may choose its referent depending upon four variables ” gender, length of tenure, level in the organization and amount of education or professionalism.
Employees with short tenure in their current organization don’t have much information about individuals or group of individuals within the organization. So these employees don’t make comparison with their colleagues while those with long tenure make comparisons with their colleagues. Employees in top position and with higher amount of education tend to have more information about people in other organization. So these employees make comparisons with individual or group of individuals from other organization (Robbins & Judge, 2007). The theory posits that people calculate a mental ratio of the outcomes (i. e. rewards) they receive and the inputs (i. e. effort) that they expend and compare it to the outcomes/inputs ratio of their referent” (Allen, Takeda and White, 2005, p. 642). If the ratio of their outcomes/input is equivalent to the outcomes/input ratio of other employee then a state of equity exist. But state of inequity exists when their ratio is not equivalent, that means an employee’s own ratio of outcomes/input could be more than, or less than to that of other employees and so they experience equity tension.
When they are underrewarded, the tension creates anger and when overrewarded the tension creates quilt (Allen, Takeda and White, 2005). When employees perceive inequity, Weller (1995) suggest a number of alternative methods to restore a feeling or sense of equity. 1) Cut back on inputs: The employee will not perform put to the mark or make full use of sick and professional leaves or put less time and effort. 2) Vary the outcomes: The employee may decide to negotiate for a much higher pay raise or take measures so that job recognition takes place. ) Cognitive dissonance: The employee may change his or her perception of inequity with the referent others, so that he or she can reduce personal tension. 4) Change the comparison other: The employee may change the reference person who received a raise with whom the employee was comparing. This may help to restore equity by comparing the input/outcome ratio with someone with similar ratio. 5) End affiliation: Due to perceived unfairness and frustration the employee might leave the organization or request for transfer. (Weller, 1995, p. 46) Example:
There is an example of inequity due to being underrewarded in an organization ABC where the employee A makes comparison of his inputs that he put into the job (i. e. efforts, experience, education) and the outcome (i. e. salary levels) which he received from his employer with another employee B in his organization . In this example employee A was graduated from a well reputed university with a degree in Information Technology. After interviews with a number of organizations on campus, he accepted a position in top Information Technology firm.
Employee A was very delighted with the offer since it was a challenging job with a prestigious firm, an excellent opportunity to gain valuable experience, and also had the highest salary package as compared to the other graduate. Twelve months have passed since the employee A had joined the employer. The work was challenging and satisfying as he had hoped. Also his employers were extremely pleased with his performance and had given him salary raised.
But from past few weeks his (employee A) motivational level has dropped dramatically because his employer has hired another fresh college graduate (employee B) from another university who lacks one year experience which employee A has gained but has a higher salary package than employee A. Here the employee A uses one of the comparisons aspect (other-inside) to compare himself with the employee B. Employee A compare his ratio of input/outcomes with the input/outcome ratio of employee B.
Since the ratio is not equivalent employee A feels underrewarded and perceives that he is not equitably treated in his organization. So in order to restore sense of equity employee A is looking for another job (i. e. End Affiliation) Implication for managers: Inequitable pay “ In most research on equity theory has focused on pay as the basic outcome”(Ivancevich, 2008). In many organization employees make comparisons of their pay with their referent others. In order to resolve the issue of pay inequity, countries like Canada and USA implemented steps of pay equity. Gunderson, 1994) – Male and female dominated jobs are first identified within the organization – For different jobs points are given according to gender-neutral job evaluation scheme. – The relationship between pay and job evaluation is done and depending upon that separate pay are assign for male and female dominated jobs – The pay of undervalued female dominated jobs is adjusted with the pay of male dominated job based on job evaluation. Cross Culture implication As seen from this article there are cross cultural differences in equity sensitivity between USA and Japan.
These two countries are major economic players in the world economy, but striking difference is observed in their culture. It has been found that business major in USA have greater importance on self-fulfilment, responsibility and intrinsic rewards, while Japanese business major have emphasis on extrinsic rewards. This may be because USA has an individualistic culture where individuals are valued over groups, whereas in Japan there is a collectivistic culture or a team oriented culture (Allen, Takeda and White, 2005).
Thus managers need to consider the cultural diversity of the country in which the organisation is functioning. Relevance to comparable worth A research has been indicated that salary differential does exist between male and female bank managers in Nigeria. Female bank managers receive less salary and are less satisfied with their pay than male colleagues. Due to this they have impact on performance, absenteeism and turnover for female bank managers. From the research it has been seen that there lower increase in salary of female bank mangers.
Lower increase in salary translates to less satisfaction and which in turn related to low morale and poor performance. If the management wants to enhance the satisfaction, attendance, performance, productivity, and reduce turn over, then the salaries of both the sexes should be compared depending upon the work assignments (Okpara, 2006). Research also shows that women bank managers were dissatisfied with opportunities to promotion. For management to ensure that promotion is fair and biased, it should be based on objective evaluation of performance (Okpara, 2006).
Thus managers can apply these implications to address comparable worth. Discussion and Conclusion: To conclude it can be identified that pay always played a role of equity controversies in any organization and so its implications should be never underestimated. The two other equity issues which need to be considered are Gender equity and comparable worth. These two are also critical issues and any organization. So in order to avoid inequity among employees related to these issues, manager’s need to apply implications as discussed above.
Also when rewards are allocated to employees it is the manager’s responsibility to avoid or at least minimised the negative consequences of equity comparison. References: Allen, R. S. , Takeda, M. , and White, C. S. (2005). Cross-cultural equity sensitivity: a test of differences between the United States and Japan. Journal of Managerial Psychology, 20(8), 641-662. Campling, J. , Poole, D. , Wiesner, R. and Schermerhorn, J. R. , (2006). Management. (2nd ed. ). Australia: John Wiley & Sons. Gunderson, M. (1994). Pay and Employment Equity in the United States and Canada. International Journal of Manpower, 15(7), 26-43.
Ivancevich, J. M. , Konopaske, R. and Matteson M. T. , (2008). Organizational Behaviour and Management. (8th ed. ). New York: McGraw-Hill Irwin. Okpara, J. O. (2006). Gender and the relationship between perceived fairness in pay, promotion, and job pay, promotion, and job satisfaction in a sub ” Saharan African economy. Woman in Management Review, 21(3), 224 ” 240. Robbins, S. P. and Judge, T. A. ,(2007). Organizational Behaviour. (12th ed. ). New Jersey: Pearson Prentice Hall. Weller, L. D. (1995). The equity factor: a vital part of the quality equation. Quality Assurance in Education, 3(4), 44-50.