Equity theory

Lecturer: Wendelin Kuepers

Group members:

1. Mai Thu Ha (12032382)

2. Zhengyan ZUO (05017882)

3. Haoxiang Wu (12083815)

4. Wu Di (11046037)

152.700 Organisation and Management - Assignment 1b

HIGHLIGHTS

Introduction & Assumptions1

Output/Input ratio - Comparison others2

Consequences of inequity3

Development of Equity theory4

5 Theory’s strengths and criticism

152.700 Organisation and Management - Assignment 1b

152.700 Assigment 1b

Introduction to Equity theory

First developed in 1963 by John Stacey Adams

Adams (1963) argues that when people measure the fairness of their work outcomes relative to others, any perceived inequity is a motivating state of mind.

Assumptions of Equity Theory

• Employees expect a fair and equitable return for their contribution to their jobs.

• Social comparison.• Employees who perceive themselves as

being in an inequitable scenario will attempt to reduce the inequity.

Model of Equity Theory

S Input versus r Input

S Outcome r Outcome

I = Inputs - employee’s contribution to employer

O=Outcomes - the individual gets in return for his contribution.

R = Referent - comparison person

S = Subject the employee who is judging fairness of the exchange 152.700 Organisation and Management - Assignment 1b

Key Factors in Equity Assessment

152.700 Organisation and Management - Assignment 1b

Equity Theory’s “Relevant Others”

• Can be four different situations:Self-Inside

• The person’s experience in a different job in the same organization

Self-Outside• The person’s experience in a different job in a

different organizationOther-Inside

• Another individual or group within the organizationOther-Outside

• Another individual or group outside of the organization

152.700 Organisation and Management - Assignment 1b

152.700 Organisation and Management - Assignment 1b

Accoring to the equity theory employees compare their outcome/input ratio with the outcome /input ratio of others to determine whether they are being treated fairly or fairly by the organization.These comparisions are divied into 3 categories:

a.Equity:

A person feels equitably treated when his outcome/input ratio is equal to others persons outcome/input ratio with the person compares himself.

S outcome = R outcome

S input R input

Equitably paid workers are said to feel satisfied.

152.700 Organisation and Management - Assignment 1b

b.under rewarded inequity /negative inequity: A person feels over rewarded when his outcome/input ratio is less than

whom the person compare himself. S outcome < R outcome S input R input

Equity theory states that an overpaid worker feels angry. c .over rewarded inequity /positive inequity: A person feels over rewarded when his outcome/input ratio is greater than

whom the person compare himself. S outcome > R outcome S input R input

Equity theory states that an overpaid worker feels guilty.

152.700 Organisation and Management - Assignment 1b

Consequences of inequityBased on equity theory, when employees perceive an inequity, they can be predicted to make one of six choices.•They change their inputs.•They change their outcomes •They distort perceptions of self•They distort perceptions of others•They choose a different referent

•They leave the field (Robbins, Millett & Waters-marsh , 2004, p.

183).

152.700 Organisation and Management - Assignment 1b

The Development of Research on Equity Theory

1. First developed in 1963 by John Stacey Adams

Adams (1963) argues that when people measure the fairness of their work outcomes relative to others any perceived inequity is a motivating state of mind.

152.700 Organisation and Management - Assignment 1b

The Development of Equity Theory

2.  Effects of Inequity on Work Output and Quality by Underpayment

Lawler and O’ Gara (1967) indicated that the underpaid group experienced feelings of inequity using the higher paid group members as their comparative others. 

Additionally, the underpaid worker would produce more work output via conducting more interviews was indeed correct. 

152.700 Organisation and Management - Assignment 1b

The Development of Equity Theory

3. Equity and workplace status

Greenbery (1988) stated that employees reassigned to offices of higher status would be more productive than those reassigned to offices of equal status employees.

The Development of Equity Theory

4. Equity Sensitive Construct• Huseman, Hatfield and Miles(1987) defined the equity

sensitive construct as the investigation of a person's perception of what is and what is not equity, and then uses that information to make predictions about reactions to inequity.

• Individuals react in consistent but individually different ways to both perceived equity and inequity because they have different preferences for equity on a continuum with classes of individual: Benevolent, Equity Sensitive, and Entitled (Huseman et al., 1987).

152.700 Organisation and Management - Assignment 1b

The Development of Equity Theory

5. Work Motivation on an Assembly Line The study was completed on the basis that

equity theory indicates that workers react to and modify their work behaviour based upon the speed or rate of the work of the people around them (Schultz, Schoenherr & Nembhard, 2006).

152.700 Organisation and Management - Assignment 1b

The Development of Equity Theory

6. Dishonesty in the Name of Equity

Individuals are more likely to engage in dishonest behaviour when they have inequity of wealth (Gino & Pierce, 2009).

Strengths

Strengths

B

E

C

D

A

Accurately predicts behavior on under-reward

Inter-personal processes (social comparison) + reference group

Important insights into employee motivation

Ability to fit with other theories (particularly the expectancy theory)

Accounts for internal assessment, comparison procedures &quality changes

152.700 Organisation and Management - Assignment 1b

Restricted & incomplete (focus on payment only)

Little practical value ->better as an explanation after the fact than as a predictor of behavior

Focuses on short-time comparison

Ignores reactions to experienced inequities

Equity’s criticism

Criticisms

Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)Huseman, Hatfield & Miles, 1987 152.700 Organisation and Management -

Assignment 1b

Applications of Equity theory

Explanation of employee behaviour

Equity

Distributive justice •Compensation•Promotion=>fair distribution of rewards

Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)152.700 Organisation and Management - Assignment 1b

152.700 Organisation and Management - Assignment 1b

Contents

Theory’s strengths and criticism

Development of Equity theory

Consequences of inequity

Output/Input ratio - Comparison others

Introduction & Assumptions

152.700 Organisation and Management - Assignment 1b

References

• Adams, J.S. (1963). Towards An Understanding of Inequality. Journal of Abnormal and Normal Social Psychology. (67), 422-436.

• Gibson, J.L., Ivancevich, J.M., Donnelly, J.H., & Konopaske, R. ( 2009). Organizations: Behavior, structure, process (13th ed.). New York, NY: McGraw-Hill., p150-153

• Gino, F., & Pierce, L. (2009). Dishonesty in the Name of Equity. Psychological Science, 20 (9): 1153-1160.

• Greenberg, J. (1988). Equity and workplace status: a field experiment. Journal of Applied Psychology, 4, 606-613.

• Huseman, R., Hatfield, J., & Miles, E. (1987). A New Perspective on Equity Theory: The Equity Sensitivity Construct. Academy of Management Review. 12(2). 232-234.

152.700 Organisation and Management - Assignment 1b

References (cont)

• Lawler, E., & O‘Gara, P. (1967). Effects of inequity produced by underpayment on work outputs, work quality, and attitudes toward the work. Journal of Applied Psychology, 51(5), 403-410.

• Robbins, S.P., Millett, B., & Waters-marsh, T. (2004). Organisational Behaviour. Australia: Person Education Australia, p. 183.

• Schultz, K., Schoenherr, T., & Nembhard, D. (2006). Equity theory effects on worker motivation and speed on an assembly line. Retrieved from: http://www.hbs.edu/units/tom/pdf/kschultz.pdf

• Stecher, M.D. & Rosse, J.  (2007). Understanding reactions to workplace injustice through process theories of motivation. Journal of Management Education, (31), 777-796.

• Weick, K.E. (1996). The concept of equity in the perception of pay. Administrative Science Quarterly. (11), 414-439.

152.700 Organisation and Management - Assignment 1b

Group reflection

• Forming• Agreeing on topic• Assigning responsibilities• Time frame• Conflicts

152.700 Organisation and Management - Assignment 1b

Forming

• Make friends during paper• For assignment• Assign leader• Group is not so diverse in cultures

152.700 Organisation and Management - Assignment 1b

Topic agreement

• Group members study all theories in motivations

• Each member proposes 1 topic• Group discusses and agrees on topic

152.700 Organisation and Management - Assignment 1b

Assigning responsibilities

• Individual task is assigned based on members’ strength (who can do better in one part)

• Members read and make recommendations for others in group

152.700 Organisation and Management - Assignment 1b

Time frame

• 1st week: forming, individually study, agree on topic

• 2nd: individual to prepare their part, combine and discuss, proof-reading, finalize

152.700 Organisation and Management - Assignment 1b

Conflicts

• Task: unequal, discussion to fix with outlines and orders of the presentation => members agree & be happy with assigned task

• Time: different time -> difficult to schedule for group meeting => discuss & propose several options then agree on one that suits all

• However, thanks to small group size of 4, those conflicts are easier to be resolved.

152.700 Organisation and Management - Assignment 1b

THANK YOU FOR YOUR ATTENTION!

Q&A?