6. Equity Theory

6. Equity Theory

Equity theory is the theory of motivation that was developed in the early 1960s by J. Stacey Adams, a psychologist. “The theory proposes that a person's motivation is based on what he or she considers being fair when compared to others” (Bawa cited Redmond & Housell, 2015)

 

(Ramlall, 2004) Equity theory acknowledges that people are concerned not only with the absolute value of rewards they receive or their efforts, but also the involvement of the extent to which others receive. Based on one’s inputs, like effort, experience, education, and competency, this can compare outcomes such as remuneration levels, increases, and recognition. When individuals understand an imbalance in their outcome-input ratio relative to other individuals, stress is created. This stress provides the idea for motivation, as individuals strive for what they recognize as equity and fairness (Robbins, 1993).

 

Inputs include time, effort, loyalty, hard work, commitment, ability, adaptability, flexibility, tolerance, determination, enthusiasm, personal sacrifice, trust in superiors, support from co‐workers and colleagues, and skill. Outputs are the positive and negative consequences that an individual perceives a participant has incurred due to their relationship with another. Outputs can be both tangible and intangible. Typical outcomes are job security, esteem, salary, employee benefit, expenses, recognition, reputation, responsibility, and sense of achievement, (Ball, 2012)

 

There are two types of inequity “under-reward” and “over-reward”. Under-reward implies that a person believes that he/she either puts in more attempts than another, receives the same reward, or puts in the same effort as another for a lesser reward. For instance, if an employee works long hours with their subordinates, the same salary will be applied. This will lead to perceive inequity in the form of under-reward. ‘Conversely, Over-reward maybe feel to the person that his or her efforts to rewards ratio is higher than other person’s, in such situation he/she should make the same reward with less effort. (Kiruja and Mukuru,  2013).

 

Eg In my organization senior officers and juniors should work long hours. Seniors have to get the effort to coordinate their juniors, but they will get the same paycheck.

 

Equity theory (Adams, 1963) considers an exchange relationship of benefits /contributions in the workplace between employers and employees, where benefits include pay, recognition, and promotions. Contributions include employees’ education, experience, effort, and ability.  (Daft, 2003).

 

(Dartey Baah and Harlley 2010) The equity theory thus has three implications for human resource managers in keeping with Martin (2005). His assertion is that staff can create comparisons, that area unit subjective. Jobs should so be marched properly in terms of the wage/effort bargain. In addition, managers should be open concerning regarding the basis on which the rewards are made to avoid wrong intentions concerning equity. Equity theory implies the importance of performance management and reward systems during which, the outcomes are seen by individuals as relevant.

 

There is a considerable amount of empirical literature that supports the basic assumptions of equity theory (Greenberg, 1982; Mowday, 1983; Werner & Mero, 1999). Additionally, there has been some research directed at understanding which factors tend to be used when evaluating three types of equity: external, internal, and employee.

External equity

This implies that, comparison of the same jobs in different organizations. As external equity factors, such as organizational type, size of the organization, ability to pay remuneration, and financial benefits are considered. Additionally, the geographic location, and capital of the organization, are also considered as important This implies that, comparison of the same jobs in different organizations. As external equity factors, such as organizational type, size of the organization, ability to pay remuneration, and financial benefits are considered. Additionally, the geographic location, and capital of an organization, are also considered as important. (Konopaske 2002).

Internal equity

This internal equity occurs, through the comparison of different jobs in the same organization. (Milkovich and Newman 1996) state that “a pay structure will be perceived as equitable or inequitable depending on whether the pay for job as compared to its requirements.

Employee equity

 This implies comparing the same job and working for the same organization. As inputs, individuals, job performance, and seniority, (Konopaske 2002).

 

Reference List

Adams, J.S., 2005. Equity theory. Organizational behavior I: Essential theories of motivation and leadership, pp.134-159.

Bawa, M., 201, Employee motivation and productivity: a review of literature and implications for management practice. International Journal of Economics, Commerce and Management,5(12), pp.664-65.

Ball, B. 2012, Need practical guide in how to motivate your employees, A summary of motivation theories. ACADEMIA

Dartey-Baah, Kwasi and Harlley, Agatha (2010) "Job Satisfaction and Motivation: Understanding its impact on employee commitment and organisational performance," Academic Leadership: The Online Journal, 8 (4), Article 39.

Konopaske, R. and Werner, S., 2002, Equity in non-North American contexts: Adapting equity theory to the new global business environment. Human Resource Management Review, 12(3), pp.405-418.

Kiruja E., and Mukuru, E., 2013, Effect of motivation on employee performance in public middle level technical training institutions. International Journal of Advances in Management and Economics, 76-77.

Ramlall, S. (2004) A review of employee motivation theories and their implications for employee retention within organizations. The Journal of American Academy of Business Cambridge.54-55.