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Equity Theory

MADE BY:GROUP B

MOTIVATION IS THE PROCESS THAT CAUSES BEHAVIOUR TO BE ENERGIZED, DIRECTED AND SUSTAINED.

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1. CONTENT THEORYFOCUS ON WHAT SPECIFIC THINGS MOTIVATE PEOPLE BASED ON THEIR NEEDS.

• MASLOW’S NEED HIERARCHY THEORY.• HERZBERG’S TWO FACTOR THEORY • ELDERFER’S ERG THEORY

2. PROCESS THEORIES

DISCUSSES HOW THESE NEEDS INTERACT AND INFLUENCE ONE ANOTHER TO PRODUCE CERTAIN KIND OF BEHAVIOUR

• EQUITY THEORY• EXPECTANCY THEORY

3. REINFORCEMENT THEORY

• OPERANT CONDITIONING

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•Equity Theory of motivation was formulated by J.S. Adams. The equity Model focuses on an individual’s feeling of how fairly he/she is treated in comparison with others.

•It is based on the assumption that members of an organisation experience strong expectations of justice, balanced and fairness in treatment by the organisation.

•When a person feels that he is being treated unfairly by the organisation, these feelings can have a variety of adverse effects on the person’s motivation and performance on the job.

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EQUITY THEORY

General Equity modelThis model is based on the comparison of two variables:

1: Inputs – Represents the efforts and skills which a member of an organisation perceive that he puts into his job.

2: Outcomes: They are the rewards which the member receives from the organisation and his job.

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INPUTS OUTCOMES

ATTENDANCE PAYAGE PROMOTIONLEVEL OF EDUCATION CHALLENGING JOB ASSIGNMENTSPAST EXPERIENCE FRINGE BENEFITSABILITY WORKING CONDITIONSSOCIAL STATUS STATUS SYMBOLSJOB EFFORT (LONG HOURS, PHYSICAL EXERTION)

JOB PERQUISITES (OFFICE LOCATION, PARKING SPACE)

PERSONALITY TRAITS JOB SECURITYSENIORITY RESPONSIBILITY

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Equitable SituationEquitable Situation Inequitable SituationInequitable Situation -- Positive inequity-- Positive inequity -- Negative inequity-- Negative inequity

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A. An Equitable SituationA. An Equitable Situation

SelfSelf OtherOther

$21 hour

= $2 per hour$42 hours

= $2 per hour

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•The individual compare his input-outcome ratioswith the ratios of the inputs and outcomes of some of his collegues or others as used in the figure. •If the Ratios are in balance , the individual experiences positive feelings of equity, fairness and justice.

Person’Outcomes = Other Outcomes Person’s Inputs Other Inputs

•This equality is shown by the balanced position of the weighing balance.

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An inequitable Situation An inequitable Situation :

Feeling of inequality are generated in the individual and tension exists due to unfairness. There are 2types of inequality:

1. Under rewarded -- It is also known as negative inequity -- Which causes anger2. Over rewarded -- It is also known as positive inequity -- Which causes guilt

$21 hour

= $2 per hour$31 hour

= $3 per hour

B. Negative InequityB. Negative Inequity

SelfSelf OtherOther

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•If the ratio is significantly less in comparison with those of others, it means that the individual feels underpaid (Under rewarded).

•He is likely to feel angry, hostile and frustrated.

•This we called Negative Inequity.

$21 hours

= $1 per hour

C. Positive InequityC. Positive Inequity

$31 hour

= $3 per hour

SelfSelf OtherOther

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•If the ratio is significantly higher, the individual feels overpaid (over-rewarded).

•Such a situation may generate a feeling of guilt in the individual.

•This we called Positive Inequity.

Fig: Inequity as Motivational

Process

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Individual Percieves Inequity

Individualexperinces Tension

Individuals wants to reduce Tension

Individual Takes Action

CONSEQUENCES OF INEQUITY

People may choose to act in one or more of the following ways to reduce a perceived inequity.

1. Changing Inputs: A person may increase or decrease the level of his or her inputs, for example through the amount of quality of work, absenteeism or working additional hours without pay.

2. Changing Outcomes: A person may attempt to change outcomes such as pay, working conditions, status and recognition , without changes to inputs.

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REACTION TO INEQUITY

3. Distortion of Inputs and Outcomes: People may distort their own inputs and outcomes, people may mentally distort them to achieve a more favourable balance.

for eg: A person who first was feeling overpaid could re-establish equity by distorting his own inputs(“ I now feel that I really do work a lot harder than anyone else does”).

4. Changing the Inputs and Outcomes of others: People may distort the inputs or outcomes of the others. For eg: Equity can also be restored by changing one’s perceptions of the inputs and outcomes of other. 18

5. Leaving the field: People may leave the organization or request a transfer to another department. In doing so, they hope to find an equitable balance.

6. Changing the Object of Comparison: This involves changing the reference group with whom comparison is made.

For eg: The star high school athlete who doesnot get a schoolship to a major university might decide that a smaller school has more advantages, thereby justifying a need to look at smaller schools when making a selection.

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Individuals seek to maximize their outcomes (where outcomes are defined as rewards minus costs).

Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards and costs among members. Systems of equity will evolve within groups, and members will attempt to induce other members to accept and adhere to these systems.

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When individuals find themselves participating in inequitable relationships, they become distressed. The more inequitable the relationship, the more distress individuals feel. According to equity theory, both the person who gets “too much” and the person who gets “too little” feel distressed.

Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by restoring equity. The greater the inequity, the more distress people feel and the more they try to restore equity.

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Propositions relating to inequitable pay:

1: Paid by time:

Overrewarded employees produce more Underrewarded employees produce less

with low quality

2: Paid by quality: Overrewarded employees give higher

quality Underrewarded employees make more

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Lessons in Equity Theory

Pay attention to what employees’ perceive to be fair and equitable

Allow employees to have a “voice” Employees should have opportunity to

appeal Organizational changes, promoting

cooperation, etc. can come easier with equitable outcomes

Failure to achieve equity could be costly Climate of justice

Organizational uses

Mangers Often use the equity model in making a variety

of decisions, such as pay raises, allocating office and taking disciplinary actions.

The equity model leads to two primary conclusions:

1: Employees should be treated fairly.2: People make decisions concerning equity only after

they compare their inputs and outcomes with those of comparable employees(same or other organizations).

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People measure the totals of their inputs and outcomes. This means a working mother may accept lower monetary compensation in return for more flexible working hours.

Different employees ascribe personal values to inputs and outcomes. Thus, two employees of equal experience and qualification performing the same work for the same pay may have quite different perceptions of the fairness of the deal.

Employees are able to adjust for purchasing power and local market conditions. Thus a teacher from Alberta may accept lower compensation than his colleague in Toronto if his cost of living is different, while a teacher in a remote African village may accept a totally different pay structure.

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Although it may be acceptable for more senior staff to receive higher compensation, there are limits to the balance of the scales of equity and employees can find excessive executive pay demotivating.

Staff perceptions of inputs and outcomes of themselves and others may be incorrect, and perceptions need to be managed effectively.

An employee who believes he is over-compensated may increase his effort. However he may also adjust the values that he ascribes to his own personal inputs. It may be that he or she internalizes a sense of superiority and actually decrease his efforts.

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CRITICISMS OF EQUITY THEORY•Criticism has been directed toward both the assumptions and practical application of equity theory.

•Scholars have questioned the simplicity of the model, arguing that a number of demographic and psychological variables affect people's perceptions of fairness and interactions with others.

•Much of the research supporting the basic propositions of equity theory has been conducted in laboratory settings, and thus has questionable applicability to real-world situations.

•Critics have also argued that people might perceive equity/inequity not only in terms of the specific inputs and outcomes of a relationship, but also in terms of the system that determines those inputs and outputs.

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In addition to their time, workers contribute their experience, their qualifications, and their capability in addition to their personal strengths. Money, of course, is the primary motivating outcome for an employee, but it is not the only, and in some cases not even the most important, factor. Power and status are also prime motivators, as are flexibility, perquisites and variety. According to the Equity Theory, the most highly motivated employee is the one who perceives his rewards are equal to his contributions. If he feels that he is working and being rewarded at about the same rate as his peers, then he will judge that he is being treated fairly.This doesn’t mean that every manager should treat every employee identically, because every worker does not measure his contributions in the same way. For example, flexible working hours might motivate a working mother even more than a pay raise.

AN EXAMPLE

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