Equity Theory Overview
Equity Theory proposes that a person's motivation is based on what he or she considers to be fair when compared to others (Redmond, 2010). As noted by Gogia (2010), when applied to the workplace, Equity Theory focuses on an employee's work-compensation relationship or "exchange relationship" as well as that employee's attempt to minimize any sense of unfairness that might result. Equity Theory deals with social relationships and fairness/unfairness, it is also known as The Social Comparisons Theory or Inequity Theory (Gogia, 2010).
Equity Theory of motivation, developed in the early 1960’s by J. Stacey Adams, recognized that motivation can be affected through an individual's perception of fair treatment in social exchanges. When compared to other people, individuals want to be compensated fairly for their contributions (the outcomes they experience match their input(s)). A person's beliefs in regards to what is fair and what is unfair can affect their motivation, attitudes, and behaviors. Equity Theory helps explain how highly paid union workers can go on strike when no one else seems to understand why. In the same way, well paid athletes feel they are not fairly compensated compared to their peers. Equity Theory shows that one's perception is relative to their own reality.
Negative (Also known as Underpayment)
Positive (Also known as Overpayment)
Anything of value that a person brings to a job. (ex. experience, education, skills, characteristics, motivation etc.) (Redmond, 2010).
Benefits that a person is awarded from a job. (ex. pay, security, insurance, promotion/advancement etc.) (Redmond, 2010).
The ratio of perceived units of input compared to perceived units of outcomes (Redmond, 2012).
Person or standard that an individual's input/outcome ratio is compared to (Redmond, 2010).
A giver, more willing to accept less rewards, contribute more inputs than the outcomes they are receiving (Huseman, et. al.,1987).
A person who must have an equity balance or else they will experience a stressor until they rebalance (Huseman, et. al.,1987).
A person who feels they are worth the extra compensation, therefore are more willing to accept overpayment (Huseman, et. al.,1987).
Outcomes are spread evenly and fairly throughout an organization (Stecher and Rosse, 2007). Sweeney and McFarlin (1997) found that this type of justice was more important for men than women.
Determines if the process of allocating outcomes/rewards is fair by making the procedures fully transparent (Redmond, 2010). Sweeney and McFarlin (1997) found this type of justice to be more important for women than for men.
Also known as negative inequity. This occurs when the ratio of one's own inputs and outcomes is greater than or less than favorable than the ratio of a comparison other, creating a sense of unfairness. (Redmond, 2010).
Also known as positive inequity. This occurs when the ratio of one's own inputs and outcomes is lower than or more favorable than the ratio of a comparison other, causing a person to feel overcompensated. (Redmond, 2010).
Equity vs. Expectancy Theory- What is the relationship?
When discussing the equity theory, it is important to distinguish between equity theory of motivation and expectancy theory, as both thesis are often interlinked. The expectancy theory emphasizes that people will be motivated when they believe their efforts will lead to the outcome they desire. Both the expectancy theory and equity theory represent a cognitive approach to motivation and describe how people will adjust themselves (motivation) when they perceive their efforts may obtain outcomes that are consistent with their expectations. The assumption is that people calculate costs and benefits in determining course of action (Stecher & Rosse, 2007). In both instances, we are dealing with individuals being motivated when they perceive their efforts will lead to the reward they expect; such as money or recognition.
In both cases, we look at the valence of rewards- if employees do not perceive their efforts will pay off (effort –reward relationship), they will be less inclined to alter their behavior. However, the equity theory goes on to evaluate the outcome-to-input ratio comparison process and the cognitive and behavioral mechanisms to restore perceptions of equity (Stecher & Rosse, 2007). It also looks at ways to reduce inequity by such means as employees changing their inputs to a level that matches their outcomes and attempting to change their outcomes to a level that matches their inputs. There is evidence that supports the theory's prediction that people respond to inequity by reducing work effort to match the outcome (Stecher & Rosse, 2007). Below we will look at how the equity theory deals with the outcome-to-input ratio.
Equity Theory can be broken down into four basic propositions (Huseman, Hatfield, & Miles, 1987).
1. Individuals develop their perception of fairness by calculating a ratio of their inputs and outcomes and then comparing this to the ratio of others (Huseman, et. al., 1987). For example, an individual may not perceive he is being treated fairly when he works 40 hours per week (input) and receives $500 in pay (output) while his co-worker (comparable other) works 30 hours per week (input) and receives $650 in pay (output).
2. If the comparative ratios are perceived by the individual to be unequal, then inequity exists (Huseman, et. al., 1987). For example, if someone feels they are putting in more effort or working harder than a co-worker, yet they earn equal or less compensation, their perceived ratios will be different and that person will experience underpayment inequity. In contrast, overpayment inequity tips the scales in the other direction. For example, someone will feel they are being paid too much considering their work, when compared to the work and compensation of a co-worker. This can cause feelings of guilt and the ratios used for comparison are based upon the perception of an individual, and not an objective measure of inputs and outcomes. The choice of a comparison other is subjective selection of the individual.
3. As the difference in inequity increases, the tension and distress felt by an individual will increase (Huseman, et. al., 1987). Smaller differences of inequity are more tolerable than significant differences of inequity. Not every person will experience equity or inequity in the same way because people have varying tolerance levels or sensitivity to perceived situations of inequity. Three types of individuals have been identified along an equity sensitivity spectrum: benevolents, equity sensitives, and entitleds. Benevolents are more tolerant of under-reward, comfortable with giving more and getting less. Equity sensitives follow the norm of equity theory and prefer their ratios to be equal to their comparison other. Entitleds prefer to be in over-reward situations and are comfortable when they ration exceeds their comparison other (Huseman, et. al., 1987). Entitleds frequently have the attitude that the world owes them a favor, so they will freely accept and seek over-reward situations.
4. The greater tension an individual feels due to perceived inequity, the harder they will work to decrease their tension and increase perceived levels of equity (Huseman, et. al., 1987). Most individuals will attempt to achieve equity by adjusting their own inputs and outcomes, or attempting to change the inputs or outcomes of the comparison other. Individuals can use behavioral processes or cognitive processes in order to attempt to restore equity. Examples include decreasing productivity at work, finding a new job, asking for a wage increase, changing the comparative other, or attempting to distort or justify changes in their perceptions of inputs and/or outcomes (Adams, 1963). The means of reducing inequity will vary depending on the situation and will not all be equally satisfying to an individual (Adams, 1963). Keep in mind that there are many mechanisms that can be chosen to reduce perceptions of inequity, Adam’s equity theory does not predict which one an individual will use, but Adam’s does believe the chosen behavior will be the one that utilizes maximum utility (Stecher & Rosse, 2007).
Ways to Reduce Inequity
When an individual experiences tension due to perceived inequity they will work to reduce that tension (Adams, 1963). The greater the tension they experience, the more effort they will put into reducing it (Adams, 1963). There are two main processes an individual can use to restore equity: behavioral processes and cognitive processes.
Employee Behavioral Processes to Restore Equity
Behavioral processes involve changing an individual’s input or outcomes. These behaviors can be positive, such as being more productive at work, or negative, such as decreased productivity at work. Behavioral ways to reduce inequity are dependent on whether the individual perceives the inequity as under-reward or over-reward. If they feel under-rewarded they will decrease their inputs. If they feel over-rewarded they will increase their inputs. Another cognitive process alternative would be to choose a different comparative other. The elementary principal could select other elementary school principals in the same district. This might provide a more equitable comparison, which decreases the principal’s perception of inequity and under-reward. For example, an employee who feels underpaid at work compared to his coworkers (under-reward) might start taking longer breaks which decreases productivity (reduced input). By decreasing inputs, the perception of equity is restored. Conversely, an employee who feels overpaid compared to coworkers (over-reward) might choose to start working through the lunch hour (increased input). In both of these examples, the employee was dissatisfied with their perceived inequity and reduced or increased their input to achieve equity. Types of behavioral outcomes are also determined by the employee’s perception of under-reward or over-reward. If an employee doesn’t receive their annual holiday bonus as expected (under-reward) they might steal office supplies for their home to compensate (increased outcome). Even though the employee might ethically disagree with stealing, the employee justifies the action based upon the need to restore equity. Theft has been found as a retaliation tactic to unfairness in the workplace (Hollinger & Clark, 1983). An employee can also take more ethical action to increase inputs, such as lobbying for a wage increase or extra time off. On the other hand, an employee that perceives inequity due to a large holiday bonus (over-reward) might donate toys to the company daycare center (reduced outcome). This restores the perception of equity in the workplace. Behavioral approaches can also cause an individual to attempt to change the input or outcome of their comparative other. A group of employees might perceive that a co-worker is over-rewarded, so they might pressure their co-worker to work faster or improve quality. Conversely, an employee or group of employees might pressure a co-worker to slow down or work less. An individual’s power to change the inputs or outcomes of their comparative other might be limited, so working to change their own inputs or outcomes is usually attempted first.
Changing their input to match outcomes such as leaving early or slacking off ("Motivation theories," 2009)
Change outcomes to match inputs such as asking for a pay increase or stealing("Motivation theories," 2009)
Persuading others to change inputs such as complaining to superiors ("Motivation theories," 2009)
Withdrawal such as tardiness or turnover ("Motivation theories," 2009)
Employee Cognitive Processes to Restore Equity
Cognitive processes involve developing justifications for the inequity to make it seem equitable, distorting perceptions of inputs and outcomes, changing the comparative other, or any other method that attempts to re-frame the perception of the situation. In some ways, cognitive processes can require less effort than behavioral processes; however, they can also be more difficult to accomplish due to the necessity of distorting one’s own perceptions.
For example, a principal at an elementary school may perceive inequity because the high school principal earns more income and benefits even though they work in the same school district and have the same occupation. The principal could choose to engage cognitive processes to restore equity instead of behavioral processes. The principal could justify that the high school principal has more credentials or manages a larger number of teachers. In this way, no actual change of inputs or outcomes occur but the elementary school principal justified changes in the perception of inputs. Another cognitive process alternative would be to choose a different comparative other. The elementary principal could select other elementary school principals in the same district. This might provide a more equitable comparison, which decreases the principal’s perception of inequity and under-reward.
Distort one's own inputs or outcomes (e.g., "I'm not really working that hard," "I have a lot of free time") ("Motivation theories," 2009).
Distort the inputs or outcomes of others (e.g., he/she gets more money than me but they have to live in Buffalo) ("Motivation theories," 2009).
Change the comparison others ("Motivation theories," 2009). The longer a person has had their comparison other the harder it is to change
Here is a step by step video to further illuminate these concepts:
It is important to note that behavioral options in reducing inequity could involve risks. Many times employees find themselves avoiding these options because pursuing one of them and failing could be detrimental to the level of future rewards. As a result, the individual may end up feeling worse than before. Often employees decide to restore equity through mental processes instead (cognitively). Altering your thought process is not perceived as the easier option; but it produces a minimal risk factor in comparison to changing your behavior (Redmond 2013).
Employer Processes to Restore Equity
Employers need to remember that employees can value different outcomes. For example, younger employees tend to value more pay (Miles, et. al., 1994). If an employee receives a higher salary than their co-worker they could still develop a perception of inequity if that co-worker has a flexible schedule, and that type of schedule is more valuable to them than extra salary. To combat this problem employers can implement two strategies. First, they could continually request feedback from employees to determine what they value and how they would prefer to be compensated. A second strategy is to offer a choice in benefits. For example, one employee might want to use a health flexible spending account while another employee might prefer to have a dependent care flexible spending account. Employers can offer choices on health or dental insurance as well as other choices among benefits. This type of plan, called a cafeteria style, allows employees to select outcomes that they value most. This can help prevent perceptions of inequity because each employee has the outcomes that they value the highest. This helps increase their ratio of inputs to outcomes when compared to their co-workers. Employers can also utilize intangible rewards such as a pat on the back, a luncheon, or even simple praise in front of coworkers. These simple intangible rewards can help balance a measure of inputs and outcomes.
Utilizing equity theory to understand how employees measure their inputs and outcomes can also help employers prevent problems related to perceptions of inequity, such as reduced productivity, theft or employee turn-over. In addition to reducing or preventing negative behavior, employers will increase satisfaction and motivation in employees.
The founder of equity theory, J. Stacy Adams, admitted that cognitive methods to reduce inequity had not proven to be extremely effective. However, Adams suggests that an individual attempt to alter the importance and relevance of his outcomes and inputs. As an example he writes, “…if Person perceived that the discrepancy between his and Other’s outcome-input ratios were principally a result of his outcomes being too low, he might become ‘aware’ of one or more outcomes he had not recognized as being relevant before,” (Adams, 1965, pp 291). In other words, one can choose to focus on other positive outcomes that is delivered by your inputs that the Other may not have access to. Another method of cognitively reducing inequity is called “task enhancement”. Task enhancement occurs when a person distorts their evaluation of the task at hand. One may choose to alter his perception of a mundane task to something that is interesting and valuable.
Both cognitive processes and behavioral processes can be effective in reducing one’s perception of inequity. An individual will most likely use a process that is relatively easy and the most satisfying in restoring a perception of equity.
Theories That Assist Equity Theory
As the main focus of the researchers moved towards employees and their motivation factors, following the Hawthorne Study results, there were many theories put forward to understand employee motivation. The following are the five major theories that have helped in understanding motivation.
Maslow's Need-Hierarchy Theory: Maslow put forward five levels of needs of employees. These needs include physiological, safety, ego, and self-actualizing. Maslow put forward an argument that said the lower level needs of employees need to be satisfied before the next higher level need is fulfilled to motivate them. The motivation was categorized into factors by Herzberg; motivators and hygiene. The motivators including intrinsic factors like achievement and recognition help produce job satisfaction. The hygiene or extrinsic factors like pay and job security lead to job dissatisfaction.
Vroom's Theory: This theory was based on the belief that employee effort leads to performance and performance leads to rewards. These rewards can be positive or negative. The positive rewards lead to a more positive employee who is highly motivated. The negative rewards lead to obviously a less motivated employee.
Skinner's Theory: This theory states that the positive outcomes will be repeated and behavior that lead to negative outcome won't be repeated. Thus, managers should try to reinforce the employee behavior, such that it leads to positive outcomes. Negative reinforcement by managers will lead to negative outcomes.
Adam's Equity Theory Model: This theory shows that employees strive to achieve equity between themselves and their coworkers. This equity can be achieved when the ratio of employee outcomes over inputs is equal to other employee outcomes over inputs (Baxamusa, 2012).
Equity Theory Components
Adams' equity theory is based on a ratio consisting of inputs to outcomes. Inputs consist of contributions by an individual. An attribute is only considered an input if it is perceived as relevant by the individual. Inputs can include abilities, effort, performance, age, seniority, education, and other attributes. Outcomes are the rewards an individual receives for their inputs. Outcomes can include pay, benefits, status symbols, and even intrinsic rewards. The value of an outcome is determined by the recipient (Adams, 1963), so no outcome has a specific objective measure. For example, an individual might rate their college degree as a more valuable input than the college degree of another person due to their perception on a college's prestige. An individual makes more money than a co-worker, but has a less flexible schedule; they might value the flexible schedule more than their extra income. An individual calculates their subjective value of inputs and outcomes then compares it to others’ ratios in order to determine if it is equitable.
Equity Theory can be applied in almost any exchange situation, so there are a multitude of components that can be listed as inputs or outcomes. There also can be significant difficulty in determining these exact components due to their subjective nature (Siegel, Schraeder, & Morrison, 2007). Siegel, et al. found that there might be patterns to how individuals cognitively frame inputs and outcomes. For example, employees tend to distinguish inputs based on whether they are controllable or uncontrollable. Such as communications or attendance within controllable inputs, and seniority or job training within non-controllable inputs (Siegel, et. al., 2007). Employees also distinguish differing characteristics of outcomes (Siegel, et. al., 2007). Outcomes are evaluated on whether they are economic or noneconomic and whether they are personalized or generalized outcomes (Siegel, et. al., 2007). It is important to understand if there are general guides for how employees evaluate inputs and outcomes in order to help prevent perceptions of inequality. It is important for managers and employers to find a suitable measure between them (Cory, 2006).
If managers can help prevent perceptions of inequality they can help prevent their employees from becoming de-motivated. Swinton (2006) developed a list of ways an employee can express motivation. This list is produced below.
Individuals are happier and experience less tension when they are equitably rewarded, as opposed to experiencing under-reward or over-reward (Austin & Walster, 1974). Equity Theory is based on the “norm of equity” which assumes that everyone is equally sensitive to equity and inequity (Huseman, et. al., 1987). This means that everyone experiences the same level of tension when they experience the same level of inequity; however this isn’t always true. Research has found that other norms may exist which are dependent upon factors such as age or personality (Huseman, et. al., 1987).
The Equity Sensitivity Construct describes a spectrum of varying sensitivities to equity and inequity (Huseman, et. al., 1987). The idea of equity sensitivity determines the extent to which an individual will tolerate inequity. Equity sensitives will experience distress when faced with either type of inequity: under-reward or over-reward. Benevolents will experience distress and possibly guilt when they are in a situation of over-reward. Because benevolents don’t necessarily seek out under-reward, they might not experience distress when in an equitable relationship. Entitleds experience distress when in an equitable or under-reward situation.
The Equity Sensitivity Construct is useful to understanding equity theory and individual behavior. However, the three categories of equity sensitivity do not account for all individual differences in preferences and behavior. Individuals might show different equity sensitivities in different contexts (Huseman, et. al., 1987). For example, an individual might be equity sensitive in their personal relationships, preferring an equitable balance or they might be an entitled at work and feel comfortable with over-reward.
In addition to preferring different outcome ratios, equity sensitivity groups also differ in their preference for types of outcomes (Miles, Hatfield, & Huseman, 1994). Specifically, there are differences in preference for extrinsic tangible outcomes versus intrinsic outcomes (Miles, et. al., 1994). A specific example of this is in the realm of pay: entitleds rate pay higher in importance than the other two equity sensitivity groups (Miles, et. al., 1994). Conversely, benevolents rate extrinsic outcomes lower in preference and show a stronger preference for intrinsic outcomes (Miles, et. al., 1994). It is possible that some of these differences can be attributed to other factors such as age. Younger workers and older workers value different things and the meaning of work varies by age (Smith, 2000). With this is mind, it is possible that age, or other external factors, might play a part in which equity sensitivity group an individual is likely to be in.
Where does Perceived Inequity Come From?
According to equity theory, perceived inequity comes from social comparisons (Adams, 1965). A person to whom we compare ourselves to is called the Comparison Other.
There are several factors that an employee can use in determining the "comparison other." The determination could be based on gender, length of service at their current position, job experience or education level. The comparisons are:
Self-inside – their experience versus someone else in their present company
Self-outside – their experience they had in another organization
Other-inside – another co-worker's experience inside their present company
Other-outside – an individual's experience in another organization
For example, a newly hired employee would choose "self-outside" since they would not have adequate experiences to compare in their current place of employment, whereas someone with a longer length of service would choose "self-inside".
Equity Theory states that people strive hard to achieve and maintain a state of equity or fairness in order to maintain internal, psychological balance (Adams, 1965). However, when ratios are different, a state of inequity exists, and employees will be motivated to bring it back into balance. With both types of inequity, under and overpayment, the amount of inequity a person feels is proportional to the size of the difference between this person's ratio and their comparison other.
Examples of Inequity
Underpayment Inequity: Negative Inequity
Sarah was hired at Corporation X to work in their Human Resources department after she graduated with a bachelor’s degree in Human Resources Management. As of current, Sarah has been with Corporation X for 3 years and is in line to move into a management position within the next six months. About three months ago, Corporation X hired another team member in the HR department to assist Sarah in her daily duties as they were getting too much for one person. The new team member, Alison graduated the same year as Sarah with a bachelor’s degree in Communications and doesn’t have any experience in HR relations. One day at lunch Alison reveals her salary to Sarah and tells her that she is surprised a company would pay her that salary with no experience in HR. Sarah realizes that she doesn’t make quite as much as Alison. She is immediately leaded to feeling under-compensated considering she does most of the work and Alison just helps. Sarah realizes that she needs to make Alison accountable for more projects so her inputs match her outputs.
Overpayment Inequity: Positive Inequity
Sarah was hired at Corporation X to work in their Human Resources department after she graduated with a bachelor’s degree in Human Resources Management. As of current, Sarah has been with Corporation X for 3 years and is in line to move into a management position within the next six months. About three months ago, Corporation X hired another team member in the HR department to assist Sarah in her daily duties as they were getting too much for one person. The new team member, Alison, graduated the same year as Sarah with a bachelor’s degree in Human Resources Management and until recently worked for another company in their HR department. One day at lunch Alison reveals her salary to Sarah and tells her that she is surprised a company would pay her that salary starting out in their HR department even though she has experience elsewhere. Sarah realizes that she makes a few more dollars than Alison. She is immediately lead to feeling overcompensated considering she does most of the same work Alison does and gets paid more. Sarah realizes that she needs to be accountable for a few more things than Alison so her inputs match her outputs.
Research on Equity Theory
In the four decades since John Stacey Adams pioneered the Equity Theory of motivation, an extensive amount of research has been conducted testing the validity of this theory. Equity Theory has been used to test several types of dyadic relationships like marriages, teacher/student and employee/employer relationships. The research has tested parts of the theory including the effects of over and under payment equity, equity sensitivity, and the behavioral and cognitive methods of reducing the dissonance caused by feelings of inequity. Within the work setting Equity Theory has been researched in several important areas. Outlined below, research related to determine the effects of perceived equities or inequities on the level of worker motivation or satisfaction will be discussed. Each of these research studies focused on key pieces of Equity Theory in practice: work output when inequities are present, sensitivity to equity or inequity, and work outputs as measured against one’s peers.
1967: Effects of Inequity on Work Output and Quality by Underpayment
A study published in 1967, Effects of Inequity Produced by Underpayment on Work Output, Work Quality, and Attitudes Towards the Work, by Lawler & O'Gara found that equity theory was indeed supported in that those who received less pay than their peers doing the same job (the comparative other) found ways to "increase their outcomes while decreasing their inputs" (p. 408). Lawler and O'Gara (1967) conducted their research via an experiment. Forty Yale University undergraduate students were hired to conduct interviews and were paid on a piece-rate basis. The lower paid group received $.05 per interview and the higher paid group, which was more in line with competitive wages during the time, was paid $.25 per interview. The workers were given two hours to complete as many interviews as possible.
The researchers hypothesized that the workers who were in the underpaid group would produce more survey results (in hopes of increasing their outcomes - making more money), but that the surveys they produced would be of a lower quality than the higher paid group. Further, Lawler and O'Gara (1967) believed that the underpaid group would be less satisfied with their scope of work. The level of equity or inequity and the level of job satisfaction that was felt by both groups were measured after the work assignment using The California Personality Inventory scores for Job Performance and Job Attitudes.
The study results proved that Equity Theory was applicable in the work environment. The underpaid group experienced feelings of inequity using the higher paid group members as their comparative others. Further, the hypothesis that the underpaid worker would produce more work output via conducting more interviews was indeed correct. Lawler and O'Gara (1967) determined that this group was increasing their personal outcomes to earn more money by working harder to make up for the piece-rate inequity. Additionally, the researchers proved their position that the work of the underpaid group would be of poorer quality than the group who experienced fewer feelings of inequity (the higher paid group). The interview results of the lower paid group had fewer recorded results; thus, their inputs were also reduced in response to perceived inequities. The lower paid group was found to have perceived the work as "relatively unimportant, simple and unchallenging" (Lawler & O'Gara, 1967, p. 408) as opposed to the more equitably compensated group.
1988: Equity and Workplace Status: A Field Experiment
Greenberg (1988) stated that, "according to equity theory, workers who receive levels of reward higher or lower than coworkers who made equivalent contributions to their jobs are considered overpaid and underpaid respectively" (p. 606). Since research on equity theory had previously studied pay, Greenberg (1988) wanted to study workplace status as an outcome of equity theory. The purpose of this study was to assess whether equity theory applied to situations where employees experienced inconsistencies between their job status and work area (Redmond, 2010). Greenberg (1988) found a company that was refurbishing their offices and was able to manipulate variables. The sample group was 198 employees from an insurance company with the independent variable being office conditions of higher, lower, or equal status. The dependent variables were the job performance and satisfaction of the employees. The data was collected at six intervals, two before reassignment, two during, and two after (Redmond, 2010).
Greenberg (1988) hypothesized that employees assigned to offices of higher status would be more productive than those assigned to offices of equal status employees. Similarly, workers transferred to offices of lower status were expected to be less productive than those placed in offices of equal-status workers (Redmond, 2010). Greenberg was correct in his hypothesis and now had results showing that money was not the only driving factor for equity theory.
Critics of this study point out that this was a short-term study that shows no long-term results.
1990: Employee Theft as a Reaction to Underpayment Inequity: The Hidden Cost of Pay Cuts
In this study, Greenberg (1990) looked at employee theft as a reaction to inequity. A manufacturing company had lost two large contracts which forced the company to temporarily reduce pay of their employees in Plants A and B while employees in Plant C did not have to reduce pay. Plant A workers received a 90 minute meeting to explain these pay cuts while workers of Plant B received only a 15 minute meeting. Greenberg (1990) hypothesized that Plant B would experience a large increase in employee theft, Plant A would experience a slight increase, while Plant C's theft rate would stay the same. Two categories of dependent measures were used, data on employee theft and self-report measures were reported as well (Greenberg, 1990).
Once again, his theories were correct. Plant B experienced a large increase in theft while Plant A experienced a smaller increase. Plant C's employee theft remained the same (Greenberg, 1990).
1992: Product quality and pay equity between lower-level employees and top management: An investigation of distributive justice theory.
Cowherd and Levine (1992) used a sample 102 business units in 41 corporations to examine whether the size of the pay differential between lower-level employees and top management had any impact on product quality. Cowherd and Levine suggest that individuals often compare their pay to that of people higher in the organization structure. If lower-level employees feel inequitably treated, they may seek to reduce their effort to achieve equity. Quality, in their study, was defined as customer perceptions of the quality of goods and services. They hypothesized that extrarole, or citizenship behaviors, such as freely offering to help others, following the spirit rather than letter of rules, and correcting errors that would ordinarily escape notice, would be less likely when pay differentials between hourly and top managerial employees were large. Their results supported this hypothesis, suggesting that organizations need to take care that they do not forget the potential adverse motivational consequences of executive pay for the motivation of other employees.
1993: The Equity Sensitive Construct
Gauging the level of tolerance for inequities is an important field of study in Equity Theory. From an employer's perspective, it may often be necessary to know which employees will be sensitive to any level of inequities derived from work policies or practices. In the study, A Test and Refinement of the Equity Sensitivity Construct, researchers hoped to test, both in an experimental and field setting, a "refinement of the equity sensitivity construct" (King, Miles & Day, 1993, p.301). The proposition of the study was that some individuals are uniquely sensitive to perceptions of equity or inequity and will, in turn, react accordingly based upon their perceptions. The equity sensitive construct, according to the researchers, is defined 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" (King, et. al., 1993, p.302).
The study classifies people as either "benevolents, equity sensitives, or entitleds" (King, et al., 1993, p. 302), depending on how sensitive they are to the equity rating. Equity sensitives will follow Adam's model of the Equity Theory, but the benevolents and entitleds will be at opposite ends of the "equity sensitive spectrum" (King, et. al., 1993, p.302). Thirteen separate hypotheses were evaluated in this research study.
The researchers first administered tests to the participants to determine their level of equity sensitivity. The participants were then assigned randomly to either under reward or over reward conditions. The results showed that all of the researchers' hypotheses were consistent with the equity sensitivity construct. The researchers did find that the "manipulations of outcomes was a stronger cause of dissatisfaction than was manipulation of inputs" (King, et. al., 1993, p. 310), essentially indicating that the participants were more sensitive to inequities when they didn't feel they were rewarded as much as their peers. The researchers confirmed that there is "strong support for the equity sensitivity construct and its incorporation into equity theory to enhance its predictive power" (King, et. al., 1993, p. 310). The results of this research further help make Equity Theory germane to the workplace, allowing employers to make initial assumptions about how employees may react to potential or perceived inequities, based upon their employees' beliefs and personal norms.
2000: Effort-Reward Imbalance and Burnout Among Nurses
"Burnout is defined as a psychological syndrome of emotional exhaustion, depersonalization, and reduced personal accomplishment that occurs among individuals who work with other people" (Bakker, Killmer, Johannes & Schaufeli, 2000). Nurses work in a field where much of their motivation and reward comes from the act and feelings they get from helping others in very desperate times. They also are considered to work in one of the most stressful job fields/environments due to the constant requirement to manage and help people in a stressful time in their lives. In the context of Equity Theory, the desire for reciprocity between their interpersonal relationships is challenged here, and as a response to the feeling of inequity nurses often respond to their patients in a more depersonalized manner (Bakker, Killmer, Johannes & Schaufeli, 2000).
A study performed based on the effort-reward imbalance model, which is based on the reciprocity of costs and gains, demonstrated that the feeling of inequity or lack of equal reciprocity had a positive correlation with burnout, particularly with emotional exhaustion and depersonalization (Bakker, Killmer, Johannes & Schaufeli, 2000). In addition, the nurses who had a higher need for control over situations experienced a higher degree of this burnout, whereas the nurses who had a higher degree of intrinsic motivation experienced lower burnout or emotional distress. Practical implications of this study could be used to restructure how workloads are distributed. Additionally, redesigning training programs/ to help nurses better prepare in l handling increased job related stress and burnout.
2005: Wage Comparisons with Similar and Dissimilar Others
Wage satisfaction and social comparison relationships has been the subject of several research studies over the past 30 years. Paul D Sweeney and Dean B. McFarlin of University of Dayton conducted a study, Wage Comparisons with Similar and Dissimilar Others (2005), in order to determine if social comparisons can predict an employee’s satisfaction with their wage. Sweeney and McFarlin hypothesized based on the Equity Theory that as employees compared their wages to similar others; their wage satisfaction would vary based on that social comparison. (Sweeney & McFarlin, 2005)
Four individual survey-based studies were conducted to test the hypothesis that wage satisfaction would more likely be affected by comparison to similar others in order to determine if their wage was fair. In the first two studies, subjects were asked to compare satisfaction with others in a similar occupation within and outside of their current organization. In the third and fourth studies wage satisfaction was compared with employees who had similar and dissimilar occupations.
Two hundred and thirty-five engineers at a Midwest utility company were mailed surveys to collect salary, age, sex, marital status, tenure, and job grade. The survey also collected data from scale rated questions pertaining to satisfaction of their pay and their perception of how others are paid with similar jobs outside the organization. The researchers found that wage is a strong predictor of wage satisfaction but comparisons to similar as well as dissimilar others also was an important and equal predictor (Sweeney & McFarlin, 2005).
During this study researchers attempted to replicate their findings from study 1 by using a large sample of US federal government workers from the Office of Personnel Management. The data was collected from a random stratified sample of workers where demographic information and scaled rated questionnaire responses were submitted by participants. (Sweeney & McFarlin, 2005) Upon statistical analysis of the data, the researchers once again found that wage itself was the most reliable predictor of wage satisfaction but both internal and external comparisons were also highly important predictors of the variation in wage satisfaction. (Sweeney & McFarlin, 2005)
During this study the construct of similarity was viewed based on similar and dissimilar occupations. The data for this study came from “Economic incentives, values, and subjective well being research project of the Survey Research Center of the Institute of Social Research, the University of Michigan (1975)”. The survey-based data were collected using a multistage area probability sampling procedure where each data point came from someone who was at least 18 years old and employed. Like the first two studies the questions were scale based and represented perceptions about their wage and their relative satisfaction. As in the first two studies, the highest predictor of wage satisfaction was based on the income level itself and comparisons with both similar and dissimilar occupations predicted variability in wage satisfaction. (Sweeney & McFarlin, 2005)
This study was researched in order to replicate the results of Study 3 and pulled data from the same University of Michigan research project while using an entirely different sample using the same 18 and older and employed criteria. The results and conclusions were the same as Study 3.
The results of all of the studies were surprising to the researchers. The most important predictor of wage satisfaction was the level of income and although comparisons to similar others did show a strong correlation, so did comparisons to dissimilar others. Defining the similarity construct as an occupation or organizational comparison did not change the strength of income being the strongest predictor of satisfaction. According to Adams Equity Theory (n.d.), employees would have detected a discrepancy of their efforts and wage ratios with similar others which would lead to dissatisfaction. Also, Adam’s theory would explain that our social comparison of the most similar others would have the greatest impact but in the case of wages there seems to be the other primary factor of income level and what that means to an employee that determines level of satisfaction.
2006: Work Motivation on an Assembly Line
During 2006, another research study applying Equity Theory in the workplace was conducted by professors from Cornell's School of Management, Eastern Michigan University's College of Business, and Penn State University's Department of Industrial and Manufacturing Engineering. The cross-functional research offered a unique perspective toward best practices in "modeling and understanding [assembly] line design" (Schultz, Schoenherr & Nembhard, 2006) in the work entitled, Equity Theory Effects on Worker Motivation and Speed on an Assembly Line. The study was completed on the basis that equity theory indicates that workers react to and modify their work behavior based upon the speed or rate of the work of the people around them. The hypothesis under evaluation was: "In additive interdependent work situations, workers will adjust their speed toward the speed of their coworkers, creating a correlation among processing times" (Schultz, et. al., 2006, p.9).
Data was examined for three production lines of a major automobile manufacturer. One hundred forty-eight workers' task times for a period of six months' work was recorded and reviewed. The results found that, on average, a person will adjust his or her "time by 41% of how much faster, or slower, their nominal time is in relation to the coworkers" (Schultz, et. al., 2006, p. 15). The researchers believed that the positive correlations found between the speed of a worker and the speed of his or her coworker were consistent with Equity Theory, as workers desired to decrease gaps between their work pace (inputs) and the work pace of their co-workers. The study results were purported as important in design of assembly lines such that workstations should be arranged as to take advantage of this equity theory effect by allowing workers only to be able to see the employees who are the fastest in the plant.
Both classical and contemporary research supports the validity of Equity Theory and its application in the work setting. While Equity Theory is supported as fact when reviewing the actions and behaviors of those who feel they are subject to inequities, additional research into how Equity Theory can be used proactively to increase the motivation and behavior of workers is necessary.
2009: Dishonesty in the Name of Equity
In 2009, Gino and Pierce conducted a research study in order to determine when it is that people act dishonestly to either help or hurt others. They had two experiments. The first was to analyze the effects of emotional reactions to inequity. The second was to analyze how far individuals would go to help one another.
The participants in this study were mostly students from Carnegie Mellon University. They were divided into groups and either did or did not receive money. They then had to grade problems completed by the individual with whom they were paired. If the solver got the problem right, he would get money. They tried to determine if individuals would be dishonest in reporting whether or not the solver actually completed the problem correctly. They found that individuals did help when there is equity (having money or not). They also found that having negative inequity causes them to have a much stronger influence on reporting the performance of the solvers (Gino & Pierce, 2009).
This study found that individuals are more likely to engage in dishonest behavior when they have inequity of wealth (Gino & Pierce, 2009). The implications of this study suggest that managers should try to keep equity between employees, because when inequity occurs, dishonesty will also occur.
2013: The mediating effect of supervisor conflict on procedural injustice–job strain relations: The function of power distance.
Recently, researchers Liu, Yang and Nauta (2013) conducted a study that broadens most research on the relationships between supervisor conflict, procedural injustice and job strain. Their study presents a more complex model of how perceived injustice influences employees' job strains than is currently available in the literature. According to the process model of conflict, (Liu et. al., 2013) conflict typically starts when one person perceives that another has negatively affected, or is about to negatively affect, something the first person cares about. This is often seen in the workplace and is common in the relationships held between a supervisor and an employee. The result is a strain in the equity shared between the two. Based on previous research on the Equity Theory, when employees perceive a lack of fairness at work, they react negatively toward the source of unfairness. Thus, because employees usually attribute procedural injustice to supervisors, Liu, Yang and Nauta's (2013) first goal was to investigate procedural injustice as a possible predictor of supervisor conflict, not just a cause.
Procedural injustice, as portrayed in this study, refers to perceived unfairness with respect to the procedures used to determine outcome distributions (Liu et. al., 2013). . To further examine procedural injustice as a predictor of conflict in a work setting, 301 university employees were randomly selected and mailed survey packets including an extra survey they were to give to a co-worker to fill out. The questions on these packets centered around supervisor conflict, procedural injustice, power distance, anxiety and depression. Once these surveys were mailed back, the data were analyzed. In the results of this study, it was found that procedural injustice could in fact be identified as a possible predictor for supervisor conflict. Based on employee–coworker dyad data, Liu and her colleagues (2013) found that perceived procedural injustice was positively related to reported conflict with supervisors. Second, power distance moderated procedural injustice in relation to supervisor conflict, as reported by both employees and their coworkers. Finally, supervisor conflict (self-reported) mediated the relations between procedural injustice and job strains (i.e., anxiety and depression) for employees with low to moderate power distance orientations but not for employees with high power distance orientation (Liu et. al, 2013).
This study adds literature to current research relative to problems in a work setting. Relationships held between supervisors and employees must have equity in order to succeed and maintain perceived justice. This study opens up many opportunities to conduct further research on conflict in the workplace, as well as ways interventions can be implemented in a work setting guided by the Equity Theory.
The Future of Equity Research
Most of the research into Equity Theory thus far has been experimental in nature and concerned with interpersonal relationships. While this is important, especially to social psychologists, new insights can be gained by looking on a larger level. By looking at Equity Theory on a broader scale, a more complete theory can evolve. Instead of focusing on just person to person and person to organization aspects, the opportunity exists to refocus on a larger scale such as how companies as a whole function in a corporate world. The people who run the companies and make the decisions run their numbers against how their competitors are doing. Their competitors can serve as comparison others. How does the company as a whole deal with their comparison other? To resolve what is essentially an underpayment inequity, if the company is not doing well, the same rules can apply and the company can work harder and look internally to see how they can resolve the inequity. Another avenue for future research would be a cultural analysis. Equity Theory has been said to be primarily rooted in Western values, however Equity Theory is suggested to be culturally bound (Kilbourne & Kelly, 1994). The opportunity is there to see what cultures are more compatible with equity theory and which, like Eastern cultures, stress equality instead. Finding out what cultures are compatible with the theory and which are not could give us insight into better ways for us to operate and why what these cultures emphasize instead works for them.
Staff members that work with the disabled are often plagued with feelings of being under-benefited (Disley, 2009). Future research calls for an investigation into the equity perceptions of the staff to determine the relevant rewards and inputs, as well as who their comparison others are. Is the staff aware of the impact their perceptions have on their peace of mind as well as how they perform at work? How much does the inequity they feel at work impact how they perform at work and does it affect the disabled that they are there to help? We can all agree that slacking off due to underpayment inequity becomes more serious when your job involves another person who is dependent on you.
Strengths and Weaknesses of Equity Theory
Equity Theory is a good resource for organizations to consider when it comes to understanding social comparison amongst employees. However, as with any theory, there are strengths and weaknesses in terms of both practice and research. Thus, in order to understand the use and applicableness of the Equity Theory as an explanation and/or as a motivator in the workplace it is vital that these strengths and weaknesses be reviewed and evaluated.
The following factors add to the strength and validity of Equity Theory.
Efficiency, effectiveness, and applicableness of theory components supported by several research studies over the years
1. 1967- Effects of Inequity Produced by Underpayment on Work Output, Work Quality, and Attitudes Towards the Work, by Lawler & O'Gara
2. 1993- A Test of Refinement of the Equity Sensitivity Construct
3. 2006- Equity Theory Effects on Worker Motivation and Speed on the Assembly Line
4. The effects of underpayment inequity in organizations are strongly supported (Pinder, 2008)
Accurately predicts behavior
For example: As in underpayment conditions, which is observed and proven through the research of the Greenburg Studies in 1990
Makes practical sense
For example: Reasonable to assume that most people do compare "their inputs and outcomes relative to others" (Redmond, 2009)
Ability to fit with other theories (particularly the expectancy theory)
Stetcher and Rosse (2007) state that "based on the assumption that people are capable of calculating costs and benefits in choosing among alternative courses of action" (p. 778). For example, employees can use the equity theory to determine if inequity has occurred, and if so, they can use the expectancy theory to act upon the inequity.
The following factors illustrate some of the problems with Equity Theory.
Lacks detail into certain factors
For example: Offers a variety of strategies for restoring equity but does not predict in detail which option an individual will select (Redmond, 2009)
Mixed empirical support
For example: Research on overpayment inequity reveals little effect of it in organizations (Redmond, 2009)
For example: Because many studies were short-term there is no knowledge of long-term reactions to inequity (Redmond, 2009)
Little practical value, thus better as an explanation after the fact than as a predictor of behavior (Redmond, 2009)
For example: Various factors, which are not under administrations, managers, and/or organizations control can lead to inequity (Redmond, 2009)
For example: Human perception can be flawed, thus exposing any conceived perception of outcomes and inputs to error as well
The original equity theory, as posed by Adam's, lacks scientific consideration or explanation for different values or lack thereof of equity itself within cultures
For example: Research conducted on the equity theory as it pertains to the Eastern cultures found that equality, rather than equity, was preferred (Leung and Bond, 1982, 1984; Leung and Park, 1986; Mahler, Greenberg, and Hayashi, 1981, as cited in Fadil et al, 2005)
As illustrated above, the Equity Theory possesses both strengths and weakness, the examination of which is necessary for the correct use of the theory’s application in the workplace. Equity Theory, with its strong empirical support, can be used in the workplace as a vital tool in reviewing motivation and understanding employee behaviors. Furthermore, the weaknesses of the theory shed crucial light upon what it is that needs further research and examination, thus providing us with the knowledge of the information we ought to seek in order to further understand the structure of workplace motivation.
Procedural and Distributive Justice
In terms of handling the distribution of rewards, employers should be attuned to distributive and procedural justice. Distributive justice involves ensuring that outcomes are fairly distributed in the organization (Stecher and Rosse, 2007). A low level of distributive justice is associated with increased amounts of organizational counterproductive work behaviors (Kwak, 2006). Procedural justice deals with whether or not the process used to allocate the rewards is fair (Redmond, 2009). Low levels of procedural justice correlate with increased organizational and interpersonal counterproductive work behaviors (Kwak, 2006). Increased levels of distributive or procedural justice can help prevent perceptions of inequity as well as any counterproductive work behaviors.
While the meaning of procedural justice will vary from organization to organization, there are several common themes that will help to establish a just process. Ensuring that employees understand the decision-making process, giving employees a voice in the process, making unbiased decisions, and being consistent in the application of rules all lend to a procedurally just process. “People feel affirmed if the procedures that are adopted treat them with respect and dignity, making it easier to accept outcomes they do not like” (Deutsch, 2000, p.45). High levels of procedural and distributive justice won’t necessarily prevent employees from having a perception of inequity or unfairness in the workplace; but can help an employer prevent repercussions from perceptions of inequity. For example, Skarlicki and Folger (1997) found that employees that are treated with respect are more likely to tolerate unfair pay. Whether the pay or compensation is actually unfair might be irrelevant. To the employee a perception of unfair compensation is the same as actual unfair compensation. So, if an employee has a perception of inequity in their compensation, they might be more willing to tolerate their perception of unfair pay if they are treated with respect by their employer. Then they will be less likely to decrease their inputs or engage in counterproductive work behaviors to compensate for a perception of underpayment inequity. In addition to establishing fair distribution and procedures in an organization, employers should always treat their employees with respect. This can help maintain or increase motivation and prevent problems that stem from perceptions of under reward.
Fairness Heuristic Theory in Equity Theory
While distributive justice is an important aspect of equity theory, there is often very little information regarding the actual distribution of outcomes. However, fairness in procedures is often quite visible and is generally widely known. A distinct relationship exists between distributive justice and procedural justice. This relationship is explained in Kees van den Bos’ Fairness Heuristic Theory which states, “ When people do not have information about outcomes of others they indeed use procedural fairness as a heuristic substitute to assess how to react to their outcome,” (Van den Bos, 2001, pp 68). In other words, when employees are not able to see whether or not resources are distributed fairly, they instead examine the procedures to determine the fairness of an outcome. The Fairness Heuristic Theory also explains that in, “…situations –in which information about the authority’s trustworthiness is missing- people refer to the fairness of the authority’s procedures to decide how to react to the outcome,” (Van den Bos, 2001, pp 73). The most important aspect of equity theory is how an individual perceives the fairness of the outcomes in relation to input; the Fairness Heuristic Theory explains the profound effect that procedural justice has on individual perception of fairness.
Global Application of Equity Theory
While there have been various attempts at breaking down the cultural barriers that have developed within organizations across the globe, one factor that continues to need research is how cultural differences influence the equity theory (Fadil, Williams, Limpaphayom, and Smatt, 2005). Although the equity theory, as posed by Adams, has been recognized by many to be on target, it was not until the 1980s that it was tested on non-Western cultures. Once research was conducted on the equity theory and how it pertains to the Eastern culture, results found that equality rather than equity was preferred (Leung and Bond, 1982, 1984; Leung and Park, 1986; Mahler, Greenberg and Hayashi, 1981 as cited in Fadil et al, 2005).
The Eastern cultural view of the equality rule states that rewards will be given out equally to all those involved in the group’s performance regardless of individual inputs or personal efforts (Fadil, et. al., 2005). Based on this information it was thought that a more detailed look at how “equality” fits into the equity theory model would be very beneficial. This would enable international managers and global organizations to have a clearer understanding of how the equity theory can be applied across Western and Eastern cultures as well as regions throughout the world (Fadil, et. al., 2005).
Equity vs. Equality
Under the equality model rewards are equally given out to all participants despite individual inputs. Therefore, the outcome is preset. This is opposite of the equity theory which states that individual outcomes or rewards will be in proportion to individual inputs and efforts (Fadil, et. al., 2005). Researchers found that individuals may be inclined to have varying views on the concepts and orientation of equity based on their socio-historical period, cultural background, and even individual personality types (Sampson, 1980 as cited in Fadil, et. al., 2005).
Individualism vs. Collectivism
Individualism (Western) and Collectivism (Eastern) are cultural dimensions that separate the regions of the world, with the major difference being their cultural view on group membership. Collectivistic cultures make a clear distinction between their in-groups and out-groups compared to those in the individualistic cultures. (Hui, Triandis, and Yee, 1991 as cited in Fadil et al, 2005).
The Culturally-Sensitive Equity Model
Choice of a
Effort, education, intelligence, experience
Pay, autonomy, job status, fringe benefits
Range of individuals due to loosely tied in-groups
Altering inputs or outcomes of the individual or the comparison other
Group membership, loyalty, support, respect
Harmony, acceptance, social status, solidarity, cohesion
May choose out-groups as a group referent, not an individual
May alter inputs of self; however, due to shame control they are unlikely to occur
The Culturally-Sensitive Equity Model serves to show how the equity theory not only applies to the Western culture, but also Eastern, collectivistic cultures (Fadil, et al., 2005). The model also encompasses the more collectivist cultural notion of equality. Lastly this model illustrates how the inputs and outcomes components of the equity theory can include group-based rewards as well as the importance of in-groups and out-groups via group membership. The Culturally-Sensitive Equity Model can be used as a tool for international managers who either have employees, customers, or suppliers in both the Western and Eastern regions of the world. Through the use of this model, these managers can gain a global understanding and have a true appreciation for the various inputs and outcomes that motivate their employees based on orientation and cultural perspectives.
When looking at how the notion of equality fits into the equity theory it is important for organizations to understand that in some cultures this idea is favored. managers may be more prepared to handle conflict or issues that arise within their own organizational culture. Conflict between co-workers could arise if some employees believe in equality, while others follow the equity theory, expecting their individual contributions to be individually rewarded.
The Culturally-Sensitive equity model can be used as a tool for international managers who either have employees, customers, or suppliers in both the Western and Eastern regions of the world. Through the use of this model, these managers can gain a global understanding and have a true appreciation for the various inputs and outcomes that motivate their employees based on orientation and cultural perspectives (Fadil et al., 2005).
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