Equity theory focuses on the concept of how hard a person is willing to work is dependent on their perception of what is fair or just when compared to others (Redmond, 2010). In the early sixties, John Stacey Adams proposed that employee motivation is impacted by whether or not the employee believes that their employment benefit/rewards (output/outcomes) are at least equal to the amount of the effort they put into their work (input). If an employee believes their outputs are not equivalent to or greater than their input, then the employee will become de-motivated. Employees will often compare their inputs and outputs to a peer within the organization when assessing whether or not the outputs that they receive are fair (www.learnmanagement2). When a person perceives his/her input/outcome ratio to be unequal with a comparison other, inequity results. Cognitive and or behavioral methods may be employed to reduce the perceived inequity (Redmond, 2010).
There are two forms of inequity which are underpayment and overpayment inequity. Our discussion this week will focus on the most common inequity, which is underpayment inequity, also known as negative inequity (Redmond, 2010). Underpayment inequity does not only exist in a work environment, it can exist in other situations. Two case studies have been constructed in order to demonstrate the different environments where underpayment inequity can present itself, and how the inequity can be rectified.
The first case is set in a college atmosphere which deals with two roommates taking a class where one (Danielle) finds a handy “shortcut” to an A. This in turn leads to inequity felt between the student with the advantage and the student working for an A the old fashioned way (Jaime).
The second case focuses on a business, and compares the input of Jane and a few leaders at the same level as her. All were leaders in the store, but Jane has been identified as having a lot of growth potential. Jane begins seeing a lot of issues with incomplete work and when it begins to impact her work center, she feels obligated to do something about it.
Details of Cases
Details of School Case
Moving to college and living in the dorms is quite an experience. New relationships both form and end quick. Students find friends and foes. Everyone moves in hoping to get along with their roommate and form a great friendship to last all four years of college and beyond. Jaime and Danielle were assigned to room together in an all freshman girls dorm. At first, they were the best of friends; doing everything together from walking to class, eating in the dining commons and watching movies late into the night. The girls even enrolled in an online arts class together called "The History of Rock and Roll." The first couple of weeks were perfect and conflict free but then things changed. Danielle joined a sorority and left Jaime behind. As the weeks went by, the two girls spent less and less time together and their friendship faltered. The two quickly found out that the online arts class was more than a simple elective; it was in turn quite demanding and required them to spend a lot of time reading chapters, writing responses and taking quizzes. One day at a meeting with her sorority, Danielle complained to the other girls about the class. One girl informed her that the sorority had all of the quiz answers and past writing responses. Another girl informed Danielle that the teacher posted the same exact writing assignments and quizzes year after year and she could easily get an A in the class with little to no work but she could not share the information with anyone. From that day on, Danielle got a 100% on every assignment in the online class with zero effort while Jaime struggled for hours reading the chapters, thinking of creative responses to the writing assignments and taking the quizzes. Jaime put a lot of time and effort into achieving a good grade in the class while her roommate did not. After several weeks, Jaime got upset over Danielle's lack of work and perfect grades. Jaime confronted Danielle and asked how she was able to get perfect scores on both the quizzes and the writing assignments week after week without reading the chapters or spending any time reviewing the material needed to understand the lessons. Danielle let Jaime in on the secret that her sorority had given her access to all assignments and then explained that unfortunately she was unable to share the information with anyone. Jaime was not upset that Danielle refused to share the information she needed to pass the class with perfect scores but rather that Danielle thought it was fair for her to spend no effort studying the material while Jaime had to spend hours reviewing the material to do well in the class. Jaime explained this thought to Danielle. Danielle then realized how unfair it was to cheat her way through the class while Jaime had to struggle. Because Jaime brought this inequity to Danielle's attention, Danielle gave the answers back to her sorority and began to read the chapters and complete her own writing assignments and quizzes. She began to struggle just like Jaime to achieve a good grade in the class. Jaime was happy that Danielle chose to return the answers and complete the class doing the same amount of work as the other students had to do. Jaime was also more motivated to read the chapters and complete the assignments knowing Danielle was doing the same thing and their workload was equal.
Details of Business Case
Jane is a supervisor at Venture, a local store. She has been with the company for 6 years and had to work her way up the ladder starting as a cashier at age 16, her first job. Jane has been moved from position to position and is now the most knowledgeable and respected supervisor in the store. Her managers have recognized her potential and performance by offering her feedback in order to be promoted to the next level. Jane is excited and begins working very hard, skipping breaks, and taking on more responsibilities. She begins to notice her peers and managers sitting in the office a lot and not completing their work. At first, she brushes it off and keeps working hard, but soon she feels overwhelmed and upset she is working so many hours and the others are relaxing in the office. Jane is conflicted and does not know how to approach the situation so she tells her supervisor. Her supervisor tells her not to worry and it will be taken care of. A week later, Jane sees her supervisor in the office with the others for over a half hour. Her coworkers’ failure to complete their tasks begins to interfere with her job. She begins having to do more than just her job to complete her work. Jane then begins to hear complaints from her subordinates about the group of managers always being in the office. They poke fun of the management staff, which includes her, and she feels forced to take action.
Jane complains to another supervisor who asks her if he can go to the Human Resources Manager about the issue. Jane is apprehensive because she doesn’t want to cause problems, but eventually agrees. The Human Resources Manager acknowledges the issue and speaks with each leader about their failure to complete their work due to spending too much time in the office. Each leader is defensive and complains about Jane, saying she is just jealous she is not involved in their group. The leaders are then verbally warned and told to complete their work in the future and spend only breaks, lunches, and other authorized time in the office. The Human Resources Manager then reaches out to Jane and tells her the issue has been solved. After a few months, Jane notices the group completing more work, and is satisfied with how she handled the situation.
Resolving the Issue through Equity Theory/Analysis of School Case
The equity theory applies to this case on several levels. First, Jaime feels as if her input is greater than Danielle's, but Danielle is receiving greater outcomes than she. Jaime is using Danielle as her comparison other and because her social comparison reveals unequal input/outcome ratios, she is experiencing the effects of underpayment inequity; a negative inequity. She feels as if she is being cheated in comparison to Danielle because Danielle is not putting as much input in as she is to achieve the same output; which is a good grade in the class. Recall that there are both behavioral and cognitive options to reduce perceived inequity (Redmond, 2010). When faced with her issue, Jaime chose a behavioral way of solving the inequality which was to try to change Danielle's behavior by explaining the inequity to her personally (See below as to what strategy an individual will use to reduce perceived inequity). Jaime persuaded Danielle to change her inputs to match that of her own and other students in the class. Because Jaime was able to get Danielle to change her inputs, the input/output ratio between Jaime and Danielle was now equal and the inequity was eliminated. She felt better about completing the amount of work necessary to attain a good grade in the class because Danielle also had to complete the work instead of cheating. A sense of fairness was instilled.
Resolving the Issue through Equity Theory/Analysis of Business Case
The equity theory applies to this case on many levels. First, Jane feels as if her input is greater than her peers, but their outcomes are greater. This comparison between Jane and her peers is called the comparison other. Jane is comparing her input and output with her colleagues at work and is experiencing the effects of underpayment inequity. She feels as if she is being under paid for her input in comparison to her peers because they are not contributing as much input as she is. There are behavioral and cognitive ways to reduce perceived inequity listed in Redmond’s (2010) Lesson 5 commentary. Behaviorally, they can “change their inputs, change their outputs, persuade the comparison other to change their input, or withdrawal,” (p. 7). Cognitively, one can “distort their views of their own input, distort their views of the comparison other’s input, or change the comparison other,” (p. 8). Stecher and Rosse (2007) point out that Equity theory does not predict which option an individual will use to reduce inequity, but rather that they will choose an option that has the most utility in the given situation. This is an area where equity theory relates to expectancy theory as it involves cognitive evaluations and choices (Stecher & Rosse, 2007). When faced with her issue, Jane selected a behavioral way of solving the inequality which was to try to change the behavior of her peers by complaining to her supervisors. The supervisors then took action to bring the input level of Jane's peers up to the level of her own, thus evening the input/outcome ratios and reducing the inequity. If Jane’s supervisors had failed to solve the problem, Jane would have gone through other steps of reducing the inequity, but eventually, employees who cannot resolve the issue look to the last option of withdrawal, either permanently or through other means such as “absenteeism, tardiness, long breaks, or minimal participation,” (p. 7).
Mary Stecher and Joseph Rosse relate the equity theory to the expectancy theory discussed in Lesson 4 in their article Understanding reactions to workplace injustice through process theories of motivation: A teaching module and simulation (2007) by saying “at the conceptual level, comparisons between equity ratios among individuals within an exchange are likely to contribute information concerning the probability, or expectancy, that certain outcomes will result from certain contributions in future exchange,” (p. 2). In application to the business case study, this means Jane’s outcomes can be predicted based on her perception of equity. Jane would be more willing to increase her input if she believed her output would also increase. She would also be more willing to increase her input if her comparison other was to increase their input to a level that matched hers. These changes in input and output would also have to balance Jane’s feeling of inequity in order to achieve certain outcomes. Jane’s instrumentality level would be low if she had a perception of inequity because she could lessen her input level as a means to balance the inequity.
Luckily, Jane's problem was resolved relatively quickly and without issue. If perceived underpayment inequity is not reduced employees may resort to drastic behavioral measures such as stealing from the company in order to boost their outcome level. Pay cuts have been shown to cause an increase in theft rates from the company, especially if the pay cuts are not adequately explained to the employees, fostering a sense of procedural justice (Greenberg, 1990). Employees may also attempt to restore equity in an underpayment situation by filing a grievance, asking for a raise, lowering their quality of work, or wasting time.
We did not cover an overpayment inequity case study since it is less common. We wanted to demonstrate two environments where an underpayment inequity may occur. However, it is still important to have an understanding of overpayment inequity. Overpayment inequity is also known as positive inequity, and occurs when the ratio of one's own inputs and outcomes is lower than or more favorable than the ratio of a comparison other (Redmond, 2010). In the situation of the school case, overpayment inequity would have been experienced by Danielle, and her comparison other would have been Jaime. Danielle's ratio would have most likely been around 10/100. Her input would have been 10, but outcomes would have been 100, while Jaime's would have been 80/50. Danielle would have resolved the overpayment inequity by working harder and ignoring the aid she was given. Restoring equity for overpayment is not only achieved by working harder, but also by improving quality of work or working longer hours. In some situations an employee may lower their outcomes, such as working during vacation, not utilizing certain benefits or donating perceived overpayments to charity.
As shown above, equity theory is most useful when considering social relationships in the workplace or the school environment. The social comparisons mentioned above gave way to perceived inequity due to the person's input/outcome ratio not matching their comparison other's ratio. Both subjects used behavioral methods to resolve the underpayment inequity and both were successful and did not have to resort to drastic measures such as quitting or theft. Equity theory concerns distributive justice; the fairness of the distribution of outcomes and rewards in an organization. However, increasing importance has been placed on procedural justice dictating equity and motivation in the workplace. In their meta-analysis, Cohen-Charash and Spector (2001) found that "job performance and counterproductive work behaviors, considered to be outcomes of perceived justice, were mainly related to procedural justice" (Cohen-Charash & Spector, 2001). It makes sense that people want to have confidence in their company or organization that they are operated and run with fairness to the employees. Sweeney and McFarlin (1997) found that procedural is especially important to women while distributive justice is more important to men. This is an interesting point concerning that both of our individuals above were female. In the business case, Jane might not only have felt a lack of distributive justice in that her fellow supervisors were getting unfair rewards, but also a lack of procedural justice that her company could just let this happen without consequence. This could have led her to seek out a solution. In the school case, Jaimie could have perceived a lack of procedural justice in the university based off the fact that copies of course answers were so easily available to her comparison other, Danielle. Both types of justice, distributive and procedural, should be considered when thinking about equity theory.
Cohen-Charash, Y., & Spector, P. E. (2001). The role of justice in organizations: A meta-analysis. Organizational Behavior and Human Decision Processes, 86, 278-321.
Greenberg, Jerald. (1990). Employee theft as a reaction to underpayment inequity: The hidden cost of pay cuts. Journal of Applied Psychology, 75.5
Redmond, B.F. (2010). Lesson 5: Equity theory: Is what I get for my work fair compared to others?. Work Attitudes and Motivation. The Pennsylvania State University World Campus.
Stecher, M.D., & Rosse, J.G. (2007). Understanding reactions to workplace injustice through process theories of Motivation: A teaching module and simulation. Journal of Management Education, 31, 777-796.
SWEENEY, P. D. and McFARLIN, D. B. (1997), Process and outcome: gender differences in the assessment of justice. Journal of Organizational Behavior, 18: 83--98. doi: 10.1002/(SICI)1099-1379(199701)18:1<83::AID-JOB779>3.0.CO;2-3