Equity theory

Lecturer: Wendelin Kuepers

Group members:
1. Mai Thu Ha (12032382)
2. Zhengyan ZUO (05017882)
3. Haoxiang Wu (12083815)
4. Wu Di (11046037)
152.700 Organisation and Management - Assignment 1b

HIGHLIGHTS
1

Introduction & Assumptions

Output/Input ratio - Comparison others

Consequences of inequity

Development of Equity theory

Theorys strengths and criticism

152.700 Organisation and Management - Assignment 1b

Introduction to Equity theory

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

152.700 Assigment 1b

Assumptions of Equity Theory

Employees expect a fair and equitable return

for their contribution to their jobs.
Social comparison.
Employees who perceive themselves as
being in an inequitable scenario will attempt
to reduce the inequity.

Model of Equity Theory

S Input versus r Input
S Outcome
r Outcome
I = Inputs - employees
contribution to employer
O=Outcomes - the individual gets
in return for his contribution.
R = Referent - comparison
person
S = Subject the employee who is
judging fairness of the
exchange
152.700 Organisation and Management - Assignment 1b

Key Factors in Equity Assessment

152.700 Organisation and Management Assignment 1b

Equity Theorys
Relevant Others
Can be four different situations:
Self-Inside
The persons experience in a different job in the
same organization
Self-Outside
The persons experience in a different job in a
different organization
Other-Inside
Another individual or group within the organization
Other-Outside
Another individual or group outside of the
organization
152.700 Organisation and Management - Assignment 1b

Accoring to the equity theory employees compare their outcome/input ratio

with the outcome /input ratio of others to determine whether they are being
treated fairly or fairly by the organization.These comparisions are divied into
3 categories:
a.Equity:
A person feels equitably treated when his outcome/input ratio is equal to
others persons outcome/input ratio with the person compares himself.
S outcome
= R outcome
S input
R input
Equitably paid workers are said to feel satisfied.

152.700 Organisation and Management Assignment 1b

b.under rewarded inequity /negative inequity:

A person feels over rewarded when his outcome/input ratio is less than
whom the person compare himself.
S outcome
< R outcome
S input
R input
Equity theory states that an overpaid worker feels angry.
c .over rewarded inequity /positive inequity:
A person feels over rewarded when his outcome/input ratio is greater than
whom the person compare himself.
S outcome
> R outcome
S input
R input
Equity theory states that an overpaid worker feels guilty.
152.700 Organisation and Management Assignment 1b

Consequences of inequity
Based on equity theory, when employees perceive
an inequity, they can be predicted to make one of
six choices.
They change their inputs.
They change their outcomes
They distort perceptions of self
They distort perceptions of others
They choose a different referent
They leave the field (Robbins, Millett & Waters-marsh , 2004, p.
183)

.
152.700 Organisation and Management Assignment 1b

The Development of Research on Equity

Theory
1. First developed in 1963 by John Stacey
Adams

Adams (1963) argues that when people

measure the fairness of their work outcomes
relative to others any perceived inequity is a
motivating state of mind.

152.700 Organisation and Management Assignment 1b

The Development of Equity Theory

2. Effects of Inequity on Work Output and

Quality by Underpayment
Lawler and O Gara (1967) indicated that the
underpaid group experienced feelings of inequity
using the higher paid group members as their
comparative others.
Additionally, the underpaid worker would produce
more work output via conducting more
interviews was indeed correct.
152.700 Organisation and Management Assignment 1b

The Development of Equity Theory

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

152.700 Organisation and Management Assignment 1b

The Development of Equity Theory

4. Equity Sensitive Construct
Huseman, Hatfield and Miles(1987) defined the equity
sensitive construct as the investigation of a person's
perception of what is and what is not equity, and then
uses that information to make predictions about
reactions to inequity.
Individuals react in consistent but individually different
ways to both perceived equity and inequity because they
have different preferences for equity on a continuum with
classes of individual: Benevolent, Equity Sensitive,
and Entitled (Huseman et al., 1987).

The Development of Equity Theory

5. Work Motivation on an Assembly Line
The study was completed on the basis that
equity theory indicates that workers react to and
modify their work behaviour based upon the
speed or rate of the work of the people around
them (Schultz, Schoenherr & Nembhard, 2006).

152.700 Organisation and Management Assignment 1b

The Development of Equity Theory

6. Dishonesty in the Name of Equity

Individuals are more likely to engage in

dishonest behaviour when they have inequity of
wealth (Gino & Pierce, 2009).

152.700 Organisation and Management Assignment 1b

Strengths
Accurately predicts behavior on under-reward
Accounts for
internal
assessment,
comparison
procedures
&quality
changes

C
Strengths

Interpersonal
processes
(social
comparison)
+ reference
group

D Ability to fit with

Important insights
into employee
motivation
152.700 Organisation and Management Assignment 1b

other theories
(particularly the
expectancy
theory)

Criticisms
Focuses on short-time comparison

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

Equitys criticism

Ignores reactions
to experienced
inequities

Restricted & incomplete

(focus on payment only)
Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)
152.700 Organisation and Management Huseman, Hatfield & Miles, 1987
Assignment 1b

Applications of Equity theory

Equity

Explanation of
employee
behaviour

Distributive
justice
Compensation
Promotion
=>fair
distribution of
rewards

Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)

152.700 Organisation and Management - Assignment 1b

Contents
Introduction & Assumptions
Output/Input ratio - Comparison others

Consequences of inequity

Development of Equity theory

Theorys strengths and criticism

152.700 Organisation and Management Assignment 1b

References
Adams, J.S. (1963). Towards An Understanding of Inequality.
Journal of Abnormal and Normal Social Psychology. (67),
422-436.
Gibson, J.L., Ivancevich, J.M., Donnelly, J.H., & Konopaske,
R. ( 2009). Organizations: Behavior, structure, process (13th
ed.). New York, NY: McGraw-Hill., p150-153
Gino, F., & Pierce, L. (2009). Dishonesty in the Name of
Equity. Psychological Science, 20 (9): 1153-1160.
Greenberg, J. (1988). Equity and workplace status: a field
experiment. Journal of Applied Psychology, 4, 606-613.
Huseman, R., Hatfield, J., & Miles, E. (1987). A New
Perspective on Equity Theory: The Equity Sensitivity
Construct. Academy of Management Review. 12(2). 232-234.
152.700 Organisation and Management Assignment 1b

References (cont)
Lawler, E., & OGara, P. (1967). Effects of inequity produced by
underpayment on work outputs, work quality, and attitudes toward
the work. Journal of Applied Psychology, 51(5), 403-410.
Robbins, S.P., Millett, B., & Waters-marsh, T. (2004). Organisational
Behaviour. Australia: Person Education Australia, p. 183.
Schultz, K., Schoenherr, T., & Nembhard, D. (2006). Equity theory
effects on worker motivation and speed on an assembly line.
Retrieved from: http://www.hbs.edu/units/tom/pdf/kschultz.pdf
Stecher, M.D. & Rosse, J. (2007). Understanding reactions to
workplace injustice through process theories of motivation. Journal
of Management Education, (31), 777-796.
Weick, K.E. (1996). The concept of equity in the perception of pay.
Administrative Science Quarterly. (11), 414-439.

152.700 Organisation and Management Assignment 1b

Group reflection

Forming
Agreeing on topic
Assigning responsibilities
Time frame
Conflicts

152.700 Organisation and Management Assignment 1b

Forming

Make friends during paper

For assignment
Assign leader
Group is not so diverse in cultures

152.700 Organisation and Management Assignment 1b

Topic agreement
Group members study all theories in
motivations
Each member proposes 1 topic
Group discusses and agrees on topic

152.700 Organisation and Management Assignment 1b

Assigning responsibilities
Individual task is assigned based on
members strength (who can do better in
one part)
Members read and make
recommendations for others in group

152.700 Organisation and Management Assignment 1b

Time frame
1st week: forming, individually study, agree
on topic
2nd: individual to prepare their part,
combine and discuss, proof-reading,
finalize

152.700 Organisation and Management Assignment 1b

Conflicts
Task: unequal, discussion to fix with outlines
and orders of the presentation => members
agree & be happy with assigned task
Time: different time -> difficult to schedule for
group meeting => discuss & propose several
options then agree on one that suits all
However, thanks to small group size of 4,
those conflicts are easier to be resolved.
152.700 Organisation and Management Assignment 1b

THANK YOU FOR YOUR ATTENTION!

152.700 Organisation and Management Assignment 1b