EQUITY THEORY

JOHN STACEY ADAMS

Prepared by: AC 220 8D

SITI KHADIJAH BINTI ZAILAN(2012248034)

NURFARAH AMALINA BINTI ABDUL AZIZ(2012494562)

ANIS SYAFIQAH BINTI ROSLAN(2012459002)

NUR ATHIRAH BINTI TUAN YAACOB(2012203764)

HISTORY

1963 – John Stacey Adams

Idea that fairness and equity are

key components

of a motivated individual

The higher an

individual's perception of

equity, the more

motivated they will be

If someone perceives an

unfair environment, they will be demotivated

DEFINITION

Outputs

What the worker gets from a jobSalary, bonus, recognition, reputation, job security, etc.

Inputs

What a worker contributes to a jobEffort, loyalty, hard work, skill,

ability, determination, etc.

Concept that people derive job satisfaction and motivation by comparing their efforts (inputs) and income (outputs) with those

of the other people in the same or other firms.

PROPOSITIONS

Individuals develop their perception of fairness by calculating a ratio of their inputs and outcomes and then comparing this to the ratio of others.

• An individual may not perceive he is being treated fairly when he works 40 hours per week and receives RM500 in pay, while his co-worker works 30 hours per week and receives RM650 in pay.

If the comparative ratios are perceived by the individual to be unequal, then inequity exists.

• Inequity exists when there is a perceived difference in the ratios of inputs and outcomes.

• Underpayment inequity and overpayment inequity

As the difference in inequity increases, the tension and distress felt by an individual will increase.

• Smaller differences of inequity are more tolerable than significant differences of inequity.

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

• Examples include decreasing productivity at work, finding a new job, asking for a wage increase, or attempting to justify changes in their perceptions of inputs or outcomes

APPLICATION

OF

EQUITY THEORY

APPLICATION OF ET

Employees will compare their input and output with

their coworkers input and output to measure their

performance and will compromise if it is different.

Equity theory can be measured by:

Individual’s outcomes

Individual’s own inputs

Rational partner’s

outcomes

Rational partner’s inputs

APPLICATION OF ET

Condition Person Referent Example

Equity Outcomes =

Outcomes

Inputs Input

Employee input and

output equal with the

referent.

Underpayment Equity Outcomes <

Outcomes

Inputs Input

Employee input is

more than the referent

but get same output as

referent.

Overpayment Equity Outcomes >

Outcomes

Inputs Input

Employee input is

same as referent but

get more outcome than

the referent.

RESEARCH ON EQUITY

A study published in 1967, Effects of

Inequity Produced by Underpayment on Work Output, Work

Quality, and Attitudes Towards the Work

Lawler & O'Gara found that equity

theory was indeed supported in that those who received less pay than their peers doing

the same job found ways to "increase their

outcomes while decreasing their

inputs”.

APPLICATION OF ET IN WORKPLACE

Distributive justice

Involves ensuring

that outcomes are

fairly distributed in

the organization.

Two levels :

o Low level

o Increase level

Procedural justice

Deals with whether or not the process used to allocate the rewards is fair.

Examples:

o Giving employees a voice in the decision-making process

o Making unbiased decisions

GLOBAL APPLICATION OF ET

Equity

Individual outcomes or rewards will be in

proportion to individual inputs and efforts.

Equality

Rewards are equally given out to all

participants despite individual inputs.

GLOBAL APPLICATION OF ET

Inputs Outcomes Choice of a

referent

Individualism

(Western)

Effort,

education,

intelligence,

experience

Pay, autonomy,

job

status, fringe

benefits

Range of

individuals

due to loosely

tied in-groups

Collectivism

(Eastern)

Group

membership,

loyalty, support,

respect

Harmony,

acceptance,

social

status,

solidarity,

cohesion

May choose out-

groups

as a group

referent, not an

individual

ASSUMPTIONS

OF

EQUITY THEORY

ASSUMPTIONS OF EQUITY THEORY

Equity

norm

Social comparison

Cognitive distortion

IMPLICATION

OF

EQUITY THEORY

MANAGER

Different employees

ascribe personal

values to inputs and

outcomes

People measure the

totals of their inputs

and outcomes

Employees are able

to adjust for

purchasing power

and local market

conditions

Staff perceptions of

inputs and outcomes

may be incorrect

Employee who

believes he is

overcompensated

may increase his

effort

HOW TO REDUCE

INEQUITY

HOW TO REDUCE INEQUITY

• Changing individual inputs/outcomes

• Persuading others to change inputs

• Withdrawal

Behavioral option

• Distort perceptions of inputs/outcomes

• Distort the inputs/outcomes of others

• Change the other comparison

Cognitive option

Determines the extent to which an

individual will tolerate inequality.

EQUITY

SENSITIVITY

EQUITY SENSITIVITY- CATEGORIES

• Employees as givers and more tolerant of under reward inequality

Benevolent

• Experience tension with inequality and will seek to restore a balance of equity in their relationships

Equity Sensitive

• Individual who frequently have an attitude that they are great and thus are entitled to great outcomes

Entitled

Directed towards both the assumptions and

practical application of equity theory

CRITICISM TO

EQUITY THEORY

EQUITY THEORY

Criticisms A number of demographic and psychological variables affect people’s perception of fairness and interactions with others

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

Not everyone will perceive the compensation system as unfair even they are in the same situation

CONCLUSION

People are motivated to

reduce perceived inequalities

To provide the proper support for

employees that may feel inequality

THE END

THANK YOU