Adam Smith’s Equity theory

     

    Many researchers have reviewed the validity of Adam’s Equity Theory over the past decades. This theory has been tested under various circumstances to prove its viability.

Drexler,Beehr, and Stetz (2001, 333) conducted a research on whether Adam’s Equity Theory has impacted on the differentiation of individual performance group tasks. Many groups may choose to differentiate in the rating of their performance against another individual who performs the same task, but how much differentiation occurs is a matter of attitude. “These attitudinal variables are satisfaction, perceived equity, and turnover”, (Drexler, Beehr, and Stetz 2001, 334). For example, two employees who perform the same task can vary in the rating of their own performance against another. One employee’s interpretation of a particular job can be different from another employee’s interpretation of the same job. Therefore, one construal may be more efficient than the other leading in different outputs, whereby Adam’s Equity Theory becomes ineffective. Brockbank (1999, 337) observed that measuring an individual’s effectiveness and rewarding that effectiveness, which results from the equity of input and output, is one of the aspects linking the firm’s ability to compete globally.

            Further stressing on the above point, Adam’s Equity Theory was testified for its validity in the gender differences that were regarded important for measuring the salary of male and female employees. Conventionally, women were paid lesser than men who performed the same tasks. But according to the responses, women did not complain about pay dissatisfaction (Crosby 1982, 95; Sauser and York 1978, 537). Women recognized that they differ from men in certain aspects such as; they may have worked for shorter hours than men due to many social obligations plus familial constitutions that they are bound to; furthermore they may take longer leave of absence for maternal purposes. As a result, even though the outcomes may be similar to men, the effort taken to do the job is certainly different; thus, resulting in lower pay rewards between two individuals doing the same job. And for these reasons, Adam’s Equity Theory does not yield productive results.

            Job input, as a concept of non-biased pay has been observed from an equity theory perspective, (Keaveny and Inderrieden 2000, 364). Adams (1965, 267) as mentioned earlier, suggested that the equity theory’s concept is based on the comparison of one’s outcomes with another referent (reference points or examples) that performs a similar task. Consequently, studies conducted by Hills (1990, 345-350) support Adam’s Equity Theory. No evidence was produced regarding the idea that individuals perform self-evaluation, in which they determine whether their input equals the same output yielded by their referent and then agree upon the equality in the pay.

However, Jacques (1961) opines that individuals may have pay expectations purely based on their job characteristics and disregard what other employees are making. Some employees’ sole concern, according to Jacques, lies exclusively on the amount of job inputs that they have slogged to finish a particular task, and their pay expectations, pay satisfaction, and motivation depends on their individual hard work that they have undertaken to do the job. Berkowitz et al.

(1987, 544-551) conducted a research to support the viability of Jacques theory. And their findings confirmed that their respondents’ satisfaction with their pay was related to what the employees feel they deserved, regardless of what others were paid.

            Shah (1998) differentiated referents in terms of social network. According to Shah, there are two types of social referents – cohesive and structurally equivalent. The difference between the both is as follows: “cohesive actors are individuals with close interpersonal ties, or friends. Structurally equivalent actors are individuals, who share a similar pattern of relationship with others and thus occupy the same position in a network” (Shah 1998, 249). The theorist suggested that Adam’s Equity Theory is generally applied to the latter type of social referent as comparison sources (e.g. co-workers). Whilst structural equivalents do provide valuable information (Shah 1998), cohesive referents, i.e. friends, are observed as more out-going and are likely to share personal or confidential information (Jehn and Shah, 1997, 776; Roloff and Miller 1987, 23). Therefore, a cohesive referent poses less threat when compared as a referent for the purposes of equity theory; as the tension between the people being compared is lost, and there is no need to juxtapose the justice of the outcomes produced by both the parties. In conjunction with the above statements, Wheeler and Miyake (1992, 768) noted that the major drawback of applying equity theory is that it may create hard feelings for both the people being compared, regardless of whether they are cohesive referent or structurally equivalents. 

Similar research was performed by Wiley (1997, 265) on the motivational factors that affect employees and whether the responses are more or less likely the same to the surveys conducted in over forty years on the equity theory. In this investigation, she endowed that most motive theories, including the Adam’s Equity Theory do not highlight individual differences, rather they emphasize on the conditions that cause for the incentive of a motive and its influence on the behavior. As, the equity theory assumes that the approaches taken to do the work is same, but pay, for instance is an extrinsic reward, which becomes a motivational factor, and accordingly it will influence on the behavior of the employee. 

            Shore (2004, 722) discussed that there are three groups who fall under the equity theory category and he labeled them as “equity sensitive groups”. These equity sensitive groups are Benevolent Individuals who reported when surveyed, as having the highest pay satisfaction, perceived pay fairness, and lowest turnover intentions; Entitled Individuals had lesser pay satisfaction, perceived pay fairness, and higher turnover intentions; these results were obtained when compared to Equity Sensitive Individuals who reported as having highest pay dissatisfaction, less perceived fairness, and highest turnover intentions. The similarity between all three focus groups was that they all preferred to be over-rewarded or equally rewarded, and were distressed when under-rewarded. Therefore, Shore considered that Adam’s Equity Theory is by far the most accurate framework that is presented to understand the relationship between employees’ motivation, pay fairness, and job satisfaction.