Equity theory explains the relational satisfaction in terms of fair or unfair distribution of resources within interpersonal relationships.
Discuss equity theory and its motivational implications at the organizational level
- Equity theory proposes that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and that this distress leads to efforts to restore equity within the relationship.
- If an employee feels underpaid, then that employee will experience hostility towards the organization and perhaps co-workers, which may result in the employee’s diminished performance.
- When individuals find themselves participating in inequitable relationships, they become distressed.
- Managers must monitor their employees’ earnings, discuss this with their superiors, assess efficacy, and provide intangible rewards.
- equitable: Marked by or having equity.
- equity theory: An attempt to explain relational satisfaction in terms of perceptions of fair or unfair distribution of resources within interpersonal relationships.
Motivated by Equity
Equity theory attempts to explain relational satisfaction in terms of perceptions of fair or unfair distributions of resources within interpersonal relationships. Regarded as one of many theories of justice, equity theory was first developed in 1963 by John Stacey Adams. Adams, a workplace and behavioral psychologist, asserted that employees seek to maintain equity between what they put into a job and what they receive from it against the perceived inputs and outcomes of others.
Equity theory posits that people value fair treatment, which motivates them to maintain a similar standard of fairness with their co-workers and the organization. According to the theory, equity structure in the workplace is based on the ratio of inputs (employee contributions) to outcomes (salary and other rewards).
Equity theory proposes that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and that this distress leads to efforts to restore equity within the relationship. Equity theory focuses on determining whether the distribution of resources is fair to both relational partners. Equity is measured by comparing the ratios of contributions and benefits of each person within the relationship. Partners do not have to receive equal benefits (such as receiving the same amount of love, care, and financial security) or make equal contributions (such as investing the same amount of effort, time, and financial resources), as long as the ratio between these benefits and contributions is similar.
Much like other prevalent theories of motivation, such as Maslow’s hierarchy of needs, equity theory acknowledges that subtle and variable individual factors affect individuals’ assessment and perception of their relationship with their relational partners. According to Adams, underpayment inequity induces anger, while overpayment induces guilt. Compensation, whether hourly or salaried, is a central concern for employees and therefore the cause of equity or inequity in most, but not all, cases.
The Employee/Organization Relationship
In any position, employees wants to feel that their contributions and work performance are being rewarded with fair pay. An employee who feels underpaid may experience feelings of hostility towards the organization and perhaps co-workers. This hostility may lead to the employee under-performing and could cause job dissatisfaction in others.
Subtle or intangible compensation also plays an important role in feelings about equity. Receiving recognition for strong job performance and being thanked can create employee satisfaction, and therefore help the employee feel worthwhile, resulting in better outcomes for both the individual and the organization.
When individuals find themselves participating in inequitable relationships, they become distressed. The more inequitable the relationship, the more distress individuals feel.
The Role of Management
Depending upon the organizational structure and its distribution of authority, the decision to provide monetary compensation for a strong work deliverable is not always in the hands of an employee’s direct manager. As a result, managers must monitor their direct reports’ earnings, discuss this with their superiors, assess efficacy, and provide intangible rewards (such as recommendations, gratitude, authority, new projects, etc.). Creating and maintaining equity is a responsibility of all managers.
Assessing and Restoring Equity
The assessment and restoration of equity helps improve employee performance and organizational behavior.
Distinguish the core components of equity theory that seek to measure equity accurately and restore equity when appropriate
- Equity theory proposes that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and this distress leads to efforts to restore equity within the relationship.
- Individuals consider themselves treated fairly if they perceive the ratio of their own inputs to outcomes to be equivalent to those around them.
- In any position, employees want to feel that their contributions and work performance are being fairly rewarded. If this is not the case, management must intervene and either renegotiate or replace dissatisfied individuals.
- organization: A group of people or other legal entities with an explicit purpose and written rules.
- human resources: The personnel department of an organization, dealing with the recruitment, administration, management and training of employees.
Similar to human resources management, organizational behavior management (OBM) is an important aspect of management. OBM applies psychological principles of organizational behavior and the experimental analysis of behavior to organizations to improve individual and group performance. The areas of application may include: systems analysis, management, and training and performance improvement. Equity theory plays a role in analyzing organizational behavior.
Definition of Equity Theory
Equity theory suggests that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and that this distress leads to efforts to restore equity within the relationship. The theory focuses on determining whether the distribution of resources is fair to both relational partners. Equity is measured by comparing the ratios of contributions and benefits of each person within the relationship.
Individuals consider themselves treated fairly when they perceive the ratio of their inputs to outcomes to be equivalent to those around them. In practice, all else being equal, this means an employee would find it acceptable for a more senior colleague to receive higher compensation, since the value of the senior employee’s experience (and input) is higher. Employee job satisfaction often relies on comparisons with their co-workers.
If an employee observes another employee receive more recognition and rewards for contributions—even when both have performed the same amount and quality of work—the employee who receives fewer rewards will experience dissatisfaction. That employee may feel under-appreciated as a consequence. Equity theory proposes that rewards (outcomes) should be directly related to the quality and quantity of employees’ contributions (inputs). If both employees in this situation receive the same reward, the workforce is more likely to recognize that the organization is fair, observant, and appreciative.
Managers are tasked with assessing equity: identifying both the quantity and quality of a given individual’s inputs and comparing that to his or her overall compensation. Managers are also responsible for discussing this situation with their subordinates, ensuring that they feel their contributions are being matched by their salary and other forms of compensation. While this concern also falls within the human resources frame, the manager is more directly involved with employee’s actual contributions (and thus more accurate in assessing value).
In any position, employees want to feel that their contributions and work performance are being fairly compensated. If this is not the case, management must intervene and either renegotiate or replace the dissatisfied individual. Workers have a right to be compensated in a manner that reflects their value; if they are not, then management must restore this equity or risk losing valuable talent.
Organizations can ensure collective rewards are maximized through the use of accepted systems for equitably rewarding members. Systems of equity will evolve within groups, and members must encourage other members to accept and adhere to these systems. The only way groups can ensure equitable practices are observed is by making it more profitable to behave equitably than inequitably. Thus, an organization will generally reward members who treat others equitably and generally punish (increase the cost for) members who treat others inequitably.
Expectancy theory deals with mental processes regarding choices and behaviors.
Analyze Vroom’s expectancy theory to assess the accuracy and effectiveness of motivating based upon expectancy, instrumentality, and valence
- Expectancy theory proposes that individuals decide to act in a certain way because they are motivated to select a behavior over other behaviors based on their expectation of the result.
- The individual chooses based on estimates of how well the expected results of a given behavior are going to match up with the desired results.
- Expectancy theory explains the behavioral process of why individuals are motivated to choose one behavioral option over another. It also explains how they make decisions to achieve the outcome that they perceive as most valuable.
- instrumentality: The quality or condition of serving a purpose, being useful.
- expectancy theory: A framework that holds that people decide to act in a certain way because they are motivated to select a specific behavior over other behaviors based on the expected result.
- valence: A one-dimensional value assigned to an object, situation, or state that can usually be positive or negative.
Expectancy theory is about the mental processes involved in making choices. In organizational behavior, expectancy theory embraces Victor Vroom’s definition of motivation. Vroom proposed that a person decides to behave in a certain way, selecting one behavior over other behaviors, based on the expected result of the selected behavior. For example, people will be willing to work harder if they think the extra effort will be rewarded.
In essence, the motivation behind chosen behavior is determined by the desirability of the expected outcome. At the theory’s core is the cognitive process of how an individual processes the different motivational elements. Processing is done before an individual makes the final choice. The expected result, therefore, is not the sole determining factor in the decision of how to behave because the person has to predict whether or not the expectation will be fulfilled.
Vroom’s Expectancy Theory
In 1964, Vroom defined motivation as a process controlled by the individual that governed choices among alternative forms of voluntary activities. Individuals make choices based on estimates of how well the expected results of a given behavior are going to match up with or eventually lead to the desired results.
In Vroom’s analysis, the basis for motivation is threefold:
- the individual’s expectancy that effort will lead to the intended performance
- the instrumentality of this performance in achieving a certain result
- the desirability of the result (known as valence ) to the individual
Vroom introduces three variables within his expectancy theory: valence (V), expectancy (E), and instrumentality (I). These three elements also have clearly defined relationships: effort-performance expectancy (E>P expectancy), performance-outcome expectancy (P>O expectancy).
These three components of expectancy theory (expectancy, instrumentality, and valence) fit together in this fashion:
- Expectancy: Effort → Performance (E→P)
- Instrumentality: Performance → Outcome (P→O)
- Valence: V(O)
Effort → Performance (E→P): Expectancy is the belief that an effort (E) will result in attainment of desired performance (P) goals. Usually, this belief is based on an individual’s past experience, self-confidence, and the perceived difficulty of the performance standard or goal. Factors associated with the individual’s expectancy perception are competence, goal difficulty, and control.
Performance → Outcome (P→O): Instrumentality is the belief that a person will receive a desired outcome (O) if the performance expectation is met. This outcome may come in the form of a pay increase, promotion, recognition, or sense of accomplishment. Instrumentality is low when the outcome is the same for all possible levels of performance.
V(O): Valence is the value individuals place on outcomes (O) based on their needs, goals, values, and sources of motivation. Factors associated with the individual’s valence are values, needs, goals, preferences, sources of motivation, and the strength of an individual’s preference for a particular outcome.
Expectancy theory can help managers understand how individuals are motivated to choose among various behavioral alternatives. To enhance the connection between performance and outcomes, managers should use systems that tie rewards very closely to performance. Managers also need to ensure that the rewards provided are deserved and wanted by the recipients. To improve the connection between effort and performance, managers should use training to improve employee capabilities and help employees believe that added effort will in fact lead to better performance.
People perform better when they are committed to achieving certain goals, enabling businesses to benefit from employing goal-setting theory.
Apply goal-setting theory to the process and motivation considerations inherent in organizational behavior and business procedure
- Studies of goal -setting suggest that it is an effective tool for making progress, as long as managers ensure that participants are clearly aware of what is expected from them.
- Goals that are difficult to achieve and specific tend to increase performance more than goals that are not.
- On a personal level, setting goals helps people work towards their own objectives (most commonly, financial or career-based goals).
- Managers should not constantly drive motivation, or keep track of an employee’s work on a continuous basis. Instead, they should use goals, which have the ability to function as a self-regulatory mechanism.
- Managers should also keep track of performance to allow employees to see how effective they have been in attaining their goals.
- motivation: Willingness of action, especially in behavior.
- productivity: The rate at which goods or services are produced by a standard population of workers.
People perform better when they are committed to achieving certain goals. Factors that ensure commitment to goals include:
- The importance of the expected outcomes of goal attainment
- Self-efficacy, or belief that the goal can be achieved
- Promises or engagements to others, which can strengthen level of commitment
Goal-setting is a key component of performance in a business setting, but certain principles apply. Goals that are difficult to achieve and specific tend to increase performance more than goals that are not. A goal can become more specific by attaching a quantity to it (for example, “increase productivity by 50 percent”) or by defining certain tasks that must be completed.
Goals in Business (Motivation)
Managers cannot constantly drive motivation, or keep track of an employee’s work on a continuous basis. Goals are therefore an important tool for managers, because goals have the ability to function as a self-regulatory mechanism that gives an employee a certain amount of guidance. Shalley, Locke, and Latham have identified four ways goal-setting can affect individual performance:
- Goals focus attention toward goal-relevant activities and away from goal-irrelevant activities.
- Goals serve as an energizer. Higher goals induce greater effort, while low goals induce lesser effort.
- Goals affect persistence.
- Goals activate cognitive knowledge and strategies that help employees cope with the situation at hand.
Locke et al. examined the behavioral effects of goal-setting, concluding that 90 percent of laboratory and field studies involving specific and challenging goals led to higher performance than those involving easy or no goals. While some managers believe it is sufficient to urge employees to “do their best,” Locke and Latham have a contrasting view. They propose that people who are told to “do their best” generally do not. To elicit some specific form of behavior from another person requires giving the person a clear view of what is expected. A goal is therefore vital, as it helps an individual focus his or her efforts in a specific direction.
However, when management merely dictates goals, employee motivation to meet these goals is diminished. To increase motivation, employees should participate in the goal-setting process.
Goals and Feedback
Managers should track performance so that employees can see how effective they have been in attaining their goals. Without proper feedback channels, employees find it impossible to adapt or adjust their behavior. Goal-setting and feedback go hand-in-hand. Without feedback, goal-setting is unlikely to work.
Providing feedback on short-term objectives helps to sustain an employee’s motivation and commitment to a goal. When giving feedback, managers should:
- Create a positive context
- Use constructive and positive language
- Focus on behaviors and strategies
- Tailor feedback to the needs of the individual worker
- Make feedback a two-way communication process
Setting the Right Goals
People perform better when they are committed to achieving certain goals, emphasizing the importance of strategic goal setting.
Examine the inherent motivational value in setting meaningful goals and objectives in the organizational behavior frame
- Setting goals is a process that requires buy-in from both the management and employee; it is best executed using tools such as goal-setting theory.
- The SMART model illustrates the goal-setting aims, where objectives are identified and pursued through being specific, measurable, achievable, realistic, and time-oriented.
- According to Locke and Latham, the effectiveness of goal setting can be explained by two aspects of Temporal Motivation Theory (TMT): the principle of diminishing returns and temporal discounting.
- Combining Locke and Latham’s perspective with SMART goal setting, individuals should focus on taking small steps towards larger objectives through specific, measurable, attainable, realistic, and timely goals.
- quantitatively: Measurable numerically; demonstrated through numbers.
- diminishing returns: A condition in which additional inputs into an organization, project, or process produce progressively fewer or lower-quality outputs and may decrease the total quantity or quality of outputs.
Introduction to Goal Setting
Goal setting involves establishing specific, measurable, achievable, realistic and time-targeted (SMART) goals. Work on the theory of goal-setting suggests that it is an effective tool for progress, primarily through ensuring that participants in a group with a common goal are clearly aware of what is expected from them (and able to measure it). On a personal level, setting goals helps people work towards their own objectives—most commonly financial or career-based goals.
Setting goals requires both the foresight to perceive future obstacles and a scale in which to measure and benchmark progress. Setting effective goals and identifying the the appropriate way in which to pursue these goals are both important elements of successfully implementing an effective motivational strategy. The SMART method for goal setting effectively summarizes the necessary steps to take when setting objectives:
- Specific: Establishing the appropriate scope of goals is difficult, and it is important to be as specific as possible to ensure successful implementation.
- Measurable: The ability to measure and assess progress quantitatively is useful in goal setting, as it provides motivational checkpoints and ensures progress stays on track.
- Achievable: Ensuring goals are achievable is important in successfully pursuing goals. People have a natural tendency to challenge themselves, but it is important to stay within the confines of ability.
- Realistic: Similar to achievable, realistic goal setting requires a grounded approach of identifying tangible, results-oriented objectives.
- Time-targeted: Establishing deadlines is essential for goals, particularly from a motivational perspective. Knowing the time frame necessary in which to complete the goal is important in ensuring the end product will be useful and relevant to the business.
Deriving Goal Setting from Temporal Motivation Theory
Locke and Latham note that goal-setting theory lacks “the issue of time perspective.” Taking this into consideration, Steel and Konig use Temporal Motivation Theory (TMT) to account for goal-setting’s effects and suggest new hypotheses regarding two moderators: goal difficulty and proximity.
Motivation over Time
The idea of time perspective is simpler than it sounds. Take an example of a university student who has 30 days to study for a final exam. On day 1, when the exam is still a month away, the student does not feel the time motivation very strongly. They are much more likely to choose an activity that is more enjoyable than studying. However, as the test approaches, the student will increasingly tend to choose studying due to the time perspective.
Larger Objectives vs. Series of Smaller Objectives
With this example in mind, it seems logical that structuring a project based on a series of smaller goals with closer deadlines rather than on one faraway end goal is likely to be more motivating. This is also supported by the idea of diminishing returns, which posits that for each unit of investment (be it a minute of time or a dollar) into a given process, less output will be produced. Therefore, combining a series of small objectives (processes) will be more motivating, causing less output to be lost to diminishing returns over time. It is related to the expression “the sum of the parts can be greater than the whole.”
SMART Goal-Setting and TMT
TMT (which draws from these two theories of time perspective and diminishing returns) and SMART goal setting together therefore tell us that to maximize motivation and therefore output, managers should divide projects into several more immediate, specific, and realistic sub-goals.