Equity Theory HRMOB 570

Basic Tenets Comparisons between self and others People balance what they put into a job with what they get out of it Am I receiving outcomes (given my inputs) at a level similar to others? my outcomes = other’s outcomes my inputs other’s inputs

Equity Theory Assumptions Individuals strive to create and maintain a state of equity When inequity is perceived, it creates tension which t he individual is motivated to reduce or eliminate The greater t he magnitude of inequity, the greater the motivation to reduce the tension Individuals should perceive negative inequities more readily than positive ones

Positive vs. Negative Inequity Positive inequity (feeling over-rewarded) »Leads to dissatisfaction and guilt »More tolerable than negative inequity »Weak motivation to change Negative inequity (feeling under- rewarded) »Dissatisfaction & anger »Strong motivation to do something

Responses to Inequity negative inequity is less tolerable than positive people resist increasing inputs people are more likely to change cognitions about others than self ways to reduce inequity?

Behavioral predictions for Negative Inequity change your inputs (reduce quality or quantity) Change your outcomes (ask for a raise) Distort your inputs or outcomes Distort inputs or outcomes of comparison other Select a different comparison other Leave Sabotage/theft “Going Postal”

Employee Theft as a Function of Time Relative to Pay Cut

Equity Theory Implications Pay attention to employee perceptions of fairness Follow fair procedures, then outcomes will be perceived as more fair Have grievance/appeal processes Open pay policies

Creating Perceptions of Fairness: Procedural & Distributive Justice Distributive Justice »Concerned with end results/outcomes »Is the allocation of rewards fair? »Is what I’m getting fair compared to what you are getting? Procedural Justice »Concerned with allocation process »Is the system fair? »Means shown to be more important than ends

Creating Fair Procedures Develop pay system using representatives Set up ground rules Follow system consistently Choose decision strategy: majority, unanimity, etc. Safeguard against bias Create an appeals process Allow change mechanisms, but don’t be inconsistent

Dealing with Salary Compression Re-evaluate need for entry level people Make “para’ positions Provide training for lower level employees to fill higher level tasks Create multiple jobs within a job family with higher pay for greater skill/experience/seniority Recruit people looking for things the job can provide Signing bonus Performance based pay