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Equity Theory

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

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Equity Theory

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  1. Equity Theory HRMOB 570

  2. 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

  3. 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

  4. 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

  5. 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?

  6. 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”

  7. Employee Theft as a Function of Time Relative to Pay Cut

  8. 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

  9. 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

  10. 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

  11. 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

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