Equity Theory says that an employee will compare his job’s inputs and outcomes with those of relevant others and then attempts to correct any inequity. It should be noted that equity perceptions is considered as a result of a subjective process and hence, for the same situation, some people may think that it is fair while others may think that it is unfair.
2. Reactions to inequity
Potential reactions that an employee may have toward inequity have already been discussed in the “Theories of motivation” post. The following table gives more detailed examples for those reactions:
|Distort perceptions||Changing one’s thinking to believe that the referent actually is more skilled than previously thought|
|Increase referent’s inputs||Encouraging the referent to work harder|
|Reduce own input||Deliberately putting forth less effort at work. Reducing the quality of one’s work|
|Increase own outcomes||Negotiating a raise for oneself or using unethical ways of increasing rewards such as stealing from the company|
|Change referent||Comparing oneself to someone who is worse off|
|Leave the situation||Quitting one’s job|
|Seek legal action||Suing the company or filing a complaint if the unfairness in question is under legal protection|
Those are the reactions that an employee may have when he thinks that the situation is unfair for him, which means that his job’s outcomes (salary, etc..) are lower than the referent. What if his job’s outcomes are higher than others who have the same title and do the same tasks? What if he is overpaid or over-rewarded? Originally, Equity Theory proposed that over-rewarded individuals would experience guilt and would increase their effort to restore perceptions of equity. However, research has shown that in reality, individuals experience less distress as a result of being over-rewarded. This can be explained by the fact that individuals can easily find perceptual ways to deal with overpayment inequity, such as believing they have more skills and contribute more to the organization compared to the referent person.
Research has shown that different people have different levels of sensitivity to inequity. Regarding to this, individuals can be categorized into 3 types of personality trait:
- Equity Sensitivity: This type of people expect to maintain equitable relationships, and they experience distress when they feel they are over-rewarded or under-rewarded.
- Benevolent: This type of people give without waiting to receive much in return.
- Entitled: This type of people expect to receive a lot without giving much in return.
Originally, Equity Theory defines fairness is limited only to fairness of outcomes. It should be noted that there are totally 3 types of fairness in organizations and Equity Theory should be applied to all of them:
- Distributive justice: refers to the degree to which the outcomes received from the organization are perceived to be fair.
- Procedural justice: refers to the degree to which fair decision-making procedures are used to arrive at a decision.
- Interactional justice: refers to the degree to which people are treated with respect, kindness, and dignity in interpersonal interactions.
- Give employees advance notice before laying them off, firing them, or disciplining them.
- Allow employees voice in decision making for such processes as performance appraisal system.
- Provide explanations to employees about reward systems or policies and rules.
- Maintain consistency in treatment.
Here are several tips for being fair in an organization:
- Pay attention to different contribution levels of employees when distributing rewards: People who are more qualified, skilled, or those who did more than others expect to receive more rewards.
- Sometimes may have to disregard people’s contributions to distribute certain rewards: Some rewards can be equally distributed (such as health insurance) or based on individual needs (such as unpaid leave for health reasons).
- Pay attention to how decisions are made: This is to ensure procedural justice.
- Pay attention to how to talk to people: This is to ensure interactional justice.
- Pay attention to the perceptions of others about fairness: Remember that justice is in the eye of the beholder.
- Create a sense of justice in the entire organization: People do not only care about their own justice but also pay attention to how others are treated.
Bauer, T. and Erdogan, Berrin., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.