Equity Theory And Employee Motivation

Every day there are new research studies, articles and books on the subject of employee motivation. Different theories promise us wisdom about what motivates people. The most popular of these is Equity Theory.

In this article we will take a look at what the theory states, how it works and how you can use it in your organization to improve worker motivation and productivity...

Introduction - 

 Equity Theory predicts that people will be motivated by a feeling of being treated fairly or being compensated for their contributions. It assumes that each person has an internal awareness of their own abilities, efforts, skills and external circumstances (also known as 'input'). The theory then predicts that people will strive to receive rewards that accurately reflect what they put into the job.

Effort - 

 Equity Theory states that when people feel that their input is greater than their outcomes, they will feel undervalued and dissatisfied with the situation. If a person feels that he has made more of an effort than others, but is not receiving more reward, he tends to become "discouraged and withdrawn". This could then have a negative effect on an organization.

Skills - 

 Equity Theory states that each individual has a "subjective evaluation" of how his skills stack up against others'. From this evaluation, he or she can determine if they feel that the rewards they are receiving are fair.

Effort x Skill = Outcomes

In this equation, if someone feels that their input is greater than their outcomes, the individual will feel under-rewarded. This could mean an overworked employee who feels that his contribution is greater than what he is receiving in return. The theory predicts that the person will then try to "close" this gap by working harder. 

If someone feels that his skills are superior to others', he will expect to be rewarded more for his efforts and skills. He will also know how much of a contribution he has made and that he is more able than others. This, in turn, can produce more satisfied workers.

Theory - 

 Equity Theory implies that people want to be paid fairly for their efforts, which are usually the same as those of their peers. The theory does not rule out the notion of a person receiving additional compensation for special skills or expertise, but it does not predict that any extra money is needed to secure an individual's loyalty or commitment. 

There are two versions of the theory: Perfectionism and Random Variables (p<0.05). Perfectionism refers to the idea that rewards should be proportional to the effort needed to achieve them. The Random Variables version implies that rewards should be proportional to the level of effort used (irrespective of the effort invested).

In practice, we do not usually agree with the estimates provided by Equity Theory. The theory is based on self-reported data and it is hard to know how accurate their perceptions are. This may be because people tend to exaggerate their own efforts and skills. In addition, when someone's outcomes are not sufficient, they might feel underpaid because they have given more in return. Thus, there will be a greater discrepancy between the two numbers than would otherwise be the case.

Criticism - 

Equity Theory seems to predict that employees will strive for a situation in which they receive more than they give, which doesn't seem fair to the employer. Equity Theory suggests that an employee should receive "his fair share", but it is hard to define this when there are several different opinions about what is fair. 

In some workplaces, it may be commonplace for workers to feel that they deserve more for their efforts and skills. However, if a worker demands more of his employer, he may see the extra reward as "unfair".

Application -

 Equity Theory can be used in most organizations as a way of improving your relationship with your employees. You can also use it to help determine a fair salary level or to see if you have an over-rewarded or under-rewarded employee.

Equity Theory suggests that people are usually more satisfied when they receive benefits that are proportional to their efforts and skills. You can apply the theory by giving your employees rewards that reflect their personality, skills, effort and abilities. If a person has more than average skill and effort, he should be rewarded accordingly. 

When using Equity Theory in organizations, you should focus on the "fairness" of the reward system. Your company policy and procedures should be made as clear as possible to avoid any misunderstandings about what is "fair" for each employee.

Theory -

According to Maslow, people progress through five stages of motivation:

Physiological needs - (e.g. food, water and shelter). People are motivated by their need to survive. They will work hard if they have the basic necessities for life. In some cases, people will do things that are dangerous or even destructive in order to satisfy their need for food and water. Maslow once observed a man who ate his own finger nail because he was hungry. Although most people would not go that far to satisfy hunger, there are still cases of murder and theft in the world today that can be attributed to a lack of basic needs (e.g., food, shelter, etc.).

Safety needs - (e.g. protection from harm). To make sure that they are not put in danger, people will work hard for their security. This could be for food, shelter or money. People who have been abused in the past by a significant other may work hard to avoid future abuse in their relationship. There is even current research showing that the higher their self-esteem is, the less likely they are to lie on surveys.

Belongingness needs - (e.g., friendship, companionship). People use social groups to feel part of society and valuable as a member of society. It is one of the reasons why people are motivated by their need for acceptance.

Esteem needs, - (e.g., feeling like you belong). People are motivated to work hard to meet others' expectations or the expectations that they have for themselves. The best way to satisfy this need is to feel valued for who you are and what you do. This may be done through achievements, recognition, rewards or appreciation of your efforts and skills.

In business, an organization needs to figure out which of these needs is the most basic and necessary in order to provide its employees with motivation that aligns with their job descriptions.

Criticism - 

Maslow's Theory does not seem to be able to predict which people will "survive" and which ones will "die" if the needs in the hierarchy are unmet. For example, Maslow would argue that because a person needs air to live ("physiological need"), he/she will work hard in order to satisfy that need. However, no one can survive if the "safety and security needs" are not met first. Security is the most important need for survival. Maslow's theory does not explain why some people would try to jump from a burning building just because they were afraid of heights or get shot while trying to protect their loved ones.

Conclusion -

Maslow's Hierarchy of Needs does not seem to be able to predict which people will "survive" and which ones will "die". A person will only do what is necessary to live or survive if the basic needs in the hierarchy are met. To achieve a higher level of motivation, people need more than just the basic needs. People need rewards and appreciation for their skills and achievements (e.g., esteem needs). The better you can identify your employees' needs, the more likely you will be able to provide them with motivation that aligns with their job descriptions.

Theory -

Reinforcement Theory suggests that a behavior or action is positively or negatively reinforced as a result of external forces.