• Describe the role of inputs and outcomes in equity theory
• Understand how equity theory relates to worker motivation
• Understand how expectancy theory can be used to motivate workers
• Understand how reinforcement theory can be used to motivate workers

Process-Based Theories of Motivation

In contrast to the need-based theories for motivating employees that you have learned about so far, process-based theories view motivation as a rational process. That is, process-based theories assume that individuals analyze their environment, develop reactions and feelings, and respond in predictable ways.

Equity Theory

equity theory

According to equity theory, workers are more motivated when they feel that their efforts and outcomes are fairly rewarded in comparison to their peers.

Equity theory is based on individuals’ perceptions about how fairly they are treated compared with their coworkers. Equity means justice or fairness, and in the workplace it refers to employees’ perceived fairness of the way they are treated and the rewards they earn. For example, imagine that after graduation you were offered a job that paid $55,000 a year and had great benefits. You’d probably be excited, even more so if you discovered that the coworker in the next cubicle was making $45,000 for the same job. But what if that same colleague were making $65,000 for the same job? You’d probably think it unfair, especially if the coworker had the same qualifications and started at the same time as you did.

Your opinion of the fairness of the situation would depend on how you felt you compared to the other person, or referent. Employees evaluate their own outcomes (e.g., salary, benefits) in relation to their inputs (e.g., number of hours worked, education, and training) and then compare the outcomes-to-inputs ratio to one of the following:

1. the employee’s own past experience in a different position in the current organization
2. the employee’s own past experience in a different organization
3. another employee’s experience inside the current organization
4. another employee’s experience outside the organization.

Equity theory assumes that individuals try to maximize their outcomes. At the same time, this theory also assumes that inequity causes people distress. For example, the person who gets too much may feel guilt while the person who gets too little may feel angry. So individuals who find themselves in an inequitable relationship will try to restore equity. In a group situation, this would result in members favoring equitable treatment and punishing inequitable treatment.

Fair Distribution of Resources

The focus of equity theory is determining whether the distribution of resources is fair. People don’t need to receive equal benefits but the ratio between benefits and contributions, the inputs and outputs, needs to be similar. According to equity theory, if employees perceive that an inequity exists, they will make one of the following choices:

• Change their work habits (exert less effort on the job)
• Change their job benefits and income (ask for a raise; steal from the employer)
• Distort their perception of themselves (“I always thought I was smart, but now I realize I’m a lot smarter than my coworkers.”)
• Distort their perceptions of others (“Alicia’s position is really much more flexible than mine.”)
• Look at the situation from a different perspective (“I don’t make as much as the other department heads, but I make a lot more than most graphic artists.”)
• Leave the situation (quit the job)

Improving Worker Satisfaction

Managers can use equity theory to improve worker satisfaction. Knowing that every employee seeks equitable and fair treatment, managers can make an effort to understand an employee’s perceptions of fairness and take steps to reduce concerns about inequity.

In any position, employees want to feel that their contributions and work performance are being rewarded with fair pay. An employee who feels underpaid may experience feelings of hostility toward the organization and perhaps coworkers. This hostility may cause the employee to underperform and breed job dissatisfaction among others.

Subtle or intangible compensation also plays an important role in feelings about equity. Receiving recognition and being thanked for strong job performance can help employees feel valued and satisfied with their jobs, resulting in better outcomes for both the individual and the organization.

Management Implications

Equity theory has several implications for business managers, as follow:

• Employees measure the totals of their inputs and outcomes. This means a working parent may accept lower monetary compensation in return for more flexible working hours.
• Different employees ascribe different personal values to inputs and outcomes. Thus, two employees of equal experience and qualification performing the same work for the same pay may have quite different perceptions of the fairness of the deal.
• Employees are able to adjust for purchasing power and local market conditions. Thus, a teacher in a rural area of Florida may accept lower compensation than a colleague in Miami due to differences is cost of living, while a teacher in a remote African village may accept a totally different pay structure.
• Although it may be acceptable for more senior staff to receive higher compensation, there are limits to the balance of the scales of equity, and employees can find excessive executive pay demotivating.
• Staff perceptions of inputs and outcomes of themselves and others may be incorrect, and perceptions need to be managed effectively.