Lesson 14-2. Use equity theory to explain how employees' perceptions of fairness affect motivation.
Equity theory
People will be motivated at work when they perceive that they are being treated fairly relative to others.
Procedural justice
The fairness of the procedures used to make reward allocation decisions
Inequity forms
Under-reward Over-reward
Reaction to over-reward
Guilt
Steps of equity theory
employees determine an outcome/input (O/I) ratio They compare their O/I ratio with a coworkers Perceive whether they are being treated fairly
rationalizing inputs or outcomes
making mental or emotional adjustments to their O/I ratios
Slight inequity
may not be strong enough to motivate an employee to take immediate action.
Over-reward
occurs when your O/I ratio is better than your referent's O/I ratio
Under-reward
occurs when your O/I ratio is worse than your referent's O/I ratio.
Who can referents be
one other individual or a generalized other oneself over time
Types of action to combat inequity
reducing inputs increasing outcomes rationalizing inputs or outcomes changing the referent simply leaving
How to motivate using equity theory
start by looking for and correcting major inequities. reduce employees' inputs. make sure that decision- making processes are fair.
Persistent inequity or there are multiple inequities
tension may build over time until a point of intolerance is reached, and the person is energized to take action.
Inputs
the contributions that employees make to the organization
Distributive justice
the degree to which outcomes and rewards are fairly distributed or allocated.
Outcomes
what employees receive in exchange for their contributions to the organization
Referents
Are those others with whom people compare themselves when determining whether they are being treated fairly
Components of equity theory
Inputs Outcomes Referents
Reaction to under-reward
frustration or anger