Theories Of Equity Theory

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Equity theory suggests that employee’ perceptions of a working situation in terms of how fairly they are treated compared with others influence their levels of motivation; motivation is a consequence of perceived inequity (Adams, 1965). According to equity theory, employees make comparisons. Employees determine their own work outcomes versus the effort or inputs required to achieve the outcomes, and compare these with outcomes and efforts of other employees. If they recognize that their compensation is equal to what others receive for similar inputs, they will believe that their treatment is fair and equitable. Education, experience, effort, ability etc. are the inputs to the job by the employees. Outcomes that employees
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Adams (1965) pointed out that perceived inequity creates a tension that can motivate individuals to bring equity into balance, in four common ways: 1) altering effort: Individuals may change their level of input to the organization. For example, underpaid individuals may decrease their level of effort or increase their absenteeism. Overpaid individuals may correct the inequity by working harder or getting more education. 2) Altering outcomes: An underpaid person may request a salary increase, other forms of recognition or a bigger office. A union may try to improve wages and working conditions in order to be consistent with a comparable union whose members are paid higher (Samson and Daft, 2002). 3) Changing how people think about inputs or outcomes: According to research, people may alter perceptions of equity if they are unable to change efforts or outcomes (Samson and Daft, 2002). Thus, individuals may unnaturally increase the status attached to their jobs or distort others’ perceived rewards to ensure equity. 4) Leaving: Individuals who feel they lack equity in the work place may choose to quit their jobs rather than bearing the inequity of being underpaid or overpaid. They may seek balance of equity applying for new jobs. The implication of equity theory for organizations is that, to motivate employees it is necessary to ensure a state of equity in the work place by establishing mechanisms to deal with perceived inequity situations. Otherwise organizations may face low motivation, low performance, high absenteeism and turnover. As it is mentioned before, a typical example of perceived inequity in a work organization is the situation of an employee who believes that his/her peers does not exert as much effort as him in the work place, although they are all
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