How to Apply Equity Theory to Improve Employee Engagement

How to Apply Equity Theory to Improve Employee Engagement

As adults, we all need to go to work. And there are quite a few motivators forcing us to get out of bed and head to the office every workday. We may be motivated by some external factors – praise from others, our paycheck, etc., and we may be motivated by internal factors – personal satisfaction for a job well done, the desire to perform well, even without recognition, etc. But according to John Stacey Adams, a behavioral psychologist who focused on studying workplace motivation in the 60s, there is a key factor in motivation that many do not consider – he calls is the Equity Theory of Motivation.

And it is something that all managers should understand if they intend to keep all employees motivated.

What is Equity Theory

The key focus of equity theory is to discern how under-reward or over-reward at the workplace correlates with employee motivation.

According to Adams, among the many factors in employee motivation is the perception of fairness. People’s motivation at work and how they behave is based on how they perceive the justice (or lack thereof) in their individual situation.

If, for example, an employee sees another employee doing the same job yet getting paid more, he has a sense of unfairness. His response may be to become less productive himself because he has lost motivation to perform at the top of his game. To the employee, this slacking off establishes equity between him and his co-worker and is “fair.”

At the other end of this spectrum, according to Adams, is the employee who perceives a high level of fairness (equity) in his work environment. He is motivated to stay at the top of his game.

In short, Adams’s equity theory is this: the lower the perceived equity, the lower the motivation; the higher the perceived equity, the higher the motivation. Quite simple, really.

The Key Premises of The Equity Theory

Managers who truly want to understand equity theory, and how it can apply to what they do, need to go a little deeper into an explanation of human motivation and perceptions of equity.

Adams introduced two key concepts for assessing this perception: Inputs and Outputs.

  1. Inputs area the thing someone does to receive a certain output. Typical inputs might include enthusiasm, experience, hours put in, a sense of loyalty, taking initiative.
  2. Outputs are what someone receives based upon inputs. These are things like a paycheck, benefits and perks, recognition and praise, great performance reviews, a sense of accomplishment, and, sometimes, a promotion.

According to Adams, equity can be defined in terms of an equation – a person’s outputs ÷ his inputs compared to another person’s outputs ÷ his inputs. The equation of comparison can be visualized like this:

One person’s output /One person’s input  = Another person’s output /   Another person’s input

Adams states that equity always involves a comparison. The person doing the comparison will always try to find some way to achieve equity with the person he compares his situation to.

So, if one employee perceives his output to be unequal to that of another, he will either lower or raise his input, in order to achieve an equitable balance. Individuals in the workplace, according to Adams, are always comparing their inputs and outputs with others around them and seeking equity.

How People Conduct Comparisons – Referent Groups

Referent groups are collectives that a person uses when making comparisons. According to equity theory, there are four referent groups:

  1. Self-Inside: A person’s experience inside of his current workplace
  2. Self-Outside: A person’s experience with outside organizations
  3. Others-Inside: Others inside the person’s current workplace
  4. Others-Outside: Others who work outside, in other organizations.

Let’s take the example of a customer service agent in Company A. When deciding if she’s treated fairly, she may:

  • Compare her salary and benefits with that of other agents within his same organization (others-inside)
  • Benchmark her salary and benefits against industry data published on salary comparison websites such as Glassdoor, PayScale, and others (others-outside)
  • Or she might compare her salary/benefits with those that he earned at a previous customer service position (self-outside).

Sometimes, individuals may even compare themselves with others in the organization who hold completely different positions. A bank teller for a large banking corporation may think it is unfair that the CEO makes 100X what he makes. Does he work 100X harder? Perhaps not.

However, another might not believe that to be unfair if they think about the input of that CEO – long hours, lots of travel, stress, accountability for decisions that impact the entire corporation – and they may see the pay difference as reasonable and equitable. The point here is that individuals can perceive equity in very different ways.

Examples of Equity Perceptions in the Workplace

Employee perceptions of equity usually show themselves in comments and conversations that employees have with one another, and these comparisons usually relate to salary, work hours, and benefits. Here are some example statements:

  • Did you know that bank tellers at XYZ Bank earn about $5,000 more a year than we do?
  • I don’t how Jim can make the same as me when I do twice the amount of work he does.
  • It’s not fair that Sally gets to work from home 2 days a week, and I can’t
  • Bill gets to go to training workshops in great places like Los Angeles and New York while I get to go to Kansas City and Des Moines. How is that fair?
  • Jane got a big bonus because our department completed that project ahead of schedule. We did all the work, and she gets the recognition and money.

These are individuals whose morale is lower because they see inequity when comparing their outputs with those of others. Lower morale usually means less employee engagement and motivation. These are detrimental to productivity, and managers need to be keenly aware of perceived inequities among their teams if they are to keep levels of motivation high.

How Managers Can Use Equity Theory in the Workplace – Tips and Strategies

If you manage a team, there are a number of things you need to understand about staff perceptions of equity.

First of all, each person comes to the workplace with different experiences and backgrounds. This can impact their perceptions of equity. What one person may see as totally fair, another will not. Your job is to keep your “ear to the ground” and feel people out about their perceptions of equity on the job.

Also, most workers compare inputs against outputs. The employee who seems to be a slacker but who is earning the same as a hard worker can create feelings of inequity on the part of workers who are performing well. These performing workers may begin to slack off too. As a manager, it will be your job to address such disparities.

Keep abreast of what similar workers are earning in similar industries. If pay and benefits are better in most other organizations, it is time to advocate for increases for your team. Otherwise, you are likely to lose your good talent.

There are things that managers can do to counteract real or perceived inequities among the team members.

1. Change the Inputs on an Individual Basis

We all have a tendency to give the most challenging and greatest number of tasks to those we know will perform really well. It may be time to give the over-performers a bit of a break.

Reduce the task responsibilities you delegate to them, and tell them why. They are great team members and deserve a break. Even if you have to take on those tasks yourself temporarily, do so.

2. Change the Inputs for an Underperforming Team Member

Give them the more mundane and boring tasks that others really don’t want. This sends a strong message to the performers that you recognize their efforts and want to reward them with the more exciting tasks.

3. Develop New the Outputs for Those Who Perform Well

If you have team members who are meeting or exceeding your expectations, reward them. Tell them to take a day off with pay. Give them tickets to a sporting event or concert or a gift certificate for a great meal. Recognize them publicly with an Employee of the Month certificate. Refer them for a bonus or raise.

4. Introduce Subtle Output Changes For Under-Performers

Deny a special request for personal time off. Don’t send them to an important training event and let them know that it’s only for solid performers. Give them an indication that something’s wrong with their performance and encourage them to come up to you personally to discuss the matter.

To Conclude

There are many things that serve as motivators for employees. One of these is the perception that they are being treated fairly in comparison to others both within and outside of the organization.

When people perceive that there is inequitable treatment on the job, they will reduce their input. When they perceive that there is equitable treatment, they will keep their solid input levels or even increase them.

A manager’s goal is always a high level of input on the part of his team members, giving them a sense that fairness is a high priority and taking actions to promote this will mean that a team remains high-performing.

Photo by Brooke Cagle

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