KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

1. INTRODUCTION
A motivation is the force that energizes, directs and sustains behavior. High performance
is achieved by well motivated people who are prepared to exercise discretionary effort. And in
motivation for employees, we have equity theory which is one of the most popular motivation
theories in managing and motivating employee performance. In this assignment, we will know
more details about equity theory and how to use it to motivate employee performance as a
manager.

2. MOTIVATION THEORY: EQUITY THEORY

Equity theory is known as one of the general theory, which is very efficient in predicting
employee behavior. Equity also defined as justice, inequity-injustice. Inequity exists for an
individual when he or she perceives an imbalance in the ratio between outcomes (reward for
work) and inputs (efforts at work) as other workers outputs and incomes According to
www.whatishumanresource.com (n.a), equity theory was first developed by John Stacey Adams,
a workplace and behavioral psychologist, in 1963. He proposed that an employees motivation is
affected by whether the employee believes that their employment benefits/rewards are at least
equal to the amount of the effort that they put into their work. This theory has been applied to
predict employees responses in diverse areas such as philanthropic relationships, industrial
relationships, exploitative relationship and intimate relationships (Berkowitz & Walster
[Hatfield], 1976). Equity Theory proposes that a person's motivation is based on what he or she
considers being fair when compared to others (Redmond, 2010). As noted by Gogia (2010),
when applied to the workplace, Equity Theory focuses on an employee's work-compensation
relationship or "exchange relationship" as well as that employee's attempt to minimize any sense
of unfairness that might result in their workplace. According to Gogia, (2010), because Equity
Theory deals with social relationships and fairness/unfairness, it is also known as The Social
Comparisons Theory or Inequity Theory. In other simple meaning, this equity can be achieved
when the ratio of employee outcomes over inputs is equal to other employee outcomes over
inputs (Baxamusa, 2012)

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

According to Hatfield and Traupmann (1980), equity theory is composed of 4

interlocking propositions. First, the employee will try to maximize their outcomes (outcomes
equal rewards minus punishment). Groups of employee can maximize their collective reward by
evolving accepted systems for equitably apportioning resources among members. Thus, (a)
groups will improve such systems of equity, and attempt to induce members to accept and adhere
to those systems, and (b) groups will generally reward employees who treat others equally and
generally punish employees who treat other inequitably. Third, when individuals find themselves
in inequitable relationships, they will become distressed or dissatisfied. The more inequitable the
relationship, the more distressed or dissatisfied they will feel. And the fourth, employees that
discover or realize they are in inequitable relationships will attempt or try to eliminate their
distress or dissatisfied by demanding for their rights of equality. The higher the inequity that
exists, the more distress or dissatisfied exists they will feel and the more they will try to restore
their equity.

3. EQUITY EQUATIONS
According to Rynes, Gerhart, and Minette (2004), equity theory predicts that an
individual is likely to change her/his behavior in one of several ways: expressing dissatisfaction
to her supervisor, working harder to get a bigger raise next year, working less to bring her/his
inputs in line with her perceived out-comes, or quitting in disgust.
While Walster (1975) define equity theory as an equitable relationship to exist when the
person scrutinizing the relationship concludes that all the participants / employees are receiving
equal relative gains from the relationship as follow:

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

Where I is inputs of employees, O is the total outcome / performance from the employees and K
is a computational device. Inputs (IA or 1B) are define as the scrutineers perception of the
employees contribution to the exchange, which are seen as entitling them to reward or
punishment (Hatfield & Traupmann , 1980). The inputs can that employees contribute can be
either assets, which entitle them to rewards, or liabilities which entitle them to punishment.
While outcomes (OA and OB are defined as the scrutineers perception of the reward and
punishments employees has received in the course of their relationship to another. The
employees total outcomes or performance then are equal to the rewards obtained from the
relationship minus the punishments that can be incurred. And for the exponents K A and KB take
on the value of +1 or -1 depending on the sign of A and Bs inputs and the signs of their gains
(outcomes inputs). If I and (I-O) are either positive (or both negative) KA or K8 = +1 otherwise
KA and KB = -1.
According to Rynes, Gerhart, and Minette (2004), the inputs and outcomes of equity
theory as follow:
Figure 1

Table above has showed us what inputs and outcomes are expected in equity theory. If an
individual or employee perceives any of them as an input then it is an input and hence he or she
expects a just return for it. The problem arises if only the employee views a particular input and
not the employer. In this case, felt injustice or dissatisfaction is experienced for example an
employer may base his promotion on seniority rather than promotion; that employee will feels
that injustice has been done (Adams, 1965).

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

4. THEORY CRITICS
But in this equity theory research, not all of the researchers believe in this theory. This theory
also has been criticized because it is oversimplified and based on prediction or laboratory rather
than real life research (Huseman, Hatfield, & Miles,1987). It also been suggested by Carrel and
Ditrich (1978) that equity can be perceived not only on a person-to-person basis, as the theory
posits, but also by reference to the fairness of processes in the organization as a whole. But the
need to equitable reward and employment practices which are supported by equity theory cannot
be questioned. To put these in simple words, the problem is how to achieve equity.

5. HOW TO MOTIVATE EMPLOYEES PERFORMANCE.

Now we do understand equity theory deeper and we are as the manager, supposed to use
it to motivate our employees performance. As a manager, we should know that People feel
affirmed if the procedures that are adopted treat them with respect and dignity, making it easier
to accept outcomes they do not like (Deutsch, 2000, p.45).
First, we must avoid underpaying and overpaying employees. They monitor performance
and compensation regularly to achieve a productive balance. If cuts need to be made due to
economic conditions, they distribute the decreases throughout the company. To remain
motivated, employees typically need to be able to provide input to their performance plan,
modify their goals if conditions change, and seek career development opportunities.
Second, clear communication. It's not easy to make equitable decisions while supporting
performance improvement. We as managers typically evaluate their employees, calibrate ratings
and decide on rewards. These rewards include pay increases, promotions, flexible work
schedules or stock options. Justifying these decisions becomes the focus, rather than relaying
constructive feedback that can enhance performance and foster career development. Successful
small-business managers clearly communicate company goals and make sure employees
understand their role in achieving business objectives. By recognizing the effort, loyalty,
commitment, skill and enthusiasm that an exemplary employee displays, an effective manager

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

acknowledges accomplishments, establishes trust and builds a productive workforce. A worker's

sense of achievement tends to build loyalty and enables him to feel secure about his future with
the company.
Next, we as manager should make setting expectations. According to equity theory, an
employee's perception of the fairness of his work's input and outcome influences his motivation.
Effective performance management systems enable a small-business manager to clarify job
responsibilities and expectations, develop an employee's capabilities, and align an employee's
behavior to the company's strategic goals and values. An employee typically feels satisfied with
the outcome of his effort, including his pay, when the compensation matches what he feels he
puts into the job. If an employee perceives that others get more for doing less, he typically
becomes less motivated to work hard. We as managers can create a productive work
environment by communicating job requirements clearly and establishing fair and consistent
performance objectives for all employees. Other than that, managers may need to manage
unrealistic expectations by more open and active communication. Other solutions may involve
acknowledging and addressing legitimate employee concerns. Finally, organizational managers
can lead change efforts thoughtfully to avoid generating employee resentment.

6. CONCLUSION
In conclusion, equity theory always has been used as one of the best tools in motivating
employees. The Culturally-Sensitive equity model can be used as a tool for international
managers who either have employees, customers, or suppliers in both the Western and Eastern
regions of the world. Through the use of this model, these managers can gain a global
understanding and have a true appreciation for the various inputs and outcomes that motivate
their employees based on orientation and cultural perspectives (Fadil, Williams, Limpaphayom,
and Smatt, 2005).
Equity in the workplace is so important is that employees need to feel that they have
some control over their future with their employer. An unfair system is one in which has a lack
of predictability, so that arbitrary decisions are made and employees fear victimization. Unfair

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

systems undermine the employees believe that efforts will result in valid outcomes. Managers
should be aware of the benefits of behaving toward subordinates in a manner perceived as fair.
Managers should be concerned with how they treat their employees because employees
perceptions of that treatment could affect the level of citizenship behavior. Also, their
understanding of equity theory and the different situations of under reward and over reward
reactions and how it would affect on the organization such as strikes, grievances, lowering
performance, theft, quitting and others.

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

7. APPENDICES:
Figure 2

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

Figure 3

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

Figure 4

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

Figure 5

KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

REFERENCES :
Disley, Philip (01/01/2009). "Applying equity theory to staff working with individuals with
intellectual disabilities". Journal of intellectual & developmental disability (1366-8250), 34
(1), p. 55.
Fadil, P.A., Williams, R.J., Limpaphayom, W., & Smatt, C. (2005) Equity or equality? A
conceptual examination of the influence of individualism/collectivism on the cross-cultural
application of equity theory. Cross Cultural Management, 12 (4), 17-36.
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Hatfield, E., Bensman, L., & Rapson, R. L. (2011.) Equity Theory. In Daniel J. Christie (Ed.),
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Deutsch, Morton (2000) Justice and conflict. In M. Deutsch and P.T. Coleman (Eds.), The
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Huseman, R. C., Hatfield, J. D., & Miles, E. W. (1987). A new perspective on equity theory: The
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Hatfield, E. & Traupmann, J. (1980). Intimate relationships: A perspective from equity theory.
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KMK 6053 : COGNITION AND ORGANIZATIONAL BEHAVIOUR

Miles, E. W., Hatfield, J. D., & Huseman, R. C. (1994). Equity sensitivity and outcome
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