Equity Theory

[Howard Wallace]

As part of my graduate studies I'm taking a course in organizational psychology. Right now, I'm looking at a theory of motivation called "Equity Theory." Equity theory supposes that people choose a referent, a neighbor, a peer, a similar worker in another company, a coworker, and then judge the ratio of their compensation / effort in relation to a similar ratio for their referrent.

Two of the propositions of equity theory are: (to quote from Robbins' "Organizational Behavior")

Given payment by quantity of production, overrewarded employees will produce fewer, but higher quality, units than equitably paid employees. Individuals paid on a piece-rate basis will increase their efforts to achieve equity, which can result in greater quality or quantity. However, increases in quantity will only increase inequity, since every unit produced results in further overpayment. Therefore, effort is directed toward increasing quality rather than increasing quantity.
...
Given payment by quantity of production, underrewarded employees will produce a large number of low-quality units in comparison with equitably paid employees. Employees on piece-rate pay plans can bring about equity because trading off quality of output for quantity will result in an increase in rewards with little or no increase in contributions.

Although I don't think equity theory is a comprehensive theory of human motivation, it does give some interesting predictions.

 

[Bill Martino]

Makes sense to me.

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Uncle Bill
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