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Equity Theory

Equity Theory. How do you know if you are fairly paid/compensated at work? Perceived outcomes (what we get) from a job in relation to what we put into it In relation to a comparable “other” Formula : Your outcomes divided by your inputs = ?. If the ratio equals one, state of equity exists

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Equity Theory

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  1. Equity Theory • How do you know if you are fairly paid/compensated at work? • Perceived outcomes (what we get) from a job in relation to what we put into it • In relation to a comparable “other” • Formula: Your outcomes divided by your inputs = ?. • If the ratio equals one, state of equity exists • If the ratio is less than one, state of negative inequity exists • If the ratio is greater than one, state of positive inequity exists

  2. Equity Theory (continued) • Psychological states • Equity: • Comfortable and satisfied • Negative inequity • Anger, frustration • Motivated to reduce the inequity (how?) • Positive inequity • Obligation to “repay” • Motivated to reduce the inequity (how?)

  3. Levels of Equity Sensitivity • Equity sensitives • Prefer that their outcome/input ratios be equal to comparison others and that the ratio is equal to 1. • Benevolents • Prefer that their outcome/input ratios be less than comparison others and that their ratio is less than one. • Entitleds • Prefer that their outcome/input ratios exceed those of comparison others and their ratio is greater than one. Survey calculation: Sum 1b, 2a, 3b, 4a, 5b. Less than 29: entitleds; 29-32: equity sensitives above 32: benevolents

  4. Equity Theory Predictions

  5. Aaron Feuerstein & Malden Mills • How would you describe his approach to managing his company? • What might his critics say about his approach? • What might his supporters say? • What is his perspective on layoffs? • Do you think his approach is successful? • What specifically supports your argument?

  6. Equity Theory & Malden Mills • How might equity theory help to explain the success Feuerstein has achieved at Malden Mills?

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