I lately mentioned the distinction between MGT1.0 and MGT 2.0, roughly 20th century management as opposed to what’s needed now in the new world of work. I do want to make clear that management today couldn’t be without the lessons, theories and research of the past. There’s some pretty good stuff back there. I hope you’ll bear with me for one more post from the history of management thought. I promise to come back to the present next week.
Another oldie and goody, which has been in most every management textbook I’ve used, is equity theory. Sometimes it is discussed as a theory of job satisfaction but is also categorized as a theory of motivation. I think it’s another piece of the employee engagement puzzle.
At the risk of oversimplifying, the basic idea is that people are always, either consciously or unconsciously, monitoring their inputs against the outcomes of their job. Inputs are what a person brings to and puts into their job such as their knowledge, training, education, experience, loyalty, work ethic, etc. Outcomes include pay and benefits, status, recognition, job security, company car, corner office, etc.
Another component of equity theory is the idea of a comparison other. This is someone to compare a situation against and can be a coworker, friend, classmate, neighbor, relative, or some idealized other. People look at their ratio of inputs to outcomes in light of their comparison other’s situation.
If a person perceives inputs = outcomes, they feel OK.
If an employee believes that their outcomes > inputs, they probably feel pretty good about the situation and may even be motivated to work harder and be a better organizational citizen.
If the perception is that their inputs > outcomes, they will feel not right – kind of like the cognitive dissonance marketing gurus talk about. This discomfort leads people to take action to balance their equity ratio. The options are to either increase their outcomes (ask for a pay raise or bonus, steal office supplies, etc.) or decrease their input (come in late/leave early, take care of personal business on company time, stop going above and beyond, etc.). Some extreme ways workers deal with inequity are to bring in a union to represent them or to withdraw from the relationship completely (quit).
Observe the behavior of employees you know. Do you see equity theory playing out?
Would love to hear your thoughts on equity theory.