While I was in management several years ago, one of the things that always astounded me
was how distorted people's perceptions of themselves were.
Regardless of their knowledge, skills, abilities, and even actual contributions, it seemed that
in general employees had a tendency to believe that they were more instrumental to the company's
success than maybe reality would find.
Although I didn't know it at the time, managing these perceptions would prove to be important
in maintaining a motivated and productive workforce.
In this week's video, we're going to explore equity theory, and look into the impact of
perception in the workplace.
Developed in 1963 by behavioral psychologist John Stacey Adams, equity theory says that
people are motivated to pursue perceptions of fairness.
But what exactly drives our perceptions of fairness?
Well it turns out there a three different variables that largely are responsible for
our perceived inequity.
These variables consists of: inputs, outcomes, and referents.
Inputs consists of contributions that the employee makes to the organization.
These can include things like: time, skills, education, experience, and even abilities.
Basically inputs include all of the intangibles that an employee brings with them to their
job.
Now in return for these inputs, employees receive what are referred to as outcomes.
These outcomes include things like salary, benefits, prestige, favorable job assignments,
and even recognition.
In short, outcomes are what the employee receives from the organization in return for the inputs
they invest.
What happens is employees begin to compare what they put into the organization i.e. inputs
with what they receive in return i.e. outcomes.
When engaging in this comparison of inputs and outcomes, what is known as an outcome/input
ratio or o/i ratio is produced.
This ratio this isn't necessarily a detailed and objective assessment driven by actual
data because remember we're dealing with observations here.
But we at least develop a rough idea of whether or not our inputs are somewhat consistent
with the outcomes that we receive.
Now in addition to engaging in this comparison, employees also compare their own individual
inputs and outcomes with others, which is referred to as referents.
A referent can be a colleague, maybe society in general, or even yourself at a time in
the past.
This comparison serves to assist employees in gaining a better picture of whether or
not they are being treated fairly.
The difficult thing however, is that we generally base these opinions off of observation, which
certainly doesn't provide us with a accurate understanding off all the variables at work.
So although we may think that our coworker gets paid more for doing less work, the truth
is they may be making other contributions that we're not aware of.
So to recap briefly before we move on, employees will compare the outcomes they receive from
the organization with the inputs they provide the organization and establish an outcome/input
ratio.
After that, employees will take this internal comparison and judge its fairness with a referent
of some kind.
And truthfully this is fairly rationale since its difficult to assess if your getting a
good deal without a knowledge of what others are actually getting.
This comparison of inputs, outcomes, and referents causes employees to develop one of three possible
conclusions related to their perceived fairness.
The first outcome is one of equity or fairness.
This means that an employee found their outcome/input ratio to be fairly consistent with some type
or referent and they don't perceive any unfairness.
Now one thing to remember is that equity is not the same thing as equality.
Equality would mean that everyone is paid the same regardless of contributions and skills.
Equity means that people are paid fairly based upon what they bring to an organization.
So although I make less than my colleague, I may not perceive any issues related to fairness
because I know that they have more years of experience or are maybe even more educated.
Now because we're dealing with perceptions, and we know that perceptions are often distorted,
a common occurrence is for there to be some perception of inequity.
Inequity can actually take two forms: underreward or overreward.
Underreward occurs when the outcome/input ratio of a referent is greater than that of
your own.
This can take many different forms.
For example, you may believe that you have the same amount of experience, education,
and skills, but come to find that your colleague earns more pay than you do.
You may also find that your colleague is paid the same, but you have greater inputs like
education, skills, or experience.
I've observed this in the workplace when one employee is habitually late to work.
If left unaddressed, what often happens is other employees will begin to show up later
and later.
Is this because the employees are lazy?
Absolutely not.
It's the result of perceived inequity since the habitually late employes outcome/input
ratio is viewed as higher due to working less.
Whatever the combination, the result is a perceived imbalance.
Although less common, overreward occurs when your outcome/input ratio is actually greater
than that of your referent.
In this case, you believe that you are receiving more outcomes than your referent, which can
produce guilt and motivate you to try and restore balance by putting in longer hours
or expending additional effort to restore equity.
So we know how employees formulate perceptions of fairness, but does it really matter whether
or not people believe their getting a fair deal?
With the job market in the U.S. still struggling should employees just be happy to have a decent
paying job?
Well actually, perception of fairness matter a great deal.
In fact, employees will typically react to a perceived inequity by attempting to restore
balance by getting their outcome/input ratio in line with that of another.
First lets look at the occurrence of underreward.
If an employee believes that their outcome/input ratio is actually below that of another, they
will likely engage in a few different actions to attempt to restore balance.
Since employees can't easily change the outcome/input ratio of another they try to focus on their
own inputs and outcomes.
Starting with inputs, since the employee perceives an underreward they can move the needle a
bit by reducing their own inputs.
This could mean showing up late for work, spacing out at your desk until lunchtime,
and even leaving work early.
Whatever the behavior, the important thing is by reducing your inputs you are now producing
a outcome/input ratio that is more in line with that of your referent.
The other variable that can be changed is the outcome.
In this case, you would want to increase your outcomes to ultimately improve your outcome/input
ratio.
This can take the form of asking for a pay raise, stealing office supplies or equipment,
and lobbying for additional perks like a covered parking space or even a nice corner office.
By raising the outcomes that you receive, you increase your outcome/input ratio which
will hopefully reduce or even eliminate this perceived inequity.
An employee can also attempt to rationalize their own inputs or outcomes in response to
a perceived inequity.
This often takes the form of "well it could be worse".
The last possible outcome of perceived inequity is simply changing the referent to someone
who is more of an equal in terms of status.
This allows for a more realistic comparison and lessens the chances of a possible issue
arising.
For example, a new quarterback in the NFL probably wouldn't use someone like Peyton
Manning as a referent for determining fairness.
Now ultimately a perception of inequity that continues unresolved will likely cause the
employee to leave the organization.
This makes it absolutely critical for managers to identify possible sources of perceived
inequity and addressing the issue early on.
Equity theory is also a big reason why many employees are secretive in their pay practices
and discourage employees from openly discussing what they earn.
So the next time you watch as your colleague marches out the back door with a nice new
flat panel monitor, instead of thinking their a dirty, low-life criminal, ask yourself:
Am I their referent?
This has been Introduction.
For questions please leave them in the comment box below and I'll do my best to get back
to those in a timely fashion.
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Thanks for watching.