Another theory relevant to the goals of this study is equity theory, which asserts that workers are motivated by a desire to be treated fairly, which is measured by the ratio of their inputs and outcomes (Adams, 1965). Workers possess certain inputs that they bring to the job, like skills, time, and effort. In return, they expect to receive certain outcomes from the job, such as a salary, benefits, and other forms of compensation. Workers are satisfied if they think their inputs are equal to their outcomes. The way this satisfaction is determined is by comparing themselves to “comparison others,” like co-workers or peers. If workers draw the conclusion that conditions are inequitable, their motivation will change. Empirical evidence has been found in many studies including Greenberg, 1988; Greenberg & Ornstein, 1983; Valenzi and Andrews, 1971. It is important to note that this is not a measure of true equity, but what workers personally perceive to be equitable (Huseman, Hatfield, & Miles, 1987). There are two types of perceived inequity: underpayment inequity and overpayment inequity. Underpayment inequity states that if the worker determines that their inputs are greater than their outcomes as compared to their comparison others, there will be four outcomes:
EQUITY THEORY AND SILICON VALLEY7i.Increasing outcomes, like asking for a raise ii.Decreasing inputs, like putting in less hours of work iii.Changing the comparison other iv.Leaving the situation, like switching companies. Overpayment inequity, which states that if the worker feels that their outcomes are greater than their inputs as compared to their comparison others, manifests in four different results: i.Increasing inputs, such as working extra hours to feel like they have earned the extra outcomes ii.Decreasing outcomes, such as asking for a cut in pay; this is the least likely scenario iii.Changing the comparison other to someone in a higher position iv.Distorting the situation through rationalization, like telling themselves that they deserve this increased outcome because of their higher work quality However, equity theory sometimes has difficulty predicting behaviors, especially when people act non-rationally. For instance, Valenzi and Andrews’ (1971) study found that, contrary to inequity theory predictions and to previous inequity theory experiments, there were no significant work performance differences among the three groups, overpay, underpay, and control. However, 3 out of 11 underpay workers quit, and during the debriefing process, many others reported wanting to quit as well. The limitations of the study also acknowledged that underpay workers may also feel that decreasing their work performance had an element of revenge that was personally distasteful to them and would have caused admonishment.
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