A COUNTER-ARGUMENT: EQUITY THEORY

ABSTRACT

For job motivation, Adam’s Equity Theory may be valid for certain situations, but sometimes, the employer needs to consider the unequal treatment of employees.

This article counter-argues Adam’s Equity Theory of Motivation in terms of its applicability and benefits of it. The major two issues about the Equity Theory are questioned within the framework of performance and potential measures of the common metrics. Business reviews and academic articles are used to evaluate the theory.

In the evaluation of the theory, it is concluded that employers must preserve their hard-to-find high-potential people in the organization, especially young talents, because of the anticipated future leader scarcity in the world. Since Equity Theory inputs cannot reveal/measure the true potential of employees, there would be nothing left to differentiate high-potential workers from low-potential ones if the theory is blindly employed in the workplace.

Even though Equity Theory seems to motivate the majority of the workers in the company, performance metrics are remarkably hard to measure correctly and the negative effects of introducing performance criteria on the employee make the theory fruitless.

                                                                                                I.        INTRODUCTION

This paper covers the counter-argument to Adam’s Equity of Motivation Theory. In Chapter II Background, essential background information about the theory and its’ metrics as well as the Hiring trends in the business world has given. In Chapter III Potential and Chapter IV Performance, the theory is stressed in terms of high potential employee and performance metrics/measurements perspectives. Chapter V Conclusion deduces the counter statements explained in this paper.

                                                                                                II.        BACKGROUND

 Equity Theory

Equity Theory was developed in 1963 by workplace behavior psychologist John Stacey Adams.

Equity Theory is based on the idea that individuals are motivated by fairness. In simple terms, equity theory states that if an individual identifies an inequity between themselves and a peer, they will adjust the work they do to make the situation fair in their eyes. As an example of equity theory, if an employee learns that a peer doing exactly the same job as them is earning more money, then they may choose to do less work, thus creating fairness in their eyes. [1]

Based on this, Adam's Equity Theory shows as the individual's perception of equity gets higher, then s/he will get more motivated. Conversely, if a person perceives injustice, he will easily be demotivated.

Traits of Equity Theory

There are Inputs and Outputs introduced in the theory. Inputs are basically the performance metrics of an employee while Outputs are the earnings in return for the Inputs. [1]

Inputs (Performance Metrics) include:

·         Hard work

·         Skill

·         Ability

·         Flexibility

·         Acceptance of others

·         Commitment

·         Determination

·         Effort

·         Enthusiasm

·         Trust in superiors

·         Adaptability

·         Loyalty

·         Support of colleagues

·         Personal sacrifice

·         Engagement

Outputs (Compensations/rewards) include:

·         Recognition

·         Financial rewards (such as salary, benefits, perks).

·         Reputation

·         Praise

·         Stimulus

·         Responsibility

·         Sense of advancement/growth

·         Job security

·         Sense of achievement

 How to measure these performance criteria?

Since it is almost impossible to measure and quantify all these traits because of their subjective nature, theory suggests having a balance between inputs and outputs where managerial observation is concerned. As a matter of fact, the general observation approach is far away from being objective.

Employing Equity Theory in the Workplace

As stated in Herzberg’s Theory, when the hygiene factors are established, workers need motivation in order to achieve better in their jobs. [2] These motivators somehow correlate with the Equity theory outputs (i.e. recognition, growth)

When it comes to the application of Equity Theory in the workplace, the employer needs to give compensation and benefits to the entire team by setting the standards and giving an equal amount of prizes for equal work. And this is the point where this paper questions the theory.

How to Hire People

For every company, there is a massive question about which people to hire and invest in. Hiring processes and criterion are changed over the centuries, if we think about ancient Egypt, you needed to hire strong men in order to build giant pyramids, whereas now, you can be hired only because of writing a code for computers.

 As discussed in the article [3], talent spotting can be separated into 4 periods;

 1.    Physical characteristics

For thousands of years, humans made choices about one another on the basis of physical attributes.

 2.    Intelligence and experience

Throughout much of the 20th century, IQ, verbal, analytical, mathematical, and logical cleverness was justifiably seen as an important factor in hiring processes (particularly for white-collar roles), with educational pedigrees and tests used as proxies.

 3.    Competency

In the 1980s, the competency movement began and it is still prevalent today. David McClelland’s 1973 paper “Testing for Competence Rather than for ‘Intelligence’” proposed that workers, especially managers, be evaluated on specific characteristics and skills that helped predict outstanding performance in the roles for which they were being hired.

 4.    Potential

Now we’re at the dawn of a fourth era, in which the focus must shift to potential. In a volatile, uncertain, complex, and ambiguous environment. What makes someone successful in a particular role today might not be tomorrow if the competitive environment shifts, the company’s strategy changes, or he or she must collaborate with or manage a different group of colleagues. So the question is not whether your company’s employees and leaders have the right skills; it’s whether they have the potential to learn new ones.

Two Aspects of the Spectrum

Evaluation of an employee can be very complex for managers and this table illustrates two main aspects of the simple evaluation process. The potential and performance of an employee give a very good forecast and understanding about the subject, whether s/he is worth investing in or performing well in relation to her/his potential. Measuring the Potential and the Performance and their determinants are explained further in the chapters.

Figure 1. Employee performance-potential scale. [4]

                                                                                                III.        POTENTIAL

What is potential?

Potential indicates whether someone will be able to succeed in a bigger role in the future. It is a person’s ability to grow and handle responsibilities of greater scale and scope. By “greater scale” we mean a job in the same area but with, say, a larger budget or staff; by “greater scope” we mean a job involving activities of substantially more breadth and complexity. [5]

How to Measure Potential?

We cannot easily relate personal potential with the traits of Equity theory. Even if there are traits that can be considered determinants of potential, it is highly inefficient and hard to measure them. For instance, if you were to measure the engagement of an employee, as discussed in the article [6], it is not even close to being an easy task. You may analyze some metrics (i.e. the amount of work that occurs outside of normal working hours, the number of network connections and time spent with people outside of the immediate team or region, the percentage of participation in ad-hoc meetings and initiatives, recurring meetings and processes, time spent collaborating directly with customers outside of the normal scope of work, management quality and time investment, influence from colleagues) and come to a very general conclusion in the end. There are of course some indicators and metrics to evaluate this but it is immensely challenging and ineffective due to character differences from one person to another.

Thus, the difficulty of measuring the traits of Equity Theory makes it far from being adequate and decisive. And I do not believe many companies would bother themselves by trying such actions.

You cannot measure always everybody’s potential to compensate for their inputs in regard to outputs. As explained in the article [7], there are three main markers of potential. These are listed below;

 1.    Ability

The best leading indicator here is demonstrating the knowledge and skill it takes to perform the key tasks that make up the job. The single-best predictor of job performance is a work sample test.

 2.    Social Skills

Reflects the growing significance of teamwork and collaboration in modern organizations. At a basic level, employees have to be able to get along and earn the support of supervisors and coworkers.

 3.    Drive

Concerns the will and motivation to work hard, achieve, and do whatever it takes to get the job done. It is easily identified as work ethic and ambition.

 Since these markers are more complex markers than the Equity Theory inputs, it is not probable to measure them by simple qualitative or quantitative assessments. This brings us to the conclusion that it is not possible to correlate Equity Theory inputs and Employee potential.

Future Leaders

As discussed in articles [3] and [5] authors state that there will be a shortage of potential leaders and managers in the near future. In the survey, only 22% of the 823 leaders consider their pipelines promising, and only 19% said they find it easy to attract the best talent.

Since it is not very plausible to measure personal potential using Equity Theory Inputs, employers should abandon the theory and need to make their hardly-found-potential leaders and managers happier than their counterparts. Even though they are doing the same job now, they have further potential for their company’s future. If the employer chooses not to do so, the potential talents may find another job and leave for another company.

                                                                                          IV.        PERFORMANCE

 Another important aspect of the Equity theory is job performance and its determinants, because, the theory benefits the employee by measuring his/her performance.

Performance measurements are highly debated subjects due to the fact that there are no true performance metrics to measure real work performance.

Since there are numerous worker performance methods, we can split them up into four main categories [4].

 ·         Work quality metrics :

They are focused on the quality of the output and are used in instances where subjective measurement is required.

 ·         Work quantity metrics :

These metrics are focused on the quantity of output. Quantitative metrics should be used when the output is straightforward and simple.

 ·         Work efficiency metrics :

Quantitative and qualitative metrics do not say much on their own so a balance between them must be incorporated.

 ·         Organizational performance metrics:

Companies can also use employee performance metrics in order to measure their own performance such as Profit per Employee or Human Capital ROI.

There are several measuring techniques for each of the metrics listed, however, none of them truly represents an employee’s performance by itself. Therefore, the combination of all these techniques has been used regularly by employers such as 360-degree or 180-degree feedback systems. Since multi-perspective feedback systems are better they can somehow represent a certain degree of performance of the employee however it is also believed that all techniques have their disadvantages.

Performance metrics are created for a reason and it is to measure the actualization of the company’s strategy in a given period. But, corporate strategies are often obscure for the workers. For example, when the company conducts a survey around customers, an employee who is responsible for interpreting the results can somehow intend to interpret positively, thinking that the strategy is maximizing the survey results, even if the objective results are vastly the inverse.

When a performance criterion is introduced, workers may easily surrogate the performance metrics such as behaving or working to achieve better on the performance scale. And this may lead to some serious causalities. An example of an extreme case, Wells Fargo, a banking company’s incentive-compensation system that has led employees to open 3.5 million accounts without customers.

Article [8] Argues that tying the strategy and performance metrics can be dangerous. “A company can easily lose sight of its strategy and instead focus strictly on the metrics that are meant to represent it.”

Hence, the Equity Theory inputs and performance metrics are most problematic for toughness to measure, their negative effects on employees, and also for ineffectiveness.

                                                                                              V.        CONCLUSION

In order to motivate an employee, Adam’s Equity Theory holds true to an extent however, sometimes employers should consider unequal treatment among employees.

An employer needs to make potential leaders and managers happier than their peers for the sake of the talent pool and leader pipeline health of the organization. Especially in the era of shortage of future leaders, top managements need to save their high potential workers in their organization and the way to do this is unfortunately not equal treatment with other good, but lack of potential people. There must be further actions involved because it is not a matter of motivation, it is a matter of keeping the future star in the hand indeed.

Also, Inputs and performance metrics of Equity Theory are predominantly questionable for toughness to measure, their negative effects on workers, and ineffectiveness as well. So, where implementation is concerned, Equity Theory does not have a solid plan for assessing its traits.

All in all, treating in absolute equity to the employees is seem only to be a good wish for an organization and it should be so.

                                                                                            VI.        REFERENCES

1. Mindtools.com. 2020. Adams' Equity Theory: Balancing Employee Inputs And Outputs. [online] Available at: <https://www.mindtools.com/pages/article/newLDR_96.htm> [Accessed 3 May 2020]

2. Frederick HERZBERG (1987) 'One More Time: How do You Motivate Employees', Harvard Business Review, reprint 87507

3. Claudio Fernández-Aráoz (2014) '21st-Century Talent Spotting', Harward Business Review, (June 2014)

4. AIHR Analytics. 2020. 21 Employee Performance Metrics | AIHR Analytics. [online] Available at:<https://www.analyticsinhr.com/blog/employee-performance-metrics/> [Accessed 3 May 2020]

5. Claudio Fernandez Araoz , Boris Groysberg and Nitin Nohria, (2011) 'How to Hang On to Your High Potentials', Harvard Business Review, (October 2011)

6. Ryan Fuller (2014) 'A Primer on Measuring Employee Engagement', Harvard Business Review, (November 2014)

7. Tomas Chamorro-Premuzic, Seymour Adler and Robert B. Kaiser (2017) 'What Science Says About Identifying High-Potential Employees', Harvard Business Review, (October 2017)

8. Michael Harris and Bill Tayler (2019) 'Don’t Let Metrics Undermine Your Business', Harvard Business Review, (October 2019)