EQUITY THEORY

1. by Steven L. McShane, Curtin University (Australia) and University of Victoria (Canada), and Tim Neale
2. Tom Parker enjoys working outdoors. At various times in the past, he has worked as a ranch hand, high steel rigger, headstone installer, prospector, and geological field technician. Now 43, Parker is a geological field technician and field coordinator with Arctic Mining Consultants. He has specialized knowledge and Page CA-3experience in all nontechnical aspects of mineral exploration, including claim staking, line cutting and grid installation, soil sampling, prospecting, and trenching. He is responsible for hiring, training, and supervising field assistants for all of Arctic Mining Consultants’ programs. Field assistants are paid a fairly low daily wage (no matter how long they work, which may be up to 12 hours) and are provided meals and accommodation. Many of the programs are operated by a project manager who reports to Parker.
3. Parker sometimes acts as a project manager, as he did on a job that involved staking 15 claims near Eagle Lake, British Columbia. He selected John Talbot, Greg Boyce, and Brian Millar, all of whom had previously worked with Parker, as the field assistants. To stake a claim, the project team marks a line with flagging tape and blazes (ribbons, paint, or other trail markers) along the perimeter of the claim, cutting a claim post every 500 metres (called a “length”). The 15 claims would require almost 100 kilometres of line in total. Parker had budgeted seven days (plus mobilization and demobilization) to complete the job. This meant that each of the four stakers (Parker, Talbot, Boyce, and Millar) would have to complete more than seven lengths each day. The following is a chronology of the project.
4. DAY 1
5. The Arctic Mining Consultants’ crew assembled in the morning and drove to Eagle Lake, from where they were flown by helicopter to the claim site. On arrival, they set up tents at the edge of the area to be staked, and agreed on a schedule for cooking duties. After supper, they pulled out the maps and discussed the job—how long it would take, the order in which the areas were to be staked, possible helicopter landing spots, and areas that might be more difficult to stake.
6. Parker pointed out that with only a week to complete the job, everyone would have to average seven and a half lengths per day. “I know that is a lot,” he said, “but you’ve all staked claims before and I’m confident that each of you is capable of it. And it’s only for a week. If we get the job done in time, there’s a $300 bonus for each of you.” Two hours later, Parker and his crew members had developed what seemed to be a workable plan.
7. DAY 2
8. Millar completed six lengths, Boyce six lengths, Talbot eight, and Parker eight. Parker was not pleased with Millar’s or Boyce’s production. However, he didn’t make an issue of it, thinking that they would develop their “rhythm” quickly.
9. DAY 3
10. Millar completed five and a half lengths, Boyce four, and Talbot seven. Parker, who was nearly twice as old as the other three, completed eight lengths. He also had enough time remaining to walk over and check the quality of stakes that Millar and Boyce had completed, and then walk back to his own area for helicopter pickup back to the tent site.
11. That night Parker exploded with anger. “I thought I told you that I wanted seven and a half lengths a day!” he shouted at Boyce and Millar. Boyce said that he was slowed down by unusually thick underbrush in his assigned area. Millar said that he had done his best and would try to pick up the pace. Parker did not mention that he had inspected their work. He explained that as far as he was concerned, the field assistants were supposed to finish their assigned area for the day, no matter what.
12. Talbot, who was sharing a tent with Parker, talked to him later. “I think that you’re being a bit hard on them, you know. I know that it has been more by luck than anything else that I’ve been able to do my quota. Yesterday I only had five lengths done after the first seven hours and there was only an hour before I was supposed to be picked up. Then I hit a patch of really open bush, and was able to do three lengths in 70 minutes. Why don’t I take Millar’s area tomorrow and he can have mine? Maybe that will help.”
13. “Conditions are the same in all of the areas,” replied Parker, rejecting Talbot’s suggestion. “Millar just has to try harder.”
14. DAY 4
15. Millar did seven lengths and Boyce completed six and a half. When they reported their production that evening, Parker grunted uncommunicatively. Parker and Talbot did eight lengths each.
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17. DAY 5
18. Millar completed six lengths, Boyce six, Talbot seven and a half, and Parker eight. Once again Parker blew up, but he concentrated his diatribe on Millar. “Why don’t you do what you say you are going to do? You know that you have to do seven and a half lengths a day. We went over that when we first got here, so why don’t you do it? If you aren’t willing to do the job then you never should have taken it in the first place!”
19. Millar replied by saying that he was doing his best, that he hadn’t even stopped for lunch, and that he didn’t know how he could possibly do any better. Parker launched into him again: “You have got to work harder! If you put enough effort into it, you will get the area done!”
20. Later Millar commented to Boyce, “I hate getting dumped on all the time! I’d quit if it didn’t mean that I’d have to walk 80 kilometres to the highway. And besides, I need the bonus money. Why doesn’t he pick on you? You don’t get any more done than me; in fact, you usually get less. Maybe if you did a bit more he wouldn’t be so bothered about me.”
21. “I only work as hard as I have to,” Boyce replied.
22. DAY 6
23. Millar raced through breakfast, was the first one to be dropped off by the helicopter, and arranged to be the last one picked up. That evening the production figures were as follows: Millar eight and a quarter lengths, Boyce seven, and Talbot and Parker eight each. Parker remained silent when the field assistants reported their performance for the day.
24. DAY 7
25. Millar was again the first out and last in. That night, he collapsed in an exhausted heap at the table, too tired to eat. After a few moments, he announced in an abject tone, “Six lengths. I worked like a dog all day and I only got a lousy six lengths!” Boyce completed five lengths, Talbot seven, and Parker seven and a quarter.
26. Parker was furious. “That means we have to do a total of 34 lengths tomorrow if we are to finish this job on time!” With his eyes directed at Millar, he added: “Why is it that you never finish the job? Don’t you realize that you are part of a team, and that you are letting the rest of the team down? I’ve been checking your lines and you’re doing too much blazing and wasting too much time making picture-perfect claim posts! If you worked smarter, you’d get a lot more done!”
27. DAY 8
28. Parker cooked breakfast in the dark. The helicopter dropoffs began as soon as morning light appeared on the horizon. Parker instructed each assistant to complete eight lengths and, if they finished early, to help the others. Parker said that he would finish the other 10 lengths. Helicopter pickups were arranged for one hour before dark.
29. By noon, after working as hard as he could, Millar had only completed three lengths. “Why bother,” he thought to himself, “I’ll never be able to do another five lengths before the helicopter comes, and I’ll catch the same amount of abuse from Parker for doing six lengths as for seven and a half.” So he sat down and had lunch and a rest. “Boyce won’t finish his eight lengths either, so even if I did finish mine, I still wouldn’t get the bonus. At least I’ll get one more day’s pay this way.”
30. That night, Parker was livid when Millar reported that he had completed five and a half lengths. Parker had done ten and a quarter lengths, and Talbot had completed eight. Boyce proudly announced that he finished seven and a half lengths, but sheepishly added that Talbot had helped him with some of it. All that remained were the two and a half lengths that Millar had not completed.
31. The job was finished the next morning and the crew demobilized. Millar has never worked for Arctic Mining Consultants again, despite being offered work several times by Parker. Boyce sometimes does staking for Arctic, and Talbot works full-time with the company.
32. Define and describe Distributive Justice. Using Equity Theory, describe what Brian Millar would have thought about in making his decision to stop trying to achieve the behaviours necessary to successfully complete his job. (4 points)

EQUITY THEORY Feelings of equity are explained by equity theory? , which says that employees determine feelings of equity by comparing their own outcome/input ratio to theoutcome/input ratio of some other person!“8 As Exhibit 5.7 illustrates, the outcome/input ratio is the value of the outcomes you receive divided by the valueof the inputs you provide in the exchange relationship. Inputs include such things as skill, effort, reputation, performance, experience, and hours worked.Outcomes are what employees receive from the organization, such as pay, promotions, recognition, interesting jobs, and opportunities to improve one’s skills andknowledge. EXHIBIT 5.7 Equity Theory Model Your Comparison Other’sOutcome/Input Ratio Outcome/Input Ratio Your outcomes Other’s outcomes – Pay/benefits ~ Promotions c"mi?are 0W" . Payibenefits – Promotions- Recognition – Workspace- Learning – Interestingjob ratio with – Reco nition ~Works ace9 p other’s ratio – Learning – Interestingiob Your inputs Other’s inputs – Skiil – Reputation- Efiort . Hours~ Performance . Experience – Skili . Reputation – Effort – Hours- Performance – Experience Perceptionsof equity orineq uity Equity theory states that we compare our outcome/input ratio with that of a comparison other.89 The comparison other might be another person or group ofpeople in other jobs (e. g., comparing your pay with your boss’s pay) or another organization. Some research suggests that employees frequently collectinformation on several referents to form a “generalized” comparison other.90 For the most part, however, the comparison other varies from one person andsituation to the next and is not easily identifiable. The comparison of our own outcome/input ratio with the ratio of someone else results in perceptions of equity, underreward inequity, or overreward inequity. Inthe equity condition, people believe that their outcome/input ratio is similar to the ratio of the comparison other. In the underreward inequity situation, Wpeople believe their outcome/input ratio is lower than the comparison other’s ratio. In the overreward inequity condition, people believe their ratio ofoutcomes/inputs is higher than the comparison other’s ratio. Inequity and Employee Motivation How do perceptions of equity or inequity affect employee motivation? The answer is illustrated in Exhibit 5.8 . Whenpeople believe they are under— or overrewarded, they experience negative emotions (called inequity tension).91 As we have pointed out throughout this chapter,emotions are the engines of motivation. In the case of inequity, people are motivated to reduce the emotional tension. Most people have a strong emotionalresponse when they believe a situation is unfair, and this emotion nags them until they take steps to correct the perceived inequity.