The paper 'How Can Equity Theory Explain the Motivation of Employees 'is a wonderful example of a Management Assignment. The equity theory is grounded on the premise that individuals are motivated to acquire and preserve fair treatment for themselves. The theory, therefore, recommends that there should be fairness in an employee’ s inputs (experience, skills, efforts, and education) and the rewards/ outputs (the benefits, salary, and promotion), in comparison to the rewards that others receive (Pride et al, 2013). The equity theory can be used to explain the motivation of employees at Diaco.
An important factor that can be noted is that Diaco acknowledges that a highly motivated workforce is the key to survival in a highly competitive environment. Interestingly, however, the company does not adopt approaches used by large corporations such as Theory X and the feel-good approach. Diaco has implemented its own motivation approach which is a reflection of the equity theory. For instance, Diaco offers its employees benefits such as daycare centers and pays medical insurance for all employees, including casuals. In return, the company requires hard work, creativity, and teamwork.
What is evident from this scenario is that the company considers the importance of fairness in the inputs and the outputs given to the employees. When the Diaco company employees make a comparison of the outputs and inputs with those of other companies, they perceive themselves as better off. As stated by the case, few of the employees are there because of the money since the company pays at the market rate or at a rate that is slightly higher. The main rewards are not monitory. It can, therefore, be stated that employees at Diaco are motivated by the fact that they receive better benefits than other companies. According to the equity theory, the idea of equity is implemented by first of all developing our personal input to outcome ratio.
The next step involves making a comparison of our input– outcome ratio with those of others (Pride et al, 2013). Although Diaco has adopted an employee motivation approach derived from the equity theory, it can be argued that the approach can result in an underpayment equity condition whereby a worker contributes more inputs but also gets the same outputs as a referent.
For instance, in the scenario where the company pays medical insurance and daycare benefits for all employees both casual and full-time employees, the underpayment equity condition arises. This is because the input of casual employees is not similar to that of the full-time employees, yet they receive the same benefits. White and Allen (2002) argue that the equity theory was re-energized by the emerging interest in equity and organizational justice. When looking keenly at the premise of the equity theory as proposed by John Stacey Adams, in 1963, it can be argued that the theory mainly promotes the concepts of equity and justice within the organization.
The concept of equity is attained when the distribution of rewards is in direct proportion to the contribution the employees make to the organization. In a practical sense, every employee in the organization cannot obtain similar rewards, but the rewards of each individual should be according to their contribution. Employees at Diaco are therefore motivated by the fact that there is justice in the organization because their contribution or input is rewarded with the lucrative nonmonitory benefits such as 50% tuition fees for those who want to study.
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