The paper 'Analysis of Application of Equity Theory and Expectancy Theories at Ultimate Software" is a perfect example of business coursework. Equity theory is an important attempt at explaining how an individual’ s motivation at the workplace is influenced by the perception of the extent of fairness in social exchange (Kreitner and Kinicki, 2010). Equity theory involves individuals making a comparison on how they are treated in with how other employees making similar contributions are treated (Bolino and William, 2008). The theory, which was developed by J. Stacy Adams posits that people seek social equity in the rewards they expect for performance (Daft et al, 2011, p.
615). Bolino and William (2008) further assert that Adams’ equity is an important theory in motivation research as it attempts to expound how individual’ s comparison of their ratio of inputs and outputs to the ratio of inputs and outputs of others affect motivation at the workplace. Inputs to the job include experience, education, ability, and effort while outcome includes pay, recognition, benefits, and promotions among other outcomes (Bolino and William, 2008). Equity theory asserts that when people perceive that outcome equals to what other persons receive for making similar contributions, or in a similar workgroup or perceived group average, then the people believe that they are receiving fair and equitable treatment and this motivates them in employment (Bolino and William, 2008).
On the other hand, the theory proposes that when people perceive the existence of inequity, both positive and negative inequity, a desire to restore equity is subsequently developed influencing employee’ s behaviors. Positive inequity occurs where an individual feels that referent other is receiving lesser outcome for similar input while negative inequity occurs where an employee feels that referent others are receiving greater outcome for similar inputs (Kreitner and Kinicki, 2010).
Employees may restore equity through the distortion of perception such as a or leaving the job among other ways if they experience negative inequity and may seek less pay, acquire more skills or artificial increase of status attached to a job if they experience positive inequity. Explaining employees motivation at Ultimate using Equity theory Equity theory has often been demonstrated in many organizations and research and even in case studies and clear implications for managers is evident on the way they should use rewards such as promotions and salary increases to motivate employees especially considering the potential that inequity has on pressurizing employees to try to change work habits, leave the job or change the system.
This assertion is supported by Kreitner and Kinicki, (2010) who points out that motivation is highest when as many people as possible in an organization perceive that they are receiving equitable treatment In the case study, explanation of employees behavior using equity theory is possible by analyzing the inputs that various employees put in the job, and the output that they receive and their perceptions of whether input- outcome ratio is equitable by making comparisons to persons in similar positions both within a workgroup or perceived group average in the organization and the industry.
In Ultimate software, various inputs are identified. For instance, inputs that are visible include loyalty and trust, which are captured in the statement that asserts that “ employees credit Scherr for setting the tone that fosters loyalty and trust” (Kreitner and Kinicki, 2010, pp.
243) indicating that trust and loyalty are some of the inputs that the employees offer to the company. Generally, employees perceive that they receive fair treatment in return as indicated by the same assertion. Since equity theory suggests that employees perceive equity in treatment when the outcome is comparable to the inputs against perceived group average, employees perceive the presence of equity when they feel they are treated as fair as others within the perceived workgroup, Ultimate employee see themselves to be treated fairly comparable to referent others and this is evident in the statement that “ ultimate employees rave about such uncommon benefits as fully paid health premiums for themselves” (p.
234). Daft et al, 2011 points out that restoration of equity works in both ways, citing examples of situations such as where a person with a high level of education receives similar pay to a new employee with less education potential of resulting to the experience of a desire to correct the perceived anomaly through changing inputs such as by working less, absenteeism or changing outcomes through a request for a salary increase, bigger office and unionization while a person receiving more than what others who make similar contribution receive, may seek to amend the inequity through changing inputs such as working harder or change the outcome by considering less pay or getting more education.
In Ultimate software, this is captured by José ’ s motivation to go back for master’ s degree to hone his skills and become more valuable to the organization followed by the desire to seek to correct the anomaly of inequity that is created as he is more likely to feel he deserves additional benefits such as promotion after acquiring more skills.
Expectations for an outcome to be reflected with an increase in inputs as captured in the equity theory are thus captured by the expectations by Chinea of parlaying the master’ s degree into a promotion. Such promotion will restore equity since for higher skills level, he would be expecting a bigger position than he was with his colleagues and which can now be compared to a new referent other persons with similar qualifications.
The promotion will effectively increase the input-output ratio for Chinea since by increasing input (education) relative to referent others in the same workgroup results to an expectation that the outcome must also be increased (promotion) to restore the input-outcome ration or equity balance. Equity is further manifested in the assertion and philosophy adopted by Sherr, “ If you take care of employees, then they take care of you” (Kreitner and Kinicki, 2010, pp. 243) indicating that Scherr considers each employee equally valuable with the subsequent benefits of having a workforce that is likely to generate a perception of equity among the employees contributing to a motivated workforce.
The fact that the health premium benefits are uncommon is an indication that they receive favorable treatment, or greater outcome comparable to among the best they can compare themselves against. This can have the effect of motivating the employees to work harder to justify these benefits in order to regain a balance of equity. Similar benefits, which are outcomes, are also captured in the 30 per cent company match on 401 (k) contributions; stock options and annual tuition reimbursement and the education benefits that are the maximum eligible for tax benefits.
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