Which of the following observations is true about the equity theory?
A. It suggests that managers compare the performance of employees with their potential to improve.
B. It suggests that employees’ performance should be evaluated based on their developmental needs.
C. It suggests that internal equity pay comparisons focus on what employees in other organizations are paid for doing the same general job.
D. It suggests that when a person’s outcome-input ratio is greater than the comparison other’s ratio, underreward inequity is perceived.
E. It suggests that people evaluate the fairness of their situations by comparing them with those of other people.
The correct answer and explanation is :
The correct answer is:
E. It suggests that people evaluate the fairness of their situations by comparing them with those of other people.
Explanation:
Equity Theory, developed by John Stacey Adams, is a psychological theory of motivation that explains how individuals perceive fairness in social and workplace settings. According to this theory, people determine fairness by comparing their input-to-outcome ratio with that of others. Inputs refer to what an employee contributes to their job, such as effort, experience, and skills, while outcomes include salary, benefits, recognition, and job satisfaction.
If an individual perceives an imbalance in comparison to their peers—either underrewarded or overrewarded—they may experience feelings of inequity, leading to changes in their motivation and behavior.
- Underreward Inequity: If an employee perceives that they are putting in more effort but receiving fewer rewards than their peers, they may feel resentment, reduce their effort, or even seek alternative employment.
- Overreward Inequity: If an employee receives disproportionately higher rewards than their peers for similar work, they may feel guilt or increased pressure to justify their rewards by working harder.
The theory highlights the importance of fair compensation and treatment in maintaining employee motivation and satisfaction. It also suggests that organizations should ensure transparent pay structures and equitable treatment to prevent workplace dissatisfaction.
Why Other Options Are Incorrect:
- A & B: These focus on performance evaluation and development rather than fairness in compensation.
- C: Internal equity comparisons focus on fairness within an organization, while external equity comparisons consider pay differences between organizations.
- D: The statement incorrectly describes underreward inequity; it actually occurs when a person’s outcome-input ratio is lower than that of a comparison other.