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Equity theory proposes that peoples motivation, performance and satisfaction depend on their subjective evaluation of the relationships between their effort/reward ratio and the effort /reward of others in similar situations.
Individual Rewards/Individual Inputs Other's Rewards/ Other's Inputs
Inequity exists whenever one feels that the rewards they receive for their work inputs or contributions are unequal to the rewards other people appear to have received for their input and equity exists when the ratio is perceived to be equal. There are two state of inequity.
Negative inequity - when an individual feels they have received relatively less than others have in proportion to their work inputs.
Positive inequity - when an individual feels they have received relatively more than others in proportion to their work inputs. Both the state of positive and negative inequity are motivating states. Adam proposes that when either state exists, an employee is likely to engage in one of the following behaviours to restore equity.
Change work inputs ( for example reduce performance efforts in case of negative inequity or increase work effort to match benefits in state of positive inequity )
Change outcomes / rewards received (for example ask for a pay increase or vacation time)
Change comparison points ( for example compare self with a different co-worker)
Psychologically distort the comparisons (for example rationalise the inequity as only a temporary situation and will be resolved in the future or artificially increase/decrease the status of the job)
Leave the situation ( for example change departments or quit for a favourable balance of rewards with another organisation)
For managers, the equity theory has several implications, the most important being that, for most individuals, rewards must be perceived as fair in order to be motivating. There must be effective communication of rewards and clarification of performance appraisal. Feelings of inequity are solely determined by the individual's interpretation of the situation. It is not how managers feel about the allocation of rewards that counts but it is how the recipients perceive the rewards that will determine the motivational outcomes of the equity dynamic. The challenge for management is that they should create a process that is seen to be fair because perceived equity can foster job satisfaction and performance. The manager must make sure that negative consequences of equity comparisons are avoided or at least minimised when resources are allocated.
Evidence supports most of the predictions of this theory. Research is most conclusive about negative inequity though both under and over rewarding employees can be detrimental to motivation. Under rewarding consistently negatively motivates but over rewarding has mixed results i.e. some employees decrease their motivation and others increase it while still others show no significant change. However because work relationships are not static, inequities are not usually isolated or onetime events. Individuals differ, so naturally their methods of reducing inequity also differ. It is difficult to assess the perception or misperceptions of the employees hence the difficulty in applying the concepts of the theory. Another weak element of the theory is; how does one choose the comparison "other"? The process by which individual chooses is not clearly understood. It is thus not precise enough to predict which actions are most probable. Despite all this, it still does have a direct relevance for compensation practices.
The Expectancy theory by Victor Vroom
This model of motivation specifies that the effort to achieve high performance is a function of the perceived likelihood that high performance can be achieved and will be rewarded if achieved and that the reward will be worth the expended effort. The theory treats motivation as a function of a person's expectation about relationships among his or her efforts, the effectiveness of those efforts, the rewards they obtain Vroom (1964). The three components of the expectancy theory can be thought of as three questions.
Can I achieve the desired level of task performance? (Expectancy)
What work outcome will be received as a result of performance?(Instrumentality)
How highly do I value work outcomes?(Valence)
For example if an employee wants a promotion and sees that a high performance will lead to that promotion and sees that if they work hard they can achieve a high performance then they can be motivated to work hard. Vroom states that motivation, expectancy, instrumentality and valence are related to one another by the equation M= E*I*V. This means that the motivational appeal of any work path is sharply reduced whenever any one or more of these factors approaches the value zero. Therefore, managers should ensure all the elements are high and positive for a great motivational force to be maintained. The expectancy model has a number of implications for how managers should maximise the elements that motivate subordinates;
To maximise Expectancy managers must;
Select and train workers with ability
Clarify work efforts and performance goals
(This ensures subordinates know what to do. If goals are too difficult or impossible then motivation is low.)
To maximise instrumentality managers must;
Communicate performance outcome possibilities
Identify rewards that are contingent on performance.
( To maintain or increase motivation analyse what factors counter act the effectiveness of the rewards; factors like timing and other influences on the work situation may require mangers to make adjustments.)
To maximise valence in a positive direction, managers must;
Identify individual needs
Adjust rewards to match individual needs
(By observing their reactions in different situations and asking them individually, what they desire. Some people prefer tangible reward while others place importance on recognition. Others prefer public praise to others who prefer quiet praise from someone they admire)
Everyone has a unique combination of valences, instrumentalities and expectancies. The expectancy theory does not necessarily give insights into the techniques of motivating employees but it helps to understand the relationships between individuals and organisations. The model is designed to help management analyse, understand workers' motivation, and identify some of the relevant variables, though not providing practical help in solving their motivational problems except simple prescriptions such as making employees know exactly what is expected of them. It therefore has an application problem because of the assumption that people are rational and logically calculating, an assumption that is too idealistic. It reflects on the complexities of motivational problems but it does not attempt to describe how motivational decisions are actually made or try to solve motivational problems facing a manager.
Goal setting theory by Edwin Locke
It is a cognitive theory of work motivation, which proposes that managers can increase and enhance motivation by setting specific, challenging goals and helping people track goal achievement by giving timely feedback. It focuses on the process of setting goals themselves. According Edwin Locke, the natural human inclination to set and strive for goals is useful only if the individuals both understand and accepts a particular goal. Furthermore, workers will not be motivated if they do not possess the skills needed to achieve a goal. However when goals are specific and challenging, they function more effectively as motivating factors in individuals.
The key components of the goal setting theory are:
Goal specificity - Includes what needs to be done, how much needs to be done and the performance period. Goals have to be concrete and unambiguous. For example goals such as sell goods worth $20 000,00 dollars in a month or keep in touch with a customer each week rather than, increase sale of goods or keep in touch with customers.
Goal difficulty - Hard goals are more motivational than easy ones because they are challenging and stretch people's abilities. The easy ones do not require workers to increase their output. Succeeding on challenging goals increases the feeling of job satisfaction, which in turn increases motivation.
Goal acceptance - Means that employees have to "buy into" the goals and be committed to them. Having people participate in setting goals can increase acceptance of goals and commitment to them for example a co- management initiative that has low-level employees and managers working together to set budgets, set goals and make decisions. This gives the employees the sense that they are also an important part of running the business and thus gives them the motivation to work hard. Participation also increases information about how a goal can be achieved. The information can let employees discover better ways of doing the job.
Feedback- feedback is the information that people get about how well they are progressing towards goal achievement. Feedback is important on a regular and ongoing basis. Employees need accurate feedback on their performance to help them adjust their work methods when necessary and to encourage them to persist in working towards goals.
Goal setting increases motivation because people can focus their energies in the right direction and because people know what to do, the goals can easily be accomplished because efforts are directed to the most important aspects of the job. When goals are achieved pride and satisfaction increase contributing to higher motivation. For example with goal setting, if economic conditions change sharply affecting a sales department for example if a goal is not adjusted downward, a goal can become unreachable and performance will drop and if it is not adjusted upward in better economic conditions then the goal becomes too easy and the employee will not perform up to his/her capabilities. Another way through which goal setting is applied Management By Objectives (MBO). This concept subscribes to the notion of specific and reasonably demanding goals with provision for feedback and a participative approach. This theory however seemingly has a greater relevance for people who are eager to derive a good learning experience from the challenge of meeting goals rather than proving to others that their capability to meet exacting standards.
Content theories help to explain what employees think and help to understand and even anticipate people's reactions to a manager's effort to lead. The major drawback of these theories is that, they are only useful after managers have gotten to know their subordinates and their individual personalities and this takes some time and effort. These drawbacks can be overcome, however if mangers are careful to establish clear standards for acceptable performance and an equitable system of extrinsic rewards without forgetting that valance of certain extrinsic rewards will vary from person and person.