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The following article was written by Coleman Patterson and appeared in the Business section of the Abilene Reporter-News.

Understanding equity theory and keeping employees motivated, January 20, 2008, 2D.

As a kid, I was taught that there were certain questions that you did not ask adults—doing so was considered inappropriate and rude.  These included questions about age, weight, and income. 

In many organizations, questions and talk of pay and compensation among coworkers is also taboo.  Workers intentionally avoid discussing the subject with coworkers and managers often try to keep the pay and compensation of organizational members known only by those involved in payroll-related functions.  The reasons for keeping pay and compensation a secret is probably less about being inappropriate and rude and more about keeping workers motivated, productive, and feeling that they are being treated fairly and equitably.

Stacey Adams, in his Equity Theory research from the early 1960s, gave explanation to how and why knowledge of the outcomes that others receive from their work influences the performance and motivation of workers.  In his classic study, he designed an experiment where the quality and rates of work on a task were recorded for subjects in his study.  After a baseline performance was determined for each subject, the researchers planted a coworker, who was part of the study, into the experiment.  The planted coworker worked along side the subject doing an identical task.  After a certain amount of time, the planted coworker told the subject how much he was being compensated for the task and revealed his supposed background and qualifications for the job/

Once subjects learned what the coworkers were being paid and their backgrounds and qualifications, the researchers studied the effects of that knowledge on subsequent performance of the subjects--on their quality and rates of production.  In the experiments, the researchers manipulated the information they revealed to the subjects.  In some cases, the planted coworkers reported that they were paid more than the subjects and in other conditions that they were paid less.  Adams also changed the supposed qualification levels of the planted workers--sometimes subjects were more qualified than the planted workers and sometimes they were less qualified.

Adams concluded that workers perceive themselves as being over-rewarded, under-rewarded, or equitably-rewarded in relation to the outputs and inputs of their coworkers.  When subjects felt that they were being compensated fairly with respect to the rewards and qualifications of the coworkers, they did not alter their performance after knowledge of their coworker’s compensation was revealed.  In cases where subjects felt over- or under-rewarded in relation to their coworkers, their performance changed after they learned what the coworkers were being paid.  Subjects changed their rates and quality of work to restore perceptions of equity with their coworkers—sometimes the changes would be beneficial to an organization and sometimes not.

Equity Theory has many implications for managers and organizational policy makers.  As a motivation model, it has direct bearing on policies such as wage and salary structures, compensation and benefits, training and development, and employee attitudes and morale.    Managers should fully investigate and the concepts of Equity Theory—asking questions about these concepts is expected and required.

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2006, 2007, 2008  Coleman Patterson, All Rights Reserved