Equity Theory How do you know if you are fairly paid/compensated at work? Perceived outcomes (what we get) from a job in relation to what we put into it In relation to a comparable “other” Formula: Your outcomes divided by your inputs = ?. If the ratio equals one, state of equity exists If the ratio is less than one, state of negative inequity exists If the ratio is greater than one, state of positive inequity exists

Equity Theory (continued) Psychological states Equity: Comfortable and satisfied Negative inequity Anger, frustration Motivated to reduce the inequity (how?) Positive inequity Obligation to “repay”

Levels of Equity Sensitivity Equity sensitives Prefer that their outcome/input ratios be equal to comparison others and that the ratio is equal to 1. Benevolents Prefer that their outcome/input ratios be less than comparison others and that their ratio is less than one. Entitleds Prefer that their outcome/input ratios exceed those of comparison others and their ratio is greater than one. Survey calculation: Sum 1b, 2a, 3b, 4a, 5b. Less than 29: entitleds; 29-32: equity sensitives above 32: benevolents

Equity Theory Predictions Underpaid Overpaid Salary Quality Quantity Piece-rate

Aaron Feuerstein & Malden Mills How would you describe his approach to managing his company? What might his critics say about his approach? What might his supporters say? What is his perspective on layoffs? Do you think his approach is successful? What specifically supports your argument?

Equity Theory & Malden Mills How might equity theory help to explain the success Feuerstein has achieved at Malden Mills?