Equity Theory of Adam Smith

Adam Smiths Equity theory
Many researchers have reviewed the validity of Adams Equity Theory over the past decades.
This theory has been tested under various circumstances to prove its viability.
Drexler,Beehr, and Stetz (2001, 333) conducted a research on whether Adams Equity Theory has
impacted on the differentiation of individual performance group tasks. Many groups may choose
to differentiate in the rating of their performance against another individual who performs the
same task, but how much differentiation occurs is a matter of attitude. These attitudinal
variables are satisfaction, perceived equity, and turnover, (Drexler, Beehr, and Stetz 2001, 334).
For example, two employees who perform the same task can vary in the rating of their own
performance against another. One employees interpretation of a particular job can be different
from another employees interpretation of the same job. Therefore, one construal may be more
efficient than the other leading in different outputs, whereby Adams Equity Theory becomes
ineffective. Brockbank (1999, 337) observed that measuring an individuals effectiveness and
rewarding that effectiveness, which results from the equity of input and output, is one of the
aspects linking the firms ability to compete globally.
Further stressing on the above point, Adams Equity Theory was testified for its validity
in the gender differences that were regarded important for measuring the salary of male and
female employees. Conventionally, women were paid lesser than men who performed the same
tasks. But according to the responses, women did not complain about pay dissatisfaction (Crosby
1982, 95; Sauser and York 1978, 537). Women recognized that they differ from men in certain
aspects such as; they may have worked for shorter hours than men due to many social obligations
plus familial constitutions that they are bound to; furthermore they may take longer leave of
absence for maternal purposes. As a result, even though the outcomes may be similar to men, the
effort taken to do the job is certainly different; thus, resulting in lower pay rewards between two
individuals doing the same job. And for these reasons, Adams Equity Theory does not yield
productive results.
Job input, as a concept of non-biased pay has been observed from an equity theory
perspective, (Keaveny and Inderrieden 2000, 364). Adams (1965, 267) as mentioned earlier,
suggested that the equity theorys concept is based on the comparison of ones outcomes with
another referent (reference points or examples) that performs a similar task. Consequently,
studies conducted by Hills (1990, 345-350) support Adams Equity Theory. No evidence was
produced regarding the idea that individuals perform self-evaluation, in which they determine
whether their input equals the same output yielded by their referent and then agree upon the
equality in the pay.
However, Jacques (1961) opines that individuals may have pay expectations purely based on
their job characteristics and disregard what other employees are making. Some employees sole
concern, according to Jacques, lies exclusively on the amount of job inputs that they have
slogged to finish a particular task, and their pay expectations, pay satisfaction, and motivation
depends on their individual hard work that they have undertaken to do the job. Berkowitz et al.
(1987, 544-551) conducted a research to support the viability of Jacques theory. And their
findings confirmed that their respondents satisfaction with their pay was related to what the
employees feel they deserved, regardless of what others were paid.
Shah (1998) differentiated referents in terms of social network. According to Shah, there
are two types of social referents cohesive and structurally equivalent. The difference between
the both is as follows: cohesive actors are individuals with close interpersonal ties, or friends.
Structurally equivalent actors are individuals, who share a similar pattern of relationship with
others and thus occupy the same position in a network (Shah 1998, 249). The theorist suggested
that Adams Equity Theory is generally applied to the latter type of social referent as comparison
sources (e.g. co-workers). Whilst structural equivalents do provide valuable information (Shah
1998), cohesive referents, i.e. friends, are observed as more out-going and are likely to share
personal or confidential information (Jehn and Shah, 1997, 776; Roloff and Miller 1987, 23).
Therefore, a cohesive referent poses less threat when compared as a referent for the purposes of
equity theory; as the tension between the people being compared is lost, and there is no need to
juxtapose the justice of the outcomes produced by both the parties. In conjunction with the above
statements, Wheeler and Miyake (1992, 768) noted that the major drawback of applying equity
theory is that it may create hard feelings for both the people being compared, regardless of
whether they are cohesive referent or structurally equivalents.
Similar research was performed by Wiley (1997, 265) on the motivational factors that affect
employees and whether the responses are more or less likely the same to the surveys conducted
in over forty years on the equity theory. In this investigation, she endowed that most motive
theories, including the Adams Equity Theory do not highlight individual differences, rather they
emphasize on the conditions that cause for the incentive of a motive and its influence on the
behavior. As, the equity theory assumes that the approaches taken to do the work is same, but
pay, for instance is an extrinsic reward, which becomes a motivational factor, and accordingly it
will influence on the behavior of the employee.
Shore (2004, 722) discussed that there are three groups who fall under the equity theory
category and he labeled them as equity sensitive groups. These equity sensitive groups are
Benevolent Individuals who reported when surveyed, as having the highest pay satisfaction,
perceived pay fairness, and lowest turnover intentions; Entitled Individuals had lesser pay
satisfaction, perceived pay fairness, and higher turnover intentions; these results were obtained
when compared to Equity Sensitive Individuals who reported as having highest pay
dissatisfaction, less perceived fairness, and highest turnover intentions. The similarity between
all three focus groups was that they all preferred to be over-rewarded or equally rewarded, and
were distressed when under-rewarded. Therefore, Shore considered that Adams Equity Theory is
by far the most accurate framework that is presented to understand the relationship between
employees motivation, pay fairness, and job satisfaction.

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Adam Smiths Equity theory

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