Equity Theory

Video Case Analysis Written Report

Watch the TED Talks Video below (“Why you should know how much your coworkers get paid”).

Once you have watched the video, prepare a written report as follows:

Behavioral psychologist John Stacey Adams developed a popular motivational theory (equity theory) in the early 1960s in which he asserted individuals develop comparisons with others to help them decide what is fair and reasonable.

Equity theory states that we seek a balance between what we put into our jobs (“inputs”, such as effort, loyalty, hard work, skills, education, etc.) and what we get out of our jobs (“outputs”, such as financial rewards, recognition, praise, thanks, etc.). On the basis of these inputs and outputs, we develop what is known as an input/output ratio.

But that’s just part of the equation. Adams believed that, once we’ve developed our own input/output ratio, we compare that ratio with those of others, known as “referent others”, and as a result of that comparison, we perceive ourselves to be in 1 of 3 conditions:

Overreward inequity – We believe we are receiving more outputs relative to our inputs compared to the referent other. Adams believed that, as a result of this perception, we will feel guilty and try to rectify the situation by rationalizing away the perceived inequity, adjusting our input/output ratio (such as working harder), or choosing a different referent other.
Underreward inequity – We believe we are receiving fewer outputs relative to our inputs compared to the referent other, and we will try to establish equity by increasing our outputs (such as asking for a raise), reducing our inputs (working less hard), or leaving the company.
Equity – We believe our input/output ratio is the same as that of the referent other, so no behavioral change would be expected.
Keep in mind that our beliefs about our input/output ratio are perceptions, not necessarily reality. Do you know what your coworker is paid? Many companies have a policy that prohibits employees from discussing their pay, and many managers tell employees not to discuss their salaries.

In this TED talk, David Burkus asserts that pay transparency – sharing salaries openly across the company – makes for a better workplace for both the employee and for the organization, because pay transparency would ensure fairness, particularly in terms of gender discrimination.

Your written report should address the following questions:

Do you agree with David Burkus that salaries should be shared openly across the company? Why or why not?
Consider Adams’ equity theory. Does pay transparency fully address the input/output ratio described by John Stacey Adams? Why or why not?
What are the ethical and privacy considerations associated with pay transparency in the workplace?
Whether we are employees or students, we have inputs and outputs. What are your inputs as a student? What are your outputs?
Would grade transparency eliminate discrimination or unfairness in education as Burkus suggests with pay transparency in the workplace? Why or why not?

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