Equity Sensitivity Theory: A test of responses to two types of under-reward situations.

Equity Sensitivity (Huseman et al., 1987) has proven to be a refinement of the original Equity Theory (Adams, 1963, 1965). However, if Equity Sensitivity (Huseman et at., 1987) is to prove more useful than the original Equity Theory (Adams, 1963, 1965) it must be more predictive and discriminant with regards to how subjects respond to feelings of inequity. Without this ability, Equity Sensitivity Theory risks the fate of being considered an interesting notion with little or no practical value and falling out of favor much as original Equity Theory (Greenberg, 1990).

The purpose of this study is to take a closer look at the efficacy of Equity Sensitivity Theory (Huseman et al., 1987). More specifically this study focuses on the ability of Equity Sensitivity to discriminate between the responses of three different classifications of individuals posited by the theory (Benevolents, Equity Sensitives and Entitleds) in response to two types of under-reward situations. Previous research has yet to examine the differences in how the three groups respond to situations in which the "under-reward" is the result of being paid the same as the "comparison-other" for doing more work. With globalization and hyper-competition characterizing today's business environment, firms are being forced to expect ever higher levels of productivity from their work force while simultaneously maintaining cost-controlling reward systems. Thus, this new type of under-reward situation may be more applicable to the current business environment considering the downsizing, flattening and job enlargement tha t have occurred over the past decade.

The following section provides a brief summary of the existing literature on this topic and identifies some weaknesses in the prior research that are addressed in the study described in the remainder of this article.

Relevant Literature

Since its origins in the 1960s Equity Theory (Adams, 1963, 1965) held forth the promise of helping to explain how employees respond to situations in which they perceive they are being rewarded more or less favorably in comparison to a referent doing similar work. Shortly after its inception, Weick (1966) deemed it to be one of the most useful existing organizational behavior theories. Subsequent reviews concluded that the empirical evidence supporting Equity Theory was generally strong (Greenberg, 1982; Mowday, 1991), especially with regards to how workers respond to under-reward situations.

Equity Theory (Adams, 1963, 1965) proposed that subjects respond to under-reward situations in various ways in an attempt to bring their equity ratio back into balance. For example, subjects may choose a behavioral response to help reduce their feelings of inequity. They may respond in such ways as reducing their inputs (i.e., not put forth as much effort) or increasing their outcomes (i.e., ask for a raise). Subjects may instead use a cognitive response to reduce feelings of inequity such as selecting another person to use as their referent. Ultimately the subject may choose to exit the situation by deciding to transfer or quit the organization.

Although previous Equity Theory research has concluded that under-rewarded subjects generally respond in a manner that is consistent with classic Equity Theory, it is not easy to predict which option they will select to bring their equity ratio into balance (Greenberg, 1990). This lack of specificity regarding what responses individuals experiencing inequity are likely to have is a serious shortcoming of the original Equity Theory (Furby, 1986). As such, the original Equity Theory eventually fell out of favor (Miner, 1984; Greenberg, 1987, 1990) due in part to this inability to predict exactly how individuals would respond to an under-reward situation (e.g., lower their inputs, attempt to raise their outcomes, cognitively justifying the situation, decide to leave the organization). This lack of predictive ability of Equity Theory makes it much less useful to practitioners such as managers and human resource professionals who would greatly benefit if they could accurately predict the reactions that their emplo yees would have to different inequitable situations.

Accordingly, research on the topic of Equity Theory moved off in another direction. Inspired by legal research, the procedural justice stream of research (Thibaut and Walker, 1975, 1978) began to focus more on the processes and procedures of how pay and recognition are determined, rather than the reactions that individuals have to them (Greenberg, 1987). Equity Theory research became less popular and eventually withered away (Greenberg, 1990).

Interest in organizational justice and equity has experienced a resurgence over the past decade (Ambrose and Kulik, 1999; Bing and Burroughs, 2001; Chan et al., 1997; George, 1994; Glass and Wood, 1996; Goodwin, 1990; Harder, 1991; Harder, 1992; Huseman and Hatfield, 1990; Lapidus and Pinkerton, 1995; Moorman, 1991; Mui, 1995; Sauley and Bedeian, 2000; Van Wijck, 1994). This rekindling of interest in equity has been spurred in part by an extension of the original Equity Theory to include individual differences. This more recent approach has been spurred by the construct of Equity Sensitivity (Hartman and Villere, 1990; Huseman et al., 1985; Huseman et al., 1987; King et al., 1993; Patrick and Jackson, 1991). This construct posits that individuals can be categorized into three groups: Equity Sensitives, Benevolents and Entitleds. This more recent extension of original Equity Theory runs the same risk of being deemed impractical if it also is not shown to be predictive.

According to the latest view, one group labeled Equity Sensitives fit the classic Equity Theory propositions. Equity Sensitives prefer to be in a state of equity with regards to the outcomes they receive for the amount of inputs they expend when compared to someone doing similar work. The original propositions of Equity Theory apply to this group. If an Equity Sensitive's ratio of outcomes to inputs is out of balance with their referent other, the subject will be motivated to do things to get their ratio back into balance.

Equity Sensitivity proposes two other groups--Benevolents and Entitleds. Benevolents are more tolerant of situations in which they are being under-rewarded. While they do not seek to be under-rewarded, they are assumed to be less likely to respond (at least overtly) when they are placed in an under-reward situation. Entitleds are posited to experience less dissonance when they are over-rewarded and more dissatisfaction when under-rewarded. As such, they are assumed to be more likely than the other groups to respond overtly to an over-reward situation.

An instrument (King and Miles, 1994) to measure Equity Sensitivity has been developed and validated using five different samples (n = 2,399). The Equity Sensitivity Instrument (ESI) has been shown to be discriminantly and convergently valid. Results suggest that equity sensitivity is unique from other variables and constructs including age, gender, educational level, social desirability, self-esteem, locus of control, Machiavellianism, pro-Protestant and non-Protestant work ethic, input-outcome orientation, exchange ideology, altruism, organizational commitment, job satisfaction, supervisor satisfaction, propensity to turnover and perceptions of pay justice. This instrument was used in the research detailed in this article.

Some initial studies have been done to attempt to validate significant differences between Benevolents, Equity Sensitives and Entitleds. For example, Huseman et al. (1985) examined job satisfaction as a dependent variable in the context of equity sensitivity. They found that in response to an under-reward situation, Entitleds report significantly lower levels of satisfaction than Equity Sensitives or Benevolents. Conversely, Benevolents report significantly higher levels of satisfaction than the other two groups.

Miles et al. (1989) tested for differences in the three groups with respect to inputs, outcomes and preferred outcome/input ratios. With regards to inputs they found that Benevolent undergraduate students were willing to code more questionnaires or complete more interviews than Equity Sensitives or Entitleds. Interestingly, they did not find significant differences between the three groups in terms of outcomes (what they perceived as a fair wage), although they did find that Benevolents prefer lower outcome/input ratios than Equity Sensitives or Entitleds. A shortcoming regarding this research is that it did not investigate the entire gamut of responses that individuals may have to under-reward situations. It focused solely on a single outcome (pay) and single input (quantity of work). The present study addresses this shortcoming by investigating a much broader gamut of potential responses to under-reward.

King et al. (1993) found that Benevolent undergraduate students experience less distress than Entitleds when facing either under-compensation or over-compensation scenarios. They also found that Entitleds placed significantly more importance on pay and Benevolents place more importance on work characteristics when asked to distribute 100 points on the Job Descriptive Index. Furthermore, Miles et al. (1994) found that Entitleds tend to place a greater emphasis on extrinsic tangible rewards (e.g., pay), whereas Benevolents are more focused on intrinsic intangible rewards (e.g., a sense of accomplishment) when asked to rate the importance of twenty of the most common outcomes from work.