Careers: Hors d’oeuvres & Referent Others

This week’s career counselling post starts with a party – a party that was over years ago but left me with a nagging career-related anecdote that I hoped could be made sense of one day. And now, years later, organizational psychology suggests a place for it.

Here’s the tale:

A recently retired manager was telling of a conflict with employee A. It seems that employee A had negotiated a raise with the manager and received one. Both were satisfied until employee A learned that employee B, who was newly hired and less experienced, was already making a higher salary than employee B, in spite of employee A’s recent raise. Employee A protested to the manager, claiming that, regardless of just having received a raise, it was unfair that he should be earning less than employee B. The manager was clearly indignant. His response to employee A was that he negotiated and received what he asked for and should be happy with it. Employee B’s salary was irrelevant.

No one challenged him because, after all, it was a party – not a courtroom. But still, I remember inwardly trying to put myself on all sides of the issue but not really being able to decide what seemed right in terms of the big picture. However, I knew one thing: In employee A’s position, I would have felt slighted. I would still have tried to perform the job to the best of my abilities but invest beyond the actual requirements of the job? Probably – but maybe not always.

The preceding paragraph sets us up nicely to talk about psychological contract renegotiation and organizational commitment – but that’s not where we are heading.

This week, we go to equity theory (Adams, 1965; in Stephens & Feldman, 1997).

Equity theory is a motivational theory, one of many, in fact. Basically, motivational theories address three issues: 1) What motivates people to choose to behave in one way versus another, 2) What motivates someone to stop a particular behavior, 3) What causes an individual to increase his or her investment in a behavior. (Stephens & Feldman, 1997).

Two ideas are central to equity theory, specifically: 1) How people compare their inputs (what they invest) with what they receive, 2) The ratio of the inputs and outcomes to that of others – specifically “comparable” others. The idea of “comparable” others is what we take note of here. The manager above apparently didn’t think much about it, but Employee A certainly did. Clearly, he felt under-rewarded compared with employee B.

It wasn’t fair. But is it healthy? And what might the costs be to the organization?

Using the term “referent” others instead of “comparable” others but with similar meaning, Beard and Edwards 1995 cite a long list of negative outcomes that are associated with an individual’s perception of being disadvantaged compared with another person. On the list:

— “Increased sickness and accident compensation costs” (Sashkin & Williams, 1990).
— “Reduced job satisfaction and feelings of justice” (e.g. Martin, 1986).
— “Lower employee performance” (Summers & Hendrix, 1991).
— “Increased absenteeism and turnover” (e.g. Telly, French & Scott, 1971).

Information from a couple of other studies:
— Williams (1995) studied factors that preceded employee benefit satisfaction. The variables that were most strongly and positively associated with benefit level satisfaction were benefits administration and benefit comparisons made versus “referent” others.
— Shore (2006) researched how employees compare their pay levels with three different referent groups: 1) groups other employees within the organization 2) groups persons employed outside the organizations 3) specific “other” individuals.

They found partial support for their hypothesis that “work attitudes would be impacted more strongly when individuals made pay comparisons with a group referent than with an individual referent other.” They also found a couple of other interesting results. Perceptions of internal equity predicted work motivation and perceived organizational support. However, external equity predicted intent to leave the organization.

This isn’t exactly party talk if you want to be invited back the next time your friends get together; but it’s an entree that companies and the parties that comprise them should keep on their menus of organizational life.

Till next week, all my best,

Primary References
Shore, T, Tashchian, A & Jourdan, L. (2006). Effects of internal and external pay comparison on work attitudes, 36: 2578-2598.

Stephens, G, Feldman, D. (1997). A motivational approach for understanding career versus personal life investments. In G. Ferris (Ed.) Research in Personnel and Human Resources Management (Vol. 15): London: JAI Press.

Williams, M. (1995). Antecedents of employee benefit level satisfaction: a test of a model. 21: 1097-1128.

Secondary References
Adams, J.S. (1965). Injustice in social exchange. In L. Berkowitz (Ed.), Advances in experimental social psychology. New York: Academic Press.

Martin, J. (1986) When expectations and justice do not coincide. In H. Bierhoff, R, L. Cohen & J. Greenberg (Eds). Justice in Social Relations. New York: Plenum.

Sashkin, M. & Williams, R. (1990). Does fairness make a difference? Organizational Dynamics, 19: 56-71.

Summers, T & Hendrix, W. (1991). Modelling the role of pay equity perceptions: A field study. Journal of Occupational Psychology. 64: 145-157.

Telly, C, French, W & Scott, W. (1971). The relationship of inequity to turnover among hourly workers. Administrative Science Quarterly, 16: 164-172