Joe's Burger Grill

How can the concepts of equity theory guide Joe’s decision concerning comparisons with pay in other cities and for other jobs?

Equity theory is a theory regarding fairness or perceived fairness. Stewart and Brown (2009) describe equity theory as “a justice perspective suggesting that people determine the fairness of their pay by comparing what they give to and receive from the organization with what others give and receive” (p.412). This suggests that employees assess how much effort and skill they put into their jobs and their amount of pay, and then compare how much effort and skill other employees put into their jobs and how much they are paid. Another component of equity theory is motivation. An employee who feels there is inequity in their comparisons may become less motivated and decrease their inputs by working less hours and or putting forth less effort. These employees are more likely to leave the organization and seek employment elsewhere.

In regards to Joe’s Hamburger Grill and Joe’s concerns with pay comparisons, he should focus on keeping his employees motivated and try to establish a pay scale that is comparable to the same job or to similar jobs in the area. This will ensure that his employees feel that they are being paid fairly. According to the equity theory, the most motivated employees are the ones that feel they are being compensated fairly and equally to their peers. In order for Joe to calculate fair compensation he needs to find a balance between his employee’s inputs and outputs. Inputs Joe should focus on include work productivity, enthusiasm, and leadership. Output focus should include salary, benefits, and promotions. Once Joe can find a balance, and also take into account the pay scale of similar jobs at other organizations, Joe can ensure his employees are motivated and feel that they are being compensated fairly.