Professional Documents
Culture Documents
Is versus Ir
Os Or
Management 40130 -
Consequences of Inequity
The employee is motivated to have an equitable
exchange with the employer.
To reduce inequity, employee may
Reduce inputs (reduce effort)
Try to influence manager to increase outcomes
(complain, file grievance, etc.)
Try to influence co-workers inputs (criticize
others outcomes or inputs)
Withdraw emotionally - or physically (engage in
absenteeism, tardiness, or quit)
Management 40130 -
Equity Theory Applications
Management 40130 -
Reinforcement Theory (Skinner, 1953)
Management 40130 -
Schedules of Reinforcement
Fixed Interval
Reinforcement received after the passage of time.
Least resistant to extinction. (people expect it)
Ex. Monthly salary, hourly wage, annual bonus.
Variable Interval
Reinforcement received on a variable (uncertain)
schedule.
Reward less likely to be viewed as entitlement.
Ex. Quarterly profit sharing (some quarters occur without
profits) / Spot cash reward - paid out after the fact
Management 40130 -
Intermittent Reinforcement (Contd)
Fixed Ratio
Reinforcement received according to fixed amount of
output
Ex. Piecework pay - worker get $1 for picking 12 apples /
Sales commission - 6% of house selling price.
Variable Ratio
Reinforcement received according to variable (uncertain)
amount of output.
This schedule is most resistant to extinction.
Ex. Entrepreneurship Rewards - One takes risks with ones
capital and is uncertain how much output will lead to a big
reward. / Gamboling behavior - slot machines.
Management 40130 -
Reinforcement Theory - Applications
Continuous reinforcement increases rate of learning
Intermittent reinforcement strengthens behavior that
is learned.
Ratio schedules produce greater motivation than
interval schedules.
Variable schedules produce stronger motivation than
fixed schedules.
Pay may not always work with ratio or variable
schedules, but praise, recognition and feedback can
be used effectively with intermittent reinforcement.
Management 40130 -
Agency Theory (Fama, 1980)
Management 40130 -
Agency Theory (Contd)
Agency Problem
Agents interest may conflict with principals interest - leading
to opportunism (moral hazard).
How can agent be motivated to behave in owners interests? It
can be costly to monitor agents behavior.
Solution to Agency Problem - Agency Contract
Contract aligns interests of principal and agents.
Compensation is a tool of incentive alignment.
Tie rewards for agent to outcomes desired by principal.
Ex. Executive Pay - Tie large share of CEO (agent) pay to
increasing the share price of the stock (agents goal). Stock
options is an incentive alignment tool.
Management 40130 -