The Equity-Equality Conflict—Dilemmas in the Management of Reward Systems

Steen Scheuer

Abstract


This article investigatesthe factors that determine workplace actors’ appeal to social norms of fairness in some
situations and what ‘fairness’ is perceived as consisting of. When is a pay level considered as relativity fair, and
when is it not? When are contingent pay systems (i.e. pay-for-performance systems) perceived as fair and when
are they not? When can differences in contribution (equity) overrule the social norm of equality? Which
contingent reward structure should be applied for teamwork members, if any? Which structure to motivate
employees to a continuous search for smarter working procedures and solutions? These are central concerns of
motivation theory, where rational choice decisions are counterbalanced by endowment effectsor other fairness
concerns. Management is placed in a dilemma between what is, e.g., an economically rational structure of
incentives, on the one hand, and what is considered as equitable by employees, on the other. Since equality in
reward counts for more among employees, while equity in contribution counts more for employers, this is an
inherent dilemma, constantly having to be negotiated and solved, but never reaching any ‘final solution’ in any
company. On the basis of this dilemma, implications for management are spelt out, and recommendations for the
utilization of and limitations for pay variance among peers are given.

Full Text: PDF DOI: 10.5539/jms.v3n3p158

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Journal of Management and Sustainability   ISSN 1925-4725 (Print)   ISSN 1925-4733 (Online)

 

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