Equity Sensitivity and Cultural Factors in Multicultural Workforces

Introduction and Theoretical Model

Research in organizational settings has long demonstrated the impact of cultural factors on work motivation (Maslow). The current study develops a model of cultural factors and work motivation—more specifically, equity sensitivity—in a concerted effort to understand worker motivation in the context of a multicultural workforce. Past research provides the foundation for this academic investigation, demonstrating the evolution of academic theories supported by ongoing empirical research. The research is designed to demonstrate the impact of a multicultural workforce on the ability of human resource managers to successfully motivate employees.

This paper examines the synthesis of theoretical and empirical research pertaining to the equity sensitivity construct and an actual multicultural organizational setting, and explains the theoretical model underpinning the study. The review also discusses work motivation theories and cultural factors.

The globalization of the workforce creates an environment in which cultural differences produce unique working environments within multicultural organizations. The ability to equitably reward and motivate employees continues to challenge American-based organizations (Henderson, 1994). Current research explores the evolution of the workforce both domestically and globally (Chhokar, Zhuplev, Fok, & Hartman, 2001; Hofstede, 2001; Wheeler, 2002). In the fast pace of current business operations, organizations are increasingly faced with the challenge of attempting to gain a strategic advantage through employee motivation (Schein, 1996). The expanding global economy has led to an increasing emphasis on understanding cultural values and their impact on human resource management throughout the world.

To implement employee motivation strategies properly, firms must understand how employees from various cultures are motivated in the workplace (Hofstede, 1997; Trompenaars, 1998; Vladimir et al., 1992). Understanding and implementing cost-effective yet successful employee reward programs is critical to organizations attempting to recruit and retain a culturally diverse workforce. Reward systems that are very effective in motivating workers in one culture might be met with hostility, perceptions of inequity, and dissatisfaction in an environment with differing cultural values (Wheeler, 2002). This unpredictable response to similar reward systems by employees within the same organization necessitates the need for firms to determine why individuals respond differently to similar rewards.

The globalization of the workforce is not limited to one industry. However, certain fields—such as healthcare—have experienced a dramatic increase in culturally diverse employees. One reason for this is the shortage of nurses in the domestic workforce and an inability to meet the medical needs of an aging population. This growing demand is creating a dependency on international workers within American hospitals. One major challenge that organizations face is the development of reward systems that are perceived to be fair, equitable, and distributing rewards in accordance with employee beliefs about their own value to the organization (Ramlall, 2004; Henderson, 1994; Fine, 1996). An equitable reward system has the potential to stabilize an organization's workforce while improving the organizational commitment of employees (Lust, 2003; Heneman, 2003).

Research in social psychology and in human and work motivation supports the contention that culture shapes beliefs, values, and perceptions (Henderson, 1994; Fine, 1996). Research also suggests that people of different cultures cannot be expected to exhibit similar behavior patterns or react to stimuli similarly in an organizational context (Mueller and Clarke, 1998).

Work Motivation Theories

To attain high levels of performance, employers depend on their employees to perform at levels that positively affect the bottom line (Wiley, 1997). Thus, employers must understand what motivates workers in an organizational setting. Rather than attempting to adapt employees to existing reward systems, organizations must realize that reward systems need to be adapted to the needs of the individual employee. This information, combined with the potential predictability of equity sensitivity, is an extremely valuable tool in the recruitment and retention battle in industries facing a shortage of qualified candidates.

Among theories of motivation, equity sensitivity is ideal for exploring the context of a multicultural workforce due to its combination of cultural factors and work motivation. Previous studies have explored this area; however, many of these studies specifically dealt with a student population and/or foreign countries as opposed to investigating a multicultural, professional workforce in an American organization (Chen, 1995; Chhokar et al., 2001; Wheeler, 2002). The context of prior research investigations is important due to the influence that environmental settings have on the behaviors of study participants. For instance, students may respond differently to certain reward situations because they prefer academic rewards rather than economic rewards; on the other hand, an individual in the workforce has a different set of goals and thus responds differently compared to a student.

A major theorist in the area of motivation was Abraham Maslow, who contended that human beings possess a hierarchy of needs. Within this hierarchy, there are five groups of needs that must be met (Maslow, 1943). The most primitive needs are physical—food, water, shelter, and so on. The next set of needs deals with the safety of an organism's surroundings; people have a need to be free from inherent danger. Maslow also contends that people have a need for love and attention (Maslow, 1943). In addition, Maslow asserts that living things have socialized needs. Last in the hierarchy is the need for self-actualization (Byrne and Lindgren, 1971).

Maslow explains that the motivation of human beings is dependent upon the fulfillment of these five needs. This hierarchy is the foundation of most motivation theories. While the first four needs deal with biological and social issues (Byrne and Lindgren, 1971), the final need for self-actualization is used most often in developing reward systems for employees.

Edwin Locke has also been a preeminent theorist in the area of motivation as it pertains to workplace and educational environments. Locke's theory of motivation asserts that goal setting plays a large role in worker motivation. Early goal-setting theories contend that "goal setting theory is based on the premise that much human action is purposeful, in that it is directed by conscious goals" (Drillings and O'Neil, 1994). Locke's theory asserts that because human beings have the ability to reason, they have the ability to set goals and pursue long-range purposes (Locke and Latham, 1990).

Lawler asserts that motivation can change when individuals are placed in a team setting. According to Lawler, a team is defined as "a distinguishable set of two or more people who interact, dynamically, interdependently, and adaptively toward a common and valued goal/objective/mission; each of whom has been assigned specific roles or functions to perform, and who have a limited life-span membership" (Salas et al., 1992). Lawler contends that team motivation consists of team spirit, interpersonal skills, leadership, and communication. Knowledge of what motivates teams is essential to human resource managers because many organizations rely on teamwork to achieve organizational goals. According to Katz and Kahn (1978), three main factors motivate teams: external rewards, rule enforcement, and internalized motivation.

Many theories make predictions about individual motivation to perform in organizations (Harder, 1992). The unique differences among individuals continue to make the motivation of employees an ongoing challenge for theorists and organizations dealing with worker motivation. These theories have been predominantly divided into two broad classes: intrinsic and extrinsic motivational theories. A person is intrinsically motivated if he or she performs an activity for no apparent reward except the activity itself (Turnage and Muchinsky, 1976). Extrinsic motivation refers to the performance of an activity because it leads to an external reward. The equity sensitivity construct is derived from the original equity theory—which is intrinsic in nature—and is utilized due to its predictive value. This construct provides additional clarity to equity theory, allowing it to function as a substantive tool for organizations and human resource executives. In addition, the equity sensitivity construct provides insight into the various responses of individuals within similar reward systems.

Equity Theory and the Equity Sensitivity Construct

Equity theory is the foundation for numerous empirical studies (Adams, 1963, 1965; Barr & Conlon, 1994; Carrell & Dittrich, 1978; Chhokar et al., 2001; King, Miles, & Day, 1993; King & Miles, 1994; Lane & Messe, 1971; Messe, Dawson, & Lane, 1973; Miles, Hatfield, & Huseman, 1994). The theory has been broadly researched, and Weick (1966) labels it as being "among the most useful middle-range theories of organizational behavior."

Comprehensive reviews of this theory (Major & Deaux, 1982; Miner, 1980; Mowday, 1991) and other writings tracing the path of equity theory acknowledge the lack of a conceptual framework for individual differences in equity theory prediction, and suggest the incorporation of individual differences into the equity theory formulation (Miles, Hatfield, & Huseman, 1994). Additionally, the original version of equity theory had limitations when removed from the laboratory and conducted in a field setting (Pinder, 1977).

Equity theory recognizes that individuals are concerned not only with the absolute amount of rewards they receive for their efforts, but also with the relationship of this amount to what their peers receive (Ramlall, 2004). Adams (1963, 1965) posits that individuals are motivated by the perception of inequality, as measured by "input" and "outcome" ratios in comparison to others. Equity theory draws from multiple empirical theories and is utilized to make predictions about how individuals manage their relationships with others (Huseman et al., 1987). If equity exists, the individual is at peace with the exchange and therefore not moved to action. If the individual perceives that his or her outcome/input ratio is less than that of a referent individual, then inequity exists and motivation to restore equity arises (Chhokar et al., 2001).

Individuals may respond to perceived inequity by choosing a behavioral response such as reducing their inputs or increasing their outcomes. Alternatively, subjects may use a cognitive response to reduce feelings of inequity, such as selecting a different person to use as their referent. The subject may also choose to exit the situation by deciding to transfer or quit the organization (Allen & White, 2002). Exiting the organization is one of the most commonly explored responses to inequity. The most commonly studied responses to inequity are behavioral in nature and include raising or lowering work inputs (Greenberg, 1988) or, in extreme cases, quitting a job (Bing and Burroughs, 2001).

Huseman et al. (1994) note that empirical research in equity theory has consistently failed to study psychological individual difference variables, centering instead upon demographic variables. The globalization of the workforce in turn creates a need to focus more on individual differences rather than demographic variables.

Mueller and Clarke (1998) note that findings have generally been mixed and that, despite its appealing parsimony, equity theory has come under increasing criticism centered primarily on questions of the theory's generalizability and its inability to explain individual differences in perceptions of fairness and reactions to inequality (Huseman et al., 1987; King et al., 1993). This seems to indicate that cultures perceive rewards differently even in similar settings. Some cultures perceive certain rewards as motivational while others perceive the same reward as unfair or inequitable. It is therefore essential to determine the underlying cause of varying individual responses in certain reward situations, as comprehension of individual motivating factors has limitless value to employers.

Huseman, Hatfield, and Miles (1985, 1987) proposed the construct of equity sensitivity in an attempt to clarify why people react differently to inequitable exchanges. The construct posits that individuals are differentially sensitive to the various levels of outcome/input ratios found between themselves and their peers in the workplace (Bing and Burroughs, 2001). It was an improvement over equity theory in that it offered the opportunity to account for and recognize individual differences in reactions to inequity without sacrificing parsimony (Mueller and Clarke, 1998). Notably, it allows a certain level of predictability to a theory that previously lacked this essential component.

Equity sensitivity is utilized in this study due to its predictive nature and the integral role it plays in the evolution of the original equity theory. Equity theory originally served as a rational explanation of motivation; however, researchers noted an obvious lack of clarity in Adams's (1963, 1965) works. This original theory failed to explain individual reactions—both positive and negative—in reward situations. The lack of consistent and predictable individual responses in reward situations created concern regarding the reliability and validity of equity theory. Miner (1980) and Mowday (1991) concluded that equity theory could only remain viable if it could account for observed differences in reactions to equity within the workplace.

Huseman et al. (1985, 1987) and Miles et al. (1989) have provided empirical evidence in support of a categorization of individuals on a continuum of equity sensitivity (Bing and Burroughs, 2001). Equity sensitivity expands equity theory by classifying individuals into three categories based upon their sensitivity to equity: benevolents, equity sensitives, and entitleds (Huseman et al., 1985). These three categories form a continuum along which all individuals fall, thereby enabling employers to make some predetermination of an employee's perception of current or future reward programs.

The equity sensitivity construct is related directly to equity theory and suggests that individuals react in consistent but individually different ways to both perceived equity and inequity because they have a different preference for—that is, are differentially sensitive to—equity (Huseman et al., 1987). Equity sensitivity is distinctive among individual difference variables in that it proposes that an individual has a unique sensitivity to equity that influences perceptions of equity or inequity and likewise influences reactions to perceived inequity (King et al., 1993). It has proven to be the natural progression of the original equity theory and has enabled researchers to answer some of the criticisms surrounding the original theory. The potential ability to predict employee responses to certain situations is the driving force justifying the utilization of this model in the current study.

Cultural Factors and Hofstede's Dimensions

Equity sensitives are individuals who simply want to be equitably rewarded when compared to their peers. These individuals represent the traditional equity theory model and thus require little additional description (Huseman et al., 1987). Equity sensitive individuals fit into the classic equity theory model and will most likely react if they perceive their ratios to be higher or lower than those of others (Wheeler, 2002). These individuals feel "distress" if they are under-rewarded and guilt when over-rewarded; they are the only group that experiences both of these feelings (Huseman et al., 1987). Patrick and Jackson (1991) conducted a survey demonstrating that equity sensitives were significantly more likely to alter their inputs and outcomes than entitleds when they are overcompensated (Allen and White, 2002).

Entitleds are the type of employees least preferred by employers. Individually, they prefer to have a higher outcome-to-input ratio than their coworkers. These individuals usually feel that they have a right to receive a greater reward than their inputs deserve relative to coworkers (Wheeler, 2002). However, much like the redefinition of benevolents, King et al. (1993) reconceptualized entitleds as individuals "who are more focused on the receipt of outcomes than on the contribution of inputs and who are thus intolerant of under-reward, more tolerant of over-reward than are either equity sensitives or benevolents" (Sauley and Bedian, 2000).

The equity sensitivity construct can therefore be viewed as a continuum, with entitleds at one extreme (preferring high ratios of outcomes to inputs), benevolents at the other extreme (preferring low ratios of outcomes to inputs), and equity sensitives in the middle (Mueller and Clarke, 1998).

The current study adopts Huseman et al.'s (1985, 1987) framework by using the three categories—benevolents, equity sensitives, and entitleds—to determine how they fit in a cross-cultural context. Over time, scholars have utilized empirical research to evolve these categories into a notable continuum of potentially predictable actions or reactions when certain types of individuals are faced with equitable or inequitable situations in particular types of environments.

Equity perceptions are unique to each individual and to the particular reward the individual is offered. Each individual has his or her own perception of what may be considered an equitable reward in any given reward situation (Miles and Day, 1993). King et al. (1993) contend that equity sensitivity is distinctive among individual difference variables with regard to equity theory in that it proposes an individual has a unique sensitivity to equity that influences perceptions of equity and likewise influences reactions to perceived inequity. These unique individual responses to the perception of equity create empirical support for the ongoing need for investigation pertaining to cultural diversity and equitable reward.

In today's highly competitive labor market, there is extensive evidence that organizations—regardless of size, technological advances, or market focus—are facing retention challenges (Ramlall, 2004). This reinforces the importance of ensuring that all employees perceive they are being equitably rewarded for their contributions to the organization. The consequences of an employee's perception that they are not being treated fairly can create a variety of behavioral options, including decreasing their inputs, seeking pay increases, or seeking alternative employment (Champagne, 1989). Employers invest a large amount of money, time, and effort to recruit and retain employees; it is therefore vitally important to ensure that all employees are satisfied with the reward system within the organization.

Worker motivation is a critical topic of concern for American society due to the ongoing cultural diversification of the domestic workforce (Katzell and Thompson, 1990). Demographic projections for the increased diversity of the American workforce raise additional problems of matching motivation practices to the needs and values of diverse subgroups of employees (Thompson and DiTomaso, 1988). These challenges have led to an increase in motivational concerns among psychologists and behavioral scientists. The primary issue is that every group and organization is an open system that exists in multiple environments (Schein, 1990). An open system is a work environment in which employees are able to freely enter and exit at their own will. These open systems attract various types of employees who are motivated by differing variables.

Hofstede (2001) defines culture as the collective programming of the mind; it manifests itself not only in values but also in more superficial ways—in symbols, heroes, and rituals. Culture perpetuates and reproduces itself through the socialization of new members entering the group (Schein, 1990). Culture is what a group learns over a period of time as that group solves its problems of survival in an external environment and its problems of internal integration (Schein, 1990). The concept of dimensions of culture is introduced through an inquiry into the philosophical opposition between the specific and the general, the different and the similar. The existing literature about dimensions of culture—both theory-based and empirically derived—contains predictions and validations of these dimensions (Hofstede, 2001). These dimensions are important because they provide empirical support for the various decisions made by individuals in similar situations.

Mueller and Clarke (1998) note that U.S. management theories were developed when there was little interest in determining whether such theories applied cross-culturally. There was an assumption that U.S.-based behavioral theories were universally applicable; this tendency stemmed in part from the dominant Anglo-American perspective of research generated in the United States and the lack of cross-cultural empirical studies (Adler, 1989; Boyacigillar and Adler, 1991). Understanding the implications of cultural factors is of growing concern due to the rapidly expanding global economy and the vital role culturally diverse workforces play in today's economy.

Cultural differences were not considered large enough to override the predictive and explanatory nature of behavioral theories developed within the United States (Chhokar et al., 2001). Today, however, a substantial body of social psychology research on human motivation and performance supports the contention that culture shapes beliefs, values, and perceptions and suggests that people of different cultures cannot be expected to exhibit similar behavior patterns or react to stimuli similarly in an organizational context (Mueller and Clarke, 1998). Thus cultural factors are a recognizable variable that influences individuals not only in external appearance but also in internal motivation and decision-making. Schein (1993) determined that individuals are culturally conditioned not only to think in terms of certain consensually validated categories but also to withhold information that would in any way threaten the current "social order."

Hofstede's (1980, 1983, 1997) empirical studies of international differences in values have become the major framework in the study of cultural factors in relation to different ways of structuring organizations, different motivations of people within organizations, and different issues people face within society (Wheeler, 2002). Through this analysis, Hofstede (2001) developed five dimensions of culture—individualism-collectivism, masculinity/femininity, uncertainty avoidance, power distance, and more recently long-term versus short-term orientation. These cultural dimensions at the individual level have received extensive examination in studies concerning a wide variety of work-related variables (Wheeler, 2002). Three of these five dimensions—individualism-collectivism, uncertainty avoidance, and power distance—are utilized to investigate the subject matter of the current study.

Individualism implies the fulfillment of individual interests, which supersedes any conception of group interests (Chen et al., 1998). Hofstede (2001) notes that individualism is reflected in the way people live together—for example, in nuclear families, extended families, or tribes—and has many implications for values and behavior. In some cultures, individualism is seen as a blessing and a source of well-being; in others, it is seen as alienating. The value of individualism emphasizes an "I" orientation where everyone takes care of him- or herself and immediate family. Individualism emphasizes independence, individual initiative, achievement, the right to private life and opinion, and autonomy (Wheeler, 2002).