Equity Principle In Management: Definition, Features, Real-Life Illustrations

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An organization’s success depends on its workforce and the quality of its work. Managing an organization is no small task, and managing people and expectations is one of the most challenging and important aspects. Happy, motivated staff produce the best results. The equity principle in management is designed to drive employee satisfaction and stimulate success.

The equity principle in management is based on fairness in the workplace. Equity is underpinned by the concept of input and output being aligned. For an organization to provide a fair environment, it must embrace diversity, be transparent, provide equal opportunities, and practice inclusivity.

Businesses must facilitate a workplace conducive to high performance for staff to be most productive. Creating an environment that makes every employee feel valued and motivated requires ongoing commitment from the company.

Equity Principle In Management Meaning

The equity principle in management is often part of an organization’s diversion and inclusion policy. The foundation of the equity principle is fairness and kindness. It, most importantly, ensures no discrimination towards any employee in the organization.

6 core issues are addressed in an equity policy in an organization:

1. Fairness
2. Transparency
3. Accountability
4. Equal opportunities
5. Diversity
6. Inclusion

It is important to note that the equity principle differs from equality. Equality in an organization means all employees are given the same career growth and development opportunities. There is no disparity in resources given to employees to be successful in their careers. In other words, no one is favored and has greater career opportunities than others.

1. J Adams And Henri Fayol Explain Equity Principles

In 1960, J. Stacy Adams, a behavioral psychologist, introduced the equity principle based on justice theories. His equity theory stated that employees must receive equitable outcomes for their input into the business. The crux of this theory is that perceived inputs and outputs are considered.

Henri Fayol, the doyenne of modern management principles, emphasizes the importance of equity in the business environment. His management model addresses the correlation between treating employees with fairness and equity.

Fayol explains that to earn devotion from employees, they must be treated with kindness and that managers must be impartial when they engage with subordinates.

The social exchange theory advocates that employees who feel that they are either under-rewarded or over-reward will feel uncomfortable and anxious about this situation. In turn, this leads to demotivation in the workplace.

Under-rewarded employees feel angry, and over-rewarded employees feel guilty. Unfairness is a precursor to hostility and strained relationships between co-workers.

Interestingly, Fayol’s 14 principles of management mention that certain situations are best served with a degree of harshness. These situations relate to instances where anti-diversity actions take place. Actions opposing diversity must be halted immediately, and strict adherence to the diversity policy must be enforced.

Employees should feel that the correlation between what they do and the rewards they receive is the same as other employees in the organization. Fayol and Adams emphasize that employees remain motivated when there is equity in the workplace.

2. Inputs And Outcomes Must Align

Inputs are defined as everything that an employee contributes to the business. This contribution extends to include prior experience, education, and skill.

Other factors considered and qualified as input are:

• Personal sacrifices by an employee for the organization
• Loyalty
• Hard work
• Commitment
• Time
• Responsibility
• Accountability
• Fostering good relationships in the workplace
• Determination
• Positive Attitude

On the other hand, an outcome relates to the benefits given to any employee in line with his or her input. Outcomes are not limited to financial rewards but include other meaningful benefits:

• Appropriate recognition for excellent work
• Acknowledgment of efforts and commitment
• Gratitude
• Positive reputation
• Job security
• Responsibility
• Career growth plans

Features Of The Equity Principle

The equity principle encompasses a broad range of elements. Most organizations have an equity policy that addresses all fairness, inclusion, and diversity issues. There are 10 important features of adequate equity practices.

1. Bias Is Not Tolerated

Bias is the treatment of any employee who is prejudiced for any reason. Prejudice arises when a person’s beliefs and feelings affect how they treat others. Prejudice can be towards or against an employee. Bias is unacceptable in an organization that adheres to the equity principle in management.

2. The Organization Operates On The Principle Of Fairness 

Fairness encompasses a broad spectrum of concepts. In the workplace, fairness is far-reaching and applies to almost every scenario and employee. Fairness covers the concepts of:

• Consequences
• Working hours
• Leave allocation
• Access to the necessary resources, support, and equipment
• Access to office services
• Communication channels
• Workplace facilities

3. Remuneration Rewards Efforts Fairly 

One of the most contentious issues in a work environment is fair remuneration. An equity policy ensures that financial reward is commensurate with the employee’s input.

The requirements for input must be clearly defined in the employee’s work contract and explained by the employer to ensure understanding.

Many companies use salary brackets to ensure that employees performing a similar function are remunerated fairly.

4. Objectivity Is Used In All Decisions

Objectivity ensures that bias and prejudice are not used in decision-making. Objective decision-making requires:

• Honesty
• Careful consideration of facts
• Understanding the facts
• Impartiality
• Additional opinions for larger decisions

5. Transparency Keeps Employees Informed

Transparency requires open lines of communication between employees and management. An accessible communication channel facilitates dialogue which in turn eliminates confusion and misconceptions. Employees feel far more secure when informed of the business goals, achievements, policies, procedures, and initiatives.

Companies that focus on transparency have less workforce disruption because employees are secure in their knowledge of the business environment and what is required.

6. Equal Opportunity Is Guaranteed For All Employees

Equal opportunity is the best way a company and its employees can grow together. Equal opportunity means no one is excluded or denied the opportunity to grow within the organization. It also means that employees are given the tools to progress.

Equal opportunity also covers conditions and requirements for promotion, termination, and compensation. The company’s recruitment policies must promote equal opportunity.

7. Accountability Is Required From All Employees

Accountability in an organization refers to employees and employers taking responsibility for their assigned tasks. As an equity principle, all employees must take ownership of their work and are held accountable for performing duties assigned to them. In an organization, this leads to high-performance levels and motivates staff members.

8. The Organization Embraces Diversity

The concept of diversity is broad in that it addresses a multitude of factors, circumstances, beliefs, and differences.

The equity principle in management acknowledges:

• Diversity
• Culture
• Gender
• Race
• Sexual orientation
• Religious beliefs and practices,
• Mental and physical health conditions
• Citizenship status
• Personal Circumstance

For a workplace to be equitable, employees must feel they can freely express themselves. Important to note is that an employee’s freedom of expression may not infringe on that of another employee.

Other factors that may affect diversity are political affiliations, personal experiences, and age differences.

9. The Organization Fosters Inclusion

Inclusion in an organization is a process whereby diversity is applied to problem-solving, business plans, and representation in various business forums.

Inclusion places value on each employee’s contribution and considers the input from all participants in a business environment. No employee’s input is marginalized.

10. Consequences Are Equally Measured

An important aspect of the equity principle is that the same standards for the consequence of actions are applied. Whether positive or negative, consequences must be fair and not differ from staff member to staff member.

How To Effectively Apply The Equity Principle

Applying the equity principle must be a conscious decision by management. Equity must be reinforced throughout the organization and must be an ongoing practice.

Although equity requires different conditions for different types of businesses, the basic requirements for equity remain the same.

Equity Requirement	Implementation
Conditions of employment	The employee must receive an easy-to-understand, detailed employment contract leaving no room for interpretation.The contract must include specified remuneration, benefits, and leave allowances.The employee must be given enough time to study the contract before signing it.Any questions the employee may have must be answered in full.
Roles and requirements	Employees are entitled to a clear job description that details functions and outcomes.Employees must have access to advise and management input as and when required.
Company policies and procedures	The employee must know all company policies and procedures and sign acknowledgment forms.
Remuneration	Companies must conduct annual salary surveys to ensure that employees are paid fairly. This ensures that talent remains within the organization.
Channels of communication	Employees must be advised of the relevant communication chains and how to access them. Employees must be given confidentiality to discuss personal matters.Employees must know how to discuss concerns, grievances, harassment, and discrimination.Employees are entitled to representation for company disciplinary hearings and complaints.
Changes within an organization	Companies must inform employees of any changes or developments within the organization.
Career growth	Employees should receive frequent and planned career conversations.
Career assistance	Management must take responsibility for career guidance.Areas of concern must be addressed with employees, and training or assistance must be provided.
Diversity	No employee should be alienated on the grounds of diversity.Acceptance of diversity must be encouraged within the organization. Cross-cultural events and informative discussions can help bridge diversity gaps.
Special needs	Employees with special health or mental disorder needs must receive the support they need and may not be discriminated against.  Support structures could include wheelchair ramps, modified workspaces, and counseling.
Diversity in management	Diversity must be embraced across the organization and include a fair representation at the management level.
Inclusion	Companies must purposefully practice inclusion. Any forum requiring employee participation must have a fair representation of diversity.
Religious practices	Religious practices must be catered to as far as possible.Employees should be allowed to celebrate religious holidays without repercussions.
Cultural Differences	Employees should have the right to dress and eat according to cultural requirements.Employees should have the right to observe religious and cultural requirements in the workplace. Employees may not be forced to break with their religious or cultural beliefs unless they are disruptive to the work environment.
Reward and recognition	Employers should recognize and express gratitude to employees for excellent work and for exceeding what is required.
Resources	Resources, tools, services, and devices must be available for staff to perform their functions and tasks.
Disciplinary action	Staff is entitled to know pre-defined disciplinary action procedures.Staff should be allowed representation during these procedures.

An equity policy benefits both the employees and the organization. A policy creates a fair environment where employees know what to expect and what they are entitled to. Although the organization will benefit from applying an equity principle in management, it is important to have guidelines and communicate these to staff.

Advantages And Disadvantages

Implementing an equity principle in management is important for a company to prosper. However, with this comes advantages and disadvantages. Organizations must be aware of these and mitigate any areas of possible concern.

Advantages Of The Equity Principle In Management

The primary advantage of the equity in the workplace is a happy, motivated workforce. Equity encourages participation, creating a sense of belonging and camaraderie in the workplace.

Workers Prefer Diverse Organizations

In a survey conducted by CNBC in April 2021, nearly 80% of workers included in the survey approved of diversity in an organization. Survey respondents said they would prefer an organization that encourages diversity. The great advantage is that companies that subscribe to the equity principle of management can attract top talent.

Diverse Leadership Is Inspirational

When equity is evident in leadership positions, employees are more likely to trust leaders and the organization. Equity in leadership is motivational as it clarifies that aspiring to a management role is within reach for all employees.

Diversity Improves Staff Retention

An equitable work environment also improves staff retention. A high ratio of staff churn is expensive for an organization. When a staff member leaves, the business must incur the cost of recruitment and training a new employee.

A new employee may take a while to become as productive as the previous staff member, which could place extra pressure on existing workers.

Employees Are Committed

One of the most profound benefits of the equity principle is that employees are committed to the business they work at. Commitment increases productivity and participation.

Inclusion Breeds Success

An equitable workplace is a breeding ground for innovation and progress. Several successful companies focused on broadening diversity post the Covid pandemic. The culture of inclusion brought about new perspectives and highlighted an opportunity for growth.

Greg Cunningham, responsible for equity and diversity at U.S. Bank, says, “We all win when we all win.”

An inclusion policy exposes the organization to broader insights, different outlooks, and approaches to problems and solutions. Innovation is often a result of inclusion.

Disadvantages Of The Equity Principle In Management

Even though the advantages of equity in the workplace are evident, there are some disadvantages and pitfalls that management must be aware of.

Management Structures May Be Compromised

Although diversity and inclusion benefit organizations and employees, businesses need reporting structures. Hierarchy in the leadership structure facilitates decision-making strategies, operational direction, human resource management, business management, and financial management.

If the expectations around diversity and inclusion are not managed, the organization will not achieve its business goals.

Equity In An Organization Costs More

Maintaining equal opportunity in an organization costs money. Ensuring all staff receives training and skill development is an expense for businesses. Still, it pays off in the long run as productivity, efficiency, and staff motivation improve.

Diversity May Infringe On Rights

A culture of diversity may infringe on the rights of employees. Suppose any culture has high requirements for equity. In that case, it may impact the workforce in general, shifting the organization away from the principles of equity.

To this end, companies must provide clear guidelines for cultural and religious practices that do not disrupt the workplace.

Decision-Making Takes Time

An equity and inclusion policy often delays decision-making because many more people are included in the decision-making process. Arranging meetings and decision-making sessions take time, as employees’ availability may need to align.

To mitigate this challenge, clearly outline which decisions and discussions require collective input. An organization must schedule times in advance so employees can plan accordingly.

Real-Life Examples

The principle of equity in management requires disciplined implementation and meticulous planning. Neglecting either of these makes equity and inclusion challenging. Here are some examples of good equity practices in an organization.

1. Employee Forums Represent Diverse Cultures

Although it is only feasible for some employees to have a say in every decision, employee forums can be established. Employee forums must represent the employees in the organization, and no bias must be applied to candidate recommendations.

Business leaders engage with employee representatives to address issues and gain input for decision-making.

2. Special Facilities Assist Mothers

An excellent example of equity in the workplace is providing childcare facilities for mothers. Childcare facilities allow mothers to focus on their work requirements while having their child nearby and knowing the child is well cared for.

3. Training Programs Include All Employees

Suppose an organization needs to train or upskill employees; group training invitations are extended to all employees. Attendance is registered, and this gives the organization an indication of which employees are eager to learn and which are not.

4. Cater For All Cultures

On-site canteens or eating facilities should include food options considering different cultures and religious requirements.

5. Cultural Days Create Understanding

Hosting cultural and heritage days in a workplace allows employees to express pride in their heritage and grow to understand different ethnic groups, religions, and cultural groups.

6. Host Mental Health Days

Mental health days are effective in reducing the stigma surrounding mental health issues. These days help convey the message that mental health is important. Talks by mental health professionals and patients highlight the complexities of mental health and discourage any negative associations.

7. Provide Employee Orientation

An organization is well-served if it orientates new employees and guides them through company policies, facilities, and procedures. An introductory pack, a tour of the organization, and a formal introduction to colleagues help employees feel more at ease.

8. Give Regular Company Updates

Employees are less likely to perform well when unsure of an organization’s progress and financial health. Regular staff updates go a long way to creating job security and giving credibility to leadership. These updates must present a broad overview of the business. Businesses’ success must be celebrated.

9. Reward And Recognize Top Performers

A reward and recognition program motivates employees. Rewards must recognize diverse employees to demonstrate the company’s appreciation for hard work and commitment across all departments and levels. A fair and representative program demonstrates that the organization provides an equitable environment to work in.

Wrap-Up

The equity principle in management is based on creating a fair work environment, embracing diversity, and providing all employees equal opportunities. Management is transparent in an equity-centered organization.

Inclusion is a feature of equity and allows employees from different backgrounds to participate in forums, problem-solving, and idea generation across the organization.

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