After implementing a pay transparency policy, the head of a sales team notices:

Top performers reducing effort
Average performers maintaining pace
Low performers increasing effort

According to Equity Theory and Expectancy theories, what complex dynamic is occurring?

Question

After implementing a pay transparency policy, the head of a sales team notices:

Top performers reducing effort
Average performers maintaining pace
Low performers increasing effort

According to Equity Theory and Expectancy theories, what complex dynamic is occurring?

BlackTom AI · Accepted Answer

The scenario presents a pay transparency policy where top performers reduce effort, average performers stay the same, and low performers increase effort. This sets up divergent perceptions of fairness and motivation across performance levels, which we can analyze through Equity Theory and Expectancy theories.
Option 1: 'Low and average performers perceiving effort-reward inequity'—This would suggest both low and average performers feel their inputs and outputs are mismatched relative to others. However, the observed pattern shows high performers reducing effort, which is not easily explained by low/average perceiving inequity alone, and it contradicts the specific dynamic described for high performers. Therefore, this option mischaracterizes the differential reactions across groups.
Option 2: 'Insufficient motivation across performers for different reasons'—While motivation gaps may exist, this answer is vague and glosses over the specific inequity dynamics tied to performance levels and perceived rewards. Equity and Expectancy theories are about perceived fairness and expected outcomes, not a blanket statement about insufficient motivation without addressing relative comparisons.
Option 3: 'High performers perceiving performance-reward inequity while low performers see opportunity'—This aligns with Equity Theory, where high performers, who previously received higher rewards for higher performance, may now see their inputs (effort) not yielding proportionate rewards due to transparency, leading to perceived inequity. Simultaneously, low performers may perceive an opportunity because the new policy reveals that rewards could be attainable with increased effort, changing the expectancy and instrumentality perceptions for them. This captures the complex, divergent reactions described in the scenario.
Option 4: 'High performers perceiving performance-reward inequity while low performers see equity'—If low performers perceived equity, they would feel their effort-to-reward ratio is fair relative to others, which contradicts the idea that low performers are increasing effort in response to transparency. The described dynamic suggests they see an opportunity, not equity, so this option is inconsistent.
Option 5: 'Wrong incentive structure for the average performers'—While plausible in some analyses, this option focuses on average performers and a misfit in incentives rather than the core dynamic of high versus low performers’ reactions to transparency. It does not directly capture the described divergence where highs feel inequity and lows see opportunity.
In summary, the most accurate interpretation under Equity Theory and Expectancy theory frameworks is that high performers perceive performance-reward inequity under the transparency policy, while low performers interpret the situation as an opportunity to earn more through increased effort. This explanation reflects how fairness judgments and expectancy evaluations can diverge across performance strata in response to a new incentive structure.

After implementing a pay transparency policy, the head of a sales team notices: Top performers reducing effort Average performers maintaining pace Low performers increasing effort According to Equity Theory and Expectancy theories, what complex dynamic is occurring?

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