A contingency approach for understanding equity theory and its predictions

This study is an empirical examination of equity theory as a predictor of pay satisfaction among managers. A contingency model is developed and confirmed. The basic idea is that equity theory does not apply universally for all situations, but is rather restricted to tasks with a high level of perceived certainty. In other situations, where information concerning the tasks and their characteristics is quite unpredictable and less certain, the assessment of the reward system as equitable or inequitable can be a very difficult task and maximization is often used as the operating norm. Consequently, three hypotheses were tested and supported: (1) Under conditions of high uncertainty, maximization has a strong relationship with pay satisfaction than equity; (2) Under conditions of low certainty, equity has a stronger relationship with pay satisfaction than maximization; (3) Under conditions of moderate uncertainty, both equity and maximization have strong direct relationships with pay satisfaction. The implications of this study for other studies of organizations are discussed.