CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Traditionally, equity theory has been tested by monitoring the reaction of individuals to experimentally induced situations of inequity by intentionally under- or overpaying them (Landy & Conte, 2010; p. 375). It was expected that underpaid participants would lower the quality or quantity of their output, whereas people who were overpaid would raise the quality or quantity. In general, results supported the underpayment predictions, but not the overpayment ones, which may be due to the fact that inequity due to overpayment is not as stressful as inequity because of underpayment (Landy & Conte, 2010; p. 375). Most criticisms on equity theory concern the artificial laboratory conditions in which the theory has been tested. Yet, an even more pertinent issue is whether the theory as suggested by Adams (1965) really holds. Most studies are unable to answer this question as this requires the theory to be evaluated within each person's value system.

The productivity of an organization is jointly determined by the efficiency with which the organization utilizes several available factors of production which invariably are scarce relative to the demand for them. As it were therefore, one can conceive of an equilibrium condition in productivity terms within given and stated constraints in an organization. Like the price scenario, several factors operate to make it difficult to optimize the use of human and other resources in the organizations such that the equilibrium condition is not achieved easily. Ouchi (1981) clearly pointed this out when he addressed the issue of what he labeled “the organizational dilemma” i.e. the organization’s search for rationality (technological determinism) and the human beings search for happiness (as in the doctrine of Hedonism).

Technology and labour are therefore the major factors/variables in the productivity equation, with the one or the other being emphasized at different points of the trade cycle. Like many economists would posit, during economic recession, emphasis is usually placed on the relationship between productivity and unemployment. According to McClelland and Winter (1969) during periods of rising prices, interest usually shifts to the problem of rising costs and the relationship between productivity and wages. As a result, many early attempts at increasing productivity emphasized technical optimization (as in scientific management) or social system optimization (as in human relations school).

All over the world, governments and businesses have long been very concerned about productivity improvement for a number of reasons. The first is that productivity is a major issue in foreign competition, and if any government’s export promotion drive is to yield the desired results, labour productivity in particular must be optimized. The second reason is that the declining rate of increase in productivity is a major cause of monetary problems and inflation, and government obviously should be interested in both. In this paper, we shall attempt a review and critique of a number of the better-known approaches to early management theories such as the scientific management, the classical organization, and the behavioural schools that emphasized performance improvement in the organization with a view to charting a new course in solving the problem of managing entrepreneurial organizations for optimal performance in this age of increasing competition.

1.2 STATEMENT OF PROBLEM

Productivity is a major issue in foreign competition, and if government’s export promotion drive is to yield the desired results, productivity in particular must be optimized. The declining rate of increase in productivity is major cause of monetary problems and inflation, and governments obviously should be interested in both. The issue of how best to improve productivity had always been at the center burner in organization theory and practice since the onset of management learning. For decades, management researchers have been obsessed with the kinds of structure that will promote effective employee behaviour and subsequently increase productivity. Is there a one best structure in organizational design in pursuit of increased productivity? There is abundant evidence that the application of theories to improve organizational efficiency and productivity have not yielded the desired result because of over emphasis on technical optimization at the exclusion of human side of the enterprise.

Managers suffered frustration, because people did not always follow predicted or expected patterns of behaviour. Thus there was increased interest in helping managers deal more effectively with the “people side” of their organizations. 

The effective motivation of workers is a problem in most organizations regardless of the theory applies to dealing with such motivation; this is probably because there is no implementation of the necessary procedure or techniques of motivation.

1.3 OBJECTIVES OF THE STUDY

The following are the objective of this research work:

1.     To investigate the impact of the application of equity theory on organizational performance.

2.     To examine the relationship between the application of equity theory and organizational productivity.

3.     To examine the effect of the equity theory on the relationship between employers and employees.

1.4 RESEARCH QUESTION

1.     What are the impacts of the application of equity theory on organizational performance?

2.     Is there any significant relationship between the application of equity theory and organizational productivity?

3.     What are the effect of the equity theory on the relationship between employers and employees? 

1.5 STATEMENT OF HYPOTHESIS

The following research hypotheses formulated will be empirically tested and result gotten will serve as a spring hoard for recommendations. For the purpose of this study, two hypotheses will be formulated and tested.

HYPOTHESIS I

Ho: The application of equity theory has no positive impact on         organizational performance.

Hi: The application of equity theory has positive impacts on    organizational performance.

HYPOTHESIS II

Ho: There is no significant relationship between equity theory and organizational productivity.

Hi: There is a significant relationship between equity theory and organizational productivity.

1.6 SIGNIFICANCE OF THE STUDY

At the end of this study, most organizations will understand that basic principles and process of application of management models and how it affect productivity and performance in organization. It will also serve as a guide for further researches.

1.7 SCOPE OF THE STUDY

The research is mainly based on the application of equity theory and how it affects organizational performance and productivity. This is done using Guinness Nigeria Plc, Benin City as a case study.

1.8 LIMITATION OF THE STUDY

One of the major problems encountered by the researcher is the monetary problem. There was no sufficient money to make the purchasing of all necessary materials for the research work. There was also the problem of meeting some personalities to get information from them. Because of that, the researcher found it difficult to collect all the necessary information. However, the researcher made do with the resources available for her research work.

1.9 DEFINITION OF TERMS

i.                   Productivity: Productivity is an average measure of the efficiency of production. It can be expressed as the ratio of output to inputs used in the production process, i.e. output per unit of input. When all outputs and inputs are included in the productivity measure it is called total productivity. Outputs and inputs are defined in the total productivity measure as their economic values.    

ii.                Motivation: This is an inner state of minds satisfaction which energizes or encourages someone’s behavior towards the attainment of the objectives.

iii.             Incentives: These are provisions which encourage one to do the best.

iv.             Productivity: This can he defined as efficiency with which work is done, the amount of work done in a certain work.

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