Using Data Envelopment Analysis to Estimate Perceived Organizational Equity

Document Type : Research Paper

Authors

1 PhD. Candidate, Department of Management, Najafabad Branch, Islamic Azad University, Najafabad, Iran.

2 Assistant Prof., Department of Management, Najafabad Branch, Islamic Azad University, Najafabad, Iran.

3 Assistant Prof., Department of Management, University of Qom, Qom, Iran.

10.22059/imj.2022.343989.1007950

Abstract

Objective: People give inputs to the organizations and receive outputs instead. Each individual compares his/her inputs and received outputs with others and may feel dissatisfied. This comparison forms the foundation of the equity theory introduced by Adams. Despite the widespread acceptance of Adams’ equity theory and the consensus on its ability to explain the distributive equity perceived by employees, the difficulty in quantifying the concept of equity has made its use challenging to some extent. This study seeks to propose an approach to estimate the degree of equity perceived by each employee compared to others and determine the number of changes in inputs/outputs of the employees to increase their sense of equity while causing the least dissatisfaction.

Methods: The output-oriented CCR model, as one of the Data Envelopment Analysis (DEA) methods, was used with two different scenarios of optimism and pessimism. It provided an estimate of the degree of equity perceived by each employee. DEA is a mathematical model that is conceptually similar to equity theory. This technique compares homogeneous decision-making units that consume similar inputs and produce similar outputs. It distinguishes the efficient and inefficient units. To illustrate the applicability of the proposed approach, it was used to estimate the equity perceived by the faculty members of an educational group. This example estimated the equity perceived by nine professors working in an educational institution, by considering two inputs (i.e., scores achieved for educational activities and research activities) and two outputs (i.e., financial compensation and supporting facilities).

Results: Solving the formulated models showed that optimistic and pessimistic views have different effects on the ranking of employees in terms of the degree of equity they perceive. The results also showed that the degree of equity perceived by an employee does not necessarily correspond to the degree of equity estimated using both optimistic and pessimistic views because these two perspectives measure the extreme values of these approaches. Instead, the degree of equity perceived by employees is more in line with the average of equities obtained from both optimistic and pessimistic approaches.

Conclusion: The results showed that the real equity values perceived by employees fall within the interval values obtained from the approach proposed in this study, indicating its validity. Therefore, it is possible to estimate the equity perceived by each employee as an interval value and, accordingly, prepare some facilities for employees who have the potential to feel inequity based on DEA models to reduce the intensity of this feeling. Since equity theory is a reactive theory that investigates the perceived equities in an exchange relation, it does not have the ability to predict and cannot be applied until the exchange relation is finished. DEA, the same as the equity theory, is also a reactive model. However, it can be considered a futuristic model due to its capability of estimating how the change in each person’s inputs and received outputs will affect his/her satisfaction and the satisfaction of his/her peers i.e. changing the inputs and outputs values of a person will change the degree of satisfaction perceived by others. DEA can predict such changes; it can predict the satisfaction degree of individuals in advance by considering different values for their inputs and outcomes.

Keywords

References

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Industrial Management Journal
Volume 14, Issue 3
2022
Pages 337-358

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