Goal-setting theory is a theory suggests that precise and challenging goals, associated

with feedback, result in higher work achievement. This is due to the fact that goals
specificity, difficulty, and feedback on performance will create intentions to work, which
are a major source of motivation (Robbins and Judge, 2013). Managers should be
aware of Whats a difficult goal?. Task effort is lower when goals are easy as there is
no reason for employees to work hardest or longest. When goals are moving from
moderate to difficult level, it maximizes employees intensity and persistence of effort.
However, when the goals are set beyond difficult level, employees will feel helpless as it
reaches the limit of a persons ability, and self-efficacy begins to diminish. Therefore,
managers should set goals wisely by setting goals within optimum level (Colquitt,
Lepine and Wesson, 2015).

As an example, Microsoft Corporation utilizes performance management system to

emphasize employees to outline achievement goals and have them agreed by their
managers. As a result, this goal-setting process encourages employees to set goals by
themselves, provided with managers assistance throughout the process by giving
performance evaluation. In the late 1990s, a senior vice president from Microsoft
wanted to increase the recruiting goals by hiring more employees to fulfill business
needs. However, the recruiting director refused to accept the challenge and asked the
recruiting manager to never agree to a precise number of new recruitment during the
meeting. As the recruiting manager was not able to provide a specific number of new
hires, the vice president set a goal twice the current years employing target and higher
than the recruiting teams expectation. As a result, the team beat the target by hiring
employees more than a third of the goal. The vice president also threw a huge
celebrating party and gifted a special cake with the total number of new-hire printed on it
as a reward (Shaw, 2004)

Although goal-setting theory concerned with clear and specific goals, associated with
performance feedback and motivation, it has its unfavourable parts and cause
complication if the organization has set the wrong goals. For instance, the launch of
New Coke by Coca-cola Company in 1985 was a great product failure introduced in the
industry (Lander, 2015). The Coca-cola Company insisted to reformulate their signature
soft drink and introduced the New Coke despite consumers protest. Employees was
receiving 1500 calls and complaints a day on its customer hotline. It gave a lesson for
the company to take intelligent risks to prevent employees from overlooking important
day-to-day tasks when dealing with other issues ensued (Coca-cola, 2012).

Equity theory recognizes that employees produce a perception of the efforts they have
committed to their tasks. Then, they will compare the input-output ratio with preferred
referent for evaluating equity. There are 3 general possibilities result from this mental
calculation. First, when employees perceive the ratio of outcomes to inputs is equal to
the comparison other, they are more likely to be motivated as they feel a sense of
equity, and no implementations are required. Second, if there is imbalance between the
ratios where employees are under-reward, they will face equity distress and negative
emotions such as anger or envy. To overcome this, employees will strive to balance the
ratio by reducing their inputs to put in lesser efforts or increasing outcomes by
convincing managers why they deserve more. Third, when employees are over-reward
as their input-output ratio is greater than their referent. They will feel guilty and anxious.
Hence, they might diminish outcomes by distributing some of their money to comparison
others. However, they are more likely to increase task efforts and citizenship behavior,
or experience cognitive distortion to think that their inputs are more valuable than others
to balance-off cognitive calculus without changing any behavior (Colquitt, 2015). The
consequences of inequity consist of 2 general hypothesis, according suggestions from
cognitive dissonance theory. First, it creates tension in employees following the degree
of inequity presented. Second, employees will eliminate or reduce the tension by
achieving equity or reducing inequity (Adams, 1966).

In short, as it is often challenging to promise equity in organizations, managers should

be effective in helping employees to fulfill their needs to achieve a sense of equity. For
example, one of the main issues for McDonalds in US is the low-wage pay for workers.
They keep fighting for $15-an-hour-pay and the right to form a union without
punishment. Although the company has raised $1 from the minimum wage, which is
from $7.25 to $8.25, employees claim that this earning is clearly not enough as living
wage (Kasperkevic, 2015). Concerning the same issue, Walmart decided to increase
the minimum wage to $9 for 500,000 staff starting from April 2015 after a long protest
and political campaigns. It is shown that Walmart had one of the highest staff turnover
levels among US firms. Therefore, Burt Flickinger, managing director of retail
consultants Strategic Resources Group said, With higher turnover come higher costs of
hiring, training and lower productivity per person. Hence, by increasing the minimum
wage, the company hoped to create a sense of ownership among workers which in turn
encourage better store experience for customers and promote higher sales (Neate,
2015).

However, as compare to US giant retailer Cotsco, who pays around $20 an hour,
employees of Walmart may feel that they are not getting enough pay for their works. But
unfortunately we cannot force Walmart to offer the same pay as Cotsco to reduce
inequity and even poverty. This is because the business models and labor policy used
are different. Besides, there are 1.3 million workers under Walmart and 184,000 workers
under Cotsco and their US sales are $102 billion and $73 billion respectively. This
situation explains why Cotsco is able to provide a much higher wages for its workers. If
Walmart is going to earn the same profit, it has to cut-off half of its staff, which are
650,000 employees. This means that although the remaining workers get to receive
higher pay, at the same time there are 650,000 more people unemployed. Therefore,
equity theory suggests that managers should constantly look at the overall picture and
policy before making any changes to overcome inequity issues to prevent from creating
bigger problems after fulfilling smaller needs (Worstall, 2014) .

References
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Worstall, T., 2014. We Can't Reduce Inequality By Forcing WalMart To Pay Like Costco.
[Online]
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[Accessed 30 October 2015].