Friday, November 04, 2005

Adams Theory Applied to CRM

The Theory Summarized

The Adams’ Equity Theory is named for John Stacey Adams, a workplace and behavioral psychologist, who developed this job motivation theory in 1963. Much like many of the more prevalent theories of motivation (theories by Maslow’s Hierarchy of Needs, Herzberg’s Theory, etc.), the Adams’ Equity Theory acknowledges that subtle and variable factors affect an employee’s assessment and perception of their relationship with their work and their employer.

The theory is built-on the belief that employees become de-motivated, both in relation to their job and their employer, if they feel as though their inputs are greater than the outputs. Employees can be expected to respond to this is different ways, including de-motivation (generally to the extent the employee perceives the disparity between the inputs and the outputs exist), reduced effort, becoming disgruntled, or, in more extreme cases, perhaps even disruptive.

Adams’ Equity Theory calls for a fair balance to be struck between an employee’s inputs (hard work, skill level, tolerance, enthusiasm, etc.) and an employee’s outputs (salary, benefits, intangibles such as recognition, etc.). According to the theory, finding this fair balance serves to ensure a strong and productive relationship is achieved with the employee, with the overall result being contented, motivated employees.

Applying Adams to Customer Relationships

We can all sense how the Adams Theory applies to our worklife from our own experience. Same goes for us as customers. When a relationship with a vendor becomes lopsided, we walk. If it is lopsided in our direction, the vendor walks. It calls for the classic "win-win" where we all feel good.

When a vendor makes a contract onerous, or the price is too high for the value we get, or the vendor's service disappoints us ... we strike out with word of mouth or viral blogging that in some cases has destroyed brands virtually overnight.

I can still remember from two decades ago when the vendor had all the consumer data. Then came scanner data and suddenly the retailer had the data. The data in both cases brought power that was then abused. The win-win relationships were pitched out as each side sought to take advantage of the other.

Another example: Wal-Mart becomes so powerful that it can dictate terms to its vendors, and even giant companies like P&G cowtail to stay in favor and keep their merchandise on the shelves.

Better if we all come to realize the real power in Adams Theory. Keep a balance on the inputs and outputs and both sides will prosper.

Okay, Dale, that's a long winded way of getting to Customer Relationship Management (CRM). Optimizing profit is what we're all paid to do. But if we optimize at the expense of the customer, the relationship part of CRM is dead. It just all calls for a sense of balance. Deliver high value at a low cost with a rapid return on the investment, but do it with optimized profit by squeezing waste from all our systems.


At 11:59 PM, Anonymous laura said...

I think the Adam's Equity Theory is a very practical theory that can and should be used in companies on a daily basis. I believe the theory is valid, and that employees may become less motivated if they feel they are putting more into their job then getting out of it. It makes sense, because people like to be acknowledged for the good work they do, and like to be rewarded for it as well.

Adam's theory, calling for a fair balance between inputs and outputs seems like a good, reasonable idea. The key in all of this is to make companies aware of this theory and the results/consequences it can have. I like the example you used about Wal-Mart being so powerful. They have potential to be a prime example of the Adam's Theory in action. Hopefully all companies, as large as Wal-Mart to even the smallest shops in downtown Auburn will realize the importance of this theory and begin have the sense of balance you refer to.

At 2:38 PM, Anonymous natalie said...

Adams’ Equity Theory is a theory that a lot of people think about but don’t always apply in their relationships with employees or customers. They think it would take to much time or effort.

Adams’ Equity Theory is also something that should be common sense but it is easy for successful companies to look past common sense issues. They are worried about what they think are the “bigger issues.” However, dealing with relationships between the employees and company and the relationship between the customer and the company now would safe it from turning into a bigger issue later.

It’s kind of like a change reaction. If the employees are happy then the customers are more likely to be happy as well. All it takes to make both customers and employees happy is to make them feel appreciated. It could be as simple as complementing an employee’s work or helping a customer find the perfect outfit. Like Laura and you said this will create a balance.

At 6:50 PM, Anonymous Tyler said...

I like the idea behind Adams’ Equity Theory, but getting it to catch on might be another story. Ideally, we all want to "enjoy" the place we work and be productive at the same time as well as give and receive the benefits of good customer service his theory would produce. However, as unfortunate as this is, we find that our society is full of "it's all about me" minded people.

Not to be discourage I found a good example in regards to the application of Adams' theory on customer service. I have to mention a store called Commando Military Supply. This store is right outside Fort Benning Army base in Columbus, Georgia and offers the best customer service I have seen. From the moment you walk in the door you are greeted and made to feel like the only customer they have at the moment. They offer you a free Gatorade or soft drink and make sure your every need is met. The trick is, Commandos often has higher prices than other stores in the area selling the same goods. Regardless, customers continue to visit Commandos and pay more just for their quality of customer service. I just hope this quality of customer service carries over when they hit the World Wide Web soon.

I firmly believe that if more companies took this approach we would all benefit. Large and small, local and global, companies need to recognize the power of customer service. More over, as Natalie mentioned, if companies use this theory inside their organization and apply it to their employees it would roll over into better customer service. Happy employees produce happy customers.

Adams' Theory is very practical and beneficial; let's just hope it catches on.

At 1:38 PM, Anonymous katie said...

I wonder how many employers are aware of Adam’s Equity Theory. I say this because so many employees become de-motivated in their positions because they don’t see the benefits of their labor. I was recently talking to a friend who works overtime almost every pay period, but never feels that his paycheck reflects his hard work. His case is similar to many people who work jobs in retail and food service where pay is often low and hours are long. The balance, as mentioned above, is not considered or enforced. And it is a shame.

We all agree that it is important, but a change in the cycle of service is needed to alter the attitudes of employees. Employers owe it to their employees and customers to ensure quality service. Employees need to be rewarded and recognized for their outstanding efforts, not just mediocre efforts. I worked at an elementary school after-school program and we rewarded children with points that they could use in the school store for excelling in manners and activities; going beyond what they were supposed to be doing. Children always behaved better when school store “dollars” were on the line. Employers should practice the same methods in their company – reward the employees who go beyond the call of duty.

I believe that this practice will create more effective and efficient employees, happier customers and more profitable employers. By applying Adam’s Theory and altering the attitudes of employers, the cycle produces benefits for all involved.


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