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Equity theory, most popularly known as equity theory of motivation, was first developed by John Stacey Adams, a workplace and behavioral psychologist, in 1963.
John Stacey Adams proposed that an employee’s motivation is affected by whether the employee believes that their employment benefits/rewards are at least equal to the amount of the effort that they put into their work.
Definition of equity An individual will consider that he is treated fairly if he perceives the ratio of his inputs to his outcomes to be equivalent to those around him. Thus, all else being equal, it would be acceptable for a more senior colleague to receive higher compensation, since the value of his experience (and input) is higher. The way people base their experience with satisfaction for their job is to make comparisons with themselves to people they work with. If an employee notices that another person is getting more recognition and rewards for their contributions, even when both have done the same amount and quality of work, it would persuade the employee to be dissatisfied.
This dissatisfaction would result in the employee feeling under-appreciated and perhaps worthless. This is in direct contrast with the idea of equity theory, the idea is to have the rewards (outcomes) be directly related with the quality and quantity of the employees contributions (inputs). If both employees were perhaps rewarded the same, it would help the workforce realize that the organization is fair, observant, and appreciative.
This can be illustrated by the following equation:
Adam’s categorized employment benefits and rewards as outputs and an employee’s work effort as inputs.
Input Examples
The number of hours worked by the employee
An employee’s work responsibilities
An employee’s work duties
The work commitment demonstrated by the employee
An employee’s loyalty
An employee’s flexibility such as undertaking tasks at short notice
The support that the employee has provided to the organisation, colleagues and line managers
Output Examples
Salary
Bonus
Prizes
Recognition of the employee’s contribution
Positive work appraisals
Work promotions
Pension
Employer flexibility
Annual leave
Adam’s stated that if an employee believes that their work outputs are not equal or greater than their inputs then the employee will become de-motivated. Adams’ theory includes the assertion that when an employee is assessing whether the outputs they receive are fair the employee will often compare their colleague’s work inputs and outputs with their own. The comparison will often be made with an employee at a similar level in the organisation to the employee.
Facts [+]
The 2011 Nielsen survey also showed that the top five dimensions students considered when it comes to seeking employment were high degree of independence at work, salary package, learning on the job, growth prospects and standing of the company in the market [Employer branding] respectively.
Propositions Equity theory consists of four propositions: Individuals seek to maximize their outcomes (where outcomes are defined as rewards minus costs).
Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards and costs among members. Systems of equity will evolve within groups, and members will attempt to induce other members to accept and adhere to these systems. The only way groups can induce members to equitably behave is by making it more profitable to behave equitably than inequitably. Thus, groups will generally reward members who treat others equitably and generally punish (increase the cost for) members who treat others inequitably.
When individuals find themselves participating in inequitable relationships, they become distressed. The more inequitable the relationship, the more distress individuals feel. According to equity theory, both the person who gets “too much” and the person who gets “too little” feel distressed. The person who gets too much may feel guilt or shame. The person who gets too little may feel angry or humiliated.
Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by restoring equity. The greater the inequity, the more distress people feel and the more they try to restore equity. (Walster, Traupmann and Walster, 1978)
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