The core of the equity theory is the principle of balance or equity. As per this motivation theory, an individual’s motivation level is correlated to his perception of equity, fairness and justice practiced by the management. Higher is individual’s perception of fairness, greater is the motivation level and vice versa. While evaluating fairness, employee compares the job input (in terms of contribution) to outcome (in terms of compensation) and also compares the same with that of another peer of equal cadre/category. D/I ratio (output-input ratio) is used to make such a comparison. Negative Tension state: Equity is perceived when this ratio is equal. While if this ratio is unequal, it leads to “equity tension”. J.Stacy Adams called this a negative tension state which motivates him to do something right to relieve this tension. A comparison has been made between 2 workers A and B to understand this point. Referents: The four comparisons an employee can make have been termed as “referents” according to Goodman. The referent chosen is a significant variable in equity theory. These referents are as follows: An employee might compare himself with his peer within the present job in the current organization or with his friend/peer working in some other organization or with the past jobs held by him with others. An employee’s choice of the referent will be influenced by the appeal of the referent and the employee’s knowledge about the referent. Moderating Variables: The gender, salary, education and the experience level are moderating variables. Individuals with greater and higher education are more informed. Thus, they are likely to compare themselves with the outsiders. Males and females prefer same sex comparison. It has been observed that females are paid typically less than males in comparable jobs and have less salary expectations than male for the same work. Thus, a women employee that uses another women employee as a referent tends to lead to a lower comparative standard. Employees with greater experience know their organization very well and compare themselves with their own colleagues, while employees with less experience rely on their personal experiences and knowledge for making comparisons. Choices: The employees who perceive inequity and are under negative tension can make the following choices:
EQUITY THEORY
Ratio Comparison
Perception
O/I a < O/I b
Under-rewarded (Equity Tension)
O/I a = O/I b
Equity
O/I a > O/I b
Over-rewarded (Equity Tension)
Self-inside: An employee’s experience in a different position inside his present organization.
Self-outside: An employee’s experience in a situation outside the present organization.
Other-inside: Another employee or group of employees inside the employee’s present organization.
Other-outside: Another employee or employees outside the employee’s present organization.
Change in input (e.g. Don’t overexert)
Change their outcome (Produce quantity output and increasing earning by sacrificing quality when piece rate incentive system exist)
Choose a different referent
Quit the job
Change self perception (For instance - I know that I’ve performed better and harder than everyone else.)
Change perception of others (For instance - Jack’s job is not as desirable as I earlier thought it was.) Assumptions of the Equity Theory
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If you pay peanuts, you may get monkeys: find the right balance.
Adams' Equity Theory calls for a fair balance to be struck between an employee's "inputs" (hard work, skill level, acceptance, enthusiasm, and so on) and their "outputs" (salary, benefits, intangibles such as recognition, and more).
According to the theory, finding this fair balance helps to achieve a strong and productive relationship with the employee, with the overall result being contented, motivated employees.
Understanding Adams' Equity Theory
Adams' Equity Theory is named for John Stacey Adams, a workplace and behavioral psychologist, who developed his job motivation theory in 1963. Much like many of the more prevalent theories of motivation (such as Maslow's Hierarchy of Needs and Herzberg's Two-Factor Theory), Adams' Equity Theory acknowledges that subtle and variable factors affect an employee's 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 that their inputs are greater than the outputs they receive. Employees can be expected to respond to this in different ways, and may exhibit de-motivation, reduced effort, annoyance, or, in extreme cases, perhaps even disruption.
How to Apply the Adams' Equity Theory
Adams' Equity Theory can help you spot ways to improve an employee's job satisfaction and their level of motivation.
To do this, consider the balance or imbalance that currently exists between your employee's inputs and outputs, as follows:
Inputs typically include:
- Effort.
- Loyalty.
- Hard work.
- Commitment.
- Skill.
- Ability.
- Adaptability.
- Flexibility.
- Acceptance of others.
- Determination.
- Enthusiasm.
- Trust in superiors.
- Support of colleagues.
- Personal sacrifice.
Outputs typically include:
- Financial rewards (such as salary, benefits, perks).
- Intangibles such as:
- Recognition.
- Reputation.
- Responsibility.
- Sense of achievement.
- Praise.
- Stimulus.
- Sense of advancement/growth.
- Job security.
While many of these points can't be quantified or perfectly compared, the theory argues that managers should aim for a fair balance between the inputs that an employee gives, and the outputs they receive.
And according to the theory, employees should be content where they perceive these to be in balance.
For a similar approach to supporting your people's success and sense of satisfaction, see Frederick Herzberg's Motivation/Hygiene Theory.
Much like the five levels of needs determined by Maslow, and the two factors of motivation classified by Herzberg (intrinsic and extrinsic), Adams' Equity Theory states that positive outcomes and high levels of motivation can be expected only when employees perceive their treatment to be fair.
This perception of fairness is based on a number of different inputs – what they put into their work – and outputs – what they get back as a result. Adams' Equity Theory is about striking a healthy balance between the two.
If the balance lies too far in favor of the employer, some employees may ask for more compensation or recognition. Others will be demotivated. Some may even decide to work elsewhere.