EQUITY THEORY

Definition
• Focuses on determining whether the distribution of resources is fair to both
relational partners.
• Equity is measured by comparing the ratio of contributions (or costs) and
benefits (or rewards) for each person.
• First developed in 1960 by J. Stacy Adam
• The belief is that people value fair treatment which causes them to be
motivated to keep the fairness maintained within the relationships of their co-
workers and the organization.
 BACKGROUND

• Equity theory focuses on

determining whether the
distribution of resources is fair
to both relational partners.
 What is equity

• Individuals compare their

job inputs and outcomes
with those of others and
then respond to eliminate
any perceived inequities.
 Inputs and outcomes

• Inputs: time, education, experience, effort, loyalty, hard work,

commitment, ability, adaptability, flexibility, tolerance, determination,
enthusiasm, personal sacrifice, trust in superiors, support from co-workers
and colleagues.
• Outcomes: job security, salary, employee benefit, expenses, recognition,
reputation, responsibility, thanks.
 Propositions
• SELF-INSIDE
Individuals seek to maximize their outcomes (where outcomes are defined as rewards minus costs).
• SELF-OUTSIDE
Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards
and costs among members.
• OTHERS-INSIDE
When individuals find themselves participating in inequitable relationships, they become distressed.
• OTHER-OUTSIDE
Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by
restoring equity.
 Assumptions of the Theory in Organizations

• The theory demonstrates that the individuals are concerned both with their own
rewards and also with what others get in their comparison.
• Employees expect a fair and equitable return for their contribution to their jobs.
• Employees decide what their equitable return should be after comparing their inputs
and outcomes with those of their colleagues.
• Employees who perceive themselves as being in an inequitable scenario will attempt
to reduce the inequity either by distorting inputs and/or outcomes psychologically, by
directly altering inputs and/or outputs, or by quitting the organization.
 Conclusion
• Theory of motivation states that positive outcomes and high levels of
motivation can be expected only when employees perceive their treatment
to be fair.
• In context this theory implies that transmitting to employees that if you do
their best at job, they are going to receive good treatment and rewards in
the company. At the end of the day this result in effectiveness in the
organization.
 References
• https://www.mindtools.com/pages/article/newLDR_96.htm
• https://en.wikipedia.org/wiki/Equity_theory
• https://www.managementstudyguide.com/equity-theory-motivation.htm