Equity theory proposes that employees seek fairness or equity between the inputs they contribute to their job and the outcomes they receive in comparison to others. Inputs include aspects like effort, skills, and loyalty, while outcomes are things like pay, benefits, and recognition. The theory states that employees will feel satisfied if they perceive their inputs and outcomes are equitable to others, but will experience inequity and its negative consequences if they perceive their outcomes are too low or too high relative to their inputs and those of others. The document outlines the concepts of equity, under-reward inequity, over-reward inequity, inputs and outputs, and consequences of inequity according to equity theory.
2. Introduction to Equity Theory
• First developed in 1963 by John Stacey Adams
• Employees seek to maintain equity between the
inputs that they bring to a job and the outcomes that
they receive from it against the perceived inputs and
outcomes of others.
• The structure of equity in the workplace is based on
the ratio of inputs to outcomes
3. Equity Theory
1)Equity:
A person feels equitably treated when his outcome/input ratio
is equal to other person’s outcome/input ratio.
Individual’s outcome = Other’s outcome
Individual’s input Other’s input
Equitably paid workers are said to feel satisfied.
4. Equity Theory
2)Under rewarded inequity / Negative inequity:
A person feels under rewarded when his outcome/input ratio is
less than whom the person compare himself.
Individual’s outcome < Other’s outcome
Individual’s input Other’s input
Equity theory states that an underpaid worker feels angry.
3)Over rewarded inequity /Positive inequity:
A person feels over rewarded when his outcome/input ratio is
greater than whom the person compare himself.
Individual’s outcome > Other’s outcome
Individual’s input Other’s input
Equity theory states that an overpaid worker produce higher
quality.
5. Inputs & Outputs
Inputs
• Individual’s contribution to
an Organization.
• Time
• Effort
• Loyalty
• Hardwork
• Commitment
• Abilities
Outputs
• Organization’s return to an
Individual.
• Job Security
• Salary
• Employee benefits
• Recognition
• Reputation
• Sense of achievement
6. Consequences of Inequity
Based on equity theory, when employees
perceive an inequity, they can be predicted to
make one of six choices.
•They change their inputs.
•They change their outcomes
•They distort perceptions of self
•They distort perceptions of others
•They choose a different referent
•They leave the field
7. References
• Robbins, S.P- Organisational Behaviour.
pg. 183.
• Schultz, K., Schoenherr, Nembhard, D. (2006).
Equity theory effects on worker motivation and
speed on an assembly line. Retrieved from:
http://www.hbs.edu/units/tom/pdf/kschultz.pdf
