Equity theory, developed by John Stacey Adams in 1963, posits that employees evaluate their job satisfaction based on the ratio of their inputs to outcomes relative to others. Employees feel equitably treated when their input/output ratio matches that of their peers, while under-rewarded or over-rewarded inequity can lead to feelings of anger or a perceived increase in performance, respectively. When inequity is sensed, employees may adjust their inputs, outcomes, or perceptions to restore balance.

1. EQUITY THEORY
Akash Patil
CMBA4

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

8. THANK YOU FOR YOUR ATTENTION!