According to equity theory, employees judge the fairness of their work outcomes based on comparisons with other people, either inside or outside their organization. If they perceive an inequity between their own input-output ratio and that of others, they will experience motivational stress to restore equity. There are three possible comparisons: inequity, where one's own ratio is lower; over-reward, where it is higher; and equity, where the ratios are equal. To reduce inequity, employees may change their own inputs or outcomes, distort perceptions, choose a different comparison person, or leave their job. The theory was developed by Adams in 1963 and has since been expanded through various research studies. While it provides insights into motivation, equity theory has

1. Equity theory
Lecturer: Wendelin Kuepers
Group members:
1. Mai Thu Ha (12032382)
2. Zhengyan ZUO (05017882)
3. Haoxiang Wu (12083815)
4. Wu Di (11046037)
152.700 Organisation and Management - Assignment 1b

2. HIGHLIGHTS
Introduction & Assumptions1
Output/Input ratio - Comparison others2
Consequences of inequity3
Development of Equity theory4
5 Theory’s strengths and criticism
152.700 Organisation and Management - Assignment 1b

3. Introduction to Equity theory
First developed in 1963 by John Stacey Adams
Adams (1963) argues that when people
measure the fairness of their work outcomes
relative to others, any perceived inequity is a
motivating state of mind.
152.700 Assigment 1b

4. Assumptions of Equity Theory
• Employees expect a fair and equitable return
for their contribution to their jobs.
• Social comparison.
• Employees who perceive themselves as
being in an inequitable scenario will attempt
to reduce the inequity.

5. Model of Equity Theory
S Input versus r Input
S Outcome r Outcome
I = Inputs - employee’s
contribution to employer
O=Outcomes - the individual gets
in return for his contribution.
R = Referent - comparison
person
S = Subject the employee who is
judging fairness of the
exchange 152.700 Organisation and Management - Assignment 1b

6. Key Factors in Equity Assessment
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7. Equity Theory’s
“Relevant Others”
• Can be four different situations:
Self-Inside
• The person’s experience in a different job in the
same organization
Self-Outside
• The person’s experience in a different job in a
different organization
Other-Inside
• Another individual or group within the organization
Other-Outside
• Another individual or group outside of the
organization
152.700 Organisation and Management - Assignment 1b

8. Accoring to the equity theory employees compare their outcome/input ratio
with the outcome /input ratio of others to determine whether they are being
treated fairly or fairly by the organization.These comparisions are divied into
3 categories:
a.Equity:
A person feels equitably treated when his outcome/input ratio is equal to
others persons outcome/input ratio with the person compares himself.
S outcome = R outcome
S input R input
Equitably paid workers are said to feel satisfied.
152.700 Organisation and Management -
Assignment 1b

9. b.under rewarded inequity /negative inequity:
A person feels over rewarded when his outcome/input ratio is less than
whom the person compare himself.
S outcome < R outcome
S input R input
Equity theory states that an overpaid worker feels angry.
c .over rewarded inequity /positive inequity:
A person feels over rewarded when his outcome/input ratio is greater than
whom the person compare himself.
S outcome > R outcome
S input R input
Equity theory states that an overpaid worker feels guilty.
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10. 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 (Robbins, Millett & Waters-marsh , 2004, p.
183).
152.700 Organisation and Management -
Assignment 1b

11. The Development of Research on Equity
Theory
1. First developed in 1963 by John Stacey
Adams
Adams (1963) argues that when people
measure the fairness of their work outcomes
relative to others any perceived inequity is a
motivating state of mind.
152.700 Organisation and Management -
Assignment 1b

12. The Development of Equity Theory
2. Effects of Inequity on Work Output and
Quality by Underpayment
Lawler and O’ Gara (1967) indicated that the
underpaid group experienced feelings of inequity
using the higher paid group members as their
comparative others.
Additionally, the underpaid worker would produce
more work output via conducting more
interviews was indeed correct.
152.700 Organisation and Management -
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13. The Development of Equity Theory
3. Equity and workplace status
Greenbery (1988) stated that employees
reassigned to offices of higher status
would be more productive than those
reassigned to offices of equal status
employees.
152.700 Organisation and Management -
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14. The Development of Equity Theory
4. Equity Sensitive Construct
• Huseman, Hatfield and Miles(1987) defined the equity
sensitive construct as the investigation of a person's
perception of what is and what is not equity, and then
uses that information to make predictions about
reactions to inequity.
• Individuals react in consistent but individually different
ways to both perceived equity and inequity because they
have different preferences for equity on a continuum with
classes of individual: Benevolent, Equity
Sensitive, and Entitled (Huseman et al., 1987).

15. The Development of Equity Theory
5. Work Motivation on an Assembly Line
The study was completed on the basis that
equity theory indicates that workers react to and
modify their work behaviour based upon the
speed or rate of the work of the people around
them (Schultz, Schoenherr & Nembhard, 2006).
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16. The Development of Equity Theory
6. Dishonesty in the Name of Equity
Individuals are more likely to engage in
dishonest behaviour when they have inequity of
wealth (Gino & Pierce, 2009).
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17. Strengths
Strengths
B
E
C
D
A
Accurately predicts behavior on under-reward
Inter-
personal
processes
(social
comparison)
+ reference
group
Important insights
into employee
motivation
Ability to fit with
other theories
(particularly the
expectancy
theory)
Accounts for
internal
assessment,
comparison
procedures
&quality
changes
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18. Restricted & incomplete
(focus on payment only)
Little practical
value ->better as
an explanation
after the fact
than as a
predictor of
behavior
Focuses on short-time comparison
Ignores reactions
to experienced
inequities
Equity’s criticism
Criticisms
Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)
Huseman, Hatfield & Miles, 1987 152.700 Organisation and Management -
Assignment 1b

19. Applications of Equity theory
Explanation of
employee
behaviour
Equity
Distributive
justice
•Compensation
•Promotion
=>fair
distribution of
rewards
Gibson, Ivancevich, Donnelly, & Konopaske (2009, p. 151-153)
152.700 Organisation and Management - Assignment 1b

20. Contents
Theory’s strengths and criticism
Development of Equity theory
Consequences of inequity
Output/Input ratio - Comparison others
Introduction & Assumptions
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Assignment 1b

21. References
• Adams, J.S. (1963). Towards An Understanding of Inequality.
Journal of Abnormal and Normal Social Psychology.
(67), 422-436.
• Gibson, J.L., Ivancevich, J.M., Donnelly, J.H., &
Konopaske, R. ( 2009). Organizations:
Behavior, structure, process (13th ed.). New York, NY:
McGraw-Hill., p150-153
• Gino, F., & Pierce, L. (2009). Dishonesty in the Name of
Equity. Psychological Science, 20 (9): 1153-1160.
• Greenberg, J. (1988). Equity and workplace status: a field
experiment. Journal of Applied Psychology, 4, 606-613.
• Huseman, R., Hatfield, J., & Miles, E. (1987). A New
Perspective on Equity Theory: The Equity Sensitivity
Construct. Academy of Management Review. 12(2). 232-234.
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22. References (cont)
• Lawler, E., & O‘Gara, P. (1967). Effects of inequity produced by
underpayment on work outputs, work quality, and attitudes toward
the work. Journal of Applied Psychology, 51(5), 403-410.
• Robbins, S.P., Millett, B., & Waters-marsh, T. (2004). Organisational
Behaviour. Australia: Person Education Australia, p. 183.
• Schultz, K., Schoenherr, T., & 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
• Stecher, M.D. & Rosse, J. (2007). Understanding reactions to
workplace injustice through process theories of motivation. Journal
of Management Education, (31), 777-796.
• Weick, K.E. (1996). The concept of equity in the perception of pay.
Administrative Science Quarterly. (11), 414-439.
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23. Group reflection
• Forming
• Agreeing on topic
• Assigning responsibilities
• Time frame
• Conflicts
152.700 Organisation and Management -
Assignment 1b

24. Forming
• Make friends during paper
• For assignment
• Assign leader
• Group is not so diverse in cultures
152.700 Organisation and Management -
Assignment 1b

25. Topic agreement
• Group members study all theories in
motivations
• Each member proposes 1 topic
• Group discusses and agrees on topic
152.700 Organisation and Management -
Assignment 1b

26. Assigning responsibilities
• Individual task is assigned based on
members’ strength (who can do better in
one part)
• Members read and make
recommendations for others in group
152.700 Organisation and Management -
Assignment 1b

27. Time frame
• 1st week: forming, individually study, agree
on topic
• 2nd: individual to prepare their
part, combine and discuss, proof-
reading, finalize
152.700 Organisation and Management -
Assignment 1b

28. Conflicts
• Task: unequal, discussion to fix with outlines
and orders of the presentation => members
agree & be happy with assigned task
• Time: different time -> difficult to schedule for
group meeting => discuss & propose several
options then agree on one that suits all
• However, thanks to small group size of
4, those conflicts are easier to be resolved.
152.700 Organisation and Management -
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29. THANK YOU FOR YOUR ATTENTION!
152.700 Organisation and Management -
Assignment 1b