Adams’ Equity Theory in Management (Midterms)

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.

The theory is built-on the belief that employees become de-motivated, both in relation to their job and their employer, if they feel as though their inputs are greater than the outputs. Employees can be expected to respond to this is different ways, including de-motivation (generally to the extent the employee perceives the disparity between the inputs and the outputs exist), reduced effort, becoming disgruntled, or, in more extreme cases, perhaps even disruptive.

Equity Theory consists of four proposed mechanisms for (de)motivation:

1. Individuals seek to maximize their outcomes (where outcomes are defined as rewards minus costs).
2. Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards and costs among members. Systems of equity will evolve within groups, and members will attempt to induce other members to accept and adhere to these systems. The only way groups can induce members to equitably behave is by making it more profitable to behave equitably than inequitably. Thus, groups will generally reward members who treat others equitably and generally punish (increase the cost for) members who treat others inequitably.
3. When individuals find themselves participating in inequitable relationships, they become distressed. The more inequitable the relationship, the more distress individuals feel. According to equity theory, both the person who gets "too much" and the person who gets "too little" feel distressed. The person who gets too much may feel guilt or shame. The person who gets too little may feel angry or humiliated.
4. Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by restoring equity. The greater the inequity, the more distress people feel and the more they try to restore equity.

An individual will consider that he is treated fairly if he perceives the ratio of his inputs to his outcomes to be equivalent to those around him. Thus, all else being equal, it would be acceptable for a more senior colleague to receive higher compensation, since the value of his experience (and input) is higher. The way people base their experience with satisfaction for their job is to make comparisons with themselves to people they work with. If an employee notices that another person is getting more recognition and rewards for their contributions, even when both have done the same amount and quality of work, it would persuade the employee to be dissatisfied. This dissatisfaction would result in the employee feeling under-appreciated and perhaps worthless. This is in direct contrast with the idea of equity theory, the idea is to have the rewards (outcomes) be directly related with the quality and quantity of the employees contributions (inputs). If both employees were perhaps rewarded the same, it would help the workforce realize that the organization is fair, observant, and appreciative.

Employee believes that their work outputs are not equal or greater than their inputs then the employee will become de-motivated. Adams’ theory includes the assertion that when an employee is assessing whether the outputs they receive are fair the employee will often compare their colleague’s work inputs and outputs with their own. The comparison will often be made with an employee at a similar level in the organisation to the employee. 

Let us summarize this blog with a quote of great meaning .