What is Equity Theory?
Equity Theory, proposed by psychologist John Stacy Adams, delves into the idea that individuals are motivated by fairness and equity in their interactions. Imagine you and your best friend are working at the same company, putting in the same effort, but he gets double the pay. Wouldn’t that make you feel a bit jealous? That’s where Equity Theory comes into action!
Definitions of Equity Theory
Adams said that “Equity theory is concerned with the way individuals evaluate the fairness of their outcomes in relation to their inputs and the outcomes and inputs of others.”
Greenberg said that “Equity theory is a social-comparison theory of motivation that proposes that individuals are motivated to maintain a perceived equivalence between their inputs and outcomes relative to those of other relevant referents.”
Cropanzano and Mitchell want to say that “Equity theory is a social-cognitive theory of motivation that proposes that individuals compare their inputs and outcomes to those of others in order to determine whether they are being treated fairly.”
History of Equity Theory
Before we leap into the nitty-gritty, let’s travel back in time for a brief history lesson. John Stacy Adams introduced this theory in the early ’60s, and it rocked the world of motivation theories. Adams believed that people not only care about the absolute amount of rewards they receive but also about how those rewards stack up against others.
- 1950s: John Stacey Adams begins developing his theory of equity.
- 1965: Adams publishes his seminal paper on equity theory, “Inequity in Social Exchange.”
- 1960s: Equity theory becomes one of the most influential theories of motivation in organisational psychology.
- 1970s: Equity theory is applied to a variety of other contexts, including education, healthcare, and sports.
- 1980s: Equity theory is criticised for its overemphasis on social comparison and its lack of empirical support.
- 1990s: Equity theory is revised to take into account individual differences and situational factors.
- 2000s: Equity theory continues to be a popular theory of motivation, but it is now seen as one of many possible explanations for employee behavior’s.
Key Assumptions of Equity Theory
Alright, here are some key assumptions of the Equity Theory. First and foremost, the theory assumes that we, as rational beings, strive for fairness in all aspects of life, including the workplace. If we perceive an unfair situation, it triggers a response within us, and that response is what drives our motivation.
- People strive for fairness. Equity Theory assumes that people are motivated to maintain a fair balance between their inputs and outcomes. Inputs are the things that people contribute to their jobs, such as their effort, skills, and education. Outcomes are the rewards that people receive for their work, such as pay, benefits, and recognition.
- People compare themselves to others. Equity Theory also assumes that people compare their inputs and outcomes to those of others. This is known as social comparison. When people perceive that they are being treated unfairly, they may experience dissatisfaction or take other actions to restore equity.
- There are three types of equity. Equity Theory identifies three types of equity:
- Positive equity: This occurs when people perceive that they are receiving more than they deserve.
- Negative equity: This occurs when people perceive that they are receiving less than they deserve.
- Equilibrium: This occurs when people perceive that they are receiving what they deserve.
- People’s responses to inequity vary. The way that people respond to inequity varies depending on a number of factors, such as their personality, their values, and the situation. Some common responses to inequity include:
- Changing their inputs: This could involve working harder, working less, or quitting their job.
- Changing their outcomes: This could involve asking for a raise, changing jobs, or taking on more responsibility.
- Changing their perceptions: This could involve distorting their inputs or outcomes, or comparing themselves to different people.
Components of Equity Theory
Equity Theory revolves around three main components: inputs, outcomes, and comparison of input-outcome ratios. It might sound a bit complicated, but don’t worry, we’ll break it down step by step.
Inputs
Inputs are the things we contribute to our job, such as hard work, skills, time, and dedication. Think of it as the “sweat and tears” you pour into your work every day.
Outcomes
Outcomes are the rewards we receive for our inputs, like pay, benefits, recognition, and that sweet, sweet promotion you’ve been eyeing.
Comparison of Input-Outcome Ratios
Now, here comes the magic part. We subconsciously compare our input-outcome ratio to that of our colleagues. If we feel that our ratio is not in balance with theirs, it sets off our internal motivation alarms!
Consequences of Inequity
Uh-oh! When inequity rears its head, it can lead to some interesting consequences in the workplace. Let’s explore them, shall we?
Dissatisfaction
Assume that You’re working your socks off, but the outcomes you receive are way less than your colleague who seems to be doing half the work. That’s bound to make you dissatisfied and demotivated.
Increased Effort
On the flip side, if you realize that your colleague is putting in way more effort than you but receiving similar outcomes, you might get a burst of motivation to up your game and level the playing field.
Reduced Effort
Here’s where it gets a bit tricky. If you find yourself in a situation where you’re putting in more effort than your peers, but the outcomes are the same, you might feel like, “Why bother?” and reduce your effort.
Withdrawal
No, no, we’re not talking about running away from the workplace (although we’ve all had those days). Withdrawal, in this context, refers to a decrease in commitment and involvement with your job due to perceived inequity.
How to Apply Equity Theory in the Workplace
Enough theory for now! Let’s explore some practical ways to apply Equity Theory and keep our workplace motivated and harmonious.
Set Clear Performance Expectations
One of the keys to ensuring equity is setting clear performance expectations for all employees. When everyone knows what’s expected of them, it’s easier to gauge their inputs and outcomes fairly.
Provide Equitable Rewards
Remember, it’s all about fairness! Ensure that rewards and recognition are distributed based on performance and contribution. This will not only boost motivation but also foster a positive work environment.
Manage Employee Perceptions
Perception is reality, my friends! Make an effort to communicate openly and transparently with your team. Address any concerns or perceptions of inequity promptly to maintain a motivated and engaged workforce.