Equity theory on job motivation - j stacey adams John Stacey Adams, a workplace and behavioural psychologist, put forward

his Equity Theory on job motivation in 1963. There are similarities with Charles Handy's extension and interpretation of previous simpler theories of Maslow, Herzberg and other pioneers of workplace psychology, in that the theory acknowledges that subtle and variable factors affect each individual's assessment and perception of their relationship with their work, and thereby their employer. However, awareness and cognizance of the wider situation - and crucially comparison - feature more strongly in Equity Theory than in many other earlier motivational models. The Adams' Equity Theory model therefore extends beyond the individual self, and incorporates influence and comparison of other people's situations - for example colleagues and friends - in forming a comparative view and awareness of Equity, which commonly manifests as a sense of what is fair. When people feel fairly or advantageously treated they are more likely to be motivated; when they feel unfairly treated they are highly prone to feelings of disaffection and demotivation. The way that people measure this sense of fairness is at the heart of Equity Theory. Equity, and thereby the motivational situation we might seek to assess using the model, is not dependent on the extent to which a person believes reward exceeds effort, nor even necessarily on the belief that reward exceeds effort at all. Rather, Equity, and the sense of fairness which commonly underpins motivation, is dependent on the comparison a person makes between his or here reward/investment ratio with the ratio enjoyed (or suffered) by others considered to be in a similar situation. Adams' equity theory Adams called personal efforts and rewards and other similar 'give and take' issues at work respectively 'inputs' and 'outputs'. Inputs are logically what we give or put into our work. Outputs are everything we take out in return. These terms help emphasise that what people put into their work includes many factors besides working hours, and that what people receive from their work includes many things aside from money. Adams used the term 'referent' others to describe the reference points or people with whom we compare our own situation, which is the pivotal part of the theory. Adams Equity Theory goes beyond - and is quite different from merely assessing effort and reward. Equity Theory adds a crucial additional perspective of comparison with 'referent' others (people we consider in a similar situation). Equity theory thus helps explain why pay and conditions alone do not determine motivation. In terms of how the theory applies to work and management, we each seek a fair balance between what we put into our job and what we get out of it. But how do we decide what is a fair balance? The answer lies in Equity Theory. Importantly we arrive at our measure of fairness - Equity - by comparing our balance of effort and reward, and other factors of give and take - the ratio of input and output - with the balance or ratio enjoyed by other people, whom we deem to be relevant reference points or examples ('referent' others).

Crucially this means that Equity does not depend on our input-to-output ratio alone - it depends on our comparison between our ratio and the ratio of others. We form perceptions of what constitutes a fair ratio (a balance or trade) of inputs and outputs by comparing our own situation with other 'referents' (reference points or examples) in the market place as we see it. In practice this helps to explain why people are so strongly affected by the situations (and views and gossip) of colleagues, friends, partners etc., in establishing their own personal sense of fairness or equity in their work situations. Adams' Equity Theory is therefore a far more complex and sophisticated motivational model than merely assessing effort (inputs) and reward (outputs). The actual sense of equity or fairness (or inequity or unfairness) within Equity Theory is arrived at only after incorporating a comparison between our own input and output ratio with the input and output ratios that we see or believe to be experienced or enjoyed by others in similar situations. This comparative aspect of Equity Theory provides a far more fluid and dynamic appreciation of motivation than typically arises in motivational theories and models based on individual circumstance alone. For example, Equity Theory explains why people can be happy and motivated by their situation one day, and yet with no change to their terms and working conditions can be made very unhappy and demotivated, if they learn for example that a colleague (or worse an entire group) is enjoying a better reward-to-effort ratio. It also explains why giving one person a promotion or pay-rise can have a demotivating effect on others. Note also, importantly, that what matters is the ratio, not the amount of effort or reward per se. This explains for example why and how full-time employees will compare their situations and input-to-output ratios with part-time colleagues, who very probably earn less, however it is the ratio of input-to-output - reward-to-effort - which counts, and if the part-timer is perceived to enjoy a more advantageous ratio, then so this will have a negative effect on the full-timer's sense of Equity, and with it, their personal motivation. Remember also that words like efforts and rewards, or work and pay, are an over-simplification hence Adams' use of the terms inputs and outputs, which more aptly cover all aspects of what a person gives, sacrifices, tolerates, invests, etc., into their work situation, and all aspects of what a person receives and benefits from in their work and wider career, as they see it.

inputs

equity outputs dependent on comparing own ratio of input/output with ratios of 'referent' others

Inputs are typically: effort, People need to feel that Outputs are typically all financial loyalty, hard work, there is a fair balance rewards - pay, salary, expenses,

commitment, skill, ability, adaptability, flexibility, tolerance, determination, heart and soul, enthusiasm, trust in our boss and superiors, support of colleagues and subordinates, personal sacrifice, etc.

between inputs and outputs. Crucially fairness is measured by comparing one's own balance or ratio between inputs and outputs, with the ratio enjoyed or endured by relevant ('referent') others.

perks, benefits, pension arrangements, bonus and commission - plus intangibles recognition, reputation, praise and thanks, interest, responsibility, stimulus, travel, training, development, sense of achievement and advancement, promotion, etc.

If we feel are that inputs are fairly rewarded by outputs (the fairness benchmark being subjectively perceived from market norms and other comparable references) then generally we are happier in our work and more motivated to continue inputting at the same level. If we feel that our ratio of inputs to outputs is less beneficial than the ratio enjoyed by referent others, then we become demotivated in relation to our job and employer. People respond to a feeling of inequity in different ways. Generally the extent of demotivation is proportional to the perceived disparity with other people or inequity, but for some people just the smallest indication of negative disparity between their situation and other people's is enough to cause massive disappointment and a feeling of considerable injustice, resulting in demotivation, or worse, open hostility. Some people reduce effort and application and become inwardly disgruntled, or outwardly difficult, recalcitrant or even disruptive. Other people seek to improve the outputs by making claims or demands for more reward, or seeking an alternative job. Understanding Equity Theory - and especially its pivotal comparative aspect - helps managers and policy-makers to appreciate that while improving one person's terms and conditions can resolve that individual's demands (for a while), if the change is perceived by other people to upset the Equity of their own situations then the solution can easily generate far more problems than it attempted to fix. Equity Theory reminds us that people see themselves and crucially the way they are treated in terms of their surrounding environment, team, system, etc - not in isolation - and so they must be managed and treated accordingly. A free fully detailed diagram similar to the image below explaining Adam's Equity Theory is available in various formats. When using or referring to the diagram emphasise that the calibration of the scales - the comparison of input/output ratios - is the crucial aspect, not merely a judgement of whether rewards are appropriate for efforts:

This interpretation of Adams' Equity Theory was updated and improved in December 2007. The previous summary failed to emphasise the pivotal significance of the comparative aspect within the theory. Thanks NT for your guidance in making these improvements. The core of the equity theory is the principle of balance or equity. As per this motivation theory, an individuals motivation level is correlated to his perception of equity, fairness and justice practiced by the management. Higher is individuals 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.

Equity Theory
Ratio Comparison O/I a < O/I b O/I a = O/I b O/I a > O/I b Perception Under-rewarded (Equity Tension) Equity Over-rewarded (Equity Tension)

Negative Tension state: Equity is perceived when this ratio is equal. While if this ratio is unequal, it leads to equity tension. J.Stacy Adams called this a negative tension state which motivates him to do something right to relieve this tension. A comparison has been made between 2 workers A and B to understand this point. Referents OR Comparators: The four comparisons an employee can make have been termed as referents according to Goodman. The referent chosen is a significant variable in equity theory. These referents are as follows:
Self-inside: An employees experience in a different position inside his present organization. Self-outside: An employees experience in a situation outside the present organization. Other-inside: Another employee or group of employees inside the employees present organization. Other-outside: Another employee or employees outside the employees present organization. An employee might compare himself with his peer within the present job in the current organization or with his friend/peer working in some other organization or with the past jobs held by him with others. An employees choice of the referent will be influenced by the appeal of the referent and the employees knowledge about the referent. Moderating Variables: The moderating variables. 1. 2.

gender, salary, education and the experience

level are

Education: Individuals with greater and higher education are more informed. Thus, they are likely to compare themselves with the outsiders. Gender - Males and females prefer same sex comparison. It has been observed that females are paid typically less than males in comparable jobs and have less salary expectations than male for the same work. Thus, a women employee that uses another women employee as a referent tends to lead to a lower comparative standard. Experience: Employees with greater experience know their organization very well and compare themselves with their own colleagues, while employees with less experience rely on their personal experiences and knowledge for making comparisons.

3.

Choices: The employees who perceive inequity and are under negative tension can make the following choices: Change in input (e.g. Dont overexert) Change their outcome (Produce quantity output and increasing earning by sacrificing quality when piece rate incentive system exist) Choose a different referent Quit the job Change self-perception (For instance - I know that Ive performed better and harder than everyone else.) Change perception of others (For instance - Jacks job is not as desirable as I earlier thought it was.)

Assumptions of the Equity Theory

The theory demonstrates that the individuals are concerned both with their own rewards and

also with what others get in their comparison.

Employees expect a fair and equitable return for their contribution to their jobs. Employees decide what their equitable return should be after comparing their inputs and

outcomes with those of their colleagues.

Employees who perceive themselves as being in an inequitable scenario will attempt to reduce

the inequity either by distorting inputs and/or outcomes psychologically, by directly altering inputs and/or outputs, or by quitting the organization.

Equity theory
From Wikipedia, the free encyclopedia

Equity theory is a theory that attempts to explain relational satisfaction in terms of perceptions of fair/unfair distributions of resources within interpersonal relationships. Considered one of the justice theories, equity theory was first developed in 1963 by John Stacey Adams, a workplace and behavioral psychologist, who asserted that 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 (Adams, 1965). The belief is that people value fair treatment which causes them to be motivated to keep the fairness maintained within the relationships of their coworkers and the organization. The structure of equity in the workplace is based on the ratio of inputs to outcomes. Inputs are the contributions made by the employee for the organization.
Contents
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1 Background

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1.1 Definition of equity 1.2 Inputs and outcomes

1.2.1 Inputs 1.2.2 Outcomes

1.3 Propositions

2 Equity theory in business

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2.1 Assumptions of equity theory applied to business 2.2 Implications for managers

3 Criticisms and related theories

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3.1 Equity Sensitivity Construct 3.2 Fairness Model 3.3 Equity Theory and Game Theory

4 See also 5 References 6 Literature

Background[edit]

Equity theory proposes that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and that this distress leads to efforts to restore equity within the relationship. It focuses on determining whether the distribution of resources is fair to both relational partners. Equity is measured by comparing the ratios of contributions and benefits of each person within the relationship. Partners do not have to receive equal benefits (such as receiving the same amount of love, care, and financial security) or make equal contributions (such as investing the same amount of effort, time, and financial resources), as long as the ratio between these benefits and contributions is similar. Much like other prevalent theories of motivation, such as Maslows hierarchy of needs, equity theory acknowledges that subtle and variable individual factors affect each persons assessment and perception of their relationship with their relational partners (Guerrero et al., 2007). According to Adams (1965), anger is induced by underpayment inequity and guilt is induced with overpayment equity (Spector 2008). Payment whether hourly wage or salary, is the main concern and therefore the cause of equity or inequity in most cases. In any position, an employee wants to feel that their contributions and work performance are being rewarded with their pay. If an employee feels underpaid then it will result in the employee feeling hostile towards the organization and perhaps their co-workers, which may result in the employee not performing well at work anymore. It is the subtle variables that also play an important role in the feeling of equity. Just the idea of recognition for the job performance and the mere act of thanking the employee will cause a feeling of satisfaction and therefore help the employee feel worthwhile and have better outcomes.

Definition of equity[edit]
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 underappreciated 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. This can be illustrated by the following equation:

Inputs and outcomes[edit]

Inputs[edit]
Inputs are defined as each participants contributions to the relational exchange and are viewed as entitling him/her to rewards or costs. The inputs that a participant contributes to a relationship can be either assets entitling him/her to rewards or liabilities - entitling him/her to costs. The entitlement to rewards or costs ascribed to each input vary depending on the relational setting. In industrial settings, assets such as capital and manual labor are seen as "relevant inputs" inputs that legitimately entitle the contributor to rewards. In social settings,

assets such as physical beauty and kindness are generally seen as assets entitling the possessor to social rewards. Individual traits such as boorishness and cruelty are seen as liabilities entitling the possessor to costs (Walster, Traupmann & Walster, 1978). Inputs typically include any of the following:

Time Effort Loyalty Hard Work Commitment Ability Adaptability Flexibility Tolerance Determination Enthusiasm Personal sacrifice Trust in superiors Support from co-workers and colleagues Skill

Outcomes[edit]
Outputs are defined as the positive and negative consequences that an individual perceives a participant has incurred as a consequence of his/her relationship with another. When the ratio of inputs to outcomes is close, than the employee should have much satisfaction with their job. Outputs can be both tangible and intangible.[1] Typical outcomes include any of the following:

Job security Salary Employee benefit Expenses Recognition Reputation Responsibility Sense of achievement Praise Thanks Stimuli

Propositions[edit]
Equity theory consists of four propositions:

1. Individuals seek to maximize their outcomes (where outcomes are defined as rewards minus costs). [2] 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. (Walster, Traupmann and Walster, 1978)

Equity theory in business[edit]

Equity theory has been widely applied to business settings by industrial psychologists to describe the relationship between an employee's motivation and his or her perception of equitable or inequitable treatment. In a business setting, the relevant dyadic relationship is that between employee and employer. As in marriage and other contractual dyadic relationships, equity theory assumes that employees seek to maintain an equitable ratio between the inputs they bring to the relationship and the outcomes they receive from it (Adams, 1965). Equity theory in business, however, introduces the concept of social comparison, whereby employees evaluate their own input/output ratios based on their comparison with the input/outcome ratios of other employees (Carrell and Dittrich, 1978). Inputs in this context include the employees time, expertise, qualifications, experience, intangible personal qualities such as drive and ambition, and interpersonal skills. Outcomes include monetary compensation, perquisites (perks), benefits, and flexible work arrangements. Employees who perceive inequity will seek to reduce it, either by distorting inputs and/or outcomes in their own minds ("cognitive distortion"), directly altering inputs and/or outcomes, or leaving the organization (Carrell and Dittrich, 1978). These perceptions of inequity are perceptions of organizational justice, or more specifically, injustice. Subsequently, the theory has wide-reaching implications for employee morale, efficiency, productivity, and turnover.

Assumptions of equity theory applied to business[edit]

The three primary assumptions applied to most business applications of equity theory can be summarized as follows: 1. Employees expect a fair return for what they contribute to their jobs, a concept referred to as the equity norm. 2. Employees determine what their equitable return should be after comparing their inputs and outcomes with those of their coworkers. This concept is referred to as social comparison. 3. Employees who perceive themselves as being in an inequitable situation will seek to reduce the inequity either by distorting inputs and/or outcomes in their own minds (cognitive distortion) , by directly altering inputs and/or outputs, or by leaving the organization. (Carrell and Dittrich, 1978)

Implications for managers[edit]

Equity theory has several implications for business managers:

People measure the totals of their inputs and outcomes. This means a working mother may accept lower monetary compensation in return for more flexible working hours.

Different employees ascribe personal values to inputs and outcomes. Thus, two employees of equal experience and qualification performing the same work for the same pay may have quite different perceptions of the fairness of the deal.

Employees are able to adjust for purchasing power and local market conditions. Thus a teacher from Alberta may accept lower compensation than his colleague in Toronto if his cost of living is different, while a teacher in a remote African village may accept a totally different pay structure.

Although it may be acceptable for more senior staff to receive higher compensation, there are limits to the balance of the scales of equity and employees can find excessive executive pay demotivating.

Staff perceptions of inputs and outcomes of themselves and others may be incorrect, and perceptions need to be managed effectively.

An employee who believes he is overcompensated may increase his effort. However he may also adjust the values that he ascribes to his own personal inputs. It may be that he or she internalizes a sense of superiority and actually decrease his efforts.

Criticisms and related theories[edit]

Criticism has been directed toward both the assumptions and practical application of equity theory. Scholars have questioned the simplicity of the model, arguing that a number of demographic and psychological variables affect people's perceptions of fairness and interactions with others. Furthermore, much of the research supporting the basic propositions of equity theory has been conducted in laboratory settings, and thus has questionable applicability to real-world situations (Huseman, Hatfield & Miles, 1987). Critics have also argued that people might perceive equity/inequity not only in terms of the specific inputs and outcomes of a relationship, but also in terms of the overarching system that determines those inputs and outputs. Thus, in a business setting, one might feel that his or her compensation is equitable to other employees', but one might view the entire compensation system as unfair (Carrell and Dittrich, 1978). Researchers have offered numerous magnifying and competing perspectives:

Equity Sensitivity Construct[edit]

The Equity Sensitivity Construct proposes that individuals have different preferences for equity and thus react differently to perceived equity and inequity. Preferences can be expressed on a continuum from preferences for extreme under-benefit to preferences for extreme over-benefit. Three archetypal classes are as follows:

Benevolents, those who prefer their own input/outcome ratios to be less than those of their relational partner. In other words, the benevolent prefers to be under-benefitted.

Equity Sensitives, those who prefer their own input/outcome ratios to be equal to those of their relational partner.

Entitleds, those who prefer their own input/outcome ratios to exceed those of their relational partner. In other words, the entitled prefers to be over-benefitted. (Huseman, Hatfield & Miles, 1987)

Fairness Model[edit]
The Fairness Model proposes an alternative measure of equity/inequity to the relational partner or "comparison person" of standard equity theory. According to the Fairness Model, an individual judges the overall "fairness" of a relationship by comparing their inputs and outcomes with an internally derived standard. The Fairness Model thus allows for the perceived equity/inequity of the overarching system to be incorporated into individuals' evaluations of their relationships (Carrell and Dittrich, 1978).

Equity Theory and Game Theory[edit]

Behavioral economics has recently started to apply game theory to the study equity theory. For instance, Gill and Stone (2010) analyze how considerations of equity influence behavior in strategic settings in which people compete and develop the implications for optimal labor contracts.