Equity Theory

MOHIT BHATPGCM5/1504

CONCEPT It is the concept that people derive job satisfaction and motivation by comparing their efforts (inputs) and income (outputs) with those of the other people in the same or other firms.

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.

First developed in 1963 by John Adams

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Equity theory 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

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Stage of Job Satisfaction

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.

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Equity theory 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 feels guilty or shame.

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Inputs & OutputsInputs: Time, Effort, Loyalty, Hard work, Skill, Ability, Commitment, Enthusiasm , Adaptability, etc.

Outputs:Salary, Bonus, Recognition, Reputation, Job security, Praise,etc.

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Consequences:

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.

Based on equity theory, when employees perceive an inequity, they can be predicted to make one of six choices.

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Criticisms: A number of demographic and psychological

variables affect people’s perception of fairness and interactions with others.

People might perceive equity/ inequity not only in terms of the specific inputs and outcomes of a relationship, but also in terms of the system that determines those inputs and outputs.

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Thank you