The Equity Theory of Motivation
The Equity Theory of Motivation

The Equity Theory of Motivation

Employees need to feel motivated to fulfill their roles effectively in the workplace.

The Equity Theory of Motivation helps employers manage their workforce by increasing motivation. It offers a strategy to ensure a balance between the contributions employees make to the workplace and the rewards they are given.

What Is the Equity Theory of Motivation?

The Equity Theory of Motivation was developed by John Stacey Adams, a behavioral psychologist.

His theory states that people's motivation is related to their perception of how fairly they are being treated.

Fairness is known as equity. It is judged in relation to the perceived experiences of other individuals or groups.

When situations are perceived as fair, employees experience increased motivation. However, if the employee feels they are being treated unfairly, their motivation will decrease.

An employee will then adapt the situation to address the balance. For example, they either work harder or put in less effort.

Employers have the challenge of creating the optimal balanced environment that inspires their employees.

The theory focuses on the idea of balance. There should be a balance between the contributions made by an employee and the compensation they receive.

Why Do Businesses Need Motivated Employees?

Motivated employees feel inspired to work hard. They are focused on achieving the overall aims of the organization.

Motivation can be internal or external:

  • Internal motivations might include a passion for the job or a belief in the aims of the company.
  • External motivations might include bonus pay or improved status.

Motivation in the workplace fluctuates. When motivation is high, effort, productivity and morale are also high.

Employees want to feel appreciated and that they are treated similarly to others. A positive perception of their situation maintains their work ethic.

Key Concepts of the Equity Theory of Motivation

Individuals judge the amount of work they do in relation to the pay they receive.

However, Adams’ theory goes much further than this simplistic view of contribution and reward. It reveals that pay is not the only motivational factor within the workplace.

What Are Inputs?

Inputs are the investments people put into their job. These require energy and positive regard towards the business.

Some examples of inputs are:

  • Flexibility
  • Experience
  • Effort
  • Commitment
  • Determination
  • Personal sacrifice
  • Loyalty
  • Enthusiasm
  • Trust in employer
  • Number of hours worked

What Are Outputs?

Outputs are the rewards people expect to receive in return for their inputs. These increase the sense of job satisfaction and encourage employees to remain committed to the company.

Feeling that a job has been worthwhile increases motivation to continue investing time and effort.

Outputs can be tangible or intangible:

  • Tangible inputs are physical, such as money.
  • Intangible outputs are non-physical, such as praise.

Some examples of outputs are:

  • Salary
  • Pay increase
  • Bonuses
  • Learning
  • Praise
  • Recognition
  • Free time
  • Benefits
  • Responsibility
  • Promotion
  • Flexi-time

Input-Output Ratio

The ratio between these inputs and outputs is more important than the total amount of effort or compensation.

The inputs contributed by an employee should balance the outputs, or compensation, for their inputs. An employee will consider the ratio between them to assess whether their situation is fair.

Judgments of fairness can be made internally and externally. This means employees will look to their own situation as well as that of others, such as their colleagues.

The ideal scenario is to achieve balance, known as ‘equity’.

If the inputs are greater than the outputs, there will be equity tension as employees are under-compensated for their efforts.

Equity tension is also created by over-compensating employees. Being overly rewarded for efforts can also cause demotivation.

Steps will then be taken by the employee to reduce the equity tension. This can have negative effects on staff members as well as the organization as a whole.

Referents – How They Change Perceptions

Individuals don’t just base their judgments of fairness on their own treatment. They will look to other individuals or groups to find a comparison.

The rewards or outputs need to be seen as fair relative to others. If they are not, the inputs will be adjusted to achieve a balanced investment and reward ratio.

Types of Referents

There are four comparisons an employee can make to determine the level of equity. These referents are:

1. Self-Inside

This is when an employee compares their own experience of other roles within the same organization.

This takes into account the level of responsibility and experience of their current and previous posts.

2. Other-Inside

This is when an employee compares their experience with other individuals or groups within the same organization.

For example, an employee might discover that a colleague doing the same job is paid a higher salary.

As a result, the employee may do less work to create more fairness.

3. Self-Outside

This is when an employee compares their current situation with their experience of working for a different organization.

For example, they will consider the type of role they previously held and compare how it relates to their current job.

4. Other-Outside

This is when an employee compares their experience with other individuals or groups outside their current organization. These could be people in a similar industry or friends.

They could either think of those in similar positions or higher-level roles.

For example, if they perceive a company CEO is being paid a much higher salary, but working intensive hours, this will be perceived as fair.

How Are Referents Chosen?

The referent chosen to make the comparison with depends on the employee’s knowledge of them. Different referents can be chosen depending on the circumstance.

If an employee has a wealth of work experience or they are educated to a high level, they are more likely to choose outside referents.

Less experienced members of the workforce are more likely to look to their peers to judge their experience.

Employees are also more likely to compare themselves with same-sex employees.

Equity Theory of Motivation: How to Keep Your Employees Motivated
Equity Theory of Motivation: How to Keep Your Employees Motivated

Employee Responses to Inequity

If they perceive inequity, or unfairness, employees will respond accordingly. These responses can have a negative effect on the organization.

An individual will attempt to redress the balance. This will keep their internal perception of fairness in balance.

The steps taken can include:

  • Making changes to their inputs – For example, reducing the amount of effort spent
  • Changing the outputs – For example, asking for a raise
  • Reconsidering their current job – For example, leaving the company or focusing their attention on searching for a new job
  • Adapting their perceptions – For example, changing perceptions of self or others to make themselves feel better
  • Changing the referent – For example, choosing a different individual or group to compare experiences. This technique will minimize the psychological discomfort felt by the employee.
  • Moving into survival mode – This means that staff will only contribute the minimum needed to get the job done

These responses can clearly have a negative impact. If an employee reduces their effort, it will harm productivity.

How to Use the Equity Theory of Motivation to Keep Your Employees Motivated

Employers need to monitor inputs and outputs to keep them in balance. They can do this by following the tips below.

Consistent Expectations

This is important when dealing with staff employed in similar roles, or who deal with similar levels of responsibility.

Be consistent in terms of expectations and rewards. This means other-inside comparisons will be balanced.

Make sure that these expectations are communicated clearly. This could be during team meetings, or regularly via email.

This helps staff monitor their equity balance in accordance with the expectations of the organization.

Transparent Reward Structure

Ensure that the reward structure for staff is clear. This can minimize any uncertainties regarding compensation and ensure staff feel they are being treated fairly.

It allows staff the option to contest any disparities they encounter. This means any issues are resolved quickly and effectively.

Employees will understand what behaviors are worthy of reward and will be encouraged to achieve them. A consistent approach toward all employees will guarantee they feel adequately rewarded.

Different staff will value different reward types. These need to be built into your reward structure.

Rewards can be intrinsic or extrinsic.

Offer a mix of tangible rewards like money and goods, as well as intangible ones like praise and approval.

Clear Pay Structure and Progression Routes

Employees need to feel motivated to achieve the necessary skills and experience to get to the next pay level.

Explaining openly why employees receive their particular wage or salary prevents them from feeling they are being paid unfairly.

Promote a transparent work culture where pay structures and progression routes are communicated directly from HR and management.

Staff who are kept in the dark are more likely to engage in gossip. This can create negative attitudes and tension in the workplace.

Regular Positive Feedback

Positive feedback is an essential technique to inform employees of the standard of their performance.

Positive and open feedback shows staff you acknowledge their efforts. They will be able to see how their contribution impacts the organization as a whole.

This leads to a greater understanding of their role in the company. Knowledge of their importance empowers employees.

Avoid Employee Comparisons

Comparing employees draws attention to the compensations received by other staff.

Keep in mind that even two individuals doing the same job for the same pay will judge their situations differently. People will view their situations in relation to the values they hold. Different personality types have different values.

If one team member is praised for a task, don’t compare this achievement to other staff. Keep it specific to the employee in question.

Remember that all employees will be observing the treatment of their colleagues. This information is used to judge fairness as well as decide whether to place trust in their employer.

Industry Awareness

Be aware of similar organizations to yours. Gain an understanding of how their terms and conditions compare with those of your company.

This prevents employees from gaining a negative perception of their current company in comparison to other organizations.

Consider how your team will interpret systems followed in other companies. Try to either match or explain any differences to maintain staff morale and motivation.

Staff Appraisals

Staff appraisals, or performance reviews, can include open discussions of strategies and how staff think they are working.

Take suggestions as to how to improve and how you can make any current systems fairer for all staff.

Involving staff in the process can keep your employees engaged. It is a valuable technique to discover alternative points of view.

Arrange regular one-to-one meetings with team members. This strategy can uncover issues first-hand and prevent them from escalating.

Change the Perceptions of Inputs and Outputs

An employer needs to be aware of how their employees perceive different inputs and outputs.

Each individual will value different types. However, the total inputs and outputs are viewed as a package. This means that adjustments to individual inputs or outputs can change the perception of the whole.

For example, promote the benefits of additional courses or further training. This enhances the status of this output and improves the perception of the total.

Why Is the Equity Theory of Motivation Useful?

Adams’ Equity Theory of Motivation has beneficial applications in organizations.

Some of these benefits include:

  • Understanding employees – It can help employers understand why staff motivation can fluctuate. If an employee suddenly appears demotivated, their input-output ratio can be focused on.
  • Useful framework – It provides a useful framework to discuss employee efforts. This is helpful for staff review situations where the individual’s feelings can be aired.
  • Staff interactions – It explains how beneficial or negative treatment of one staff member can affect the work output of their colleagues.
  • Communication – It can improve communication and teamwork between employees.
  • Improves employee retention – Satisfied employees are more likely to remain in a role where they feel the equity is balanced.
  • Saves money – An economic benefit is that employers don’t need to employ and train more staff.
  • Public perception – It improves the public perception of the company. A reputation for fair treatment will also help attract prospective employees.

Final Thoughts

Fairness is a value that is close to many people's hearts. When people think they are being fairly treated, they feel happier and more motivated to achieve.

Applying Adams' theory successfully in the workplace can help to avoid problems. It can improve staff morale and avoid attrition.

The highest levels of motivation can be reached by making sure that every employee believes their treatment is fair in relation to others.

Be aware that these judgments will be communicated amongst staff and step in to manage the situation when needed.

Create high levels of workplace satisfaction for both employer and employee. This develops a culture of continuous improvement. Everyone will work toward the same organizational goals for the benefit of all.

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