Equity Theory helps us analyze employee motivation in terms of equality and fairness.
Workplace motivation differs from employee to employee. For some employees, motivation means money, status, etc.
For others, it is about doing their best and becoming the star performer.
Many business leaders have invested their time to understand employee perception and theories of motivation. They test these theories in the workplace to learn how it affects employee productivity and efficiency.
One such motivation theory is Equity Theory, and this article will shed some light upon it. But before we go in-depth, let’s understand:
What is Adam’s Equity Theory of Motivation?
Equity Theory, otherwise known as the Equity Theory of Motivation, was introduced in 1963 by John Stacey Adams, a workplace behavioral psychologist.
It is based on a simple idea.
A succesful workplace can enhance team motivation by treating everyone with respect and dignity.
According to Adam’s Equity Theory of motivation, employees who identify a situation of inequality between them and their peers will feel demotivated and distressed.
For example, if an employee knows that their colleague is getting a higher salary than them for the same amount of work, this might create dissatisfaction.
The theory also indicates that the higher the level of equity (fairness) amongst employees, the higher the level of motivation. Similarly, the prime reason for employee demotivation is inequity.
Also Read: Employee Motivation: A Comprehensive Guide
Understanding Adam’s Equity Theory of Motivation in the Workplace
If we were to understand Adam’s Equity Theory fully, we must know the inputs and outputs of employees first. Inputs are nothing but the things an employee does to achieve the outputs.
Inputs are nothing but every small or significant contribution employees make towards the organization. For instance:
- The number of working hours
- The experience brought to practice
- Personal sacrifices (if any)
- Loyalty towards mentors, managers, and the organization
- Job role and responsibilities
- Flexibility to work under pressure or strict deadlines
Whereas outputs, commonly referred to as outcomes, are what the employee receives because of their inputs in the organization. Some of them are tangible benefits like salary or intangible benefits like flexible working hours and recognition.
Some of the typical outputs are:
- Annual Holidays
- Company travels
- Performance appraisals
- Significant achievements
- Learning and Development
We can clearly define equity now that we understand the basics of inputs and outputs..
The definition of equity is an employee’s outputs divided by their inputs.
But Adam’s Equity Theory is a level-up and mentions that individuals do not measure equity in isolation. Instead, they compare with their peers. If they come across an inequitable situation, they tend to adjust their inputs to maintain balance.
To maintain the balance, employees constantly regulate their inputs. Let's say X and Y have identical inputs. But, the output of Y is vastly larger than that of X. Thus, X would feel highly demotivated.
Also, employees will have to give better inputs if their outputs are more significant than their colleagues doing the same job. Employees’ perception of equity depends on how their managers treat them by giving them equal respect and opportunities.
How To Compare: Referent Groups
A referent group is a group of people a person uses for comparison. As per Adam’s Equity Theory, there are four significant referent groups people tend to compare themselves with.
- Self-inside: An employee’s intrinsic experience in their current workplace
- Self-outside: An employee’s experience with the industry standards
- Others-inside: An employee comparing themselves with someone from their current workplace
- Others-outside: An individual comparing themselves with someone outside their workplace
Let’s have a look at this with an example to understand better.
If a UX Designer compares their salary with other UX designers in the same company then the referent group is others-inside.
If the same employee compares their pay with an acquaintance from a different company, it refers to others-outside.
If they compare their pay with their previous job, it relates to self-outside.
And, when they contemplate on their performances in the same organization, it refers to self-inside.
Surprisingly, the Equity Theory of Motivation in the workplace is applicable when employees compare themselves to people in absolute opposite job roles and significant salary differences.
For instance, let’s take the example of a UX Designer. They might compare themselves to the CEO, who earns much higher than them. How can this seem fair to you?
Well, here’s the answer!
Employees determine their inputs to be very different. They will see that even though they have a lesser salary than the CEO, they have an excellent work-life balance. They might know the CEO is traveling very often for client meetings, work long hours even on weekends, and deals with tremendous stress. In such a situation, employees console themselves to see the fairness established in their minds.
As a leader or a manager, keep in mind, Equity Theory is applicable in a broad sense. Every employee responds to inequitable relationships in their unique way.
Equity Theory Examples in the Workplace
One can identify Equity Theory in the workplace by overhearing conversations among their colleagues and peers.
Generally, employees compare themselves with people who get higher salaries than them. Equity Theory comes into existence when you hear things like:
- “Miranda earns more than me, but I don’t see her doing much work.”
- “I get less salary compared to Miranda, but this place needs me more than her.”
- “Hey, did you know the new guy gets paid three times more than us yet works few hours! Hows is this fair?”
With these examples, we can see employees comparing their remuneration and contribution with others. However, salary comparison is a common practice amongst employees. There are other types of comparison like learning opportunities, work from home opportunities, flexibility, etc.
Critical Points for Managers to Keep in Mind
Here are some essential things to keep in mind to understand equity theory in the workplace if you’re managing a team:
Employees measure their total inputs against all outputs. For example, a single parent will accept flexible working hours and lesser pay.
Social comparison plays a vital role while being fair to every employee. Two employees who do the same work will compare their performances with individual perceptions. As a good team leader, you must learn these expectations and influence values.
Senior employees get more salary than juniors. But, paying excessive salaries is a sign of demotivation amongst other employees. One must know to balance both.
An employee who receives higher compensation and recognition will increase their effort. Similarly, if an employee feels underpaid, their motivation level goes down.
Managers must also keep track of options available to the ti reduce inequality and partiality in the workplace. They are:
- Change employees’ inputs or outputs
- Change inputs or outputs of others
- Change the perception of inputs and outputs
Equity Theory- Summary
Overall, Adam’s Equity Theory of Motivation indicates that employees can attain higher motivation when every employee gets equal and fair opportunities.
It is common for employees to compare themselves to other employees from inside and outside the organization. They compare their total of all inputs against the sum of all outputs.
If they see inequality and unfairness, they will lower their inputs to compensate. They will choose to work more or work less depending on the positivity or negativity of the situation.