EQUITY THEORY

Akash Patil

CMBA4

Introduction to Equity Theory

• First developed in 1963 by John Stacey Adams

• 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.

• The structure of equity in the workplace is based on the ratio of inputs to outcomes

Equity Theory

1)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

Equitably paid workers are said to feel satisfied.

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.

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 produce higher quality.

Inputs & Outputs

Inputs

• Individual’s contribution to an Organization.

• Time

• Effort

• Loyalty

• Hardwork

• Commitment

• Abilities

Outputs

• Organization’s return to an Individual.

• Job Security

• Salary

• Employee benefits

• Recognition

• Reputation

• Sense of achievement

Consequences of Inequity

Based on equity theory, when employees

perceive an inequity, they can be predicted to

make one of six choices.

•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

References

• Robbins, S.P- Organisational Behaviour.

pg. 183.

• Schultz, K., Schoenherr, Nembhard, D. (2006).

Equity theory effects on worker motivation and

speed on an assembly line. Retrieved from:

http://www.hbs.edu/units/tom/pdf/kschultz.pdf

THANK YOU FOR YOUR ATTENTION!