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What Is an Equity Theory?

Equity theory includes employee productivity compared with compensation.
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  • Written By: Karize Uy
  • Edited By: Lauren Fritsky
  • Last Modified Date: 07 July 2014
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Equity theory is a concept in psychology that asserts humans will be more motivated if what they receive as compensation is equal to the efforts they give out. John Stacey Adams, a behavioral psychologist, conceived the theory in 1963. Aside from the equality itself, the theory also studies the human perception and how it affects the view of what is equal.

The theory comprises several factors, two of which are the “input” and the “output.” Input can generally refer to an individual’s contribution or effort in a certain situation, while the output is the thing that the individual gets in return for his contribution. In a familiar setting such as the workplace, the input can be the employee’s efforts and hard work for doing what he is tasked to do. In return, he gets a fixed salary and maybe a small bonus as the output. The theory of equity can also apply to the hiring of a workforce, wherein applicants might expect a higher salary that will equate to their levels of experience and skills.

The third important factor in the equity theory is the human perception. The concept of equality is very subjective and can differ from one person to another. One way of determining what is “equal” is through comparing similar situations. For example, an employee will assume that a company will provide a certain amount of salary if he sees other rival companies providing the same salary to their employers. Adams labeled these points of comparisons as “referents.”

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Aside from the workplace, the equity theory can also be applied in many human relationships. In these situations, hard work and financial returns are not the only things included as inputs and outputs, respectively. Emotional gratification may be an important measurement for the concept of equality. For a married couple, for instance, a wife who makes her husband happy by cooking his favorite dinner might expect her husband to do a similar trade-off that will make her just as happy. Conflict may arise if the perceived equality is not reached.

In many situations, equity theory cites the human desire for rewards to equal their efforts. For example, an employee asks his boss for a raise if he feels he is deserving. The theory, however, also explains that a person will strive to contribute more to a situation or a relationship if he sees that he receives more output than he deserves. In both cases, the theory illustrates that humans seek to attain a sense of balance and equality.

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Melonlity
Post 2

@Soulfox -- you don't just see that in the workplace. You see that in society, as well. The sense that it is somehow unfair that some people make more money or have more "stuff" than others has been a powerful notion around which political parties have been formed over the centuries.

Soulfox
Post 1

This is exactly why companies have a strict policy against employees revealing their salaries for each other. Let's say, for example, you have Jane and John. They both do the same work and they share the assumption that each make the same salary as they have both been at the company for the same amount of time.

John learns that Jane makes more money than he does and is furious. It doesn't matter that his lifestyle does not depend one bit on what Jane makes -- the chances are good John will be furious because it is not fair (i.e. not equitable) that Jane makes more money than he does.

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