Which theory of motivation discusses fair balance between employees inputs and outputs?

Definition: Equity theory, popularly known as Adam's equity theory, aims to strike a balance between an employee’s input and output in a workplace. If the employee is able to find his or her right balance it would lead to a more productive relationship with the management.

Description: Equity theory is used in parlance of human resource management. We might not see it but this theory is applied at every workplace. An individual’s satisfaction at the workplace is directly linked to the efforts he or she is putting and what exactly he or she is getting out of it.

Let's first understand what we mean when we say input. Input includes hard work, skill-set, motivation, enthusiasm, and technical know-how. Output relates to salary, perks, bonus, and recognitions in the form of awards.

If an individual thinks that he/she is treated in a fair manner, which means that ratio of their input to the output is comparatively similar to those around him/her, it would be acceptable. If there is nothing to compare, then he/her would judge with employees in other organisation at the same level.

However, if an individual thinks that others are getting more rewards and recognition compared to him/her who is putting in similar amount of inputs in his/her job, it would lead to some imbalance.

The dissatisfaction often leaves the employee demotivated which would result in lower productivity, and in some cases attrition. There is one thing to note that equity theory does not only depend on the input-to-output ratio but also on comparison with peer group.

It aims to explain why people may be happy one day, and suddenly the motivation level goes down after they learn that others are enjoying better rewards for their efforts.

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In the equity theory of motivation, employee’s motivation depends on their perception of how fair is the compensation and treatment for their work input. Equity Theory states that the employees perceive what they get from a job situation (outcomes) about what they put into it( inputs) and then compare their inputs- outcomes ratio with the inputs- outcomes ratios of others.

The equity theory of motivation describes the relationship between the employee’s perception of how fairly is he being treated and how hard he is motivated to work. J. Stacy Adams developed equity theory.

This theory show-

• Inputs: Inputs include all the rich and diverse elements that employees believe they bring or contribute to the job – their education, experience, effort, loyalty, commitment.
• Outcomes: Outcomes are rewards they perceive they get from their jobs and employers’ outcomes include- direct pay and bonuses, fringe benefit, job security, social rewards and psychological.
• Overrewarded: if employees fell over-rewarded equity theory predicts then they will feel an imbalance in their relationship with their employee and seek to restore that balance.
• Equity: if employees perceive equity then they will be motivated to continue to contribute act about the same level.
• Unrewarded: unrewarded who feel they have been unrewarded and seek to reduce their feeling inequity through the same types of strategies but the same of this specific action is now reverse.

This theory is based on the following two assumptions about human behavior:

1. Individuals make contributions (inputs) for which they expect certain outcomes (rewards). Inputs include such things as the person’s past training and experience, special knowledge, personal characteristics, etc. Outcomes include pay, recognition, promotion, prestige, fringe benefits, etc.
2. Individuals decide whether or not a particular exchange is satisfactory, by comparing their inputs and outcomes to those of others, in the form of a ratio. Equity exists when an individual concludes that his/her own outcome/input ratio is equal to that of other people.

The essential aspects of the equity theory may be shown by an equation;

There should be a balance of the outcomes/inputs relationship for one person in comparison with that for another person. If the person thinks that the rewards are greater than what is considered, he/she may work harder.

If the person perceives the rewards as equitable, he/she probably will continue at the same level of output.

If the person feels that he/she is inequitably rewarded, he/she may be dissatisfied, reduce the quantity or quality of output, or even leave the organization.

The three situations of equity theory are illustrated in the following figure:

An employee with several years’ experience can be frustrated to find out that a recent college grad hired at a salary level higher than he or she is current earnings, causing motivation levels to drop.

Why?

Roles played by the equity in motivation;

1. Employees make comparisons between their job inputs and outcomes relative to those of others.
   • If we perceive our ratio to be equal to that of the relevant others with whom we compare ourselves, a state of equity is said to exist. We perceive our situation as fair.
   • When we see the ratio as unequal, we experience equity tension.
2. Additionally, the referent that an employee selects adds to the complexity of equity theory. There are four referent comparisons that an employee can use:
   • Self-inside: An employee’s experiences in a different position inside his or her current organization.
   • Self-outside: An employee’s experiences in a situation or position outside his or her current organization.
   • Other-inside: Another individual or group of individuals inside the employee’s organization.
   • Other-outside: Another individual or group of individuals outside the employee’s organization.
3. Which referent an employee chooses will be influenced by the information the employee holds about referents, as well as by the attractiveness of the referent. There are 4 moderating variables: gender, the length of tenure, level in the organization, and the amount of education or professionalism. Men and women prefer same-sex comparisons. This also suggests that if women are tolerant of lower pay, it may be due to the comparative standard they use. Employees in jobs that are not sex-segregated will make more cross-sex comparisons than those in jobs that are either male- or female-dominated.
4. Employees with a short tenure in their current organizations tend to have little information about others.
5. Employees with long tenure rely more heavily on coworkers for comparison.
6. Upper-level employees tend to be more cosmopolitan and have better information about people in other organizations. Therefore, these types of employees will make more other- outside comparisons.
7. When employees perceive an inequity, they can be predicted to make one of six choices:
   1. Change their inputs.
   2. Change their outcomes.
   3. Distort perceptions of self.
   4. Distort perceptions of others.
   5. Choose a different referent.
   6. Leave the field.
8. The theory establishes the following propositions relating to inequitable pay:
   1. Given payment by time, over-rewarded employees will produce more than will equitably pay employees.
   2. Given payment by the quantity of production, over-rewarded employees will produce fewer, but higher quality, units that will equitably pay employees.
   3. Given payment by time, under-rewarded employees will produce the less or poorer quality of output.
9. Given payment by the quantity of production, under-rewarded employees will produce a large number of low-quality units in comparison with equitably paid employees.
10. These propositions have generally been supported with a few minor qualifications.
    1. Inequities created by over-payment do not seem to have a very significant impact on behavior in most work situations.
    2. Not all people are equity-sensitive.
11. Employees also seem to look for equity in the distribution of other organizational rewards.
12. Finally, recent research has been directed at expanding what is meant by equity or fairness.
    1. Historically, equity theory focused on distributive justice or the perceived fairness of the amount and allocation of rewards among individuals.
    2. Equity should also consider procedural justice, the perceived fairness of the process used to determine the distribution of rewards.
    3. The evidence indicates that distributive justice has a greater influence on employee satisfaction than procedural justice,
    4. Procedural justice tends to affect an employee’s organizational commitment, trust in his or her boss, and intention to quit.
    5. By increasing the perception of procedural fairness, employees are likely to view their bosses and the organization as positive even if they are dissatisfied with pay, promotions, and other personal outcomes.

Equity theory demonstrates that, for most employees, motivation is influenced significantly by relative rewards as well as by absolute rewards, but some key issues are still unclear.

What is equity theory of work motivation?

Which of the following motivation theories is based on the principle of comparing inputs and outcomes?

What is meant by equity theory?

What is equity theory and example?