Adams’ equity theory of motivation posits that employees feel motivated if they perceive that they are being rewarded fairly for what they give to the organization and in comparison to what other employees in similar positions receive as a reward.
Indeed, one of the most important things you can do as a manager is to build trust and support employees to help them feel they are being treated fairly. Understanding the equity theory of motivation at work can help you identify what fair treatment may mean and how to ensure it takes place in your organization.
In this article, I will explain the equity theory of motivation at work in more detail, describe how managers can apply it in the workplace with some examples, and suggest 7 actionable strategies to ensure equity in the workplace.
You might find this theory useful if you are a trainer or facilitator who is running workshops on diversity, equity, and inclusion (DEI) for leaders. Also, you may be interested in its implications and applications if you are an HR executive or a manager.
What Is Equity Theory of Motivation at Work?
The equity theory was developed by the behavioral and workplace psychologist John Stacey Adams in 1963.
A short definition of the equity theory of motivation in the workplace is that the perception of fairness is key in motivating individuals.
An important part of the theory is to pinpoint what fairness means exactly, i.e., what it involves and how it is measured. So, we can define and summarize J.S. Adams’ equity theory as such:
Individuals feel motivated at work when they perceive that the benefits (output) they receive from the organization they work for are commensurate with what they give to the organization (the input). In addition, this balance between input and output needs to be perceived as being equal to what other people in similar job roles (the referent others) experience.
by Dr Valeria Lo Iacono
Let’s now unpick some key concepts of the equity theory of motivation in organizational behavior.
What Are Inputs and Outputs in Equity Theory?
In Equity Theory, employees compare what they contribute (their inputs) with what they receive in return (their outputs). Motivation is highest when employees believe this balance is fair.
The right balance between input and output is key in the equity theory of compensation.
Input refers to all the efforts (in terms of quality and quantity) that an employee makes to contribute to the success of an organization.
Output refers to the outcomes of the employee’s input, i.e., what the organization gives them in exchange for their efforts. Outputs can be both tangible and intangible and include both the positive and negative outcomes of the relationship between the employee and the organization.
Inputs can include:
- Time – especially the quality of the time they put into the work.
- Loyalty – are you engaging the employee and developing loyal employees?
- Skills and knowledge – as employees develop, you also gain more skilled staff, so training can be key.
- Experience and expertise – Are you offering the right guidance, such as mentoring, to help your staff develop their expertise?
- Enthusiasm – Leading by example as a manager is a great way to develop enthusiastic employees.
- Commitment – Are you offering a stable workplace that breeds commitment on behalf of employees?
- Personal sacrifice – When hiring, is the person likely to buy into the company’s goals and ambition?
Outputs can include:
- Financial rewards – such as a pay raise when it’s due.
- Job security – such as offering temporary staff a full-time position.
- Status (e.g., job titles) – giving the employee a better job title to reflect the work they really do or giving a promotion.
- Perks and benefits – offering free or subsidized gym membership or health insurance, for example.
- Pension contributions – a valuable bonus for any employee.
- Recognition and praise – gratitude giving is very simple and costs nothing to give but is highly effective.
- Opportunities for growth and career progression – as a manager, are you helping each employee to work toward their desired career path, such as by helping them access training they may need?
- Social connections – can you provide opportunities such as social events or team-building opportunities?
- Sense of achievement – are you providing the employee with a challenging enough role to keep them happy and motivated?
Who Are the Referent Others in Equity Theory?
Employees rarely judge fairness in isolation. Instead, they compare their own rewards and contributions with those of colleagues or similar employees, known as referent others or comparison groups.
Social comparison is another key element of the equity theory of motivation at work.
This means that the way an employee evaluates if they are being treated fairly is by comparing their situation with what they can see happening to other people in similar positions or even to their own previous experiences.
These comparisons are referred to as comparison groups or referent others and can include:
- Self-Inside: it refers to the experience of the employee in a different position while working for the same organization.
- Self-Outside: it refers to the experience of the employee while working for a different organization.
- Other-Inside: it refers to the situation of another employee who serves as a comparison within the same organization.
- Other-Outside: it refers to the situation of another employee who serves as a comparison and works for a different organization.
Why Is Perceived Fairness Important in Equity Theory?
Employees rarely judge fairness in isolation. Instead, they compare their own rewards and contributions with those of colleagues or similar employees, known as referent others or comparison groups.
Different employees can have different standards and can compare themselves to different people.
Also, perceptions can change over time as an employee’s situation changes. This explains why an employee can be motivated one day and then become unmotivated the day after if, for example, they witness another employee being treated differently.
So, how do you know what the right balance is for each employee? The only way to know is to make sure you have good communication with your employees.
Rewards
According to Equity Theory, employees generally experience one of three perceptions: feeling under-rewarded, fairly rewarded, or over-rewarded. Each perception influences motivation and workplace behavior differently.
In terms of the perception of fairness, according to the equity theory of motivation in the workplace, there are three ways an employee can feel:
- Under-rewarded: This is when the employee perceives the reward they receive to be less valuable than their input.
- Rewarded with the optimal ratio of equity: In this case, the employee feels rewarded in a way that is right, or commensurate with the contribution they give.
- Over-rewarded: This happens when an employee feels that they are being rewarded more than they deserve, based on their contribution (it seems counterintuitive, but it can happen).
Employee’s Possible Reactions to Perceived Inequity or Unfairness
When things go wrong, and employees perceive that they are being treated unfairly, they will feel distress, and there are a few ways in which they can react.
- Cognitive Distortion: This means that an employee may change their perception in order to redress the balance.
For example, if they think that they are being over-rewarded, they may inflate their sense of worth (thus starting to think that their contribution is worth more than it actually is). Alternatively, they might deflate the perception of their peers’ contribution and think that their peers are rewarded less because they are not as valuable. In the long term, this is not a desirable situation.
On the other hand, if an employee thinks that they are being under-rewarded, they may start to deflate their sense of worth to justify the reasons why they are not being rewarded in the same way as their referent others. - Change of input: In this case, an employee will contribute more if they feel over-rewarded (as they feel guilty and try to make up for it) or contribute less if they feel under-rewarded (for example, by working fewer hours, not making the same effort, or being more careless).
- Change of output: If an employee feels under-rewarded, they may, for example, ask for a pay rise or better working conditions.
- Change or referent: In this case, the employee may decide to compare themselves to another set of colleagues. For instance, someone who feels under-rewarded may choose to compare themselves to colleagues who receive lower rewards than them in order to reduce their own distress.
- Reconsidering the current job situation: For example, the employee may look for another job.
What Are the Benefits of Equity Theory of Motivation at Work?
Why is Adam’s equity theory important in the workplace? Being aware of the equity theory of motivation in organizational behavior has certain benefits, including:
- Promoting organizational justice and fair treatment of all employees, regardless of their background
- Supporting employee motivation, engagement, and psychological safety
- Reducing staff turnover and absenteeism
- Providing a framework of reference for performance management
Employee Engagement Training Course Materials
- Fully editable PowerPoint slides
- Trainer Notes & participants guide
- Printable participant workbooks, handouts & activities inthe PPTs
What are Some Examples of the Equity Theory of Motivation at Work?
You may be wondering now how to apply Adam’s equity theory in the workplace. A good way to give you some ideas is to provide you with some practical examples of equity theory in the workplace. Below are four examples for you:
1. Pay Disparity Between Colleagues
If two employees with similar responsibilities, qualifications, and skills are paid differently, it may lead to the employee who is paid less feeling demotivated.
So, ensure that you have a clear pay structure in place according to grades and responsibilities, and tied to objective job descriptions.
2. Recognition for Contributions
Employee A contributes a lot to team efforts, but employee B, who contributes a lot less, receives all the praise. As a result, employee A feels demotivated.
To counteract this problem, always make sure you praise all your employees equally when they offer a contribution and offer immediate positive feedback.
3. Promotions and Career Advancement
If a less experienced employee is promoted over a more experienced one, the latter may perceive this as unfair. This could lead to frustration and disengagement unless you set clear criteria for promotions.
4. Work-Life Balance and Flexibility
Employee A is allowed to work from home with flexible hours, while Employee B, with similar responsibilities, is required to work in the office full-time without such flexibility.
As a manager, you might have made the assumption (for whatever reason) that employee B may not value flexibility in the same way as employee A, when instead they do. As a result, employee B is frustrated and disengaged. To prevent this problem, make sure you know your employees’ needs and try to find a way to accommodate them while keeping in mind the necessities of the business.
7 Strategies to Apply Equity Theory in the Workplace
Managers and HR professionals can apply Equity Theory by creating fair, transparent, and consistent workplace practices. The seven strategies below help improve employee motivation by ensuring employees perceive their rewards, recognition, and opportunities as equitable.
1. Ensure Open Communication
Communication is the most important thing in the workplace to ensure trust. So, make sure you communicate clearly to your employees in terms of what is expected of them and what their goals are. Likewise, seek input from your employees to be aware of what their feelings are.
You can ensure open communication by having an open-door policy and making the most of all the communication channels and opportunities available, including one-to-one performance reviews, team meetings, communication technology, newsletters, etc.
2. Listen to Your Employees and Try to Understand Their Needs
Don’t make assumptions about what your employees may value as a reward. Instead, take any opportunity to listen to them and get to know their needs and what motivates them.
Every person is different and may have a different perception of fairness, so make sure to find out what every employee’s perception may be.
In this respect, maintaining psychological safety is key, so that employees feel free to express their thoughts without fear.
3. Give Regular Positive Feedback
Praise is a valuable output for many employees, so make sure to give positive feedback regularly and promptly. Also, make employees feel appreciated and thank them for their contributions.
4. Make Use of Clear Job Descriptions
Having job descriptions clearly laid out, with clear goals and objectives and a list of tasks, and linked to a set payscale is essential to avoid confusion and a possible feeling of unfairness.
5. Ensure Transparency in All Processes
This includes any kind of HR policies, pay scales, promotion processes, reward structures, and anything that may lead to employees feeling like they are being treated unfairly.
If all these processes are clearly written and laid out, and all employees are aware of them, it will reduce the chances of employees feeling unfairly treated.
6. Be Aware of Industry Standards
Keep an eye out for how other companies in your industry reward their employees. Keep up with their standards (or improve on them) to make sure your employees don’t feel treated less favorably than their peers in other similar organizations.
7. Focus on Equality of Opportunity and Inclusion
Make sure that all employees, regardless of their background and personal characteristics, are given equal opportunities for growth and career advancement. Also, encourage inclusivity so everyone feels they can contribute equally, and try to be aware of and eliminate bias that might affect employees’ opportunities.
How Can the Equity Theory of Motivation Be Used for Workplace EDI?
If you are a corporate trainer or facilitator, the equity theory of motivation at work may be a good addition to your diversity, equity, and inclusion (DEI) workshops when teaching managers and employees.
The equity theory of motivation at work can also be useful to teach employee engagement and motivation, of course, but it can also be a great topic to cover for EDI training.
If you are delivering training on EDI for managers, you might be interested in:
- Learning about Allyship in the workplace
- and Inclusive Leadership training course materials.
- Understanding the benefits of EDI training and how it reinforces fairness and matters in motivation and inclusion.
- Equity Theory is one of many workplace guides in our Corporate Training Strategies hub.
