EQUITY THEORY OF MOTIVATION: How It Works

If an employee believes they are being fairly compensated for their efforts, they are more likely to remain motivated and satisfied in their position. This is known as the equity theory, and it may be used to keep your staff motivated. In this post, we will look at the equity theory of motivation and how it might be applied in the workplace.

What is the Equity Theory of Motivation?

The equity theory of motivation holds that what a person gets paid for their work has a direct impact on their motivation. When applied to the workplace, it suggests that an individual will generally strive to strike a balance between what they contribute to the business and what they receive in return.

Understanding the importance of equity theory in professional settings will help you guarantee that your staff is adequately motivated and acknowledged for their efforts. When you provide fair remuneration for your team’s contributions, they may sustain higher levels of motivation. This can improve elements such as teamwork, job commitment, and communication.

Adam’s Equity Theory

The Equity theory of motivation, developed in the early 1960s by behavioral psychologist John Stacey Adams, is concerned with defining and analyzing employee relational satisfaction. According to Adams, employees should strive for a balance between what they provide to an organization and what they receive, and base their happiness with that balance on the opinions of their colleagues.

Employee Perception and the Equity Theory of Motivation

Equity is calculated by dividing a person’s outputs by the same person’s inputs. Employees that believe in the inequity theory will alter their inputs in order to restore balance. According to Adam’s Equity Theory of Motivation, employees look around and compare themselves to others rather than simply grasping equality in isolation.

When employees’ outputs are lower than their inputs in contrast to others, they feel demotivated. Similarly, if an employee’s outputs are higher than those of others doing the same job, they may need to rectify their distorting inputs or focus on changing inputs. Employees that believe in the inequality theory will work hard to restore the equilibrium.

What are the 4 Equity Theory Propositions?

A referent group is a group of persons used by an employee to make comparisons. In Adam’s Equity Theory of Motivation, people compare themselves to four referent groups:

A person’s experience within their current organization is referred to as self-inside.
The individual’s interactions with other organizations outside of the self.
Others-on-the-inside: those currently employed by the individual.
Others-from-aside: people who are not members of a given group.

When a programmer compares their income to that of other programmers in the same business, they are referring to the others inside. If they compare themselves to programmers they know socially, the referent group is others-outside. If they measure themselves to what they earned in their previous job, the referent group is self-outside.

Components of Equity Theory of Motivation

The equity theory is divided into two parts: inputs and results. The perception of these two characteristics by team members can influence their motivation levels.

#1. Inputs

An input is a contribution made in exchange for a reward. Time obligations, daily job tasks, loyalty to an organization, and excitement for one’s profession are all examples of inputs.
Employees frequently distinguish between controllable and uncontrollable stimuli. Communication and attendance are examples of controlled inputs, whereas job training and seniority are examples of uncontrollable inputs.

#2. Outcomes

An outcome, also known as an output, is the remuneration that a person receives as a direct result of the input they provide.

Outcomes can include hard factors such as:

Salary and pay raises
Job security
Benefits like healthcare or vacation time

There are also indirect outcomes:

Compliments from coworkers
Enhanced reputation
Pride in one’s job

The importance placed on the input should ideally result in the value of the end. A college graduate, for example, may feel that their degree will lead to improved work chances.

Read Also: EMPLOYEE MOTIVATION: Best Practices On How To Motivate Employees

Equity Theory Factors

Referents and moderating variables are components of the equity theory. These factors can have an impact on an employee’s judgment of what is fair.

#1. Referent Groups

Referents are comparisons that an employee can use to build an opinion about a result. The four key comparisons are as follows:

Self-inside: Includes an employee’s experience in a previous position in their current business.
Self-outside: The employee’s experience in positions outside of the organization.
Other-inside: A comparison to the inputs and outcomes of another employee in the same company.
Other-outside: A comparison to employees in comparable positions outside of the current firm.

One of these four referents can be used by an employee to judge how fairly their employer treats them. One of your team members, for example, may have come from a company that did not value their effort. If you frequently compliment that person when they exceed their goals, they will likely do a self-outside comparison and conclude that they are now receiving more equitable compensation for their efforts.

#2. Moderating factors

Moderating characteristics such as an individual’s education and amount of experience can also have a direct impact on their view of fairness. Those with higher education levels, for example, may have met a greater number of people in their field, prompting them to make other-outside comparisons. Employees with more expertise in their profession or firm are more likely to make internal comparisons, whereas those with less experience will rely on personal knowledge more frequently.

How to Implement It at Work the Equity Theory of Motivation

Equity theory can help you understand the various aspects that influence your team’s motivation levels. Consider the following suggestions for implementing the equity theory in your workplace:

#1. Maintain a balanced squad composition.

Because many employees make work contributions based on what they expect to receive, setting fairness and equality criteria can benefit your entire team. Make certain that all team members are compensated equally for similar quantities of effort. You can also arrange regular team meetings to ensure that everyone feels appreciated for their contributions.

#2. Ensure that you provide similar remuneration.

Your team members may draw distinctions between the inside and outside of the workplace. If an employee perceives that they are getting the same results as others in their area with the same amount of experience, they are more likely to stay in their position. Consider studying external employment for salary, benefits, and incentives when establishing compensation guidelines. Use similar objects to make staff feel more at ease in their roles.

#3. Understand your team’s core values.

Your team members will most likely assign different weights to various inputs and results. Some people place a larger value on education, skills, and training, while others believe that their time and work should be rewarded more. When you show your team that you fairly value their contributions, you can help them stay motivated and pleased at work. It may be beneficial to ask individual members what motivates them to develop a workable plan.

Typical Underpaid Employee Behavior

Employees who are underpaid are not provided with extrinsic/external motivation in the form of money. Under normal conditions, they can be content with the status quo or even find intrinsic motivation to do their job well or enjoy it.
When Adams’ Equity Theory is violated, however, bad things happen.
Employees who believe they are being paid too little may:

Feel dissatisfied with their employment or their employer
Enter survival mode (performing ‘only their job’ but nothing else).
Be dissatisfied
Make less effort during working hours.
Work fewer hours (start later, finish earlier, or take longer or more frequent breaks).
Negative behavior
Make a strong case for greater funds.
‘Act out’ by being disruptive, causing trouble, or simply making life more difficult for those around them.
Excessive competition
Quit.

Typical Overpaid Employee Behavior

Overpaid employees may feel humiliation, guilt, or that they ‘got lucky.’
Employees who believe they are overpaid may: Extend their efforts beyond reasonable expectations to justify their salary (which may result in working excessive hours, weariness, or even burnout)
Cognitive distortion occurs when people modify their perspective on what is fair unconsciously.

Read Also: INTERNAL EQUITY: Importance And How To Implement It

What are the Consequences of Equity Theory For Business Managers?

The equity theory has several consequences for business managers:

Employees calculate the sums of their inputs and outputs. As a result, a working mother may be willing to accept lower compensation in return for more flexible working hours.
Different personnel applies personal values to inputs and outputs. As a result, two employees with the same amount of experience and qualifications performing the same job for the same pay may have quite different perspectives on the contract’s fairness.
Employees are given the freedom to adjust to changing purchasing power and market conditions in their individual areas. As a result, a teacher in Alberta may take lower pay than a colleague in Toronto if their cost of living differs, or a teacher in a far-flung African village may accept a whole different pay structure.
While it may be acceptable for more senior staff to be paid more, there are limits to the balance of the equity scales, and excessive executive pay can be demotivating to employees.
Employee perceptions of their own and others’ inputs and outcomes may be incorrect, and these perceptions must be successfully managed.
Employees who believe they are compensated may work harder. However, he has the ability to adjust the values he assigns to his own personal inputs. He may internalize a sense of superiority and, as a result, diminish his efforts.

Examples of Equity Theory in the Workplace

Overhearing interactions among coworkers and peers can help one identify Equity Theory in the workplace.

Employees frequently compare themselves to those with better pay. When you hear statements like, “Miranda earns more than me, but I don’t see her doing much work,” Equity Theory is born.
“I make less money than Miranda, but this place needs me more than she does.”
“Did you know the new guy gets paid three times more than us despite working only a few hours?” “Is this right?”

We may see employees comparing their salary and contribution to others in these cases. Salary comparison, on the other hand, is a widespread habit among employees. Other forms of comparison include learning opportunities, work-from-home opportunities, flexibility, and so on.

What Happens When Equity Theory Fails?

Employee behavior changes when they believe the balance between input and output (or between what they contribute and the rewards they receive) is out of whack.
According to the theory, when employees believe their work situation is unjust, they will (consciously or unconsciously) do everything in their power to make it right.

How Can Human Resources Aid Equity Theory?

HR is responsible for ensuring that employees are adequately compensated. However, it is equally critical to foster a feeling of justice within teams. Employees who are treated fairly are more likely to be motivated, engaged, and perform effectively.

Transparency can also be beneficial in this situation. When employees are unsure of what is going on or why, they tend to form their own (sometimes wrong) judgments. In general, the better-informed people are, the better they work. HR departments should strive to communicate as much information as feasible.

Finally, HR can put Equity Theory into action by ensuring a fair organizational culture. Celebrate examples of fairness and tell tales about why fairness is essential to your company and what you do to promote it (or address unfairness issues).

Conclusion

In summary, the Equity Theory of Motivation posits that high levels of employee motivation in the workplace can only be attained if each employee believes their treatment to be fair in comparison to others.

Employees will make comparisons to other groups both within and outside of the organization. They will do so by comparing the total of all inputs to the total of all outputs. If people perceive injustice, they will change their inputs to compensate, working more or less depending on whether their condition is favorable or unfavorable in comparison to the group or person being compared.

Recognizing the terms people use in the workplace when equity theory is in play can be a critical step in building a high-performance team.