Equity, as the general dictionary defines, is fairness in a very basic sense. The theory of Equity in the workplace was proposed by John Stacey Adams in 1963 after looking at the similar motivation models proposed by Maslow, Handy and Herzberg. Adams, being behavioral psychologist, studied the effects of variables on worker motivation in the workplace and came up with his own theory of perceived equity influenced by what is thought to be ‘fair and reasonable’.
In very simple terms, Adam’s theory of equity provided that if the effort made by a worker was equal to the result of that effort, then this worker would consider this equitable. In scientific terms, Adam created a formula (or a ratio) where we calculated equity by measuring the inputs (effort) and the outputs (result). Thus when the output was equal or higher than the input, the worker would feel motivated and hence work better. (Miner, 2007)
According to Adam, inputs can be defined in many variables other than just the number of hours spent at work. Inputs such as effort made by the worker, loyalty to the organization, number of hours put in, skill-set used, tolerance practiced, determination and enthusiasm, support given to co-workers, sacrifices made, etc. Similarly output is not just the salary received for the work done, rather it is all kind of financial rewards and non-financial rewards like recognition for the work, gain in reputation, praise from the co-workers, having a sense of responsibility and power, training and new skills learnt and developed, promotions received, etc . Thus for an employee to feel equitable, there needs to be a cohesive balance between the inputs and outputs. (Miner, 2007)
However, Adam being a behavioral scientist understood exactly that simple input equals output cannot be described as equity as humans are affected by other humans. Therefore Adams stated a term “referent others” in his theory that explains that people measure the balance of fairness by using other’s situation as a reference point. Thus Adam’s theory goes beyond a simple effort and reward calculation. It studies deeply the inbuilt human behavior of comparison and explains that motivation increases not just by pay and rewards, rather by level of pay and rewards in comparison to others. (Cosier & Dalton, 1983)
One would expect that if our inputs and outputs are equal, we would be motivated as the ratio of output to input will be 1. However, Adams define equity as (Cosier & Dalton, 1983)
where O =Outputs, I =Inputs, p =Self, o = Others
Hence, the ratio of output to inputs of self should be equal or greater than the ratio of output to inputs of self to motivate oneself. This formula can be simply explained that if a person gets a salary of $5000 and is increased to $10000 without any extra input, then ideally the person would feel motivated as the ratio of output to input increased. However if a co-worker with similar work responsibilities gets a salary boost from $5000 to $15000, this would have a de-motivating effect. This is simply because people compare their own situation with the situation of others and formulate their own sense of fairness or equity according to these work situations. (Cosier & Dalton, 1983)
Adams theory need to be understood by the management of organizations since it can help them craft policies that motivate the required number of people without de-motivating others. This theory further reminiscent of the fact that actions are not done in isolation thus they result in different reactions. Effective management of these actions need to be done beforehand to gain a favorable experience.
Adams, J.S. (1963). Toward an understanding of inequity. Journal of Abnormal and Social Psychology. Vol. 67, p422-436
Carrell, M.R., Dittrich, J.E. (1978). Equity Theory: The Recent Literature, Methodological Considerations, and New Directions. Academy of Management. The Academy of Management Review. Briarcliff Manor: Apr. 1978. Vol. 3, Iss. 2; p. 202
Miner, J. B. (2007). Organizational behavior, Volume 4. M.E. Sharpe, p.92-102.