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Equity Theory Reward Management Assignment

Adams' Equity Theory [edit]

J stacey adams - equity theory on job motivation

John Stacey Adams, a workplace and behavioural psychologist, put forward his Equity Theory on job motivation in 1963. There are similarities with Charles Handy's extension and interpretation of previous simpler theories of Maslow, Herzberg and other pioneers of workplace psychology, in that the theory acknowledges that subtle and variable factors affect each individual's assessment and perception of their relationship with their work, and thereby their employer. However, awareness and cognizance of the wider situation - and crucially comparison - feature more strongly in Equity Theory than in many other earlier motivational models.

The Adams' Equity Theory model therefore extends beyond the individual self, and incorporates influence and comparison of other people's situations - for example colleagues and friends - in forming a comparative view and awareness of Equity, which commonly manifests as a sense of what is fair.

When people feel fairly or advantageously treated they are more likely to be motivated; when they feel unfairly treated they are highly prone to feelings of disaffection and demotivation. The way that people measure this sense of fairness is at the heart of Equity Theory.

Equity, and therefore the motivational situation we aim to assess using the model, is not dependent on the extent to which a person believes reward exceeds effort, nor even necessarily on the belief that reward exceeds effort at all. Rather, Equity, and the sense of fairness which commonly underpins motivation, is dependent on the comparison a person makes between his or her reward/investment ratio with the ratio enjoyed (or suffered) by others considered to be in a similar situation.

Adams called personalefforts and rewards and other similar 'give and take' issues at work respectively 'inputs' and 'outputs'.

Inputs are logically what we give or put into our work. Outputs are everything we take out in return.

These terms help emphasise that what people put into their work includes many factors besides working hours, and that what people receive from their work includes many things aside from money.

Adams used the term 'referent' others to describe the reference points or people with whom we compare our own situation, which is the pivotal part of the theory.

Adams Equity Theory goes beyond - and is quite different from merely assessing effort and reward. Equity Theory adds a crucial additional perspective of comparison with 'referent' others (people we consider in a similar situation).

Equity theory thus helps explain why pay and conditions alone do not determine motivation.

In terms of how the theory applies to work and management, we each seek a fair balance between what we put into our job and what we get out of it. But how do we decide what is a fairbalance?

The answer lies in Equity Theory. Importantly we arrive at our measure of fairness - Equity - by comparing our balance of effort and reward, and other factors of give and take - the ratio of input and output - with the balance or ratio enjoyed by other people, whom we deem to be relevant reference points or examples ('referent' others).

Crucially this means that Equity does not depend on our input-to-output ratio alone - it depends on our comparison between our ratio and the ratio of others.  

In practice this helps to explain why people are so strongly affected by the situations (and views and gossip) of colleagues, friends, partners etc., in establishing their own personal sense of fairness or equity in their work situations.

Adams' Equity Theory is therefore a far more complex and sophisticated motivational model than merely assessing effort (inputs) and reward (outputs).

The actual sense of equity or fairness (or inequity or unfairness) within Equity Theory is arrived at only after incorporating a comparison between our own input and output ratio with the input and output ratios that we see or believe to be experienced or enjoyed by others in similar situations.

This comparative aspect of Equity Theory provides a far more fluid and dynamic appreciation of motivation than typically arises in motivational theories and models based on individual circumstance alone.

For example, Equity Theory explains why people can be happy and motivated by their situation one day, and yet with no change to their terms and working conditions can be made very unhappy and demotivated, if they learn for example that a colleague (or worse an entire group) is enjoying a better reward-to-effort ratio.

It also explains why giving one person a promotion or pay-rise can have a demotivating effect on others.

Note also, importantly, that what matters is the ratio, not the amount of effort or reward per se. This explains for example why and how full-time employees will compare their situations and input-to-output ratios with part-time colleagues, who very probably earn less, however it is the ratio of input-to-output - reward-to-effort - which counts, and if the part-timer is perceived to enjoy a more advantageous ratio, then so this will have a negative effect on the full-timer's sense of Equity, and with it, their personal motivation.

Remember also that words like efforts and rewards, or work and pay, are an over-simplification - hence Adams' use of the terms inputs and outputs, which more aptly cover all aspects of what a person gives, sacrifices, tolerates, invests, etc., into their work situation, and all aspects of what a person receives and benefits from in their work and wider career, as they see it.

inputsequity
dependent on comparing own ratio of input/output with ratios of 'referent' others
outputs
Inputs are typically: effort, loyalty, hard work, commitment, skill, ability, adaptability, flexibility, tolerance, determination, heart and soul, enthusiasm, trust in our boss and superiors, support of colleagues and subordinates, personal sacrifice, etc.People need to feel that there is a fair balance between inputs and outputs. Crucially fairness is measured by comparing one's own balance or ratio between inputs and outputs, with the ratio enjoyed or endured by relevant ('referent') others.Outputs are typically all financial rewards - pay, salary, expenses, perks, benefits, pension arrangements, bonus and commission - plus intangibles - recognition, reputation, praise and thanks, interest, responsibility, stimulus, travel, training, development, sense of achievement and advancement, promotion, etc.

If we feel are that inputs are fairly rewarded by outputs (the fairness benchmark being subjectively perceived from market norms and other comparable references) then generally we are happier in our work and more motivated to continue inputting at the same level.

If we feel that our ratio of inputs to outputs is less beneficial than the ratio enjoyed by referent others, then we become demotivated in relation to our job and employer.

People respond to a feeling of inequity in different ways. Generally the extent of demotivation is proportional to the perceived disparity with other people or inequity, but for some people just the smallest indication of negative disparity between their situation and other people's is enough to cause massive disappointment and a feeling of considerable injustice, resulting in demotivation, or worse, open hostility.

Some people reduce effort and application and become inwardly disgruntled, or outwardly difficult, or even disruptive. Other people seek to improve the outputs by making claims or demands for more reward, or seeking an alternative job.

Understanding Equity Theory - and especially its pivotal comparative aspect - helps managers and policy-makers to appreciate that while improving one person's terms and conditions can resolve that individual's demands (for a while), if the change is perceived by other people to upset the Equity of their own situations then the solution can easily generate far more problems than it attempted to fix.

Equity Theory reminds us that people see themselves and crucially the way they are treated in terms of their surrounding environment, team, system, etc - not in isolation - and so they must be managed and treated accordingly.



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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