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John Stacey Adams' Equity Theory of Motivation: Business Applications for Managers

Updated on September 18, 2012

Motivation theories take several flavors. Some deal with basic needs that employees have, while others deal with employees’ expectations. Still another, equity theory, comes from the work of John Stacey Adams in 1963. Adams believed that motivation is primarily based on the equity (or fairness) of the outcome/input ratio. That is, is the relationship between inputs like effort and outcomes like pay and benefits fair? If employees see that others receive better outcomes for the same work (or the same outcome for less work), they’re less likely to be motivated to work harder.

Equity in the Workplace: A Manager’s Focus

Employees are unlikely to work harder if inequity, or lack of fairness, exists. There are three primary situations that can occur.

The first, equity, is when outcomes/inputs for the individual is equal to outcomes/inputs for the referent – or the person the employee is referencing. If both employees ratios’ of contributions to outcomes is equivalent, then equity has occurred.

Overpayment inequity occurs when an employee receives more rewards than the referent, given equal contributions. This is bad because it will not motivate employees to work harder, as they are already receiving “more for less work.”

Underpayment inequity is the opposite situation: the individual is “underpaid” compared to the referent. This is bad because the employee then feels no motivation to work harder.

Both underpayment and overpayment inequity are generally bad for employee morale. Underpayment inequity in particular causes problems for managers and can lead to unethical behaviors on the part of employees. It’s important to note that “equity theory” does not suggest all employees should be treated equally – literally interpreting “employee equity” would mean each employee receives exactly the same level of rewards. Rather, a proper application of equity theory means all employees should be compensated with pay/benefits/etc proportionate to their contributions to the company.

Organizational justice theory is related to equity theory in that it focuses on the procedures used to match inputs with outputs. It deals with several types of justice: procedural justice is the fairness of procedures used to allocate outcomes. Interpersonal justice examines the fairness with which managers treat employees. Informational justice deals with how managers explain decisions and procedures to employees, and distributive justice deals with the distribution of outcomes in an organization.

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