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.
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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