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Adams' Equity Theory: What is the Meaning of Equity Theory and The Principles

Everyone wants to be treated fairly. This is normal. This concept is the basis of equity theory. Equity theory was put forward by John Stacey Adams, a work and behavior psychologist in 1963. This is why this theory is also known as Adam's equity theory.

What is the meaning of equity theory?

This theory assumes that basically, humans enjoy fair/comparable treatment. This relates to relational satisfaction in terms of perceived fair/unfair distribution of resources in interpersonal relationships.

This theory builds a broader awareness of the dimensions of each individual's assessment as a broader manifestation of justice than other motivational theories.

The theory of justice explains that a person's satisfaction depends on whether he feels there is equity or inequity in a situation he is experiencing. This theory is a variation of social comparison.

In the business world and for a company, understanding equity theory is important. Understanding equity theory will help us manage companies, especially in people management, in a better way.

According to this theory, a person will compare the ratio of his input to the results of his input to the ratio of his input to his comparison. If the comparison is considered fair enough, then he will be satisfied. However, if the comparison is not balanced and it is detrimental (insufficient compensation), it will cause dissatisfaction and become a motive for action for someone to uphold justice.

So, this theory helps understand how companies perform employee management. According to this theory, employees will try to maintain fairness between the input they provide to their work and the output they receive, with the input and output of others.

The employee's assessment of other people's input and output is based on their perceptions and sometimes is not what it is. This means that even though the input and output they provide are equivalent to the input and output were given by others, if according to their perception this is not equal, they will lose motivation.

Input and Output in Equity Theory

To start understanding equity theory, we must understand what can be the input and output for employees.

Input

Input is all the things that a person gives and uses for his job. This can include:

  • Adaptability
  • Enthusiasm
  • Endorsement
  • Flexibility
  • Expertise
  • Trust
  • Loyalty
  • Determination
  • Skills
  • Commitment
  • Sacrifice
  • Effort

These are just a few examples of input an employee can give to his or her job.

Output

The output is what employees receive because they have provided input. This can include:

  • Salary
  • Job guarantee
  • Recognition
  • Praise
  • A sense of accomplishment
  • A sense of development
  • Reputation
  • Responsible

According to the Adams equity theory, employees will only be satisfied with their work and motivated if they judge that the input is given and the output received is comparable. Apart from that, they will also compare their inputs and outputs against others. If they have judged that what they got is fair, then they will be motivated.

When feeling injustice, our employees can do these things:

  • Change the input they give.
  • Changing the results they do (eg if they are paid a piece rate then they can produce more at a lower quality).
  • Changing perceptions of myself ("Maybe I'm trying more than others").
  • Changing perceptions of other people ("Maybe Joko tried harder than me").
  • Get out.

Some of the above are the possibilities that could happen. The change in perception that can occur is the result we want. However, this is something we cannot completely control. So what we have to do as business people is ensure that our employees feel that they are being treated fairly.

Implications of Equity Theory

The following theoretical implications will help us better understand the conclusions and benefits that we can take based on equity theory.

  • Balance theory can help explain organizational behavior. Employees who feel their compensation decisions are fair will display greater job satisfaction and demonstrate a commitment to the organization. Moreover, the theory of justice plays a role in worker-management relations regarding trade union negotiations.
  • People measure total inputs and results. This means a working housewife can receive lower monetary compensation in exchange for more flexible working hours.
  • Different employees assume personal values for input and results. Thus, two employees with the same experience and qualifications doing the same job for the same pay may have very different perceptions of a fairness agreement.
  • Employees can adjust for local purchasing power and market conditions. Thus an employee in a certain place may receive lower compensation than his counterpart in another if the cost of living is different.
  • Employees' perceptions of the inputs and results of themselves and others may be wrong, and perceptions need to be managed effectively.