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Equity Theory

Process theory is a commonly used form of scientific research study in which events or occurrences are said to be the result of certain input states leading to a certain outcome stat, following a set process. Process theory holds that of an outcome is to be duplicated, so too must the process which originally created it, and that there are certain constant necessary conditions for the outcomes to be reached. When the phrase is used in connection with human motivation, process theory attempts to explain the mechanism by which human needs changes. Equity theory falls into the process theory.

John Stacey Adams, workplace and behavioral 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. Awareness and cognizance feature more strongly than in earlier models, as does the influence of colleagues and friends, etc, in forming cognizance, and in this particular model, ‘a sense of what is fair and reasonable’.

Equity or inequity is a psychological state residing within an individual. It creates a feeling of dissonance that the individual attempts to resolve in some manner. The notion of "equity" is associated with justice and fairness. The individual fundamentally believes that they are being treated fairly in comparison to what they see others receiving.

Equity is a social comparison process, resulting when individuals compare their pay to the pay of others. There is no "rational" or single "equitable pay rate" for any given job or individual. Equity is a subjective evaluation, not an objective one. Based on the comparison that individuals use, each individual is likely to develop different perceptions of equity.

The comparisons individuals use tend to fall into five classes of comparison:

1. Job Equity- Individuals compare their pay to the pay of other individuals in the same position they hold within their organization.

2. Company Equity- Individuals compare their pay to the pay of other individuals holding the different positions within their organization.

3. Occupational (Market) Equity- Individuals compare their pay to the pay of other individuals holding the same position in other

4. Cohort Equity- Individuals compare their pay to the pay of others in similar cohort groups, generally age and education.

5. Self Equity- Individuals compare their pay to the pay they received at another point in time.

Individuals determine equity by comparing their contributions (job inputs) and their rewards (job outcomes) to those of their comparisons. This comparison takes the form of the following ratio:

When this ratio is in balance, the individual perceives equity. Inequity is experienced when the ratio is out of balance. Thus when the individual perceives that his or her contribution are equal to the comparison and his or her rewards are lower, or his or her contributions are greater and rewards are equal, inequity is felt.

We each seek a fair balance between what we put into our job and what we get out of it. Adams calls these inputs and outputs. We form perceptions of what constitutes a fair balance or trade of inputs and outputs by comparing our own situation with other 'referents' (reference points or examples) in the market place. We are also influenced by colleagues, friends, partners in establishing these benchmarks and our own responses to them in relation to our own ratio of inputs to outputs. If we feel are that inputs are fairly and adequately rewarded by outputs then we are happy in our work and motivated to continue inputting at the same level.

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. Outputs are typically all financial rewards - pay, salary, expenses, perks, benefits, pension arrangements, bonus and commission - plus intangibles - recognition, reputation, praise