Equity Theory

Posted in Human Resource Terms, Total Reads: 2938
Advertisements

Definition: Equity Theory

The equity theory was proposed by a Behavioral Psychologist, John Stacey Adams. It states that:

‘The motivation of an individual is positively correlated to his perception of justice and fair treatment practiced by the management. The employee seeks a balance between the amount of efforts he pours in (Input) and the kind of compensation he receives (Output). The Individual compares this input-output balance with the other employees in the organization (known as ‘referents’)

Inputs: time, effort, loyalty, commitment, reliability, integrity, tolerance etc

Outcomes: pay, bonus, perks, benefits, praise, reputation, responsibility etc




-          If the individual’s output to input ratio is lower than the partner’s ratio, he feels under-rewarded and demotivated. The phenomenon is called Equity Tension.

-          When the Output-Input ratio is equal to the referents’ ratio, Perfect Equity is said to be developed and the employee feels motivated.

-          If the employee’s ratio is greater than the referents’ ratio, the employee feels over-rewarded and again, Equity Tension is said to be developed.


Hence, this concludes the definition of Equity Theory along with its overview.

Advertisements

Browse the definition and meaning of more terms similar to Equity Theory. The Management Dictionary covers over 7000 business concepts from 6 categories.

Search & Explore : Management Dictionary



Share this Page on: