Equity Theory of Motivation at Work for Workplace Fairness

One of the most important things you can do to support employees’ motivation is to make them feel they are being treated fairly. Understanding the equity theory of motivation at work can help you identify what fair treatment may mean and how to ensure it takes place in your organization.

Adams equity theory of motivation posits that employees feel motivated if they perceive that they are being rewarded fairly for what they give to the organization and in comparison to what other employees in similar positions receive as a reward.

In this article, I will explain the equity theory of motivation at work in more detail, describe how managers can apply it in the workplace with some examples, and suggest 7 actionable strategies to ensure equity in the workplace.

You might find this theory useful if you are a trainer or facilitator who is running workshops on equality, diversity, and inclusion for leaders. Also, you may be interested in its implications and applications if you are an HR executive or a manager.

What Is Equity Theory of Motivation at Work?

The equity theory was developed by the behavioral and workplace psychologist John Stacey Adams in 1963.

A short definition of the equity theory of motivation in the workplace can be that the perception of fairness is key in motivating individuals.

An important part of the theory is though to pinpoint what fairness means exactly, i.e., what it involves and how it is measured. So, we can define and summarise J.S. Adam’s equity theory as such:

Individuals feel motivated at work when they perceive that the benefits (output) they receive from the organization they work for are commensurate with what they give to the organization (the input). In addition, this balance between input and output needs to be perceived as being equal to what other people in similar job roles (the referent others) experience.

by Dr Valeria Lo Iacono

Let’s now unpick some key concepts of the equity theory of motivation in organizational behavior.

Input and Output

The right balance between input and output is key in the equity theory of compensation.

Input refers to all the efforts (in terms of quality and quality) that an employee makes to contribute to the success of an organization.

Output refers to the outcomes of the employee’s input, i.e. what the organization gives them in exchange for their efforts. Outputs can be both tangible and intangible and include both the positive and negative outcomes of the relationship between the employee and the organization.

Inputs can include:

• Time – especially the quality of the time they put into the work.
• Loyalty – are you engaging the employee and developing loyal employees?
• Skills and knowledge – as employees develop you also gain more skilled staff so training can be key.
• Experience and expertise – Are you offering the right guidance such as mentoring to help your staff develop their expertise?
• Enthusiasm – Leading by example as a manager is a great way to develop enthusiastic employees.
• Commitment – Are you offering a stable workplace that breeds commitment on behalf of employees?
• Personal sacrifice – When hiring, is the personal likely to buy into the company’s goals and ambition?

Outputs can include:

• Financial rewards – such as a pay rise where it’s due.
• Job security – such as offering temporary staff a long-term contract.
• Status (e.g. job titles) – giving the employee a better job title to reflect the work they really do or giving a promotion.
• Perks and benefits – offering free or subsidized gym membership or health insurance for example.
• Pension contributions – a valuable bonus for any employee.
• Recognition and praise – gratitude giving is very simple and costs nothing to give but is highly effective.
• Opportunities for growth and career progression – as a manager are you helping each employee to work toward their desired career path, such as by helping them get training that might need?
• Social connections – can you provide opportunities such as social events or team-building opportunities?
• Sense of achievement – are you providing the employee with a challenging enough role to keep them happy and motivated?

Referent Others or Comparison Groups

Social comparison is another key element of the equity theory of motivation at work.

This means that the way an employee evaluates if they are being treated fairly is by comparing their situation with what they can see happening to other people in similar positions or even to their own previous experiences.

These comparisons are referred to as comparison groups or referent others and can include:

• Self-Inside: it refers to the experience of the employee in a different position while working for the same organization.
• Self-Outside: it refers to the experience of the employee while working for a different organization.
• Other-Inside: it refers to the situation of another employee who serves as a comparison within the same organization.
• Other-Outside: it refers to the situation of another employee who serves as comparison who works for a different organization.

Perception of Fairness

Another key element of the equity theory of motivation at work is the perception of fairness and this is the tricky part as perception can be subjective and not easy to measure.

Different employees can have different standards and can compare themselves to different people.

Also, perceptions can change over time as an employee’s situation changes. This explains why an employee can be motivated one day and then become unmotivated the day after if, for example, they witness another employee being treated differently.

So, how do you know what the right balance is for each employee? The only way to know is to make sure you have good communication with your employees.

In terms of the perception of fairness, according to the equity theory of motivation in the workplace, there are three ways an employee can feel:

• Under-rewarded: This is when the employee perceives the reward they receive to be less valuable than their input.
• Rewarded with the optimal ratio of equity: In this case, the employee feels rewarded in a way that is right, or commensurate with the contribution they give.
• Over-rewarded: This happens when an employee feels that they are being rewarded more than they deserve, based on their contribution (it seems counterintuitive but it can happen).

Employee’s Possible Reactions to Perceived Inequity or Unfairness

When things go wrong and employees perceive that they are being treated unfairly, they will feel distress and there are a few ways in which they can react.

• Cognitive Distorsion: This means that an employee may change their perception in order to redress the balance.
  For example, if they think that they are being over-rewarded, they may inflate their sense of worth (thus starting to think that their contribution is worth more than it actually is). Alternatively, they might deflate the perception of their peers’ contribution and think that their peers are rewarded less because they are not as valuable. In the long term, this is not a desirable situation.
  On the other hand, if an employee thinks that they are being under-rewarded, they may start to deflate their sense of worth to justify the reasons why they are not being rewarded in the same way as their referent others.
• Change of input: In this case, an employee will contribute more if they feel over-rewarded (as they feel guilty and try to make up for it) or contribute less if they feel under-rewarded (for example, by working fewer hours, not making the same effort or by being more careless).
• Change of output: If an employee feels under-rewarded they may, for example, ask for a pay rise or better working conditions.
• Change or referent: In this case, the employee may decide to compare themselves to another set of colleagues. For instance, someone who feels under-rewarded may choose to compare themselves to colleagues who receive lower rewards than them in order to reduce their own distress.
• Reconsidering the current job situation: For example, the employee may look for another job.

Benefits of Equity Theory of Motivation at Work

Why is Adam’s equity theory important in the workplace? Being aware of the equity theory of motivation in organizational behavior has certain benefits, including:

• Promoting fair treatment of all employees regardless of their background
• Supporting employee motivation and engagement
• Reducing staff turnover and absenteeism
• Providing a framework of reference for performance management

Examples of Equity Theory of Motivation at Work

You may be wondering now how to apply Adam’s equity theory in the workplace. A good way to give you some ideas is to provide you with some practical examples of equity theory in the workplace. Below are four examples for you:

1. Pay Disparity Between Colleagues

If two employees with similar responsibilities, qualifications, and skills are paid differently, it may lead to the employee who is paid less to feel demotivated.

So, ensure that you have a clear pay structure is in place according to grades and responsibilities, and tied to objective job descriptions.

2. Recognition for Contributions

Employee A contributes a lot to team efforts but employee B, who contributes a lot less, receives all the praise. As a result, employee A feels demotivated.

To counteract this problem, always make sure you praise all your employees equally when they offer a contribution and offer immediate positive feedback.

3. Promotions and Career Advancement

If a less experienced employee is promoted over a more experienced one, the latter may perceive this as unfair. This could lead to frustration and disengagement unless you set clear criteria for promotions.

4. Work-Life Balance and Flexibility

Employee A is allowed to work from home with flexible hours while Employee B, with similar responsibilities, is required to work in the office full-time without such flexibility.

As a manager, you might have made the assumption (for whatever reason) that employee B may not value flexibility in the same way as employee A when instead they do. As a result, employee B is frustrated and disengaged. To prevent this problem, make sure you know your employees’ needs and try to find a way to accommodate them while keeping in mind the necessities of the business.

7 Strategies to Apply Equity Theory in the Workplace

So, what are the implications of equity theory of motivation at work and for HR and what can you do to apply this theory in practice?

Here I have listed 7 strategies you can use as a manager or HR executive.

1. Ensure Open Communication

Communication is the most important thing in the workplace to ensure trust. So, make sure you communicate clearly to your employees in terms of what is expected of them and what their goals are. Likewise, seek input from your employees to be aware of what their feelings are.

You can ensure open communication by having an open-door policy and making the most of all the communication channels and opportunities available, including one-to-one performance reviews, team meetings, communication technology, newsletters, etc.

2. Listen to Your Employees and Try to Understand Their Needs

Don’t make assumptions about what your employees may value as a reward. Instead, take any opportunity to listen to them and get to know their needs and what motivates them.

Every person is different and may have a different perception of fairness, so make sure to find out what every employee’s perception may be.

In this respect, maintaining psychological safety is key, so that employees feel free to express their thoughts without fear.

3. Give Regular Positive Feedback

Praise is a valuable output for many employees, so make sure to give positive feedback regularly and promptly. Also, make employees feel appreciated and thank them for their contributions.

4. Make Use of Clear Job Descriptions

Having job descriptions clearly laid out, with clear goals and objectives and a list of tasks, and linked to a set payscale is essential to avoid confusion and a possible feeling of unfairness.

5. Ensure Transparency in All Processes

This includes any kind of HR policies, pay scales, promotion processes, reward structures, and anything that may lead to employees feeling like they are being treated unfairly.

If all these processes are clearly written and laid out and all employees are aware of them, it will reduce the chances of employees feeling unfairly treated.

6. Be Aware of Industry Standards

Keep an eye out for how other companies in your industry reward their employees. Keep up with their standards (or improve on them) to make sure your employees don’t feel treated less favorably than their peers in other similar organizations.

7. Focus on Equality of Opportunity and Inclusion

Make sure that all employees, regardless of their background and personal characteristics are given equally opportunities for growth and career advancement. Also, encourage inclusivity so everyone feels they can contribute equally and try to be aware of and eliminate bias that might affect employees’ opportunities.

Equity Theory of Motivation at Work to Foster EDI

If you are a corporate trainer or facilitator, the equity theory of motivation at work may be a good addition to your equality, diversity, and inclusion workshops when teaching managers and employees.

The equity theory of motivation at work can also be useful to teach employee engagement and motivation, of course, but it can also be a great topic to cover for EDI training.

If you are delivering training on EDI for managers, you might be interested in: