J. Stacy Adams developed equity theory.
This theory states that the employees perceive what they get from a job situation (outcomes) in relation to what they put into it( inputs) and then compare their inputs- outcomes ratio with the inputs- outcomes ratios of others.
This theory show-
- Inputs: inputs include all the rich and diverse elements that employees belief they bring or contribute to the job – there education, experience, effort, loyalty, commitment.
- Outcomes: Outcomes are rewards they perceive they get from their jobs and employers outcomes include- direct pay and bonuses, fringe benefit, job security, social rewards and psychological.
- Over rewarded: if employees fell over rewarded equity theory predicts then they will feel and imbalance in their relationship with their employee and seek to restore that balance.
- Equity: if employees perceive equity then they will be motivated to continue to contribute act about the same level.
- Unrewarded: unrewarded who feel they have been unrewarded and seek to reduce their feeling in equity through the same types of strategies but same of this specific action are now reverse.
This theory is based on following two assumptions about human behavior:
- Individuals make contributions (inputs) for which they expect certain outcomes (rewards). Inputs include such things as the person’s past training and experience, special knowledge, personal characteristics etc. Outcomes include pay, recognition, promotion, prestige, fringe benefits etc.
- Individuals decide whether or not a particular exchange is satisfactory, by comparing their inputs and outcomes to those of others, in the form of a ratio. Equity exists when an individual concludes that his/her own outcome/input ratio is equal to that of other people.
The essential aspects of the equity theory may be shown by an equation;
There should be a balance of the outcomes/inputs relationship for one person in comparison with that for another person. If the person thinks that the rewards are greater than what is considerable, he/she may work harder.
If the person perceives the rewards as equitable, he/she probably will continue at the same level of output.
If the person feels that he/she is inequitably rewarded, he/she may be dissatisfied, reduce the quantity or quality of output, or even leave the organization.
The three situations of equity theory are illustrated in the following figure: