Adam’s Equity Theory, also known as the Equity Theory of Motivation, was developed in 1963 by John Stacey Adams, a Belgian psychologist known for workplace behavior. When people exhibit inappropriate behavior in the workplace, everyone suffers. For instance, if someone frequently tells lies, his/her disruptive behavior affects coworkers’ morale and productivity. Equity Theory is based on the idea that individuals are motivated by justice. In simple terms, equity theory states that if an individual identifies an inequity between himself and a peer, he automatically will adjust his working style to make the situation fair in his own eyes. As an example of equity theory, if an employee learns that a peer doing exactly the same job as him is earning more money, he may choose to do less work, thus feeling justified in his own eyes.
Equity theory focuses on influencing whether the distribution of resources is fair to both relational partners – the employer and employee. Equity is measured by comparing the ratio of contributions in terms of costs and benefits in terms of rewards for each person. This theory is also considered as one of the justice theories. John Adams asserted that employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the professed inputs and compare them to outcomes of others. According to Equity Theory, organizations must maximize individuals’ rewards, by creating systems where resources can be fairly divided amongst members of a team. If the employees feel they are treated unequally in treatment and rewards, they will shy away from giving the best inputs.
The structure of equity in the workplace is based on the ratio of inputs to outcomes. Inputs are the contributions made by the employee for the organization. Inputs for instance come in form of the number of hours worked (effort), the commitment shown, the enthusiasm shown, experience brought to the role, personal sacrifices made, responsibilities and duties of the individual in the role. Outputs are the result an individual receives as a result of their inputs to the organization. Some of these benefits will be tangible, such as salary, but others will be intangible, such as recognition. Common outputs include salary, bonus, pension, annual holiday allowance, company car, company home, stock options, recognition, and promotion.
It’s a universal truth that company cultures are strongly interrelated with employee happiness. The more appealing and enjoyable the organization culture is, the happier their employees will be. It is not possible for a worker to be engaged when they are unhappy. Employees keep comparing with each other in regards to salary, perks, recognition and promotion. By cultivating a strong corporate culture, organizations increase the chances of good employee engagement. And, engaged employees are more likely to be great advocates of the organization brand. When organizations maintain rational inputs and outputs, they get clarity in defining equity. Equity is defined as an individual’s outputs divided by that same person’s inputs. Adam’s Equity Theory goes a step further and states that individuals look around and compare their promotions and perks to others. If they perceive an inequity then they will adjust their inputs to restore balance.
The airline industry is often mocked for grumpy employees and poor customer service, but Southwest Airlines bucks those trends. Customers loyal to Southwest often point to happy and friendly employees who try hard to help. This airline has managed to communicate its goals and vision to employees in a way that makes them a part of a unified team. Southwest also gives employees “permission” to go that extra mile to make customers happy, empowering them to do what they need to do to meet that vision. Employees who are convinced of a larger common goal are people who are excited to be part of a larger purpose.
Adobe is a company that goes out of its way to give employees challenging projects and then provide the trust and support to help them meet those challenges successfully. While it offers benefits and perks like any modern creative company, Adobe’s is a culture that avoids micromanaging in favor of trusting employees to do their best. Adobe does not use ratings to establish employee capabilities, feeling that that restrains creativity and harms how teams work. Managers take on the role of a coach/mentor, more than anything, letting employees set goals and determine how they should be assessed. Adobe gives its employees stock options so that they respect both a stake and reward in the company’s success. Continual training and culture that promotes risk taking without fear of penalty are part of Adobe’s open company culture. Putting trust in employees goes a long way towards positive organizational culture, because trust leads to independent employees who help their company grow.
Employees who are high in equity sensitivity place more importance on inputs in terms of what they can give in a situation; the higher scorers have been labeled “Benevolent.” In contrast, those who score toward the low end of the pole on equity sensitivity place greater importance on outcomes; they value what they can get in a given situation, they are labeled as “Entitled.” Toward the mid-point are those individuals who adhere more closely to the originally proposed norm of equity—that is, those who desire their inputs and outcomes to be balanced, they are labeled as “Equity Sensitive.” In sum, along the range, individuals who score high on equity sensitivity lean more toward benevolence, whereas individuals who score low on equity sensitivity lean more toward entitled.
