What is Adams’ equity theory?

Adams’ equity theory posits that the level of reward an individual receives compared to their own sense of contribution (and likewise for their co-workers) influences their performance.
When employees believe a situation is fair, they are more likely to act in a way that rewards or benefits the organization. When they believe a situation is not fair, they become dissatisfied, unmotivated, and may resign.
Fairness arises from an equitable relationship between inputs and outputs and whether one believes they are compensated comparably to others.

Aspect	Explanation
Adams’ Equity Theory	– Adams’ Equity Theory, developed by psychologist John Stacey Adams in 1963, is a motivational theory that focuses on the relationship between an individual’s perception of fairness in the workplace and their motivation.
Key Principles	– According to the theory, individuals compare their inputs (effort, time, skills) and outputs (compensation, recognition) to those of others in the workplace to determine if they are being treated fairly. This comparison results in one of three states: equity, underreward, or overreward.
Equity	– In a state of equity, an individual perceives that their inputs equal their outputs in comparison to their peers. This perception leads to a sense of fairness and satisfaction, which in turn motivates the individual to maintain their current level of effort and performance.
Underreward	– In a state of underreward, an individual perceives that their inputs are greater than their outputs compared to their peers. This perception can lead to feelings of injustice and demotivation, prompting the individual to either reduce effort, seek additional rewards, or both.
Overreward	– In a state of overreward, an individual perceives that their inputs are less than their outputs compared to their peers. This perception may lead to guilt or discomfort, but it can also motivate the individual to maintain or increase their effort to restore a sense of equity.
Application	– Adams’ Equity Theory is often applied in human resources and management to understand and manage employee motivation and job satisfaction. Employers use it to create equitable compensation, recognition, and reward systems.
Limitations	– The theory simplifies the complex nature of human motivation and doesn’t account for individual variations in perceptions of fairness. – It assumes that individuals always seek fairness, but some may prioritize other factors like job security or personal growth. – It doesn’t address the role of external factors, such as market forces or economic conditions, which can affect compensation and rewards.
Psychological Impact	– Perceptions of inequity, whether real or perceived, can have a significant impact on an individual’s job satisfaction and motivation. If employees consistently feel underrewarded, it can lead to reduced productivity, increased turnover, and decreased morale. Conversely, a sense of equity can enhance job satisfaction and overall well-being.
Ongoing Evaluation	– To maintain motivation and job satisfaction, organizations must continuously evaluate and adjust their reward and compensation systems to align with employees’ changing perceptions of fairness. Open communication and feedback channels are crucial in addressing equity issues.
Conclusion	– Adams’ Equity Theory highlights the importance of perceived fairness in the workplace as a key factor in employee motivation and job satisfaction. It serves as a valuable framework for organizations to create equitable work environments and foster employee engagement.

Table of Contents

Understanding Adams’ equity theory

Adams’ equity theory was developed by behavioral and organizational psychologist J. Stacy Adams in the 1960s.

Adams’ equity theory is a process model of motivation.

The theory posits that the level of reward an individual receives compared to their own sense of contribution (and likewise for their co-workers) influences their performance.

Adams based his motivational theory on three key assumptions:

Individuals make contributions in the form of inputs and expert certain rewards (outcomes) in return, and
To determine whether the exchange is valid, the individual compares their input and rewards with the input and rewards of others.
Individuals in an inequitable solution (whether perceived or otherwise) may attempt to reduce that inequity. This occurs via cognitive distortion of the inputs and outputs in the individual’s mind. In some cases, however, the individual will alter the inputs and rewards directly or choose to leave the company.

In the workplace, the theory believes that equity and motivation are intricately linked.

When employees believe a situation is fair, they are more likely to act in a way that rewards or benefits themselves and the organization.

Employees who identify a situation that is not equitable, on the other hand, may feel stressed or demotivated.

The most obvious example is someone who becomes dissatisfied after realizing that a peer is paid more money to do the same amount of work.

Inputs and outputs in Adams’ equity theory

Some of the inputs and outputs that contribute to equality and indeed inequality in the workplace are listed below.

Inputs

Inputs comprise the contributions an employee makes toward an organization. This includes:

The number of hours worked per week.
Experience and industry-related skills.
Social and conversational skills that contribute to a positive culture. Examples include company functions and birthday celebrations.
The ability to work under pressure and meet strict deadlines.
Commitment and enthusiasm to their role.
Personal sacrifices.
Loyalty to superiors or the organization.

Outputs

Outputs describe what the employee receives as a result of their inputs. Some of the most obvious examples include:

Salary or wages.
Annual vacation time.
Work-related trips.
Pensions and insurance.
Recognition and promotion.
Job flexibility.
Learning and career development.

The relationship between inputs, outputs, and fairness

Earlier, we mentioned that desirable employee and organizational performance is more likely in situations perceived to be fair and equitable.

But how does fairness arise, exactly?

Fairness arises from an equitable relationship between inputs and outputs. Employees want the outputs they receive to seem fair in relation to the inputs provided and this must also hold for the inputs and outputs of others.

The interaction of inputs and outputs can also be explained in three types of exchange relationships:

Overpaid inequity

When an employee perceives that their outcomes are above what is fair (when compared to co-workers).

These individuals may increase their effort to match their compensation or develop a sense of entitlement and reduce their input.

Underpaid inequity

When an employee perceives that their outcomes are less than is fair (when compared to co-workers).

As we noted, these individuals lose motivation and purpose.

Equity

The sweet spot where the employee considers that the relationship between their inputs and outputs is equal when compared to others.

Case Studies

Supply and Demand: In economics, the law of supply and demand dictates that when the demand for a product or service (output) exceeds its supply (input), prices tend to rise. Conversely, when supply exceeds demand, prices tend to fall.
Salary Disparity: In a workplace, if employees with similar qualifications and responsibilities perceive that one is paid significantly more than the other, it can lead to feelings of underpaid inequity, potentially resulting in demotivation and decreased performance.
Promotions: Suppose two employees in a company have similar skills, experience, and contributions. If one is consistently promoted while the other is overlooked, it can create a perception of overpaid inequity for the promoted employee and underpaid inequity for the one not promoted.
Group Projects: In a group project at school, if one member contributes significantly more effort and resources than others but receives the same grade (output), they may perceive the situation as unfair and feel they are not receiving equitable recognition for their contributions.
Friendship Equity: In a group of friends, if one individual consistently makes an effort to plan and host gatherings while others rarely contribute, it can lead to feelings of overpaid inequity for the host, potentially straining the friendship.
Performance Bonuses: In a sales team, if a top-performing salesperson receives the same bonus as others who perform at a lower level, it may result in overpaid inequity for the high achiever and underpaid inequity for the rest of the team.
Athlete Salaries: Professional sports often showcase salary disparities. When an athlete on a team receives a significantly higher salary than their teammates, it can lead to perceptions of overpaid inequity within the team.
Resource Allocation: In a classroom, if a teacher consistently gives one student more time and attention than others, those other students may perceive the situation as unfair, leading to feelings of underpaid inequity.
Gender Pay Gap: The gender pay gap, where women are paid less than men for the same work, is a real-world example of underpaid inequity. It has been a subject of concern and advocacy for gender equity.
Taxation: In taxation, progressive tax systems aim to achieve equity by taxing individuals with higher incomes at higher rates. This system is designed to distribute the burden of taxation more equitably based on income levels.
Resource Allocation in Healthcare: In healthcare, the allocation of medical resources, such as ventilators during a pandemic, can raise ethical questions about fairness and equity in decision-making.
Access to Education: Differences in the quality of education available to students in affluent and disadvantaged areas can result in significant disparities in opportunities and outcomes, highlighting issues of equity in education.
Environmental Equity: Environmental justice advocates for equitable access to a clean environment. For example, communities disproportionately affected by pollution or climate change may perceive inequities in environmental protection efforts.

Key Highlights of Adams’ Equity Theory:

Equity and Performance: Adams’ Equity Theory suggests that an individual’s perception of the fairness of their rewards compared to their contributions significantly influences their performance and behavior.
Fairness and Motivation: When employees believe a situation is fair, they are more likely to act in ways that benefit both themselves and the organization. Conversely, perceptions of unfairness can lead to dissatisfaction, demotivation, and potentially resignation.
Equitable Relationship: Fairness is achieved when there is an equitable relationship between the inputs (contributions) employees make and the outputs (rewards) they receive. This equity must also hold when comparing one’s inputs and outputs to those of others.
Development by J. Stacy Adams: Adams’ Equity Theory was developed by J. Stacy Adams in the 1960s and is considered a process model of motivation.
Key Assumptions: Adams’ theory is built on three key assumptions: individuals make contributions (inputs) and expect rewards (outcomes) in return; individuals compare their inputs and rewards with those of others to determine validity; and individuals in an inequitable situation may attempt to reduce the inequity through various means.
Types of Inequity: Adams identified two main types of inequity: overpaid inequity (when individuals feel their outcomes are too high compared to others) and underpaid inequity (when individuals feel their outcomes are too low compared to others). Equity, on the other hand, is when individuals perceive a balance between inputs and outputs.
Inputs: Inputs are the contributions employees make to the organization, including work hours, skills, social skills, commitment, personal sacrifices, loyalty, and more.
Outputs: Outputs are what employees receive in return for their inputs, such as salary, benefits, recognition, promotions, job flexibility, and career development.
Exchange Relationships: Adams’ theory describes three types of exchange relationships: overpaid inequity, underpaid inequity, and equity, each of which affects employee motivation and behavior differently.
Impact on Workplace: In the workplace, Adams’ Equity Theory suggests that promoting fairness and equity is crucial for fostering motivation and positive organizational performance. Addressing perceived inequities can lead to improved employee satisfaction and productivity.

Related Frameworks, Models, or Concepts	Description	When to Apply
Adams’ Equity Theory	Adams’ Equity Theory proposes that individuals are motivated by the perception of fairness and equity in social exchanges and relationships. According to the theory, employees compare their inputs (such as effort, skills, and experience) to their outcomes (such as pay, recognition, and benefits) and evaluate the fairness of the exchange. When individuals perceive an imbalance between their inputs and outcomes compared to others, they experience feelings of inequity, which can lead to reduced motivation, job dissatisfaction, and behavioral responses to restore equity.	Apply Adams’ Equity Theory to understand and address issues of fairness and equity in the workplace. Use it to assess employees’ perceptions of fairness in reward systems, performance evaluations, and resource allocations, identify and address sources of inequity and discrimination, and design policies and practices that promote a sense of fairness and equity, enhancing motivation, satisfaction, and organizational effectiveness. Implement equity theory principles to foster a culture of fairness, transparency, and trust in organizational relationships and decision-making processes.
Expectancy Theory	Expectancy Theory suggests that individuals are motivated to exert effort and achieve high levels of performance when they believe that their efforts will lead to desirable outcomes or rewards. Expectancy theory posits that motivation is influenced by three key factors: expectancy (belief that effort will lead to performance), instrumentality (belief that performance will lead to outcomes), and valence (value or attractiveness of outcomes). Expectancy theory emphasizes the importance of aligning individual goals and rewards to enhance motivation and performance.	Apply Expectancy Theory to analyze and enhance motivation and performance in organizational settings. Use it to assess individuals’ beliefs about the link between effort, performance, and outcomes, identify factors that influence motivation and decision-making, and design incentive systems and reward structures that are perceived as fair, meaningful, and motivating to employees, aligning individual and organizational goals to drive performance and effectiveness.
Maslow’s Hierarchy of Needs	Maslow’s Hierarchy of Needs is a motivational theory that proposes that individuals have a hierarchy of needs, ranging from basic physiological needs (such as food and shelter) to higher-order needs for self-actualization and fulfillment. Maslow’s hierarchy suggests that individuals are motivated to satisfy lower-level needs before pursuing higher-level needs. The hierarchy includes five levels: physiological, safety, love/belonging, esteem, and self-actualization.	Apply Maslow’s Hierarchy of Needs to understand and address employees’ motivational needs and priorities. Use it to identify the underlying needs and desires that drive employee behavior and performance, tailor motivational strategies and incentives to address individuals’ needs at different levels of the hierarchy, and create a supportive work environment that fosters personal growth, fulfillment, and self-actualization. Implement Maslow’s hierarchy principles to enhance employee engagement, job satisfaction, and well-being in the workplace.
Herzberg’s Two-Factor Theory	Herzberg’s Two-Factor Theory distinguishes between motivator factors (such as recognition, achievement, and growth opportunities) and hygiene factors (such as pay, job security, and working conditions) in the workplace. The theory suggests that motivator factors contribute to job satisfaction and intrinsic motivation, while hygiene factors prevent dissatisfaction but do not necessarily lead to satisfaction or motivation. Herzberg’s theory emphasizes the importance of intrinsic factors in motivating employees and promoting job satisfaction and engagement.	Apply Herzberg’s Two-Factor Theory to understand and address factors that influence employee motivation and job satisfaction. Use it to identify motivator factors that enhance job satisfaction and intrinsic motivation, such as challenging work, recognition, and opportunities for growth and development, and hygiene factors that prevent dissatisfaction but do not necessarily lead to motivation, such as adequate pay and working conditions. Implement Herzberg’s theory to design job roles and environments that promote employee engagement, satisfaction, and performance.
Goal-Setting Theory	Goal-Setting Theory proposes that setting specific, challenging goals can enhance motivation and performance by directing attention, mobilizing effort, and providing a clear path for achievement. The theory suggests that individuals are more likely to exert effort and persist in the face of challenges when they have clear, achievable goals and receive feedback on their progress. Goal-setting theory emphasizes the importance of setting SMART goals (specific, measurable, achievable, relevant, and time-bound) and providing support and resources to facilitate goal attainment.	Apply Goal-Setting Theory to enhance motivation and performance in organizational settings. Use it to set clear, challenging goals that align with individual and organizational objectives, provide employees with autonomy and accountability to pursue their goals, and offer feedback and support to facilitate goal attainment and performance improvement. Implement goal-setting principles to foster a culture of achievement, continuous learning, and goal alignment in the workplace.
Social Learning Theory	Social Learning Theory suggests that individuals learn by observing others and modeling their behavior, attitudes, and beliefs. Social learning theory emphasizes the role of social interactions, role models, and vicarious learning experiences in shaping behavior and attitudes. According to the theory, individuals are motivated to emulate the behaviors of role models and peers who are perceived as competent, successful, and influential. Social learning theory highlights the importance of feedback, reinforcement, and social support in promoting learning and behavior change.	Apply Social Learning Theory to foster learning and development in the workplace. Use it to provide employees with opportunities to observe and learn from role models and peers, offer feedback and reinforcement to support skill development and performance improvement, and create a collaborative and supportive learning environment that encourages knowledge sharing, innovation, and continuous improvement. Implement social learning principles to enhance employee engagement, skill acquisition, and organizational effectiveness.
Equity Sensitivity	Equity Sensitivity refers to individual differences in how people perceive and respond to fairness and equity in social exchanges. Equity-sensitive individuals are highly attuned to fairness and equity concerns and are more likely to react strongly to perceived inequities or injustices in social relationships. Equity sensitivity influences how individuals interpret and respond to reward systems, performance evaluations, and resource allocations in the workplace.	Apply Equity Sensitivity to understand individual differences in motivation and response to fairness and equity in the workplace. Use it to assess employees’ sensitivity to perceived inequities and injustices in reward systems and organizational practices, tailor motivational strategies and policies to address individuals’ equity concerns and preferences, and promote a culture of fairness, transparency, and trust in organizational relationships and decision-making processes. Implement equity-sensitive practices to enhance employee engagement, satisfaction, and retention in diverse and inclusive work environments.
Attribution Theory	Attribution Theory examines how individuals attribute causes to their own behavior and the behavior of others. According to attribution theory, people tend to attribute behavior to either internal factors (such as personal traits or abilities) or external factors (such as situational or environmental factors). The theory suggests that individuals’ attributions influence their emotions, motivations, and behaviors, shaping how they interpret and respond to success, failure, and feedback in the workplace.	Apply Attribution Theory to understand and address the impact of attributions on motivation and performance in organizational settings. Use it to examine how individuals interpret and attribute success, failure, and performance outcomes to internal or external factors, identify factors that influence individuals’ attributions and perceptions of control, and provide feedback and support to promote adaptive attributions and motivation-enhancing beliefs and behaviors. Implement attribution theory principles to foster a growth mindset, resilience, and self-efficacy in the workplace.
Cognitive Dissonance Theory	Cognitive Dissonance Theory suggests that individuals experience psychological discomfort when their beliefs, attitudes, or behaviors are inconsistent or contradictory. Cognitive dissonance arises when individuals perceive a mismatch between their beliefs or values and their actions or experiences, leading to feelings of tension or discomfort. According to the theory, individuals are motivated to reduce cognitive dissonance by changing their beliefs, attitudes, or behaviors to restore consistency and harmony.	Apply Cognitive Dissonance Theory to understand and address inconsistencies and conflicts in beliefs, attitudes, and behaviors in the workplace. Use it to identify situations that may trigger cognitive dissonance, such as conflicting values or ethical dilemmas, provide opportunities for reflection and self-awareness to resolve cognitive dissonance and promote alignment between beliefs, attitudes, and behaviors, and foster a culture of integrity, ethical behavior, and psychological well-being in the workplace. Implement cognitive dissonance reduction strategies to enhance employee engagement, decision-making, and organizational effectiveness.