- 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.
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 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 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.