Equity Theory

1. EQUITY THEORY
JOHN STACEY ADAMS
Prepared by: AC 220 8D
SITI KHADIJAH BINTI ZAILAN(2012248034)
NURFARAH AMALINA BINTI ABDUL AZIZ(2012494562)
ANIS SYAFIQAH BINTI ROSLAN(2012459002)
NUR ATHIRAH BINTI TUAN YAACOB(2012203764)

3. HISTORY
1963 – John
Stacey
Adams
Idea that
fairness and
equity are
key
components
of a
motivated
individual
The higher
an
individual's
perception of
equity, the
more
motivated
they will be
If someone
perceives an
unfair
environment,
they will be
demotivated

4. DEFINITION
Concept that people derive job satisfaction and motivation by
comparing their efforts (inputs) and income (outputs) with those
of the other people in the same or other firms.
Outputs
What the worker gets from a job
Salary, bonus, recognition,
reputation, job security, etc.
Inputs
What a worker contributes to a job
Effort, loyalty, hard work, skill,
ability, determination, etc.

5. PROPOSITIONS
Individuals develop their perception of fairness by
calculating a ratio of their inputs and outcomes and then
comparing this to the ratio of others.
• An individual may not perceive he is being treated
fairly when he works 40 hours per week and receives
RM500 in pay, while his co-worker works 30 hours
per week and receives RM650 in pay.
If the comparative ratios are perceived by the individual to
be unequal, then inequity exists.
• Inequity exists when there is a perceived difference
in the ratios of inputs and outcomes.
• Underpayment inequity and overpayment inequity

6. As the difference in inequity increases, the tension and
distress felt by an individual will increase.
• Smaller differences of inequity are more tolerable
than significant differences of inequity.
The greater tension an individual feels due to perceived
inequity, the harder they will work to decrease their tension
and increase perceived levels of equity
• Examples include decreasing productivity at
work, finding a new job, asking for a wage
increase, or attempting to justify changes in their
perceptions of inputs or outcomes

7. APPLICATION
OF
EQUITY THEORY

8. APPLICATION OF ET
Employees will compare their input and output with
their coworkers input and output to measure their
performance and will compromise if it is different.
Equity theory can be measured by:
Individual’s outcomes
Individual’s own inputs
Rational partner’s
outcomes
Rational partner’s inputs

9. APPLICATION OF ET
Condition Person Referent Example
Equity Outcomes =
Outcomes
Inputs Input
Employee input and
output equal with the
referent.
Underpayment Equity Outcomes <
Outcomes
Inputs Input
Employee input is
more than the referent
but get same output as
referent.
Overpayment Equity Outcomes >
Outcomes
Inputs Input
Employee input is
same as referent but
get more outcome than
the referent.

10. RESEARCH ON EQUITY
A study published in
1967, Effects of
Inequity Produced by
Underpayment on
Work Output, Work
Quality, and Attitudes
Towards the Work
Lawler & O'Gara
found that equity
theory was indeed
supported in that those
who received less pay
than their peers doing
the same job found
ways to "increase their
outcomes while
decreasing their
inputs”.

11. APPLICATION OF ET IN WORKPLACE
Distributive justice
Involves ensuring
that outcomes are
fairly distributed in
the organization.
Two levels :
o Low level
o Increase level
Procedural justice
Deals with whether or
not the process used
to allocate the
rewards is fair.
Examples:
o Giving employees a voice
in the decision-making
process
o Making unbiased
decisions

12. GLOBAL APPLICATION OF ET
Equity
Individual outcomes or
rewards will be in
proportion to individual
inputs and efforts.
Equality
Rewards are equally
given out to all
participants despite
individual inputs.

13. GLOBAL APPLICATION OF ET
Inputs Outcomes Choice of a
referent
Individualism
(Western)
Effort,
education,
intelligence,
experience
Pay, autonomy,
job
status, fringe
benefits
Range of
individuals
due to loosely
tied in-groups
Collectivism
(Eastern)
Group
membership,
loyalty, support,
respect
Harmony,
acceptance,
social
status,
solidarity,
cohesion
May choose out-groups
as a group
referent, not an
individual

14. ASSUMPTIONS
OF
EQUITY THEORY

15. ASSUMPTIONS OF EQUITY THEORY
Equity
norm
Social
comparison
Cognitive
distortion

16. IMPLICATION
OF
EQUITY THEORY

17. MANAGER
Different employees
ascribe personal
values to inputs and
outcomes
People measure the
totals of their inputs
and outcomes
Employees are able
to adjust for
purchasing power
and local market
conditions
Staff perceptions of
inputs and outcomes
may be incorrect
Employee who
believes he is
overcompensated
may increase his
effort

18. HOW TO REDUCE
INEQUITY

19. HOW TO REDUCE INEQUITY
• Changing individual
inputs/outcomes
• Persuading others to change
inputs
• Withdrawal
Behavioral
option
• Distort perceptions of
inputs/outcomes
• Distort the inputs/outcomes of
others
• Change the other comparison
Cognitive
option

20. EQUITY
SENSITIVITY
Determines the extent to which an
individual will tolerate inequality.

21. EQUITY SENSITIVITY- CATEGORIES
• Employees as givers and more tolerant of
under reward inequality
Benevolent
• Experience tension with inequality and will
seek to restore a balance of equity in their
relationships
Equity
Sensitive
• Individual who frequently have an attitude
that they are great and thus are entitled to
great outcomes
Entitled

22. CRITICISM TO
EQUITY THEORY
Directed towards both the assumptions and
practical application of equity theory

23. EQUITY THEORY
Criticisms A number of demographic and psychological
variables affect people’s perception of fairness
and interactions with others
People might perceive equity/ inequity not
only in terms of the specific inputs and
outcomes of a relationship, but also in terms
of the system that determines those inputs
and outputs
Not everyone will perceive the compensation
system as unfair even they are in the same
situation

24. CONCLUSION
People are
motivated to
reduce perceived
inequalities
To provide the
proper support for
employees that
may feel inequality

25. THE END
THANK YOU