Equity Theory

This theory is formulated by J. Stacy Adams. According to him, people compare the rewards of their performance with the rewards their fellow workers get for similar performance .Rewards are the outcomes of a person’s performance and performance is the input of a person by virtue of his knowledge, skill, ability, education and competence. After comparing rewards in relation to his imputes with those of theirs, they judge the fairness of the rewards receive.

The relationship between inputs and outcomes of one person and inputs and outcomes of another person is mathematically expressed as follows:

                           Outcomes                                        Outcomes
                         ___________              ?                 ___________
                          Inputs put in                                   Inputs put in
                          by a person                                    another person


Three situations can be perceived by an individual:

(a)    The rewards he receives as result of his imputes may be equal to the rewards that another person receives for his imputes (L.H.S=R.H.S.) This is a situation of equitable reward and people feel satisfied in such situations and continue to work according to present standards.

(b)    The reward he gets is less than what other person gets for similar performance. (L.H.S< R.H.S.). This is a situation of inequitable reward. It dissatisfies the employee, demodulated him to work and he may sewer his performance level. He may even change the behaviour of his fellow workers to restore equity in rewards. In extreme situation, he may even quit the organization.

(c)    The reward that the person gets for his inputs is more than (L.H.S>R.H.S.) what others are getting for the same input. Either the worker works hard to overcome the felling of being paid more than his co-workers for the  same performance or in some situations, he may even discount the rewards.

Managers must be careful while rewarding similar performance of different workers because inequitable rewards can lead to dissatisfaction and frustration amongst those who are not equitably rewarded. This may lead to sub-optimal attainment of organizational goals.

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