Equity Theory

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J. Stacy Adams, Equity Theory [1963]

Equity Theory, as the name implies, is predicated on the assumption that people want to be treated fairly, particularly when compared to how others around them are treated.  It also purports that such comparisons will be made frequently.

In the context of employment, equity theory asserts that employees will compare their inputs (everything they bring to the job and invest in the job) and outputs (how they are rewarded – both intrinsically and extrinsically – for what they invest in the job) to others’ inputs and outputs.  If employees come away from this process with the feeling as though they are being treated fairly in comparison to others, they will continue to put forth effort.  Conversely, employees who come away from this process with the belief that they are being treated unfairly will seek to make a change. That change might include trying to change their own inputs, trying to change their own outputs, or trying to change the inputs or outputs of others.  Any of these options could manifest themselves in either productive or unproductive ways.  And, of course, that same employee could quit – the most dramatic way that an employee can change inputs.

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