Equity Theory

What is Equity Theory in organizational behavior?

According to Equity Theory, employees are driven by the outcomes of work. They compare the inputs and outputs at work and that fundamentally is the driving factor to staying motivated at work. Employees seek an equal and fair ratio between what they put into their work and what they get out of it.

What is an example of an Equity Theory?

Equity Theory is based on the idea that individuals are driven by fairness. An example for this could be when an employee sees that his peer is getting more benefits even when they do the same amount of work, and thus the employee might work less to create an illusion of equality.

Why should I apply Equity Theory?

Equity theory is an important philosophy that drives the employees and thus it becomes crucial for managers to pay attention to how it guides as well as misguides the employees. They should apply it to understand their employees better and thus be better able to guide them. A manager can ensure the following:

• A fair balance among the team.
• Offer fair compensation to all.
• Understand what your team needs and values.

What are the key components of Equity Theory?

Inputs include:

• Effort.
• Commitment.
• Skill.
• Hard work.
• Ability.
• Personal sacrifice.
• Loyalty.

Outputs include:

• Financial rewards such as salary and benefits.
• Recognition.
• Praise.
• Stimulus.
• Career Progression.
• Sense of advancement/growth.
• Job security.

How do you use Equity Theory?

For managers, Equity theory can be advantageous as it can help them measure the extent of employee satisfaction at the workplace. It can help you keep a balance between how much they put in (inputs), and what they receive from your business in return (outputs).