EQUITY THEORY

2.  This theory simply means that all the workers
in the organization should be treated equally,
then only they will be motivated& thereby
work efficiently & effectively for attaining
organizational goals.

3.  People develop beliefs about what is a fair
reward for one’ job contribution - an exchange
 People compare their exchanges with their
employer to exchanges with others-insiders
and outsiders called referents
 If an employee believes his treatment is
inequitable, compared to others, he or she will
be motivated to do something about it -- that is,
seek justice.

4. Is versus Ir
Os Or
I = Inputs - employee’s contribution to
employer
R = Referent - comparison person
O = Outcomes – employers’ reward to employees

6.  Case 1: Equity -- pay allocation is perceived
to be to be fair - motivation is sustained
 Case 2: Inequity -- Underpayment.
Employee is motivated to seek justice. Work
motivation is disrupted.
 Case 3: Inequity - Overpayment. Could be
problem. Inefficient. In other words,
employees lose their working mentality.

7.  The employee is motivated to have an
equitable exchange with the employer.
 To reduce inequity, employee may…
 Reduce inputs (reduce effort)
 Try to influence manager to increase outcomes
(complain, file grievance, etc.)
 Try to influence co-workers’ inputs (criticize
others outcomes or inputs)
 Withdraw emotionally - or physically (engage in
absenteeism, tardiness, or quit)

8.  Develop tools to pay people in proportion to
their contributions
 Let employees know who their pay referents
are in the pay system: identify pay competitors
and internal pay comparators.
 Strive for consistent pay allocations
 Monitor internal pay structure and position in
the labor market for consistency.