What is equity theory?

Equity theory is a concept belonging to John S. Adams, a behavioural psychologist. The theory helps explain why your employees’ motivation levels can go up and down at work.

As we’ve talked about many times here at BrightHR, your business needs motivated staff to operate at its full capacity. Otherwise, the standard of work and services that your staff produce will drop. Then, you risk losing customers. And after that, you lose revenue.

So let's explore the equity theory...

A definition of equity theory

Adams devised his equity theory on the basis that when your employee feels like you’re treating them in an advantageous way, they’re more likely to be motivated to work hard. Their morale is high and they’re full of energy.

And on the flip side, when one of your employees feels like you’re treating them unfairly, they’re more prone to demotivation because they don’t feel satisfied.

It's important to note: An employee’s feeling of unfair treatment doesn’t have to be because of something you have done to them—it can be because of how they compare their current situation to someone in a similar situation to them.

Here, we’ll explain further.

Applying equity theory in the workplace

Equity theory can be a model for measuring how satisfied an employee is in their job.

According to John S. Adams, your staff try to keep a balance between how much they give to you (inputs), and what they receive from your business in return (outputs).

But, what an employee thinks of their current input-output balance can change day-to-day if they think one of their colleagues currently has a better balance between what they give and what they get back.

In the theory, Adams labelled the colleagues as “referents”. The referents are anybody your employee feels they are in a similar situation to—for example, if two people have the same job title and duties.

An employee’s inputs

Put in plain English, this refers to what one of your staff “puts in” to their job. What they give to you—their employer.

• Time

• Effort

• Commitment

• Personal sacrifice

• Skill

• Enthusiasm

• Loyalty

• Trust in their workplace superiors—management

An employee’s outputs

This is what they get in return for all of their inputs.

• Salary or wage

• Job security

• Pension auto-enrolment

• Benefits

• Praise

• Responsibility

• Stimuli

• A sense of achievement

Depending on what’s in someone’s contract, their company benefits could include things like a company phone or laptop, company car, travel expenses, childcare vouchers, private healthcare enrolment, retail benefits, flexible working, pension, and more.

So, these are the inputs and the outputs. And we know that the referent is an employee in a similar or identical role.

An employee’s response to inequity at work

Your staff will typically value their salary above the other outputs. And so, salary concerns count for many examples of inequity among employees everywhere.

If one of your team feels like their contributions, time, and effort are not earning the rewards they should be—especially when they think that colleague X, who earns a higher salary despite doing a similar job, does less work—you can expect a reaction.

Your employee might begin to perform their work at a lower level. They might become unfriendly, even hostile, towards their co-workers or your management team.

They might start looking for other jobs.

Remember, your staff can experience a feeling of inequity without you changing their terms or their working conditions, and without you changing how you interact with them—if they think you’re treating their colleagues better than them.

What can you do to stop demotivation in your workplace?

Reviews

First, make sure all of your staff know how often you will perform salary reviews. The most common instances are:

• Yearly performance and salary reviews

• A review upon completing the probation period

• A review upon achieving a promotion

Make sure you send your employee a calendar invite for any review meetings well in advance—this will show them that you’re thinking about their performance.

It could also help your staff to regain any lost motivation. If they have a review date coming up, they know they need to impress you with their work and attitude.

Open door policy

Second, have an open door policy.

It should be common knowledge that if one of your staff has a problem, they can come and speak to you—but of course, this doesn’t mean you’ll automatically solve their problem. Otherwise, you’d have a queue of employees all ready to demand pay increases.

Use an employee assistance programme

With an employee assistance programme (EAP), your staff have access to confidential, round-the-clock support from trained professionals.

When your people feel at their best, they perform better and they take fewer sick days.

And we all know that a healthier and more successful workplace is a happier workplace.

Need help?

In most workplaces, the term “equity theory” doesn’t even get a mention. But it's in play—everywhere.

All BrightHR customers can get free employment law advice from our experts—we call them the BrightAdvice team. They can help you if you're unsure about equity theory or any other employment law topic.