In the Lord’s Prayer, the first petition is for daily bread. No one can worship God or love his neighbor on an empty stomach.
Woodrow Wilson
Equity theory is a process theory that states that motivation comes from what you get for what you give with a twist: what the other one gets is much more and always exactly what you should get.
According to this theory, inequity is unpleasant and people will consume a lot of energy to reach a balance.
There a number of assumptions in Equity Theory that applies to business:
- Equity norm – an employee expects a fair return for its contribution to his job.
- Social comparison – an employee will define what is his equitable return in comparison with what his peers in the company or in other companies get.
- Cognitive distortion – the employee will perceptually distort his own inputs and outcomes or choose another benchmark.
- I am out of here – the employee will leave the relationship because the exchange is highly inequitable.
Inputs typically include:
- Effort
- Loyalty
- Hard Work
- Commitment
- Skill
- Ability
- Adaptability
- Flexibility
- Tolerance
- Determination
- Enthusiasm
- Trust in superiors
- Support of colleagues
- Personal sacrifice, etc
Outputs typically include:
- Financial rewards (salary, benefits, perks, etc.)
- Intangibles that typically include:
- Recognition
- Reputation
- Responsibility
- Sense of Achievement
- Praise
- Stimulus
- Sense of Advancement/Growth
- Job Security
The problem that any manager has is that his employees will think they are underpaid as soon as they have a benchmark. He has no control over what the employee will decide that are relevant inputs, results, or peers. But he can control his message because it is directly linked to employee morale, efficiency, productivity, and turnover rate.
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