Equity Theory and Performance

The success of an organization is largely based on the people whom they employ. Successful organizations have bright and skilled people who are motivated to be productive. Motivation is however subjective. It is based on individuals’ perceptions. If an employee perceives an unfair situation, how does that affect their motivation, and in turn, their performance? A closer look at the concept of Equity Theory may point us in the direction of an explanation of how an employee’s perception, affects their behavior in work organizations.

Equity theory is a concept in Industrial/Organizational Psychology that focuses on an individual’s perceptions of how equitably they are being treated in their work organization. The theory is based on the idea that people are motivated by the ratio of inputs and outputs they receive in comparison to others. (Muchinsky & Culbertson, 2015) In order to understand equity theory, there must be an understanding of its different components. First, there are inputs.  Inputs are considered the things an individual puts into their job. Inputs include time, effort, commitment, and a host of other variables. Next, we have outputs. Outputs, or outcomes, are the things that an individual gets out of their jobs. Outputs can include benefits, pay, bonuses, praise, and a host of other variables. Finally, we come to the comparison other. The comparison other is a person or a standard that an employee chooses with which to compare their input/output ratio. (Muchinsky & Culbertson, 2015) One key concept to remember regarding equity theory is that it is based on perception. That is, equity theory is based on inequity from the employee’s perspective, and in many cases, the inequity is not real.

Equity theory states that employees need a sense of equity in the workplace in order to maintain psychological balance. (Adams, 1965). When that sense of equity is lacking, dissonance arises within the employee. In an effort to quell the dissonance, the employee will either change their cognitions on their inputs or outputs, act to alter their inputs or outputs, or leave the situation altogether. The method chosen by the employee will be based on that particular employee’s evaluation of what actions might bring about what outcomes, which is also related to expectancy theory. Some employees simply attempt to reduce dissonance by thinking differently rather than by changing behavior. (Greenberg, 1989) An employee who feels they are being underpaid compared to their comparison other may tell themselves, “He/She has a master’s degree and I only have a bachelor’s degree, so he/she deserves to make more money than I do”. In this situation, the employee is able to fight dissonance, by creating a rationale about why the perceived inequity is fair. Other employees may make changes to their behavior. An employee who feels they are being treated inequitably may become absent more, steal from their organization, or may not give the same effort they were giving before. They are able to decrease dissonance by reducing their inputs to a level they perceive to be in line with the outputs they are receiving. This brings equity back into balance in the perception of the employee. Finally, an employee may just decide to leave the job, and seek a more equitable situation. While these are all possible outcomes, individual differences play a role in which method an employee will take to reduce feelings in inequity.

I recently had an experience with inequity in my work organization. In order to deal with the dissonance that I was feeling, I began to arrive at work late, and leave from work early. At first, this did ease the dissonance I was feeling. Eventually, the feeling of inequity began to come back as I began to recognize more and more inequitable things happening, from my perception. At that point, I began to look for other employment opportunities. Following the ideas from equity theory, I attempted to change my inputs in an effort to decrease the inequity I was feeling. After a while, I realized that wasn’t working, and I found another job.

How employees feel in an organization, goes a long way in their motivation to perform their jobs well. Perception of inequity, whether real or not, can have a detrimental impact on the operation of an organization. Employees who perceive inequitable treatment, find ways to decrease those perceptions, many times at the detriment of the organization. Things like missing work, stealing, and slacking, can all cost the organization time and resources. This makes it important to understand the concepts that makeup equity theory, and put mechanisms in place to create the perception of more equitable environments.





Adams, J. S. (1965). Inequity in social exchange, In L. Berkowitz (Ed.), Advances in experimental and social psychology (pp. 276-299). New York: Academic Press.

Greenberg, J. (1989). Cognitive re-evaluation of outcomes in response to underpayment inequity. Academy of Management Journal, 32, 174-184.

Muchinsky, P. M., & Culbertson, S. S. (2016). Psychology applied to work®: An introduction to industrial and organizational psychology (11th ed.). Summerfield: Hypergraphic Press.

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