Achievement Theories

Equity Theory

This theory explains the motivation of the employees of a company. The theory of equity was originated in the 1960s, following the research and experiments carried out by psychologist John Stacey Adams.

The basis of this theory states that every employee in the workplace will compare their situation (workload, salary, benefits, etc.) with other personnel within or outside the workplace. Such a comparison can result in unfairness that will push the employee towards taking action for restoring balance. The search for "justice" therefore is an essential element for individual motivation (Effraty and Sirgy, 2000).

The equity ratio: a means of comparison. Every employee creates an equity ratio by relating remuneration for their work with the effort invested. Remuneration comprises of salary along with all the benefits from which the employee benefits (working conditions, recognition, etc.).

As per Adams, the equity ratio for every employee is calculated as follows:

                   Equity Ratio = Remuneration / Contribution

This calculation is not based over concrete variables: the company employee gives, in accordance with his personal opinion, a value to every element of contribution and remuneration. This ratio will make sense when it is compared to those of other employees. This comparison derives three feelings:

·         Feeling of fairness if the ratios are identical,

·         Feeling of under-equity when the staff ratio is lower,

·         Feeling of over-fairness if this ratio is higher.

A company employee may develop a feeling of under-equity within the company (feeling of being underpaid than other colleagues for equivalent efforts) as well as of over-equity with regard to external situations (feeling of certainly being treated less than those of other colleagues, however, this situation might not improve with another employer) (Elias and Yaakub, 2009).

Under-equity leads to action

The feeling of fairness will create satisfaction: establishment of status quo, irrespective of the pay scale level. On the other hand, inequity, and specifically under-equity, is a source of strain. It results in a change within employee behavior, with the objective of restoring justice:

·         Search for increased income: request for increases, bonuses or additional benefits,

·         Action over employee with higher ratio: non-transmission of information, non-cooperation, "sabotage" of work.

·         Demotivation: limitation of efforts and absenteeism

The feeling of under-fairness can be collective and concern, within your company, a service as a whole (example: “salespeople are better treated than marketing in banks”).

Over-equity also leads to action: employees generally tend to increase their contributions. They can also alleviate those of others by helping them.

Critics of the theory states that the theory supports the notion that the motivation level of the employees tends to always reduce when the input and output ratios are compared with others. For example, in a bank, when employees are given their performance appraisal outcomes, some may rank higher on the basis of their performance whereas, some may not be that highly ranked despite of many efforts. Those who are ranked highly are rewarded whereas those who do not remain stagnant in their positions. Equity theory relates with this situation and Feight, Ferguson, Rodriguez, & Simmons (2006) indicates that this aspect is certainly demotivating in any circumstances.

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