The term equity refers to the system of justice and fairness, where there is an evenhanded treatment of all the people. The fairness of exchange between employees and employer is. Equity sensitive individuals represent the tra ditional equity theory model, and thus, require little description. Adams equity theory, which stresses the importance of striking a balance between employee inputs and outputs. A funny way to understand equity theory is through the video below. Adams 1965 developed a theory on motivation to attempt to explain behavior influenced by the norm of equity lane, irving m. Equity theory definition, meaning, examples, advantages. Equity theory, popularly known as adams equity theory, aims to strike a balance between an employees input and output in a workplace. Inputs include all the rich and diverse elements that employees believe they bring or contribute to the job.
Equity is the net amount of funds invested in a business by its owners, plus any retained earnings. Equity, or more precisely, inequity is a major concern of industry, labor, and government. This sentiment may have started with the beatles song, but chances are youve heard it dozens of times and used for different meanings. Experimental equity research has centered largely on three topical areas the existence of individuals equity perceptions, how individuals attempt to resolve perceptions of in. If other workers have the same job title but do less work and get paid more than x, x will not be happy. The equity theory of motivation how to keep your team. Research conducted to test equity theory is summarized.
Definition of equity theory equity theory is a concept where people want the ratio of their outcomes to be nearly equivalent to the ratio of a referent person or a group. Equity represents a claim on the companys assets and earnings. It explores the perceptions of humans regarding their inputs in the relationship and the outcomes they get. Stockholders equity is the portion of the balance sheet that represents the capital received from investors in exchange for stock paidin capital, donated capital and retained earnings. As an example of equity theory, if an employee learns that a peer doing. Equity theory is a concept of human relations based on utility, or the amount of happiness and satisfaction one gets out of any given relationship. Inputs can include abilities, effort, performance, age, seniority, education, and other attributes. Equity sensi tives are most content when their outcomeinput. Top 5 motivation theories free ebook in pdf format. In its basic form, the equity theory of motivation implies that each individual is motivated by the concept of fairness. Process theories of motivation equity theory business essay. As per this motivation theory, an individuals motivation level is correlated to his perception of equity, fairness and justice practiced by the management. Relationship partners will try to balance their own costbenefit ratios to avoid getting a raw deal in the relationship as well as to avoid shortchanging. If the employee perceives inequality, he or she he will act to correct the inequity.
The listening passage gives examples of equity theory. It can be used in personal life, government or business. Read this article to learn about the equity theory of motivation and its evaluation. According to equity theory, it is the perception of equitability and inequitability. Difference between equity and equality with comparison. In other words, an employee gets demotivated by the job and his employer in case his. If an imaginary employee, x, has the same job title, does the same work, has the same office and gets the same salary as other workers, he is happy. The utility of equity theory in enhancing organizational. Ways in which equity theory interlocks with other major social psychological theories are discussed. Equity theory is used in parlance of human resource management.
The studies either are representative of several studies within an area, or are unique empirical efforts. Handys motivation theory has three important factors needs, expectation and results that when combined together will determine the amount of motivation an individual has when completing a task. In the video, sheldon is almost obsessed with the present that was given to him. This paper describes a new construct, equity sensitivity, and proposes that reactions to. The case for promoting equity in developing countries 19 4. It is part of a broader set of social exchange theories.
Developed by the behavioral and workplace psychologist, john stacy adams, equity theory of motivation is one of the justice theories explaining the correlation between input and outcome of performance of employee at a job with hisher perception of equitable or inequitable behavior from the employers. Higher is individuals perception of fairness, greater is the motivation level and vice versa. The annotations for research papers describe the essential contents. Adams equity theory is based on a ratio consisting of inputs to outcomes. Equity planning is a framework in which urban planners working within government use their research, analytical, and organizing skills to influence opinion, mobilize underrepresented constituencies, and advance and perhaps implement policies and programs that redistribute public and private resources to the poor and working class. It is also calculated as the difference between the total of all recorded assets and liabilities on an entitys balance sheet.
Equity theory of motivation management study guide. Equity theory is based in the idea that individuals are motivated by fairness, and if they identify inequities in the input or output ratios of themselves and their referent group, they will seek to adjust their input to reach their perceived equity. In simple terms, equity theory states that if an individual identifies an inequity between themselves and a peer, they will adjust the work they do to make the situation fair in their eyes. Considered one of the justice theories, equity theory was first developed in the 1960s by j. Higher is individuals perception of fairness, greater is. According to carrell and dittrich 1978, employees who perceive inequity will seek to reduce it, either by distorting inputs andor outcomes in. It the ratio is not equal, then emotional responses will occur that will result in the restoration of equity by itself. Equity theory based strategies for students on overcoming. If ratios are not equal, and the difference is beyond some individual threshold level, emotional responses occur and the desire to restore equity manifests. Equity theory focuses on determining whether the distribution of resources is fair to both relational partners.
The theory helps explain why your employees motivation levels can go up and down at work. Stacey adams formulation of the theory which is most highly developed and researched statement on the topic. Equity theory proposes that a persons motivation is based on what he or she considers to be fair when compared to others redmond, 2010. The dictionary meaning of the word equity is the quality of being fair and impartial. If there are unequal levels of input or output, either internally or within an observed group, then adjustments are made to create more fairness. The relevance of scientific management and equity theory.
According to the theory, employee motivation is the. Equity is measured by comparing the ratio of contributions or costs and benefits or rewards for each person. Plain and simple, equity is a share in the ownership of a company. Equity theory is based on the idea that individuals are motivated by fairness.
Equity theory has received more attention lately from human resource professionals especially regarding the fairness of outcomes. In 1963, john stacey adams introduced the idea that fairness and equity are key components of a motivated individual. This theory of motivation states that positive outcomes and high levels of motivation can be expected only when employees perceive their treatment to be fair. Whether you say shares, equity, it all means the same thing. Adams equity theory leadership skills training from. An employee compares his or her jobs inputs with an outcomes ratio. An analyst routinely compares the amount of equity to the debt stated on a balance sheet to see if a business is properly capitalized. The odds of finding an undervalued stock would always be 50. John stacey adamss equity theory has been a part of classical management literature since 1963. This is what we as human beings strive to achieve in our relationships, either knowingly or subconsciously. Equity theory states that humans have a natural tendency to maintain equity in their social relationships. Equity theory states that a persons motivation is based on what they believe is fair or not fair compared to others pennsylvania state university, 2016.
Stacy adams, a workplace and behavioral psychologist, who. It is centered around a costbenefit analysis of any given relationship. Briefly, they subscribe to the norm of equity and feel distress when either overrewarded or underrewarded. As weve talked about many times here at brighthr, your business needs motivated staff to operate at its full capacity. Equity theory proposes that peoples motivation, performance and satisfaction depend on their subjective evaluation of the relationships between their effortreward ratio and the effort reward of others in similar situations.
An attribute is only considered an input if it is perceived as relevant by the individual. When applied to the workplace, equity theory focuses on an employees workcompensation relationship or exchange relationship as well as that employees attempt to minimize any sense of unfairness that might. The equity theory of motivation describes the relationship between the employees perception of how fairly is he being treated and how hard he is motivated to work. What is motivating today is unlikely remain so in the future. Adams asserted that when people feel distress from inequity they may react in one or all of the following ways. The utility of equity theory in enhancing organizational effectiveness introduction what motivates people to work. The entity theory is based on the idea that all of a. First, they may restrict their inputs to a level they believe is consistent with the outcomes they receive. Available formats pdf please select a format to send. Equity financing and debt financing relevant to pbe paper ii management accounting and finance dr. Aristotle on equity, law, and justice legal theory.
Equity theory was introduced in the study of organizational settings to examine justice in the workplace environment adams, 1963, but was soon formulated as a general theory of interpersonal relationships walster et al. Equity is a sense of fairness in the exchange of goods, services, time, and effort. The equity theory owes its origin to several prominent theorists. Equity and equality iza institute of labor economics. Introduction to equity theory first developed in 1963 by john stacey adams employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the perceived inputs and outcomes of others. Information and translations of equity theory in the most comprehensive dictionary definitions resource on the web. Emotional intelligence refers to the capability of a person to manage and control his or her emotions and possess the ability to control the emotions of others as well. Fong chun cheong, steve, school of business, macao polytechnic institute company financing is a prior concern for operating any business, and financing is arranged before any business plans are made. This paper proposes equity theory as a guiding aid in ph. The entity theory is a basic assumption that all economic activity conducted by a business is separate from that of its owners.
To further illustrate equity theory considerations, a. It has been accepted for inclusion in scripps senior theses by an authorized administrator of scholarship. At best, the benefits from information collection and equity research would cover the costs of doing the research. The adams equity theory posits that people maintain a fair relationship between the performance and rewards in comparison to others. Equity theory posits that when it comes to relationships, two concerns stand out. Equity theory proposes that individuals who perceive themselves as either underrewarded or overrewarded will experience distress, and that this distress leads to efforts to restore equity. Equity theory of motivation examples explained hrf. Equity theory definition equity theory states that people desire the ratio of their outcomes and investments to be roughly equivalent to the ratio for some other referent person or group. Equity theory criticisms a number of demographic and psychological variables affect peoples perception of fairness and interactions with others people might perceive equity inequity not only in terms of the specific inputs and outcomes of a relationship, but also in terms of the system that determines those inputs and outputs not everyone. As you acquire more equity, your ownership stake in the company becomes greater. The equity theory of relationships is based on a theory developed by workplace and behavioral psychologist john stacey adams.
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