What does the equity theory explain?

Equity theory is a theory of motivation that suggests that employee motivation at work is driven largely by their sense of fairness. Employees create a mental ledger of the inputs and outcomes of their job and then use this ledger to compare the ratio of their inputs and outputs to others.

What is the equity theory in social psychology?

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.

What is the equity theory discuss equity theory applications?

Definition: Equity theory, popularly known as Adam’s equity theory, aims to strike a balance between an employee’s input and output in a workplace. If the employee is able to find his or her right balance it would lead to a more productive relationship with the management.

How would you apply the equity theory in a performance appraisal?

Applying this theory when conducting a company’s performance appraisals involves balancing the assessment of an employee’s contribution to his job with the compensation and other rewards associated with his success.

Why is equity theory important?

Equity theory explains how employees determine what is fair and how they act upon their perceptions. As a result, employee perceptions about fairness do matter–whether they are real or misguided. For managers it is better to effectively address these concerns than ignore them.

Why is equity theory important in compensation?

Equity theory has several implications for business managers: People measure the totals of their inputs and outcomes. This means a working mother may accept lower monetary compensation in return for more flexible working hours. Different employees ascribe personal values to inputs and outcomes.

Who proposed Equity Theory?

Adams’ Equity Theory is named for John Stacey Adams, a workplace and behavioral psychologist, who developed his job motivation theory in 1963.