Group Members:WASI HAIDER 13-ARID-1225ZOHAIB KHAN 13-ARID-1229

BSIT-4A

EQUITY THEORY(Developed in 1963 by John Adams)

“Equity theory is a theory that attempts to explain relational satisfaction in terms of perceptions of fair/unfair distributions of

resources within interpersonal relationships.”

EQUITY EQUATIONS

1. Equity2. Underpayment equity (Negative)3. Overpayment equity (Positive)

Inputs: (What a worker contributes to a job)

Efforts, loyalty, hard work, skills,ability,detrtmination etc,

Outcomes:(What a worker gets from a job)

Salary, bonus, recognition, reputation, security etc.

EQUITY EQUATIONS

For Example PersonA PersonB I/O < I/O (Underpay) 5/10 10/10 (Inequity)

I/O = I/O (Equity) 10/10 = 10/10

I/O > I/O (Overpay) 10/10 5/10 (Inequity)

BALANCING THE SCALESWorkers can change their inputsWorkers can change their outcomesWorkers can try to change others

outcomes and inputsWorkers can change their perceptionsWorkers can change their reference

personWorkers can change jobs

Assumptions of equity theoryEmployees expect a fair return for what they

contribute to their jobs, a concept referred to as the "equity norm".

Employees determine what their equitable return should be after comparing their inputs and outcomes with those of their coworkers. This concept is referred to as "social comparison".

IMPLICATIONS OF EQUITY THEORYAvoid underpaymentAvoid overpaymentBe sensitive to inequity perceptionsMonitor regularly for creeping inequityWhen sacrifices are needed distribute

equally from top to bottom

How to reduce Inequity:Behavioral Opinion: Changing Individuals inputs/outcomes. Persuading others to change inputs.Cognitive Opinion: Distort perceptions of inputs/outcomes. Change the other comparison.

Equity Theory Applications 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. In general, highly-paid and rewarded employees tend to be the most motivated to continue performing well on the job.

Advantages In Workplace:AchievementEmployee RetentionAttracting TalentBreadth by DiversityEnhanced Bottom LineMotivate the employees

ConclusionAdam’s stated that if an employee believes

that their work outputs are not equal or greater than their inputs then the employee will become de-motivated. Adams’ theory includes the assertion that when an employee is assessing whether the outputs they receive are fair the employee will often compare their colleague’s work inputs and outputs with their own. The comparison will often be made with an employee at a similar level in the organization to the employee.