Occupational psychologist John Stacy Adams was a key thinker of his day. He put forward his equity theory in 1963, during a watershed period for our understanding of organisational and employee behaviour.
In essence, Adams’ equity theory is about perceptions of fairness, something that every leader needs to regulate in order to maintain a functional business environment.
The concept of “a fair day’s work for a fair day’s pay” is well known. Equity theory tries to explore this in greater depth by illustrating that most workers have a keen (if sometimes inaccurate) perception of what they are asked to give, and what they are given in return.
Adams illustrates this with a pair of scales, where one bucket is for the worker’s ‘inputs’ and the other for the ‘outputs’ they receive in return. The premise is that fairness, what we might now call ‘natural justice’, demands that the scales are reasonably balanced. Adams further suggests that an imbalance, increasing the inputs required beyond the point of reasonable balance, causes the worker to feel exploited and aggrieved.
The result of a ‘negative equity’ is usually the worker seeking to redress the balance, either by seeking more output rewards, or reducing the value or volume of their inputs.
Tipping the scales the other way, to increase reward ‘outputs’ beyond reasonable limits, results in guilt or shame (unless the employee works for some merchant banks or stockbrokers, where this rule doesn’t seem to apply).
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Equity theory today
Crucially, this perception of balance is not absolute, but relative to the worker’s environment and peer group. Research suggests that it is not whether the balance or level of reward is actually reasonable, more that there is a balance with others in a comparable situation. Thus, a worker may feel aggrieved and reduce their inputs if they perceive others doing a job that they see as being of equal value to their own, yet being rewarded to a higher level.
These inputs and outputs are no longer simply ‘work’ and ‘pay’. In our increasingly complex working world, inputs may be skills, personal sacrifices, lifestyle choices, work-life balance and expertise, while outputs may include status, satisfaction, recognition, interest, development or opportunities for advancement.
The key reflection question here is this: are you creating an ‘equity’ for your people? Do they realise and value the full range of ‘outputs’ they are receiving? Can you add things to the output bucket that will increase the commitment, engagement and motivation of your people in way you can afford and sustain?
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