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    Theoretical Framework Equity Theory

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    Guste Sulit Riza
    Equity theory recognizes that individuals consider both the absolute amount of rewards they receive for their efforts as well as how those rewards compare to what others receive. The theory was developed by J.S. Adams and holds that people develop beliefs about fair compensation based on their job inputs like education, experience, and effort. When people perceive their treatment and compensation as inequitable compared to others, they will be motivated to take corrective action. Equity theory states that employees will be better motivated if treated equitably and demotivated if treated inequitably. Inputs refer to job performance while outputs refer to compensation strategies.

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    Theoretical Framework Equity Theory

    Uploaded by

    Guste Sulit Riza
    92 views3 pages
    Equity theory recognizes that individuals consider both the absolute amount of rewards they receive for their efforts as well as how those rewards compare to what others receive. The theory was developed by J.S. Adams and holds that people develop beliefs about fair compensation based on their job inputs like education, experience, and effort. When people perceive their treatment and compensation as inequitable compared to others, they will be motivated to take corrective action. Equity theory states that employees will be better motivated if treated equitably and demotivated if treated inequitably. Inputs refer to job performance while outputs refer to compensation strategies.

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    Equity theory recognizes that individuals consider both the absolute amount of rewards they receive for their efforts as well as how those rewards compare to what others receive. The theory was developed by J.S. Adams and holds that people develop beliefs about fair compensation based on their job inputs like education, experience, and effort. When people perceive their treatment and compensation as inequitable compared to others, they will be motivated to take corrective action. Equity theory states that employees will be better motivated if treated equitably and demotivated if treated inequitably. Inputs refer to job performance while outputs refer to compensation strategies.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    92 views3 pages

    Theoretical Framework Equity Theory

    Uploaded by

    Guste Sulit Riza
    Equity theory recognizes that individuals consider both the absolute amount of rewards they receive for their efforts as well as how those rewards compare to what others receive. The theory was developed by J.S. Adams and holds that people develop beliefs about fair compensation based on their job inputs like education, experience, and effort. When people perceive their treatment and compensation as inequitable compared to others, they will be motivated to take corrective action. Equity theory states that employees will be better motivated if treated equitably and demotivated if treated inequitably. Inputs refer to job performance while outputs refer to compensation strategies.

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    THEORETICAL FRAMEWORK

    Equity Theory
    Equity theory recognizes that individuals are concerned not only with the absolute
    amount of rewards they receive for their efforts, but also with the relationship of the
    amount to what others receive (Armstrong, 2010). Based on one’s inputs, such as
    effort, experience, commitment, education and competence, one can compare
    outcomes such as levels, increases, compensation, recognition and other factor. One of
    the prominent theories with respect to equity theory was developed through the work of
    J.S. Adams. Adams’ theory (Adams, 1963) is perhaps the most rigorously developed
    statement of how individuals evaluate social exchange relationships (Armstrong, 2010).
    The major components of exchange relationships in this theory are inputs and
    outcomes or the performance and compensation. In a situation where a person
    exchanges his or her services for pay, inputs may include previous work experience,
    education, effort on the job and training. Outcomes are those factors that result from the
    exchange. The most important outcome is likely to be pay with outcomes such as
    incentives, supervisory treatment, job assignments, benefits and status symbols also
    taken into consideration.

    Equity theory rests upon three main assumptions (Carrell & Dittrich, 1978):
    • The theory holds that people develop beliefs about what constitutes a fair and
    equitable return for their contributions to their jobs;

     The theory assumes that people tend to compare what they perceive to be
    the1exchange they have with employers.1

     The theory assumes that when people believe that their own treatment is not
    equitable, relative to the exchange theory they perceive others to be making,
    they will be in motivated to take actions they deem appropriate. This concept of
    equity is most often interpreted in work organizations as a positive association
    between an employee’s performance on the job and the compensations that
    individual receives.

    Equity theory states, in effect, that people will be better motivated if they are treated
    equitably and de-motivated if they are treated inequitably (Armstrong, 2010). 1In this
    theory, INPUTS serve as the Job performance of the employees and OUTPUTS serve
    as the Compensation strategies within an organization.
    INPUTS EQUITY OUTPUTS

    (PERFORMANCE) (COMPENSATION
    STRATEGIES)
    Theoretical Review

    The relationship between compensation practices and employee performance was


    viewed from the perspectives of a number of theories relevant to the study. For the
    purpose of the study, the researcher reviewed a number of theories as applied by
    various researchers globally. The theories are further critiqued on the basis of empirical
    evidence found in literature on the subject matter of compensation practices and
    employee performance.

    Expectancy Theory

    According to (Armstrong, 2010), in the expectancy theory, motivation is likely to be


    when there is a perceived and usable relationship between and outcome, with the
    outcome being seen as a means of rewarding needs. In other words, there must be a
    relationship between a certain reward and what has to be done to achieve it. This theory
    is very important in the context of this research. It is instrumental especially when
    designing performance-based employee wellbeing programmes. This theory helps
    explain why an organization’s staff would feel confident that they can grow in the same
    organization, hence remain there or seek development elsewhere by exiting the
    organisation. 3

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