What is Adams’ Equity Theory?
Adams’ Equity Theory of motivation is based on the premise that employees are motivated by fairness in the workplace. It suggests that individuals assess the fairness of their work environment by comparing their input-output ratios with those of others.
Inputs refer to the efforts, skills, time, and resources an employee contributes to their job. Outputs are the rewards or benefits they receive, such as salary, recognition, and promotions.
The theory posits that when employees perceive an imbalance between their inputs and the outcomes they receive, they experience inequity, leading to demotivation and decreased productivity.
The theory’s significance lies in its focus on understanding employee satisfaction and behavior through the lens of fairness. Employees who feel treated fairly are more likely to be motivated, perform well, and stay with the organization.
Conversely, perceived inequity can lead to dissatisfaction, reduced effort, and even turnover.
The concept of comparing input-output ratios among individuals enables organizations to understand how fairness—or the lack of it—affects employee motivation and behavior, ultimately influencing overall performance and organizational success.
History of Equity Theory of Motivation
Adams’ Equity Theory was developed by J. Stacy Adams in the 1960s, rooted in social exchange theory, and inspired by principles of fairness and justice. Adams explored how individuals assess fairness by comparing their input-output ratios (effort vs. rewards) to those of others.
Influenced by earlier works in behavioral psychology and organizational behavior, the theory emphasized that perceived inequity creates tension, motivating individuals to restore balance.
Initially applied to workplace motivation, the theory has since been widely used to understand employee satisfaction, performance, and interpersonal dynamics, making it a cornerstone of modern organizational psychology and management practices.
The Role of “Relevant Others” in Equity Theory
In Adams’ Equity Theory, employees evaluate their perceived fairness by comparing their input-output ratios with those of others, known as “relevant others.”
These comparisons play a crucial role in determining whether an employee feels they are being treated fairly or unfairly. There are four key types of comparisons, each reflecting different perspectives:
Self-Inside
This comparison occurs when an employee evaluates their current role in relation to their experience in a different role within the same organization.
For example, if an employee moves from a managerial position to a lower-paying administrative role and notices a discrepancy in their pay, they may feel inequity.
Self-Outside
Here, an employee compares their current role with their experience in a similar role at another organization.
For instance, if an employee with a similar skill set learns that a colleague in another company is earning more for the same type of work, they may feel under-rewarded.
Other-Inside
Employees also compare themselves to others within the same organization.
For example, if a worker learns that a colleague in the same department with similar qualifications and experience is earning more or receiving more recognition, it may create feelings of unfairness.
Other-Outside
This comparison involves comparing oneself to individuals or groups outside of the organization.
For example, an employee may look at the compensation packages offered to workers in the same role at different companies and feel that their own compensation is not on par.
Each of these comparisons influences the employee’s sense of fairness and can impact motivation, engagement, and job satisfaction.
When employees perceive that their input-output ratio is unequal compared to these relevant others, it can lead to feelings of frustration, reduced motivation, or even turnover.
Reactions to Perceived Inequity
When employees perceive inequity in the workplace, they often take specific actions to restore a sense of fairness.
These behavioral responses are meant to reduce the tension caused by the perceived imbalance between their inputs (effort, time, skills) and outputs (rewards, recognition, salary). The key reactions include:
Changing Inputs
Employees may adjust the level of effort they put into their work. For instance, if they feel under-rewarded, they might reduce their work output, become less engaged, or stop going above and beyond.
Conversely, if they feel over-rewarded, they might increase their effort to match the higher reward.
Seeking Higher Outcomes
Employees who feel under-compensated might demand a raise, bonus, or more recognition to align their outputs with those of others. They may also request better working conditions or career development opportunities.
Read More: Reinforcement Theory
Distorting Perceptions
To restore fairness, employees might reassess or alter their perception of their contributions.
They may convince themselves that their work has a higher value than initially thought or adjust their beliefs about what others contribute.
Choosing a New Referent
If the inequity is based on comparisons with a particular colleague or role, employees may choose to compare themselves to someone else whose situation seems more fair, thereby reducing the perceived inequity.
Leaving the Organization
In some cases, when inequity persists, employees may choose to leave the organization entirely. This often happens when they believe that the inequity cannot be resolved within the current work environment.
Read More: Self-Efficacy Theory
Impact of Equity and Inequity
The emotional responses to perceived equity or inequity significantly impact employee behavior and performance in the workplace.
Under-Rewarded State
When employees feel under-rewarded, they experience emotions like anger, frustration, and resentment. These feelings often lead to decreased motivation, lower engagement, and reduced performance.
Employees may feel that their contributions are undervalued, which can result in disengagement, lower work quality, and even absenteeism.
In time-based pay structures, employees in an under-rewarded state may reduce their effort, while in quality-based pay structures, they might lower the quality of their output.
Over-Rewarded State
On the other hand, employees who perceive themselves as over-rewarded may feel guilt, as they believe they are receiving more than they deserve.
This can lead to a desire to adjust their behavior to match the rewards they’re receiving. In a time-based payment system, over-rewarded employees might work harder to justify the higher pay.
In a quality-based payment system, they may focus on producing higher-quality work to maintain their sense of fairness.
Read More: McClelland’s Theory of Needs
Relevance of Equity Theory in the Workplace
Equity theory plays a critical role in promoting fairness and fostering a motivated workforce.
Organizations can leverage this theory to create a balanced and productive work environment by focusing on employee perceptions of fairness in inputs (efforts, skills) and outputs (salary, rewards).
To ensure equity, organizations should adopt transparent communication practices, openly sharing how rewards and benefits are determined. This helps employees understand the rationale behind decisions and reduces perceptions of favoritism or bias.
Implementing consistent reward systems is another essential strategy. Standardizing salary structures, performance bonuses, and recognition programs ensures that employees performing similar roles or delivering comparable results receive equitable rewards.
Additionally, promoting equitable treatment across the organization—irrespective of rank, background, or demographics—fosters trust and loyalty. Encouraging managers to regularly review and address discrepancies in pay, workload, or recognition can also mitigate feelings of inequity.
By integrating these strategies, businesses can boost employee satisfaction, motivation, and overall performance, aligning workplace dynamics with the principles of equity theory.
Read More: Self Determination Theory (SDT)
Criticisms of Equity Theory of Motivation
While Adams’ Equity Theory provides valuable insights into workplace motivation, it has its share of criticisms and limitations.
One significant challenge is the subjectivity of fairness perceptions. Different employees may assess inputs (effort, skills) and outputs (rewards, recognition) differently, leading to varied conclusions about equity, even in the same situation.
These personal perceptions make it difficult for organizations to implement universally accepted fairness standards.
Another limitation lies in cultural differences. In some cultures, collective outcomes and harmony may be valued more than individual fairness, reducing the applicability of equity theory.
For instance, employees in collectivist cultures may prioritize group success over personal equity, while those in individualistic cultures may focus more on personal rewards.
Lastly, equity theory may not fully address complex motivation dynamics. Combining it with other motivation theories, such as Maslow’s Hierarchy of Needs or Goal-Setting Theory, can offer a more holistic approach.
This integration ensures organizations consider both tangible rewards and intrinsic motivators, addressing diverse employee needs effectively.
Read Next: Goal-Setting Theory of Motivation

Sujan Chaudhary is an MBA graduate. He loves to share his business knowledge with the rest of the world. While not writing, he will be found reading and exploring the world.