What is Equity theory?
Equity theory refers to defining and measuring relational satisfaction of employees in a company.
Equity theory definition
Equity theory refers to defining and measuring relational satisfaction of employees in a company. It inspects employees' satisfaction based on the balance between what they give to the company against what they receive.
Inputs: time, effort, loyalty, commitment, reliability, integrity, tolerance, enthusiasm, skill etc
Outputs: pay, bonus, perks,j ob security, benefits, sense of achievement, praise, reputation, responsibility etc.
Stages of equity
1. Equity tension: when the employee’s output to input ratio is lower than the employer’s ratio, so he/she feels under-rewarded and demotivated.
2. Perfect equity: when the Output-Input ratio is equal.
3. Equity tension: when the employee’s ratio is greater than the referents’ ratio so he/she feels over-rewarded.