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Equity Theory – Why Employee Perceptions About Fairness Do Matter

In This Article

(Click the links below to move easily to sections of this article)

Why Workplace Fairness Matters Today
What is Adam’s Equity Theory
Why Adam’s Equity Theory is Important to the Workplace
How to Apply Adam’s Equity Theory to the Workplace
What Our Own History Teaches Us About Perceptions of Fairness
Video: Improving Motivation with Adam’s Equity Theory?
Quiz: Can You Apply Adam’s Equity Theory to the Workplace?
Scholarly Citations for this Article
Motivation in the Workplace Article Series


SPOILER ALERT: The information in this article can be like taking bitter medicine — unpleasant at first with some adverse side effects that you feel immediately. (In other words, you might have an emotional reaction to what I have to say here.) However, if this information applies to you and you consider it objectively, it will make you better in the long run as a leader — just like bitter medicine does.

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Why Workplace Fairness Matters Today

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Why

Gone are the days when managers can simply command and control employees! Organizations now operate under a pace of change that is unforgiving and unrelenting. Customers through social media now have more power to affect a business’s bottom line and its market reputation. Employees bring different generational expectations that come from different life experiences. Given all of this, it’s not surprising that the lack of employee motivation is a frequent area of concern that managers express to me.

While managers do not technically motivate people, they do create an environment that can foster or hinder employee motivation. An important factor in an employee’s internal motivation is his belief about how fair his treatment is and has been in the organization relative to others. Given the uncertainty and intense demands of our new millennium, employees are especially sensitive to issues of fairness and how organizational leaders treat them.

Employees know that life is not fair but they expect their boss to be fair! Click To Tweet

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What is Adam’s Equity Theory

the word "what" written on a chalkboardThe behavioral psychologist, John Stacey Adams, developed a useful model for explaining why employee perceptions about fairness matters. Equity Theory (Adam’s Equity Theory) explains the thought process an employee uses to determine the fairness of management decision making. The core of equity theory says that individuals judge the fairness of their treatment based on how others like them are treated. Employees make social comparisons to others who are similarly situated in the organization.

Said another way, an employee will consider the following:  Based on what I am giving to this organization (inputs), am I getting the same rewards (outcomes) as others are getting who give similar inputs? Equity theory says that employees view a situation as equitable when employees who give similar inputs receive similar outcomes. When the rewards differ for the same degree of effort, employees view the situation as inequitable.

It's hard for an employee to feel motivated in the workplace if he or she feels they were treated unfairly. Click To Tweet

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Why Adam’s Equity Theory is Important to the Workplace

the word "important" underlined with a red pencilEquity theory shows that inequities (perceived or real) harm employee motivation. Employees who feel that they are receiving inequitable treatment will be emotionally motivated to gain equity. What does this behavior look like? When inequities persist, employees may do any of the following:

  • Decrease inputs (give less time, do less work)
  • Push for more output from the company (more pay, authority)
  • Go into survival mode (do their job and little more)
  • Become resistant (act out on other issues)
  • Become overly competitive (focus on reducing the outputs of others)
  • Quit

These outcomes harm an organization’s bottom line and where organizational turnover occurs the loss is two-fold (economic and talent based). Clearly, equity theory shows why employee perceptions about fairness do matter. When employees believe that the workplace is unfair, they grow to distrust organizational leadership. When leaders choose to ignore this distrust, employee morale and motivation suffers.

Organizations can sow the seeds of inequity and distrust in everyday operational matters. It does not require a leader to have a significant ethical lapse to bring this about.

For example, once I worked with an organization that was experiencing significant problems implementing changes that were critical to its long term viability.  As I listened to managers at all levels of the organization, it became clear to me why senior leadership was experiencing so much resistance.

Through a series of badly executed budget cutbacks and organizational realignments, senior leadership had undermined their effectiveness with managers and employees in the organization. There were numerous stakeholders who felt they had been treated unfairly in the past and they now viewed senior leadership with suspicion. These unaddressed trust issues prevented meaningful organizational change.

Equity theory explains how employees determine what is fair and how they act upon their perceptions. Equity theory is supported by research over the years. As a result, employee perceptions about fairness do matter–whether they are real or misguided.  For managers it is better to effectively address these concerns than ignore them.

Ignoring employees who feel they were treated unfairly will not make their feelings go away. Click To Tweet

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How to Apply Adam’s Equity Theory to the Workplace

the word "how" shown on a white backgroundAs most leaders are operating in good faith in an organization, “the cure” is often just better communication. Leaders may need to manage unrealistic expectations by more open and active communication. Other solutions may involve acknowledging and addressing legitimate employee concerns.

As you address workplace fairness issues, keep in mind that rewards have different value to different employees. This makes it vital to both know your people and know how to adjust your leadership style appropriately. However, even given the individual aspects of motivation and workplace rewards, there are some rewards that are generally important to everyone. For example, concerns over pay equity are usually important to every employee as a basic issue of workplace fairness.

It’s also important to understand that employee dissatisfaction can arise over perceptions of inequitable treatment in non-basic issues of workplace fairness. For example, it is not uncommon for people to be unhappy because their title is less prestigious than their peers or because they have less autonomy than others in the workplace.

Finally, if your organization is undergoing significant change, making special efforts to lead your change effort thoughtfully can help you to avoid generating employee resentment.

Employees know that life is not fair but they do expect their boss to be fair. Click To Tweet

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What Our Own History Teaches Us About Perceptions of Fairness

graphic image of usa flagDo employee perceptions about workplace fairness really matter?

Equity theory says they do!

Still need convincing?

Our country’s own Hatfields and McCoys feud also says perceptions about what is fair and what is not fair do matter! 

Ignoring continuing employee resentment about what they perceive as unfairness in the workplace will not make their concerns go away. Left unaddressed, these lingering employee concerns will ultimately harm organizational morale and organizational productivity.

People have long memories. They’ll remember whether they think they were dealt with equitably. — William Conaty


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Video: Improving Motivation with Adam’s Equity Theory


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Quiz


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Scholarly Citations for this Article

This article from Management is a Journey has been cited in the following scholarly research articles:


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Motivation in the Workplace Article Series


Written by Robert Tanner | Copyrighted Material | All Rights Reserved Worldwide

Robert Tanner, MBA

Welcome to my leadership blog. I'm the Founder & Principal Consultant of Business Consulting Solutions LLC, a certified practitioner of psychometric assessments, and a former Adjunct Professor of Management. As a leadership professional, I bring 20+ years of real world experience at all levels of management.

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