Equity theory is based on the principle that everyone within an organization will compare the relationship between their own input and output with that of their colleagues. In this context, input should be seen as the contribution that a person makes to the work, the output should be seen as the results that this contribution to the work produces for the employee himself. Salary, status and social appreciation are examples of output within equity theory.
Equity theory general
According to equity theory, people strive for equality in the input/output ratio of themselves and that of comparable colleagues. As soon as there are clear differences in this perceived equality, for example a colleague works less but receives substantially more in bonuses, an employee will try to eliminate this inequality. Eliminating this inequality can be done by either reducing input or increasing output. However, increasing output is difficult in many cases; Increasing one’s own salary is not something everyone can do. The easiest way to eliminate perceived inequality is to reduce one’s own input, so that the comparison between the different ratios between input and output is correct again.
A negative difference in equality, if resolved by a reduction in one’s own input, also causes a number of other effects; for example, more undesirable behavior will occur, motivation will decrease, work involvement will decrease and cohesion among group members will decrease (OReilly (1989), Latham & Pinder (2005) et al.).
Equity theory within team settings
When working in a team, equity theory has a number of consequences for the functioning of the entire group. For example, if one person within a team does a worse job than the other people, the intrinsic motivation of the other group members will decrease. The decrease in this intrinsic motivation is then the cause of a decrease in the input of the group members (Tagger, 2004).
According to equity theory, fairness and equality also play an important role within teams; fair treatment is seen as an indication of appreciation by an authority, which creates stronger feelings of pride and self-esteem (Roberson (2005)). The involvement in the work of team members will also be stronger and team members will put more effort into the team (Roberson (2005)). In addition to the effects mentioned, the aforementioned comparison between one’s own input and output and those of others also plays an important role (Rey-Biel (2008)). If this is not seen as equal, this can have negative consequences for work involvement, effort, motivation, performance, confidence and job satisfaction (Colquitt (2004), Roberson (2005), Tagger (2004)).
Punishments in light of equity theory
According to equity theory, providing an external negative motivator, such as a punishment, to the individual in question ensures that the equality in the input/output ratio between the individual and the other group members remains the same (at least if the individual in question has reduced his input ); there is no change in the motivation of the group members in equity theory. However, if the external negative motivator is not provided, there is no longer equality; In accordance with equity theory, the intrinsic motivation of the team members would then have to decrease to restore equality.
Rewarding in the light of equity theory
If an individual is rewarded even though he has done the same amount of work as his group members and they are not rewarded, equity theory can have a negative effect. After all, it seems to the group members as if their input/output ratio is unfavorable compared to the group member; the expectation is therefore that the group members will reduce their input, so that the input/output ratio is again equal to the rewarded group member. However, the rewarded group member will not work harder; he will rate his own input higher than that of his group members, even though this may not be the case.
If a group member has actually done more work than the rest of the group, and the rest of the group also sees this, then it is wise to reward him; otherwise, at some point this team member will judge his own input/output ratio negatively compared to the rest of the group and work less hard.