Equity theory provides a solid basis for designing work in such a way that employee motivation is not negatively affected. Within this theory, motivation is related to a social comparison principle, whereby people constantly, consciously or unconsciously, compare their own situation with people in a similar situation. To increase people’s motivation, several conditions must be met within equity theory for the most optimal possible comparison.
Equity theory and motivation
The equity theory has as its basic principle the perceived fairness within an organization or company. This theory states that employees seek equality between their own input in the work (the contribution that the employee makes to the work) and the output obtained (e.g. salary, appreciation) and the perceived input and output of other, comparable employees. So they compare themselves with others. Employees will try to achieve equality and are motivated to maintain this fairness. For example, if an employee sees a colleague who gets the same output, but does much less work (a lower input), the theory states that the employee will reduce his/her own input so that the input/output ratio is the same as that of colleagues.
Other examples are also possible; a manager who earns much more money (output) than another, comparable manager but does the same amount of work (input) will also want to eliminate this inequality. However, this is not done by accepting less salary, but by estimating the own contribution (input) higher than the input of the comparable manager. In this way the perceived input/output ratio becomes equal again.
Equity theory in a team context
Within equity theory, the importance of perceived equality not only applies to individuals, but the importance of this equality is also recognized within a team context. For example, if one person within a team does less work than the other people, but the output is the same, the intrinsic motivation of the other group members will decrease. The decrease in intrinsic motivation results in a less good contribution to the work (input). To prevent this, a reduction in the reward for the poorly performing person can be applied; As a result, the intrinsic motivation of the other team members will no longer decrease in accordance with equity theory.
Extrinsic motivation/motivator within equity theory
To achieve a reduction in compensation for the poor performer, a manager can use a sanction or punishment to reduce the ,reward, for the employee’s work. This restores the perceived input/output ratio between the team members. In the context of equity theory, the sanction imposed is seen as an extrinsic motivator; this is an incentive from outside the person himself, which influences extrinsic motivation. In addition to a sanction, an extrinsic motivator can also be a monetary reward, for example.