Equity Theory: Balancing of Inputs and Outputs

According to equity theory, people look for justice in their interpersonal relationships. They want to believe that they are getting what they deserve from others. When people feel they are not being treated fairly, they may end up getting dissatisfied and take action to change the situation. Equity theory holds that people measure their inputs (the job they perform, the money they pay, the effort they put in) to their results (the rewards they get, such as compensation, perks, and recognition). If they feel they are not treated fairly, they may get dissatisfied and take steps to change the situation.

The Process of Equity Theory

Equity theory is founded on the notion that people attempt to keep balance in their interactions and relationships. They want to feel that they are receiving what they deserve from those with whom they contact. According to equity theory, people will compare what they provide to a relationship vs what they’re getting in return. If they believe they are not receiving what they deserve, then will take action to redress the imbalance.
This idea can be applied to a wide range of activities, including things such as motivation for staff, job fulfillment, and corporate citizenship behavior. Employees who believe they are being treated unfairly may become unhappy and less motivated. They might be less inclined to go beyond what is required for their professional responsibilities. Organizations that apply equity theory to analyze and address employee problems can boost morale and motivation.

Key Elements of Equity Theory

The concept of equity is a social psychology theory that looks forward to explaining how people perceive fairness in their relationships. It is founded on the foundation that people look for equity in their relationships with others, which means they want to feel as if they are receiving what they deserve. Equity theory’s major elements are input, result, and comparison levels. The input is the number of efforts that a person puts or makes to a connection. It includes education, intelligence, number of working hours, training, etc. Outcome refers to the benefits that a person receives from a connection. Whatever an employee receives in exchange for their contributions to the organization. It can include incentives, promotions, special status, prizes, etc.

According to psychologist Mahika Patel, when people start comparing each other in a relationship, they expect the same behavior or treatment from the other partner. For example, if one partner attends the family function of the second, then next time they expect the same thing from the other partner. This condition brings the feeling of give and take in the relationship.  Overall, the tendency to compare oneself to others in a relationship stems from a desire to maintain fairness and balance, which are important factors for relationship satisfaction and well-being.

The comparison level refers to a person’s desired level of input and output in a relationship. According to equity theory, people are happiest when the input and the outcome match their comparative level. If a person’s input exceeds their comparable level, they will feel overwhelmed and undervalued. If a person’s outcome exceeds their comparative level, they will feel spoilt and overvalued.

Importance of Perception

It is essential to understand that equity theory emphasizes the importance of perceptions. Therefore, regardless of the actual level of reward people receive, they must perceive that relative to others they are being treated fairly.

According to psychologist Tapas Dasmohapatra, unexpressed expectations are an invitation to resentment. Sometimes people expect something from others but do not express it directly. In our society, a myth exists that if two people are in a relationship, there is no need to tell them everything; some things can be understood even if it is not expressed. People also want their partner to be a mind reader At last, people need to understand what the other person is going through, and what is going on with them.

What is the Outcome/Input Ratio?

The comparison of outcome with input is called the outcome/input ratio. Inequity can be seen in two forms – under-reward and over-reward.

Under reward occurs when others’ Outcome/input ratio is better than yours. It means that you are getting fewer outcomes relative to your inputs than the others who you compare yourselves with are getting. It leads to the feeling of anger and frustration and that tends to happen a lot.

In contrast, over-reward occurs when others’ outcome/input ratio is worse than yours. It means that you are getting more outcomes relative to your input than the others who you compare yourselves with are getting. Theoretically, when people perceive that they have been over-rewarded, they feel guilty. However, people have a very high tolerance for over rewards because it takes a good amount of overpayment before they realize that they are getting benefits more than what they deserve.

Restoration of Equity

Feelings discussed above in the case of both under and over-reward cause inequity for individuals. People try to restore equity by eliminating inequity. Various ways of restoring inequity are:

• Withholding inputs: when people perceive that they are being under-rewarded relative to their inputs, they decrease or withhold their inputs i.e. their efforts.
• Increasing outcomes is one of the ways to restore equity.
• Distortion and rationalization are also a way to restore equity by making mental and emotional adjustments in the outcome/input ratio of their reference.
• Management should make sure that decision-making processes are fair.
• Procedural Justice is the perceived fairness of the procedures used to make reward allocation decisions, is also very important. Even when the employees are unhappy with their outcomes which can be low paid, they are likely to be less unhappy if they are ensured that the procedures used for allocating outcomes are fair.