How to Use the Equity Theory of Motivation in Life & Business

The equity theory of motivation states that a person’s motivation is directly related to their perception of equity, also known as level of fairness.  This theory by John Stacey Adams shows that you become more motivated when perceived equity is higher, and vice versa. Key inputs directly increase or decrease equity, affecting things like your salary and recognition.

The equity theory of motivation is typically used in the workplace as a management technique. However, the same theory is also applicable to an individual’s self-motivation, even outside the work environment. In this article, we discuss how the equity theory of motivation works, what inputs increase or decrease equity, as well as how to use the theory to your advantage.

How The Equity Theory of Motivation Works

The equity theory of motivation directly relates a person’s motivation to their perception of fairness, known as “equity.” This means that your motivation is highly correlated to fairness and justice, both in the workplace as well as in the outside world. The higher the fairness and justice, the more motivated a person will typically become.

For example, when you evaluate your individual equity (or fairness), you typically compare specific inputs like effort and enthusiasm to desired outputs like compensation or self-worth. If key inputs result in expected or desired outputs, the perception is that things are fair and you will be more motivated.

Further, people will also usually compare their perception of equity to their perception of other people’s equity. In this case, a person like you typically wants to be neither under-rewarded or over-rewarded when compared to others they know or work with. Therefore, you become more motivated not only when they get what they deserve, but when your peers also get what they deserve.

When measuring fairness, a person almost always compares themselves one of four “referents.” The specific type of reference you measure yourself against is key to your motivation (even if that person is yourself). If you’re able to figure out what referent you or another person is using, you can work to create more fairness and increase motivation.

The four types of referents include the following:

  • Self-inside: Comparing current experiences to past experiences inside the same organization or group
  • Self-outside: Comparing current experiences to past experiences outside the organization or group
  • Other-inside: Comparing current experiences to the experiences of another person inside the same organization or group
  • Other-outside: Comparing current experiences to the experiences of another person outside the organization or group

Understanding these reference experiences is key to understanding how a person perceives fairness. Once you identify which of the four referents you or another person uses to judge fairness, you can then change the inputs to alter the desired outputs.

Common Inputs & Outputs That Affect Equity

An “input” is a thing a person does in order to achieve a specific output, like an increase in salary or extra free time. Inputs are typically contributions a person makes to themselves, other people, or larger organization. In return for these inputs, people expect to earn a desired output. If the inputs result in the output, and if the referent is positive, then a person is motivated, and vice versa. This is why it’s important to understand what inputs yourself or a person is investing and the desired outputs of yourself and/or others.

Common inputs that result in fairness and motivation include:

  • Effort – The amount of time you invest in a person, project, or organization
  • Commitment – The level of engagement you show to people, projects, or organizations
  • Enthusiasm – The excitement you or others show towards other people, projects, or organizations
  • Experience – The amount of experience that you bring to a project or role
  • Personal sacrifice – Selflessness you or others show by putting the priorities of others over your own
  • Loyalty – The demonstrated level of allegiance one shows towards other people or organizations
  • Flexibility – The ability of the individual to take things in stride and adapt in light of new situations or information

These inputs are the things you and others invest into your life and your work. You can invest one or many of these inputs. Regardless, at the end of the day, you expect to be fairly compensated for the investment of these inputs in the form of salary, satisfaction, and more.

Common outputs that result in fairness and motivation include:

  • Monetary compensation – Salary, bonus, pension, stock options, increased revenue, and more
  • Increase in free time – The ability to spend your time as you see fit, such as creating a lifestyle business or getting extra vacation days at work
  • Recognition and accomplishment – The feeling of self-worth and that your life and your work is meaningful
  • Learning – The chance to learn new skills and gain greater life experiences

If the inputs a person invests doesn’t result in the outputs the expect, a person will feel that they’re being treated unfairly and their motivation will wane. If you can identify what you or another person is investing and what you or they expect to earn in return, you’ll be able to self-motivate as well as motivate the others around you.

The Optimal Ratio of Equity and How it Relates to Motivation

While it might seem natural to think that the higher a person’s equity or perceived fairness the higher their motivation, but this isn’t exactly true. While a person always wants to be treated fairly and increase their personal equity, they also want to ensure that they’re not being unfairly compensated in relation to others around them.

This is where the four referents we discussed above come into play. If a person believes that they have either more or less equity in relation to their chosen reference, they will feel that things are unfair and lose motivation. This is known as “equity tension.” If you think you’re under-rewarded and have less equity in relation to your reference, you become less motivated. Conversely, if you think you’re over-rewarded and have more equity, you also become less motivated.

For this reason, it’s extremely important to treat others as you would treat yourself so that no one feels over- or under-appreciated. To help ensure you don’t create equity tension, make sure you refer to the following ratio:

  • Under-rewarded (equity tension): When the input/output of a person results in less fairness than the input/output of their reference
  • Optimal ratio of equity: When the input/output of a person results in equal fairness than the input/output of their reference
  • Over-rewarded (equity tension): When the input/output of a person results in more fairness than the input/output of their reference

Therefore, it’s important than when you’re trying to motivate yourself or others, you try to create equal fairness across the board. This will motivate people because they’ll know that the effort they put in will bear the fruits of their labor.

How to Use the Equity Theory of Motivation to Your Advantage

Now that we understand what the equity theory of motivation is and how it works, the next logical step is to understand how to use it to your advantage. Remember that while the equity theory of motivation was originally geared towards business, it can also be used for your personal life. Regardless, the approach is the same, which is to identify the inputs and desired outputs, and then figure out what references people are using to gauge their fairness.

The Equity Theory of Motivation in Business

In business, the equity theory of motivation is typically used as a management technique. Rather than worrying about your own motivation, you worry about the motivation of others in your organization – specifically the people who you work with and who work for you. When this is the case, it’s important to identify your subordinates’ inputs, desired outputs, and references before they become demotivated, so that you can accelerate their growth within your company.

When looking to motivate people in your organization, you should take the following 3 steps:

  1. Define peoples’ outputs – This may seem backward, but it’s important to first understand what the people in your organization want. What are their goals and what do they hope to get out of their time working for you? This will help you motivate them by rewarding them with the things they actually want, such as growth or freedom.
  2. Celebrate peoples’ inputs – Once you know what people want, it’s time to show them how to get there, and celebrate them when they display the right input. For example, if someone in your organization needs to show greater effort in order to achieve their desired goal, point out times when they display positive effort and reward them for it.
  3. Understand how they compare themselves – This is extremely important because while you may judge yourself based on your past experiences, someone else might judge themselves against their current peers. If you don’t understand how the people in your organization feel fairness or unfairness, you’ll never be able to motivate them.

The Equity Theory of Motivation for Personal Use

The equity theory of motivation can be used personally in a number of ways. If you’re unmotivated because you don’t have a firm goal in mind, then refer to the strategy above by trying to first define your outputs. If you have a goal – like build more assets – but aren’t able to achieve it, your current hard work (and other inputs) aren’t resulting in your desired outputs. When this happens, you can do one of three things. You can either change your inputs, alter your desired outputs, or adjust the reference you’re using to compare your fairness to others.

If you find that your motivation is waning, the 3 steps you should take include:

  1. Change your inputs – If what you’re currently doing isn’t resulting in the life you want, change your approach! Look at your current plan of attack and how you expect it to achieve your goals. How can you adjust your course so even though your inputs change, your desired outputs remain the same?
  2. Change your outputs – If, after you change your inputs, you still aren’t achieving your outputs and you’re feeling unmotivated, it’s time to change your outputs. Maybe the thing you thought you wanted isn’t what you want anymore. Maybe your goals aren’t realistic given your resources. Changing your outputs, even by a small amount, can help increase your motivation.
  3. Change your references – Finally, if you’re still feeling unmotivated, maybe you’re judging yourself against the wrong references. For example, rather than comparing yourself to others you compare your current self to your past self. This might help you gain back some of that motivation you’re missing.

Equity Theory of Motivation Examples

People are often motivated by fairness and equity in the workplace. You can identify which people or employees are motivated by equity by listening to what they say as well as how they talk about or react to certain situations. For example, most people motivated by the equity theory of motivation will often compare themselves or the people they care about to others within an organization.

People motivated by the equity theory will state things such as:

  • “He or she earns more than I do even though I work harder.”
  • “My co-worker isn’t getting the recognition she deserves.”
  • “I don’t get paid what I’m worth even though I’m important to the company.”
  • “How did they get that promotion when I’m more valuable?”

As you can see, in each of these examples, an individual is comparing their current state of affairs with someone else’s. In each case, the individual believes that they or their colleague aren’t being treated fairly, and that the rewards someone else is getting are underserved compared to the rewards the individual expects they should get for themselves. The best way to address this is to treat all people of a team or organization equitably.

Limitations on the Equity Theory of Motivation

While the equity theory sounds great, it does have its limitations. For example, life isn’t really all that fair. Rather than becoming demotivated when we feel like we were dealt a bad hand, we should instead focus on the things in life we appreciate. This helps put things in perspective so we never feel slighted by life or by someone else. People feel demotivated and stressed when they feel like life isn’t fair, sure, but life is rarely fair, so we should learn to embrace it rather than rejecting it.

Further, outputs or rewards are seldom highly correlated with inputs. For example, your hard work might make you feel like you deserve a raise, but the company you work for might be strapped for cash. What do you do? Should you become demotivated and quit, or should you stick it out and further invest in the company, hoping that you (or the company) can turn it around. This might cause you to feel depressed and demotivated.

Assumptions of the Equity Theory of Motivation

Therefore, the equity theory of motivation has to make key assumptions. If the assumptions hold true then the equity theory can help you increase motivation. If not, then it fails and should be discarded for another theory or approach.

The key assumptions of the equity theory of motivation include:

  • Inputs and outputs are highly correlated
  • People have the capability to achieve their desired outputs
  • People are rewarded for good performance on a regular basis
  • Reward systems are fair and just across people and organizations
  • People assess their motivation continuously and course correct when necessary

Frequently Asked Questions (FAQ)

Who is John Stacey Adams?

John Stacey Adams is a workplace, social, and behavioral psychologist who came up with the equity theory of motivation in 1963.

What is Herzberg’s Two-Factor Theory of Motivation?

Herzberg’s two-factor theory of motivation is opposite to the equity theory of motivation in that employee attitude and workplace motivation are not correlated. In fact, equity does not motivate people. However, while these two factors don’t motivate people, the absence of these factors, other things known as “hygiene factors” like compensation or job security can cause dissatisfaction in the workplace.

What Are the Strengths & Weaknesses of the Equity Theory?

There are many pros and cons of the equity theory. Strengths include the ability to motivate a team through fair and equitable treatment. However, there are weaknesses, such as a person feeling slighted even through their being treated fairly, resulting in decreased motivation.

Is the Equity Theory the Only Type of Motivation?

No, in fact, there are many different types of motivation. Some people are motivated by the equity theory while others aren’t. If you aren’t motivated by this theory, check out some of the other top types of motivation:

Conclusion

The equity theory of motivation is great for understanding what goals motivate you and the people around you. It’s a great theory when used correctly, but it’s definitely not the only theory. In fact, there are many other ways to motivate yourself and others. Ultimately, it takes a blended approach of understanding key inputs and outputs in order to drive towards your ultimate goals.