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Equity theory
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==Practical applications== Equity theory has been widely applied to [[business]] settings by industrial psychologists to describe the relationship between an employee's motivation and his or her perception of equitable or inequitable treatment.{{Citation needed|date=April 2020}} In a business setting, the relevant [[Dyad (sociology)|dyadic]] relationship is that between employee and employer.{{Citation needed|date=April 2020}} As in marriage and other contractual dyadic relationships, equity theory assumes that employees seek to maintain an equitable ratio between the inputs they bring to the relationship and the outcomes they receive from it.{{sfnp|Adams|1965}} Equity theory in business, however, introduces the concept of social comparison, whereby employees evaluate their own input/output ratios based on their comparison with the input/outcome ratios of other employees.{{sfnp|Carrell|Dittrich|1978}} Inputs in this context include the employeeβs time, expertise, qualifications, experience, intangible personal qualities such as drive and ambition, and interpersonal skills. Outcomes include monetary compensation, perquisites ("perks"), benefits, and flexible work arrangements which impact motivation, performance, and satisfaction of workers.{{cn|date=June 2022}} Employees who perceive inequity will seek to reduce it, either by distorting inputs and/or outcomes in their own minds ("cognitive distortion"), directly altering inputs and/or outcomes, or leaving the organization.{{sfnp|Carrell|Dittrich|1978}} Workers will change the quality of their work based on their perceived compensation.<ref>{{Cite journal|last=Andrews|first=A|date=1967|title=Wage inequity and job performance: An experimental study|journal=Journal of Applied Psychology|volume=51|issue=1|pages=39β45|doi=10.1037/h0024242|pmid=6038479}}</ref> These perceptions of inequity are perceptions of [[organizational justice]], or more specifically, injustice.{{Citation needed|date=April 2020}} Subsequently, the theory has wide-reaching implications for employee [[morale]], [[Economic efficiency|efficiency]], [[productivity]], and [[Turnover (employment)|turnover]].{{Citation needed|date=April 2020}} Equity theory has also been applied to intimate relationships. Scholars address the notion that intimate relationships also exemplify equity theory in action because partners evaluate the fairness of their inputs and outputs.<ref>{{Cite book|last1=Hatfield|first1=E.|title=Personal relationships I: Studying personal relationships |last2=Traupmann|first2=J.|publisher=Academic Press|year=1980|editor-last=Duck|editor-first=S.|pages=165β178|chapter=Intimate relationships: A perspective from equity theory |editor-last2=Gilmour|editor-first2=R.}}</ref> According to scholars, equity theory may explain how individuals choose their partner and the functionality of the relationship <ref>{{Cite book|last1=Hatfield|first1=E.|title=Social exchange in developing relationships|last2=Utne |first2=M |last3=Traupmann|first3=J|publisher=Academic Press|year=1979|editor-last=Burgess|editor-first=R.L.|pages=99β117|chapter=Equity theory and intimate relationships |editor-last2=Huston|editor-first2=T.L.}}</ref> This concept has been applied to exploitative relationships, reciprocal relationships, and altruistic relationships.<ref>{{Cite book|last1=Hatfield|first1=E|title=Compatible and Incompatible Relationships |last2=Traupmann|first2=J|last3=Sprecher|first3=S|last4=Utne|first4=M|last5=Hay|first5=J.|publisher=Springer|year=1985|editor-last=Ickes|editor-first=W.|location=New York|chapter=Equity and Intimate Relations: Recent Research}}</ref> Further, scholars state that equity theory explains that inequalities in the relationship can lead to feelings of distress and depression.<ref>{{Cite journal|last1=Schafer |first1=R.B.|last2=Keith |first2=P.M. |date=1980 |title=Equity and depression among married couples |journal=Social Psychology Quarterly|volume=43|issue=4 |pages=430β435|doi=10.2307/3033963 |jstor=3033963 |pmid=7209589 }}</ref> ===Assumptions of equity theory applied to business=== The three primary assumptions applied to most business applications of equity theory can be summarized as follows: # Employees expect a fair return for what they contribute to their jobs, a concept referred to as the "equity norm".{{Citation needed|date=April 2020}} # Employees determine what their equitable return should be after comparing their inputs and outcomes with those of their co-workers. This concept is referred to as "social comparison".{{Citation needed|date=April 2020}} # Employees who perceive themselves as being in an inequitable situation will seek to reduce the inequity either by distorting inputs and/or outcomes in their own minds ("cognitive distortion"), by directly altering inputs and/or outputs, or by leaving the organization.<ref>{{cite journal |last1=Carrell |first1=Michael R. |last2=Dittrich |first2=John E. |title=Equity Theory: The Recent Literature, Methodological Considerations, and New Directions |url=https://doi.org/10.5465/amr.1978.4294844 |journal=Academy of Management Review |year=1978 |volume=3 |issue=2 |pages=202β210 |publisher=Academy of Management|doi=10.5465/amr.1978.4294844 |url-access=subscription }}</ref> ===Implications for managers=== Equity theory has several implications for business managers: *People measure the totals of their inputs and outcomes. This means a working mother may accept lower monetary compensation in return for more flexible working hours.{{Citation needed|date=April 2020}} *Different employees ascribe personal values to inputs and outcomes. Thus, two employees of equal experience and qualification performing the same work for the same pay may have [[Double Demotivation|quite different perceptions of the fairness of the deal]].{{Citation needed|date=April 2020}} *Employees are able to adjust for purchasing power and local market conditions. Thus a teacher from Alberta may accept lower compensation than his colleague in Toronto if his cost of living is different, while a teacher in a remote African village may accept a totally different pay structure.{{Citation needed|date=April 2020}} *Although it may be acceptable for more senior staff to receive higher compensation, there are limits to the balance of the scales of equity and employees can find excessive executive pay demotivating.{{Citation needed|date=April 2020}} *Staff perceptions of inputs and outcomes of themselves and others may be incorrect, and perceptions need to be managed effectively.{{Citation needed|date=April 2020}} *An employee who believes he is overcompensated may increase his effort. However he may also adjust the values that he ascribes to his own personal inputs. It may be that he or she internalizes a sense of superiority and actually decrease his efforts.{{Citation needed|date=April 2020}}
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