Equity theory states that employees are more motivated to work when they feel that they are being treated fairly. There are three components of equity theory: inputs, outcomes, and referents. Workers internally use an equity theory ratio that compares their own inputs and outcomes to a referent’s inputs and outcomes to determine if there is a perceived inequity. When there is a perceived equity workers are happy, but when they perceive an inequity they may become angry, frustrated, or guilty. Managers should understand this perception and take steps to overcome it.
An important element of workplace management is when managers motivate workers to do their job well. This course discusses how equity theory can be used to motivate employees.