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The equity theory is a concept of how a worker perceives the compensation they receive in comparison to other workers. John Stacey Adams found in the early sixties that worker motivation was impacted whether or not an associate felt that their total compensation was equal to their effort within the organization. Inequity can come in a couple different forms. In the following text, we will outline a scenario where inequity is present, then we will analyze the equity theory some more, and then conclude with showing the application of the equity theory in our scenario (Shin-I, 2012).

Analysis of The Situation

John has been working for Coach factory store for about two months now and he typically enjoys his job. However, lately John has been feeling that he is being treated unfairly at work as far as his recognition goes. Coach factory store, takes pride in their employees work and rewards their workers with praise when they work hard. One of the ways that Coach rewards their associates is to place star stickers on a board that contains all of the employees’ names. At the end of the month all of the stars are tallied and whichever employee has the highest number of stars is awarded employee of the month and is given several gifts. Although John has been consistently praised throughout his time at Coach he has yet to receive a star next to his name. He also notices that other employees who do just as much work as him have many stars next to their names. John feels perceives inequality in his place of work due to this seemingly unfair situation.

Equity Theory Overview

Equity theory is the concept of how a worker perceives the compensation they recieve in comparison to other workers.  There are three important terms related to equity theory, comparison other, inputs, and outputs. The comparison other is a reference to a fellow associate that an associate would compare themselves too. Inputs are what an associate puts into their work such as efforts, skills, and talents. Outputs are the results of an associate’s inputs such as money, bonuses, promotions, etc. These definitions help us to define the equity theory better (Redmond, 2010).

Motivation highly determines the equity that an associate feels. If for instance, an associate feels that they input more than their comparative other does but yet they receive the same outputs then that associate could become less motivated to put as many inputs into their work. On the other hand, the associate could be receiving fewer outputs than the comparative other. Not only is this scenario apparently unfair, it can be perceived as underpayment inequity. When an associate works they expect to be compensated for their work based on their level of inputs, not less than expected. Now the opposite of underpayment inequity is overpayment inequity where an associates inputs maybe lower than the comparative others inputs but yet that associate is receiving the same or greater outputs than the comparative others. Whether underpayment or overpayment inequity, an associate’s motivation may not be the only thing that could be affected. Since employment is at will, an associate who is facing inequity may as a result freely terminate their employment in the organization, which as a result can lead to higher turnover in that organization (Raja, 2009).

The previous paragraph discussed some of the behavioral ways that one can reduce their inequities but there are also a couple of cognitive ways that one can reduce their feelings of inequity. The first option would be for an associate to distort their own inputs or outcomes by convincing themselves that they’re not working as hard as they think. The second option would be for an associate to distort their inputs or outcomes of others by thinking that the comparative other is privileged more because they hold more years of service in the organization. Then lastly, the associate could just alter their comparison of others (Raja, 2009).

Application of Equity Theory

In this case study John is experiencing underpayment inequity. Underpayment inequity (or negative inequity) is when the ratio of one's own inputs and outcomes is greater than or less favorable than the ratio of a comparison other (Shin-I, 2012). His comparative others are his co-workers that hold the same position as he does in the Coach store. John’s inputs are the same as those of his co-workers; however his outputs (recognition of achievements) are less when compared to his co-workers. John feels that he is being treated unfairly because he is doing just as much work as the other employees but is not receiving reward stars that the other employees are earning. As a result of this inequity John may become less motivated to maintain his current high level of input at his job. This will allow him to “correct” the inequity because his decreased amount of input will more closely match up to his current low level of outputs. If John continues to experience inequity, there may be increased negative reactions on his part in an attempt to correct the inequity. A possible behavioral reaction may be withdrawal from his work environment (calling out, arriving late, leaving early). A possible cognitive reaction could be a distortion of his comparison views towards the other employees (“I guess they are doing more work than I am after all”). The manager of this store should take actions to decrease inequity in this work environment to avoid a decrease in John's (and possibly other employee's) productivity (Shin-I, 2012).


With this case in mind, the importance of equity can be properly understood. When a case of inequity should arise in a work place setting it is important that is properly dealt with otherwise it could lead to consequences such as the employee quitting or being fired. It is basic human nature to desire a sense of equality with those around you. If inequality is felt there are many cognitive or behavioral strategies that can accomplish a feeling of equity. Employers must understand and be sensitive to equity in order to have a more productive and motivated work force. Input output ratios will not always be equal from one person to their comparison other but they should be close enough for an employee to perceive that there is not a significant amount of difference. In conclusion, equity is an important facet of the work place that motivates employees and must be treated carefully to reduce the amount of inequity felt by employees.


Raja, S. (2009). Motivation Theories [PowerPoint slides]. Retrieved from

Redmond, B.F. (2010). Lesson 5: Equity theory: Is what I get for my work fair compared to others? Work Attitudes and Motivation. The Pennsylvania State University World Campus.

Shin-I Shih. (2012). Equity Theory. Work Attitudes and Motivation. The Pennsylvania State University World Campus.


Louis Albanese, Michael Prestifilippo, and Jeremie Thompson contributed to the publication of this page.