How does equity theory influence employee satisfaction and motivation?

"Another contemporary explanation of motivation, equity theory is based on individuals’ perceptions about how fairly they are treated compared with their coworkers. Equity means justice or fairness, and in the workplace it refers to employees’ perceived fairness of the way they are treated and the rewards they earn. For example, imagine that after graduation you were offered a job that paid $55,000 a year and had great benefits. You’d probably be ecstatic, even more so if you discovered that the coworker in the next cubicle was making $45,000 for the same job. But what if that same colleague were making $59,000 for the same job? You’d probably think it unfair, particularly if the coworker had the same qualifications and started at the same time as you did. Your determination of the fairness of the situation would depend on how you felt you compared to the other person, or referent.\n\nEmployees evaluate their own outcomes (e.g., salary, benefits) in relation to their inputs (e.g., number of hours worked, education, and training) and then compare the outcomes-to-inputs ratio to one of the following: (1) the employee’s own past experience in a different position in the current organization, (2) the employee’s own past experience in a different organization, (3) another employee’s experience inside the current organization, or (4) another employee’s experience outside the organization.\n\nAccording to equity theory, if employees perceive that an inequity exists, they will make one of the following choices:\n\n• Change their work habits (exert less effort on the job)\n\n• Change their job benefits and income (ask for a raise, steal from the employer)\n\n• Distort their perception of themselves (“I always thought I was smart, but now I realize I’m a lot smarter than my coworkers.”)\n\n• Distort their perceptions of others (“Joe’s position is really much less flexible than mine.”)\n\n• Look at the situation from a different perspective (“I don’t make as much as the other department heads, but I make a lot more than most graphic artists.”)\n\n• Leave the situation (quit the job)\n\nManagers can use equity theory to improve worker satisfaction. Knowing that every employee seeks equitable and fair treatment, managers can make an effort to understand an employee’s perceptions of fairness and take steps to reduce concerns about inequity."