Equity

Equity theory was developed by John Stacey Adams (1963, 1965). Individuals feel that they are rewarded fairly and are satisfied based on similar tasks completed by others.

Adams’s model contains three crucial components:

inputs (the effort an individual makes);
outputs (intrinsic and extrinsic rewards from the organization);
comparison with others Brooks, I. p.97 (2009).

Brooks, I. (2009). Organisational behaviour Individuals, Groups and Oganisation. 4th ed. Essex, England: Pearson Education Limited
Below chart extracted from http://www.businessballs.com/adamsequitytheory.htm

inputs	equity dependent on comparing own ratio of input/output with ratios of ‘referent’ others	outputs
Inputs are typically: effort, loyalty, hard work, commitment, skill, ability, adaptability, flexibility, tolerance, determination, heart and soul, enthusiasm, trust in our boss and superiors, support of colleagues and subordinates, personal sacrifice, etc.	People need to feel that there is a fair balance between inputs and outputs. Crucially fairness is measured by comparing one’s own balance or ratio between inputs and outputs, with the ratio enjoyed or endured by relevant (‘referent’) others.	Outputs are typically all financial rewards – pay, salary, expenses, perks, benefits, pension arrangements, bonus and commission – plus intangibles – recognition, reputation, praise and thanks, interest, responsibility, stimulus, travel, training, development, sense of achievement and advancement, promotion, etc.