UNIT – I Lesson 1 HRM – AN OVERVIEW Lesson Outline Nature of ...

Adam’s Equity Theory:
Stacy Adams (1963) advocated Equity theory states that employees should be perceived as
fair in comparison with various factors. Adams explained inequity as an injustice
perceived by a person when he compares the ratio of his outcomes in the form of rewards
to his inputs in the form of efforts, with the ratio of the inputs and outputs of another
comparable person and finds that it is to his disadvantage and that they are being underrewarded
or over-rewarded. For example, when people of same educational
qualifications, age-group, experience-levels and levels of Intelligence quotient are placed,
the first to be employed might be placed in the regular cadre, while the subsequent
appointed persons could be placed in a contractual mode of appointment. Such practices
can bring forth feelings of inequity and de-motivation among the latter.
The referent with which employees choose to compare themselves is an important
variable in equity theory. The three referent categories have been classified as “other,”
“system,” and “self.” The “other” category includes other individuals with similar jobs in
the same organization and also includes friends, neighbors, or professional associates. On
the basis of information they receive through word of mouth, newspapers and magazine
articles on issues such as executive salaries or a recent union contract, employees compare
their pay with that of others.
The “system” category considers organizational pay policies and procedures and
the administration of this system. It considers organization-wide pay policies, both implied
and explicit. Precedents by the organization on matters of allocation of pay are major
determinants in this category. The “self” category refers to inputs-outcomes ratios that are
unique to the individual. It might reflect past personal experiences or other occupations
presently held. The choice of a particular set of referents is related to the information
available about referents as well as to their perceived relevance.
On the basis of the nuances of equity theory, when employees perceive any
significant inequity in their working conditions or pay, they might follow any one or more
of the following options:
a. Distort either their own or other’s inputs or outcomes;
b. Behave in some way to induce others to change their inputs or outputs;
c. Behave in some way to change their own inputs or outcomes
d. Choose a different comparison referent and /or
e. Give up and quit their jobs.
Goal setting theory of motivation: