Let’s face it, we are not all equal, but we want to be treated fairly, with mutually beneficial relationships. Employees’ perception of being treated fairly affects their attitude and performance. So we need to be honest and fair to develop trusting relationship to motivate others. When managers are unfair and abusive, they can demotivate employees and hurt performance. Equity theory proposes employees are motivated when their perceived inputs equal outputs.

We compare our inputs (effort and so forth) and outputs (praise, recognition, pay, etc.) to those of relevant others. A relevant other could be a coworker or a group of employees from the same or different organizations. Notice that the definition says that employees compare their perceived (not actual) inputs to outputs. Equity may actually exist. We compare our inputs (effort and so forth) and outputs (praise, recognition, pay, etc.) to those of relevant others. A relevant other could be a coworker or a group of employees from the same or different organizations.

Notice that the definition says that employees compare their perceived (not actual) inputs to outputs. Equity may actually exist. Using equity theory in practice can be difficult, because you don’t know the employees’ reference groups and their views of inputs and outcomes. Managers can help control employee perceptions of fairness by following perception congruence. Managers should be aware that equity is based on perception, which may not be correct. Managers should not play favorites but instead should treat employees equally but in unique ways.