Definition of Equity Theory
Equity theory which is also known as Adam’s equity theory outlines a necessary balance between an employee’s input and output in an organization. Input includes time, efforts, skill-set, motivation, technical knowledge. Output includes salary, perks, recognition, bonus, etc. in the form of awards by the company. If the employee finds the right balance between its input and outputs, it would lead to higher satisfaction and productivity.
If an employee senses that another employee is enjoying more output benefits as compared to him/her while both are putting the same level of inputs, it creates job dissatisfaction among the hard-working employee which leads to low productivity and motivation.