Equity Theory

A basic overview of the fundamentals of equity theory as it relates to employee management.

This paper examines equity theory, a process theory that focuses on individuals’ perceptions of how fairly they are treated relative to others. It looks at how, while this theory initially related to pay, it can also be expanded and applied to other areas of workplace relations. It attempts to show how equity theory relates to various factors related to employee management and how, for any organization, there is a need to consider how individual employees and departments are treated in regards to salary, praise, awards, and involvement.
It is also important to note that equity theory applies to areas that go beyond just pay. Firstly, rewards can come in other forms such as praise, awards, and recognition. If some employees receive greater praise than others, this can result in situations that are perceived as inequitable. Issues of equity also commonly arise between departments. For example, consider a situation where the marketing department is always receiving praise for its accomplishments. More example sees on coursework writing. Other departments may be just as effective but their outputs are not as obvious. This can result in entire departments feeling that their contribution is not appreciated and can also cause conflict between departments. Another issues relates to involvement with the company.