Equity Theory

Suppose employee A gets a 20% raise and employee B gets a 10% raise. Will both be motivated as a result? Will A be twice as motivated? Will be B be negatively motivated?

Equity theory says that it is not the actual reward that motivates, but the perception, and the perception is based not on the reward in isolation, but in comparison with the efforts that went into getting it, and the rewards and efforts of others. If everyone got a 5% raise, B is likely to feel quite pleased with her raise, even if she worked harder than everyone else. But if A got an even higher raise, B perceives that she worked just as hard as A, she will be unhappy.

In other words, people's motivation results from a ratio of ratios: a person compares the ratio of reward to effort with the comparable ratio of reward to effort that they think others are getting.

Of course, in terms of actually predicting how a person will react to a given motivator, this will get pretty complicated:

1. People do not have complete information about how others are rewarded. So they are going on perceptions, rumors, inferences.
2. Some people are more sensitive to equity issues than others
3. Some people are willing to ignore short-term inequities as long as they expect things to work out in the long-term.

THE MAN WHO THINKS HE CAN:
If you think you are beaten, you are, 
If you think that you dare not, you don't, 
If you'd like to win, but you think you can't, 
It's almost certain you won't. 
If you think you'll lose, you've lost, 
For out in the world you'll find, 
Success begins with a fellow's will, 
It's all in the state of mind. 
If you think you are outclassed, you are, 
You've got to think high to rise, 
You've got to be sure of yourself before You can ever win a prize. 
Life's battles don't always go To the stronger or faster man, 
But soon or late the man who wins Is the man who thinks he can. 
Arnold Palmer, Champion Professional Golfer
NOTE: A copy of this inspirational poem hangs on the wall in Arnold Palmer's office. Arnie has made it a practice to read the poem at the start of each day. It serves him as a source of inspiration, courage and motivation that enables him to attack whatever problems and challenges that day might bring. It works for Arnie. It will work for you. Try it.