Importance of Equity to an Employer & an Employee

There is not one person or entity solely responsible for workplace equity and workplace equality. Many organizations require employees at every level to acknowledge their understanding of the company’s equal opportunity and nondiscrimination policies. Adhering to the company’s policies amounts to equality in the workplace. Workplace equity and equality in the workplace often are used interchangeably, but workplace equity refers to the relationship between intrinsic workplace behavior and psychology and the extrinsic rewards for employee behavior.

Workplace Equality vs. Equity Theory

The textbook definition of equity is simple and straightforward – equity means impartiality and fair treatment of others. Fair and equal treatment is the responsibility of every person, regardless of their power, influence, position or role. Workplace equity is a standard, meaning that everyone who works for an organization receives fair treatment and that the organization's policies prohibit discrimination in any form.

What is not always so simple and straightforward is equity theory and how employees and their employers operationalize equity theory. Equity theory refers to the give-and-take synergy between employee and employer. Understanding equity theory is critical because it explains how employees demonstrate their side of the equation and how an organization can overcome equity problems in the management of personnel.

Equity Theory

Many human resources practitioners rely on behavioral psychologist John Adams’ 1960’s-era equity theory. Adams’ theory refers to how satisfied employees are, the measurement of which typically involves two types of motivation – content motivation and process motivation. He believed that, to be “motivated, individuals need to perceive that the rewards they receive for their contributions are fair, and these rewards are similar to those received by their peers.”

Content motivation refers to what employees need, whether it’s money, prestige, power or any number of things employees require to be satisfied and engaged in their work. Process motivation includes an employee’s actions and thoughts as the underpinnings of motivation. Where work is concerned, process motivation could be as elementary a concept as putting in more effort to one’s job (process) and seeing the results of that effort (content). In looking at the relationship between the effort and the result, equity exists when there is parity between the effort and the result.

Equity Theory in Practice

The employer and the employee both play a part in putting equity theory into practice. For example, consider process motivation as the employee who typically works only Monday through Friday, 9 to 5, putting forth the extra effort by devoting their weekend to working on a high-profile project. When that employee receives something in return – a monetary reward, pat on the back or their manager’s praise during a staff meeting – that’s content motivation.

Employees who need those types of tangible or intangible rewards are encouraged by them. In the ideal employer-employee relationship, the cycle repeats itself, and the result is workplace equity or equity in reward management. However, when that employee puts forth extra effort and doesn’t receive any recognition, or the content of the recognition isn’t what the employee needed, that’s when there are equity problems in the management of personnel, or simply, no equity.

Workplace Equality and Equity Theory

Workplace equality plays an important role in equity theory. If the organization routinely rewards men with generous bonuses for going above and beyond, yet rewards women who put forth similar or greater effort with a pat on the back, this practice could get an employer in hot water, not to mention causing both men and women to wonder if working for the organization results in their needs being met.

An organization that makes it a habit to ensure individual equity in compensation generally will regularly assess its compensation strategy and structure. On an annual basis, organizations that review their compensation practices will be a step ahead of companies that don’t recognize the importance of equity in reward management. By assessing compensation practices and structure, employers evaluate how their rewards system addresses employee effort, or process motivation, and how the company adequately rewards employees for their efforts.