We form perceptions of what constitutes a fair ratio (a balance or trade) of inputs and outputs by comparing our own situation with other 'referents' (reference points or examples) in the market place as we see it. Equity does not depend on our input-to-output ratio alone - it depends on our comparison between our ratio and the ratio of others. 'Referent' others are used to describe the reference points or people with whom we compare our own situation, which is the pivotal part of the theory.

Equity Theory adds a crucial additional perspective of comparison with 'referent' others (people we consider in a similar situation). Perception of equity But Adams' Equity Theory is a far more complex and sophisticated motivational model than merely assessing effort (inputs) and reward (outputs). Just the idea of recognition for the job performance and the mere act of thanking the employee will cause a feeling of satisfaction and therefore help the employee feel worthwhile and have more outcomes. It's the subtle variables that also play an important role for the feeling of equity.

According to equity theory, if an employee feels underpaid then it will result in the employee feeling hostile towards the organization and perhaps their co-workers, which may result the employee not performing well at work anymore. In any position, an employee wants to feel that their contributions and work performance are being rewarded with their pay. It's all about the money Payment however, is the main concern and therefore the cause of equity or inequity in most cases.

Adam equity theory of motivation pdf