Self-inside: An employees experience in a different position inside his present organization. The referent chosen is a significant variable in equity theory. Referents: The four comparisons an employee can make have been termed as referents according to Goodman. A comparison has been made between 2 workers A and B to understand this point. J.Stacy Adams called this a negative tension state which motivates him to do something right to relieve this tension. While if this ratio is unequal, it leads to equity tension. Negative Tension state: Equity is perceived when this ratio is equal. D/I ratio (output-input ratio) is used to make such a comparison. While evaluating fairness, employee compares the job input (in terms of contribution) to outcome (in terms of compensation) and also compares the same with that of another peer of equal cadre/category.
Higher is individuals perception of fairness, greater is the motivation level and vice versa. As per this motivation theory, an individuals motivation level is correlated to his perception of equity, fairness and justice practiced by the management.
The core of the equity theory is the principle of balance or equity.
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