Equity Theory
Compensation is important to employees beyond the simple fact that most of us need money to pay our bills and buy the things we need and want. Employees also perceive that their compensation reflects how their firms and people around them value them as individuals. Compensation, therefore, is very important to employees and serves to motivate them at work. You probably already have studied a number of motivation theories in other classes, such as psychology. We introduced motivation theory in Chapter 4, when we described the job design process, and in Chapter9, when we discussed performance management, and we will talk more about motivation in Chapter11, when we discuss incentive pay. In this chapter, we introduce another theory of motivation: equity theory.