Equity Theory vs Expectancy Theory: Understanding Workplace Motivation

Motivation theories attempt to explain why people choose to direct effort toward certain goals rather than others. Among the most influential in organisational settings are Adams' equity theory and Vroom's expectancy theory. Both offer valuable insights for HR professionals, but they approach motivation from fundamentally different angles. Understanding when each applies helps you analyse workplace situations more effectively and recommend appropriate interventions.

Equity theory focuses on fairness and social comparison. It asks: do employees perceive that they're being treated fairly relative to others? Expectancy theory focuses on rational calculation. It asks: do employees believe their effort will lead to valued outcomes? These different starting points lead to different implications for HR practice.

Adams' Equity Theory

John Stacey Adams developed equity theory in 1963, proposing that employees evaluate their treatment by comparing their input-to-outcome ratio against the ratios of relevant others. Inputs include effort, skills, experience, education, and anything else employees feel they contribute. Outcomes include pay, benefits, recognition, status, and anything else employees receive in return.

When employees perceive their ratio as roughly equal to comparison others, they experience equity and feel fairly treated. When they perceive inequality—either under-reward or over-reward—they experience tension that motivates behaviour change.

Under-reward is the more common and problematic perception. An employee who believes they contribute more than a colleague but receives the same pay experiences inequity. This creates psychological discomfort that demands resolution. The employee might reduce their inputs (working less hard), attempt to increase their outcomes (requesting a raise), distort their perceptions (convincing themselves the situation is actually fair), change their comparison other (finding someone who makes them look better off), or leave the situation entirely.

Over-reward also creates tension, though people tolerate it more easily. Someone who perceives they receive more than they deserve relative to others might increase their inputs (working harder to justify their rewards) or distort their perceptions (deciding they really do deserve what they get). In practice, people adjust to over-reward quite quickly, resetting their expectations to treat their current situation as the baseline.

The choice of comparison other significantly affects equity perceptions. Employees might compare themselves to colleagues in similar roles, to people doing different jobs in the same organisation, to friends working elsewhere, to their own past situations, or to generalised market rates. Different comparisons can produce different equity judgments about the same objective situation.

Implications for HR Practice

Equity theory highlights the importance of perceived fairness in reward systems. Pay transparency, clear criteria for rewards, and consistent application of policies all help employees see the system as fair. When employees understand why some people earn more than others and see the logic as legitimate, they're more likely to accept differences without experiencing inequity.

The theory also warns against creating obvious inequities. Paying new hires more than existing employees in similar roles, giving bonuses to some teams but not others without clear justification, or allowing managers to play favourites with recognition all risk triggering equity concerns. Even if the organisation has good reasons for differential treatment, employees who don't understand those reasons may perceive unfairness.

Communication matters enormously. Employees often have incomplete information about others' inputs and outcomes. They may overestimate what colleagues receive or underestimate what colleagues contribute. Providing more information—within appropriate limits—can sometimes resolve equity concerns that stem from misperception rather than actual unfairness.

The theory suggests that underpaying high performers is particularly risky. These employees have strong inputs to point to, making under-reward especially salient. They also have more options to leave for better treatment elsewhere. Retaining top talent requires ensuring they perceive equitable treatment.

Vroom's Expectancy Theory

Victor Vroom introduced expectancy theory in 1964, proposing that motivation depends on three beliefs: expectancy (will effort lead to performance?), instrumentality (will performance lead to outcomes?), and valence (do I value those outcomes?). Motivation is highest when all three are strong; if any approaches zero, motivation suffers.

Expectancy refers to the belief that effort will translate into successful performance. This depends on having the necessary skills, resources, and information to perform effectively. An employee who doubts their ability to complete a task, or who lacks the tools to do so, has low expectancy regardless of what rewards might follow success.

Instrumentality refers to the belief that performance will actually lead to promised outcomes. If an employee performs well, will they really get the bonus, promotion, or recognition they expect? Past experience heavily influences instrumentality beliefs. Organisations that consistently deliver on promises build high instrumentality; those that renege on commitments destroy it.

Valence refers to the value an employee places on the potential outcomes. A bonus matters little to someone who prioritises time off. A promotion may be unappealing to someone who doesn't want additional responsibility. Public recognition might embarrass an introverted employee. Valence is personal—what motivates one person may leave another indifferent.

The theory suggests motivation is multiplicative: Motivation = Expectancy × Instrumentality × Valence. If any component approaches zero, overall motivation approaches zero regardless of the others. High valence outcomes linked to high instrumentality deliver nothing if expectancy is absent—the employee simply doesn't believe they can achieve the performance required.

Implications for HR Practice

Expectancy theory emphasises the importance of clear, achievable performance standards. If employees don't understand what constitutes good performance or believe the standards are impossible to meet, expectancy suffers. Goal-setting practices should ensure targets are challenging but realistic, with clear criteria for success.

Building expectancy also requires attention to ability and resources. Training that develops necessary skills, tools that enable effective work, and information that guides decision-making all strengthen the belief that effort can translate into results. The AMO model's emphasis on ability connects directly to expectancy—without capability, employees cannot expect effort to succeed.

Instrumentality requires organisations to deliver on their promises. Incentive schemes only motivate when employees believe payouts will actually occur. Development opportunities only attract when past participants actually progressed. Every broken promise erodes instrumentality, making future promises less motivating. Consistency and follow-through build the credibility that makes rewards effective.

Valence reminds us that rewards must match what employees actually want. This argues for choice in reward packages, personalised recognition approaches, and understanding individual preferences. The assumption that everyone values the same outcomes leads to motivational systems that work for some employees while failing to engage others.

Comparing the Two Theories

Equity theory and expectancy theory offer complementary rather than competing perspectives. Equity theory focuses on the social context of motivation—how employees evaluate their treatment relative to others. Expectancy theory focuses on the individual calculation of effort, performance, and outcomes. Both processes operate simultaneously.

An employee might have high expectancy (believing they can perform well), high instrumentality (trusting that performance leads to rewards), and high valence (wanting those rewards), yet still feel demotivated if they perceive inequity—seeing colleagues receive more for similar contributions. Conversely, an employee might perceive perfect equity but lack motivation if they don't value available rewards or doubt their ability to perform.

The theories also differ in their practical focus. Equity theory directs attention to fairness in how rewards are distributed across people. Expectancy theory directs attention to the clarity of links between effort, performance, and outcomes for individuals. Both perspectives are necessary for effective reward system design.

When diagnosing motivation problems, consider both frameworks. Is the issue that employees don't see connections between effort and outcomes (expectancy theory)? Or is it that they perceive unfair treatment relative to others (equity theory)? The appropriate intervention depends on accurate diagnosis.

Applying Both Theories in CIPD Assignments

CIPD assessments often ask you to analyse motivation issues or recommend approaches to improving engagement. Using both theories demonstrates sophisticated understanding of workplace motivation.

Start by identifying which theory best explains the situation at hand. If the case involves employees comparing themselves to others and perceiving unfairness, equity theory provides the analytical framework. If the case involves employees who don't see the point of effort or doubt that performance leads to rewards, expectancy theory applies. Often both dynamics are present.

Apply the theories specifically to your case rather than simply describing them generically. What are the inputs and outcomes employees are comparing? Who are the comparison others? What are the expectancy, instrumentality, and valence beliefs in this situation? Specific application demonstrates deeper understanding than abstract description.

Consider the practical implications of each theory for your recommendations. If equity is the issue, what would restore fairness perceptions? If expectancy is low, what would build confidence in the effort-performance link? If instrumentality is weak, how can the organisation rebuild trust that rewards follow performance? If valence is low, what outcomes might employees actually value?

Where appropriate, acknowledge limitations. Both theories assume relatively rational processing of information, which may not capture emotional or intuitive aspects of motivation. Both focus on individual motivation without fully addressing group dynamics. Noting these limitations while still using the theories constructively demonstrates critical thinking.