Equity Theory

People compare inputs and outputs to other to determine fairness.

One of the ways people determine fairness is by comparing our inputs and outputs to others around us. If we put in more work than other team-members, and get the same or less back, that is unfair. As a manager, you need to be able to recognize and reward good work from your team members.

People also have different tolerance levels for imbalances in equity. Equity-sensitive people want things to be fair. Benevolent people are more willing to accept less for more inputs. Entitled expect to get more than others, for less inputs. Entitled personality types can create major issues within an organization.

One common example of equity theory in action is game pricing. If people pay full price for a game, and the price is dropped soon after, the full-price payers will naturally feel shafted. It is tempting to put your game on sale quickly to get a sales volume boost, but doing so can actually reduce total revenue (due to consumer surplus) and foster feelings of unfairness. Pissing off your community can hurt future sales potential, word of mouth, and give your studio a poor reputation going forward.

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