Intrinsic versus extrinsic rewards in employee motivation

Motivation: Intrinsic vs Extrinsic

Motivation plays a critical role in the success of an organization. Employees who are motivated to achieve organizational goals and targets leave a positive impression on the overall performance of that organization. While there are many theories and strategies concerning motivation, the one that is most critical is the debate regarding intrinsic and extrinsic rewards. Motivational theories like Maslow's theory or Vroom's expectancy theory fail to completely answer the question of which kind of reward is more important for motivation: intrinsic or extrinsic. For example can we truly motivate a person by showing him how extra effort on a task can enhance his knowledge or do we really need to attach a monetary reward with it? A student may be motivated to study harder for intrinsic reward like more knowledge and higher learning but without appreciation and recognition, will he continue to put in the effort simply for the sake of intrinsic reward? Before we delve deeper into the debate, we need to understand what is meant by each term. We shall then discuss if intrinsic rewards are really more important than extrinsic rewards for employee motivation.

Intrinsic Rewards:

Intrinsic rewards come from within. This would the most basic definition of the term. Intrinsic value of a work refers to the inherent quality of the job that excites or motivates a person. A student who studies for at least two hours a day and is deeply motivated by the idea of learning more and gaining higher knowledge in the subject is said to be intrinsically motivated. But the same student would be extrinsically motivated if he is looking for better grades or more recognition from professors and fellow students.

According to Weinberg & Gould (2003), there are three types of intrinsic motivation:

Knowledge

Accomplishment

Stimulation

A person who is motivated by knowledge factor would be interested in mastering the task he is assigned. He would want to be the best in the field for his own satisfaction and pride. Accomplishment is a related factor and a person is motivated by sense of accomplishment when he knows that doing a job perfectly gives me an internal sense of fulfillment. Stimulation refers to the sense of excitement that a job generates.

Extrinsic Rewards

Extrinsic rewards are dependent on others. They don't come from within a person. A man does a job well because he wants recognition and reinforcement from others. He may also be motivated by tangible rewards like more money, better title and enhanced power. There are four types of extrinsic rewards as identified by Weinberg & Gould (2003). These are

• Integrated regulation

• Identified regulation

• Introjected regulation

• External regulation

Integrated regulation is when a person chooses to perform a task to achieve another purpose. A person working out very hard to lose weight and not to master the routine itself is involved in this kind of extrinsic reward.

Similarly when a person is interested in identified regulation, he is basically attached to a task because it is considered of high value by others in his social circle.

Introjected regulation is a more forced type of reward where a person seeks extrinsic rewards because of various kinds of pressures like impressing others, getting recognition, and basically being the best for extrinsic rewards and not intrinsic value.

External regulating is the most common type of extrinsic reward like performing a task for money and bigger title.

Intrinsic vs. Extrinsic Rewards Debate

It is now being debated that while extrinsic rewards have their own place in motivation strategy, they cannot outweigh the power and force of intrinsic rewards. It is believed that for employee motivation, intrinsic rewards are now more important than extrinsic rewards. But that is not entirely true or even valid. There is no way an organization would develop a motivation plan and not involve extrinsic rewards. Every person needs some kind of recognition for a job well done. Even if he is performing the task for his own sense of fulfillment, it is an established fact that sooner or later he would want recognition for his good performance in monetary or non-monetary terms. For this reason, it is much better to link the two rewards and instead of undermining the role of one, we can say with certainty that intrinsic value of a job is enhanced or affected by extrinsic rewards. The effect can be either positive or negative and may not necessarily be positive. For example an employee chooses to do extra time on his job in order to learn more about a particular task, he may get outside of his department, connect with others and see how supply side works even if that is none of his concern. He is intrinsically motivated to learn but if he is recognized for this effort, he will be motivated to continue and may even expand his circle of voluntary duties. But if he is ignored, he may sooner or later lose interest and choose to stick to assigned tasks only. Extrinsic rewards may in some cases prove to have a negative impact on intrinsic motivation. For example if a person goes out of his way to take over more responsibilities simply to gain knowledge, the company may see this and in order to encourage him, offer him a monetary reward. The person who was doing everything for no reward in return may in due course of time find the monetary reward too negligible and either ask for bigger reward or simply stop taking on more work. In both cases, his intrinsic motivation would be negatively affected by extrinsic rewards.

One of the most important theories in this regard was propounded by Deci and Ryan and is known as Self-determination theory. Linking intrinsic value of a job with extrinsic rewards, they said people are motivated by three psychological factors relatedness, effectance and autonomy. Elaborating this theory, they further explained, "people are inherently motivated to feel connected to others within a social milieu (relatedness), to function effectively in that milieu (effectance), and to feel a sense of personal initiative in doing so (autonomy)" (p.7)