Intrinsic and 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.

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)

But since self-determination theory did not focus much on extrinsic rewards, a revised version of the theory was proposed by Deci and Ryan which was called Cognitive Evaluation theory. According to Deci and Ryan (2000) CET explains what kind of extrinsic rewards have a bearing on intrinsic value of a job. The two important factors to consider are control and information. The information a reward transmits about a person enhances his or her intrinsic desire to do better. For example if a reward like a bigger title or a certification says that a person is truly competent, it would positively affect his performance and enhance intrinsic value. Similarly the control factor says a great deal about locus of causality. This factor focuses on where the control lies according to a person's perception. A job that is considered forced would mean a person believes he has to perform the task due to outside pressure and this is when locus of causality lies outside of his control. This type of control can lower a person's intrinsic motivation. Control of the other kind can positively enhance intrinsic motivation.

CONCLUSION

We can thus conclude that a person's motivation is not solely dependent on either intrinsic or extrinsic rewards. Instead they are both connected and if used effectively, one type of reward can enhance the other. However intrinsic motivation has an edge over extrinsic because while the latter can positively enhance the former, the former cannot be generated solely with extrinsic rewards. In other words, intrinsic motivation must be present for external rewards to work and positively affect employee motivation. Without intrinsic motivation, there is not much that extrinsic rewards can do to enhance organization performance or employee motivation.