Intrinsic vs. Extrinsic Motivation in Financial Services
This paper examines motivational problems in the financial services industry, focusing on how the bonus-driven compensation culture contributed to short-term thinking and high-risk behavior that fueled the 2008 credit crisis. Using the theoretical lens of extrinsic versus intrinsic motivation, the paper contrasts Wall Street's bonus culture with alternative motivational models employed by Best Buy (Results Only Work Environment) and Google (20% time for personal projects). It argues that shifting away from externally driven incentives toward intrinsic motivators — such as autonomy, work-life balance, and passion-driven work — could foster greater employee loyalty, more responsible risk-taking, and long-term financial stability in the broader global economy.
- Introduction: Motivation and HR Performance in Financial Services: Bonus culture as dominant motivator in finance
- The Bonus Culture and Short-Term Thinking: How bonuses drove risky behavior and the 2008 crisis
- The Limits of External Motivation: Why salary and bonuses alone are insufficient motivators
- Intrinsic Motivation in Practice: Best Buy and Google: ROWE and 20% time as intrinsic motivation models
- Applying Intrinsic Motivation to Financial Services: Whether intrinsic models can reform finance culture
- Conclusion: Call for cultural shift away from bonus dependence
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What makes this paper effective
- Uses concrete, well-known corporate examples (Goldman Sachs, Best Buy's ROWE, Google's 20% time) to ground abstract motivational theory in real-world practice.
- Builds its argument progressively — identifying a problem, examining its consequences, exploring alternative models, and then attempting to extrapolate lessons back to the original industry.
- Maintains a balanced tone by acknowledging the limitations of intrinsic motivation models before proposing their application to financial services.
Key academic technique demonstrated
The paper uses comparative analysis to test a theoretical framework. By contrasting the extrinsic bonus model of Wall Street with the intrinsic motivation models of Best Buy and Google, it applies the internal/external motivation distinction as an analytical lens rather than simply describing it — showing how a theoretical concept explains real organizational outcomes.
Structure breakdown
The paper opens by defining the motivational problem in financial services and situating it historically. It then details the consequences of bonus-driven culture, particularly in the 2008 financial crisis. The middle sections present alternative motivational strategies from other industries as evidence for intrinsic motivation's effectiveness. The paper closes by asking whether these strategies can be adapted to financial services, ending with a normative recommendation for cultural reform.
Introduction: Motivation and HR Performance in Financial Services
Many HR performance issues stem from underlying motivational problems within the external work environment. As Clark (2010) observed, "Often an employee knows how to perform correctly, the process is good, and all resources are available, but for one reason or another, chooses not to do so, which normally means it is a motivational issue." In the past, during the era of scientific management, motivational issues were addressed by rigorously governing employee movement in a strict and controlled fashion. However, this approach can stifle employee creativity and enthusiasm for the task.
The most obvious motivator for most people to work is money. In the financial services industry, money is a major motivator in terms of how salary and compensation are structured. The expectation of a large Christmas bonus is designed to encourage workers to perform at a high level throughout the year. At some firms, 60% of the overall salary of financial workers is derived solely from bonuses (Pauly, 2009). However, this externally focused method of motivation has come under a great deal of criticism. This paper uses the theory of external versus internal motivation in financial services to examine whether different motivational factors could create greater financial stability in the world economy and a less short-term-focused workplace culture, drawing on examples of intrinsic motivators used in other industries.
References
Clark, D. (2010). Motivation and performance. Big Dog Little Dog. Retrieved from http://www.nwlink.com/~donclark/performance/motivation.html
Hollon, J. (2011). Weekly wrap: Best Buy and ROWE — Yes, flex work works, at least for them. TLNT. Retrieved from
Mediratta, B. (2007). The Google way: Give engineers room. The New York Times. Retrieved from http://www.nytimes.com/2007/10/21/jobs/21pre.html
Pauly, D. (2009). Wall Street's bonus culture: RIP. Businessweek. Retrieved from http://www.businessweek.com/investor/content/dec2009/pi20091214_441647.htm
Price, M. (2012). Getting to grips with finance's cultural problems. E-Financial News. Retrieved from http://www.efinancialnews.com/story/2012-08-13/getting-to-grips-with-finance-culture-problems
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