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Intrinsic and extrinsic rewards: The NEW reality!

By Doug Brown
| www.cos-mag.com

Now that all of the goals, plans and budgets are in place for the upcoming year, the focus is on “how to” achieve those goals. Has everything been communicated to the people responsible for the targets and goals? Is everyone in agreement and aligned with the direction of the organization and the department on how to get there? Most importantly, have you put the right metrics and motivators in place to inspire ALL employees to achieve the objectives defined?

No discussion of motivation would be complete without addressing the specific issue of intrinsic and extrinsic rewards. The starting point is to define these terms:

  • Intrinsic: rewards that are part of the job itself and the personal satisfaction of accomplishing something worthwhile (i.e., responsibility, challenge, autonomy, purpose and feedback; or rewards that are self-administered).
  • Extrinsic: rewards that are external to the job, i.e., pay, bonuses, promotion, incentives, fringe benefits or tangible awards; or rewards that are administered by someone else (i.e., the carrot)

What type of employee motivators are you using? What have you done in the past? Are they delivering the desired results? Most likely, you have used the tools and principles developed over the last 20, or even 50 years, and you are finding that they are not achieving the planned results or what they once did in the past. The common adage, “what gets rewarded gets done” doesn’t seem to be working as well as it has in previous years.

One topic that needs to be addressed is the perennial question, "What motivates people?" There have been many theories and studies on this question, with intrinsic versus extrinsic motivation often at the center of the discussion. Which strategy is more powerful or which is really the source of a person's actions has been the subject of much debate.

There have been many psychologists addressing motivational drivers from Maslow to Hertzberg, but new research is shedding some light on these topics that could surprise you. The new reality is that we have to design and ALLOW the right motivators to take shape in our organization to remain not only competitive but to excel in our respective markets. (No doubt, this type of discussion will be taking place in divisions of Toyota around the world.) We need to come to terms and embrace the motivators that work best as they not only depend on the individual involved (as we all respond to different stimulus) but also on the tasks or behaviours you are trying to motivate. Lineal thinking will likely achieve marginal results.

Many studies have shown that in certain situations, extrinsic motivators actually decreased employee performance. Why? Rewarded subjects often have a difficult time seeing the periphery and crafting solutions. This is not the type of creativity and excellence we need to nurture in our new economic reality. Perhaps it’s time for a reality check given that extrinsic motivators are still the primary source of motivational activity used by businesses and companies today.

What the key research shows is that there are three motivational drives:

1. Basic physiological needs

– food, shelter, etc.

2. The Carrot and the Stick

– punishment/pain for doing something wrong and the carrot/pleasure that is offered for doing something right or generating desired results.

3. Intrinsic Motivators

– autonomy, purpose and mastery.

Further research indicates that certain functions such as innovation and creativity are actually decreased by extrinsic motivators. The studies describe two types of job functions/categories:

  • Heuristic: One that requires insight, thought, creativity, imagination, innovation, etc.
  • Algorithmic: One that follows a set of established instructions and procedures

Many firms will have a combination of these types of job categories. The most important decision for business leaders and human resource professionals is to put the right employee engagement strategies in place that promotes instead of chokes creativity and excellence.


Doug Brown is President of DBC Marketing Inc. DBC Marketing provides strategies and solutions to companies that engage with employees and increase productivity. To learn more, or to contact Doug, click here.

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