Intrinsic vs Extrinsic Rewards in the Workplace

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Many employers struggle to figure out what the right incentive is to motivate their employees to intrinsically desire to push towards greatness. Many rely on external rewards, but for those who have a limited budget in the recession this option may not be financially viable. There are also those that while acknowledging the benefits and appeals of external rewards, recognise that these provide an extrinsic motivation, which is less likely to last in the long term, and also don’t work across the board like intrinsic motivation does.

For example, if you are offering to cover the cost of a team going out to dinner as a reward for them successfully completing a project, this may appeal to those who are extroverted or enjoy trying out restaurants in their spare time but is less likely to motivate an individual who is not interested in the activity. No matter what extrinsic rewards you offer, it is almost impossible to discover one that will provide motivation for every type of personality.

Before we get into the nitty gritty, let’s be clear on what intrinsic and extrinsic mean when it comes to rewards for your employees.

Definitions:

Intrinsic rewards are not tangible. For example, the sense of achievement and satisfaction you get from learning a new skill or the successful completion of a challenging project, or a project which you particularly enjoyed working on.

Extrinsic rewards can be tangible, like a trophy, as well as intangible, like the ability to work remotely. Extrinsic rewards can also be financial, such as a bonus, as well as non-financial, such as praise. They are offered by the employer to give employees an incentive to achieve a particular goal.

Sometimes you can gain intrinsic rewards off extrinsic rewards. When an employee receives a trophy or a raise as a thank you for their contributions to an organisation, they are also then likely to feel the sense of appreciation or satisfaction which we use to define intrinsic rewards. There can also be rewards which are carry elements of both. A promotion, for instance, would likely entail both a raise and a new title.

The problem with extrinsic rewards…

Extrinsic rewards are popularly used by many companies, and absolutely have the benefit of immediate satisfaction, but when they’re meant to increase or sustain employee engagement in something like employee mental well-being, the effects can be short-lived for most people. This is because the impact of extrinsic rewards dwindles when it comes to making a long-term difference if they are not increased.

Intrinsic rewards are necessary to driving sustained employee satisfaction, motivation and experience. The psychological aspect of intrinsic rewards which allow employees to feel seen and appreciated are vital for keeping them happy in the long term. A pay rise may provide a brilliant jump start for this motivation and happy mood, but to keep the employee’s motivation going, intrinsic rewards are the best way forward.

The problem with intrinsic rewards…

You can put all the processes in place to encourage feelings of achievement, but you first have to have an employee who is willing to engage. In some cases this may be an issue of employee mental health, and so may need your close attention and care, such as through a mental health first aider. In other circumstances it may be that your employee has lacked motivation while with your organisation for so long, that they lack the desire to even consider the incentive you are offering. This is why starting this practices from the get go is incredibly important to having an engaged and interested employee in the first place.

How can employers influence workplace productivity and employee wellbeing by creating motivation?

Support their passion and creativity

A major player in the value of intrinsic rewards is that it is reliant on the internal sense of achievement, which in turn leads to happiness. Since this is independently produced off an employee’s own work, they are motivated to recreate that feeling again and again. However, they must be allowed to be in these situations in the first place, where they are given the autonomy and freedom to work on a passion project. 

This is where the employer’s role is important, as they must delegate tasks to employee’s that feel a personal connection with, or desire for the project. When these projects are team efforts, it’s also essential to recognise creative collaboration and contribution. The Harvard Business Review has “encouraged managers to assign work fairly and to intervene when they found that the “superstars” on their teams were hogging glamour work while women and people of color wound up doing behind-the-scenes work.” as described by Alan Henry in their article for the New York Times.

Ensuring all employees are given opportunity to show you their best, increases the likelihood of them receiving the deserved recognition as a reward for something they put their effort and care into. This will increase their intrinsic motivation in the long term.

Create purpose

Intrinsic rewards are driven by purpose. A 2020 McKinsey & Company survey found that 82% of employees think it’s important that their company has a purpose, ideally one that contributes meaningfully to society. The first step to creating a sense of purpose in employee’s is showing that the company they work for has a purpose. Sharing on social media, as well as companywide emails and meetings the difference your company has made in the world is important. You do not have to be solving world hunger, but simply sharing success stories where you made a positive impact on something can create waves in your workforce. Perhaps you provide an important service to charities? Maybe your product can reduce someone else’s stress in some way? This all provides an incentive to your employees to get stuck in.

The second step in showing your employees what a significant role they play in this. This is where those intrinsic rewards coming out of extrinsic rewards comes into play. If you go out of your way to show them exactly the kind of impact their individual work had for your overall mission this will motivate your workforce as they will feel pride in the fact they have a role to play in something that is meaningful as they have been explicitly recognised for it. 

Nurture potential

External rewards can still be great for showing appreciation for a task well completed, however intrinsic rewards tend to provide a better incentive for your employees appreciating the process of their work which got them the end result, and all of the small achievements which took place along the way.

Recognising people’s potential can come in the form of praise, as well as offering to cover the cost of them taking qualifications which are relevant to their field of work.

This is the perfect example of intrinsically motivating someone through external rewards. When you invest in your employees it creates a sense of pride – an intrinsic reward – motivating them to prove to you that they can live up to it. When done in this way the incentive power of rewards really shines.

Both intrinsic and extrinsic rewards are needed in the workplace

Ultimately, the best rewards for giving your workforce a sense of autonomy and motivation is to offer the incentive of extrinsic rewards that lead to intrinsic rewards. This most likely comes in the form of recognition from colleagues, and praise from those that have worked with them. This not only builds up stronger workplace relationships, but also creates a motivation that is long lasting, and can be easily topped up.

Some ideas you could use include:

  •        Regular performance reviews
  •        Charitable company incentives
  •        Peer to peer recognition
  •        Employee’s achievements being public – such as on social media or your website

To make employee recognition easier than ever, we’ve recently introduced Appreciation, our employee recognition tool designed to facilitate peer-to-peer recognition. Allowing anyone in the organisation to send personalised recognition messages and to any team or individual doing great work. Appreciation encourages everyone to take ownership of recognition, meaning it’s not entirely reliant on your HR team to constantly be creating new reward schemes.

To learn more about how XCD Appreciation can motivate your workforce click on the button below to find out more on the Salesforce AppExchange.