Extrinsic AND Intrinsic Rewards: NOT Extrinsic OR Intrinsic Rewards

There have been claims that extrinsic rewards can destroy intrinsic rewards. But these claims are supported only by lab research that lacks generalizability and is refuted by substantial field (aka real life) research that supports the opposite position. Yet the claims continue to show up periodically and they have wasted a lot of ink and speaking slots at conferences.

The need is for BOTH intrinsic and extrinsic rewards if employees are to be satisfied and motivated to do the right things. The most cited basic needs are

  • autonomy (being in control and having choices),
  • competence (being able to develop and use personal capabilities) and
  • relatedness (being a part of something significant).

And performance is a function of ability and motivation (a multiplicative formula). So if organizations are going to fulfill their missions and meet their objectives they must have the right people in the right roles doing the right things in the right ways for the right reasons. To put it simply they need motivated and satisfied people performing the work of the organization. That is more likely to happen if the people have their needs met. And their needs are more likely to be met if an organization creates well-designed roles.

A well-designed role sets the stage for both motivation and satisfaction. The research done on effective role design has provided the characteristics that must be present. Employees must be capable of doing what needs to be done, want to do what is needed, be allowed to do it and know what it is. And if they are to be motivated to put forth their best effort and to focus it on what the organization needs they need to feel they are rewarded in a manner that is fair, competitive and appropriate. If someone is to endure a thirty year career on an assembly line doing repetitive work they are going to expect adequate extrinsic rewards (aka, pay), to partially make up for poor role design and for the lack of intrinsic rewards. One characteristic of intrinsic rewards is that employees in effect have to give them to themselves, based on their own psychological makeup.

Someone deriving considerable satisfaction by doing things they value and in a way that provides the basic needs may place less emphasis on extrinsic rewards, since the intrinsic rewards may meet operative needs. And it is possible that they may derive satisfaction from receiving substantial extrinsic rewards (pay or recognition) since it signals their personal achievement.

But even if the amount of total rewards is adequate it is unlikely that an employee can be satisfied with only extrinsic or intrinsic rewards. The two are not related in a formulaic tradeoff function. That is, employees may be placed in roles that deliver a lot of both, a little of both or a mix of both. But there needs to be an adequate amount of both types of rewards if satisfaction is to manifest. What is puzzling to researchers is that subjects might seem satisfied and motivated even if there is little evidence of intrinsic rewards being available. Some people are upbeat and optimists and find coping strategies that minimize the unpleasant. Others cannot be satisfied even it they are showered with excessive amount of both types of rewards.

Some derive great satisfaction from doing error free work or out-producing everyone else even if they go home exhausted. Others derive satisfaction from figuring out how to do the least amount possible without being censured or terminated. Some will throw tennis balls at targets for long periods and enjoy the game. Others will find it pointless and view it is a punishment. As a result, researchers must adopt humble aspirations when setting out to support their hypotheses, unless they are capable of psychoanalyzing their subjects so they can adjust for inevitable differences between them. It is likely that the research study sample will include people with a variety of needs and taking an average of the group tells us little of value.

So let’s accept that those who receive acceptable amounts of both intrinsic and extrinsic rewards are more likely to be satisfied than those who do not. And let’s expect that organizations doing a better job of providing adequate amounts of both will have more effective workforces. It will open up a lot of print space and conference presentations so they can focus on important issues that really need to be addressed.