Extrinsic Vs. Intrinsic Employee Rewards

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A close-up of co-workers in a team huddle.
A close-up of co-workers in a team huddle. (Image: BartekSzewczyk/iStock/Getty Images)

Motivating employees with incentives and rewards is one way to improve performance and increase revenue generation. It can also be a model for improving employee morale, provided it’s done correctly. Attempting to motivate employees in high-pressure or unsustainable ways, on the other hand, can backfire and decrease morale.

Positives of Intrinsic Rewards

When a staff member is intrinsically motivated toward a goal, she is prompted to do something because the reward provides some degree of internal, personal or professional fulfillment. For example, allowing staff members to take paid work hours to do community service projects of their choice is an intrinsic reward that allows them to be compensated for donating their time to what they consider a worthy cause. This provides employees with a sense of personal fulfillment while also creating a sense of goodwill toward their employer.

Negatives of Intrinsic Rewards

Not all people are motivated by intrinsic rewards, particularly when it comes to the workplace. Intrinsic rewards might not be effective for employees who aren't looking for a feel-good approach to work and for whom promotions, public accolades or increased responsibilities are not valued. An intrinsic reward system may not be the best approach for staff members who prefer to be recognized or rewarded with monetary compensation.

Positives of Extrinsic Rewards

Extrinsic rewards work from the outside in. For example, an employee who reaches a team objective as part of a collective effort is being extrinsically motivated by peer pressure to succeed. An example of this type of reward is a shared group bonus that is only given out if the entire team reaches a predetermined earning objective. This type of reward system can be effective, because it forces all team members to pull their weight or be subject to the disappointment and disrespect of the group.

Negatives of Extrinsic Rewards

Extrinsic reward programs can intimidate low-performing staffers and frustrate high achievers. For example, if both your top- and lowest-earning salespeople equally share in the reward offered for a group earnings goal, the high achiever may resent having to carry lower earners. A low earner may feel more pressure because he understands that winning or losing the group reward can be directly affected by his performance. This is a negative for staffers that don't perform well under pressure, as well as for those who feel they should receive a bigger piece of the pie for making “above and beyond” contributions.

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