Motivation Through Intrinsic Rewards

by | November 17, 2021 | Blog

“Monetary rewards are not a substitute for intrinsic motivation.” -W. Edwards Deming

By now we’re probably all aware of the labor shortage that’s occurring in a number of industries across the country. Everyone from McDonald’s to Walgreens to Synchrony Bank seems to have a “Help Wanted” sign plastered across their front doors.

In fact, in June, the American economy registered the most job openings in its history—more than 10 million and counting. As a result, many businesses have tried increasing wages as a way to attract new workers. But increasingly, employers are finding that offering more money or benefits isn’t as appealing as it may have once been. What’s changed?

For starters, the pandemic has caused people to reassess what’s important to them. Whether it’s safer work environments, more flexible hours, the ability to work remotely, or wanting to spend more time with their families, employees today seem to be taking into account factors that go beyond traditional considerations—namely financial rewards and benefits—of their work lives.

But everybody loves money, right? How can money not be the most important factor? While it’s true that money continues to play a significant role for people in their decision-making processes, the modern worker seems to be placing less emphasis on these sorts of extrinsic rewards, and more on intrinsic factors like happiness and personal wellbeing.

Extrinsic Rewards vs. Intrinsic Rewards: What’s the Difference?

First, a quick primer on the difference between extrinsic and intrinsic rewards. Extrinsic rewards tend to be financial, such as pay raises, bonuses, benefits, and promotions—in other words, cash-related. One of the key components of an extrinsic reward is that other people control it and determine its value. Intrinsic rewards, on the other hand, are often psychological and intangible. They include feelings of pride and personal fulfillment and come from within rather than without. When it comes to an intrinsic reward, it’s we who determine the value.

Extrinsic rewards have been common in the past, especially when the work being done was more repetitive in nature. Today, however, incentive-laden tasks for many workers have become more nuanced, unique, collaborative, and technology-driven. This increased complexity has made the effort required to complete these tasks opaquer and more skills-based, which in turn has made them more challenging to value.

Is this true even of sales? Of course, a sale is still a sale, measured in dollars and cents. However, even typical sales strategies are becoming more complex, often involving multiple touch-points and behaviors that can be rewarded for along the way. As a result, traditional incentive strategies that focus solely on extrinsic rewards may not effectively value the work of the modern salesperson.

Intrinsic rewards, on the other hand, are better suited for the complex tasks of today. The skills required for these tasks—creativity, critical thinking, collaboration, etc.—tend to be cultivated through a combination of training and motivation. While common training regimens can indeed be utilized to promote greater workplace efficiency, improving employee motivation is a bit less straightforward. Nevertheless, studies have shown that intrinsic rewards can play an important and strategic role in helping to develop this motivation.

Why Intrinsic Rewards Are Valuable

If we accept the premise that the modern worker requires motivation to maximize their potential, and that intrinsic rewards are an effective way to motivate, the question becomes how to create a strategy that focuses on these types of rewards.

A good place to begin may be with the cash vs. non-cash incentives debate. While people tend to perceive cash as more valuable and desirable compared to non-cash rewards, this perception doesn’t match the reality of the outcomes. That’s because overall, employee performances have proven superior when motivated by non-cash incentives.

There are a variety of reasons for this, many of which we’ve touched on previously. The chart below provides a quick summary:

Reason

              Cash

Non-Cash

Mental Accounting Used for utilitarian purposes such as gas or bills, which are quickly forgotten More unique and memorable
Appreciation vs. Entitlement After a cash reward is introduced, performance actually worsens from base levels if this reward is later taken away Viewed more as a reward or gift, and therefore, recipients tend to appreciate these more and connect them with the “giver”
Trophy Value People feel socially uncomfortable bragging about cash More visible, and therefore more likely to be displayed or talked about
The IKEA Effect People tend to feel less invested in the achievement of cash, because it is viewed more as compensation rather than a reward Recipients of non-cash rewards tend to overestimate their value because they are more invested in their achievement

 

As you may have guessed, non-cash incentives are typically viewed more as intrinsic rewards. In part, this is because the true value of these rewards is not financial. While an incentive trip, an expensive piece of merchandise, or a concierge-level experience all may cost a certain amount of money, the value of these rewards is uniquely dependent on the individual recipient. In other words, although $100 is $100 to everybody, a trip to Costa Rica will likely be viewed as more valuable to someone who has never traveled outside of the U.S.

Furthermore, non-cash rewards such as incentive trips can offer ancillary benefits that are also intrinsically motivating. For example, a trip that includes a Corporate Social Responsibility (CSR) component may enrich participants’ sense of self, deepen their connection to their community, and enhance the overall travel experience in a way that is both meaningful and memorable. This kind of experience—especially one in which the recipients themselves contribute to in some way—is nearly impossible to put a price on and can add significant intrinsic value to an already rewarding incentive.

Conclusion

As businesses continue to try to attract new employees with higher pay and stronger benefits, it’s possible that they may be overlooking a key component of the modern worker. For many, the desire to be intrinsically motivated feels more pressing now than ever before. Whether it’s the result of a “YOLO” generation finally coming of age, a global pandemic that has made us all reassess our values, or something else entirely, people today seem to want a greater sense of fulfillment from their work that goes beyond how they are compensated.

A strong work-life balance, more flexible schedule, and opportunities for growth all may become table stakes sooner rather than later. For employers, this means paying close attention to how their workers are being motivated, and perhaps offering rewards whose value is determined not by the organization, but by the workers themselves.

 

Need more incentive insights? Check out these related articles.

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