The Coaching Effect Blog

The Coaching Effect Blog

    Rewards Part 1: Understand Intrinsic Rewards vs Extrinsic

    by Kristi Shoemaker / March 12, 2012

    This is the first of a three part series on how to use rewards to drive sales performance and enagement. Motivational dynamics have changed dramatically to reflect new workIncentive Program Graphic requirements and changed worker expectations. One of the biggest changes has been the rise in importance of psychic, or intrinsic rewards, and the decline of material or extrinsic rewards. This information comes from a powerful article we found on Rewards and Recognition written by Kenneth Thomas, author of Intrinsic Motivation at Work: What Really Drives Employee Engagement. Compensation and bonuses are no longer enough to keep sales employees engaged and motivated.   Kenneth Thomas draws upon recent research to explain the popularity of intrinsic rewards and how these rewards can be used to build a high-engagement culture. Enjoy!

    I have been researching workplace motivation for about 30 years and I’m amazed at how much has changed recently. Automation and off-shoring have eliminated most of the highly repetitive jobs in the U.S., while global competition has produced flatter, more responsive organizations that require employees to use judgment and initiative to a much greater extent. Over this same 30-year period, the proportion of American workers who say that their work is meaningful, allows them discretion, and makes use of their abilities has more than doubled—from less than one third to about two thirds. In addition, younger workers now come to organizations with different expectations than their parents. Raised during an era of rapid technological change and instant access to data, they respond best to work that is more meaningful, allows them to learn cutting-edge skills, and lets them find their own ways of accomplishing tasks.

    Most of the motivational models used today were developed in earlier eras, when work and workers were different. That is why my colleagues and I developed models and strategies of motivation that better reflect the changes in today’s work dynamics. In doing so, we discovered that intrinsic rewards have become more important and more prevalent in the workplace today. This article will describe the reasons for this increase and why intrinsic rewards are so important today.

    Extrinsic and intrinsic rewards

    Extrinsic rewards—usually financial—are the tangible rewards given employees by managers, such as pay raises, bonuses, and benefits. They are called “extrinsic” because they are external to the work itself and other people control their size and whether or not they are granted. In contrast, intrinsic rewards are psychological rewards that employees get from doing meaningful work and performing it well.

    Extrinsic rewards played a dominant role in earlier eras, when work was generally more routine and bureaucratic, and when complying with rules and procedures was paramount. This work offered workers few intrinsic rewards, so that extrinsic rewards were often the only motivational tools available to organizations.

    Extrinsic rewards remain significant for workers, of course. Pay is an important consideration for most workers in accepting a job, and unfair pay can be a strong de-motivator. However, after people have taken a job and issues of unfairness have been settled, we find that extrinsic rewards are now less important, as day-to-day motivation is more strongly driven by intrinsic rewards.

    The intrinsic rewards in today’s work

    To identify these intrinsic rewards, we began by analyzing the nature of today’s work. Basically, most of today’s workers are asked to self-manage to a significant degree—to use their intelligence and experience to direct their work activities to accomplish important organizational purposes. This is how today’s employees add value—innovating, problem solving and improvising to meet the conditions they encounter to meet customers’ needs.

    In turn, we found that the self-management process involves four key steps:

    1. Committing to a meaningful purpose
    2. Choosing the best way of fulfilling that purpose
    3. Making sure that one is performing work activities competently, and
    4. Making sure that one is making progress to achieving the purpose.

    Each of these steps requires workers to make a judgment—about the meaningfulness of their purpose, the degree of choice they have for doing things the right way, the competence of their performance, and the actual progress being made toward fulfilling the purpose. These four judgments are the key factors in workers’ assessments of the value and effectiveness of their efforts—and the contribution they are making.

    When positive, each of these judgments is accompanied by a positive emotional charge. These positive charges are the intrinsic rewards that employees get from work, ranging in size from quiet satisfaction to an exuberant “Yes!” They are the reinforcements that keep employees actively self-managing and engaged in their work.

    The following are descriptions of the four intrinsic rewards and how workers view them:

    • Sense of meaningfulness. This reward involves the meaningfulness or importance of the purpose you are trying to fulfill. You feel that you have an opportunity to accomplish something of real value—something that matters in the larger scheme of things. You feel that you are on a path that is worth your time and energy, giving you a strong sense of purpose or direction.
    • Sense of choice. You feel free to choose how to accomplish your work—to use your best judgment to select those work activities that make the most sense to you and to perform them in ways that seem appropriate. You feel ownership of your work, believe in the approach you are taking, and feel responsible for making it work.
    • Sense of competence. You feel that you are handling your work activities well—that your performance of these activities meets or exceeds your personal standards, and that you are doing good, high-quality work. You feel a sense of satisfaction, pride, or even artistry in how well you handle these activities.
    • Sense of progress. You are encouraged that your efforts are really accomplishing something. You feel that your work is on track and moving in the right direction. You see convincing signs that things are working out, giving you confidence in the choices you have made and confidence in the future.

    Learn how to set up a successful sales reward and recognition program by listening to our webinar titled "Simplifying Sales Incentive Programs: Learn the Critical Elements in Design and Set Up"

    Read more about the Compensation / Rewards / Recognition Pillar


    About The Author:

    Kenneth Thomas
    Kenneth W. Thomas is an emeritus professor, researcher, and developer of training materials. He is co-author of the best-selling Thomas-Kilmann Conflict Mode Instrument (TKI), and the author of Intrinsic Motivation at Work: What Really Drives Employee Engagement (Berrett-Koehler, 2009). This article is based on the book.

    previous post Sales Team Talent: Can Be Acquired By Hope or By Plan
    Next Post Rewards Part 2: 4 Intrinsic Rewards That Drive Employee Engagement
    Kristi Shoemaker

    Kristi Shoemaker

    Kristi is a marketing communications and public relations expert with over 30+ years of experience in a variety of industries. She was an integral part of EcSell's go-to-market strategy and execution from 2008 - 2012. Kristi enjoys taking a holistic approach by integrating all the key marketing disciplines to create synergies that generate maximum results. She is currently the president of KLS Consulting in Lincoln, Nebraska.

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