Extrinsic rewards are the best motivation to drive performance Introduction
With global competition increasing by the day, finding the key ingredients that will give an organisation an advantage that will lead to success is vital. It is widely accepted and supported heavily be research that a motivated workforce will lead to better organisational performance. The purpose of this paper is to analyse the drivers of motivation in reference to organisational performance. Specifically the analysis will look at financial or extrinsic rewards and the impact they make to overall employee motivation. Wage incentives have been used to motivate employees since before preindustrial times, with the theory that a financial reward (including commissions, bonuses etc.) is liked to motivation and overall performance, with fair pay driving employees to accept task and unfair pay acting as a strong de-motivator. The overall effectiveness of financial reward has been largely debated, we will review both sides. Benefits of Extrinsic Rewards and how they drive motivation the definition extrinsic motivation (http://en.wikipedia.org/wiki/Motivation) comes from outside of the individual. Common extrinsic motivations are rewards like money and grades, coercion and threat of punishment. In this paper we will be focusing on pay and incentives such as bonus as extrinsic reward motivators. An individual’s wage is arguably the most important component on an employment relationship for both the employee and the organisation. This is because from an organisation point of view it represents a large expense and is used to compete in obtaining the best available skilled labour to impact the overall success of the business. And for an employee, it provides a standard of living and is an indication of the employee’s importance and/ or performance. Further extrinsic rewards such as cash bonuses, oversee trips and expense accounts can motivate employees to drive themselves to better performance due to the individuals personal drivers. These incentives allow the employee a perceived higher standard of living that is directly attributable to performing their job duties better. Monetary rewards are also generally directly attributed to a quantifiable performance outcome, (this can be perceived as negative if the employee has met the target) and can give the employee direction and clear goal to what success means to the organisation. Disadvantages of Extrinsic rewards to Motivation
Even though extrinsic rewards have been proven to motivate employee in achieving a performance outcome there is a dark side. Extrinsic rewards direct employs to focus on the reward not the action that gave them the reward therefore if you were to stop the reward you consequently stop the action. This is a significant problem as it suggest that the employees has only personal gain in mind and that the performance of the organisation is merely a consequence of them achieving the reward. In study from Deci (1975) two groups of college students paid and unpaid respectively were ask to work on a puzzle for a certain time. Interestingly the students that were receiving no financial reward demonstrated a higher interest in the task then those who were paid. The study demonstrated that the unpaid students found personal reward or intrinsic reward in the task and applied more effort leading to a better performance outcome. Further studies with students have shown that there are some significant consequences to extrinsic rewards and the impact to motivation. The found: •
Rewards change student's goal away from learning about & mastering the task •
Rewards undermine student's preference for optimal challenge. •
Rewards redefine when a task is completed, or finished.
Students become increasingly prone to a negative emotionality challenge was not met and rewards were not given Consequently, pay is a recompense that has a great impact in establishing employees’ diligence and...
References: J. Richard Hackman Yale University and Greg R. Oldham University of Illinois, (1976) Motivation through the Design of Work: Test of a Theory, Organizational Behaviour and Human Performance 16, 250-279.
Rupp, A. D. & Smith, W. T. 2003, ‘An examination of emerging strategy and sales performance: motivation, chaotic change and organizational structure’, Marketing Intelligence & Planning, vol. 21, no. 3, pp. 156-167
DECI, E. (1975) Intrinsic Motivation (New York: Plenum Press)
Berrett-Koehler, 2009, The self-management process is described in more detail in Kenneth Thomas, Intrinsic Motivation at Work,
Title and reference of article J. Richard Hackman Yale University and Greg R. Oldham University of Illinois, (1976) Motivation through the Design of Work: Test of a Theory, Organizational Behavior And Human Performance 16, 250-279.
Please join StudyMode to read the full document