Should
Companies focus on Financial Incentives or Intrinsic Motivators?
Source: IDE
736: Reflection 3: Intrinsic vs. Extrinsic Motivation (olieide736.blogspot.com)
Usually, we think that the best way
to boost productivity is by of monetary incentives. Many organizations are
focused on financial incentives that serve as extrinsic motivators.
However, extrinsic motivation becomes a way to manipulate behavior rather than
inspire desired outcomes. Nevertheless, to achieve the goal of leading an
innovative, collaborate and adaptive workforce, intrinsic motivation is
important (Cohen Bendon, 2021).
Just what is Extrinsic Motivation.
It is behavior driven by external rewards such as money, fame., grades and
praise. Using financial incentives as a motivator assumes that people are
economically driven and completely rational. However, assumptions are often
disproved by empirical findings and facts. Even if money is a motivating
factor, it is more often than not going to produce temporary results. One of the researches done by Daniel Kahneman
and Angus Deaton in 2010 found that once people earned more than $75,000, their
daily levels of emotional well-being did not continue to improve with more
money (Cohen Bendon, 2021).
Further research states that
companies are blindly using financial incentives to motivate and retain
employees. However, in today’s business context where there involves higher
concentration, problem-solving and creativity financial incentives do more ham
than good. Researchers at the Massachusetts Institute of Technology (MIT) and
the University of Chicago found that high reward levels can have negative
effects on performance. In the experiments that was conducted with diverse
participants around the globe they found that financial incentives led to worse
performance in 90% of the task. More research over the decades in this subject
show that punishments including threats, tight deadlines, evaluations and
imposed goals will destroy motivation (Santos, 2021).
Therefore, if companies that
provide rewards and punishments does not work, what should they do instead?
Then organizations should support intrinsic motivation instead of financial
incentive (Santos, 2021).
Daniel Pink in his book Drive: The
Surprising Truth About What Motivates Us states that in order to optimize
employee performance and productivity is intrinsic motivation. He further
states that the best type of motivation is driven by autonomy, mastery and
purpose. Motivational researchers Richard M. Ryan and Edward Deci define
intrinsic motivation as the inherent tendency to seek out novelty and
challenges, to extend and exercise one’s capacities. To explore and to learn.
According to them, intrinsically motivated are more interested, excited and
confident. This will aide them to perform better, persist in the face of
challenges and be more creative. Intrinsic motivators seek to learn something
better and faster than those who are forced to do so. Therefore, company
culture can either bring out or diminish people’s intrinsic motivation. Thus,
companies should focus on creating conditions that foster intrinsic motivation
(Santos, 2021).
As told above for intrinsic
motivation to take place, companies should focus on autonomy, mastery and
purpose. The following will delve into these motivational drivers:
Companies should reward employees
with autonomy. This
is letting employees make their own decisions, pursue their own goals, come up
with their own ideas and direct their own lives. For instance, at Google,
employees are provided 20% of their paid work time to pursue personal projects.
A few of Google’s best-known products such as the Gmail came out of this. As a
result, autonomy is good for companies because it drives innovation and great
for employees because it makes them happier (Santos, 2021).
Companies should encourage
employees to pursue mastery.
It is natural for human beings to get satisfied from improving their skills.
That is why we all spend unpaid hours to learn or hone something we like to get
better at. In employees pursuit of mastery, companies can acknowledge
employees’ improvements to performance as well as provide them with ample
opportunities. For example, web software company Basecamp provides its
employees from their first year on the job with continuous education allowance
about S1000 annually to learn something new whether its related to the job or
not. Such companies are leveraging employees’ natural desire to get better at
what they do as a way to keep them intrinsically motivated (Santos, 2021).
The third thing company should
focus is to give them employees a purpose instead of financial incentives. It means companies
should create a purpose behind what they do. This will assist the company to
hire and retain talent based on its own culture. Moreover, these organizations
provide their employees a sense of satisfaction and genuine feeling that they
are making the workplace a better place where they create better products and
deliver better service (Santos, 2021).
What should be done?
In the current business context,
bonuses and commissions will not make employees work harder or better. Nor will
threats, deadlines and micromanaging. The key to making the employees happier,
engaged, motivated and retained is to empower them to make their own decisions
about how to work, give them opportunities to improve their skills and provide
them with an inspiring vision to work (Santos, 2021).
Conclusion
In winding up, leaders and
employees should work together to achieve a workplace that values intrinsic
motivators over financial incentives (Jason, et al. 2018). So my research delve
into what organizations should reward as motivators. My research discussed why
monetary rewards were not suitable because it was short term and whereas
intrinsic motivation evolves with us as we grow and helps develop our own
incentives to do great work (Falk, 2023).
References:
Cohen
R.B. (2021) Mind our Incentives: An Argument for Instrinsic Motivation’, Linkedin,02
March. Available at: Mind
our Incentives: An Argument for Intrinsic Motivation (linkedin.com)
(Accessed: 12 December 2023).
Falk, S. (2023) ‘Understanding the
Power of Intrinsic Motivation’, Harvard Business Review, 08 March.
Available at: Understanding
the Power of Intrinsic Motivation (hbr.org)(Accessed: 12 December 2023.
Jason N. et al. (2018) ‘The Incentive Dilemma: Intrinsic Motivation and
Workplace Performance’, Journal of the American College of Radiology, 16(1),
pp. Not Available. doi: 10.1016/j.jacr.2018.09.008.
Santos
M. (2021) ‘Can Financial Incentives Combat the Great Combat Resignation?’, TextExpander,
04 March. Available at: Can
Financial Incentives Combat the Great Resignation? (textexpander.com)
(Accessed: 12 December 2023).
Intrinsic motivation was first based on people’s needs and drives. Hunger, thirst, and sex are biological needs that we’re driven to pursue in order to live and be healthy. Just like these biological needs, people also have psychological needs that must be satisfied in order to develop. intrinsic motivation has a long-term effect both at the personal and organizational level. To handle Gen Z, I think this is the best motivation factor, along with the prospect of any financial incentives.
ReplyDeleteYes, organizations needs to focus on intrinsic motivators and relating it with financial rewards. Likewise, employees will be more motivated to perform.
DeleteAdding to the above, to successfully integrate Generation Z in organizations, employers need to understand and focus on their motivations, strengths and weaknesses and work out how to balance these against the perspectives, skills and work styles. Because there is nothing this generation loves more than to play a part in the development of its own destiny (Sparrow, 2017).
DeleteReference:
Sparrow, J. (2017) 'How to engage Generation Z- and why it's vital to the future growth of organizations in Hong Kong', Chartered Institute of Personnel Management, 12 April. Available at: https://www.cipd.org/uk/about/news-archive/engage-generation-z-hong-kong/ (Accessed: 17 December 2023).
Your enlightening research emphasizes the significance of intrinsic motivation in the workplace. As you pointed out, financial incentives are frequently transient and might not be useful in the long run. On the other side, intrinsic motivation is a highly valued trait that may support workers' success and productivity. It is the innate propensity to look for new experiences and challenges, to grow and push oneself, to explore, and to learn. Extrinsic motivation is an external incentive to participate in a particular activity, particularly motivation resulting from the anticipation of punishment or reward, such as doing a detested duty in exchange for cash. In contrast, intrinsic motivation is based on internal motivations like delight or interests(Neuhaus,2021).
ReplyDeleteAccepting that implementing a culture of intrinsic motivation comes with its own set of challenges and discussing how organizations can overcome them will help better. And you have discussed the limitations of relying solely on financial incentives and promotes a shift towards intrinsic motivators is good.
ReplyDeleteWell in today's economy employees would naturally welcome financial incentives. However, if you remove the current economic impact in Sri Lanka, well then yes financial incentives alone would not be enough and 'intrinsic motivator' play a huge role. Employees would naturally feel engaged and motivated to do better and would have a sense of belonging.
ReplyDeleteDecades ago, yes employees were motivated by financial incentives. Employees can retain just with monetary compensation. However, currently, this is not the case. Because the employees can get the same or better monetary compensation from a different company. Presently, employees need monetary compensation as a need, but intrinsic motivation is the main drive to stay with the organization for the long term.
ReplyDeleteThis answers sums up all your responses.
Delete