Extrinsic Reward

Understanding the difference between intrinsic and extrinsic rewards is key to designing an effective motivation strategy within any organization.

What are extrinsic rewards?

Extrinsic rewards are external incentives given to motivate someone to take specific actions or achieve certain goals. These rewards can be tangible, like money, prizes, or gifts, or intangible rewards, such as praise, recognition, or promotions. These rewards are often used to encourage people to reach goals or improve performance.

While extrinsic rewards can be effective, they should be balanced with intrinsic motivation to promote long term engagement. When setting goals or objectives, it’s important to use these rewards as part of a broader strategy that aligns with larger goals and encourages commitment. Tracking progress and setting clear, measurable objectives can help ensure that these rewards drive the desired outcomes.

What are characteristics of extrinsic reward?

Extrinsic rewards are external incentives designed to motivate specific behaviors or actions. They can be tangible, like money or prizes, or intangible rewards, like praise or recognition. Typically given by others, such as managers or teachers, these rewards focus on achieving short-term goals or objectives rather than long-term growth. HBR’s research on motivating people identifies performance bonuses as the most commonly deployed extrinsic reward, though non-financial recognition often produces stronger long-term engagement effects.

While it can drive results, excessive reliance on extrinsic rewards may reduce intrinsic motivation, as individuals might become dependent on these external rewards rather than finding satisfaction in the activity itself.

Additionally, high stakes can sometimes lead to unethical behavior as individuals strive to earn the rewards. These rewards are perfect for setting goals and tracking progress toward specific actions or outcomes. However, they should be used carefully to ensure they align with the larger goals of the organization and do not undermine intrinsic motivation or lead to undesirable behaviors.

Why extrinsic reward can be useful?

Extrinsic rewards play a crucial role in driving motivation and achieving various goals and objectives within an organization. Here’s why they are effective:

1. Setting goals: These rewards help in setting clear goals and targets. By offering incentives, they motivate employees to complete tasks or reach specific milestones within a given time frame.
2. Encouraging specific behaviors: These external rewards can promote desired behaviors, like punctuality, attendance, or staying focused on tasks. They guide employees toward meeting company standards.
3. Improving performance: When linked to performance outcomes, extrinsic rewards push individuals to achieve better results. They provide a tangible incentive for meeting or exceeding expectations.
4. Ensuring compliance: Organizations can use these rewards to ensure adherence to rules and regulations. Employees are more likely to follow guidelines when rewarded for compliance.
5. Promoting skill development: Extrinsic rewards encourage the learning of new skills by offering incentives for mastering them. This promotes continuous growth and development within the team.
6. Creating accountability: By tying rewards to specific outcomes or standards, organizations can create accountability. Employees know they must meet certain expectations to receive the reward.
7. Achieving business objectives: Extrinsic rewards are instrumental in aligning individual efforts with broader business objectives. They provide a clear path toward reaching company goals.
8. Promoting teamwork: By rewarding collaborative efforts, extrinsic rewards encourage team members to work together effectively. This strengthens team dynamics and contributes to the achievement of larger goals.

Integrating these rewards into the goal setting process can significantly enhance motivation, accountability, and overall performance. This helps organizations to achieve their business objectives more efficiently.

Understanding the difference between intrinsic and extrinsic rewards is key to designing an effective motivation strategy within any organization. Both types of rewards play vital roles but in different ways.

Intrinsic vs. Extrinsic rewards

Understanding the difference between intrinsic and extrinsic rewards is key to design an effective motivation strategy within any organization. Both types of rewards play vital roles but in different ways.

Intrinsic rewards:

• Definition: Intrinsic rewards are internal motivators. They come from within the individual, driven by personal satisfaction or the inherent pleasure of completing a task. These rewards are closely tied to personal values, interests, and the desire for self-improvement.
• Examples: A sense of accomplishment, personal growth, employee satisfaction, and the joy of overcoming challenges are all examples of intrinsic rewards.
• Motivation style: Individuals who are intrinsically motivated often take on tasks for the personal gratification they provide, rather than for external incentives. They tend to be driven by their own goals and the big picture of what they want to achieve in life or their career.

Extrinsic rewards:

• Definition: Extrinsic rewards are external motivators provided by others, typically in the form of tangible rewards or recognition. These rewards are often used to encourage specific actions or behaviors that align with the organization’s goals and objectives.
• Examples: Bonuses, promotions, praise, awards, and other forms of recognition are common examples of extrinsic rewards.
• Motivation style: These rewards are effective in motivating individuals to achieve goals or objectives that are set by the organization. These rewards are particularly useful in situations where measurable outcomes or compliance with specific standards are required.

Comparison:

• Focus: Intrinsic rewards focus on the internal satisfaction and personal growth of the individual, while extrinsic rewards focus on achieving external goals and meeting specific targets.
• Application: Intrinsic rewards are often tied to long-term motivation and satisfaction, promoting a deeper connection to the work. In contrast, extrinsic rewards are typically used for short-term motivation, helping to meet immediate business needs or achieve specific outcomes.
• Balance: The most effective motivation strategies often combine both intrinsic and extrinsic rewards, recognizing the importance of personal fulfillment while also providing tangible incentives to meet organizational goals.

By utlizing both intrinsic and extrinsic rewards, organizations can create a more balanced and effective approach to motivating their employees, ultimately driving higher levels of engagement and performance. SHRM’s total rewards framework provides a structured approach to designing extrinsic reward programs that balance cost-effectiveness with motivational impact.

Extrinsic reward design is core to competitive total compensation strategy. A structured hiring plan and strong talent acquisition practices help organizations attract and retain top talent.

Frequently asked questions