The Advantages and Disadvantages of Extrinsic and Intrinsic Reward Systems

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Feb 20, 2024

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The Advantages and Disadvantages of Extrinsic and Intrinsic Reward Systems Management is not a tree, it is a television set. As Daniel Pink explains in his TED talk, the idea of management was something created long ago and not a naturally occurring phenomenon. Science has spent many years studying management styles and reward systems, but there is a fundamental mismatch between their findings and the reality of management in most businesses today. Most business models focus on extrinsic reward systems as a means to drive productivity, but as Pink explained, once a task requires even a small amount of cognitive reasoning this system of extrinsic reward can be irrelevant or even harmful. Pink explains there is another reward system that works much more effectively for these tasks: intrinsic reward. Autonomy, a sense of purpose, a growing sense of mastery, and a sense of progress make up the fundamental aspects of intrinsic reward that Pink argues for. Both extrinsic and intrinsic reward systems have advantages. Extrinsic reward systems are quite effective in simple tasks that do not require higher-level thinking. They help create and reinforce a more rigid hierarchy and can allow for greater control over operations by management in situations that call for it. Intrinsic motivation, on the other hand, is more effective at driving innovation and productivity in positions and situations that require higher-level cognitive reasoning. One of the foundations of intrinsic thought is autonomy or choice. As they discuss in Chapter 7 of “Communicating at Work,” people are much more likely to respond well to the work of a team if they feel they directly contributed. This idea of an individual choosing what they work on and how to contribute to it is paramount in driving motivation in this model. Extrinsic and intrinsic motivation also both face challenges. Extrinsic reward systems can be highly effective, but only in a narrow band of situations for specific tasks. In the current business world, many of the situations in which extrinsic reward systems and motivation would flourish have been either outsourced or are falling prey to automation. Most of the remaining work left for employees in firms and businesses in the United States is of the kind that does not interact well with that form of motivation. Intrinsic motivation faces many challenges as well. Kenneth Thomas says in “The Four Intrinsic Rewards that Drive Employee Engagement” that to build a meaningful sense of purpose for your employees to engage with, you have to go beyond just profit. In today’s business society, most changes and decisions are linked directly with profit, and to better make use of an intrinsic motivation system, businesses would have to shift away from that hyper-focus on profit. Thomas also talks about creating an intrinsic reward system is not something that a Human Resources department can just come up with and is something that largely falls on the shoulders of the line managers. Managers today are largely trained relying on utilizing the carrot-and-stick method of reward and punishment, and it would be no small undertaking to retrain them to focus more on the foundations of intrinsic rewards and motivation. Moving from an extrinsic model of reward and motivation to a more intrinsic one would help drive innovation and productivity in many projects and business, those that require higher level thinking. While both styles have advantages and disadvantages, as Pink says there is a mismatch between what the science says and the reality of most business firms. More businesses should investigate focusing

more on intrinsic motivation if they, like Google and the Australian IT firm Atlassian, want to drive innovation in the rapidly changing economy. Management is a man-made phenomenon, and business can and should use the findings of science to improve management techniques.

References Adler, R., Maresh-Fuehrer, M., Elmhorst, J., & Lucas, K. (2019). Communicating at Work (12th ed., pp. 197-220). McGraw-Hill Education. Pink, D. (2009). The Puzzle of Motivation . Youtube.com. Retrieved 26 March 2021, from https://www.youtube.com/watch?v=rrkrvAUbU9Y&feature=emb_imp_woyt . Thomas, K. (2009). The Four Intrinsic Rewards that Drive Employee Engagement . Ivey Business Journal. Retrieved 26 March 2021, from https://iveybusinessjournal.com/publication/the-four-intrinsic- rewards-that-drive-employee-engagement/.

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