Extrinsic and intrinsic rewards – and how they affect employee Engagement

Do you know what rewards motivate your employees and make them want to not only remain employed in your business – but to inspire them to achieve higher levels of customer satisfaction and excellence?

Of course, this is not a simple or easy question to answer – as your workforce will be made up of an extremely diverse group of people who have differing wants and needs and discovering and instilling that one undiscovered factor that will excite and motivate each person to get to work and perform to their potential can often feel like a type of magic that you do not have the spell or wand for.

What role do rewards play in influencing employee engagement and motivation?

There are numerous surveys and studies that have looked at the question of why people work. It is too easy to say money as we all know money is not the main reason people spend most of their waking hours furthering the aims of their employing entity. However, we do know that people want to find meaning in the work they do and want to see opportunities for personal and professional growth and development. They also want to be satisfied that they are being rewarded fairly and that their rewards are aligned with the organisational culture.

This discussion looks at two primary categories for rewards and recognition and their impact on employee engagement and motivation.
Extrinsic rewards are usually financial or tangible rewards given to employees, such as pay increases, bonuses, and benefits. They are rewards to which an objective dollar value can be assigned. They are extrinsic because they are external to completing the work itself and are controlled by people other than the employee.

Extrinsic rewards usually have a limited impact over time if they are not increased. Therefore, when they are used to increase employee engagement or motivation the effects can be short-lived for most people.

Intrinsic rewards (or intangible rewards) are psychological rewards that employees get from doing meaningful work and performing it well

They are intrinsic because they are internal to the work being done and achieving them largely depends on the employee’s own efforts. They are essential to sustained behaviour change and can be created by allowing employees to do more self-managing and adding value to their work by innovating, problem-solving and improvising. When someone achieves an intrinsic reward, there is a positive emotional reaction.

Is the power of intrinsic rewards under rated?

Given intrinsic rewards or intangible rewards are the reasons employees choose to work at a particular place of employment over another when both employers offer the same tangible rewards, indeed intrinsic rewards are critically important to the business’s ability to attract, retain and motivate employees. It is a mistake to view them as incidental.

What intrinsic rewards can we provide to our employees?

There are a multitude of ways your business can establish, promote and foster intrinsic rewards:

  • Autonomy – employees want more autonomy, so allow them to take responsibility for their job and tasks and ditch that micromanagement approach. Empowered employees will take ownership and pride in their work and see to it that projects are completed to a higher level of excellence.
  • Let them make a difference – people want to make a difference, therefore develop an authentic culture of purpose that your employees can believe in. Encourage your people to find meaning in the work they do and show them the good that came of their specific efforts and accomplishments.
  • Promote social interaction – employees want to connect with their colleagues and with other teams. Encourage them to take a break and take them out of the work environment to do something fun together so that they can connect, interact, get to know and understand each other.
  • Provide opportunities for advancement – employees want to progress and achieve. Human beings – not just employees – do more and produce better work when they are making progress on something they care about. So, when trying to motivate employees, be clear about how their work is developing their career path and let them stretch themselves and demonstrate their skill set. Of course, through it all, be sure to recognise their efforts and achievements.
  • Invest in your employee’s learning, development and well-being – employees are increasingly responsible for managing their own careers and they know that their futures depend on improving their skills. If they are not expanding their capabilities, they risk compromising their employability – there is no standing still in this world. Accordingly, opportunities for growth and development are the most consistent predictors of employee commitment. Through coaching and regular feedback, managers can help employees identify development needs and enhance their skills.
  • Sharing company information – by entrusting employees with vital information about the organisation’s financial and operational health, business leaders send a message that they consider every worker to be a valued partner and stakeholder in their enterprises. Research shows employees who believe they are trusted by their managers can better see the bigger picture and tend to be more loyal and productive, or in other words, more engaged.
  • Provide recognition – numerous studies conducted over time have suggested that non-monetary rewards and recognition can be much more effective motivators than cash. Surprisingly, many employee surveys have suggested that too few organisations take advantage of the motivational power of non-monetary rewards. It is not that money does not matter – if employees feel that they are significantly underpaid – that their pay does not reflect their contributions to the organisation, their motivation is likely to suffer. But when it comes to encouraging employees to put in discretionary effort into their work and to deliver superior performance, the chance to make a difference and be recognised for it is likely to provide a very strong incentive. Employee efforts that get recognised also get repeated.

Finally, while we will never say that keeping employees engaged and committed to your initiatives is easy – especially in today’s distracted workplace – you can certainly turn things around, pick up the momentum, and sustain a healthy, flourishing, engaged culture by tapping into your population’s intrinsic motivators.

Book a complimentary 15 minute consultation now with our Director, Tanya Gray.