Intrinsic vs. Extrinsic Motivation in Employee Rewards

Think about the last time you practiced something, and why. Playing the guitar, running a mile, cultivating a sourdough starter, anything. Did you do it because you wanted to impress someone? Solely to profit from it? Or did you practice because it felt personally enjoyable, giving you a sense of accomplishment as you improve? 

This is a good example of intrinsic motivation. It’s when the act of doing feels as good or even better than achieving some exceptional result. Feeling extrinsically motivated could fuel your practice, too, but for a shorter time. 

This is an important concept in employee reward programs. Many of them focus on external incentives, but intrinsic motivation is more sustainable. Let’s discuss the two in more detail and see how both find their way into best practices for employee recognition programs. 

What do extrinsic and intrinsic mean?

There’s a motivation behind every behavior. The question is, does it come from within, or is someone (or something) else provoking us? 

Intrinsic motivation (“in” for “internal”) comes from within. Your passion, joy, curiosity, personal growth, purpose, and pride inform your behavior. 

For instance, if you join an intramural sports team, you may dream of winning a regional tournament. But the fun, team bonding, and personal progress are why you go to each practice.

Extrinsic motivation (“ex” for “external”) is when you perform a behavior to achieve an external result. Money, privileges, and prizes are the reasons you engage.

In their personal lives, people are often extrinsically motivated to meet social standards or get validation from others. Whether it’s fitting into a special outfit for an event or impressing a date, the results can be gratifying, but short-lived and not really rooted in our personal values.

We all use both, but let’s take this comparison to the workplace and see what happens.

Intrinsic motivation: The meaning-maker

Rewards that leverage intrinsic motivation have long been studied for their positive effects on engagement and retention rates. Moving the needle on those two metrics in a significant way takes time, demonstrating how intrinsic motivation has a longer-term impact on both employee and employer.

Employee reward ideas with intrinsic value are also associated with improved performance, so organizations aren’t trading one benefit for another. For employees, ramping up their output is just a side effect of feeling more connected and committed to their roles. What they do feels meaningful. 

Here are some examples of intrinsic rewards that far exceed the benefits of the usual employee gifts:

• Peer recognition: Praise from peers isn’t just validation. When made part of the culture, it creates a sense of belonging that inspires people to show up every day. They also enjoy reciprocating, keeping an eye out for coworker behaviors they can heap positive recognition onto.
• Growth opportunities: Offering mentorship, training, tuition compensation, lateral moves, and other resources makes employees feel hopeful. Looking forward to the future is a huge factor in high retention.
• Autonomy: Job autonomy perks like letting employees work remotely, compressed workweeks, or allowing them to tailor their own processes show trust in their abilities. Being able to take more ownership for their success enhances engagement. 

Extrinsic motivation: The goal-getter

You want a little more? Give a little more. Extrinsic motivation can drive action short term. While they shouldn’t be the basis of employee rewards programs, extrinsic incentives can keep companies on target when it counts most. 

Offering a cash bonus or more PTO for meeting a quota is a classic example of this. It’s so transactional, so plainly connected to a specific goal, that there’s not much psychological sleuthing to do. 

The main risk of using extrinsically motivating rewards like cash bonuses is that they can crowd out or reduce the impact of intrinsically motivating rewards. If someone is mostly given cash for performance increases, abruptly switching to more symbolic rewards feels like a downgrade. 

Another way to use extrinsic rewards effectively involves looking for workplace “asks” that might hurt engagement or morale.

For instance, some research has found that asking employees to work during hours or days when they normally wouldn’t may reduce intrinsic motivation. They’re thinking about what they usually would have done with that time. 

An intrinsically helpful solution would be autonomy to complete the extra work on their terms. The extrinsic solution (that may help protect their existing intrinsic motivation) is more PTO or money in exchange for shaking up their schedule. 

Employee rewards can support both

The very phrase “employee rewards and recognition” tells us there’s room for both extrinsic and intrinsic motivation. First, recognition is purely intrinsic. Making people feel appreciated and accepted with messages, words, and similar gestures is the surest route to engagement and retention. 

The addition of rewards can leverage both, provoking both short-term performance leaps and long-term emotional impact. For example:

• Experiences. Offering an employee tickets to a concert by their favorite artist if they meet a deadline earlier than originally asked. This acknowledges their preferences and personal interests. It also pays them back for going the extra mile.
• Tying meaning to performance. Give an employee autonomy to complete an important project. They meet the goal on their terms and receive a bonus. Trust and professional growth intersect with a monetary reward.  

However, rewards don’t have to have extrinsic appeal. Some teams even choose intrinsic value over extrinsic-leaning rewards. Tacos for Charity is a good example of this, where the intrinsic value of recognition leads down a path of even more giving. 

Quick tips and takeaways for a motivation-aware employee rewards strategy

• Don’t lead with rewards. No matter the motivation, recognition always comes first. This prevents extrinsic motivation from crowding out the intrinsic. 
• Offer choice and welcome feedback. You won’t know what your employees truly align with unless they receive options or are asked. 
• Make intrinsic motivators visible. Cash bonuses and swanky appreciation gifts will look too shiny if we aren’t prioritizing intrinsic motivators (e.g., leader shoutouts, team rituals) consistently. 
• Use extrinsic rewards sparingly and meaningfully. Tie meaning to extrinsic rewards whenever possible, but don’t make them part of everyday motivation. 

Motivation first, rewards second, recognition always.

The best strategy supports what truly motivates people. Employee rewards like extra money can definitely be performance-enhancing. For the moment, anyway. 

Recognition is what drives belonging. It keeps employees engaged with their work, connected to community, and looking forward to the future. Rewards should amplify—not replace—those benefits. 

Here’s our challenge for you. Audit your current program and be honest. Are you building a culture that intrinsically motivates people, or just managing a points system? With meaningful reward systems, culture-building rituals, and appreciation that’s always fun and easy to share, HeyTaco can help your organization master both.