Do Incentives Motivate Employees?

Where does intrinsic motivation work?

Extensive research indicates that intrinsic motivation leads to higher performance. In other words, when the task itself is motivating due to being enjoyable and interesting to the employee, then the employee will expend greater intensity, effort, and persistence in doing the work, thereby enhancing performance. Work that is enjoyable and interesting to the employee is a driver of engagement.

The relation between intrinsic motivation and performance is stronger for tasks emphasizing performance quality—rather than quantity—because quality tasks require more complexity, judgment, absorption, and personal investment. For these tasks, incentives are less effective.

Where do incentives work?

Incentives or external control are forms of extrinsic motivation. Research cautions using incentives such as money as a form of motivation due to the “undermining effect.” The use of incentives on an enjoyable, interesting task can reduce subsequent intrinsic motivation for the task. Rewards can often backfire and be demotivating. When incentives are linked to performance, and the incentive is later stopped, motivation disappears. For tasks requiring creativity, quality, ethical behavior, learning, autonomy, and teamwork, any incentives used should be less relevant to the task.

Based on research, using incentives to motivate employees can be effective in particular situations.

• Incentives can be effective for tasks emphasizing performance quantity. These tasks tend to be lower in complexity, are highly repetitive, require focus and drive, and require less personal cognitive investment. In quantity tasks, incentives contingent upon gaining a specific, desired outcome are appropriate.
• Incentives do not negatively impact intrinsic motivation when the award of the incentive does not have a direct tie with the performance. In other words, when tangible rewards are not expected and not contingent on task behavior, they do not impact intrinsic motivation.
• Awards are typically best for work that is over and beyond what was expected rather than for doing work that would be expected.

Both intrinsic and extrinsic motivation can work

In conclusion, incentives and intrinsic motivation can both be used in an organization to motivate employees, drive performance, and promote engagement. But the form that is used depends on the type of work the employee is doing and whether or not the incentive is predicated on a particular performance. Quality-focused work lends itself to intrinsic motivation. If incentives are offered, they should not be directly or clearly tied to a specified performance. In contrast, with quantity-focused work, incentives are more effective because the work is not as intrinsically motivating. These incentives work best when they are designed to be contingent on the work. When incentives have a clear link to a particular performance, they are a strong extrinsic motivator which tends to crowd-out intrinsic motivation. When applied properly, jointly, intrinsic motivation and incentives can be used to drive performance.

For a meta-analysis that provides data on intrinsic motivation and extrinsic incentives, read the article: Intrinsic Motivation and Extrinsic Incentives Jointly Predict Performance: A 40-Year Meta-Analysis by Christopher P. Cerasoli, Jessica M. Nicklin, and Michael T. Ford, February 3, 2014 in Psychological Bulletin.