INSTRINSIC MOTIVATION & EXTRINSIC MOTIVATION IN FINANCIAL INDUSTRY
Motivation of the employees can be divided into intrinsic motivation and extrinsic motivation (Reiss, 2012). Gerhart and Fang (2015) mentioned that individuals high in intrinsic motivation seeks to perform more challenging work so that they can test themselves in a greater way. On the other hand, Gillet, Vallerand and Lafrenière (2012) described employees are extrinsically motivated when they try to engage in different works so they can achieve some goals, which are not related to the work itself.
Figure 1: Extrinsic & Intrinsic
Motivation.
(Source- Cherry,
2020).
Intrinsic Motivation
‘Intrinsic motivation is defined as the doing of an activity for its inherent satisfaction rather than for some separable consequence. When intrinsically motivated, a person is moved to act for the fun or challenge entailed rather than because of external products, pressures or reward.’ (Ryan and Deci, 2000, p. 56).
Maximum Satisfaction - In order to compete effectively in the global marketplace, companies should design jobs so that stress can be reduced, and the motivation and satisfaction of employees and their performance can be increased (Garg and Rastogi, 2006).
Innovating New Systems - Employees will continuously strive to complete the task within the organization in an easier way so that they can develop their career and make it more valuable. It will also help in satisfying the accomplishments that they consider meaningful within the organization (Sen et al. 2014).
Increasing Knowledge – The service sector should invest in training and developing their workforce to keep them up-to-date with the latest innovations and well-equipped to deliver quality services in a highly- competitive environment (Hammond & Churchill, 2018; Jaworski, 2018). The sense of accomplishing the target helps the employees in feeling satisfied when they perform the task, which also results in improving their level of motivation (Yousaf, Yang and Sanders 2015).
Reduce Labor Cost –The employees who are motivated intrinsically will try to solve their own problems so that the assistance from the managers can be reduced (Benedetti et al. 2015).
Extrinsic Motivation
‘Extrinsic motivation is a construct that pertains whenever an
activity is done in order to attain some separable outcome. Extrinsic
motivation thus contrasts with intrinsic motivation, which refers to doing an
activity simply for the enjoyment of the activity itself, rather than its
instrumental value’. (Ryan and Deci, 2000, p. 60).
Figure 2: Financial
Rewards.
Extrinsic Motivation is Defined by Minbaeva et al. (2012) as something that is done to or for the employees in the organization to motivate them. Cummings and Worley (2014) have stated in their research paper that this type of inspiration has an instantaneous as well as commanding consequence; however it does not lean to last for a long time (Titi Amayah 2013). However, this does not dictate that extrinsic motivation is less effective than intrinsic motivation (Deci, Koestner, & Ryan, 1999). There are benefits we can achieve from extrinsic motivation.
Financial reward - Some employees satisfy with financial rewards when they achieve organization targets. In this it is clear that financial benefits are the most powerful motivator which can be used by organization because from this source many other desires are fulfilled (Cherry, 2016).The extrinsic motivation deals with the external factors like the amount of salary, bonus and incentives which help the employees to perform their duties efficiently (Youndt et al., 1996).
I work for a leading Company in
the Financial industry, and the provide bonuses twice a
year, by contrast, can mitigate uncertainty, send a clear signal to employees
about how well they’re performing, reduce their resentment at being forcibly
tied to the company for an entire year, and enable them to lead a more
comfortable life with money in their pocket. This in turn can engender more
loyalty from employees and incentivize them to do their best work for a company
that they feel cares about and values them.
In addition, since a bonus serves as
the perfect KPI, a semi-annual bonus can be used to encourage employees to
adjust their performance during the course of the year instead of only at the
end when they receive their annual performance review. That obviously benefits
the company but can also help employees improve their work product and increase
their chances of a receiving a higher bonus in the next cycle.
Competition - When employees see that their colleagues earn the recognition, they also feel motivated in working hard so that it can help them in earning the recognition as well (Judson, Vollpp and Detsky 2015).
The
Organization which I work is conducting Performance Award Ceremony on
performance basis in every year under three category according to the Branch Portfolio
Size & its name called GAME OF THE ACHIEVER. Such competition can motivate employees, make them put in
more effort, and achieve results. Indeed, competition increases physiological and psychological
activation, which prepares body and mind for increased effort and
enables higher performance & Productivity.
In Video 01 illustrate the impact of
Intrinsic & Extrinsic motivation, Practical steps & ideas, Leadership,
Team Deployment & employee Performance in the work place.
Video 1: Intrinsic and Extrinsic Employee Motivation Factors.
The manager can motivate the employees by the payments, promotional
activities and praise (Yidong and Xinxin 2013). Lemos and Veríssimo (2014)
mentioned that if organizations do not provide proper benefit to its employees,
not only it will create adverse impact on the extrinsic motivation of the
employees but also will have huge amount of impact on the intrinsic
motivational level as well. It has been suggested that a relationship between
motivation and employee engagement exists, and, for an example the development
of motivational schemes including both intrinsic and extrinsic motivational
factors can improve employee engagement within an organization (Silvera, 2013).
Reference
Benedetti, AA., Diefendorff, JM., Gabriel, AS and Chandler, MM., (2015), ‘The effects of intrinsic and extrinsic sources of motivation on well-being depend on time of day’: The moderating effects of workday accumulation, Journal of Vocational Behavior, 88, pp. 38-46.
Cherry , 2020, Cognitive Psychology, Differences of Extrinsic and Intrinsic Motivation, [online]. Available From: <https://www.verywellmind.com/differences-between-extrinsic-and-intrinsic-motivation-2795384>.[Accessed on 16 April 2021].
Cummings, T and Worley, C., (2014), Organization development and change, Cengage learning.
Deci & Koestner, R., (1999), A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychological Bulletin, 125(6), p. 627.
Garg, P., Rastogi, R., (2006), ‘New model of job design: motivating employees performance’, Journal of Management Development, Vol. 25, No. 6, pp. 572-87.
Gerhart, B and Fang, M., (2015), Pay, intrinsic motivation, extrinsic motivation, performance, and creativity in the workplace, Revisiting long-held beliefs, Annu. Rev. Organ. Psychol. Organ. Behav, 2(1), pp.489-521.
Gillet, N., Vallerand, RJ and Lafrenière, MAK., (2012), Intrinsic and extrinsic school motivation as a function of age, The mediating role of autonomy support, Social Psychology of Education,15(1), pp.77-95.
Goldgerg, S., (2019), Intrincis and Extrinisic Employee Motivation Factors.
Hammond, H & Churchill, RQ., (2018), the role of employee training and development in achieving organizational objectives: A study of Accra Technical University, Archives of Business Research, 6(2), pp. 67-74.
Jaworski, C., Ravichandran, S., Karpinski, AC & Singh, S., (2018), ‘The effects of training satisfaction’, employee benefits, and incentives on part-time employees‘ commitment. International Journal of Hospitality Management, 74, pp. 1-12.
Judson, TJ., Volpp, KG and Detsky, AS., (2015), Harnessing the right combination of extrinsic and intrinsic motivation to change physician behavior, Jama, pp. 2233-4.
Lemos, MS and Veríssimo, L., (2014), The relationships between intrinsic motivation, extrinsic motivation, and achievement, along elementary school, Procedia-Social and Behavioral Sciences, 112, pp. 930-8.
Minbaeva, DB., Mäkelä, K and Rabbiosi, L., (2012), Linking HRM and knowledge transfer via individual level mechanisms, Human Resource Management, 51(3), pp. 387-405.
Reiss, S., (2012), Intrinsic and extrinsic motivation, Teaching of Psychology, 39(2), pp.152-6.
Ryan, RM and Deci, EL., (2000). Intrinsic and extrinsic motivations: Classic definitions and new directions, Contemporary Educational Psychology, 25,pp. 54–67.
Sen, AP., Huffman, D., Loewenstein, G., Asch, DA., Kullgren, JT and Volpp, KG., (2014), Do financial incentives reduce intrinsic motivation for weight loss, Evidence from two tests of crowding out, In 5th Biennial Conference of the American Society of Health Economics (ASHEcon 2014), pp. 23-5.
Serino, B., (2002), Non-cash Awards Boost Sales Compensation Plans, Workspan, 45,8, pp. 24-7.
Silvera, I., (2013), Motivation schemes can build long-term engagement, Employee Benefits, [online]. Available From<http://www.employeebenefits.co.uk/motivation-schemes-can-build-long-term-engagement/>.[Accessed on 19 April 2021].
Stajkovic, AD and Luthans, F., (2003), ‘Behavioral Management and Task Performance in Organizations’: Conceptual Background, Meta-analysis, and Test of Alternative Models, Personnel Psychology, 56, pp. 155-94.
Titi Amayah, A., (2013), ‘Determinants of knowledge sharing in a public sector organization’, Journal of Knowledge Management, 17(3), pp. 454-71.
Wietrak, E., (2017), Compensation and Benefits and Featured, External Incentives and Internal Motivation – a perfect pairing to boost work performance, [online]. Available From:<https://scienceforwork.com/blog/incentives-motivation-performance/>. [Accessed on 19 April 2021].
Yidong, T and Xinxin, L., (2013), ‘How ethical leadership influence employees’ innovative work behavior’, A perspective of intrinsic motivation, Journal of Business Ethics, 116(2), pp. 441-55.
Youndt, Mark, A., Scott, A., Snell, James W., Dean, and David P., Lepak, (1996), ‘Human resource management, manufacturing strategy, and firm performance’, Academy of management Journal 39, no. 4, pp. 836-66.
Yousaf, A., Yang, H
and Sanders, K., (2015), ‘Effects of intrinsic and extrinsic motivation on task
and contextual performance of Pakistani professionals’: the mediating role of
commitment foci, Journal of Managerial Psychology,30(2), pp.
133-50.
I agree with your argument about using financial rewards and recognition to motivate the employees, Eranga. The Financial rewards system is very attractive. Yet it is really vital to use other motivational factors as well. According to Casper and Harris (2008), the balance between employees working hours and personal time will improve employees’ organizational commitments and reduce turnover intentions. Another motivation factor is humanitarianism, the willingness to treat employees well. And some corporate leaders believed it was simply good business to satisfy worker’s needs for good working conditions, a fair day’s pay and social interaction (Gibson, Ivancevch and Donnelly, 2000).
ReplyDeleteAgreed and thank you for the comment Gagana. On my blog I have elaborated both the motivators of intrinsic and extrinsic extensively. Though it has been argued the validity and the accuracy of the above factors, the motivation of employees in the form of intrinsic and extrinsic motivation will be able to improve employee performance (Ardiyanto and Pogo, 2019).
DeleteExactly Uddikka, intrinsically motivated behaviors, which are performed out of interest and satisfy the innate psychological needs for competence and autonomy are the prototype of self-determined behavior. Extrinsically motivated behaviors those that are executed because they are instrumental to some separable consequence can vary in the extent to which they represent self-determinational (Deci 2000).
ReplyDeleteYes Treva, intrinsic and extrinsic motivation are not additive but instead are interactive. That is, the addition of extrinsic motivators may either diminish or enhance intrinsic motivation. Whereas intrinsic motivation is often associated with the involvement in complex tasks,
Deleteextrinsic motivation is claimed to be important in relation to unattractive and simple tasks
(Osterloh & Frey 2000; Gagné & Deci 2005). This shows how intrinsic and extrinsic motivation give different impacts when employees are performing the task
I do agree with you Uddika, Intrinsic motivation is performing a job role for the pleasure inherent in the activity (Story et al., 2008). Extrinsic motivation is defined by London (2009) as doing a job role because it leads to a separable outcome which is the outside encouragement or rewards are earned from performing a job role rather than the actual enjoyment of the task. Extrinsic and intrinsic characteristics are influenced by the personality and expectations of each employee. Though extrinsic and intrinsic motivations may seem opposed, the two motivation categories can be used together to create an efficient workplace (Singh, 2016).
ReplyDeleteYes Nivethini, Extrinsic motivation has a big power and with write use can lead to high results. External rewards can stimulate interest and participation in which person has not had initial interest Praises are able to induce to obtain new skills or knowledges. In the moment when people have studied more they become more motivated intrinsically. External rewards can be a good sign that a worker does a good job and give a chance to understand that their performance is achieved reinforcement. (Cherry 2016).
DeleteAdding to your views according to Dixit and Bhatti (2012) employers commitment is to motivate their employees by providing them confidence, enthusiastic behavior can increase the working environment in positive manner. They elaborated that employers are responsible to delegate and get work done from employees at high level.
ReplyDeleteYes Pernalla. Further, Turner (2017) mentions, existence of both Intrinsic and extrinsic motivation factors is vital to the organization, as employees with lower level income, would be significantly motivated with the extrinsic motivational factors such as rewards and as a result, would be more enthusiastic and productive in the job execution.
Deleteindeed Eranga and further To reinforce the distinction, Herzberg, (1987) suggested that motivation is like an internal self-charging battery. For an employee to become motivated, the energy or
ReplyDeletedesire to move must come from within.
Agree. Further, each individual has the self-motivation capability which need to be enhanced by introducing suitable motivational factors, to assure encouragement of employees to give the fullest contribution to achieve organizational goals (Saad, 2018).
DeleteAs you have pointed out, intrinsic motivation enhances job satisfaction of the employees, which will increase the power of innovation ultimately. According to Fischer et al (2019), the effect between intrinsic motivation and creative performance is significantly positive. The need of creative ideas and innovation have become a crucial factor for many organizations due to being operated in a dynamic and knowledge based environment. Highly creative and innovative employees will increase the organizational performance and achieve competitive advantage over other organizations.
ReplyDeleteAgreed, The motivation of employees in the organization still remains one of the sensitive subjects that determine the stage of input that employees will place in the organization to commit to good performance. This means that motivation also intrinsic or extrinsic contribute to employee satisfaction and therefore improves performance and productivity (Bhattacharyya, 2007).
DeleteI agree with you Uddika. Intrinsic motivators like recognition, achievement, advancement
ReplyDeleteand growth have direct relationship with job satisfaction but the absence of such will not unsatisfied the employees (Bogardus, 2007).
Yes Chanaka. Although intrinsic motivation is considered the most optimal form of motivation and is associated with various benefits –including enjoyment, per-insistence, and psychological well-being (Deci andRyan 2008)
DeleteAgreed, When it comes to Intrinsic motivation, it is a psychological rewards system such as the opportunity to use employee ability. A sense of challenge and achievement, receiving appreciation, positive recognition, can be caring and considerate. (Mullins, 2005).
ReplyDeleteYes Harsha. Although intrinsic motivation is considered the most optimal form of motivation and is associated with various benefits –including enjoyment, per-insistence, and psychological well-being (Deci andRyan 2008)
DeleteReply
Agreed with your views and even though extrinsic motivation can work in resistance to intrinsic motivation, it can also have a reinforcing result: "once the framework of extrinsic motivation is engaged care of, intrinsic motivation can guide to high levels of satisfaction and performance". Further more both intrinsic and extrinsic principles can motivate employees to do their work. On the other hand intrinsic and extrinsic motivation can very different impacts on employees (Abiro, 2013).
ReplyDeleteYes Indeevari,According to Herzberg Two Factor Theory, intrinsic motivators and extrinsic motivators have an inverse relationship. That is, intrinsic motivators tend to increase motivation when they are present while extrinsic motivators tend to reduce motivation when they are absent. This is due to employees’ expectations (Tan, 2013).
Delete