BscB(IM) 6 Semester
Bachelor Thesis
Institute of Management
Author:
René Sembach Munk
Counsellor:
Mai Skjøtt Linneberg
A theoretical discussion
Of the effect of intrinsic and extrinsic motivation
Aarhus School of Business
2011
A theoretical discussion of the effect of intrinsic and extrinsic motivation.
Abstract ................................................................................................................. 4 1 Introduction ..................................................................................................... 5 1.1 Background ........................................................................................................... 5 1.2 Problem statement ............................................................................................... 8 1.3 Limitations ............................................................................................................ 9 1.4 Definitions .......................................................................................................... 10 1.5 Methods ............................................................................................................. 11 1.6 Information gathering ......................................................................................... 11 1.7 Structure of the paper ......................................................................................... 12 2 Methods ......................................................................................................... 14 3 Motivation in general ..................................................................................... 16 3.1 Motivation and employees ................................................................................. 17 3.2 Intrinsic Motivation ............................................................................................ 19 3.3 Extrinsic motivation ............................................................................................ 21 3.4 Extrinsic versus intrinsic ...................................................................................... 23 3.4.1 Other essential motivation theories .................................................................. 25 3.4.2 Cognitive Evaluation Theory .............................................................................. 25 3.4.3 Yerkes Dodson Inverted U Theory ...................................................................... 25 3.4.4 Expectancy Theory(Vroom) ................................................................................ 26 3.4.5 The Porter and Lawler model ............................................................................. 27 3.4.6 Overjustification effect ....................................................................................... 28 4 General criticism of sources ............................................................................ 29 4.1 Experiments cannot focus on one factor solely. .................................................. 29 4.2 Bias theory .......................................................................................................... 30 4.3 The monkey experiment ..................................................................................... 30 4.4 Criticism of the of the articles ............................................................................. 33 5 Review of experiments within intrinsic and extrinsic motivation .................... 33 5.1 Additivity Versus Nonadditivity of intrinsic and extrinsic incentives .................... 33 5.2 Deci’s College newspaper field experiment ......................................................... 36 5.3 Real life tests in companies ................................................................................. 38 Page 2 of 71
A theoretical discussion of the effect of intrinsic and extrinsic motivation.
6 Motivating employees by means of rewards .................................................. 39 6.1 Why use rewards? .............................................................................................. 40 6.2 Rewards divided in to intrinsic and extrinsic categories ...................................... 40 6.3 Rewarding employees through visible goals ........................................................ 41 6.4 Rewards differs between cultures ....................................................................... 44 6.5 Non-­‐monetary rewards ....................................................................................... 45 6.6 Rewards systems amongst white and blue collar ................................................ 45 6.6.1 Blue collars ......................................................................................................... 45 6.6.2 White collars ...................................................................................................... 46 6.7 Reward systems can demotivate and raise conflicts ............................................ 46 6.8 The “but last year” factor .................................................................................... 48 6.9 Denmark is not in the front ................................................................................. 49 6.10 Danish difficulties ............................................................................................. 49 6.11 Requirements of reward systems ...................................................................... 50 7 Main components in reward systems ............................................................. 51 7.1 Financial rewards ................................................................................................ 52 7.2 Non financial rewards ......................................................................................... 54 7.3 Employee benefits .............................................................................................. 55 7.4 Rewards in kind .................................................................................................. 55 7.5 Total rewards management ................................................................................ 55 8 Rewards as a motivator in 2010’s ................................................................... 56 8.1 Statistics ............................................................................................................. 57 8.2 Stock as a reward today. ..................................................................................... 58 8.3 All workers in Microsoft have bonus ................................................................... 59 8.4 Rewarding top managing level ............................................................................ 60 8.5 Zentropa ............................................................................................................. 60 9 Conclusion ...................................................................................................... 61 10 Bibliography ................................................................................................. 64 Page 3 of 71
A theoretical discussion of the effect of intrinsic and extrinsic motivation.
Abstract This abstract is written in Danish as requested by the advisor of the thesis.
Formålet med denne teoretiske afhandling er på baggrund AF litteratur at studere
motivation og motivationsfaktorer, og især indre (intrinsic) og ydre (extrinsic)
motivationsfaktorer.
Både indre og ydre motivationsfaktorer er nyttige, dog er der en kompliceret
sammenhæng imellem dem. Samspillet mellem indre og ydre motivationsfaktorer er
kompliceret, når det skal anvendes i praksis i motivationsprogrammer af
virksomhederne.
Formålet er også at studere motivation, når det kommer til anvendelse når man
motiverer medarbejdere i et firma med monetære belønninger. Det er vigtigt for
virksomhederne at være opmærksomme på, hvordan de motiverer deres medarbejdere
til at arbejde med en optimal ydeevne, og ekstra vigtigt da anvendelsen af
belønningssystemer er meget udbredt i virksomhederne. Teorier, eksperimenter samt
erfaringer har vist, at indre og ydre motivation gennem belønning er en værdifuld
måde at opnå høj ydeevne, men det kan være svært at være sikker på resultatet af ydre
motivationsfaktorer på grund af påvirkninger af de indre motivationsfaktorer.
I problemformuleringen er stillet det primære spørgsmål ”Kan belønninger, der er
baseret på indre og ydre motivation teorier, eksperimenter og oplevelser, ses som en
værdifuld måde at motivere på?"
Forinden er der i problemformuleringen også stillet nogle underspørgsmål:
•
om der er klar forståelse af, hvordan indre og ydre motivation virker
•
om motivation gennem belønning er mulig
•
om belønning giver en virkning, og om der er positive erfaringer
•
om der er forskelle ved forskellige jobtyper eller kulturer
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A theoretical discussion of the effect of intrinsic and extrinsic motivation.
Der er i rapporten studeret litteratur, eksperimenter og søgt erfaringer fra
virksomheder i pressen, således der kan konkluderes på disse spørgsmål.
Teorier om indre og ydre motivation og forbindelsen mellem dem blev drøftet på
grundlag af artikler og eksperimenter. Der er anvendt artikler fra flere årtier, både helt
nye og en del fra 60´erne og 70`erne hvor teorierne især var under udvikling.
Selvom området har været til grund for forskning i 100 år - den ældste artikel der er
brugt er fra 1908 og den nyeste fra 2011 – vil det fremgå af konklussionen, at det er
vigtigt at forskning fortsætter og erfaringer stadig gøres. Motivation og belønning er
et vanskeligt område at konkludere på og vanskeligt at sikre sig, at man bruger bedst
muligt i praksis, fordi der er så mange indre og ydre faktorer der spiller sammen, så
man kan vanskeligt måle på isolerede faktorer på grund af de indbyrdes påvirkninger.
1 Introduction In this chapter motivation will be introduced followed by an experiment of historical
significance, followed by the problem statement and limitations, and to assist when
reading the paper the structure of the paper is described along with literature
gathering and some essential definition of widely used terms.
1.1 Background Going back in history, setting the scene with an experiment with historically value
and importance within the field of
motivation.
In the late 1940’s a psychology
professor called Harry F. Harlow
(Harlow, Harlow & Meyer 1950)
conducted one of the first true intrinsic
motivational experiments ever
performed, using a simple puzzle
where a rhesus monkey needed to
perform 3 simple tasks in a specific
Figure 1 (Harlow, Harlow & Meyer 1950)
row to complete it. A simple task for a
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A theoretical discussion of the effect of intrinsic and extrinsic motivation.
human, but a much more complex task for a little monkey.
The experiment was performed on 12 primates over a 3-week period. Almost
immediately the monkeys were able to solve the puzzle and they continued to solve it
every time they were near it, without receiving any kind of rewards or recognition
from doing so.
Nobody showed the rhesus monkeys how to solve the puzzle or taught them that they
even could solve it, but they still did it. Harlow concluded that it must have been due
to an internal biological motivator, that gave the monkeys a satisfaction or enjoyment
from solving the puzzle.
The experiment was repeated, but this time the monkeys were rewarded with a raisin
every time they solved the puzzle. To his astonishment the monkeys started to make
more errors and they solved the puzzle with less frequency than when no rewards was
given. It was almost as if the reward reduced the monkeys motivation, lowering their
enjoyment that came from solving the puzzle (Pink 2010).
Harlow’s monkey experiments are amongst the most discussed and acknowledge
studies within its field and are generally presumed to be part of the foundation within
the field of psychology and management.(Deci, Ryan 1985).
The puzzle experiment shows how hard it is to determine if a reward will result in
increased motivation, decrease in motivation or if it even has a significant impact on
how motivated subjects are, hence having a positive impact on the output of the
subject.
Still most companies incorporate some kind of a reward system as motivation tool,
these reward systems come in all shapes and sizes(Brooks 2009). Used at the small
store at the street corner to huge multinational corporations with hundreds of
thousands of employees. They all apply different types and combinations of reward
systems but with the same goal in mind, to increase efficiency and reduce
employment turnover (Armstrong, Stephens 2005).
Rewards systems have been defineded by Wilson as "A reward system is any process
within an organization that encourages, reinforcement, or compensates people for
taking a particular set of actions. It may be formal or informal, cash or non-cash,
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Immediate or delayed "(Wilson 1995). The Business Dictionary goes even further
focusing more on the emphasize of a desirable behavior “Scheme to support and
reinforce desirable behavior, such as wage rate that increased with the productivity of
the worker”(BusinessDictionary).
Whenever you want a monkey to do a simple task or you want your employee to
perform their work better, motivation is a factor that plays a key role, not only on a
individual level but also on a company wide level.
Most private companies in industrialized societies are based on some form of
exchange, employees provide their time and labour and in exchange they are paid
wages. Most companies on top of the basic wage provide some form of incentive
program to motivate its employees to work more efficient, either by giving external
rewards or improving grounds for development of personal growth and
accomplishments. Neither of the two, external rewards or improving grounds for
development is perfect, companies use a wide range of different combination of both
methods to motivate employees. Even within the same field of business some
companies apply total opposite technics as in the field of telemarketing (Nordhaug,
Holt Larsen & Øhrstrøm 2004), where newspapers pay employees per new
subscriber(Hesselager 1999) compared to banks, where no such monetary reward is
given to their employees for each new customer(Nykredit 2011).
It may seem that rewards are effective tools to motivate employees with, but it is not
as simple as is might sound. Knowledge of how rewards can motivate the individuals
and how much it varies across individuals, cultures and socialites, have been
discussed to great length through the century, and it seems not anyone have been able
to compose one complete definition, still rewards in someway or form are used in
most corporate environments across the world(Adler, Gundersen 2008).
A common understanding is that rewards can have a beneficial effect on performance
seems to be clear in global business environment. There is though no clear
explanation behind the effect and what the result are of these reward systems or how
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to best construct a reward system that is in the same time optimized for the culture,
employees and for the organization (Shields 2007).
Going back through the literature uncovers a waste amount of researches, studies
articles, theories and experiments. Therefore it is important to start this thesis with an
overview of the basic theories that relate to motivation in particular intrinsic/extrinsic
motivation, these basic theories are normally what creates the foundation of the
reward systems that are used in the business world. As will be shown and discussed in
this thesis it can be hard to optimize the use of rewards systems without accidently
resulting the opposite effect of what was originally intended with the reward system,
results as decrease in efficiency, lower level of motivation, unhealthy competition
amongst employees or misinterpretation of what rewards are given for(White, Druker
2000).
1.2 Problem statement Most companies are built on a concept, where efficiency or productivity are
keywords, whatever the overall goal is the highest attainable service, quality or profit.
Through history there are times when it is more difficult to run a company than ever
before, as in the financial crisis in recent years. Often companies apply money as
their key motivator to improve efficiency or output, as part of their reward systems –
based on measurement of quality or production - are used to influence the employee’s
motivation and job performance. To verify whether monetary-based rewards are
useful as motivators, the motivational theories as the mechanism behind rewards are
in focus.
This thesis is a theoretical paper, discussing the issue connected with rewards and
motivation, in particular external rewards effect on intrinsic motivation. Theories
about intrinsic and extrinsic motivation and the link between them, will be discussed
to analyse whether there is a clear understanding of how it works and can be used.
With a starting point in motivation and based on theories and preceding experiments,
the paper will examine the question whether motivation through rewards is possibly.
The thesis will analyse and reflect on rewards motivators and rewards systems and
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their effect. Based on examples published about companies usage of motivation by
rewards, it will investigate whether it gives the desired effect and what the experience
done my companies are.
The thesis will briefly investigate whether there are any differences across cultures.
Summarise the problem statement as
Can rewards, based on intrinsic and extrinsic motivation theories,
experiments and experiences, be seen as a valuable way of motivation?
In the sections methods, limitations and structure, the overall framework of the paper
is described.
1.3 Limitations Rewards and motivation are each quite large topics, each with many hundreds if not
thousands of books and studies within their respective subject (Hein 2009), it is
therefore necessary to limit the paper, primary to money–based reward and rewards
systems.
Rewards can be looked at in many different ways depending on what theories and
from what point of view they are applied. They can even be look at through the eyes
of sociology, psychology, economy and general motivation theories (Brooks 2009).
Even with the limitation of only looking at external motivational factors effect on
subjects internal motivation and efficiency it is a large topic, it would be too
comprehensive too include all theories. Some theories will therefore be highlighted
while less significant ones in this context will not be included.
Herzberg's two-factor theory(Herzberg et al. 1959) and Maslow’s hierarchy of
needs(Maslow 1943) won’t be considered in the paper as their scope is too broad even
though they represent two of the corner stones in the field of motivation, Hertzberg
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may in parts be included but as he separated the internal and external factors in two
other factors only parts of his theories will be useful in this context.
To limit this thesis it will not include a full description or an analysis of rewards but a
presentation that will help linking rewardings and motivation together.
Thesis will look at wages and reward systems in general, not focusing on any specific
nation, region or culture, - nevertheless most books look at the subject through
western eyes at the western part of the world, the paper looks mostly at motivation
and rewarding from a western point of view.
1.4 Definitions Before beginning the main element of the thesis there are some essential elements and
definitions that have to be explained to prevent misinterpreting of the different terms.
Company: Private or public business units or organization in general without meaning
any specific branch.
Culture: A group of subjects that behave, think, look or as a group differ from another
group, subculture, professional culture, corporate culture, in-group culture(Brooks
2009).
Monetary based rewards: also called money reward or financial reward. It is the base
pay, payment for special working conditions or responsibility and extra pay as
incentives and bonuses based on performance(Fisher 1995).
Motivator: “A person’s interest or drive to act in a certain way”(Atkinson 1997), it is
the factor the moves a person in the direction of performing a task.
Performance: “The accomplishment of a given task measured against present known
standards of accuracy, completeness, cost, and speed. In a contract, performance is
deemed to be the fulfilment of an obligation, in a manner that releases the performer
from all liabilities under the contract.” (BusinessDictionary)
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Reward: A gift, money, tangible or intangible given to someone in recognition of their
service, achievement or effort they provide for an employer or an
organisation(Armstrong, Stephens 2005).
Reward systems: Method for allocating benefits, rewards and compensation amongst
employees in a fair and organized manner. (Armstrong, Stephens 2005)
Subject: A person or thing that is being discussed, described, or dealt with. A person
who is the focus of scientific experiment or a theoretical situation (Oxford
Dictionaries).
Wage system: The system for paying employees is in literature called wage systems
as well as salary systems. In the same way this report use these terms
varying(Heneman 2002).
1.5 Methods This thesis is based on literature and do not include any data collection or interviews.
As a theoretical paper it is about connecting old and new literature, experiments
published about how motivation is handled as well as older experiments of value.
Newer experiments and experiences about rewarding and motivation are included
when they are of value to understand how rewards can be handled. In this thesis all
experiments are taken from published experiments.
In chapter 2 the methods behind the study is further explained.
1.6 Information gathering Literature surveying is an significant part of the task, creating a scope of knowledge
of the literature in the felt of rewards and motivation systems, with opinions, theories
and studies covering every aspect of it, from the supporters as Harlow(Harlow, Mears
1979) to the sceptics as Steven Reiss(Reiss 2009).
Throughout the work with this paper articles old and new have been used as well as
journals, books and webpages.
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Most researcher and experiments within the field of intrinsic motivation were
conducted in the late 1970’s, most if not all of the theories and experiments created at
that time are still valid and still used in their original form in educational books like in
Ian Brooks ‘Organisational Behaviour’ (Brooks 2009) or theory books like Helle
Hein’s ‘Motivation’ book (Hein 2009) she even expresses it as:
“There has been little development in motivation theory since the
1980s”(Hein 2009)
Therefor literature, articles and theories that was produced in the 50’ties and 70’ties
will be assumed as valid, as that where the fundamental theories were developed and
little have change since
1.7 Structure of the paper The structure of the main parts will be as follows:
Introduction
In this part the reader is given a background to the general
understanding of the thesis, including background and
questions.
It includes the following subsections:
Background
Problem statement
Limitations
Definitions
Methods
Information gathering
Structure of paper
Methods
In this part it is described how the thesis and study are done
and the considerations made through the study.
Theoretical
In this part my choices of theories are described as a
framework
fundamental background to understand rewarding. Basic
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theories about reward-related motivation theories are
discussed
It includes the following subsections:
Motivation and employees
Intrinsic motivation
Extrinsic motivation
Extrinsic versus intrinsic motivation
Some other motivation theories
Criticism
Criticism of the sources
Experiment study
In this part reviews of Experiments within intrinsic and
extrinsic motivation are described
It includes the following subsections:
Pinder
College newspaper
Real life test in companies
Motivating employees
In this part the phenomena reward are described and
through rewards
discussed
It includes the following subsections:
Why use rewards
Rewards divided into intrinsic and extrinsic categories
Rewarding employees through visible goals
Rewards in different cultures
Non-monetary rewards
Rewards system amongst white/blue collar
Rewards can demotivate and raise conflicts
The last year factor
Rewards in Denmark
Requirements of reward systems
Main components in a
Financial rewards
reward systems
Non-financial rewards
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Employee benefits
Rewards in kind
Total rewards management
Rewards as motivator
This part givens a statistical point and some examples of
in 2010’s
actual usage of rewards in companies nowadays
It includes the following subsections:
Statistics
Stock as a reward
All workers in Microsoft have bonus
Rewarding top level management
Zentropa
Conclusion
This part present the conclusions reached during the study
and answers the questions raised in the problem statement
Literature
References
2 Methods The purpose of this chapter is to clarify how the thesis was conducted. Considerations
taken and choices make in the production of this thesis are described here.
The subject that have been chosen to this thesis is motivation of employees, especially
via an intrinsic/extrinsic motivational approach and how rewards can be used to raise
the productivity and production of an organization.
This thesis has its idea in the basis that motivation is an essential part of a modern
organization.
This thesis seeks to understand how motivational theories influence motivation with
rewards. Since motivation and salary systems including reward systems are
widespread topics, there are certain areas that must be excluded in an effort to be able
to focus on others. This thesis will give an introduction and overview of the
mechanism of motivation.
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In the thesis different theories will be used, theories that can help in the understanding
of rewarding and salary systems in an effort to increase the motivation amongst
employees. Most theories within the field seems to be of an older date but they are
still considered valid by scholars and behavioral researchers.
In context to this thesis and to be able to answer the questions asked in the problem
statement there will be a theoretical section based on motivation theories and their
usage.
A more descriptive section will be devoted to the scientist, doctors and ph.’s and how
they have experimented with the different factors in an effort to explain and clarify
the dilemmas that exist within the field of motivation.
Diagrams, tables and models will be used when they add a visual aid that can enrich
the thesis resulting in a better understanding of how models and devices used in
experiments are used.
The data used in the form of statistical data and results as foundation for examples
were either published in academic books or articles found in databases of publish
works and articles through the ASB liberty.
By means of a theoretical description of the different extrinsic and intrinsic
motivation systems and their related rewards motivators this paper will highlight and
reflect on the linkage between motivation and rewards and their effect.
By examining motivational theories I want to reflect on when they represent a useful
tool for managers and when they may have the opposite effect of what managers
would have expected.
Finally the report will include a definition and description of rewards systems used as
motivators, examples are given of companies who use rewards and a section showing
statistics of how common rewards are.
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3 Motivation in general “Before digging deeper into the topic that is motivation it is essential
to create a clear picture of what motivation is.”(Hein 2009)
Before the description of reward systems is discussed, the paper will focus on and
define the concept of motivation, as that is the foundation of what rewards systems
are based on.
The business dictionary.com provides a thorough definition of motivation:
“Internal and external factors that stimulates desire and energy in
people to be continually interested in and committed to a job, role, or
subject and to exert persistent effort in attaining a goal. Motivation is
the energizer of behaviour and mother of al action. It results from the
interactions among conscious and unconscious factors such as the (1)
intensity of desire or need, (2) incentive or reward value of the goal,
and (3) expectations of the individual and of his or her significant
others.”(BusinessDictionary)
Through time researchers and psychologists have made different definitions of what
motivation is, Bedeian expresses it as the will to accomplish(Bedeian, Glueck 1983),
an internal drive for fulfilling unsatisfied need(Higgins 1994), encouraging people to
work better by triggering their needs(Hein 2009), a tendency to behave in goaloriented way to satisfy unmet needs(Buford, Bedeian & Lindner 1995), the
psychological process that gives behaviour purpose and direction(Kreitner 1995)
Robert Dubin defines motivation as:
“The complex forces starting and keeping a person at work in an
organization. Motivation is something that moves the person to action.
And continues him in the course of action already initiated”(Dubin
1958)
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The Nature of Motivation are defined as (Dubin 1958):
1. Motivation is a psychological theory it’s based on the subjects it’s individual needs
hence the subjects behaviour and actions depends on it.
2. Motivation form a whole and it’s not possible to be motivated partly en subject is
either motivated or not.
3. Motivation in in a continuous development evolving and responding to external and
internal stimuli’s, as soon as one need is fulfilled a new one surface.
4. Motivation is a goal-driven behaviour, it’s the goal that drives the motivation
5. Motivation can de controlled by tangible or intangible stimuli’s
6. Motivation is of a complex nature, no universal approach exist, but many scholars
and behavioural researchers have tried to reduce your knowledge about motivation in
to a simple theory, some of which will be discussed in this paper
Mitchell has extracted four common characteristics from a large number of other
definitions, meant to create a more unified definition of what motivation is:
•
•
•
•
Motivation is an individual phenomenon
Motivation is intentional
Motivation is multifaceted
Motivation theories predict behaviour
(Mitchell 1982)
Concerning motivation of employees, extrinsic motivation come in focus, extrinsic
motivation can be stimulated by monetary rewards and gifts. Intrinsic motivation
cannot but it is still a significant part of motivating employees.
Why do we need motivation? Because motivation is an essential parts of running a
company (Smith 1990). Motivated employees are crucial in a globalized world where
employees have an active role in cultivating and developing the organization and it’s
goals. Work roles change at a nincessant faster level requiring employees to be
constantly motivated to undertake new challengers and situations and still be super
efficient.(Bowen, Radhakrishna 1991)
3.1 Motivation and employees Motivation theories have the ability to help us comprehend why employees act as they
do, still not universal motivation practise have been developed, the human psyche is
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complex and individual it differs from person to person, human behaviour can’t be
placed into a simple theory, human being are far to complex and divers for that
(Donnelly, Gibson & Ivancevich 1995).
Knowing what element and type of rewards that are contained within the field of
intrinsic and extrinsic motivation are only useful if a manager knows how to use them
and more important when not to use them, as said:
“Work valued by the employee for its own sake or for fulfilling
personal or social norms is often indispensable. These values or norms
may be undermined, or even destroyed, by offering monetary
incentives.”(Osterloh, Frey 2007)
The following story tells about how pleasing people does not equally motivate people.
On a recent study trip to Jamaica Ramsus Ankersen (Ankersen 2011) tried to explain
why Jamaica had such a high share of athletic world records compared to the relative
small size of the country, comparing it with what athletes are used to in richer region
as the US and Europe. In Jamaica the athletes are used to perform in poor or rundown
facilities if there even is any real sport facility, where in the US and Europe there has
been built lot of huge modern sports facilities making it very comfortable for the
athletes to practise. Drawing similarities to how business environments should not be
to comfortable but instate they should be designed for hard work, Ankersen calls it
“the feel good factor” it has to be replaced with a more “how to make hunger in
paradise” meaning. Athletes and employees that have to make top perform must have
an incentive to give it that extra mile that is required to be the best no matter if it is on
the sports field or if it is in a office cubical. “The job of a boss is not to make your
employees comfortable, it’s to make them better at doing their jobs.” It is not longer
“show them a carrot” in Europe, it has to turn into“how to create hunger” for
something in a world of plenty. (Ankersen 2011)
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3.2 Intrinsic Motivation “Adults are […] motivated to do a variety of things […] for which
there are no obvious or appreciable external rewards. The rewards are
inherent in the activity […] intrinsic motivation is the innate, natural
propensity to engage one’s interests and exercise one’s capacities, and
in so doing, to seek and conquer optimal challenges”(Deci, Ryan
1985)
Self-motivation of an employee with a good attitude towards his work, his manager or
co-workers comes from within the employee himself(Brooks 2009).
Each individual in the world have their own personal motivational factors, things that
internally encourage them to perform certain tasks helping the individual reach his
goals, a worker can reward himself with a break or the thought of how proud he will
be when he finish a task or a goal. These internal motivators are intrinsic and come
from within the individual itself (Brooks 2009).
A company has to prove all the necessary hygiene factors as Hertzberg calls them
(Brooks 2009), they include a basic wage, work environment and job security to
provide an environment where intrinsic motivation can flourish. Without any form of
intrinsic motivation it’s almost impossible to motivate a person too perform a task
even if there is lot of extrinsic motivators present in an effort to motivate the person.
Malone and Lepper defines intrinsic motivation as “what people will do without
external inducement”(Malone, Lepper 1987). Intrinsically motivating activities are
only fuelled by the subjects interest and enjoyment from doing and accomplishing
them, without getting any external reward or recognition.
The general factors that influence or promote intrinsic motivation have been described
by Vockell, he has created a simple framework for use in learning with the factors
descriptions and some guidelines on how to stimulate the factors(Vockell). Based on
that table interpretations figure 2 have been made. Page 19 of 71
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Factor
Interpretation.
Challenge
Individuals are best motivated when they are working towards
meaningful goals with a persistent (intermediate) level of difficulty,
where the individual is challenge with problems of a manageable size.
Curiosity
The individual is able to connect the dots between two already know
things or able to acquire some knowledge that’s is within the scope of
the persons interest and current knowledge.
Control
By doing a specific thing the individual is able to control or effect what
will happen to them.
It is a natural urge for individuals to want to be in control of what
happens to them.
Fantasy
Use mental images of things and situations to stimulate their
behaviour.
Imagining how the knowledge would be used in the future.
Competition
Being able to compare how well the individual performs compared to
others in a natural non-staged competition
(if individual is in a “losing” position it result in a bigger impact than if
the person was in a “winning” position”)
Co-
Satisfaction from being able to help others archive their goals
operation
Recognition
Satisfaction when other recognizes and appreciates their
accomplishments.
Being able to achieve something that the individuals are proud of and
able to show others (it is almost an extrinsic motivator)
Figure 2 (Vockell)
As can be seen in figure 2 intrinsic motivation is of a delusive nature, it is hard to
isolate one factor that is the dominating within it, however it is still a much more
influential motivator than the external motivator is. Yet when a external motivation is
introduced it can easily displace the intrinsic motivator and take its place as the
dominating motivator within the individual, reducing the effect of the internal
motivator even after the external motivation has been removed again.(Deci, Ryan
1985)
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A person is intrinsically motivated to perform a task when it receives no obvious
rewards other than performing the activity in itself. Internal motivation must be either
an competence that a person is born with or one that it learns from the environment
that the individual is growing up in (White 1959).
“When a superior acknowledge an employee’s extraordinary effort
with a symbolic gift(such as a bunch of flowers), the intrinsic
motivation of the employee tends to be raised because he or she feels
that his or her intrinsic motivation is appreciated. However, if the
employees feels that the superior’s gesture serves only in an
instrumental purpose, his/her intrinsic motivation is impaired. The
bunch of flowers is perceived to be controlling; the relationship in
interpreted as being transactional” (Osterloh, Frey 2007)
That is why “[…]intrinsic motivation sometimes has disadvantages for the
organization[…]”(Osterloh, Frey 2007). Deci(Deci, Ryan 1985) reliantly express
how powerful at motivator the internal ones are, if an employee feel like a pawn that
the manager is just using, it will have devastating effects on the individual motivation.
Jim Harris(Harris 1996) defines the epitome of internal motivation as ‘heart-power’,
organisations can capture employees ‘heart’ engage them in such a way that the
employer never have to consider motivating the employees or managing them. Then
the employees have such a passion for what they do or the organisation that they are
self-motivated (Harris 1996). Heart powered job could be employees at Red Cross or
Doctors Without Borders where they travel deep inside the worlds conflict zones
trying to help the local population with out any huge personal gain(Doctors Without
Borders 2011).
3.3 Extrinsic motivation Many different factors play a part when trying to motivate employees not only by the
intrinsic motivation but also the external factors, the extrinsic motivators can take
many forms from monetary rewards to gifts, their shared purpose is to stimulate and
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reinforce the subjects motivation in an effort to encourage the subject to work more,
faster or better(Shields 2007).
Any paid employees can be assumed to do their job with the expectation that they will
receive some form of payment for the work, it is well known that monetary incentives
are a powerful way to boost the motivation of an employee, making it one of the most
powerful and well-known external rewards(Shields 2007).
Later in this thesis different monetary based rewards will be discussed, first a better
understanding of extrinsic motivation is needed.
Extrinsic motivators are the influences that come from an external source, the source
can be anything from peers, employer or society. The way these sources influence is
by using positive or negative stimuli, positively charged stimuli could be fame,
recognition, material goods or even money though as Osterloh and Frey puts it
“money as such do not provide direct utility but serves to acquire desired goods and
services”(Osterloh, Frey 2007). Often it is not the money that stimulates but the things
that follow with money that motivates.
Opposite to the positive stimuli are the negative stimuli, in the idiom “Carrot and
stick” the negative stimuli are used to say “if you not” a punishment will occur, it
could be a monetary punishment where the subject has to give up money or being
portrayed as a failure and loose recognition amongst peers.
An important thing to remember about money as a reward is that money in themself
do not, at least for the majority of people, hold any real value. It is the things that
money give access to that is the real motivator as expressed:
“money as such do not provide direct utility but serves to acquire
desired goods and services”(Osterloh, Frey 2007)
People who see money as a reward in itself would share characteristics with Scrooge
McDuck(Herper 2007), even though he is a fictional character his persona illustrates
quite well what a person who finds money in themself to be rewarding, as he has no
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desire exchanging his money for more useful material goods, part from of course
other things that motivate him, like his desire to being the riches duck in the world.
It is safe to assume that the number of people who would share Scrooge McDuck’s
love for money is few, most people with a larger quantity of money have them either
as an investment, saving or for and ideological reason or they just accumulate wealth
faster than they can spend it.
Extrinsic motivation towards consumers have long been an essential part of brick and
mortar stores, they constantly try to motivate their customers to return with the means
of loyality cards, special discounts or airline miles when it comes to the aviation
industry all in an effort to motivate customer to shop at their shop at a regular
basis(Heneman 2002).
Lepper, Greene and Nisbett (1973) asked two groups of children to draw some
drawings. One group was promised a 'good player medal' for their work and the other
was promised nothing. On a return visit, the groups were given paper and crayons all
(Lepper, Greene & Nisbett 1973) and what they did was observed the children with
out telling them to draw anything. The group who had been given the medal for
drawing previously spent significantly less time drawing as compared with the noreward group.(Lepper, Greene & Nisbett 1973)
As shown in the drawing mini experiment external rewards can make people focus on
the reward and not on the action, stop giving them the reward and they stop
performing the action(White, Druker 2000).
Extrinsic motivation is commonly seen as a necessary to motivate employees to do
mundane tasks that are not intrinsically appealing.(Ryan, Deci 2000) .
3.4 Extrinsic versus intrinsic Motivation is not an unambiguous phenomenon, individuals differ and so does their
natural level of internal motivation and the feeling they connect with performing
different tasks(Ryan, Deci 2000).
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Outlining what respectively intrinsic and extrinsic motivation are, intrinsic can be
expressed as native(Pinder 1976) or internal motivation(Ryan, Deci 2000) where the
extrinsic is the artificial(Dickinson 1989) or external motivation(Pinder 1976).
Edward Deci explains what happens to a subject when external motivators are applied
in a situation where intrinsic motivation already excise in the following way:
“The person perceives that the locus of control or the knowledge or
feeling of personal causation shifts to an external source, leading him
to become ‘a pawn’ to the source of the external rewards”(Deci 1971)
The subject becomes a pawn in the puzzle and is at the mercy of the external reward,
the external reward distorted the subject’s unconscious perception of what his payoff
from doing the task is and his attitude toward the task he is performing (Festinger
1967). This situation and the consequence of it have been discussed and rewired in
countless psychological papers, articles and books. The conclusion seems to be
skewed towards the perception that external rewards decrease intrinsic motivation but
that there is no definitive empirical answer(Deci 1971).
Deci even goes further declaring, “there is no definitive answer”(Deci 1971) reducing
it to two main uncertainties that affect all empirical studies within the field, the first
on being the tendency to gather empirical data form subhuman species that shares
many of the same traits as humans, but still these subhuman species lack the cognitive
control over their own behaviour and motivation that humans possess. The second one
is that there is a difference in how both humans and subhumans value and decode
tangible and intangible rewards and the properties they associate with them.
The traditional motivational theories assume that the effects of extrinsic and intrinsic
motivation is of an additive nature meaning that they are just like two sound waves
with the same frequency, they result in constructive interference when two sounds
waves meet(Dictionary.com), this is how traditional motivation theories vroom
(Vroom 1994), Porter and Lawler (Porter, III 1968) with the use of the expectancy
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framework explains motivation(Farr, Vance & McIntyre 1977). Reiss expressing
uncertainty with:
“In the interim many studies were conducted on intrinsic and extrinsic
motivation. To prove that rewards undermine intrinsic interest,
researchers needed to demonstrate each of the following: construct
validity; reliable measures; experimental controls; and favorable
experimental results. Let's see what happened.(Reiss 2009)”
3.4.1 Other essential motivation theories Not only intrinsic and extrinsic but also a lot of other theories can be used when
discussing motivation and rewarding.
3.4.2 Cognitive Evaluation Theory When a subject is presented with a task, the task is evaluated by the subjects on how it
meets the competences and the need to be in control by the subjects. If a subject feels
challenged but able to fulfil the goals of a given task the subject will be intrinsically
motivated to complete the task, any external motivation would be unnecessary. The
level of control needed by the subjects depends on how strong the internal versus
external locus is, external placed subject believes that the environment and the people
around them have a bigger influence on the subjects than it has over it self and the
other way around for the internal.(Kristjansson 1993)
3.4.3 Yerkes Dodson Inverted U Theory The performance was analysed back in 1908 by Yerks, the performance of any subject
follows an inverted u shape, where the X-axes represent the arousal meaning stress
level and the y-axis represent the performance level (see fig. 3). As the subjects
arousal increases its ability to perform increases up until a max point thereafter
additional arousal will result in a lowering of the subjects performance. Without any
motivation to complete the task the subjects would just put the task aside and spend
energy on other things, but as soon as some motivation is present internally or
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externally the subject becomes more motivated to perform. The human body and
mind is able to handle a lot of stress,
the more stressed a subject is the more
motivated the subject becomes. It is
one of the main motivators and this
only applies until the max point on the
Figure 3 (ChangingMinds )
curve is reached, thereafter added any
more stress will decrease performance
sometimes sharply. If a nervous
breakdown is triggered it results in a
state of mind where the subjects is overstressed, seeks any way of reducing the level
of stress resulting in irrational behaviour and lower than normal performance (Yerkes,
Dodson 1908) .
3.4.4 Expectancy Theory(Vroom) Vroom’s Expectancy Theory (Vroom 1964) developed in the 1960s argues that
humans as a species act in accordance with their expectations, constantly trying to
foresee the future, trying to predict what each action will result in. How likely the
outcome of the action is a good one, trying to minimize our effort and maximize the
outcome of it. If a subject believes that it is able to reach the goal and that the
outcome of doing so is a good one the subject will be motivate to try and reach the
goal.
That theory has base in the believe that effort will result in performance, performance
will then finally result in some forms of reward (Vroom 1964).
The theory is frequently defined as a mathematical equation:
Expectancy theory defines motivation as
Motivation(M) = Valance*Expectancy
(Brooks 2009)
or the extended version that is just as often used:
Motivation force(M) = Valence*Instrumentality*Expectancy
(Hein 2009)
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The outcome M can both be of a positive or negative value depending on the input
numbers in the equation, a positive outcome means that the person is motivated, a
neutral outcome means that person is indifferent and negative outcome will invert it to
an avoidance motivator (Brooks 2009). It is only the Valance factor that can have a
negative outcome from -1 to +1, the other two factors are percentages that range from
0% till 100%(Hein 2009).
Valence: The value of the perceived outcome (what is in it for me?), Ranging form +1
when the outcome is of a favourable nature to the subject to -1 when the subject prefer
a alternative hence the outcome of V is of a unfavourable nature to the subject. (Hein
2009) Valance is of a subjective dimension and is based on the persons needs.
Instrumentality: The belief that if ‘I’ complete a certain actions then It will result in
an outcome. (is there a clear path to the rewads? ) The instrumental factor reflects the
work performance and accomplishment, the instrumentality factor is part of the
valence concept and Vroom (Hein 2009) have there for place the instrumentality
under the valance shortening the equation to M=V*E.
Expectancy: The belief that I am able to complete the actions. (Do I have the
competencies and capabilities to do it?) the subjective expectation that the subjects
will reach the expected goal.(Brooks 2009)
3.4.5 The Porter and Lawler model Porter and Lawler (Porter, III 1968) further expanded Vroom’s expectancy theory
creating a substantially more complex framework (see figure 4), exploring the
complex relations that exist between motivation, satisfaction and performance. It does
not assume that effort will naturally result in performance but that two other factors,
the role perception and the ability to perform the task, have an equal effect on the
individuals performance(Hein 2009).
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One of the big differences between Vroom’s model and Porter and Lawler’s (Hein
2009) revised model is, that the latter one takes into account that employees can be
highly motivated to perform a task but that does not necessary mean it will result in a
correct performance or the wished result, the subject have to possess the necessary
competence level to be able to perform the task.
The other big addition made by Porter and Lawler’s is role perception, it is like the
effort and competence level affect the performance, it describes the level of clarity the
subject has towards the task and if that subject does have a well defined idea of what
its role is in the task. If the task is vague the subjects will not be aware where to direct
effort and energy thus reducing the task performance.
Porter and Lawler’s additionally incorporate the principals of intrinsic and extrinsic
motivation in their model after the performance element(Hein 2009).
Figure 4
Adapted from Porter and Lawler (Porter, III 1968) and (Hein 2009)
3.4.6 Overjustification effect The overjustification effect also known as undermining effect does exactly what it
says, it overjustifies and undermines the intrinsic motivation with the use of big
external rewarding. Resulting in a lowering of the natural intrinsic motivation that
again results in a bigger need for external motivations to motivate the subject, it’s will
becomes a vicious circle (Greene, Sternberg & Lepper 1976).
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The individuals focus on the intrinsic motivation is reduced so much when an external
stimuli is present, that when the rewards are no longer there, the subject will engage
less in the activity (Reiss, Sushinsky 1975).
A person may think is it not worth doing an activity for his intrinsic interest, but only
for the expected external reward(Luyten , Lens 1981).
An example of overjustification at work is Greene, Sternberg and Leppers game
experiment, where in a groups of schoolchildren played mathematical games, finding
a joy in playing the game in itself. After sometime rewards were added to the game,
when a child succeeded they received a reward, after sometime the rewarding were
again removed from the game, resulting in the kids quickly giving up playing the
game as the reward had replaced the pure joy of playing the game. The kids were
now only playing to gain the reward and not for the fun, the reward had undermined
the fun(Greene, Sternberg & Lepper 1976).
4 General criticism of sources ”Intrinsic consequences are the natural and automatic results of
responding. They are more or less inevitably produced by the structural
characteristics of the physical environment and the biological
organism; they are not programmed by others to occur. In contrast,
extrinsic consequences occur in addition to any intrinsic consequences.
They may be programmed by our social environments, by applied
behaviour analysts, by researchers, and by teachers and others, but they
do not occur solely as a natural consequence of responding”(Dickinson
1989).
4.1 Experiments cannot focus on one factor solely. One of the common criticisms of the way experiments within the field of intrinsic and
extrinsic motivation are done, is that it is impossible to make a clinical experiment
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without any external factors affecting the result. As it is almost impossible to remove
all intrinsic motivators from a test subject just as it is impossible to remove all
biological motivators, therefore the link between intrinsic and extrinsic motivation has
been based on the ability to remove all external motivating factors, thereby creating
an environment where the subject is only effected by intrinsic or internal
motivators(Pritchard, Campbell & Campbell 1977)
4.2 Bias theory “A man standing under a tree is a behavioral indicator of his belief
that it is raining, but only on the assumption that he desired to stay
dry, and if we then look for evidence that he wants to stay dry, his
standing under the tree will do, but only on the assumption that he
believes that the tree will shelter him, [etc.]”.(Dennett 1978)
Both Deci(Deci 1971) and Harlow(Harlow, Harlow & Meyer 1950) performed
experiments both with small sample sizes and the common sense quote above
illustrates perfectly how the test subject is evaluated based on the scientists own
point-of-view and that can result in a bias towards their own interpretation of the
results. That means that the experiment contains a degree of uncertainty, but that must
be expected the scientist themselves have recognized it before their conclusion it is
discussed by themselves in their article too (Deci 1971).
4.3 The monkey experiment As stated earlier Harlow’s monkey experiment is amongst the most important
experiments within this field(Deci 1971), so it will be highlight here for an evaluation.
The pre-experiment phases is full of potential influences that could have effect on the
subjects external motivator, this however creates some problems how are external
factors removed in an efficient way. In Harry F. Harlow puzzle experiment, as
descried in the introduction, the monkeys were kept a away from any form of external
stimuli, without even going into the way the monkeys were raised, meaning that if
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they were raised by their own mother she could have effected the idea of how an
action can result in a reward or if they were raised by scientist, there is also a risk that
they could have been effected in connection with that. (Deci, Ryan 1985)
The only real way to raise a test animal without any former experience with external
rewards would be if the subject was all alone in a closed off cage with no real toys, as
that would be extremely unethical to treat a monkey that way, there is a chance that
the monkey would be mentally affected by being imprisoned alone and without
anything to stimulate it. The chances that the same experiment would ever be
performed on a human are slim to non, as it would been seen as criminal not to
mention inhumane to imprison a person for most of its lifetime (Deci, Ryan 1985).
Just as with the time prior to the experiment, the experiment itself risks influencing
the subjects with the principals of that a action will result in a reward.
A great example on how hard it is to experiment with subjects intrinsic and extrinsic
motivation is Harlow’s puzzle experiment in the late 1940’s, as described in the
introduction, it is one of the most citrated experiment within it’s field. 20 years later
Edward Deci(Deci 1971) was still looking at the principals of the experiment with a
critical eye, arguing that some of the fundamental elements of the experiment could
be error factors.
Deci does not question the tested species type as the rhesus monkeys are assumed to
be amongst the most intelligent types of monkeys that together with their small size
and large a population that exists of them makes them a widely used test
animal(Encyclopædia Britannica).
He however argues against the small sample size that has been used in Harlow’s
puzzle experiment, as Harlow only used a test group of eight monkeys. Such a small
test group would not be the optimal way to test the theories behind intrinsic and
extrinsic motivation as it would not show a realistic picture as a larger test group
would be more representative for the species or multiple repetitions of the experiment
would help support the experiments validity(Luyten , Lens 1981).
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On the fourteenth day of the experiment where the monkeys were put on 22 hour food
deprivation and then observed during the experiment for 5 minutes, the monkeys who
would get rewards were making more errors and fewer solutions than the nonrewarded group, Harlow saw the errors in the rewarded group as random. Where as
Deci argues that they were in fact of a systematic form. The monkeys first tried to
retrieve the raisins (the reward) from the puzzle by going straight to it and trying to
retrieve it. Trying to perform the last action in the puzzle without doing the previous
actions that was required to unlock the reward within(Deci 1971).
The observation periods was only 5 minutes with such a short time frame there is a
large risk that after been denied food for 22 hours they, the monkeys, may have
passed the optimal point on the Yerkes-Dodson law inverted-U relationship law that
expresses the optimal point of performance(Yerkes, Dodson 1908). They would have
been so stressed after been closed off from the outside world without any forms of
stimuli that the sheer sight of a ‘toy’ or anything that looked like it would have
excited them to the point that the experiment would not have been reliable as the
monkeys would be looking for any form of entertainment, stimulation or diversion
from the stress they experienced during their 22 hours on lockdown.
Together with the fact the sight of food for a animal that have been without it for 22
hours could have tricked a basic survival intrinsic in the rewarded group subjects
circumventing the normal behaviour of a normal rhesus monkey thus it being an
emotional reaction to the sight of something the subject is yearning for.(Deci 1971)
Deci points out another reason for why the rewarded group maybe be hindered in
solving the puzzle again “the monkeys were merely relaxing to digest their food.”
(Deci 1971) These disruption would be able to distorted the outcome of the
experiment from showing no correlation between rewarding and intrinsic motivation
to showing a negative correlation. (Deci 1971)
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4.4 Criticism of the of the articles A larger part of the literature used in this paper originates from the United States.
Most motivational theories have been developed by American scientists but they are
still considered to be valid across the world as they are internationally recognized.
Danish sources have also been found concerning companies experiences using
rewards systems which have been taken in to consideration to add a Danish
perspective.
5 Review of experiments within intrinsic and extrinsic motivation In this section some essential experiments on humans are presented, experiments done
to explain how motivation works.
Psychologist have for more than a century researched motivation, satisfaction,
attraction and retraction in an effort to determine the effect of rewards on workers
(Lawler, Jenkins 1992).
The external rewards can shift the locus of the internal motivator, affecting a subject’s
perception of their abilities to perform a given task both in the now and in the future,
this in a significant assumption on a theoretical level, it is assumed that intrinsic and
extrinsic motivation are in someway connected and that a increase in external will
result in a decrease in the internal.(Pritchard, Campbell & Campbell 1977)
5.1 Additivity Versus Nonadditivity of intrinsic and extrinsic incentives A experiment performed with humans in the late 1970’s by Craig C Pinder (Pinder
1976) with a larger sample size than the Harlow Puzzle experiment(n=24)(Harlow,
Harlow & Meyer 1950), Pinder had a sample of 80 male test subjects recruited form
the Cornell university campus with a mean age of 17,2 years.
The 80 students were divided in four groups, the four groups was then divided up, 2
of the groups performed intrinsic motivation tasks while the 2 other groups would
perform non- intrinsic motivating tasks, one of the non- intrinsic motivating would
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receive a extrinsic motivator and the same would one of the groups with the intrinsic
motivation task, as follows.
Group 1: intrinsic motivating task with extrinsic motivation
Group 2: non-intrinsic motivating task with extrinsic motivation
Group 3: intrinsic motivating task without extrinsic motivation
Group 4: non-intrinsic motivating task without extrinsic motivation
The intrinsic motivating task that group 1 and 3 would perform was to construct a
model car from premade parts. It would take more than an hour to perform this task
Pinder’s pre-testing showed that males around the test subjects mean age would
precive the car building task as a intrinsically appealing task and there for not need
any external reward (Pinder 1976).
The Subjects in the “non-appealing” groups 2 and 4 would perform a much simpler
task that would be repeated again and again, just as group 1 & 3, 2 and 4 would be
creating a physical products, connection two parts with three nuts and three bolts a
very simple task, the procedure would be repeated until all nuts and bolts had been
used, a task that would take even the fastest groupmember well over an hour to
complete. A task that resembles the car building task expected for the amount of
action that had to be repeated(Pinder 1976).
The extrinsic motivation used on the subjects was a monetary reward of 5 cent for
each correct placed element on the car or each successful connection of the bolts and
nut’s, to give the test subject an immediate reward a “clicker” was used hence each
time a correct task was performed a click was performed and 5 cent was dropped in a
open box near the test subject.
In the non-extrinsic groups 3 and 4 as flat rate of 2.75 dollar was paid or about the
same as members of group 1 and 2 would earn by performing the task, subjects in
group 3 and 4 were informed that they would not receive any other form of
payment.(Pinder 1976)
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During the experiment a fake interruption was staged and the test subject was told that
the experiment would be stopped for a bit and that the test subject could do what it
wanted while the break lasted, continue working on the task or read a magazine, this
was done to see if the subjects would continue working on the task or if they would
stop, the test subject was informed that that any work done in the break would not be
included in the experiment or paid for. (Pinder 1976)
What was looked for was if subjects prepared the bolt’s and nut’s to make it easier
and faster for the test subject to finish the task when the experiment would started
again.
At the end of each experiment each test subject filled out a questionnaire containing
questions regarding what motivated them to do that task and whether they felt like
they gained anything form performing it.
Some of the test subjects continued to work during the break even after they were told
that it would not make a difference for the experiment. The subjects who worked
during the break were ask to clarify why they did it and whether it was for intrinsic
reasons, hence they enjoyed that task in it self or if it was for extrinsic reason, hence
soring the nuts and bolt’s to make it possible to work faster and earn more money in a
shorter timeframe. (Pinder 1976)
Running the experiments results through multiple statistical tests Pinder concluded
that no overwhelming clear-cut result could be extracted form the statistics it failed to
find larger differences between the four groups, but a tendency leading towards
Deci’s theories the intrinsic and extrinsic incentives are not additive to determine
attitudes and behaviour (Pinder 1976).
Using the statistical data Pinder saw some tendencies, subjects who are intrinsic
motivated but without an extrinsic motivator are more satisfied by doing the same
task as the groups who was both intrinsic and extrinsic motivated to perform the task,
meaning that in this situation there is a decline when external motivators are added to
an already self motivating task(Pinder 1976).
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5.2 Deci’s College newspaper field experiment In an effort to investigate how rewards affected motivation in a real life situation
Edward Deci in the fall semester of 1969 studied the behaviour of the staff members
at a biweekly college newspaper, where two groups of four without their knowledge
were observed, over a time frame of 19 issues, 9 Fridays and 10 Tuesdays the two
groups were observed, the two groups were independently each responsible for either
the Friday or the Tuesday issue. The two groups were given the simple job of
assigning headlines to the different articles in an effort to capture more readers (Deci
1971).
The Friday group would be used as a control group, hence the goal was to see if and
how it differed from the Tuesday group who the real experiments was to be performed
on, the 10 weeks that experiment lasted was divided into 3 different sections, one of
four weeks and two of three weeks, non of the members of the two groups or any
other staff member except the editor-in-chief was aware that an experiment was being
performed, the two groups performed there headline writing task once a week for 10
weeks in a row (Deci 1971).
What was measured was the time it took the groups to assign a headline to each article
Deci assumed that the faster that staff members performed their task the more
motivated they were, meaning they enjoyed the task and there by did not get
distracted as easily, additionally the attendances was measured to help indicate the
attitude the staff members had towards the assignment (Deci 1971).
After the first period had past by (the first four weeks) the Tuesday group was told
that due to unforeseen allocation of funds the news paper would be able to pay the
group members 50 cent for each headline they produced but that they due to rules
were not able to pay other parts of the newspapers staffs and that they there for was
advised not to tell others about the paid they were receiving, three weeks past where
the group was paid, after the 3 week the group was told that all the money had been
used and that they therefore no longer would receive any payment.
Deci goes on to evaluating the experiment and comparing it to a clinical experiment
previously performed (Deci 1971).
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Field experiments are just as debatable as the clinical ones are, though the subjects are
in their normal environment so they are not affected by the first day at work
syndrome(Weick 1979 (reprint of 1967 article)) that otherwise can have an stressful
effect on the subjects.
Even though some unforeseen problems occurred during the observation phases, one
control subject had to drop out at as she was assigned to another task at the
newspaper, another of the control subject only attended two-headline session before
leaving the newspaper.
The results of the experiment are inconclusive partly due to the fact that half the
control group back out half way though the experiment. That is clearly seen in Deci’s
results where the mean number of minutes spend writing each headline for the control
group drops by 50 percentage half way though the experiment from being in the 20’s
to being in the 10’s, where the mean time spend for the experimental group stays in
the 20’s all the way though the experiment (see figure 5) (Deci 1971).
Group
period 1
period 2
period 3
period 4(extra
control
section)
Experimental
22.39 min
20.34 min
21.35 min
20.05 min
Control
22.19 min
20.97 min
12.60 min
13.79 min
Figure 5 (Deci 1971)
Section 4 is an extra two weeks control period, located 5 weeks after section 3
There is a significant drop in time used from section 1 till period 2 this can be due to
the first day a work syndrome(Weick 1979 (reprint of 1967 article)). In the start the
task is new and stressful and the staff maybe a bit slower that in period 2 where the
assigning headlines have become a routine.
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Deci saw a clear increase in the level of absence for both groups, even during period 2
where the experimental groups were being paid there was a increasing absence
amongst the members of the group even after they had been informed about their pay.
In period 3 where the rewards had been removed attendance dropped even further.
Where it in the control group the attendance had decreased each period but in no way
as drastically as it had in the experiment group.
The collage newspaper experiment was part of a collection of two experiments
investigating the effects on intrinsic motivation, giving support to Deci’s hypnosis 1
that suggests that money have a negative effect on intrinsic motivation as have been
suggested by Harlow in 1953(Harlow 1953)
5.3 Real life tests in companies Years after the basic theories were tested through experiments done by Deci(Deci,
Ryan 1985), Harlow(Harlow, Harlow & Meyer 1950), Porter and Lawler(Porter, III
1968) today companies are experimenting with rewards motivation inspired by the
theories that was developed in last century.
In 1994 the tire manufacturer Goodyear launch an internal campaign in an effort to
raise the sales of tires in the company’s local American branch, In an effort to
motivate the employees. The branches were divided in to two groups, employees in
group two was promised tangible gifts if they achieved their goals, group tow was
promised a monetary reward if they succeeded. Group one that was promised tangible
gifts performed almost 50% better then group two after the first year of
implementation, partly due to the employees in group one had more emotionally
attach to their rewards and often had them on display in their office as a trophy of
how successful they were.(Gostick, Elton 2008)
Extrinsic motivation appears to work in most companies, seen from stories about
successful motivation by performance-pay and reward. The widespread use of
Rewards and the belief in it having a good influence on workers' efficiency, have led
to performance pay becoming more and more common since the 80s. the general
consensus amongst top management across industries is that is works. (Beer, Katz
2003)
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Back in 1998, a survey of 500 random U.S. companies showed, that companies who
used performance-pay, had a shareholder return that was the double of those who did
not use that type of reward system (Beer, Cannon 2004). But Nobody knows if this
due to the effect of the wage system, but the result of the survey shows that i must
play a significant factor(Beer, Cannon 2004).
Lincoln Electric and arc welding company with approximately 9500 employees
(Lincoln Electric Holdings 2011) is one of the best examples of the use of incentive
and performance pay, and with a very extensive usage of motivation of the
employees. Workers get no basic salary but are paid for they produce and the quality
standard of what they produce, together with several bonus at the end of each year
depending of their own and the company's performance. Lincoln Electric have
managed to do considerable better than it’s competitors while it’s employees also earn
more than employees at competing companies. (Shields 2007)
6 Motivating employees by means of rewards In this section motivation by means of reward is discussed.
In recent years there have an increasing tendency amongst organization to expand
their reward programs with educational elements in an effort to encourage the
workforces to educate themselves in an effort to reach a higher degree of productivity
and thereby help the organizations bottom-line without adding additional expenses on
the organization.(Mujtaba 2010)
It is just as important how the rewards are given as how big the rewards are. What is
the goal with the reward, to attract new employees, strengthen the corporate spirit or
encourage employees to be more efficient.(White, Druker 2000)
Many employees feel that they are more directly motivated when they are offered
financial rewards and bonuses where they are able to see a clear path to the goal. They
do not consider base pay or non-financial rewards as a form of motivation but more as
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a right, even more significant is it, when employers neglect to considerer the
importance of the non-financials rewards effect as a motivator. (Fisher 1995)
6.1 Why use rewards? The goal of any monetary rewards system is improving the motivation the subjects
have towards a given assignment or job hence help improve the efficiency or
productivity in the company or department, without posing a large financial burden on
the company. The monetary rewards have to be kept on a sensible level thus not to
generate expenses that exceed the benefits from more efficient workers.(Nordhaug,
Holt Larsen & Øhrstrøm 2004)
Another element of the monetary rewards system is the hierarchy it creates in each
department highlighting the best performing employees or groups as they are able to
fulfil the requirements for gaining the reward, whereas the employees who do not
perform as well will not receive a reward, they should however be motivated to
perform better next time so they will be able to fulfil the requirements for gaining the
reward. (Nordhaug, Holt Larsen & Øhrstrøm 2004)
Rewards and recognition are generally assumed to be amongst the most influential
tools in the Human Resource (HR) toolbox for managing employees motivation, but it
is still the most mystifying area within the field HR, no common understanding exists
amongst researchers (Jackson, Hitt & Nesi 2003). Researches have shown that when
employees are awarded for their results and these result are in consistency with the
organizational goals the organization is more inclined to succeeded. (Shaw, Gupta &
Delery 2002)
6.2 Rewards divided in to intrinsic and extrinsic categories While Shields table of extrinsic rewards (see figure 6) is well-defined and includes
many different elements, elements that others have challenged, as Harlow(Harlow,
Mears 1979), as being intrinsic. It is necessary to stress as Bernstein put’s it “It is the
most mundane of psychological facts that desires differ radically among persons or even
intrapersonally over time,”(Bernstein 2001) meaning that the two categories development
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rewards and social rewards can switch between being a form of extrinsic rewards to
intrinsic rewards depending on each individuals needs and desires.
6.3 Rewarding employees through visible goals Today’s human beings are best motivated with the use of ‘a carrot’, at least according
to Adrian Gostick and Chester Elton, gifts and recognition are the most important
thing when trying to motivate an organisation’s employees, without distinguish
between the different types of recognition as praise, gifts, good salary or the
prospect's of bonuses if corporate or personal goals are reached.(Gostick, Elton 2008)
Extrinsic rewards
Financial rewards or remuneration:
•
Fixed or base pay
•
Direct benefits
•
Performance-related pay
Developmental reward:
•
Learning, training and development
•
Succession planning
•
Career progression
•
Other indirect or non-cash benefits
Social rewards
•
Organisational climate or
management culture
•
Performance culture
•
Work group affinity
•
Work-life balance
•
Other indirect or non-cash benefits
Figure 6 Shields categorizing of different types of extrinsic rewards (Shields 2007)
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Andrian Gostick point it out as clear as:
“acknowledgement is the most powerful strategy a company can apply
in order to achieve better business results”.(Gostick, Elton 2008)
Quote translated from Danish by René Munk
Service companies located in Western Europe have a limited ability to expand their
current markets further, but they still need to increase their income and profit margin.
They are in an increasing degree turning to optimization of their current employees
making them work faster or more efficient. The methods are various but the goal
remains the same, to increase profit. (Brooks 2009)
Acknowledgement can also consist of a item of low to no value, wrapped in an
context or event that appropriates a large mental rewards, the reward should be a
award of a kind, where it is the setup around it that provides all the acknowledgement
but not the award in itself. (Fisher 1995)
Before merging with Pfizer, Warner-Lambert manage to place themself on the world
map as an example of what a symbolic reward can result in. in 1998 all of WarnerLambert’s 40.000 employees were gathered across the world at 140 different location
at the same time. At each place a manager told the employees what a extraordinary
journey the company had been on for the last 6 years and to show how much each
employee meant to Warner-Lambert’s, each of them received a gift with the
engraving “We’re making the world feel better”. The award did exactly what it was
supposed to do, it increased the employees commitment to the company and their
work ethics. Warner-Lambert was never able to see the long-term impact of the event,
a few months later they were merged with the Pfizer corporation.(Gostick, Elton
2008)
Andrian Gostick notified very clearly, what any company must be aware:
“You can have all the goals in the world, but if you don’t tell people
about them your are never going to archive them […] There is a
simple premis: if you measure it, people will do it. If you measure it
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and [reward it], people will do it in spades. If what you measure
matches up with corporate goals and strategy, the company will be
successful.” Howard Weizmann, managing consultant of global HR at
Watson Wyatt Worldwide(Gostick, Elton 2001)
One of the crucial elements in any reward system is as Howard Weitzmann puts it, to
tell people what you want from them again and again, describe exactly the company’s
requirements are, which criteria’s the reward systems is build up around and how
rewards are distributed amongst employees based on the criteria’s that the managers,
company and employees have set for a given period of time. (Gostick, Elton 2001)
It is just as essential for the company as it is for the employee to succeed, this is only
a possibility if both employer and employee have clear undisputable goals, giving
every employee a clear path and direction and the employer a clear vision of where
the company is heading.(Gostick, Elton 2001)
There is a big difference in how long an employee remember a reward that consist of
a monetary form compared to a more tangible gift. Money are rarely used for an exact
item they are normally just add to the subjects disposable income, unless it is of a
significant amount that can payout a for example car or new house. When a less
significant amount is added to the pool of disposable income the subject will forget all
about it. A tangible rewarding can be a award or gift, it could be in the form of a little
decorative novelty that is a constant reminder of why it was received and the feelings
it resulted in.(Gostick, Elton 2008)
Individuals in any society, group or sub-group will strive to be equal with others of
their group(Adams 1965), they will compare themself with the people around them.
This is also the case in organizations, departments and work groups, members will
strive to become equal with their colleagues. It creates a potential problem if the
group members are aware of big variances amongst other group member in how big
rewards and salaries are, that could lead to jealousy and cooperation difficulties inside
the group.
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6.4 Rewards differs between cultures There is a diverse view on how to structure pay for performance. It is difficult to
choose the right reward system, but it is even more difficult to motivate employee
across national borders. With a global business world, managers now have to cover
management crossing different cultures. National cultures affect the design and
underlying structure of wage systems, something multinational companies must tackle
when dealing with multinational employment, rewards can be difficult to arrange so it
creates the wanted motivation. (White, Druker 2000)
This could be discussed if there really is a difference in different region of motivation
both external and internal, a basic element of the human race and many animals and
there by be present in almost the same form in all cultures in the world. (White,
Druker 2000)
Employees with different social status can in the same way understand wage
structures and reward systems in different ways. Working females varies more than
males across cultures which making it especially hard for multinational corporations
to cater to their demands and their preferences when it comes to rewards. (White,
Druker 2000)
Most motivational theories are developed in the U.S. and if not, they are influenced
by American behavioral theories. Motivations vary between cultures, and therefore it
is difficult, especially in multinational corporation, to motivate employees for higher
performance, the rewards wishes by the employees for their efforts vary greatly from
culture to culture. It is difficult for an American manager to imagine how the
employees in their Chinese, Japanese or Danish department responds to the
organizations reward system. (Adler, Gundersen 2008)
As said in the limitations any difference between national cultures is not the main
focus in this thesis, and will not be analyzed further.
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6.5 Non-­‐monetary rewards “The programmers want pizza and cola at 2 am at night, creative
employees want thai food Sunday afternoon and management would
like freshly baked bread everyday” IT-manager,(Civiløkonomen 2000)
Quote translated from Danish by René Munk
Non-monetary rewards or perks are of a totally different nature than monetary
rewards, money are not a reward in them self but just a uniformed instrument that let
the owners decide for themself what they want, where non-monetary rewards need to
cater specially to that person and their needs.(Civiløkonomen 2000)
What will motivate a person will not work on the person sitting next to him or her, as
expressed in the quote from Civiløkonomen(Civiløkonomen 2000), perks for a
programmer may be the ability to drink cola and enjoy pizza at 2 am when he is
working on a job at the office, but a pizza and a cola will not be an efficient way to
motivate an employee in HR or a receptionist.
6.6 Rewards systems amongst white and blue collar As we in the highly developed parts of the world are outsourcing our manufacturing
related jobs to cheaper developing countries(OECD 2010), we are forced to progress
from being an industrial society to becoming an information based society of highly
educated specialized individuals. It will force companies and managers to start think
in new ways, it is notably harder to set goals for highly creative and academic jobs
where the output is often not in a unified and standardized manner that makes it easy
to measure and compared it with company wide goals.(Hein 2009)
6.6.1 Blue collars Amongst blue collar workers meaning employees with job types requiring low to noneducation, performance based pay is the norm, in the western world, it is extremely
easy to measure the performance of this kind of work, how much have the person
produced or sold, a base wage is paid and on top of that the employees can often earn
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a specific amount every time a product is produced or sold.(Neergaard, Larsen &
Oehrstroem 2006)
6.6.2 White collars White-collar workers meaning employees with high academic education, performing
jobs task that often is extremely specialized and seldom-routine tasks. (Hein 2009)
White-collar workers do not see wage or bonuses as an important motivator, it is the
task itself they see as the biggest motivator. They want to be inspired and challenged,
their main goal is not only to earn money but also to develop as a person. (Larsen,
Munkgård Pedersen & Aagaard 2005). A great indicator that reflects that is how much
more a white-collar worker works overtime without getting paid for it than a bluecollar workers would do. White-collar workers work for there own sake, for the
recognition and because they just like performing the tasks their job includes(Berry
2008).
In knowledge-based organizations, human resource management systems and that
company culture are essential part of any efficient work place, they must be able to
attract and retain the highly skilled employees and motivate them to develop their
skills and experience, help them contribute to the efficiency of the organization. That
is where the reward system is essential, it is crucial that any organization dealing with
highly specialized have a reward system that is able to attract and retain employees,
help motivate them to grow and learn what the organization requires of them.(Lawler
2003)
6.7 Reward systems can demotivate and raise conflicts As result of expanding reward programs some employees may feel pressured to act in
a unethical and inappropriate manner just to reach their goals, this is in no way a
beneficial position for a organization to be in.(Mujtaba 2010)
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Pay and reward systems are an arena for conflicts, bonuses and perks that everybody
in a given company obtain have a risk of becoming demotivated, it can almost result
in a revolt amongst the employees when facing with the fact that they will loose a
“right” or “thing” that they have earned, after receiving the same rewards for multiple
years in a row. This could be a big annual bonus or a luxurious Christmas
party(Christensen 2009), employees have grown accustomed to it therefore no longer
see it as perk or reward for when the company as a whole performs over expectations,
they will se it as a basic part of working there.(Nordhaug, Holt Larsen & Øhrstrøm
2004)
“2.000 Shipyard Workers at Lindø went home in protest after finding
out that they were going to loose a 10 minutes long company paid
coffee break”(Benson 2005)
Quote translated from Danish by René Munk
An example shows how discussion about a short break can hurt a big company. In
financially difficult times the management may decide to remove the bonus often
resulting in a revolt amongst the employees, as it was seen at Lindø when the board
decided to remove a 10 minutes coffee break. A great example of how something
which was thought as a motivator evolves in becoming a basic requirement amongst
the employees, the same as with the Danish employer paid pensions plans that exist in
Denmark, originally created as a reward but no longer seen as one(Neergaard, Larsen
& Oehrstroem 2006).
A problem that can arise and did arise when Unilever, a European food manufacturer,
restructured their Danish branch in an effort to optimize the efficiency and reduce the
overhead, first removing 70% of the employees in Denmark and then introducing a
bonus system where some employees would be able to earn up to 50% of their wage
in bonuses. The bonus system is a combination of department based performance
goals (income, profit and production) and individual personality goals (efficiency,
personal development, customer review and co-workers review) would be used to
calculate the bonus level. The bonus system was introduced slowly over a period of 5
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years before it was fully implemented within the company, in the following years
management realized that a problem had surfaced, there was a enormous focus on the
target bonus level, the prospect level of bonus that employees could expect to gain
over a period of 5 years. In years where some divisions of the Danish branch had
difficult market conditions while others did not, resulted in very various bonus levels.
Tension can raised amongst the different department and employees over which
departments and employees received what and who was entitled to what level of
bonus. The solution to the problem was for the management and human resources to
start a continuous information campaign to further explain how the bonuses would be
calculated and that the system was only there to help both the company and
employees perform and find places where action could be taken to optimize the work
flow(Kiaby 2006).
Applying a reward systems will in some situations create results in self-centred
employees who are reluctant to share knowledge and ideas with others, or recognizing
co-workers ideas as valid and useful.(Lawler 2003)
6.8 The “but last year” factor Humans are creatures of habit meaning when a company has paid out a company wide
bonus due to high profit 2 years in a row, the employees will expect a bonus each year
after that. As they after 2 years are used to receiving a bonus at the end of a financial
year and then the motivation factor of the bonus has been reduced. They may even
expect a bonus even after a deficit in the company as they see the bonus as a part of
their wage and not as a motivating reward.(Nordhaug, Holt Larsen & Øhrstrøm 2004)
Another example could be the Christmas party, employees may expect a lavish party
each year just because they had it two years in a row, employees could even
interpreted it as a insult if it is removed.(Christensen 2009)
As written in a previous paragraph it is a real problem when a company have to
decrease the monetary rewards, because of the de-motivation it results in.
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6.9 Denmark is not in the front “Denmark is loosing the competition for the most qualified employees
according to Danish industry(a confederation of private Danish
employers) […] Danish companies have to be allowed to rewards their
employees with bonus schemes, stock options and fringe benefit,
without labour unions requiring that the bonuses should be
permanent” (Ulrichsen 2003)
Quote translated from Danish by René Munk
One of the main problems with incorporating reward systems further with the Danish
wage structure is the bargaining power that unions in Denmark have and how they
praise solidary amongst their members. Where as in the United States rewards
systems are much deeper integrated within the wage structure from the CEO to the
people on the floor. Very few employees are outside of the reward systems, this is
partly due to the individualistic culture that exists in the United States where
"Everyone is the architect of his own fortune"(Regnier 1573) this results in a lower
bargaining power for labour unions in the united states compared to Denmark.
In the 2003 Cranet survey, an research organization comprised of more than forty
universities and business schools,(Cranet 2009) shows that the reward systems are not
nearly as wide spread in the Nordic countries as in other parts of Europe, even in
comparison with a country like the Netherlands where reward systems are used in a
very high degree. The Netherlands without a doubt share many similarities with the
Nordic countries but when it comes to reward systems there is a huge gap.(Nordhaug,
Holt Larsen & Øhrstrøm 2004)
6.10 Danish difficulties
The Danish division of the international information technology magazine, computer
World aimed at senior IT leaders, ran an article called “Sådan scorer du lønbonus”
roughly translated to “How to score salary bonuses” focusing on how widespread
bonuses are in the Danish IT industry and how to incorporate them into a IT
organization. In the Danish private sector approximately 7 % of employees wages
come in the form of a bonus, in the Danish public sector the number is almost twice as
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high, in that aspect the private is more conservative when it comes to rewards system
than public organizations are(Hansen 2011b).
Defining what the ‘carrot’ is means defining the rewards, the goal and the path
leading to it, it’s important for employees to participate in the defining of their goals.
But not all unions are hesitating, Djøf and Lederne are amongst those, but they
underline the importance of lettering the employees play a crucial part of how a
rewards system is incorporated into the organization(Hansen 2011b).
The two unions warns that’s it’s crucial that employees understand exactly how they
are measured, they need to know that it’s fair and that everyone have an equal form of
measurements, the employees need to know that it’s not only the employers that will
benefit from implementing an reward system but that also the employees also will
benefit(Hansen 2011b).
6.11 Requirements of reward systems A basic requirement for extrinsic reward systems to be efficient is require the
employees as a minimum to see it as being fair and objective. If this is not the case the
reward systems will be useless as employees will not see them as fair, and such unfair reward systems can have a devastating results for a company as employees will
start searching for companies where they have a fair chance of getting a monetary
reward. (Nordhaug, Holt Larsen & Øhrstrøm 2004)
Another important element of reward systems is how simple the system is meaning
that the measurements where by the employees are evaluated need to be simple and
not require a lot of administration as an complex evaluation system could be
expensive to administrate and potentially eat up the profit that the company would
expect to gain from implementing such a rewards system.(Nordhaug, Holt Larsen &
Øhrstrøm 2004)
Companies often use a combination of different reward systems, for example a
combination of commission and behaviour-based rewards, the commission to
motivate the employee to push for extra sales and to sell at a higher rate and the
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behaviour-based give the employee an incentive way to be nice to customers and coworkers(Heneman 2002).
There is one main problem with rewarding, they have to add something new to the
subject that is not already obtained and that the value the item has over time will
decrease. Meaning that if one year the subject receives a bike as a yearly bonus the
next year promising the subject another bike I not going to be as effective. Basically
the value that the subjects connects with each rewarding will decrease over time and
employers will have to come up with new ideas for bonuses and rewards on a
continual basis (Mujtaba 2010).
7 Main components in reward systems The complete rewards system consist of multiple elements, they are listed
below(Fisher 1995):
•
•
•
•
Financial rewards
o Base pay: Basic rate for the job
o Performance related pay: Differential payment related to performance
o Bonus: Rewards for success
o Competence or skill-based pay: Pay linked to employees’ skill or
competence
o Special payment: Pay for unpleasant conditions of job
Non financial rewards
o Achievement: The need for success measured against personal standard
o Recognition: Motivation by showing the employee appreciation
o Responsibility: Motivation by given more responsibility of their own work
o Influence: Motivation by the drive for influence or power
o Personal growth: Motivation by given opportunity to upgrade skills via
training/course
Employee benefits: Extra value beyond their pay, e.g. cars and insurance
Rewards in kind: Taxable rewards as gifts, dinner or a weekend trip
According to the elements of reward systems shown above, each of the mentioned
parts are described in the following sub sections, although regarding the limitations
mentioned in the introduction chapter.
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7.1 Financial rewards Financial rewards are the basic external motivation factor, they provide a monetary
incentive or reward that the subject can obtain if a certain goal is fulfilled. (Fisher
1995)
The Basic amount employees earn in exchange of their time and effort, is most
common in the form of either hourly wage or monthly wage (Nordhaug, Holt Larsen
& Øhrstrøm 2004).
The normal or basic wage is not considered as a reward but simple an exchange of
services, the employees trades their time, expertise and energy for a wage that the
employer pays.(Lawler 2003)
Performance related pay seems to be the most debated reward factor in articles and
managements books, the wage depending on the performance measure sales, profit or
increase of shareholder value. Incentives are forward minded in an effort to motivate
employees to achieve a higher performance. (Fisher 1995)
Some companies employ performance based pay on a company wide scale where
everyone within the organization gets an identical bonus as it is was in Nesaa Danish
electricity distributor. Before it merged with Dong Energy in 2006, in 2003 every
Nesa employee received an equal percentage bonus that was based on the employees
base salary (Nordhaug, Holt Larsen & Øhrstrøm 2004). The future goal of the
organization was to incorporate the bonus system deeper into the company, gradually
transforming it being a 50% work group and 50% individual base reward
system(Nordhaug, Holt Larsen & Øhrstrøm 2004).
Bonus is paid as a reward for success, bonus is widely used amongst companies as
their major form of reward. Bonus is related to a measured performance in a welldefined period typically a year or less(Fisher 1995). It can be paid to individuals,
teams or company-wide, in the latter it is related not to individuals performance but
the company’s profit or value (Fisher 1995).
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Stock and profit sharing are as such not direct rewards as they depends on the
companies performance as a whole and the especially stocks often comes with
restrictions such as requirements of holding the stock for a certain number of years
before they are allowed to sell them. (Heneman 2002)
Another form of stock sharing is when a given company lets it employees buy stock
in the company at a reduced price, meaning that already from the starting point the
employees have earned on the stock, this is a reward but a reward where the
employees also have to sacrifice a part of their income to acquire the shares.
Another often-used reward type is commission where employees receive a percentage
of goods sold, commission is mainly used as a motivator for sales workers as there is
no real efficient way to use it in connection with production or creation of goods.
One of the biggest advantages of the commission is that it is extremely simple for the
employees to perceive and administrate, where as the main disadvantage is the
employees way not be motivated to prove the customers with the best product but
with the product that gives the biggest commission.(Nordhaug, Holt Larsen &
Øhrstrøm 2004)
As some products sell better then others and some regions have a higher number of
big costumers than other,s there is a risk that the sales people will only focus on big
existing costumers instead of also contacting small companies that a not currently
customers, consequently not maximizing the company’s customer group, this
skewness if often is fixed by offering a extra bonus every time a new customer is
secured. (Heneman 2002)
Competence-based pay is linked to employees’ skill or competence, as long as the
skill is relevant is it typically used for highly skilled employees in companies that
believe, due to the culture of the company, that skill based pay are more relevant than
incentive scheme based rewards (Fisher 1995).
Paying employees based on their skills and competences not depending on what their
job is can give the problem with two employees who perform exactly the same job but
do have different educational background would not be on the same level when it
came to their salary outcome.(Lawler 2003)
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Employees are not encouraged to move up the hierarchy in a organization, as this
would only mean more responsibility but not additional wage increase. Competition
amongst employees to get a promotion is almost non-existing and instead they focus
on developing their skills and there by increasing their wages. In the mean time this
creates a competitive advantage for knowledge based organizations who are able to
control the skills the employees learn.(Lawler 2003)
Special payment includes pay for unpleasant conditions of the job as overtime
shifts, special working hours or dangerous job conditions.(Fisher 1995)
7.2 Non financial rewards Motivation through rewards is possibly in many ways to achieve a particular objective
without money, it can be posting individual results in the canteen as a Wall-offame/Wall-of-performance or to mark an achieved with cake for afternoon tea.(Fisher
1995)
This form of award reward is of great importance any encouragement from the
executives or managers will be a positive motivation and can also motivate colleagues
who witness it. These awards belong to a category that is called non-financial reward.
They will not be discussed deeply in this report but the essential reward factors are
mentioned below including achievement, recognition, responsibility, influence and
personal growth. (Heneman 2002)
Non-financial rewards are related to the needs people have for recognition,
achievement, responsibility, influence and personal growth. How powerful they are as
motivators differ between individuals there for it is important that they are adapted to
the individual. (Fisher 1995)
Achievement can be seen as the need for success measured against personal standard,
typical seen as a motivator for successful managers. (Fisher 1995)
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Recognition is an effective rewards type, employees need to know that their
achievements are appreciated by their managers and coworkers, it is not only a
measurement of their performance. Praise, showing respect, job enrichment or
nomination as “salesman of the month” are typical ways to do it. (Fisher 1995)
Employees can be motivated by a managers providing them more responsibility of
their own job, an intrinsic motivation through good feedback, possibility to define
their goals or way to achieve their job.(Fisher 1995)
Through influence and involvement of the employees with ambitions they are
motivated. (Fisher 1995)
Most employees feel personal growth is important, upgrading their skills or
competence through courses or training can work as motivator. (Fisher 1995)
7.3 Employee benefits Employee benefits are extra value as they go beyond just being a number, benefits can
for example be cars, insurance or extra holidays, it is an essential elements of the
reward system even though it does not provide direct motivation because its not often
directly linked to an specific performance goal (Heneman 2002)
7.4 Rewards in kind Gifts, a diner or a weekend trip are often used as a reward for salesmen for achieving
specific goals in a sales competitions (Fisher 1995).
7.5 Total rewards management Rewards seen as a “total approach” (Shields 2007) or as a “total reward
management”(Heneman 2002) and “total reward system” (Fisher 1995) they all three
are attempt to frame all the motivation by rewards into one whole unit as a motivation
strategy and package of rewards in a company.
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The way to frame it in a total reward system is to determine the financial and nonfinancial rewards. The company must identify what non-financial rewards they
provide to promote the wanted behavior, and the financial rewards if any, and the
balance between them. Due to the company, its kind of job and workers, different
focus on extrinsic or intrinsic motivation must be chosen. (Shields 2007)
Due to that company culture, its job and workers, and its actual status, the board,
management and human-resource department have to create the motivation system
that meet the company where it is and make focus of the wanted evolution and
necessity for raising the performance(Heneman 2002). The above list, and maybe
more to that, are possible components in that exercise.
Total Reward is the sum of all financial and non-financial reward factors used in a
company, and Total Reward System is a term used for that together with the
rewarding strategy in a company, as the whole setup about how a company works
with motivation and rewards as a part of their human-resource strategy(Armstrong,
Stephens 2005).
8 Rewards as a motivator in 2010’s In this section a view of how rewards are used to day is shown.
“Danish companies and managers are too conservative when it come
to their rewards systems that can hinter the competitiveness of Danish
companies “ Casper Rose, professor department of International
Economics and Management as Copenhagen business school
(Ravensborg 2010b)
It is important not being too conservative when considering implementing a reward
system in a Danish organization, Danish leaders are often hindered by “janteloven”,
they do want to do like everyone else is doing and they not want to encourage
competition inside there own organization even through it could benefit the
organizations turnover(Ravensborg 2010b).
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8.1 Statistics The academic leaders journal “Lederen” have performed an extensive study in the use
of bonuses and performance based pay in Denmark and concluded that less than 10 %
of the wage collected by the subscriptions of “Lederen” was a result of a bonus or
reward program. Danish companies could just as well stop using them, as the size of
them would have slight to no effect “bonus on less that 20% of the wage is not really
useful for leaders”. (Ravensborg 2010a)
The reward has to be of a significant size before it is able to influence the leaders
performance, ‘Lederne’ expect that Danish companies in the coming years will start
using rewards on a much larger scale than they do today. (Ravensborg 2010a)
Lector and salary scientist at Ålborg university Jørgen Stamhus mentions in the same
article that it is a general trend among Danish companies to use rewards in a less
extent then foreign companies do. It can be connected with the fact that there is fewer
big companies in Denmark and that amongst small companies is a lower need for
rewards as a instrument for managing the companies as the board is able to keep
overview of the company and employees much easier than when dealing with larger
corporation. (Ravensborg 2010a)
The 8 most used titles amongst the members of
Rewards share of the base
“Lederne”
wage
Chief Executive Officer (CEO)
8%
Department head
4%
Head of department
2%
Retail manager
4%
Project manager
2%
Team leader
2%
Supervisor
0%
Chief Financial Officer (CFO)
3%
Figure 7 (Ravensborg 2010b)
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Figure 7 shows the average percentage of the wage that is paid in the form of bonuses
and performance bases wage amongst the 8 most popular titles amongst the
subscribers to “Lederne” it ranges from 0 % up till 8 %. Figure 8 shows the job types
with the largest bonus, ranging from 9 to 14%.
Top 10 of the job types with the larges bonuses according
Rewards share of the
to the “Lederne” survey
base wage
Vice President
14 %
Country Manager
12 %
Divisional director
11 %
Director
11 %
Deputy chief executive
11 %
Business Unit Manager
11 %
General Manager
11 %
Chief information officer (CIO)
11 %
Business manager
10 %
Human resource director
9%
Figure 8(Ravensborg 2010b)
8.2 Stock as a reward today. The union “Lederne” have surveyed their members to see how wide spread stocks are
as a reward among Danish corporations, from 2008 till 2010 the share of leader who
recive share bonus as an part of their wage plan dropped from 8.7 to 4.7 % in 2010.
Professor Ken L Bechmann at the Department of Finance at Copenhagen school of
business expresses concern regarding the negative view many employees and
employers have when it come to shares as a bonus. This view is largely due to the
way the press have portrayed it during the last financial crises and there for it is not
seen as a efficient external motivator(Ravensborg 2010a).
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It is likely that stock rewards will get a renaissance as soon as the financial markets in
the world stabilizes, stock are a highly efficient way of aligning the companies
leaders interest with the stock owners interests, it is essential to motivate the leaders
to perform and a ‘carrot’ is a great tool for motivating them(Fisher 1995).
It is always hard to find the optimal stock rewards for a leader, give him too much and
he will get rich and loose focus, give him too little and he will not be motivated to
perform.(Ravensborg 2010a)
8.3 All workers in Microsoft have bonus The Danish division of Microsoft in Denmark, used reward systems through the
whole organization, Microsoft HR manager Anna Louise expresses this as “we have
an 100% performance culture”(Great Place to Work 2009). In the beginning of every
year every one of Microsoft Denmark’s 1000 employees get their own individual
goals, each month each employee has a meeting with their superior regarding the
progress and the employees goals and whether the goal should be increased or
lowered as a result of events outside the organization. These meetings give the
employees freedom, the employees know what goals they have to reach but it is up to
them to decide how they want to reach them.
It varies how much of the bonus is connected to the employees goals, depending on
the levels of difficulties and type of goals, some employees earn up to 43% of their
salary as bonus while other like the HR-manager Anna Louise only earn 20% of her
salary as bonus(Hansen 2011a). From a Danish corporate point of view the reward
systems in Microsoft Denmark can be seen as unnecessary tough compared with the
loose reward systems that currently exist in other Danish organization, still the
employees consider it a fair system and in 2009 Microsoft Denmark was voted to be
Denmark’s best workplace(Great Place to Work 2009), prowing that the employees
like the way the organization is run.
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8.4 Rewarding top managing level Performance based pay is especially common amongst the top management in Danish
companies, an example of that is the 17.500 man strong Danish shoe company Ecco
where performance based pay in the norm among the top management where the
profit or deficit has a big impact on how high the wages are. The average director
salary varied from 2.4 million DKK in 2004 to 11 million DKK in 2006, and then
back again to 4.7 millions DKK in 2010 all in accordance with how profitable the
company was that year, the board of Ecco sees the task of optimizing the performance
based pay as one of the most important factors to determine how well Ecco will do in
the years to come.(Kragballe 2011)
8.5 Zentropa In a section above the difference regarding blue and white-collar workers was
discussed. Here we look at a company only consisting of white collars.
An example of a company where there is a big focus on intrinsic motivation. The
Danish film company Zentropa is a company with a majority of highly specialized
creative employees (Hein 2009) that just like many other highly specialized
companies focuses more on cultivating the internal motivation than on optimizing the
external motivation with rewards and bonuses.
Zentropa shares many similarities with other companies within the same industry, it
though goes a step further than the other companies, owned by the two eccentrics
Peter Aalbæk Jensen and Lar von Trier. Zentropa has a very distinguished working
environment, where employees can get fired my SMS or email in the middle of the
night(Ankersen 2008) and where employees are encouraged to use the on campus
nude sauna to bond with co-workers.(Avanti 2008)
“there must be an economic hardship being employed here. Ergo, it
must be so much more interesting and fun to work here, that employees
are indifferent to the salary. They must be so excited that they can live
with that they get 20% less than what they can get somewhere else.”
(Ankersen 2008)
Quote translated from Danish by René Munk
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The focus on size of the salary is not an issue as Zentropa employees work there
because they have a passion and an environment that allows them to develop their
skills. They have the liberty and control, they are in charge of their own projects,
nobody controls what they can or cannot do, if they succeed they take the honor if
they fail they are told-off. (Ankersen 2008)
“That is why Zentropa is able to pay 20% less than what is average in the industry”.
(Ankersen 2008)
9 Conclusion The purpose of this theoretical thesis was to study motivation and especially extrinsic
motivations effect on intrinsic motivation, and to look at extrinsic motivation in the
context of motivating employees with monetary rewards. It is important for
companies to be aware of how they can motivate their employees to work more
efficiently, and therefore it is important to understand the basic intrinsic and extrinsic
motivation theories.
In the problem statement a basic statement was set, before that some questions about
motivation were asked. Throughout the thesis these questions have been in focus
when selecting theories and examples.
Theories about intrinsic and extrinsic motivation and the link between them were
discussed based on articles and experiments. The research studies and experiments
showed that workers do not become more effective or perform better due to extrinsic
motivation alone, but that they are motivated by intrinsic factors in higher degree.
Articles show the complexity of motivation theory, especially when it comes to
applying it in the real world. The interaction between intrinsic and extrinsic is
complicated and therefor it can be difficult to conclude on result of extrinsic
motivation factors because of inference with intrinsic motivation factors.
It is evident that a reward system contributes to the employees drive to perform, and
that the motivation is focused in the right direction for both the employees and for the
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A theoretical discussion of the effect of intrinsic and extrinsic motivation.
strategy in the company, hence resulting in better performance for the organization. It
is essential to understand how motivational factors connect with rewards in practices,
to avoid external factors affecting the internal motivation in a bad way.
Although the correlation between intrinsic and extrinsic motivation has been debated
and researched for decades, no clear definition have been made.
This thesis shows a big variety in the factors that influence employee smotivation, if
a positive correlation between extrinsic and intrinsic motivation is obtained, there is a
possibility to achieve a higher performance level, in that scenario a reward system
would make sense.
The study showed, that a big part of companies use wage system and extrinsic
rewards as motivators, and their experiences showed it worked. companies are using
reward systems, more than ever, that must be due to positive experience with it.
Motivation factors influence in difference ways, as seen in the experiments, studies
and in practice, in different working classes, cultures and regions of the world, even
different between male and female workers. The variation amongst national, cultural
or social situations is not discussed in depth in this thesis, they are there, although not
analyzed or described in details in this paper.
The first sub question was whether there is a clear understanding of how intrinsic and
extrinsic motivation works, and the answer is, that both the intrinsic and extrinsic
motivation is useful, and they must be used in combination, - and although it is
difficult to derive the right combination as it depends on the culture of the
organization or group, if the culture is well-defined the way to combine extrinsic and
intrinsic motivation is much more clear.
The next question was to examine whether motivation through rewards were possibly,
and the answer was, bases on theories and experiments that it is.
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A theoretical discussion of the effect of intrinsic and extrinsic motivation.
The third sub question was whether motivation thru rewards gives an effect and
whether there are positive experiences. The answer based on the published
experiences showed that it mostly is, but a uniform culture is required for it to be
efficient as member of such would have the same goals and needs hence the same
motivation factors.
The next sub question was to investigate whether there are any differences among job
types or cultures. The study shows that there are differences between cultures and job
types, and for multinational companies with employees across borders, reward system
are really a challenge.
The primary question in the problem statement that was “Can rewards, based on
intrinsic and extrinsic motivation theories, experiments and experiences, be seen as a
valuable way of motivation?” The answer is, that it does, it is important to motivate
and it is important to use extrinsic motivation factors. Theories, experiments as well
as experiences have shown, that intrinsic and extrinsic motivation through rewards is
a valuable way to get high performance.
The thesis showed that it is important that research and experiences continues,
because motivation and rewarding is an area where there is a need for more
knowledge and clarity. Rewards are in focus in many companies and the trend seems
to continue.
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