How do you motivate employees to get the best out of them? We take a look at what the research says...
Key takeaways from this article
- Employee performance is enhanced by both intrinsic and extrinsic motivators
- There is no one-size fits all approach to motivation. Different motivational tactics produce different performance results.
- Intrinsic motivators are universally effective. Extrinsic motivators need to be carefully designed to support, rather than override intrinsic motivators.
- Incentivising teams as a whole rather than individual team members can produce greater performance results
Getting motivation right: The business leader & manager's challenge
One of the most difficult and uncertain areas in the modern organisation is how to motivate employees and teams to get the best out of them.
Traditionally, financial incentives have been used as the primary motivation tool to optimise performance. If you do a good job, you get a cash bonus. It's simple and effective.
However, some argue that when you get down to what truly motivates people, financial incentives are just not that important. In some cases, the are even detrimental to motivation.
So what do we do?
Part of the problem is that we spend time trying to find the best single motivator - there is no best single motivator - it depends on the situation. There is no one-size-fits-all approach to motivating employees and teams. It really depends on the situation and what you are trying to achieve.
Intrinsic & extrinsic motivating factors
At the most basic level, there are two categories of motivators that drive behaviour: intrinsic and extrinsic
Behaviour happens because an individual wants to engage in activities for their own sake (e.g. task enjoyment).
Behaviour happens because of the prospect of instrumental gain or loss (e.g. a pay rise, bonus, or commission payment)
How motivating factors impact performance: What says the scientific research?
A 2009 survey by McKinsey9 found that employees rated non-financial incentives as more desirable than financial incentives - citing praise, attention from leaders, and opportunities to lead projects as the most motivating types of incentives.
Intrinsic motivation drives performance in several ways. When individuals find a task interesting, enjoyable and/or personally meaningful, they:
- are more likely to fully participate in the task10
- will invest a higher degree of intensity or effort in the task4
- persist longer on tasks7.
Intrinsic motivation is more strongly related to performance quality than it is quantity4. The reason is that quality-type tasks are often more complex and require employees to invest more attention and personal effort in the task and to persist for longer periods of time, often in the face of obstacles4.
When we talk about extrinsic motivation, we are referring to motivating employees through the provision of incentives.
Incentives drive performance because there is a clear link between performance and the incentive. It is easy for employees to see that their performance will lead to a very specific outcome. For example, sales commissions and expected end-of-year bonuses create an extrinsic reason to perform because receiving the incentive is contingent on a certain level of performance8.
Incentives are more strongly related to an increase in performance quantity, rather than quality – the opposite to intrinsic motivation. Quantity-type tasks - for example, the number of boxes put together in an hour – are often lower in complexity, and require less personal investment from an employee6.
Interestingly, unlike intrinsic motivation which has a positive effect regardless of the type of task, incentives can have a negative effect on performance quality. The presence of incentives can create a focus and urgency that is counterproductive and can dull creativity3. Employees become more focussed on how to gain the reward, rather than how to solve the problem.
It’s also worth noting that incentives are only motivating to the extent that an employee believes the incentive is important to attain other things of value, such as food, cars, housing or leisure activities11.
What type of motivating factor to use?
As we have discussed, employee performance is not simply determined by one or the other: to some degree, both intrinsic and extrinsic motivation are important4
Broadly speaking though, the objective of the leader or organisation can be used to determine the type of motivator deployed:
Main objective a higher quality result produce more quantity Motivator used intrinsic motivators extrinsic motivators
How managers & business leaders can foster intrinsic motivation
Theories of intrinsic motivation state that there are two psychological states that drive an individual’s intrinsic motivation:
- Autonomy – Feeling a sense of control over what you do and how you do it
- Competence – Feeling confident in your abilities to do things well
Given that these factors are so theoretically similar to factors that drive psychological empowerment, it is safe to assume that attempts to build feelings of empowerment in employees will have a direct, positive impact on their intrinsic motivation.
To read more about empowering employees, check out our article 'Empowerment – The key to improved productivity and effectiveness'.
Use of rewards and incentives for extrinsic motivation
Despite employees rating non-financial incentives (such as praise, attention, or opportunities for leadership) as more desirable than financial incentives9, there is strong research to suggest that financial incentives are the most potent influence on employee performance4. Some studies even criticise financial incentives for being too effective at boosting performance1.
Given that financial incentives are proven to deliver significant performance gains, they are a safe bet - if it is financially viable to provide them.
Non-financial incentives provide a more cost-effective option and can be used in conjunction with (or in the absence of) financial incentives.
Team incentives are more effective than individual incentives
People either work as individuals, or as part of teams. When structuring an incentive program, it is important to consider - is the outcome you're looking for at the team or individual level?
If an employee works largely on their own, it makes sense to incentivise that employee directly. However, where team members must work together to produce an outcome and are jointly responsible for that outcome, do you incentivise the team or the individual team members?
A meta-analytic study from 2003 found a 48% increase in the performance of teams who were offered incentives compared with a 19% increase for individually based incentive programs5. Clearly, team-level incentives have a more significant impact on performance than individual incentives - where they are appropriate.
The risk with team-level incentives is that it can lead to 'social loafing', where some team members put in less effort than they would if they were being individually assessed and rewarded. The potential for social loafing can largely be eliminated, however, by ensuring leaders hold each team member accountable for their contributions5.
A leader's guide to motivation strategies
We've put all the advice in this article into a super-helpful PDF that you can print, save or share with colleagues. It includes a simple one-page summary table - designed to help guide your leaders through the process of using motivational strategies to support individual and team performance.
The research shows that intrinsic motivation and extrinsic incentives are powerful tools to motivate employees if used in the right way.
When considering how to effectively motivate your employees, don’t use a one size fits all approach. Consider the outcome you are looking for and structure your motivational strategies accordingly.
How Leadership Success can help your leaders
Leadership Success provides a complete solution for developing managers and business leaders. We can provide data and insights to the HR team, as well as 1-to-1 coaching and support to your managers.
Using our AI feedback engine, we can help you to understand and identify how effectively your leaders are:
- Giving employees control over how they do their jobs
- Involving employees in making decisions
- Coaching and supporting performance.
- Providing development opportunities.
- Providing positive feedback and reinforcing employees’ sense of competence.
- Helping employees see why their work is important
References: Article is built on the following research
- Baker, G. P. (1993). Rethinking rewards: What role—If any—Should incentives play in the workplace? Harvard Business Review, 71, 44 – 45.
- Bandura, A. (1997). Self-efficacy: The exercise of control. New York: W.H. Freeman and Company.
- Byron, K., & Khazanchi, S. (2012). Rewards and creative performance: A meta-analytic test of theoretically derived hypotheses. Psychological Bulletin, 138, 809 – 830. doi:10.1037/a0027652
- Cerasoli CP, Nicklin JM, Ford MT. 2014. Intrinsic motivation and extrinsic incentives jointly predict performance: a 40-year meta-analysis. Psychol. Bull. 140(4):980–1008
- Condly, S. J., Clark, R. E., & Stolovitch, H. D. (2003). The effects of incentives on workplace performance: A meta-analytic review of research studies. Performance Improvement Quarterly, 16, 46 – 63. doi:10 .1111/j.1937-8327.2003.tb00287.x
- Gilliland, S. W., & Landis, R. S. (1992). Quality and quantity goals in a complex decision task: Strategies and outcomes. Journal of Applied Psychology, 77, 672– 681. doi:10.1037/0021-9010.77.5.672
- Grant, A. M. (2008). Does intrinsic motivation fuel the prosocial fire? Motivational synergy in predicting persistence, performance, and productivity. Journal of Applied Psychology, 93, 48 –58. doi:10.1037/0021- 9010.93.1.48
- Greene, R. J. (2011). Rewarding performance: Guiding principles, custom strategies. New York, NY: Routledge
- McKinsey Quarterly June 2009
- Patall, E. A., Cooper, H., & Robinson, J. C. (2008). The effects of choice on intrinsic motivation and related outcomes: A meta-analysis of research findings. Psychological Bulletin, 134, 270 –300. doi:10.1037/ 0033-2909.134.2.270
- Vroom, V. H. (1994). Work and motivation. Oxford, England: Wiley