Extrinsic rewards are those that rewardevenifyou do notnecessarilydo a task.Getting asubsidy ,for instance. You still can buy something with the money although you did nothing to earn it.
It isextrinsicbecausetheirperceived value depends on how it is valued externallyand thisperceived value has a very short termofrewarding.Maybetwo weeks.Andits perceived value is not the absolute reward but its rate of increase.
Let ususesome examples to manifest thosecharacteristics.
There are two types of extrinsic rewards: The firsttype of extrinsic reward is money. Pure and simple. How much you take home.The second typeis non-pecuniary rewardslikesymbolicrecognition:title,office location,companycar,locationof the individualizedparking spot,etc.
Let us start with salary. You can get a salary without much work.For example, theson of the owner. He gets paid,but his performance does not meet the value of the salary he gets.
How rewarding is it? Well,sinceit dependsonwhat you can buy with it,its value is determined by external factors.It’s the same with recognition.Itsvaluedependson how others value it.
It feels rewarding to get a bonus,but the feeling fadesafterabouttwo weeks or months. Then you ask yourself what is next. Itis notasustainablemotivation.
Whatmotivatesis if the change in your take-homeincomeincreasesfrom year to year. This year you gotafivepercent increase,next year ten percent,etc.You must feel that you are not stagnated.That you are growing. That is why profit-sharing is more motivating than fixed bonuses.
Intrinsic rewards are different.To feel rewarded,youhave to performatask you love.The rewardistask-dependent. It does not depend on any external recognition. It is sustainable as long as you do thejobandthereis no needtoincreasethe reward to feel rewarded.
There are fourtypes ofintrinsic rewards: task, power, mission,and affiliation.
Task reward is when you love the task you perform.Just performing it is rewarding,like dancing, painting, playing music,etc. (P reward)
Power reward is when the task gives you power. You do not love the job but love the power it givesyou,like a warden in a prison.Or a bureaucrat that makes you goandcome back to filloutsome form. (A reward)
Mission reward is when you have a mission in life and are attached to it:the reward is in feeling you are advancing towards your mission. Like missionaries,soldiers in war.(E reward)
Affiliation is the reward you feelin your taskwhen associated with people you love and appreciate and want to be with. (I reward)
Feeling rewardedbothextrinsically and intrinsically is perfect but not realistic to expect.
If one had a choiceinhow to designthe package,I would say have threshold extrinsic reward and maximize intrinsic rewards. They sustainmotivationlonger.
Now that we defined our terms, let us discuss how the world is changing.
I believe that in timesofscarcity,extrinsic rewards are more in demand than intrinsic.Intrinsicrewardsare a luxury. You need money to live,and recognition to get more money.
In timesofabundance,materialistic needs like money play a muchsmaller role.One can now turn to intrinsic rewards.
Whenasociety moves from scarcity to abundance,extrinsic rewardswill be less motivating thanintrinsic rewards.There will be a transition from extrinsic to intrinsic.
Withextrinsic rewards:MoreIs Better. More money. More capital.More recognition.The more we have, the better we feel about ourselves. Thus,the accumulation of wealth.
With intrinsic rewards,it is the reverse:BetterIsMore.The better we areatdoing our task, achieving our mission, affiliatingwithmoreenjoyablepeople,the more we feel rewarded. It is a transition from quantity to quality.
Indevelopedcountries, we are in the midst of this transformation as a society. We now live in unprecedented abundance.Therefore, it isnosurprise thatmillennialsworryless aboutthemoney they get and more about having a jobthat providesintrinsic rewards.Granted, there are exceptions.There arestillremnants of those who focus more on extrinsic rewards. I suggest it applies toall societies that were once underacommunist regime. In communism,materialism was discouraged. Once communism beat the dust,and people had the freedom to accumulate wealth,it became a major preoccupation in these countries.
If I am right in what I say here,it has major repercussions for management and leadership. As artificial intelligence is coming to rule the roost,people willseekintrinsic rewards.Robots andalgorithmswillreplacesalary earning peoplebut willnot be able to replace those that are intrinsically motivated.
Just thinking,
Ichak Kalderon Adizes
