Intrinsic vs. Extrinsic Motivation in Employee Rewards

Think about the last time you practiced something, and why. Playing the guitar, running a mile, cultivating a sourdough starter- anything. Did you do it to impress someone? Solely to profit from it? Or did you practice because it felt personally enjoyable and gave you a sense of accomplishment as you improved? 

This is a good example of intrinsic motivation. It’s when the act of doing feels as good as, or even better than, achieving an exceptional result. Extrinsic motivation can fuel your practice, too, but only for a shorter time. 

This is an important concept in employee reward programs. Many of them focus on external incentives, but intrinsic motivation is more sustainable. Let’s discuss both in more detail and see how they fit into best practices for employee recognition programs. 

What do extrinsic and intrinsic mean?

Every behavior has a motivation behind it. The question is whether it comes from within or whether someone (or something) else is provoking us. 

Intrinsic motivation (“in” for “internal”) comes from within. Your passion, joy, curiosity, personal growth, purpose, and pride inform your behavior. 

For instance, if you join an intramural sports team, you may dream of winning a regional tournament. But you go to each practice for the fun, team bonding, and personal progress.

Extrinsic motivation (“ex” for “external”) is when you perform a behavior to achieve an external result. Money, privileges, and prizes are what motivate you.

In their personal lives, people are often extrinsically motivated to meet social standards or get validation from others. Whether it’s fitting into a special outfit for an event or impressing a date, the results can be gratifying, but short-lived and not really rooted in our personal values.

We all use both, but let’s take this comparison to the workplace and see what happens.

Intrinsic motivation: The meaning-maker

Rewards that leverage intrinsic motivation have long been studied for their positive effects on engagement and retention rates. Moving the needle on those two metrics significantly takes time, showing that intrinsic motivation has a longer-term impact on both employees and employers.

Intrinsic employee reward ideas also improve performance, so organizations aren’t trading one benefit for another. For employees, increased output is a side effect of feeling more connected to and committed to their roles. What they do feels meaningful. 

Here are some examples of intrinsic rewards that far exceed the benefits of the usual employee gifts:

• Peer recognition: Praise from peers isn’t just validation. When made part of the culture, it creates a sense of belonging that inspires people to show up every day. They also enjoy reciprocating, keeping an eye out for coworker behaviors they can heap positive recognition onto.
• Growth opportunities: Offering mentorship, training, tuition compensation, lateral moves, and other resources helps employees feel hopeful about their future. Looking forward to the future is a huge factor in high retention.
• Autonomy: Job autonomy perks like remote work, compressed workweeks, or letting employees tailor their own processes show trust in their abilities. Taking more ownership of their success enhances engagement. 

Extrinsic motivation: The goal-getter

You want a little more? Give a little more. Extrinsic motivation can drive action short-term. While they shouldn’t be the basis of employee rewards programs, extrinsic incentives can keep companies on target when it counts most. 

Offering a cash bonus or more PTO for meeting a quota is a classic example of this. It’s so transactional, so directly tied to a specific goal, that it requires little psychological sleuthing. 

The main risk of using extrinsically motivating rewards like cash bonuses is that they can crowd out or reduce the impact of intrinsically motivating rewards. If someone is mostly paid in cash for performance, abruptly switching to more symbolic rewards can feel like a downgrade. 

Another way to use extrinsic rewards effectively is to look for workplace “asks” that might hurt engagement or morale.

For instance, some research has found that asking employees to work during hours or days when they normally wouldn’t may reduce intrinsic motivation. They’re thinking about what they usually would have done with that time. 

An intrinsically helpful solution is giving them autonomy to complete the extra work on their terms. The extrinsic solution (that may help protect their existing intrinsic motivation) is more PTO or money in exchange for shaking up their schedule. 

Employee rewards can support both

The phrase “employee rewards and recognition” suggests room for both extrinsic and intrinsic motivation. First, recognition is purely intrinsic. Making people feel appreciated and accepted with messages, words, and similar gestures is the surest route to engagement and retention. 

Adding rewards can leverage both, driving short-term performance leaps and long-term emotional impact. For example:

• Experiences. Offer an employee tickets to a concert by their favorite artist if they meet a deadline earlier than requested. This acknowledges their preferences and personal interests. It also pays them back for going the extra mile.
• Tying meaning to performance. Give an employee autonomy to complete an important project. They meet the goal on their terms and receive a bonus. Trust and professional growth intersect with a monetary reward.  

However, rewards don’t have to be extrinsic. Some teams even choose intrinsic value over extrinsic-leaning rewards. Tacos for Charity is a good example: the intrinsic value of recognition leads to even more giving. 

Quick tips and takeaways for a motivation-aware employee rewards strategy

• Don’t lead with rewards. No matter the motivation, recognition always comes first. This prevents extrinsic motivation from crowding out the intrinsic. 
• Offer choice and welcome feedback. You won’t know what your employees truly align with unless you give them options or ask. 
• Make intrinsic motivators visible. Cash bonuses and swanky appreciation gifts will look too shiny if we don’t consistently prioritize intrinsic motivators (e.g., leader shoutouts, team rituals). 
• Use extrinsic rewards sparingly and meaningfully. Tie meaning to extrinsic rewards whenever possible, but don’t make them part of everyday motivation. 

Motivation first, rewards second, recognition always.

The best strategy supports what truly motivates people. Employee rewards like extra money can definitely be performance-enhancing. For the moment, anyway. 

Recognition is what drives belonging. It keeps employees engaged with their work, connected to community, and looking forward to the future. Rewards should amplify—not replace—those benefits. 

Here’s our challenge for you. Audit your current program and be honest. Are you building a culture that intrinsically motivates people, or just managing a points system? With meaningful reward systems, culture-building rituals, and appreciation that’s always fun and easy to share, HeyTaco can help your organization master both.