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The Impact Of Intrinsic And Extrinsic Rewards

In this competitive environment nowadays, organisations are predicted to become more intense on empowering the employees because the employees' job satisfactions are important for your organizational performance. As a result of this reason, in order to achieve the organization's missions and goals, the success on controlling the determination of employees shouldn't be excluded. The drive such as employees' satisfaction on the works or the rewards given to them brings about better performance in their organization. Rewards are the performance incentives that given by the business to the individuals because of their good work performance. You will discover two types of rewards that normally implemented by the organizations to inspire the employees, extrinsic rewards and intrinsic rewards. Predicated on the expectancy theory of Vroom research, it modified that extrinsic rewards are positively valued work benefits that the average person receives from someone else in the work setting, include specific things like pay, financial incentives, security, acceptance and campaign; intrinsic rewards are positively valued work outcomes that the individual receives directly therefore of process performance, such as sense of success, personal expansion, and self-worth (French et. al 2008). Each type of the rewards' demands has different functions and interpretation within itself that may be applied by with regards to the situations and requirements of the organizations. It is very important for a director to aware the dissimilarities between extrinsic and intrinsic rewards because both of them are objective to increase drive of employees.

2. 0 Format of Theory

Rewards are categorised into two categories which are extrinsic and intrinsic. Everyone has different needs and conception on their job. Therefore, results such as pay, advertising have different ideals for differing people. The types of extrinsic rewards are such as pay, bonus items, spot awards, advertising and recognition. Each of the rewards shows different ways of motivation strategies will depend on the business composition and performance. Furthermore, extrinsic rewards are of help if employees have the ability to gratify their needs indirectly through financial rewards and bonuses for past performances. Intrinsic reward is the form of motivation a worker has within himself that comes from a interest or curiosity about performing a job done well. In other words, intrinsic rewards result from inside an individual alternatively than from any exterior rewards, such as financial incentives. Types of intrinsic rewards are conclusion, accomplishment, autonomy, personal expansion, challenge, responsibility, reward, and feels of self-esteem.

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2. 1 Types of Extrinsic Rewards


The organizations normally raise the salary of the employees to encourage their contributions to the business. Incentive pay is another type of pay, which means a benefit paid when specified performance objectives are fulfilled (Folgeman 2001). This pay may motivate employees to work and encourage them to achieve tremendous lead to the same time attain their organization's goals.


Sometimes some of the companies will give the items to remunerate for many who have the wonderful performance. These bonuses present the understanding of the employer for the employees. For example, the employer gives away the hampers to the staff who does a congrats in the supermarket every end of the entire year.

Spot Awards

The reason for this program is to recognize the impulsive appreciation for the contributions of individuals (Deadrick 2009). For example, excellent performance on a project in AmericaCompany might get yourself a "spot award", such as point-based award card that allowed employees to redeem some value gift item with the things given based on their performance level (Incentive America 2010).


Promotions less occurs in someone job because it attained your choice of the employer to pick the right person with certain requirements such as experience or abilities based on seniority(Ganesan&Weitz 2001). For example, senior employee who works longer in the company is competent to be elected for better position, like older project supervisor.


The recognition identifies managerial acknowledgement of worker achievement which could bring about improve position like public compliment, expressions of a job done well, or special attention (Mind, Sorensen & Baum 1994). It is determined by the recognized value and the individual's patterns. For example, LifeScan employees' accomplishment will be highlighted in a LifeScan Screen article if indeed they did a great job in their company.

2. 2 Types of Intrinsic Rewards


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Some individuals feel that it is important to have the ability to start and finish a given job. They value activity completion. A kind of self-reward is the result of doing the tasks they have got. Opportunities that allow individual to complete duties can lead to a powerful motivating result.


Achievement is a self-administered incentive that derives from the success of a challenging goal. Some individuals look for challenging goals whereas others look for modest or low goals. In goal-setting programs, the result of difficult goals is a higher level of individual performance. Furthermore, specific differences that shoot for achievement must be considered as well.


Some employees should have freedom in their careers such as have the right to make decisions and stand on their own principles. The liberty to do what the employee considers best in a specific situation may gives a sense of autonomy in employees themselves. In other words, they have ownership in their careers. It is hard to create jobs that lead to a sense of autonomy in highly set up jobs and managed by management.

Personal growth

The personal expansion in an worker is totally not the same as others. Some individuals can sense their development and sense their competences that are being broadened through experiencing personal growth. They can maximize or at least satisfy their skill potential by widening their competences. The performance of duties meets or exceeds their personal requirements. On the other hand, others may not satisfy using their jobs and organization as they are disallowed to develop their own skills.

3. 0 Impact of extrinsic rewards on individual and firm performance

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When talking about extrinsic rewards, individuals are reported to be sensitively worried on the pay and add-ons. They will be more stimulated by pay than other type of compensation. Based on the research, the financial bonuses have larger impact on motivation than other effects. This is because money is vital for a person's multiple needs in lifestyle. Extrinsic motivation may be used to organize resources by linking employees' financial motive to the purpose of the business (Osterloh and Frey, 2000). However, people who follow goals for extrinsic reasons such as money, status or other benefits are less inclined to attain their goals and are less happy even they certainly achieve them because they believe that the goals are less significant for these people (Robbins 2009). This means that people are pressured on attaining the goals by doing some complicated tasks in order to attain their bonuses, position or promotion. Even though the goals of organizations might achieved properly, but the feelings or satisfaction of employees would be reducing due to uneasy with the jobs. This example will lead the extrinsic rewards become less effective in the organizations if they do not take care of the rewards systems carefully.

3. 1 Impact of intrinsic rewards on individual and business performance

The intrinsic rewards impact both individual and organizational performance. For instance, the employees within an organization have reached the esteem level of development and perhaps the self-actualization period through the impact of intrinsic rewards. The intrinsic rewards encourage and enhance both employees and company to have the ability to challenge themselves and attain new duties and cooperate with others to work in a harmony environment. Apart from that, intrinsic rewards permit the employees to get greater concentration and keep them in energizing and self-managing. By having the high levels of intrinsic rewards, employees end up being the casual recruiters and marketers for his or her organization in which they recommend their friends to work in the organization and recommend product and services to customers. According to Thomas (2009), intrinsic rewards build a win-win situation for business and its own employees. The employees feel happy and satisfy as they experience emotions of achievements and self-worth, which create job satisfaction. At the same time, the organization improves its profit because of the increase in worker job satisfaction. The intrinsic rewards facilitated better levels of satisfaction and competency. Employees have significantly more interest, exhilaration, fun and self confidence in performing jobs which brings about improved organizational performance. The study recommended that organizations pay employees equitable wages, not linked with performance, in order to catch the attention of and ensure participation, and to count more on intrinsic motivational techniques to improve performance (Uco 1992).

3. 2 Advantages of Extrinsic rewards

Based on the research, extrinsic rewards can be motivating in a nutshell term period effectively (Vanderbuilt College or university, 2009). Moreover, the result of the performance on the average person should be expected easily and looked into in a quick review. Nevertheless, it is also escalates the competitive benefits of the firms in the industry.

3. 3 Benefits of Intrinsic rewards

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Increasing job satisfaction is an good thing about intrinsic rewards. Job satisfaction is considered as a great motivator in having employees and employer(s) work hard to be able to produce quality results (Alexandrou 2011). Subsequently, it boosts the organizational performance. Intrinsic rewards tend to be effective over time because an intrinsically encouraged employee performs jobs given to him willingly, because he locates the task is either challenging or interesting and satisfies to get it done, rather than striving to flee from it once the task is done.

3. 4 Cons of Extrinsic rewards

Most of the analysts found out that offering extrinsic rewards to a person for doing an activity can diminish the person's intrinsic drive (Galia 2007). This means it will decrease the personal desire on the job which caused low satisfaction and build up stresses if the organization is too counting on the extrinsic rewards. Besides˜some of the psychologists dispute which may be pay is not the best motivator for many performance rewards situations. Based on the journal, the crowding out effect on intrinsic inspiration by using extrinsic rewards is especially significant when the price-dependent, financial compensation is perceived as controlling and therefore creates the feeling of being pressured from outside (Osterloh and Frey, 2000). After they discovered that their job is enjoyable and challenging, they are less inclined to be fascinated by extrinsic rewards such as higher pay offered by other organizations. Janssen and Mendys-Kamphorst (2004)also concluded likewise that introducing financial incentives to brokers to contribute to a socially attractive outcome tends to decrease the number of contribution.

3. 5 Negatives of Intrinsic rewards

Somehow, job satisfaction can be considered a weakness of intrinsic rewards as though a worker is not satisfied from what he does indeed, his performance gets affected thus harming the performance of whole team and subsequently, the organization. It really is difficult to achieve intrinsic rewards. Besides, short-term goals are difficult to attain as intrinsic rewards have a long time frame.

4. 0 Conclusion

In summary, extrinsic and intrinsic rewards are being used to inspire both employees and employer to increase the organizational performance. Most of the authors mentioned that intrinsic rewards are important than extrinsic rewards for higher job satisfaction which can affect the performance of an organization. Both rewards involve some issues that impact the average person and affect the performance as well, it is is determined by the strategies that organizations have been used to control the situations effectively.

5. 0 Recommendations

Organizations can consider that extrinsic rewards and intrinsic rewards are accessible to both and impact situational inspiration in both short and long term period.

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For example, that each might be highly encouraged to prosper on an interesting task and get some bonus items (extrinsic desire) so that they can gain some knowledge and encounters from that particular task (Intrinsic desire). However, there are some factors that can affect the motivations of specific rather than extrinsic and intrinsic rewards, such as individual's personality, tendencies, culture, beliefs and belief. The organizations should aware those factors on the employees in order to meet them and enhance the organizations performance in once.

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