Explain the advantages or disadvantages of intrinsic and extrinsic rewards in the workplace

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andrewnightingale eNotes educator| Certified Educator

Extrinsic rewards are, simply, the tangible rewards an employer gives to an employee. Such rewards are presented in the form of increases in pay, bonuses, commissions, promotions, improved working conditions, profit-sharing and other fringe benefits. These awards are, of course, related to work performance and have to be presented consistently each time a task is achieved. Such regularity promotes the desire to do better and inspires confidence in employees. If applied fairly, extrinsic rewards lead to loyalty and the desire to remain with an employer. This commitment to a company ensures a low staff turnover.

Intrinsic rewards are non-physical and are emotionally connected with employees. They are presented in the feelings of contentment employees experience in the completion of their tasks. Just as extrinsic rewards, intrinsic rewards are also related to job performance. The higher the success rate, the higher the rate of intrinsic reward. Intrinsic rewards present in many forms. They may occur in the sense of achievement a worker feels for having completed a difficult task. The greater the difficulty, the higher the sense of achievement. Words of praise from employers for a job well done also encourages employees and is reflected in their positive performance.  

Recognition from fellow staff and others also enhances feelings of well being, and adds to an employee's sense of achievement. Furthermore, an employee's sense of pride is also amplified when he or she has adequately completed a task. When employers show trust in an employee by providing him or her greater autonomy in the completion of tasks, the sense of freedom he or she enjoys may add to the employees' feelings of well-being and will generate a positive atmosphere. Also, employees also feel that their work is meaningful if their contributions are acknowledged. They achieve a sense of purpose and do not feel as if what they do is irrelevant.

The only disadvantage of rewards possibly lies in the allocation of extrinsic awards. Employees might feel that because of nepotism, graft, bias or any other prejudice a fellow employee unjustly benefits. In such instances, fellow workers may become disgruntled and refuse to perform at their best or, at least, become demotivated. 

thanatassa eNotes educator| Certified Educator

Extrinsic rewards: The advantage to an extrinsic rewards system is that is it is fairy simple to implement. One rewards desirable behaviours with money or other immediately tangible benefits (better parking, more vacation. etc.) Financial rewards, or even types of prestige award such as "Employee of the Month" that can go on resumes are ones most employees will appreciate. Disadvantages are that this can get expensive and also that employees will focus not on doing all aspects of the job well, but just on getting the extrinsic rewards, as when CEOs maximize their bonuses by going for short term profits over long term health of the company. It can also foster a corporate culture of competition rather than cooperation. Also, employees working merely for extrinsic rewards may leave if offered more money by another company,

Intrinsic rewards: The advantage is that if the job is intrinsically rewarding, employees will be loyal and dedicated and work hard because they enjoy what they are doing. Many non-profit organizations rely on intrinsic rewards, people who feel rewarded because they can see that they are benefitting others. The disadvantage of intrinsic rewards is that they are much harder to implement, especially for inherently routine tasks and often they require management to trust and empower employees.