Extrinsic rewards are those that originate from the company itself, providing a fairly tangible means of recognizing an employee's hard work. Employees thus want to work harder and complete tasks well because they want to reap the rewards of their efforts. Companies may offer things like bonuses, promotions, extra time...
Extrinsic rewards are those that originate from the company itself, providing a fairly tangible means of recognizing an employee's hard work. Employees thus want to work harder and complete tasks well because they want to reap the rewards of their efforts. Companies may offer things like bonuses, promotions, extra time off, raises, gifts, a larger office, better parking, free lunches, or a relaxed dress code to those employees who meet its goals. These types of rewards are usually much-appreciated by employees, particularly when the rewards are significant. Employees who know that they will receive a $15,000 Christmas bonus if they meet production goals each month are much more likely to work hard all year long in order to obtain that extra money.
The disadvantage of an extrinsic reward system is that it can lead to unproductive relationships among employees as they all compete for those rewards. Google, known for its sense of innovative work environments, tackled this problem by phasing out monetary rewards and using rewards of "experience" instead. They found that offering extrinsic rewards, such as travel and tech gadgets, better improved employee performance overall. Extrinsic rewards may also not affect long-term productivity; if employers remove the reward system due to factors like a decreased budget, they may find that employee performance decreases as well.
Intrinsic rewards rely on employees' feelings of pride in the job itself completely independent of any external reward system. In this way, an employer may demonstrate that they trust an employee by giving him more responsibility. They may not "check up" on the employee with as much frequency. The employee may be given a choice in the work she wants to complete. The great advantage in this type of reward system is that it identifies those workers who are most committed to the goals of the organization. While some workers may leave in the absence of external rewards, those who remain prove themselves to be more effective and motivated; this means that companies retain the best workers. This type of reward system is sustainable, and workers generally report higher levels of job satisfaction.
One negative aspect of intrinsic rewards is that some workers simply do not have the self-awareness necessary to work in the absence of other perks, so there is bound to be conflict and turnover in trying to find the best workers. This reward system also requires insight within the company to build a meaningful purpose into the work environment that helps employees to "buy in" to the vision of the organization from the beginning.