Extrinsic Rewards

Definition

Extrinsic rewards are tangible benefits or incentives provided by an external source, such as an organization, to motivate and influence employee behavior. These rewards are typically used to encourage specific actions or outcomes that align with the organization's goals and objectives.

5 Must Know Facts For Your Next Test

1. Extrinsic rewards are often used to motivate employees to perform tasks or behaviors that they may not find inherently enjoyable or satisfying.
2. Examples of extrinsic rewards include pay raises, bonuses, promotions, recognition awards, and access to valuable resources or opportunities.
3. Extrinsic rewards can be effective in the short-term, but they may not lead to long-term, sustainable motivation if they are not aligned with an employee's intrinsic motivations.
4. The design and implementation of extrinsic reward systems can have a significant impact on employee engagement, job satisfaction, and organizational performance.
5. Overreliance on extrinsic rewards can sometimes undermine intrinsic motivation and lead to unintended consequences, such as reduced creativity, risk-taking, or collaboration.

Review Questions

• Explain how extrinsic rewards are used in organizations to influence employee behavior and performance.
  • Extrinsic rewards are a key component of an organization's reward system, as they provide tangible incentives to employees for achieving specific goals or exhibiting desired behaviors. These rewards can include financial compensation, such as bonuses or pay increases, as well as non-monetary rewards like promotions, recognition awards, or access to valuable resources. By strategically designing and implementing extrinsic reward systems, organizations can motivate employees to focus on tasks and behaviors that align with the organization's objectives, ultimately improving overall performance and productivity.
• Analyze the potential benefits and drawbacks of using extrinsic rewards in the context of organizational reward systems.
  • The use of extrinsic rewards in organizations can have both positive and negative consequences. On the positive side, extrinsic rewards can be effective in the short-term at motivating employees to engage in specific behaviors or achieve desired outcomes. This can lead to improved productivity, increased task completion, and better alignment between employee and organizational goals. However, overreliance on extrinsic rewards can also have detrimental effects, such as undermining intrinsic motivation, reducing creativity and risk-taking, and fostering a culture of compliance rather than commitment. Additionally, poorly designed or implemented extrinsic reward systems can lead to unintended consequences, such as increased competition, reduced collaboration, or a focus on gaming the system rather than achieving meaningful results. Ultimately, organizations must carefully balance the use of extrinsic and intrinsic rewards to create a comprehensive and effective reward system that supports long-term employee engagement and organizational success.
• Evaluate the role of extrinsic rewards within the broader context of organizational reward systems and their influence on employee motivation and performance.
  • Extrinsic rewards are a critical component of an organization's overall reward system, which also includes intrinsic rewards and other non-financial incentives. While extrinsic rewards can be effective in the short-term at motivating specific behaviors and achieving desired outcomes, their long-term impact on employee motivation and performance is more complex. Extrinsic rewards should be strategically designed and implemented to complement and enhance intrinsic motivation, rather than serving as the primary driver of employee engagement. Overreliance on extrinsic rewards can undermine intrinsic motivation, leading to unintended consequences such as reduced creativity, risk-taking, and collaboration. Effective organizational reward systems strike a balance between extrinsic and intrinsic rewards, tailoring the mix to the specific needs and goals of the organization and its workforce. By understanding the nuances of extrinsic rewards and their role within the broader reward system, organizations can leverage these incentives to support long-term employee engagement, productivity, and overall organizational success.

Related terms

Intrinsic Rewards:

Intrinsic rewards are internal, psychological rewards that individuals receive from performing a task or activity, such as a sense of accomplishment, personal growth, or job satisfaction.

Compensation: Compensation refers to the financial rewards, including salaries, wages, bonuses, and benefits, that organizations provide to employees in exchange for their work.

Incentive Systems: Incentive systems are structured programs that offer extrinsic rewards, such as monetary payments or recognition, to employees for achieving specific performance goals or behaviors.