What is the difference between 'intrinsic' and 'extrinsic' rewards in the context of Rewarding Human Resources? In your response, discuss which is most effective and why.

Answer:

An intrinsic reward is an intangible award of recognition, a sense of achievement, or a conscious satisfaction. An extrinsic reward is an award that is tangible or physically given to you for accomplishing something. It is a tangible recognition of ones endeavor.

For example, an intrinsic reward is the feeling of satisfaction after completing a large project, and an extrinsic reward is a monetary bonus received for finishing that project. Research suggests that when employees are intrinsically motivated by their work they are more likely to get promoted. Extrinsic motivation is a nice way of describing when you do things primarily to receive a reward. You might take a new job because of the higher pay and better benefits package.

An intrinsic reward is intangible; it might be the sense of satisfaction you get from mastering a new skill or the successful completion of a complex project or from working on a project that has personal significance or meaning.

In contrast, extrinsic reward is something that comes from an external source—for example, your instructor at school or your manager at work. Extrinsic rewards can be financial (a bonus, incentive, or commission) or non-financial (praise, a training badge, a development opportunity, or a coveted project assignment). There can also be elements of both; for example, a promotion would likely entail both a raise and a new title. Extrinsic rewards can also include intangibles such as the ability to work remotely or an invitation to participate in a mentoring program.

A manager can't prompt intrinsic motivation or provide an intrinsic reward, since the motivation flows from the employee's interest in and value for a particular type of work. A manager does, however, have control of situational factors. Management consulting firm Hay Group (acquired by Korn Ferry) reports business results can vary by up to 30% based on differences in the work climate created by a manager.