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Submitted by
Murali Krishnan Balasunaram
Student ID:

Intrinsic motivation...3
Extrinsic motivation.3
Money as the sole extrinsic motivator..3
What really motivates...4

Historically, employees are recognized as the most recognized asset in the business world.
Researchers from the management field have been pushed by business leaders to conducted numerous
studies on employees due to the simple fact that happy employees are productive employees to
determine techniques to motivate team based performance goals, increase bonding, and higher
performance. Employee satisfaction is seen as a crucial driver which results in satisfied customers and
provides room for continuous improvement as per many total quality management literatures. We
usually hear the terms intrinsic and extrinsic motivational factors as topics of discussion in order to bring
out the best in every employee. This article focusses on money, an external motivator, as to whether it
really motivates employees in every aspect in the workplace.

Intrinsic motivation

Sports is the classic example of intrinsic motivation seen in humans. It represents the most
pervasive set of activities that humans engage just for the sake of fun and enjoyment whether it be active
like jogging, going to the gym or just religiously watching every football match. Intrinsic rewards are
the psychological rewards that employees receive from doing a meaningful work and performing it a
through manner. This usually requires the employee to make a judgement as to whether his/her job has
a meaningful purpose and whether they are performing and progressing competently to fulfil that
purpose. In laymans terms, intrinsic motivator is like marrying someone for love and extrinsic motivator
is marrying someone for money. For many, the former is more self-satisfying despite the materialistic

Extrinsic motivation

Extrinsic rewards as the word denotes are the external factors which motivate an employee and
is anything tangible such as the salary paid to employees. Financial rewards are the tangible rewards
usually given to employees by managers (bonus, benefits, pay raise, incentives, commissions, rewards
and gifts) and companies like McDonalds. Performance based pay is an important consideration for
most employees while attending an interview, and an unfair pay can become a strong demotivator and
eventually lead to loss of good candidates. Extrinsic rewards were developed in older times where the
work life was more of a routine and the bureaucracy was high and paramount importance was given to
complying with rules and procedures of the company.

Money as the sole extrinsic motivator

Does money really motivate employees? The answer is a tricky yes and no an inconclusive
and ambiguous answer. This is due to the fact that research of the past years has resulted in conflicting
results due to the complexity of human behaviour. Not all humans are alike. They are different and they
vary in their interests on what really gives them job satisfaction and acts as an extrinsic motivator.
Employees with a higher affliction and interest towards pay were more often motivated only through
pay raise and bonuses whereas the other employees have a broader approach to motivation like
recognition, job satisfaction or simply presence of opportunities of self-betterment and feeling of
working towards a meaningful purpose. Complex employee behaviour makes it difficult to predict
behaviour towards whether or not money is a motivator: in a sense it becomes a broad question with too
many unknown variables.

Money does motivate up to a certain level. It is the core of the barter system between organizations
and employees where the latter can purchase basic amenities and requirements. It also serves as a
scorecard not only for the organization (e.g. bank managers being paid in millions in comparison to an
average employee) but also serves the employee to assess the value of the organization places on him/her
and also helps in comparison with fellow employees.

There are three theories developed which explains the value of money. Firstly, the equity theory
focuses on the employees assumption of equity between their jobs and pay when their comparison with
fellow employees shows an equilibrium. Fair treatment serves as a motivation to exhibit fairness in their
relationships with the organization and also their colleagues. Secondly, reinforcement theory focuses on
the concept that high levels of effort will be seen in employees who feel that their pay is contingent with
their performance. Finally, the expectancy theory focussing on the employees comprehension of the
work seen as satisfying their personal goals and to the extent that they see the money to be dependent
on their performance criteria.

Renowned industrial psychologist Edwin Locke compared the following methods as motivational
factors for employee performance:

i. Money
ii. Goal setting
iii. Participation in decision
iv. Redesigning jobs

The result was favourable the factor money by about 30% compared to only 16% for goal setting,
less than 1% for decision making and lastly a 17% from redesign of job (improvement in performance
was compared). Money, as an extrinsic motivator, does result in better performance, only when
quantitative evaluation is done and preferred over qualitative performance.

What really motivates

It is clear that money is indeed a strong motivational factor of employee productivity. However, the
relationship is not simple due to the complexities of human nature. Money acts as a motivator in
favourable conditions like the following:

i. Money must be perceived as a direct reward for performance by the employee.

ii. Money must be perceived as a very important factor by the employee
iii. The amount of money offered to the employee for his/her performance must be perceived to be
a significant amount by the employee
iv. The management must have a tendency to award incentives and pay rise to employees they
perceive as high performing employees.

Having stated the four conditions, one can see that it is highly unlikely that all the four conditions
are met at the same time. As said earlier, not all human beings are motivated by only money in their
work space to perform significantly better. Employees who are motivated intrinsically are not at all
affected by money as it is an extrinsic motivator. Money plays a stronger role for those who suffer to
satisfy their everyday crucial financial needs rather than those from privileged families (who have
already enough to meet their lower order needs).

To stay motivated minimum pay is very important but at the same time paying a huge amount of
money to make the employees work in poor working conditions without job security does nothing but
keep then in an agitated and insecure state of feeling. Without these even the best employees will end
up yielding unsatisfactory and undesired performance results. People who have the basic amenities in
life do not find happiness through money at all. As far as the second condition to be met goes, it is very
rare for employees to see the pay as a reward for performance when the after the after taxes net amount
taken home is almost half the amount quoted in the pay slips as gross amount of salary.

The HR Professionals usually follow recruiting minimums (pay, working conditions and job
security) to ensure that their hires stay productive, focused and engaged. White collar job employees
cannot be treated with the same the carrot and the stick method as applied to blue collared workers and
as a matter of fact, when applying the rewards and punishment method can actually have adverse effects
on the motivation of the employee. Recent studies have shown that higher financial rewards lead to
lower performance than the fairly paid workers in terms of output. IT reports that over paying am
employee can have adverse effects on the output generation and their overall work performance.


The strongest motivational factor has been found to be creativity allowance for an employee in
a particular project. Low rates of compensation do not only hinder the performance of an employee but
can actually create vengeful employees. Inadequate pay makes an employee shift his/her fullest attention
to the unfairness of the situation. But, money takes the interesting factor out of the job. Of course
bonuses and incentives do motivate the employee as a sign of appreciation from the managerial side but
strictly monetary gain usually hinder the creativity of a project and the unique problem solving approach
of an employee. The joy of discovery and challenge of creation cannot be bought with money and needs
to instilled in an employee through an active work place. Intrinsic motivation is the key to escalation of
goals and head hunters usually actively seek out those who engage and embrace career challenges.
Overall the intrinsic rewards, seem to create a stronger and a win-win situation for both the employee
and organization and also suits the current times. Intrinsic motivation cannot be ignored if quality is
prioritised over quantity. The power to make the employees care about their work is unparalleled when
it comes to intrinsic motivators.

1. National Business Research Institute June 25, 2015 accessed 05 December 2017,
2. Entrepreneur Network June 2015, accessed 10 December 2017,
3. Ivey Business Journal December 2009 accessed 11 December 2017,
4. The Sydney Morning Herald Aprik 10 2015 accessed 05 December 2017,
5. Pau Sabria March 26 2016 accessed 05 December 2016, <