Pay, Intrinsic Motivation, Extrinsic Motivation, Performance, and Creativity in the Workplace: Revisiting Long-Held Beliefs

Abstract

The role of compensation or extrinsic rewards, including pay for performance (PFP), has received relatively little attention in the organizational behavior/psychology literature on work motivation. What attention it has received has often taken the form of raising cautions about the potential harmful effects of PFP on (intrinsic) work motivation, as well as on creativity. We critically assess the theory and evidence that have provided the basis for such arguments and conclude that support for such claims (in workplace settings) is lacking. We seek to provide a more accurate view of how extrinsic rewards such as PFP operate in the workplace and how they influence workplace motivation, creativity, and performance. We document how social determination theory and creativity theory have recently undergone major changes that better recognize the potential positive influence of extrinsic rewards such as PFP. Finally, we identify areas in need of further research.

Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort

“…This effect varies depending on the impact that the reward has on feelings of autonomy and feelings of competence (Moller & Deci, 2014 Even though base pay can be influenced by annual merit pay increases based on results and/or (evaluations of) behavior, it is much less dependent on recent performance than variable PFP. Relying on instrumentality theories and reviews of the compensation literature (Gerhart & Fang, 2015;Gerhart et al, 2009), we should therefore not expect that the amount of base pay will impact on work effort through controlled motivation. Relying on SDT, however, the amount of base pay can influence other relevant employee outcomes if it is interpreted as recognition of competence, as autonomy supportive, or as fostering relatedness (Gagné & Forest, 2008).…”

“…Pay for performance (PFP) refers to pay programs in which pay is contingent on performance and where performance can be measured in terms of results (e.g., number of sales) or (evaluations of) behavior (Gerhart & Fang, 2015). Tying individual PFP to results-based criteria has the capacity to generate strong motivational effects, and there is meta-analytical evidence for a positive relation between individual variable PFP and performance quantity (Jenkins, Gupta, Mitra, & Shaw, 1998), performance on simple tasks (Stajkovic & Luthans, 2003), and performance on uninteresting laboratory tasks (Weibel, Rost, & Osterloh, 2010).…”

“…The current study is also the first to investigate motivation as a mediator and to include both controlled and autonomous motivation. Previous field and experimental studies of PFP have failed to directly investigate the main mechanism (i.e., motivation) that is hypothesized to explain the effects of incentives, something that has recently been called for in recent reviews of the compensation literature (Gerhart & Fang, 2015). In addition, though many organizations pay employees using different PFP components (Gerhart et al, 2009), the total compensation in most industrialized countries is composed largely of base pay, with a relatively small performance-contingent portion (Thierry, 2002).…”

Behavioral Economic Factors Related to Pediatric Obesity

“…However, data supporting this conclusion are mixed; 6-8 rather than opposite ends of the motivation spectrum, intrinsic and extrinsic motivation appear to exist more independently than earlier thought. 9-11 A recent review of treatments for cannabis dependence demonstrated that long-term follow-up results from interventions combining contingency management (i.e., giving vouchers for abstinence) and cognitive-behavioral therapy were better than for those using just one form of treatment, 12 suggesting that interventions targeting both intrinsic and extrinsic forms of motivation to change can be efficacious.…”

Well It’s Only Fair: How Perceptions of Manager Discretion in Bonus Allocation Affect Intrinsic Motivation

“…Specifically, as articulated in self‐determination theory (SDT; Deci and Ryan, [and in a similar vein in crowding‐out theory from the economics domain; Frey and Oberholzer‐Gee, ]), while instrumental incentives drive extrinsic motivation, by directing behaviour towards a specific outcome, the same instrumentality might undermine individuals’ intrinsic motivation, which is driven by interest or enjoyment in the task itself (Deci, ; Deci and Porac, ; Ryan and Connell, ; Ryan et al, ). After much historical debate on this topic (see reviews from Deci et al, and Gerhart and Fang, ), in the most recent meta‐analysis, Cerasoli and colleagues (, p. 996) concluded that:

Incentives alone have little omnibus impact on intrinsic motivation (r =.06). However, incentive contingency has a very strong link to intrinsic motivation (r =.78): More controlling (directly salient) incentives are associated with lower intrinsic motivation, while less controlling (indirectly salient) incentives have a positive link.

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