Extrinsic rewards

Extrinsic rewards are a piece of carrot on a stick that helps to achieve better performance. They can be in the form of rewards, money, gifts, or are based on individual efforts.

While these types of rewards do tend to increase productivity in most circumstances, they also influence an employee's attitude and willingness to perform.

What are extrinsic rewards?

Extrinsic rewards are usually financial or tangible rewards given to employees. Extrinsic rewards are benefits that come in the shape of cash, vouchers or tickets.

They can be used to reward performance in a specific behavior and dedication. They can also come in the form of praise and recognition, which is praised by psychologists as effective. This kind of reward is offered when a person's achievements are greater than what was expected.

Why are extrinsic rewards important?

People have a natural tendency to do things that they enjoy and get rewarded for. In the workplace, extrinsic rewards can be used to encourage employees to perform their duties more efficiently.

Here are some of the benefits of extrinsic rewards in the workplace are:

Boosts employee motivation: Extrinsic rewards are often used as incentives to motivate employees to perform better or maintain high standards. They can also be used as a punishment for poor performance by withholding rewards from workers who don't meet their targets.

Improves Employee retention: Extrinsic rewards such as bonuses or salary increases can be used to retain valuable employees who might otherwise leave for another company offering better pay or benefits.

Build teamwork: Extrinsic rewards help build teamwork among employees because they allow them to work together towards common goals. When people work together with shared goals, they tend to develop stronger relationships with each other as well as stronger commitment towards achieving those goals successfully.

Helps in performance improvement: Employees who feel motivated by extrinsic rewards will be more likely to improve their performance over time than those who don't receive any external motivation at all.

Increases employee productivity: They increase employee productivity because employees have something to work toward achieving such as raises, promotions and bonuses. When employees know that their hard work will result in something positive such as a raise or promotion, they tend to work harder so that they can reach their goals faster so that they can receive their reward sooner rather than later.

When should extrinsic rewards be used in the workplace?

Extrinsic rewards should be used when you have a specific goal in mind that you know your employees will find rewarding. They are particularly useful in the short-term for motivating employees to work towards one specific organizational goal. For example, offering additional money if an employee meets a sales quota is an example of extrinsic rewards used in the workplace.

How does extrinsic reward work?

Extrinsic reward works on the carrot and stick appproach. It is doing what you do with the aim of achieving something that you are hoping to receive. It is an external reward system. It is not you feeling motivated and going out and doing what you need to do. It is motivation that comes from something added on to you already doing the work.

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What are the different types of extrinsic rewards?

There are two main types of extrinsic rewards that help to improve employee motivation:

Monetary rewards: These include money, bonuses, and raises. Money is a powerful motivator and can be used to reward both individual performance and team performance.

Non monetary rewards: These include praise, public recognition, and awards such as trophies or plaques. Public recognition can be an effective way to reward employees for their efforts because it encourages others to follow their example and reinforces the importance of their work.

What are the advantages of extrinsic rewards?

The advantages of extrinsic rewards are:

They can be used as incentives for specific behaviors.
They can be used to motivate people who lack intrinsic motivation for an activity.
They help people to focus on doing their best work without worrying about the outcome.
They can help improve performance by increasing employee engagement and commitment to the organization’s mission and goals.
They help employees focus on specific tasks rather than get distracted by other things around them.
They can motivate people to work harder and longer than they would without any incentives.
They are easy to implement and administer.

Employee pulse surveys:

These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).

One-on-one meetings:

Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.

eNPS:

eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.

Based on the responses, employees can be placed in three different categories:

Promoters
Employees who have responded positively or agreed.
Detractors
Employees who have reacted negatively or disagreed.
Passives
Employees who have stayed neutral with their responses.

What are the disadvantages of extrinsic rewards?

The disadvantages of extrinsic rewards are:

They can lead to cheating and unethical behavior.
They don’t motivate people to be creative or innovative.
They can create an unhealthy focus on money and material things over other intrinsic motivations like personal growth and achievement.
They focus on the end result instead of the process.
They can create a short-term culture that doesn't promote growth or innovation.
They can be unreliable and unpredictable.

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Note: Pushing an employee too far with extrinsic rewards can result in demotivation due to over-reliance on extrinsic motivations, which can result in less efficiency than intrinsic motivations.