The value of intrinsic rewards

For any organisation, the motivation of employees is key to achieving consistently high productivity levels. Motivation is also a significant factor in retaining valuable talent that enables the organisation to have a competitive edge over its counterparts and meet its mission and goals. In order to retain and motivate their worforce, companies must therefore reward employees accordingly.

Performance reviews are invariably associated with monetary rewards. The dominating narrative is  around how much the bonus will be and what percentage salary increase will be on the table for that cycle. In other words, there tends to be a focus on extrinsic rewards. Extrinsic rewards refer to tangible rewards provided to employees, such as wage increases, bonuses, and benefits. These rewards are usually financial in nature. They are called extrinsic because they are outside of the individuals control and often determined by other agents i.e. management. Extrinsic rewards can also be determined by other factors such as company performance and economic conditions. They do, of course, remain important because compensation is a key consideration for most employees when they accept or remain in a job.

However, after monetary issues have been settled, intrinsic rewards take a more prominent role in the day-to-day motivation of employees.

If extrinsic rewards are the key focus during performance reviews, a risk arises when, for example, there is an economic down turn that limits an organisation’s ability to provide financial rewards in particular year. During such times, if extrinsic rewards are the only incentive, organisation will struggle to keep employees motivated.

The new world (of work) order

The world of work has changed and reward systems need to keep up with the changing times. The concept of what a career is or should be has changed dramatically.. The traditional career is characterised by a succession of related jobs, that progresses through a vertical ascent of the corporate ladder. Individuals move in an ordered, predictable sequence through their career. Traditional career models implicitly assume that careers generally fit a certain pattern. In this traditional view, employees take an entirely passive role in their career-management and rely solely on the organization to provide career direction and advancement. This model is becoming increasingly obsolete in the modern business environment.

Extrinsic rewards played a dominant role in this traditional concept of career when work was generally more routine and bureaucratic, and when complying with rules and procedures was paramount. This work offered employees few intrinsic rewards, and extrinsic rewards were often the only motivational tools available to organizations.

Today’s careers are characterised by what is known as the protean or “boundaryless” career. This is characterised by a career that is driven by the employee and not the organization. It is based on individually defined goals and driven by psychological success rather than objective measures of success such as pay, rank or power.

An individual with a protean career or one who is protean is predominantly values driven, meaning that it is their personal values that provide guidance and serve as a measure of success. The focus is on psychological success rather than vertical success. Employability takes precedenceover job security, careers are about continuous learning, and sources of development are work challenges not necessarily training programs. Moreover, the focus is on learning metaskills (learning how to learn), adaptability and innovation.

Why focus on intrinsic rewards

Intrinsic rewards are intangible rewards that workers attain after completing meaningful work and from a passion or interest in doing a job well done. Intrinsic rewards come from inside the individual. Examples of intrinsic rewards are achievement, autonomy, personal growth, challenge, responsibility, praise, and feelings of self-esteem. Intrinsic rewards are more congruent with the nature of today’s employee who prioritises psychological rewards and success.

Facilitating and implementing intrinsic rewards is predominantly the responsibility of line managers, but there are things that can be done, from a HR perspesctive, that can have a singificant impactnon instrinsic rewards systems.

It is threefore important to incorporate training on intrinsic motivation into management development programs. Managers need to first learn how to better understand and manage their own intrinsic rewards before shifting to support the intrinsic rewards of their direct reports.

Broadly speaking, there are four categories of intrinsic rewards that managers can take into consideration during performance review time. These are; a sense of meaning, a sense of choice, a sense of competence and a sense of progress.

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Sense of meaning

Sense of meaning is compensation that involves providing the employee with a sense of purpose in their work. This reward is giving the employee an opportunity to accomplish something of real value to them, which matters in the larger scheme of things. Employees need to feel that they are on a path that is worth their time and energy, providing them with a strong sense of purpose or direction.

Here are a few practical steps to foster a sense of meaning and purpose;

• Identify employees’ values, goals and purposes and align these with aspects of the job.
• Foster purpose outside of work. Employers need to acknowledge that employees have their own lives and purpose outside of work. Organizations should encourage employees to pursue their passions outside of work, and give them both the time and if possible resources to do so.
• Focus on the “why”.  Define your company’s purpose and communicate this higher calling to employees as a guidepost for everything they do. Meaning comes when employees realize the impact of their work on others. People are motivated when they know why what they do matters. Gather stories of how their work helps others, even in small ways, and encourage them to share their own stories.

Sense of choice

Sense of choice is creating an environment wherein employees feels free to select the method that they will use to accomplish the assigned job. The freedom to choose how to accomplish their work, using their best judgment to perform tasks in ways that seem appropriate, gives employees a sense of ownership and responsibility

Sense of choice can be practically applied in the following ways;

• Delegate authority. Provide room for your employees to make some key decisions. Support, guide and empower them in making these decisions if need be.
• Trust. Demonstrate confidence in an individual’s self-management through your actions as a manager and let there be consistency in what you say and how you behave.
• Provide a safe space to fail. In fostering a sense of choice, employees need to feel secure and have no fear of punishment for honest mistakes. The environment should be conducive for learning and learning from failures.

Sense of competence

Sense of competence is achieved when an employee feels they are handling the job activities well, and they are satisfying or exceeding personal expectations. Employees need to feel that they are doing high-quality work and have a sense of satisfaction and pride in how well they handle their work activities.

Sense of competence can be practically applied in the following ways;

• Positive feedback from manager. When employees perform well, they have to feel it is acknowledged. Positive reinforcement is a great tool to use in this regard.
• Provide challenging tasks. Managers should find ways to allocate tasks that will challenge employees to develop or harness their skills above their current capabilities. The best managers do not limit themselves to a strict interpretation of their employees' job descriptions. Rather, they create meaningful challenges for employees and inspire workers to accept those challenges.

Sense of progress

Sense of progress is achieved when an individual is encouraged because they feel that their careers are headed in the right direction. They have a sense of confidence over their choices and are encouraged that their efforts are accomplishing something.

Sense of progress can be practically applied in the following ways;

• Foster a collaborative climate where co-workers help each other to succeed.
• Acknowledge and celebrate milestones. Outline reference points to mark stages of accomplishment.
• Have ways to measure and track improvement to monitor if performance is getting better.

Conclusion 

Intrinsic rewards provide the “right” kind of retention in the organisation, keeping the people who are energized and self-managing rather than those who stay only because they can’t afford to leave. Employees with high levels of intrinsic rewards also become informal recruiters and marketers for their organization. They recommend the organization to friends as a place to work and recommend its products and services to potential customers. Intrinsic rewards are also a relatively healthy and sustainable source of motivation for employees. There is little chance of burnout with this form of motivation.

Overall, intrinsic rewards seem to create a strong, win/win form of motivation for both the organization and its employees—and one which is congruent with the current word of work. It embodies the kind of self-management and professional development demanded by today’s protean and “boundaryless” employee. It does not depend on large expenditures of money to generate extra effort, and remains feasible when funds are tight. Extrinsic rewards are not sustainable; if the reward is withdrawn, the motivation disappears. There is also diminishing returns if the reward stays at the same level, motivation slowly drops and a bigger reward is required next time to get to the same motivation. When considering issues of motivation remember that each employee is different. Tailor your strategies to the individual rather than building "one size fits all" systems.