Motivation and Work Performance. The Effects of Intrinsic and Extrinsic Motivation on Work Performance

Table of Contents

1. Status quo

2. Theoretical Framework and Core Constructs
2.1. Self-Determination Theory
2.2. Intrinsic Motivation
2.3. Extrinsic Motivation
2.4. Work Performance

3. Evidence
3.1. The Effect of Intrinsic Motivation on Work Performance
3.2. The Effect of Extrinsic Motivation on Work Performance
3.3. The Interaction Effect and the Joint Impact on Work Performance
3.4. Related Constructs

4. Recommendations
4.1. Intrinsic Incentives
4.2. Extrinsic Incentives

Reference List

1. Status quo

Substantial research has been conducted to investigate the construct of motivation and to validate its impact on core business outcomes within varying environments. According to Rani and Lenka (2012), the motivational process affects an individual's strength and persistence of behaviour. Thus, motivated individuals are activated to behave in a more creative, productive and persistent way (Rani & Lenka, 2012). Prevailing literature validates this positive effect. For example, Deci and Ryan (2008a) argue that there is a significant link between motivation and positive work-related outcomes, such as psychological well-being and work performance.

Considering this convincing evidence, further research tried to investigate this relationship within varying settings. An area that has aroused major attention is the R&D environment. Within this context managers face several obstacles in establishing high levels of motivation. Clarke (2002) mentions, for example, the differing values and expectations of R&D specialists, the uncertainty of outcomes and the difficulty in measuring the results. For high levels of motivation and performance to occur, managers need to respond to the needs of the R&D professionals without losing sight of the company's major objectives (Manolopoulos, 2006). Based on the work of Deci, Vallerand, Pelletier and Ryan (1991) and their distinction between intrinsic and extrinsic motivation, studies in the R&D management literature validate the importance of both motivational constructs within this context (Clarke, 2002; Farris & Cordero, 2003).

However, in practice, organizations like BMW may be incentivized to primarily focus on extrinsic rewards. Extrinsic incentive systems, such as salary increases or bonuses, can easily be established, fairly measured and provide a clear link between the employees' monetary motives and the organizations objectives (Manolopoulos, 2006). Further, intrinsic motivation may be neglected due to difficulties and increased efforts of implementing such incentives. As a result of this neglect of their workers' intrinsic needs and desires, the motivation within the R&D department and in turn the work performance may decline. The purpose of this paper is to investigate this situation by clarifying the effects of intrinsic and extrinsic motivation on work performance within the R&D environment and provide practical recommendations. At first, a definition of the theoretical framework and the core constructs will be provided. Then, the effects of intrinsic and extrinsic motivation, as well as their interaction and related constructs, will be examined. The last part will draw some practical recommendations for BMW.

2. Theoretical Framework and Core Constructs

The purpose of this section is to describe the theoretical framework that constitutes the basis of the discussion in this work. Further, the core constructs of this paper will be defined.

2.1. Self-Determination Theory

The discussion in this paper is based on the self-determination theory (SDT) from Deci and Ryan (1985). Within this empirically based theory, Deci and Ryan (2008a) argue that individuals strive to satisfy their basic psychological needs for autonomy, competence and relatedness. Autonomy refers to a feeling of having a choice and being self-determined (Deci, et al., 2001). The need for competence accounts for the ability to succeed at challenging tasks and to attain desired outcomes (Baard, Deci & Ryan, 2004). Relatedness refers to a feeling of mutual respect and connectedness to the individuals in the environment (Ryan & Deci, 2000a). Deci et al. (2001) argue that the satisfaction of these basic psychological needs is essential for high levels of motivation and individuals' psychological growth. Based on this, Deci and Ryan (2000) differ several types of motivation that can be described along a continuum ranging from controlled to autonomous motivation. However, this paper only differs between intrinsic and extrinsic motivation as defined below and thus follows a more aggregated distinction.

Further, the cognitive evaluation theory (CET), a sub-theory of SDT, which focuses on the needs for competence and autonomy, explains variability in intrinsic motivation (Ryan & Deci, 2000b). Hereafter, factors that support the psychological need satisfaction result in an increase in intrinsic motivation, whereas factors that thwart this need satisfaction tend to result in a decrease in intrinsic motivation (Deci, Koestner & Ryan, 1999).

As a result, the SDT intends to link the individuals' need satisfaction and the two types of motivation (Baard et al., 2004). This enables studies to identify factors that may have positive and factors that may have detrimental effects on motivation (Deci et al., 1999). Therefore, the SDT provides a suitable framework for the discussion of this paper. Moving on, the following section will define the three core constructs of this work.

2.2. Intrinsic Motivation

According to Deci and Ryan (2008a), intrinsic motivation involves engaging in a behaviour because the activity itself is perceived to be enjoyable, interesting and satisfying.

Therefore, intrinsically motivated activities are engaged in for the positive feelings derived from performing the task at hand (Baard et al., 2004). Individuals freely choose to engage in the activity making external rewards or pressure unnecessary (Ryan & Deci, 2000a).

Intrinsic motivation is based on the satisfaction of the psychological needs mentioned above (Deci & Ryan, 2000). It represents a pure form of autonomous motivation and draws on an internal perceived locus of causality (Deci & Ryan, 2000; Gagne & Deci, 2005). Following the logic of the CET, factors that facilitate the need satisfaction, especially the ones for competence and autonomy, will result in increasing levels of intrinsic motivation, whereas conditions that thwart the psychological need satisfaction will lead to decreasing levels of intrinsic motivation (Deci & Ryan, 2000). According to Baard et al. (2004), this intrinsic need satisfaction will predict work performance and psychological well-being. Section 3.1. will closely examine the intrinsic motivation - work performance link.

However, it is unlikely that tasks are purely intrinsically motivated (Amabile, 1993). Amabile (1993) argues that most activities are intrinsically as well as extrinsically motivated and some tasks are even purely extrinsically motivated. Deci and Ryan (2000) state that these different types of motivations result in different performance outcomes. Therefore, it is essential to acknowledge the importance of extrinsic motivation, which will be defined in the following.

2.3. Extrinsic Motivation

In contrast to intrinsic motivation, extrinsic motivation involves engaging in a behaviour because of some separate outcome (Deci & Ryan, 2008a). Thus, extrinsically motivated individuals are activated by something outside of the activity itself, for example rewards or evaluations (Amabile, 1993). Gagne and Deci (2005) mention that satisfaction is derived from the extrinsic consequence of the task, not from the task itself. Extrinsic incentives are especially essential if the task at hand is not intrinsically interesting (Ryan & Deci, 2000a).

Ryan and Deci (2000a) argue that, based on the SDT, there are four different types of extrinsic motivation, which differ in the extent to which they are autonomous. Via internalization and integration of the activity's value and regulation, more controlled forms of extrinsic motivation can become more autonomous forms (Ryan & Deci, 2000a). As a result, extrinsic motivation can range from a passive compliance to an active personal commitment (Ryan & Deci, 2000b). In this work, the term extrinsic motivation includes those different types, as most studies have not accounted for the different effects of these types on work performance.

Further, as several activities combine both, intrinsic and extrinsic motivation, substantial research has focused on the interaction effect of extrinsic incentives on prevalent intrinsic motivation (Amabile, 1993). Early studies suggest that the introduction of extrinsic rewards undermines initial levels of intrinsic motivation, because individuals tend to feel controlled and pressured thwarting the satisfaction of their autonomy need (Deci & Ryan, 2008a). However, based on the CET, later studies show that extrinsic incentives that facilitate the intrinsic need satisfaction may not have such a detrimental effect (Gagne & Deci, 2005).

As a result, the interaction effect can be positive or negative (Gagne & Deci, 2005). Therefore, this paper will examine both, the sole effect of extrinsic motivation as well as the joint impact of intrinsic and extrinsic motivation on work performance. Before, the construct of work performance needs to be defined.

2.4. Work Performance

According to Cerasoli, Nicklin and Ford (2014), work performance can be defined as an observable and evaluative achievement-related behaviour. Basically, there are two types of performance, namely task and contextual performance (Christian, Garza & Slaughter, 2011). Task performance involves the individual's performance on job-required duties, whereas contextual performance refers to an individual's behaviour that benefits the social and psychological context of the organization (Christian et al., 2011). However, following the prevailing literature, this work focuses on certain aspects of performance. Using the approach of Cerasoli et al. (2014), this paper will differ between performance quality and quantity whenever this is feasible. Quality-type tasks involve more complexity and engagement, whereas quantity-type tasks are characterized by pressure towards certain outcomes and require external control (Cerasoli, et al., 2014). As will be shown in section 3.1. and 3.2., the effects of intrinsic and extrinsic motivation will significantly differ depending on the examined performance aspect.

In the end, work performance in this paper will be operationalized in different forms depending on the respective study that is described. However, common to all forms mentioned here is that they draw on observable behaviours that can fairly be evaluated (Cerasoli et al., 2014). Based on this theoretical background and the definitions of the core constructs, the next part of this work will examine the effects of intrinsic and extrinsic motivation on work performance.

3. Evidence

This section will closely examine the effects of intrinsic and extrinsic motivation on work performance. Additionally, their joint impact on performance outcomes will be investigated. Following this, some related constructs will be mentioned that may deliver some additional inside concerning the discussion of this paper.

3.1. The Effect of Intrinsic Motivation on Work Performance

As stated earlier, intrinsic motivation comprises behaviours that are engaged in for their own sake, as the activity itself is perceived to be interesting or enjoyable (Deci & Ryan, 2008a). The effects of intrinsic motivation on major business outcomes have been widely studied in the prevailing literature. Thus, positive effects on satisfaction or well-being have been validated (Ilardi, Leone, Kasser & Ryan, 1993). However, the focus of this work is on work performance.

One of the earliest studies that validates the link between intrinsic motivation and performance is the study by Kasser, Davey and Ryan (1992). They show that supervisor ratings of employees' intrinsic motivation reliably predict their future performance in a psychiatric rehabilitation setting (Kasser et al., 1992). Confirming the importance of the SDT, they base their results on the psychological need satisfaction (Kasser et al., 1992).

Baard et al. (2004) confirm that this positive link between intrinsic motivation and work performance also holds within an organizational environment. They show that managers' autonomy support, characterized by an interpersonal climate and managerial functions, such as decision making or work planning, promotes the employees' intrinsic need satisfaction, which in turn has a medium, positive effect on their performance evaluations (Baard et al., 2004).

In accordance with these findings are the results from Black and Deci (2000). Based in an academic setting, they find a positive relationship between an instructor's autonomy support and an individual's self-regulation ultimately predicting a student's course performance (Black & Deci, 2000). Again, the psychological need satisfaction results in higher levels of intrinsic motivation, which in turn significantly enhances the individual's performance (Black & Deci, 2000).

More recently, the meta-analysis by Cerasoli et al. (2014) summarizes the numerous findings on the link between intrinsic motivation and work performance. Considering 183 studies from different domains, their results indicate that intrinsic motivation has a medium to strong positive effect on work performance (Cerasoli et al., 2014). Cerasoli et al. (2014) state that successfully satisfying their needs for competence, autonomy and relatedness, individuals tend to expand higher levels of effort, persistence and intensity, which results in an increase in work performance. Further, they argue that the strength of this link depends on whether performance accounts for quality or quantity (Cerasoli et al., 2014). Quality emphasizing tasks are characterized by a high degree of complexity and require a substantial personal commitment, whereas quantity related tasks tend to have a low degree of complexity and require less personal investment resulting in perceived pressure towards certain outcomes (Cerasoli et al., 2014). As a result, these findings suggest that intrinsic motivation tends to be stronger linked to performance quality than to performance quantity (Cerasoli et al., 2014).

Considering the R&D environment, several studies emphasize the importance of intrinsic motivation for researchers and developers (Cohen & Sauermann, 2007). Clarke (2002) mentions that they respond more strongly to intrinsic incentives than workers in other environments. Based on data from 191 R&D specialists of large chemical companies, Tierney, Farmer and Graen (1999) show that individuals' intrinsic motivation positively relates to their creative performance as measured by supervisor ratings. In accordance, the results of Chen, Ford and Farris (1999) suggest that intrinsic incentives for technical staff result in increases in organizational performance as operationalized as net benefits. Thus, the positive link between intrinsic motivation and work performance remains valid within the R&D environment.

Summarizing this, there tends to be a positive effect of intrinsic motivation on work performance which is based on the psychological need satisfaction (Baard et al., 2004). Contexts and factors that facilitate this need satisfaction may increase the level of intrinsic motivation and in turn the work performance (Baard et al., 2004). Further, Cerasoli et al. (2014) suggest that the performance criterion may moderate the intrinsic motivation - performance link. Additionally, several studies validate this positive relationship in the context of an R&D environment (Chen et al., 1999). However, intrinsic motivation is not the only type of motivation that may impact the work performance (Amabile, 1993). Therefore, the following section will investigate the effect of extrinsic motivation on work performance.

3.2. The Effect of Extrinsic Motivation on Work Performance

As stated above, extrinsically motivated individuals tend to engage in a behaviour due to some separate outcome (Deci & Ryan, 2008a). As not all tasks can be inherently intrinsically interesting, extrinsic motivation plays a major role in motivating employees and incentivizing them to perform at high levels (Amabile, 1993). Thus, the link between extrinsic motivation and work performance has aroused a great deal of attention in the prevailing literature.

Starting with the work by Lazear (2000), extrinsic motivation tends to be positively correlated to work performance. Lazear (2000) found that monetary, output-contingent incentives, such as piece-rate pay, significantly increase the average levels of output per worker. The author argues that the 44% percent increase in output found in the study is based equally on a motivation and a selection effect (Lazear, 2000). This notion is confirmed by Bartol and Durham (2009) who state that the effect of extrinsic incentives operates via two mechanisms. It enhances the extrinsic motivation to perform and further impacts the attraction and retention pattern of the organization resulting in a more skilled workforce (Bartol & Durham, 2009).

Furthermore, the meta-analysis by Condly, Clark and Stolovitch (2003) validates the positive effect of extrinsic motivation on work performance across different work settings. On average, they report a 22% gain in performance due to extrinsic incentive programs (Condly et al., 2003). Simultaneously, they argue money to be a more powerful incentive than other forms of extrinsic incentives (Condly et al., 2003). Additionally, Condly et al. (2003) do not validate differences in the effect size as to wheatear performance quality or quantity is measured.

Conversely, Jenkins Jr., Mitra, Gupta and Shaw (1998) in their meta-analysis find different effects of extrinsic incentives for performance quality and quantity. Whereas financial incentives have no significant effect on the performance quality, their results validate a significant, medium strong, positive effect on the performance quantity (Jenkins Jr. et al., 1998). The authors argue that extrinsic incentives induce individuals to expend more effort and to accept difficult performance goals, which enhances the performance quantity (Jenkins Jr. et al., 1998). In their opinion, the insignificant effect on performance quality is based on detrimental effects of extrinsic incentives on the intrinsic motivation (Jenkins Jr. et al., 1998). This undermining effect will be further investigated in section 3.3.

Moving on, the work by Ariely, Gneezy, Loewenstein and Mazar (2009) confirms the notion that extrinsic, performance-related incentives tend to result in higher levels of effort, which in turn enhances work performance. However, they mention that excessive rewards can have a detrimental effect on performance (Ariely et al., 2009). A narrow focus of individuals and a supra-optimal level of arousal may result in a deterioration of performance for tasks involving cognitive and creative components, whereas the performance for tasks involving only effort or concentration seems to be unaffected by excessive rewards (Ariely et al., 2009).

Furthermore, the meta-analysis by Cerasoli et al. (2014) validates the positive relationship between extrinsic motivation and work performance, the strength of which is, however, moderated by the performance criterion and the incentive contingency. Confirming the results from Jenkins Jr. et al. (1998), Cerasoli et al. (2014) find that extrinsic motivation reliably predicts the performance quantity but not the performance quality. Further, directly salient incentives that are clearly linked to performance result in a strong extrinsic motivation to perform, whereas indirectly salient incentives, have a weaker link to performance resulting in a more moderate extrinsic motivation to perform (Cerasoli et al., 2014).

Moreover, as mentioned above, extrinsic motivation can greatly vary in its degree of autonomy (Ryan & Deci, 2000a). More autonomous forms are argued to result in more effective performance on complex tasks, whereas more controlled forms tend to lead to performance enhancements for mundane tasks (Gagne & Deci, 2005). Thus, the degree of autonomy may also moderate the extrinsic motivation - performance link (Gagne & Deci, 2005).

In the R&D environment, extrinsic incentives tend to be an essential way to motivate researchers and developers to perform at high levels (Manolopoulos, 2006). Based on a large- scale survey of R&D laboratories in Greece, Manolopoulos (2006) shows that R&D specialists assign more importance to extrinsic incentives, such as bonuses or hierarchical advancement, to enhance their motivation and work performance than to intrinsic motivators.

Further, Farris and Cordero (2003) mention the necessity of extrinsically motivating R&D employees. They argue that an organization needs to reward researchers and developers according to their contributions to sustain high levels of performance and to retain top­performers (Farris & Cordero, 2003). Thus, the positive link between extrinsic motivation and work performance remains valid within the R&D context.

Summarizing this, extrinsic motivation tends to be positively correlated with work performance, which is based on directing the individual's behaviour and increasing their effort and attention (Cerasoli et al., 2014). Further, the prevalent studies suggest several moderators that may influence this relationship, namely excessive rewards, the incentive contingency, the performance criterion and the degree of autonomy (Ariely et al., 2009; Cerasoli et al., 2014; Gagne & Deci, 2005; Jenkins Jr. et al., 1998). Additionally, the importance of the extrinsic motivation - performance link remains valid in the R&D environment (Manolopoulos, 2006). After separately investigating the effects of intrinsic and extrinsic motivation on work performance, the next section will examine their joint impact on work performance.

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