How Extrinsic Motivation Impacts Performance

Employers have long favored the use of increased salaries, bonuses, promotions, fancy titles, extra holidays and so on to motivate employees or inspire certain behaviors or actions. The prevailing instinct around motivation seems to be that an increase in external incentives is directly proportional to performance or productivity. And that instinct is partly correct.

In the 2017 study, “Do Intrinsic and Extrinsic Motivation Relate Differently to Employee Outcomes?” by Bard Kuvaas, Robert Buch, Antoinette Weibel, Anders Dysvik and Christina G.L. Nerstad, the researchers discovered that ‘extrinsic’ motivation or rewards work extremely well for jobs that are simple and standardized. They state that, “Tasks that are straightforward, highly repetitive, and perhaps even less inherently enjoyable, should be more closely linked to extrinsic incentives. For example, linking pay to performance has been found to improve productivity on relatively straightforward tasks, such as tree planting.”

So, in a nutshell, extrinsic motivation works well for jobs that are straightforward, repetitive and, well, boring. These are the kind of jobs that were extremely common in the 19th or early to mid 20th century. But why do we still use the same extrinsic tools to motivate employees in the 21st century, where jobs revolve around higher level skills, such as creativity, problem solving and negotiation?

The Candle Problem

In 1945, Karl Duncker invented the “Candle Problem” to test creative problem solving. In it, he provides participants with a candle, a box of thumbtacks, and a box of matches and asks them to fix the lit candle to the wall so that it will not drip wax onto the table below.

To solve this problem, the participants needed to overcome something called “functional fixedness”.

“Functional Fixedness” is a cognitive bias which limits a person’s ability to perceive an object beyond what it is traditionally used for. When someone looks at the box of thumbtacks, it doesn’t initially occur to them that the box can be a part of the solution by first emptying it of thumbtacks.

A variation of this test was carried out by a scientist named Sam Glucksberg to figure out the effect of incentives on the outcome of the test. He divided the participants into two groups. Group A was asked to solve the problem in order to establish how long it typically takes for someone to solve it. Group B was offered $5 if they were in the top 25% fastest to solve the problem, and $20 if they were the fastest.

Glucksberg then ran two versions of the test; one with the thumbtacks outside the box and another one with the thumbtacks inside the box. As expected, for the first version of the test more participants solved the problem and it was solved faster. However, for the second version of the test Group B performed worse than Group A.

From this it was concluded that the introduction of a monetary incentive hampered the participants ability to overcome their cognitive bias or “Functional Fixedness” in order to effectively solve the problem.

The Overjustification Effect

Why does this happen? Another study by researchers Mark Lepper, David Greene and Richard Nisbett offers some answers. The researchers ran an experiment in which they encouraged two groups of children to draw with felt tip pens, lavishly rewarding one group for their efforts and not the other. The children were then asked to draw again, but this time no rewards were offered. They observed that the group of children who were not rewarded the first time were as enthusiastic as before, while the group that was rewarded had no interest in the activity the second time around.

This is called the “Overjustification Effect”, a process by which extrinsic motivators negate people’s existing intrinsic motivators by causing them to assign too much importance to the external reward.

Raising the Stakes

In late 2002, Dan Ariely, Uri Gneezy, George Loewenstein, and Nina Mazar conducted a study at MIT with 24 undergraduate students. The study involved two tasks: one that required only effort and one that required mainly cognitive skills. They were provided with a cash incentive based on their level of performance for each task. The experiment was also conducted toward the end of the semester, a time when the students have usually depleted their budgets and are thus more strapped for cash.

The researchers found that, for the effort-based task, performance increased in relation to the size of the reward, while conversely for the cognitive based task, performance decreased.

Under the same study, they carried out a similar experiment with 87 participants from a rural town in India. Participants were offered small, medium, or large rewards based on their performance. There was no significant difference in performance between participants who were offered the small and medium rewards. Participants that were offered the highest rewards however, performed the worst.

one part of the puzzle

The impact of extrinsic motivation on performance has been demonstrated by researchers over the past 50 years. However, change has been slow.

As motivation theory trailblazer Daniel Pink points out in his 2009 Ted Talk, the Puzzle of Motivation, “There is a mismatch between what science knows and what business does. And what worries me, as we stand here in the rubble of the economic collapse, is that too many organizations are making their decisions, their policies about talent and people, based on assumptions that are outdated, unexamined, and rooted more in folklore than in science.”

Extrinsic motivation is not wholly without merit, however. As previously mentioned, it works well for certain very specific scenarios. Extrinsic motivation has been shown to be effective in motivating people to participate in tasks in which they previously had no interest, or to motivate them to learn new skills or knowledge, at least in the short term.

Extrinsic motivation can also be extremely potent when used as a complement to intrinsic motivation. As Professor Teresa M. Amabile explains, “Extrinsic motivators that either allow a person to be more engaged, or confirm their competence, something they are already keen to do, can synergistically add to intrinsic motivation and creativity. That delicate balance is what workplaces should be aiming for.”