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A Business Psychology View: Intrinsic and Extrinsic Employee Engagement

business woman standing in front of a blackboard with big brain drawn on it in chalk demonstrating business psychology

If you’re looking to improve employee engagement levels, be aware of these four critical intrinsic rewards

If you are an HR professional, you might have noticed the myriad of articles discussing the topic of employee engagement, and the fact that employee engagement remains a top HR concern. Research and studies continue to focus on both employee engagement and employee experience, how the two are related, and how managers can adapt existing business processes to inspire high levels of employee engagement.

We recently covered the topic of employee engagement, discussed why employee engagement is important, and mentioned the negative repercussions of when employee engagement is ignored. We will now use our expertise in the field of business psychology to cover intrinsic and extrinsic factors that impact employee engagement. Which one is more effective when it comes to boosting employee engagement in your workforce?

What are extrinsic rewards? And how do they impact employee engagement?

Extrinsic rewards are usually financial, and they come in the form of bonuses, benefits, promotions, and increased pay. These tangible rewards are known as extrinsic as they are external to the work itself. Other people, usually line managers, decide what form the extrinsic reward comes in and whether or not it will be given.

In the past, extrinsic rewards have been relied upon to improve employee engagement and morale, but in recent years, research reveals that extrinsic rewards fail to inspire and motivate employees. Extrinsic motivation is poor for employee creativity, and is rarely effective when it comes to retaining top talent.

Having said this, extrinsic rewards are still important. After all, if an employee feels they are unfairly paid, this can be a strong demotivator, and you might end up costing yourself a valuable employee. It should be noted, though, that in order to properly maintain engagement in the long-term, intrinsic rewards need to be prioritised and highlighted.

What are intrinsic rewards? And how do they impact employee engagement?

Intrinsic rewards are different from extrinsic rewards in the sense that they are more psychological in nature. They describe the benefits and positive effects employees enjoy from performing meaningful work and doing their role well. An intrinsic reward creates a sense of personal satisfaction. This is something all employers should want to tap into. If employees experience an internal sense of fulfilment from their role, they will be truly invested and enthusiastic about performing and excelling.

What are the four main intrinsic rewards required to improve employee engagement levels?

Professor Kenneth. W Thomas, who has spent over 30 years studying employee engagement and the intrinsic factors that influence it, argues that there are four core intrinsic rewards.

  1. A sense of meaningfulness

Employees need to feel like what they do matters. In order for this to happen, companies need to give each individual a thorough understanding of their role objectives and how they factor into the company’s wider strategic objectives, vision and direction. This will encourage your employees to feel part of a team, with the knowledge that they are adding value and that they are contributing to something great.

This is particularly true of millennials who, despite their stereotypes, are very purpose-driven and seek jobs that provide a strong sense of meaning. They are driven by compassion and innovation, so extrinsic motivation simply won’t hold a millennial’s interest long-term.

  1. A sense of choice

Employee autonomy is more important than ever. If you want to disengage your employees, a surefire way of doing that is by micromanaging their every move. Instead, employees should be given a degree of freedom and independence.

Allowing them to choose how to accomplish their work while using their best judgement is a great way to motivate and inspire. This way, employees will feel genuinely trusted, worthy of praise and recognition when they meet their goals, and work will be less of an obligation and more of a creative outlet.

  1. A sense of competence

Employees want to know they are competent at what they do, and they are capable of producing high-quality work. Without this, employees can’t develop a sense of pride in their work, and they will feel superfluous. In order for employees to feel competent, however, managers and HR need to demonstrate support and provide appropriate training and tools when needed. With added training comes added confidence, which is important for business, as self-assured employees always outperform those who doubt themselves.

  1. A sense of progress

An engaged employee won’t remain engaged for long if they are given the same responsibilities and goals year after year. Employees need to experience a sense of progress. They want to learn and grow. In fact, increasingly employees are regarding jobs as opportunities for development. Companies who don’t prioritise learning and development are shooting themselves in the foot and seriously limiting engagement levels.

How can leadership development and executive coaching help build intrinsic motivation?

Despite the fact that managers might appreciate the role of their own intrinsic rewards, they all too often fail to recognise the importance of intrinsic rewards in their employees. In order to properly build an environment and culture of engagement, it is important for managers to be trained on intrinsic motivation and how it impacts employee engagement. This is where leadership development programmes and executive coaching can step in to develop this awareness.

Once managers are able to better understand intrinsic rewards, they will be able to help nurture them in others by providing them with company context, flexibility, recognition, and development opportunities. Once leaders are competent, caring and willing to engage their workforce, the company as a whole begins to benefit from more motivated, enthusiastic employees.

Davis Associates is an experienced, dedicated HR Consultancy in Surrey. Get in touch for information on employee engagement, leadership development and executive coaching.

Nick Davis
Nick Davis
Nick Davis is a business Psychologist and Director at Davis Associates, helping clients across the globe to achieve greater individual, team and organisational performance. Passionate about the beneficial qualities psychology can have within the workplace, see how Nick and Davis Associates can unlock the hidden potential of your workforce, click here. You can also find Nick on Linkedin

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