The Effects of Intrinsic Motivation and Extrinsic Incentives on Employee Performance

Bachelor Thesis from the year 2016 in the subject Leadership and Human Resources - Employee Motivation, grade: 1,3, University of Mannheim, language: English, abstract: The motivation for this work is a result of several factors. At first, the topics of motivation and work performance represent core areas in the fields of management and leadership with essential theoretical and practical implications. Second, various studies have been undertaken in order to examine the direct effects of motivation on work performance showing the high relevance of this issue. For example, the work of Jenkins, Mitra, Gupta and Shaw (1998) verifies a positive link between extrinsic motivation and work performance. Such performance improvements may be essential for companies trying to bet the competition. However, comparable studies examining the effects of intrinsic motivation on work performance tend to be rare. Thus, another reason for this present thesis is to close this substantial research gap. The topic of motivation has been widely studied from various researchers in several areas. It represents an essential part in multiple research fields, including the ones of management and psychology. Rani and Lenka define motivation as “a process that elicits, controls, and sustains certain behaviors”. Thus, motivated employees are activated to engage in a certain behaviour in an energized way, whereas unmotivated employees may not have any incentive to act. Ilardi, Leone, Kasser and Ryan (1993) validate a positive relation between high levels of motivation and positive work outcomes, such as job satisfaction or well-being. The importance of motivation becomes clear in light of the recent Gallup-study, which states that unmotivated workers lead to substantial losses for businesses. Until now, a significant number of studies have focused on the effects of motivation on well-being or job satisfaction. However, this thesis has a slightly different focus. It examines the effects of motivation on work performance of employees based on the self-determination theory (SDT) from Deci and Ryan (1985). Therefore, it distinguishes between two types of motivation, namely intrinsic and extrinsic motivation, which will be defined later. This distinction allows to separately examine the effects of intrinsic and extrinsic motivation on work performance as well as the interaction of those two variables and the joint impact of both motivational constructs on work performance.