The role of compensation or extrinsic rewards, including pay for performance (PFP) has received more and more attention in the recent literature on work motivation. A consistent strand of literature and renowned scholars, such as Daniel Pink, have raised caution about the potentially harmful effects of PFP on (intrinsic) work motivation, self-appreciation, and the creativity and sense of purpose of beneficiaries. These arguments come somehow against another strand of research and widely shared beliefs, common especially within large tech companies that afford high payment levels, that high pay allows companies to recruit and select the best candidates, set up and maintain high professional standards, and drive forward the development of innovative high-end products and fuel of the whole economy of knowledge based on creativity and creative industries.
We explored this tension in the last Executive Talk where our guest speaker, Roxana Corduneanu, Ph.D., Lecturer at Northumbria University (UK), discussed new approaches in exploring and understanding the relation between PFP and motivation. The talk drew on Roxana’s research experience on intrinsic motivation and financial rewards. She explored this relationship from the perspective of the Self-Determination Theory which assumes that intrinsic motivation is generated through the meeting of three basic psychological needs:
- Autonomy (having the experience of choice)
- Competence (having the opportunity to demonstrate one’s skills)
- Relatedness (feeling connected with others at work)
These needs are met through the social environment, which can consist of a certain type of organizational culture, a certain type of management, job design factors, and individual differences, making motivation and effect that sits on the interplay of externally controlled sources of motivation and autonomous intrinsic motivation.
PFP is assumed to undermine intrinsic motivation by triggering perceptions of control. But can also enhance intrinsic motivation when performed in an autonomy-supportive context. The talk drawing on Roxana’s research explored this relationship and mediating factors, building on cross-sectional research conducted in the UK.
Some of the main takeaways from this research discussion:
- PFP may be perceived as externally controlling, decreasing satisfaction with the need for autonomy, may lead to perceptions of unfairness (with employees believing that they deserve more or value more than what they received), and increase competition within organizations. But in some conditions, jobs that are high in intrinsic characteristics moderate the negative relationship between PFP and the satisfaction of competence needs.
- PFP may be perceived as fairer in jobs that are intrinsically motivating and serve as a symbol of recognition rather than a control tool in organizations where the job context is supportive.
So, in conclusion, when thinking about PFP and motivation, please consider investing first in more positive and supportive working environments, that ensure greater task autonomy, significance, variety, and open and honest feedback, consider strategies for helping employees coping with feelings of anxiety and helplessness, consider alternative forms of reward (intangible as well as non-cash) and provide PFP for generalized rather than specific outcomes as a symbol of valuing employees overall contribution.
If you want to read more about this topic and read some of the most recent publications on PFP and motivation follow Roxana Corduneanu at https://www.northumbria.ac.uk/about-us/our-staff/c/roxana-corduneanu/ and join us for the next Executive Talk sessions.