The significance of intrinsic rewards over extrinsic rewards on employees’ motivation

Abstract

This study examines the comparative significance of intrinsic versus extrinsic rewards on employee motivation at ASTU and Arsi Universities. A quantitative, explanatory research approach was employed, using a survey distributed to 420 administrative and academic staff, with 385 valid responses analyzed. The research assessed the relationship between Employee Motivation (EM) and key Intrinsic Factors (job attitude, empowerment, promotion, and career development) and Extrinsic Factors (recognition, salary, benefits, work environment, leadership, co-worker relations, policy). Key findings of the current study revealed that both IFs and EFs significantly correlate with employees’ motivation, but intrinsic factors are substantially more influential. Aggregate IFs showed a strong correlation with EM (0.760), compared to 0.511 for EFs. Regression analysis indicated that IFs alone explain 72.8% of the variance in motivation, while EFs alone explain only 35.2%. When combined, they explain 76.2%, with IFs contributing 74.3% of the variance and EFs just 1.9%. Job attitude (0.852) and empowerment (0.670) were the most powerful predictors, while recognition was the most impactful extrinsic factor. The study concludes that while both reward types are important, intrinsic rewards are paramount for sustained motivation. This study contributes to motivation theory by empirically reinforcing the primacy of intrinsic drivers within the Self-Determination Theory framework. For practice, it advises organizations to prioritize job design, autonomy, and professional growth, while using recognition and equitable extrinsic systems as foundational, but secondary, supports.