Gig Economy - Overview, Advantages, Disadvantages
A gig economy is an economy that operates flexibly, involving the exchange of labor and resources through digital platforms that actively facilitate buyer and ...
employee motivation
Individuals who are interested in accumulating extra income are attracted to applying for a position that offers a unique work schedule. Such flexibility directly impacts <anchor>employee motivation</anchor>, which in turn, creates a positive correlation to output production.
Extrinsic Motivation - Overview, Examples
Extrinsic Motivation - Overview, Examples

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[Home](https://corporatefinanceinstitute.com "Go to Corporate Finance Institute.") › [Resources](https://corporatefinanceinstitute.com/resources/ "Go to Resources.") › [Wealth Management](https://corporatefinanceinstitute.com/topic/wealth-management/ "Go to the Wealth Management Resource Type archives.") › Extrinsic Motivation

# Extrinsic Motivation

A behavior driven by external factors such as a reward or avoidance of negative outcomes

Written by[CFI Team](https://corporatefinanceinstitute.com/about-cfi/)

## What is Extrinsic Motivation?

Extrinsic motivation refers to behavior that is driven by external factors, such as a reward or avoidance of negative outcomes. Money is the most obvious example of an extrinsic motivation.

Extrinsic motivation factors can be either tangible and intangible. Tangible factors are factors with a physical form. Any type of financial reward can be an example of a tangible factor. Conversely, intangible factors are abstract in their nature and lack a physical form. Examples of intangible external motivations include fame and praise.

### Extrinsic vs. Intrinsic Motivation

Extrinsic and [intrinsic motivation](https://corporatefinanceinstitute.com/resources/management/intrinsic-motivation/) are two types of behavior stimulation. Extrinsic motivation is the stimulation of behavior through various external factors. Intrinsic motivation is a behavioral catalyst driven by a desire for personal satisfaction or fulfillment. Note that both extrinsic and intrinsic motivation correspond with [Maslow’s Hierarchy of Needs](https://www.oxford-royale.com/articles/5-levels-maslows-hierarchy-needs-affect-life.html). Extrinsic motivation coincides with the safety needs in the hierarchy, while intrinsic motivation concurs with esteem and self-actualization needs.

We cannot say that one form of motivation is better than the other. Both extrinsic and intrinsic motivation can effectively impact humans’ behavior and stimulate them to perform certain actions. It is also worth mentioning that the effectiveness of a particular type of motivation may vary among individuals. For example, some people tend to prefer external rewards more, while others put a greater emphasis on personal satisfaction.

Generally, intrinsic motivation is highly regarded as the strongest incentive to achieve long-term objectives. If an individual possesses strong intrinsic motivation, it is very likely that he or she will complete a task. The caveat here is that a person cannot always be intrinsically motivated.

Unlike intrinsic motivation that can drive human behavior only in certain tasks or actions, extrinsic motivation comes with a larger number of potential applications. It is an effective stimulus to motivate a person to do a task he or she was not interested in previously.

### Extrinsic Motivation in Organizational Behavior

In organizational behavior, extrinsic motivation plays a crucial role in determining the actions and behavior models of a company’s employees. In every organization or company, employees are extrinsically motivated by the compensation they receive for their work. However, [salary](https://corporatefinanceinstitute.com/resources/career/remuneration/) is not the single extrinsic motivation factor since many organizations provide many other rewards, such as bonuses, commissions, [benefits](https://corporatefinanceinstitute.com/resources/career/fringe-benefits/) (e.g., health benefits). We must also acknowledge that intangible extrinsic rewards such as praise and peer recognition are typically presented in many workplaces.

In the workplace, extrinsic rewards can be used to stimulate the interest of employees in tasks in which they are not initially interested. In addition, other sources of motivation typically encourage employees to acquire new knowledge and skills. Finally, the management of a company can use extrinsic rewards as a source of feedback regarding the performance of its employees.

Despite the fact that external rewards are essential to motivate the company’s employees, a company should not rely solely on extrinsic motivation. If the company’s employees possess strong intrinsic motivation, they are likely to remain motivated for longer periods of time. Furthermore, an excess of external motivation may subsequently decrease the employees’ intrinsic motivation.

Therefore, every company or organization must carefully assess their workforce to understand their needs and to determine the optimal mix of extrinsic and intrinsic motivations.

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