the limits of compensation as motivation

At leadership.sprouts, we use the HEIDI principles to roughly summarize what New Work is based on and what it requires in order to successfully unlock potential. One of these five principles refers to Intrinsic Motivation & Purpose and explores the ways in which organizations and leaders motivate their talents. We have observed our business world transform from mainly manufacturing work to creative knowledge work, and believe our organizations need to be approached and organized differently. Sustainable leaders embrace and develop practices which center knowledge workers while promoting intrinsic motivation. While still a key issue, compensation is in and of itself limited in its capability to motivate the kinds of creative work that now differentiates organizations, their processes, and products.

Definition Intrinsic Motivation: Intrinsic motivation refers to behavior driven by internal rewards. In other words, the motivation to engage in a behavior arises from within the individual because it is naturally satisfying to you (Cherry, Kendra)

The power of exploration

The trust, care, and safety we receive from our parents as children empower us to explore the world. We dare to engage with the new because we know the caring arms of our parents are not too far away. This is how we learn during the first years of our life. No goal to reach, no KPI to meet – pure, curious, and intrinsically motivated learning.

Interestingly, this changes the moment we start school. From this moment we begin conditioning ourselves to believe that our learning and work are motivated by an extrinsic reward, ie a grade. This idea continues to manifest throughout our educational lives and into our careers, reaffirming value to be more about quality than individuality and creativity. However; while one may objectively judge the quality of a motor, it is much harder to judge the quality of creative knowledge work. We make the mistake of borrowing concepts of leadership that were developed for a resource-focused production economy, and fail to acknowledge that their effectiveness may have been washed away with the tidal wave of digitalization. We also make the mistake of implementing New Work practices without understanding the ways in which these practices have the potential to impact their people and businesses.

What environments are we offering as organizations?

The truth is, we are all learning what New Work is, how it is to be experienced and how it will motivate people differently from industrial systems. Our work environments keep structures in place that are made to guarantee quality standards in manufacturing processes, not to facilitate creative work, like software engineering, data science, and people-centric roles. We set highly defined goals and have traditionally rewarded their achievement with additional money. Our organizations measure working time and punish, explicitly but also implicitly, when those norms are ignored. We implement hierarchies to move decision power and speeding up. All this because it makes us feel we can control productivity.

While it feels so undeniably good to be in control of something, we can no longer ignore that it kills collective productivity step by step. When we assume control we take away from our organizations and people the autonomy to be creative, the time to experiment, and the trust to truly fail and innovate. To spark creativity at work we need to go back and trigger intrinsic motivation as we did it with our children. We need to re-think our leadership, our organizational structures, and our reward and recognition processes.

What does money have to do with it?

This doesn’t mean that fair payment is not important. The way we compensate talents within an organization is a key component. In fact, if we feel unfairly compensated, we experience a drop in motivation and productivity. We also know that a pay raise affects motivation only for the short term. We have created a cultural taboo on the topic of money and not talking about it is not helping either. Opening up the conversation triggers an important reflection: what is my relationship with money? Where does it stand in my life and how much do I need to be happy? And what else do I need to be happy? All of these questions help us to find the sweet spot where money does motivate, as well as to learn what other needs and desires exist – financial, physical, or emotional. Talking about money helps us to realize its limits and that there is so much more to think of than extrinsic rewards.

Definition Extrinsic Motivation: Extrinsic motivation refers to behavior that is driven by external rewards. These rewards can be tangible, such as money or grades, or intangible, such as praise or fame. (Cherry, Kendra)


While external rewards can be effective for short-term motivation, it’s worth further exploring means for intrinsic motivation. This exploration has become greater in its importance since the work we are engaged in shifts from manufacturing work to work centering knowledge and creativity by nature. Dynamic capabilities like innovation and creativity unleash when people experience autonomy and impact (intrinsic motivation). We know this kind of motivation or inner spark from our childhood. However, the way we run our organizations is often killing it. To tap into the full potential of our talents and organizational strengths we need to balance the two kinds of motivations and recognize where pure external reward and compensation have their limitations. We need to question if the way we currently motivate our talents really adds value to the overall performance of an organization. Having conversations about money, including its important yet limited role in life, opens up conversations about how organizations can care for and motivate talents towards New Work more effectively.

Want more?

Listen to the leadership.sprouts podcast episode ‘Intrinsic motivation – the power of passion & how money can destroy it’


Cherry, Kendra. “Extrinsic vs. Intrinsic Motivation: What’s the Difference?” Verywell Mind, Verywell Mind, 15 Jan. 2020, https://www.verywellmind.com/differences-between-extrinsic-and-intrinsic-motivation-2795384.

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