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CHAPTER 8: MOTIVATION AND EMPOWERMENT 239
that some new hires were earning thousands more than their counterparts (including
Allen) with more experience, and that “a noted screw-up” was making more than
some highly competent people, Allen began questioning why she was working on
weekends for less pay than many others were receiving. She became so
demoralized by the perceived state of inequity that she quit her job
As a leader, you can clarify the rewards
three months later. 31 Action Memo
This discussion provides only a brief overview of equity theory. a follower desires and ensure that he or
The theory’s practical use has been criticized because a number of she has the knowledge, skills, resources,
key issues are unclear. However, the important point of equity the- and support to perform and obtain the
ory is that, for many people, motivation is infl uenced signifi cantly desired rewards. You can keep in mind that
by relative as well as absolute rewards. The concept reminds leaders perceived equity or inequity in rewards also
that they should be cognizant of the possible effects of perceived
inequity on follower motivation and performance. infl uences motivation.

The Carrot-and-Stick Controversy

Reward and punishment motivational practices dominate organizations. Accord-
ing to the Society for Human Resource Management, 84 percent of all companies
in the United States offer some type of monetary or non-monetary reward system,
and 69 percent offer incentive pay, such as bonuses, based on an employee’s perfor-
32
mance. However, in other studies, more than 80 percent of employers with incen-
tive programs have reported that their programs are only somewhat successful or
not working at all. 33

When used appropriately, financial incentives can be quite effective. For one
thing, giving employees pay raises or bonuses can signal that leaders value their
contributions to the organization. Some researchers argue that using money as
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a motivator almost always leads to higher performance. However, despite the
testimonies of numerous organizations that enjoy successful incentive programs,
the arguments against the efficacy of carrot-and-stick methods are growing. Critics

argue that extrinsic rewards are neither adequate nor productive motivators and
may even work against the best interests of organizations. Reasons for this criti-
cism include the following:
1. Extrinsic rewards diminish intrinsic rewards. The motivation to seek an
extrinsic reward, whether a bonus or professional approval, leads people
to focus on the reward rather than on the work they do to achieve it. 35
Reward-seeking of this type necessarily diminishes the intrinsic satisfaction
people receive from the process of working. Numerous studies have found
that giving people extrinsic rewards undermines their interest in the work
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itself. When people lack intrinsic rewards in their work, their performance
levels out; it stays just adequate to reach the reward. In the worst case,
people perform hazardously, such as covering up an on-the-job accident to
get a bonus based on a safety target. In addition, with extrinsic rewards,
individuals tend to attribute their behavior to extrinsic rather than intrinsic
factors, diminishing their own contributions. 37
2. Extrinsic rewards are temporary. Bestowing outside incentives on people
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might ensure short-term success, but not long-term quality. The success of
reaching immediate goals is quickly followed by the development of unintended
consequences. Because people are focusing on the reward, the work they do
holds no interest for them, and without interest in their work, the potential
for exploration, innovation, and creativity disappears. The current deadline
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may be met, but better ways of working will not be discovered.