CASE 5: Dan Pink: The puzzle of motivation

In the 21st century tasks (more complicated and require higher cognitive skills), make employees focus on intrinsic motivation rather than extrinsic motivation

The intrinsic motivation include autonomy, mastery and purpose

Extrinsic motivation include money and other kind of rewards.

A few experiments show that extrinsic motivation lures people from their intrinsic motivation, which make them good at creativity and other tasks require cognitive abilities. For the easy-20-century tasks, the productivity goes up, but for the 21-century task that even make the productivity goes down, totally contrast with the “free market theory” and the way business doing at this time.

The speaker consult that, business can move from extrinsic value to giving employees more sense of autonomy, … For example: Google allows employees to have 20% of their time doing any projects , later lots of products from Google were created through that time.

Applying intrinsic motivation also reduce the turnover rate

Theory part

Chapter 10: Managing Compensation

Total Conpensation (rewards employee receive for his/her labour)  = Base Compensation (fixed pay: salary based on a regular basis) + Pay Incentives (rewards for good performance) + Indirect Compensation/Benefits

Design a compensation system

  • 1.Internal vs External Equity

fairness of pay within the firm (internal) and pay relative to other employees same type of labour (external)

Pay equal when

The ratio of employee input and output is equavilent to that of the other employees

/or/ base on the equilibrium of labour market


  • 2 Elitism vs Egalitarianism

Egalitarian pay system: almost employees under the same compensation plan

Elitist pay system: compensation plans are different for different groups


+3 Below Market vs Above Market compensation

Pay some groups higher than market and cover these cost by some not important group with below market compensation

+4. Monetary vs Nonmonetary Rewards

Monetary: tangible, easy to see (salary, money, stocks etc)

Nonmonetary: interesting work, challenging assignments, public recognition

Survey: Money is not so important (but not sure about that)

Monetary rewards: for volatile market with low job security, high competitiveness.

Nonmonetary rewards: For stable workforce, for company focus on cooperative within the firm.



+5. Open vs Secret Pay

Open pay allows more fairness towards employees, also rise the truth from the employees

Secret pay reduce the need of employers to explain the salaries

Compensation Tools 

  • Job based compensation plans


  • Skill Based compensation plans’



Chapter 11: Rewarding Performance

Challenges of pay for performance

“Do only what you get paid for” syndrome: The pay based on some particular performance, lead to the employees only focus on that and neglect other important components. Ex: teacher focus on students’ standardized test rather than real understanding

Unethical behaviors lead to employees engage in undesirable behavior.

Increase competition and reduce cooperation

Difficulties in measuring performance: Chapter 7

Reduce intrinsic motivation: Like in the case, extrinsic motivation can lure people from intrinsic motivation, which can really help the business

How to deal with challenges

Hybrid intrinsic-extrinsic rewards system: both compliment each other so it lead to the most benefit

Pay and performance should be linked correctly

Use motivation and non financial incentive





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