The impact of financial and non-financial incentives on intrinsic motivation

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Amsterdam Business School

The impact of financial and non-financial incentives on intrinsic

motivation

Name: Gabriëlle Slijngard Student number: 10882057 Thesis supervisor: Qi Yang Date: June 20, 2016

Word count: 13.766

MSc Accountancy & Control, specialization Accountancy and specialization Control Faculty of Economics and Business, University of Amsterdam

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Statement of Originality

This document is written by student Gabriëlle Slijngard who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Financial incentive plans are common methods to motivate employees and to align their interest with the interest of the organization that they work for. Recently, economists have admitted that there might be a possibility that the motivation of an employee could be affected in a negative way when a previous non-financial relationship is transformed into a financial relationship (Frey & Jegen, 2001). Furthermore, a number of studies have concluded based on the motivation crowding theory that financial incentive plans are not as effective as was initially. For that reason this thesis looks into the impact of financial and non-financial incentives on the intrinsic motivation of an employee.

Intrinsic motivation is an important part of motivation since this means that a person will engage in a certain activity based on the inherent satisfaction that engaging in that activity or completing that activity brings (Rode, Gómez-Baggethun, & Krause, 2015). Intrinsic motivation is also important, because intrinsic motivation is a moderate to strong predictor of performance, since people that find a task intrinsically motivating will put in more effort or intensity in executing that activity (Cerasoli, Nicklin, & Ford, 2014).

The motivation crowding theory states that external interventions, such as financial incentives, can decrease the intrinsic motivation of an employee in some conditions and in other conditions increase the intrinsic motivation of an employee (Frey, 1997). This theory states that when external interventions are seen as controlling, the intrinsic motivation will decrease because the self-determination, the self-esteem and the expression possibility of the employee is undermined. When external interventions are however seen as supportive, the intrinsic motivation will increase because the self-esteem and the self-determination are stimulated.

In order to draw conclusions on the impact that incentives have on intrinsic motivation, they are categorized as controlling incentives and as supportive incentives. Controlling and supportive incentives can be financial as well as non-financial. A controlling financial incentive is for example a salary increase, while a controlling non-financial incentive is controlling feedback. Supportive financial incentives can for example be financial rewards that are not closely contingent to the performance, while supportive feedback is an example of a supportive non-financial incentive.

Besides the motivation crowding theory, there is another theory that explains the

conditions for non-financial incentives to be effective, namely the perceptions of fairness theory. The perceptions of fairness theory explains that employees will determine whether the financial

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rewards which they receive are fair in comparison to the financial rewards that employees with similar functions receive (Morrel, 2011). This is called distributional justice. Employees will also look at the fairness of the incentive other the fairness of the evaluation system (Morrel, 2011). This is called procedural justice. If at least one of these conditions is met, non-financial incentives can be effective.

The findings of this thesis are in contrast to the motivation crowding theory since the results show that the controlling (financial) incentives that were defined in the survey have a positive and significant impact on the intrinsic motivation of an employee. Furthermore, the supportive incentives with regard to self-determination did not have a significant impact on the intrinsic motivation when incentive fairness was taken into account as well when incentive fairness was not taken into account. The supportive incentives with regard to appreciation however did have a positive and significant effect on the intrinsic motivation when incentive fairness was taken into account as well when incentive fairness was not taken into account. The nationality and the educational level of the employees did not seem to have an impact on the intrinsic motivation of the employees and they don’t affect the relationship between controlling incentives and supportive incentives on intrinsic motivation.

This research contributes to prior literature since not much is known about the impact of non-financial incentives on employees’ intrinsic motivation. This thesis also contributes to prior literature since the conclusions with regard to the impact of incentives on intrinsic motivation are inconsistent. Finally, this research also contributes to practice since it is well known that it can be difficult to motivate employees. This study gives insight in the conditions for non-financial incentives to be effective and also explains what non-non-financial incentives are positively associated with intrinsic motivation.

Despite these contributions, there are also some limitations associated with this thesis. The first limitation is that the sample is small. Another limitation is that the variable incentive fairness does not specifically measure financial incentive fairness. The final limitation regards the controlling incentives and the supportive incentives. The survey did not specifically mention controlling non-financial incentives and supportive financial incentives.

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Contents

1 Introduction ...6

2 Literature review and hypotheses development ... 11

2.1 Motivation ... 11

2.2 Financial and non-financial incentives ... 12

2.3 Motivation crowding theory ... 13

2.4 Perceptions of fairness ... 15

2.5 Sorting hypothesis/ job matching... 17

3 Empirical basis ... 19

3.1 Data collection ... 19

3.2 Data analysis ... 20

4 Results... 29

4.1 Impact controlling incentives on intrinsic motivation ... 29

4.2 Impact supportive incentives on intrinsic motivation ... 30

4.3 Control variable; educational level ... 34

4.4 Control variable; nationality ... 39

5 Conclusion ... 41

References ... 44

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1 Introduction

Financial incentives are often used in organizations to align the interests of an employee with the interests of the organization that he works for and the shareholders of that organization (Miller & Whitford, 2006). Besides this, financial incentives are used to motivate employees and to enhance their performance (Miller & Whitford, 2006). This is substantiated by the agency theory, which states that principals (shareholders) need to design appropriate incentive contracts to make sure that the agents (management) act in the best interest of the principals and to increase shareholder value (Widener, Shackell, & Demers, 2008). In other words, the agency theory suggests that if the compensation system provides employees with higher rewards when their behavior leads to the achievement of organizational goals, they will be more motivated to maintain that behavior in order to retain that reward. The popularity of financial incentives can also be explained by the relative price effect, which states that people will work harder or increase their effort for a certain activity that has a higher reward in comparison to other activities (Frey, 1997).

Despite this, studies such as Deci, Koestner and Ryan (1999) have shown that financial incentives do not always have a positive impact on motivation. They state that financial incentives can increase motivation when the incentive is unexpected or not closely contingent on the performance, but they can also decrease motivation when the incentive is offered for engaging in a certain activity, completing that activity or performing well on that activity (closely contingent on the performance). The cause for the different findings can be found in the different types of employee motivation that can be distinguished, namely intrinsic motivation and extrinsic motivation. The cause can also be found in the fact that economic theories almost solely focus on the impact that (financial) incentives have on extrinsic motivation and moreover disregard the impact that (financial) incentives can have on intrinsic motivation.

Intrinsic motivation means that a person will engage in a certain activity based on the inherent satisfaction that engaging in that activity or completing that activity brings, while extrinsic motivation means that a person will engage in a certain activity to attain a separable outcome (Rode, Gómez-Baggethun, & Krause, 2015). This distinction could indicate why certain incentives that might have a positive influence on extrinsic motivation, can have an adverse impact on intrinsic motivation.

In addition to the previous paragraphs, Frey (1997) states that there is a negative effect on intrinsic motivation if employees perceive external interventions as controlling and that there is a positive effect on intrinsic motivation if employees perceive external interventions as supportive.

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External interventions are seen as controlling when the activities are formally regulated and these formal regulations includes convincing threats of punishment for non-compliance, when the firm relies on hierarchical commands and when a reward is closely contingent on the performance that is desired by the principal. In short, incentives are seen as controlling when they are based on directives, monitoring and (threats of) punishment. This could for example be the case with certain financial rewards, such as a bonus, but also with certain non-financial incentives such as controlling feedback. External interventions are seen as supportive when employees are allowed to participate in decision making, when the external intervention is based on the person his intrinsic motivation instead of a uniform intervention regardless of the degree of the employee’s intrinsic motivation, when there is soft regulation that includes non-enforceable directives that don’t include threats of punishment and when an external intervention implies acknowledgement of the employee’s intrinsic motivation. In short, incentives are seen as supportive when they are based on dialogue and suggestions. This is for example the case for certain non-financial rewards, such as supportive verbal rewards, but also for certain financial incentives, such as a financial compensation that is not closely contingent with the performance or a financial compensation that is unexpected.

The distinction between controlling and supportive incentives makes it easier to understand why certain incentives might undermine intrinsic motivation, while other incentives increase intrinsic motivation. If an incentive is seen as controlling, an employee’s determination, self-esteem and expression possibility suffer, because that employee feels that his freedom to act is undermined (Frey, 1997). The reason is that the actions and/or outcomes are already (fully) defined by for example the supervisor in the case of controlling incentives. An employee will for example need to a produce or sell certain amount of products, which is determined by management in advance, in order to obtain the (controlling) incentive. If this predetermined goal is not reached, the employee might not receive a bonus and will receive negative and controlling feedback. This can undermined the intrinsic motivation. If an incentive is seen as supportive, the self-determination and self-esteem are positively affected, because the employee feels like his freedom to act is supported (Frey, 1997). In this case, the actions and/or outcomes are also (fully) defined, but the outcomes are used in a supportive way. One could think about training if the goals are not reached or positive feedback if the goals are reached.

Deci, Koestner and Ryan (1999) also looked into the effects of extrinsic rewards on intrinsic motivation. They used the Cognitive Evaluation Theory (CET) to explain that in order to understand the effects of a certain reward, a consideration of the interpretation that the recipient is likely to give to that reward is required. Deci, Koestner and Ryan (1999) also make a

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distinction between controlling and supportive incentives to analyze the impact of incentives on intrinsic motivation. They state that controlling positive feedback leads to lower intrinsic motivation, while supportive positive feedback leads to higher intrinsic motivation. An example of controlling positive feedback is ‘excellent, you should keep up the good work’. In this example the word ‘should’ could be seen as pressure to continue performing well. An example of supportive positive feedback is ‘excellent, you are doing very well’. This finding can be explained since positive feedback affirms competence. If the feedback however is seen as controlling, the impact on intrinsic motivation is negative because it could be experienced as pressure to do something.

Besides this, Crifo and Diaye (2004) analyzed whether non-financial incentives can do what financial incentives can do in a setting that assumes that agents are purely self-interested (Principal-Agent model). They have shown that non-financial incentives dominate financial incentives within a Principal-Agent model. They also state that non-financial incentives can do all the things that financial incentives can do and show the possibility for non-financial incentives to increase intrinsic motivation, while financial incentives reduce the motivation to provide effort.

In addition the argument in the paragraph before, respondents of a survey from McKinsey & Company ranked various incentives by their effectiveness in increasing the motivation of employees (Morrel, 2011). The result of this survey was that praise, commendations, attention from supervisors and the opportunity to lead projects are ranked as more important than the three common monetary incentives, namely performance based cash bonuses, increase in base pay and company stock or stock options.

In contrast to the argument in the previous paragraph, Shaw and Gupta (2015) conclude that financial incentives have a positive impact on intrinsic motivation. They specifically state that financial incentives are positively related to performance and that financial incentives do not reduce intrinsic motivation. The reason is that in workplace settings, people feel more autonomy when they are paid for performance. Furthermore, they state that the negative effects of financial incentives on intrinsic motivation that other researchers have found are not caused by the financial incentives themselves, but are caused by the withdrawal of that financial incentive.

This result is also found in the field experiment of Bareket-Bojmel, Hockman and Ariely (2014). This experiment reported an increase in productivity of an employee when a verbal reward or short term incentives such as a cash payment or vouchers were given. When these incentives were dropped without explanation, the productivity declined as a result of the damaged intrinsic motivation of that employee.

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This study focusses on intrinsic motivation, because intrinsic motivation is a moderate to strong predictor of performance, since people that find a task intrinsically motivating will put in more effort or intensity in executing that activity (Cerasoli, Nicklin, & Ford, 2014). Besley and Ghatak (2005) state that employees usually are motivated workers who pursue goals because they perceive intrinsic rewards from doing so. This might indicate that an employee who is intrinsically motivated might put in more effort than someone that is only extrinsically motivated. Deci (1972) stated that when individuals find an activity enjoyable or interesting, they will engage in the task for longer periods of time, thus beyond the point at which they are rewarded. Extrinsically motivated employees, in contrast will reduce their effort when the point at which they are rewarded has passed. For that reason, it might be important for employers to attract intrinsically motivated employees. This study also focusses on intrinsic motivation, since not much is known about the effects on intrinsic motivation.

The aim of this thesis is to advance our understanding with regard to the impact that financial and non-financial incentives have on intrinsic motivation and gain insight in the methods to effectively motivate employees. Based on prior literature and the fact that the conclusions with regard to the impact of financial incentives on intrinsic motivation are inconsistent, the first research question can be developed: ‘To what extent do financial incentives influence the intrinsic motivation of employees?’. The second research question is: ‘To what extent do non-financial incentives influence the intrinsic motivation of employees?’. The final research question is: ‘How does the educational level of an employee affect the relationship between controlling incentives on intrinsic motivation and the relationship between supportive incentives on intrinsic motivation?’.

This research will contribute to prior literature since not much is known about the impact of non-financial incentives on employees’ intrinsic motivation. The reason is that there is not much research available about this subject. In order to fill this gap in the literature, this research aims to use the motivation crowding theory to explain the impact of financial and non-financial incentives on the intrinsic motivation of employees. Besides this, this study will contribute to the literature since it is one of a few studies that incorporates financial as well as non-financial incentives in one study. This makes it easier to compare the impact of financial incentives and non-financial incentives on intrinsic motivation and conclude whether intrinsic motivation is higher if financial incentives are provided or whether intrinsic motivation is higher if financial incentives are provided. The ability to compare the impact of financial and non-financial incentives will increase, since the same scales in the survey are used to measure the impact of these incentives. Furthermore, this research will also contribute since the conclusions

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with regard to the impact of (financial) incentives on intrinsic motivation are inconsistent. Finally, this thesis will contribute to knowledge since the focus lies on operational employees instead of the frequently studied higher level employees or managers.

This research will also have contributions to practice since it is well known that it can be difficult to motivate employees. This study might give insight in the conditions for non-financial incentives to be effective by explaining the internal and external pay equity perceptions, or in other words distributive justice. Furthermore, this study will also look into the procedural justice to explain when non-financial incentives can be successful. Dependent on the outcomes of the study, an organization could save financial resources if the performance of intrinsically motivated employees is at least as high as the performance of employees that need financial incentives. This thesis will also look into the impact that the educational level of an employee might have on his intrinsic motivation, since few research analyzed the potential impact of the educational level on intrinsic motivation.

The remainder of this thesis is structured as follows. The following chapter will describe the literature that is used to advance our understanding and will also explain the hypotheses. The third chapter gives insight in the data collection and data analysis. Chapter 4 presents the results that are found and chapter 5 draws conclusions.

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2 Literature review and hypotheses development

2.1 Motivation

Motivation is a theoretical concept which explains why people behave in a certain way. Motivation can be divided in two categories, namely intrinsic motivation and extrinsic motivation. According to (Gagné & Deci, 2005), an employee is intrinsically motivated if he carries out an activity because he finds that activity interesting and gains some kind of satisfaction from carrying out that activity. The results of this motivation will persist in the absence of supervision or financial incentives (Morrel, 2011). Furthermore, studies have showed that activities that are challenging are also highly intrinsically motivating (Danner & Lonky, 1981). Tasks are considered to be challenging when they are reachable for a person, but developmentally just beyond their current knowledge and/or capacity level (Danner & Lonky, 1981).

An employee is extrinsically motivated of he carries out an activity because he is interested in the external outcomes that are associated with carrying out that activity, such as a tangible or verbal reward (Gagné & Deci, 2005). This means that in the case of extrinsic motivation, satisfaction does not come from the activity itself, but from the extrinsic consequences that are associated with (engaging in or the completion of) a certain activity. With regard to intrinsic motivation, one could think of a person that engages in a certain sport because he or she enjoys playing that sport. With regard to extrinsic motivation, one could think of that same person that only plays a certain sport to receive a scholarship.

One might argue that in work situations it is irrelevant to make a distinction between the type of motivation that attributes to (good) performance or the completion of a job, since it is only relevant that the job is done. Even though this argument might seem valid based on economic theories, there are some advantages of having work done by intrinsically motivated employees (Frey, 1997):

- Employees that are intrinsically motivated have a better mental and physical health, since their work and life satisfaction is higher. This might also lead to lower absenteeism, which in turn is financially beneficial for the organization.

- The learning capacity and creativity is higher for intrinsically motivated employees, while the learning capacity of extrinsically motivated employees is specific to the situation to which the reward or punishment refers.

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- Employees that are intrinsically motivated are better in solving cognitively difficult tasks, since setbacks are better overcome by employees that find the task exciting and by employees that are less focused on the rewards that are associated with the unknown probability of successfully completing the task.

- Employers save costs for monitoring employees that have a high work morale, since the employers do not have to discipline them. Monitoring cost are also lower for intrinsically motivated employees, since their work ethic is not dependent on a (financial) reward. Despite these advantages, there is also one important disadvantage of having work done by intrinsically motivated employees, namely that they are difficult to guide (Frey, 1997). A wrong word might completely destroy the intrinsic motivation of an employee, which leaves that employee disgruntled and could possibly lead to attempts from that employee to sabotage the production. In contract, an employer might specify precisely what he expects from extrinsically motivated employees, without caring of worrying about how that employee feels (Frey, 1997).

2.2 Financial and non-financial incentives

A various number of methods can be used to incentivize employees. Incentives are outcomes that are based on predetermined criteria and standards to determine and allocate rewards and are provided to employees to make sure that they will put in more effort to behave or act in a certain way (Cerasoli, Nicklin, & Ford, 2014). In this thesis, a distinction is made between financial incentives and non-financial incentives. Financial incentives consists for example of salaries/financial compensation, bonus plans, profit sharing programs (Govindarajulu & Daily, 2004) and increase in base pay (Morrel, 2011) for example due to a promotion. Non-financial incentives consist for example of time off from work, paid vacations, favored parking space, gift certificates, praise and appreciation from the supervisor (Govindarajulu & Daily, 2004), job security, learning opportunities, status or other recognition programs such as employee of the month (Morrel, 2011). Furthermore, autonomy from an employee to determine himself how he will execute a task is also an important non-financial incentive (Gagné & Deci, 2005).

Within financial and non-financial incentives, one could also make a distinction between controlling incentives and supportive incentives. Incentives are seen as controlling when the activities are formally regulated and these formal regulations include convincing threats of punishment for non-compliance, when the firm relies on hierarchical commands and when a reward is closely contingent on the performance that is desired by the principal (Deci, Koestner, & Ryan, 1999). This could for example be the case with certain financial rewards, such as a

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performance. Certain non-financial incentives can also be seen as controlling, such as controlling feedback i.e. feedback that is aimed at letting or almost forcing an employee act in a certain way. External interventions are seen as supportive when employees are allowed to participate in decision making, when the external intervention is based on the person his intrinsic motivation (instead of a uniform intervention regardless of the degree of the employee’s intrinsic motivation), when there is soft regulation that includes non-enforceable directives that does not include threats of punishment and when an external intervention implies acknowledgement of the employee’s intrinsic motivation (Deci, Koestner, & Ryan, 1999). This is for example the case for certain non-financial rewards, such as recognition programs since the employee’s motivation is seen and rewarded by the employer. Certain financial incentives can also be seen as a supportive incentive, such as a financial reward that is not closely contingent to the performance or financial rewards that are unexpected. The distinction between controlling and supportive incentives will contribute to the understanding of why a certain incentive might undermine or increase the intrinsic motivation of an employee.

2.3 Motivation crowding theory

Based on the relative price effect, economists state that people will increase their performance on an activity with the highest reward or when there is a higher marginal costs on shirking due to the disciplining effect (Frey, 1997). In other words they will work more and also work harder on the activity that has the highest reward and on the activity that is associated with high cost when results or performance are not in accordance with the norm. The relative price effect assumes that intrinsic motivation is a constant factor or an absent factor, which explains why the theory states that external interventions (for example financial incentives) have a positive impact on motivation and performance (Frey & Jegen, 2001). In contrast to this, a number of economists have admitted the theoretical possibility that motivation might be affected in a negative way when a previous non-financial relationship is transformed into a financial relationship (Frey & Jegen, 2001).

The motivation crowding theory states that in certain circumstances intrinsic motivation will decrease/crowd out due to external interventions via financial incentives and in other circumstances intrinsic motivation can increase/crowd in due to external interventions via financial incentives (Frey & Jegen, 2001). The impact on the intrinsic motivation of an employee can be explained by the following arguments (Frey, 1997):

a) When external interventions are perceived to reduce the self-determination of a person, that person will partly or wholly give up his intrinsic motivation. This occurs because that

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person feels like his responsibility is undermined, since the responsibility for the task seems to be shifted from himself to the person or institution that provides the incentive. The first argument is called impaired self-determination.

b) When external interventions carry the notion that the intrinsic motivation of a person is not acknowledged, that person will partly or wholly give up his intrinsic motivation and will reduce his effort to execute an activity. This occurs because that person feels like his involvement or capacities are not appreciated. The second argument is called impaired self-esteem.

c) Finally, the intrinsic motivation of an employee will decrease when a person that acts based on his intrinsic motivation is deprived from the chance to express that intrinsic motivation to other people. This means that the intrinsic motivation of a person to do a certain activity is undermined when he is forced to engage in that activity. This argument is called the impaired expression possibility.

In order to fully understand these arguments, it is important to define what external interventions are. External interventions are interventions that do not come from within the employee but are imposed by an external party. Examples of external interventions are financial incentives, an order from the employer to engage in an activity, feedback from the employer or regulations.

Based on these arguments, we can identify two conditions under which the crowding effect occurs (Frey, 1997):

- External interventions crowd out intrinsic motivation if the intervention is seen as a controlling intervention. In that situation, the self-determination, the self-esteem and the expression possibility are negatively affected, which leads to a lower intrinsic motivation. - External interventions crowd in intrinsic motivation if the intervention is seen as a

supportive intervention. In that situation, the self-esteem and the self-determination are positively affected, since the employees feel that they are given more freedom to execute an activity in their own way.

This means that the intrinsic motivation of an employee is negatively affected when he is rewarded if his performance is (exactly) in accordance with the directions of his employer, because this is a controlling incentive. When a reward is part of the normal contractual relation, the intrinsic motivation is not negatively impacted (Frey, 1997). This means that the base salary of an employee, which is part if the normal contractual relationship, does not affect the intrinsic motivation of an employee. The motivation crowding theory leads to the first hypothesis:

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H1: Controlling incentives have a negative impact on the intrinsic motivation of an employee.

2.4 Perceptions of fairness

Organizational literature states that fair treatment of organizational participants with regard to the compensation that they receive for their organizational contribution is an important determinant for work-related outcomes, such as motivation (Hartman & Slapničar, 2012). Studies have showed that employees that are treated fairly by members of an organization, are more motivated and perform better than employees who perceive their working environment as unfair (Hartman & Slapničar, 2012). They also state that individuals that are treated fairly find their tasks more enjoyable and interesting. According to the fairness literature, employees evaluate the fairness of their financial reward in at least three different ways (Morrel, 2011). The first method is called distributional justice and states that employees compare their pay-to-effort ratio to the pay-to-effort ratio of comparable others. In this thesis, we will regard to this as pay transparency. The second method is called procedural justice and states that employees will assess whether the methods or evaluation systems that are used to determine the financial reward are fairly. We will regard to this as incentive system fairness. The third method is called interactional justice and regards the perceived fairness of interpersonal treatment when procedures are implemented. Of these three methods, the distributional justice method and the procedural justice method have the greatest effect in matters of compensation (Morrel, 2011).

Distributional justice explains the perceptions that an employee might have and states that individuals will compare their (financial) situation to the (financial) situation of others to evaluate their own condition (Festinger, 1954). If an employee feels that the financial reward that he receives is fair compared to the rewards of another employee with a similar function in the same organization (internal pay equity perceptions), non-financial incentives can be successful (Morrel, 2011). Non-financial incentives can also be successful if employees feel that the financial reward that they receive are fair compared to the rewards of employees with similar jobs in another organization (external pay equity perceptions). Hartman and Slapničar (2012) state that pay transparency (public availability of information) enables employees to find out what their relative position in the organization is and helps them to gain knowledge about how much their work is valued.

In addition to this, Morrel (2011) states that non-financial incentives will not be successful if employees feel that the financial rewards are not fair compared to the rewards that others receive. Financial incentives are seen as unfair if an employee with the same function or educational level receives a higher reward i.e. when the pay-to-effort ratio is unfavorably

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compared to others. The reason is that objects that are seen as more salient, will have a more profound effect on the general thoughts patterns of a person (Morrel, 2011). For example when a salient financial incentive is seen as unfair, the non-financial incentive will not increase intrinsic motivation but will instead reduce intrinsic motivation (Morrel, 2011). In other words, if employees perceive that they are not compensated fairly compared to other employees in the same company and compared to employees with a similar function in another company, this inequity might become more salient than the non-financial incentive, which will lead to a decreasing intrinsic motivation. Hartman and Slapničar (2012) state that employees will feel less motivated in such a situation and they will more likely adapt their efforts downwards to restore the pay-to-effort ratio.

Procedural justice explains that employees look at the fairness of the incentive or the fairness of the evaluation system. Based on this they will assess whether they feel that the financial reward that they receive arises from an incentive system which they perceive as fair, in line with social norms of accuracy and free from bias (Hartman & Slapničar, 2012). Morrel (2011) states that employees who receive rewards that in their opinion are not determined in a fair manner, thus not by a fair compensation system, might be so unsatisfied with the incentive outcome that their intrinsic motivation could decrease. This is not only the case when an employee feels like he is unfairly receiving a lower reward than comparable others, but also when an employee feels that he is unfairly receiving a higher reward than comparable others.

In this thesis, we will focus on the procedural justice (incentive system fairness) since it is claimed that employees that feel like the incentive and/or evaluation system is fair are more likely to also judge the resulting outcome, for example the financial reward in the form of a bonus, as fair (Hartman & Slapničar, 2012). Furthermore, the results of Hartman and Slapničar (2012) show that when employees only have information about their own financial rewards and do not have information about the financial rewards of others i.e. the pay transparency is low, they may use the perceptions of fairness as a substitute for pay transparency to assess the fairness of their financial reward. This means that the intrinsic motivation is explained by the perceptions of fairness if there is no transparency with regard to the financial rewards. Hartman and Slapničar (2012) argue that perceptions of fairness is positively associated with intrinsic motivation, since it causes employees to find their task more enjoyable and interesting through a clear communication of organizational goals which clarifies the role of the employee. For that reason, the second hypothesis is:

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H2: Supportive incentives have a positive impact on the intrinsic motivation of an employee if the financial incentives that are provided are seen as fairly determined.

2.5 Sorting hypothesis/ job matching

This thesis will also look at the impact that the educational level of an employee might have on his intrinsic motivation. This arises from Tiebouts sorting hypothesis, which states that in economic situations where it is optimal to have many jurisdictions offering competing packages of public goods, the movement of consumers to jurisdictions where their wants are best satisfied will lead to near optimal market like outcomes (Wooders, 1999). Wooders (1999) also states that the results of Tiebouts sorting hypothesis apply more broadly than was initially anticipated by Tiebout. In this thesis, we assume that this sorting hypothesis can also explain the job matching of employees. Job matching explains that employees will apply for jobs at organizations that have similar morals and values as they have, or in Tiebouts words ‘jurisdictions where their wants are best satisfied’. Besley and Ghatak (2005) state that the need for incentive pay will reduce if employees and the organization that they work for have similar dispositions. They also state that they use the role of matching of principals instead of incentivizing to overcome non-congruence between the interests of an employee and the interest of the organization.

Frey (1997) states that liberal and academic professions find their jobs intrinsically more interesting than lower educated employees. He also states that lower educated employees are essentially in an organization because they need the financial reward to survive, while higher educated employees that have an income that is higher than the subsistence level seek meaning in their work. This could indicate that higher educated employees look for a intrinsically interesting job that brings them satisfaction, while lower educated employees look for a job with the highest financial reward. According to Morrel (2011) intrinsic motivation is an important factor in the reason why employees favor one organization over another organization.

The expectation with regard to the educational level is that the intrinsic motivation of higher educated employees is higher than the intrinsic motivation of lower educated employees. The reason is that higher educated employees earn higher salaries than lower educated employees. This could indicate that higher educated employees are less dependent on a bonus to complement/increase their income than lower educated employees. This can be explained by the fact that higher educated employees already have a good base salary and a bonus will relatively not add as much as when you have a lower base salary. For that reason higher educated employees might be inclined to find an employer with similar morals and values, instead of finding an employer that pays higher salaries and/or a higher bonus. Furthermore, higher

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educated employees will apply for jobs at organizations with similar values, while lower educated employees might apply at organization where the base salary is highest even though their morals and values are not similar. This might lead to a higher intrinsic motivation for higher educated employees, since their morals and values are aligned with the morals and values of the organization that they work for.

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3 Empirical basis

3.1 Data collection

In order to obtain data for this thesis, I joined a survey project from the University of Amsterdam. This survey project focuses on performance measurement, incentives, motivation, leadership and performance. All participants of this survey project were required to collect at least six pairs of respondents, consisting of an operational employee and his direct supervisor. The respondents of the survey are located in the Netherlands, China and other European countries such as the United Kingdom and Belgium. The participants are working for profit and non-profit organizations.

The fact that few organizations have implemented performance measurement within the lower levels of their organization, made it difficult to find sufficient respondents for this project. The starting point for obtaining respondents for this project was within our own network. Some of the respondents helped us obtain more respondents by asking other colleagues or acquaintances if they were willing to participate in this project as well.

The survey instrument was web-based. The coordinator of the survey project sent e-mails to the potential respondents with the request to participate in the survey. The results were treated strictly confidential and were anonymized. After sending the initial emails, a follow-up procedure included sending reminders based on a list of missing respondents. The final data set consists of 106 pairs of operational employees and their direct supervisors, thus in total 212 respondents. Respondents were able to fill in the survey in the period December 2015 up and until February 2016. The size of the firms range from small sized firms with 3 employees to larger sized firms with approximately 70,000 employees, and cover a wide variety of industries, such as financial services, government, logistics, IT and healthcare. The age of the respondents range from 18 to 62 and 49% of the respondents are female while 51% of the respondents are male.

In order to participate in the survey, the operational employee and their direct supervisor were required to meet certain conditions. In this thesis, a work floor employee is defined as an employee that is directly involved in creating the actual products and/or services of the organization.

The operational employees were required to meet the following conditions: - They are work floor employees/professionals

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- Their direct supervisor uses individual and/or group performance indicators to measure their performance.

The direct supervisors were required to meet the following conditions: - They are directly in charge of the work floor employees/professionals - They have been working in this position for at least one year

- They are in an operational department (the core business of an organization)

- They use individual and/or group performance indicators to measure the performance of their employees.

The final survey items measure the constructs that are shown in the appendix. The items in the survey were measured on a 7-point Likert scale: (1) totally disagree, (2) disagree, (3) moderately disagree, (4) neutral, (5) moderately agree, (6) agree and (7) totally agree.

3.2 Data analysis

In order to prepare the data for analysis, a test of normality was executed. As expected, the data was not normally distributed and almost all of the items were negatively skewed. This is caused by the small data sample, namely 106 pairs of respondents which leads to a total of 212 respondents (employees and their direct supervisors). Since this thesis focuses on the intrinsic motivation of the employees and since the direct supervisors did not fill in questions with regard to their intrinsic motivation, the usable dataset consist only of the 106 employees. The survey data was not transformed in order to increase the normality of the data, because the questionnaire is measured on a 7-point Likert scale.

After the test of normality was executed, the items in the survey were grouped into the different variables, namely financial incentive fairness, intrinsic motivation, controlling incentives, supportive incentives with regard to the self-determination and supportive incentives with regard to appreciation. To make sure that the items measure one and the same thing, the reliability and validity were analyzed through the Cronbach alpha and the factor analysis. All of the variables have a Cronbach alpha of at least 0.8. Items of the survey that did not fit properly in the variable were excluded. This exclusion of items of the survey was only the case for the variable incentive fairness. Three out of the originally chosen items did not ‘load’ to the variable incentive fairness and were thus excluded.

To measure controlling incentives, a part of the proxy ‘use of performance indicators for incentive purposes’ that mentions financial consequences is included. The part of the proxy ‘use of performance indicators for incentive purposes’ that is included measures whether the

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outcomes of the evaluation on the performance indicators are used to determine the financial rewards that an employee receives. The financial rewards that are stated in the survey are salary increase, a bonus and promotion. A promotion is also seen as a financial incentive due to the increase in salary that is associated with the promotion. The questions that were not related to financial rewards, such as whether the authority within an organization is increased based on the scores on the performance indicators, were not included in this variable.

This thesis only takes into account the impact of controlling financial incentives, since controlling non-financial incentives are not clearly defined in the survey. There are questions in the survey about how the supervisor uses the outcomes from the performance indicators for periodic discussions with the employee. If the discussions lead to supportive feedback, it would have been a supportive non-financial incentive. But if the discussions lead to controlling feedback, it would have been a controlling non-financial incentive. Since the survey does not clearly indicate whether these discussions lead to supportive feedback or controlling feedback, this item was not included in the variable controlling incentives.

Table 1: Descriptive statistics; controlling incentives

Controlling incentives

N Minimum Maximum Mean deviationStandard loadingFactor Cronbachalpha

Item 1 106 1.00 7.00 4.540 1.790 0.908

Item 2 106 1.00 7.00 4.520 1.948 0.888

Item 3 106 1.00 7.00 4.570 1.927 0.915

Controlling incentives 106 1.00 7.00 4.541 1.706 0.887

To measure supportive incentives, the proxies ‘delegation of decision rights’ and ‘leader-member exchange’ are used. The proxy ‘delegation of decision rights’ measures whether an employee has autonomy in deciding how he executes his job. This ranges from the employee selecting different ways to execute his job to the employee making his own choices without being told by management what to do. This supportive incentive is called self-determination.

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Table 2: Descriptive statistics; Supportive incentives with regard to self-determination

Supportive incentives; Self-determination

N Minimum Maximum Mean deviationStandard loadingFactor Cronbachalpha

Item 4 106 1.00 7.00 5.060 1.426 0.730 Item 5 106 1.00 7.00 4.970 1.383 0.852 Item 6 106 1.00 7.00 4.880 1.510 0.780 Item 7 106 1.00 7.00 4.450 1.574 0.824 Item 8 106 1.00 7.00 3.750 1.761 0.692 Item 9 106 1.00 7.00 4.660 1.536 0.816

Supportive incentives; Self-determination 106 1.00 6.83 4.629 1.196 0.870 The proxy ‘leader-member exchange’ measures to what extent an employee receives praise,

appreciation and recognition from his supervisor and whether the manager would bail the employee out at his own expense. This supportive incentive is called appreciation. To look into the impact that the supportive incentives have on the intrinsic motivation, it is analyzed whether both of these supportive incentives have a positive impact on the intrinsic motivation or whether one of the two has a stronger or even a negative impact on the intrinsic motivation.

This thesis only takes into account the impact of supportive non-financial incentives, since supportive financial incentives are not defined in the survey. This survey for example does not define financial incentives that are not closely contingent to the performance or financial incentives that are unexpected. For that reason only supportive non-financial incentives are included.

Table 3: Descriptive statistics; Supportive incentives with regard to appreciation

Supportive incentives; Appreciation

N Minimum Maximum Mean deviationStandard loadingFactor Cronbachalpha

Item 10 106 2.00 7.00 5.700 1.172 0.749 Item 11 106 2.00 7.00 5.590 1.201 0.807 Item 12 106 2.00 7.00 5.600 1.110 0.776 Item 13 106 1.00 7.00 5.700 1.106 0.891 Item 14 106 1.00 7.00 4.960 1.373 0.803 Item 15 106 1.00 7.00 5.450 1.243 0.809 Item 16 106 1.00 7.00 6.010 1.000 0.810

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To measure the intrinsic motivation, the proxy ‘intention to perform well’ is used. This proxy measures the intrinsic motivation of an employee and explains to what extent an employee feels that he is willing to meet what is expected from him in his work. This ranges from being ready to always meet the expectations, trying to always meet every expectation, doing everything to always meet the expectations and always meeting the expectations.

Besides ‘intention to perform well’, the survey provides another proxy that measures intrinsic motivation, namely ‘attitude to perform well’. The difference between these proxies is that ‘attitude to perform well’ only measures whether an employee finds it positive or satisfying to meet everything that is expected from them in their work, while ‘intention to perform well’ also measures how employees translate the fact that they find it satisfying to meet the expectations into their performance. Since it is important for an organization that an employee converts/translates his intrinsic motivation into performance, this thesis will look at the intention of an employee to perform well. Furthermore, it is also interesting to determine whether an employee will set aside his (lack of) intrinsic motivation and still perform well or that the performance of an employee will suffer if he is not intrinsically motivated. The reason is that previous studies examined for example children that were paid to do household chores and the effects if this financial reward was not provided anymore. The result was that the intrinsic motivation decreased and performance decreased, i.e. the children were not willing to execute those chores or similar chores anymore. This study focusses on a different situation, because whether or not an employee is intrinsically motivated, the tasks still need to be done. This is another reason why this thesis looks at ‘intention to perform well’ rather than ‘attitude to perform well’.

Table 4: Descriptive statistics; Intrinsic motivation

Intrinsic motivation

Item 17 106 2.00 7.00 5.800 0.990 0.790

Item 18 106 2.00 7.00 5.930 0.865 0.815

Item 19 106 2.00 7.00 5.750 1.033 0.901

Item 20 106 2.00 7.00 5.490 1.132 0.883

Intrinsic motivation 106 3.00 7.00 5.743 0.855 0.868

To measure financial incentive fairness, the proxy ‘measurement properties of performance indicators’ is used. The part of the proxy ‘measurement properties of performance indicators’ that is included is based on the rotated component matrix and measures whether devotion and

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effort in the job leads to better performance on the performance indicators and whether the performance indicators are objective and verifiable. This proxy however, does not specifically measure the fairness of the procedure that leads to the provided financial incentives, but it measures the fairness of the procedures that lead to all the incentives that are provided.

Table 5: Descriptive statistics; incentive fairness

Incentive fairness

Item 21 106 1.00 7.00 4.480 1.686 0.843

Item 22 106 2.00 7.00 4.660 1.498 0.753

Item 23 106 2.00 7.00 5.070 1.326 0.716

Item 24 106 1.00 7.00 5.050 1.403 0.757

Incentive fairness 106 2.00 7.00 4.814 1.193 0.817

After the items of the survey that belong together were grouped into the different variables, the check for outliers was conducted. In order to do this, Z-scores were created for all of the used variables. All the items that have a Z-score that is greater than 3.29 and smaller than -3.29 are considered to be outliers (Field, 2009). There was one outlier for the variable supportive incentives with regard to appreciation. This outlier had a Z-score of 4.08 and the value of the variable itself is 1.71. The expectation with regard to the Z-scores is that 95% of the values are between -1.96 and 1.96, 5% of the values are between 1.96 and 2.58 and between -1.96 and -2.58 and 1% is above 2.58 and below -2.58 (Field, 2009). The Z-values of supportive incentives with regard to appreciation are as follows: 96.23% is between -1.96 and 1.96, 2.83% is between 1.96 and 2.58 and between -1.96 and -2.58 and 0.9% is above 2.58 and below -2.58. For that reason, this outlier is not removed from the variable.

Table 6: Z-scores supportive incentives with regard to appreciation

Frequency Percentage Cumulativepercentage

Absolute Z-score between -1.96 and 1.96 102 96.23% 96.23%

Absolute Z-score between -1.96 and -2.58 and

between 1.96 and 2.58 3 2.83% 99.06%

Absolute Z score smaller than -2.58 and greater

2.58 1 0.94% 100.00%

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With regard to the educational level of an employee, this thesis makes a distinction between lower educated employees, employees with intermediate level of education and higher educated employees. This distinction is based on the measurements that Nagelhout, Crone, van den Putte, Willemsen, Fong and de Vries (2013) used for their analysis in a Dutch setting. Lower educated employees are employees that have primary education and pre-vocational secondary education. Employees with intermediate level of education are employees that have middle pre-vocational secondary education and secondary vocational education. Higher educated employees are employees that have senior general secondary education, (pre-) university education and higher professional education. The dispersion of the educational level is as follows:

Table 7: Demographics; educational level of the respondents

Educational level

Frequency Percentage Lower educated

employees

Primary education 1 0.9%

Lower vocational education 2 1.9%

Intermediate general education 2 1.9%

Total lower educated employees 5 4.7%

Intermediate educated employees

Intermediate vocational education 12 11.3%

Higher general education 11 10.4%

Total intermediate educated employees 23 21.7%

Higher educated employees

Higher vocational education 28 26.4%

Scientific education 50 47.2%

Total higher educated employees 78 73.6%

Total 106 100%

Finally, this thesis will give insight in whether these effects are consistent for the different nationalities, thus the country of the respondents will be a control variable. A large amount (54%) of the respondents are from the Netherlands and 32% of the respondents are located in China. The other 14% of the respondents have their origin in a variety of different European countries, such as Belgium and the United Kingdom. This thesis will only look into the difference in findings for the Dutch and the Chinese respondents, since the category other consist of 9 different European countries. If the educational level and the respondent’s nationality are combined, it will result in the following table:

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Table 8: Demographics; educational level of the respondents when their nationality is taken into account

Educational level divided by nationality

Frequency Percentage Dutch 54% Lower educated employees Primary education 0 0.0%

Total 57 100% Chinese 32% Lower educated employees Primary education 0 0.0%

Total 34 100% Other 14% Lower educated employees Primary education 1 6.7%

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The following table shows the correlations between the variables that will be used in the analysis. The top half represents the Spearman correlations and the bottom half represent the Pearson correlations. The table shows that controlling incentives and supportive incentives with regard to appreciation are significantly correlated to the intrinsic motivation when we look at the Pearson correlations. If we however look at the Spearman correlations, the incentive fairness is also significantly correlated to intrinsic motivation besides controlling incentives and supportive incentives with regard to appreciation. The educational level and the nationality are not significantly correlated to intrinsic motivation for both of the correlation methods. This means that controlling incentives, supportive incentives with regard to appreciation and incentive fairness have a statistical relationship with the intrinsic motivation of an employee.

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Table 9: Bivariate correlations Spearman and Pearson

Intrinsic

motivation Controllingincentives

Supportive incentives; self-determination Supportive incentives;

appreciation Incentivefairness Educationallevel Nationality

Intrinsic motivation Pearson correlation 1 0.244* -0.020 0.394** 0.201* -0.007 0.000 Sig. (2-tailed) 0.012 0.839 0.000 0.039 0.947 0.997 N 106 106 106 106 106 106 106 Controlling incentives Pearson correlation 0.258** 1 0.166 0.263** 0.323** 0.200* 0.176 Sig. (2-tailed) 0.008 0.089 0.006 0.001 0.039 0.071 N 106 106 106 106 106 106 106 Supportive incentives; self determination Pearson correlation -0.055 0.159 1 0.206* 0.213* 0.221* 0.025 Sig. (2-tailed) 0.578 0.103 0.034 0.028 0.023 0.798 N 106 106 106 106 106 106 106 Supportive incentives; appreciation Pearson correlation 0.254** 0.274** 0.206* 1 0.366** -0.018 0.069 Sig. (2-tailed) 0.009 0.004 0.035 0.000 0.854 0.484 N 106 106 106 106 106 106 106 Incentive fairness Pearson correlation 0.136 0.374** 0.148 0.417** 1 0.174 0.328** Sig. (2-tailed) 0.165 0.000 0.131 0.000 0.074 0.001 N 106 106 106 106 106 106 106 Educational level Pearson correlation 0.050 0.325** 0.263** 0.035 0.219* 1 0.173 Sig. (2-tailed) 0.609 0.001 0.007 0.721 0.024 0.076 N 106 106 106 106 106 106 106

Nationality Pearsoncorrelation 0.007 0.144 0.041 0.109 0.271** 0.116 1

Sig. (2-tailed) 0.944 0.141 0.676 0.268 0.005 0.238

N 106 106 106 106 106 106 106

* = Correlation is significant at the 0.05 level (2-tailed) ** = Correlation is significant at the 0.01 level (2-tailed)

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4 Results

4.1 Impact controlling incentives on intrinsic motivation

The impact of controlling incentives on the intrinsic motivation of employees is examined with a linear regression. The regression equation is Y = α + β * Χ + ε.

Table 10: Model summary: impact of controlling incentives on intrinsic motivation

Model summary

Model R R square Adjusted R square Standard error of theestimate

1 0.258 0.067 0.058 0.830

This model summary describes how much of the variation of the intrinsic motivation can be explained by controlling incentives. The R square in this model is 0.067, which means that the controlling incentives explain 6.7% of the variation in the intrinsic motivation of an employee. The R square for the impact of controlling incentives and supportive incentives with regard to self-determination and appreciation on intrinsic motivation are all low. The reason is that there are multiple other factors besides controlling and supportive incentives that explain the intrinsic motivation of an employee. Examples of these factors are challenge, engagement, autonomy and mastery (Shaw & Gupta, 2015).

Table 11: Coefficients: impact of controlling incentives on intrinsic motivation

Unstandardized

coefficients Standardizedcoefficients

B Standard error Beta t Sig.

(Constant) 5.156 0.230 22.413 0.000

Controlling incentives 0.129 0.047 0.258 2.723 0.008

Table 11 describes the effect of controlling incentives on the intrinsic motivation of an employee. The regression equation is Y = 5.156 + 0.129 * X. When no controlling incentives are provided, the intrinsic motivation is 5.156 and when controlling incentives are increased with 1 unit, the intrinsic motivation will increase with 0.129. In other words, the effect of controlling incentives on the intrinsic motivation is positive and also significant on the 99% confidence interval. This is in contrast with hypothesis 1, which stated that controlling incentives have a negative effect on the intrinsic motivation of an employee. This result might be explained because the variable controlling incentives only looks at controlling financial incentives, since

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this were the only controlling incentives that were clearly defined in the survey. The survey does define non-financial incentives such as that performance measures are used for periodic discussions (controlling or supportive feedback). But since the survey does not clearly define whether this regards supportive feedback or controlling feedback, this item was not included in the variable controlling incentives. The variable controlling incentives thus only measures controlling financial incentives. Based on the fact that this variable only measures controlling financial incentives, the findings are in accordance with the findings in the paper of Shaw and Gupta (2015) which states that financial incentives increase intrinsic motivation. They explain that the Cognitive Evaluation Theory (CET), which is another name for the motivation crowding theory is largely based on a ‘free-time’ environment and not on a working environment. This ‘free-time’ environment analyses the behavior of children when financial incentives are removed for certain (household) chores or when children engage in a sport where they previously received financial incentives for. Shaw and Gupta (2015) question whether these findings also apply to a working environment and they conclude that providing the financial incentive itself does not decrease the intrinsic motivation, but removing the financial incentive might decrease intrinsic motivation due to the arbitrary fashion in which the incentive is removed. Finally, Shaw and Gupta (2015) conclude that in workplace settings, people feel more autonomy when they are paid for performance.

4.2 Impact supportive incentives on intrinsic motivation

The impact of supportive incentives with regard to the self-determination and with regard to appreciation are examined with a linear regression. The regression equation is Y = α + β1 * Χ1 +

β2 * Χ2 + ε.

Table 12: Model summary: impact of supportive incentives with regard to self-determination on intrinsic motivation

Model summary

Model R R square Adjusted R square Standard error ofthe estimate

1 0.155 0.024 0.005 0.852

This model summary describes how much of the variation of the intrinsic motivation can be explained by supportive incentives with regard to self-determination (when incentive fairness is taken into account). The R square in this model is 0.024, which means that the supportive incentives with regard to self-determination explain 2.4% of the variation in the intrinsic

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motivation of an employee when the fairness of the provided incentive are also taken into account.

Table 13: Impact supportive incentives with regard to self-determination on intrinsic motivation

Model Sum of squares df Mean square F Sig

1 Regression 1.853 2 0,.926 1.275 0.284

Residual 74.830 103 0.727

Total 76.682 105

Table 13 describes the model, thus the impact of supportive incentives with regard to self-determination on the intrinsic motivation of an employee when incentive fairness is taken into account. The model is not significant, thus hypothesis 2 is not supported for supportive incentives with regard to self-determination when incentive fairness is taken into account. The regression equation is Y = 5.488 – 0.055 * X1 + 0.105 * X2.

Table 14: Coefficients: impact of supportive incentives with regard to self-determination on intrinsic motivation

Unstandardized coefficients Standardizedcoefficients

Model B Standard error Beta t Sig.

1 (Constant) 5.488 0.442 12.420 0.000

Supportive incentives;

self-determination -0.055 0.070 -0.076 -0.776 0.440

Incentive fairness 0.105 0.070 0.147 1.495 0.138

Table 14 describes the effect of the individual variables, thus supportive incentives with regard to self-determination and incentive fairness on the intrinsic motivation of an employee. The impact of these supportive incentives on the intrinsic motivation is negative, which means that this is not in accordance with the expectation. The finding is however not significant. Furthermore, incentive fairness also does not have a significant impact. Thus, hypothesis 2 is also not supported for the individual variables: supportive incentives with regard to self-determination and incentive fairness, since the impact is also not significant.

This finding is in contrast with the motivation crowding theory, since the motivation crowding theory states that the intrinsic motivation of an employee will increase when the self-determination is supported and decrease when an employee feels like his self-self-determination is undermined. The argumentation that the motivation crowding theory provides is that the

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employee does not feel that he is responsible for the task, which will cause the employee to partly or wholly give up his intrinsic motivation.

The finding might however be explained because self-determination can be associated with feedback and it might be difficult for employees to completely separate the feeling they have when they receive feedback and the self-determination itself. The self-determination theory predicts that feedback will not help in developing a feeling of competence and price and will consequently lead to a decrease intrinsic motivation since the three psychological needs namely competence, autonomy and relatedness are not satisfied in most feedback procedures (ten Cate, 2013). If an employee can determine himself how he will execute his job, he will also receive feedback from his supervisor about the way that he executed that job. Controlling feedback can decrease intrinsic motivation, for example due to a loss of face, while supportive feedback can increase the intrinsic motivation. If employees associate self-determination with controlling feedback, this could explain why the impact is negative. The explanation for the fact that this finding is not significant might be that some employees associate self-determination with negative feedback, while other employees associate self-determination with positive feedback.

Table 15: Model summary: impact of supportive incentives with regard to appreciation on intrinsic motivation

Model summary

Model R R square Adjusted R square Standard error ofthe estimate

1 0.256 0.065 0.047 0.834

This model summary describes how much of the variation of the intrinsic motivation can be explained by supportive incentives with regard to appreciation when incentive fairness is taken into account. The R square in this model is 0.065, which means that the supportive incentives with regard to appreciation explain 6.5% of the variation in the intrinsic motivation of an employee when the fairness of the provided incentives are taken into account.

Table 16: Impact supportive incentives with regard to appreciation on intrinsic motivation

Model Sum of squares df Mean square F Sig

1 Regression 5.016 2 2.508 3.604 0.031

Residual 71.666 103 0.696