Intrinsic and Extrinsic Motivation: What Deci and Ryan Mean for Businesses

Why the question of motivation is so often asked the wrong way

When owners talk about motivation, they usually ask about quantity: how do I get more effort? The obvious answers are bonuses, commissions, and targets with rewards. Sometimes they work, sometimes they fizzle out, and occasionally they seem to cause the opposite: employees do exactly what is rewarded and nothing beyond it.

The article what motivates salespeople showed for sales that money, recognition, and development work together. This analysis goes one step back to the theory on which many of these studies rest and asks: What does the distinction between intrinsic and extrinsic motivation according to Deci and Ryan mean for leading a small business?

To answer it, I first clarify the terms and present the model. Then I look at what large reviews show about the effect of rewards, weigh the question of whether bonuses crowd out intrinsic motivation, and apply the model to three questions an owner can ask himself.

Intrinsic and extrinsic motivation: the terms

Intrinsic motivation means doing an activity for its own sake, because it is interesting or enjoyable. Extrinsic motivation means doing an activity because of a consequence that lies outside the activity: money, praise, promotion, or avoiding trouble.

This division is well known, but too coarse for a business. Hardly anyone posts incoming invoices out of pure joy. Nevertheless, there are employees who do it carefully and without supervision, and others who do it only when someone checks. Both are extrinsically motivated, but in very different ways. This is exactly where the theory of Edward Deci and Richard Ryan comes in.

The thinking model: self-determination theory according to Deci and Ryan

Self-determination theory was developed by the psychologists Edward Deci and Richard Ryan from the 1970s onward and is today one of the most widely studied theories of motivation. It has two parts, both of which are useful for owners.

First part: a ladder instead of two drawers

The theory orders extrinsic motivation by how far a person has adopted the reason for their action. At one end is controlled motivation: the feeling of having to do something because of the reward or the pressure. At the other end is autonomous motivation: work out of one's own drive, because one sees its purpose or it fits one's own person. The study by Kuvaas and colleagues, presented in the article what motivates salespeople, uses these two terms as well.

Second part: three basic needs

The second part explains what determines where someone stands on the ladder. Deci and Ryan name three basic psychological needs. Autonomy is the experience of steering one's own actions. Competence is the experience of being good at the task and getting better. Relatedness is the experience of belonging to a group and being taken seriously by it. When these needs are met, autonomous motivation grows. When they are thwarted, motivation slides toward control.

An everyday analogy shows the difference. Two children practice the piano. One practices because the parents will scold otherwise, the other because it wants to play a piece it heard on the radio. Both sit at the instrument for half an hour. Only the second keeps practicing when the parents are not at home.

What large reviews show about reward and performance

The effect of rewards on intrinsic motivation is one of the most studied questions in psychology. Deci, Koestner, and Ryan (1999) analyzed 128 experiments on it. Their finding: tangible rewards that are expected for an interesting task and tied to completing it reduced enjoyment of the task. Positive verbal feedback, by contrast, increased it. What was measured above all was whether participants later continued the task voluntarily when no reward was on offer any more.

For the working world, a second finding is more important. Good, Hughes, Kirca, and colleagues (2022) analyzed 127 studies with a total of 77,560 salespeople. Overall, motivation was clearly related to performance. Intrinsic motivation, fed by autonomy, competence, and connection, was more strongly related to performance than extrinsic motivation through compensation and recognition. This applied to measured results as well as to ratings by supervisors.

Two qualifications belong here. First, Good and colleagues count recognition as extrinsic motivation because it comes from outside. The article what motivates salespeople treats recognition as a separate lever alongside money. The two do not contradict each other; it is a question of classification. Second, the authors themselves emphasize that extrinsic incentives were also associated with better performance. The difference lies in strength, not in direction.

Cerasoli, Nicklin, and Ford (2014), in a review spanning four decades, arrived at a complementary picture: intrinsic motivation predicted above all the quality of work, incentives rather its quantity. Together, the two explained performance better than either alone.

Do bonuses crowd out enjoyment of work? Two views

The first view rests on the experiments summarized by Deci, Koestner, and Ryan. Whoever is paid for something he likes to do begins to do it for the money. If the money goes away, the reason is missing. This leads to a warning for businesses: whoever attaches a bonus to every activity turns believers into wage earners.

The second view rests on studies from the working world. Khusainova, de Jong, Arendt, and colleagues (2025) found among salespeople that intrinsic and extrinsic drive complement each other and that the highest performance arises where both are in balance. The article what motivates salespeople presents this study in detail. At work, money is not an extra on top of a hobby but the basis of one's livelihood.

I consider both views compatible if one pays attention to the kind of reward. Self-determination theory itself provides the key: a reward does harm when it is experienced as control, that is, as an attempt to steer behavior. It does no harm when it is experienced as information, that is, as feedback on good work. Good and colleagues point to the same thing: rewards that contain feedback in themselves can even strengthen the experience of competence and autonomy. For a business this means: the bonus is not the problem, but a bonus that expresses distrust is.

A bonus that says “well done” strengthens drive. A bonus that says “otherwise you wouldn't do it” replaces it.

Three questions for the business: autonomy, competence, relatedness

From the three basic needs, I derive a check that an owner can go through for any position or team. It does not replace questions of pay; it adds to them what research shows to be the stronger lever.

1. Autonomy: who decides on the how?

   Check which decisions about their own work the employee may make: sequence, approach, scheduling. How to transfer latitude in stages is described in the guide delegating tasks with a clear handover.

2. Competence: do they learn that they are good and getting better?

   Check whether there is regular, concrete feedback and whether everyone has a task to grow with. Asking instead of answering helps here, as the article the owner as coach shows.

3. Relatedness: do they belong?

   Check whether the employee knows what their work is needed for in the larger picture and whether they are heard on the team. How work makes significance for others visible is described in the essay meaning at work.

The three questions overlap with Hackman and Oldham's job characteristics model, presented in the essay on meaning at work: autonomy and feedback appear there as two of five characteristics of a job. Self-determination theory explains why these characteristics work: they satisfy basic needs.

Transferability and limits

For small businesses, the theory is good news. In pay, they often cannot keep up with large companies. In autonomy, the experience of competence, and belonging, they can, because paths are short and the owner knows everyone. The same closeness can also do harm, however, if it turns into control. What keeps good people in the long run is described in the article employee retention in a small business.

The limits are equally clear. The experiments on crowding out come predominantly from laboratories, often with students and with tasks that are interesting in themselves. The review by Good and colleagues concerns salespeople and shows relationships, not causes. For activities nobody likes to do, the theory mainly says that it helps to explain their purpose. Whether that is enough in an individual case cannot be derived from the studies.

What you can do this week

• Choose two positions in the business and go through the three questions on autonomy, competence, and relatedness.
• Check every bonus or target agreement: is it experienced more as feedback or more as control?
• For the next unpopular task, state explicitly what it is needed for.
• Give an experienced employee back a decision you have been making yourself.

Conclusion: What do Deci and Ryan mean for businesses?

We set out to ask
the distinction between intrinsic and extrinsic motivation according to Deci and Ryan means for leading a small business. The answer has two parts. First, it is not the amount but the kind of motivation that matters: autonomous motivation is more strongly related to performance than controlled motivation, in sales as in other fields. Second, a business influences the kind of motivation above all through three needs: autonomy, competence, and relatedness.

Bonuses are neither poison nor a cure-all. They crowd out intrinsic motivation when experienced as control, and they complement it when they recognize good work. An owner who pays attention to this does not have to pay more to get more effort. He has to control less.