How do extrinsic rewards differ from intrinsic rewards?

Extrinsic rewards and intrinsic rewards play distinct roles in motivation and can significantly impact behavior and performance in a business context. The correct choice highlights that extrinsic rewards are typically performance-based, meaning they are tangible rewards given to individuals for achieving specific objectives or outcomes. These rewards can include bonuses, salary increases, promotions, or even recognition awards—essentially, anything that is given externally and is a direct result of an individual's work performance.

On the other hand, intrinsic rewards stem from personal satisfaction and fulfillment that come from within an individual. This might include the joy of completing a challenging project, the satisfaction of mastering a skill, or a sense of accomplishment that arises from contributing to a team or organization. Intrinsic motivation is essential because it often leads to greater engagement, creativity, and long-term commitment to work.

By recognizing the distinction between these two types of rewards, leaders can better tailor their incentives to motivate their teams effectively, fostering an environment that promotes both external recognition and internal satisfaction.