Individual Pay for Performance, Controlling Effects, and Intrinsic Motivation

Abstract

A core question in research on compensation and motivation is whether individual variable pay for performance (IVPFP) can undermine intrinsic motivation in the workplace. We investigated the mediating role of a controlling effect on the relationship between the amount of IVPFP received and intrinsic motivation. In a three-wave study of 304 employees from eight European countries, we found that a controlling effect mediated the negative association between IVPFP and intrinsic motivation. These findings support the proposition from self-determination theory that financial rewards can have a controlling effect that decreases intrinsic motivation. Theoretical and practical implications for compensation and motivation in the workplace are discussed.