What Leaders Get Wrong About Employee Motivation

Flawed assumptions about what motivates people to work can lead to counterproductive management tactics. Research points to a better way.

- By Marylène Gagné and Rebecca Hewett

Since managers started managing, they have questioned how to motivate employees to be productive and do good work — and, for most, their answers are still shaped by assumptions formed long ago. While modern leaders understand that the best performance comes from intrinsically motivated, highly engaged employees, many still use traditional management practices that assume people won’t work hard unless they are incentivized and monitored to make sure they deliver. Underlying that inconsistency are two theories with very different assumptions about how humans are motivated, each with significant implications for management, organizational structure, culture, and outcomes.

In our recent paper in the Journal of Management Studies, we compare agency theory and self-determination theory — both highly influential in research, business education, and practice. We suggest that agency theory has dominated management practice for decades — despite evidence about its limitations — leading to suboptimal ways of managing workers.1

Monitoring, regulating, and incentivizing people to work harder is expensive and never foolproof.

Agency theory is built on the assumption that humans are self-interested, rational beings who need to be controlled and motivated through external mechanisms such as rules, monitoring, and rewards. A fundamental assumption is that employee goals and organizational goals are in opposition — organizational owners (for example, shareholders) want to pay the minimum required to get the work done in order to maximize capital gains, whereas employees want to put in minimal effort for maximum pay. This means that employees need to be persuaded to contribute to organizational goals via incentives and must be monitored and regulated to ensure they work effectively.