Intrinsic and extrinsic are two ways to describe the source of motivation in individuals. Intrinsic motivation comes from within, brought about by characteristics like self confidence, ambition and inquisitiveness. Extrinsic motivation comes from outside forces such as rewards, punishment and incentives. Small-business employees experience a bit of both types of motivation, although Douglas McGregor's Theory X and Theory Y suggests that some employees' motivation comes more from one source than the other. Small businesses often have close-knit teams and small workforces that provide distinct opportunities to encourage both types of motivation. As a small business grows, different factors inevitably arise to influence both types in new ways. Understanding how both types of motivation come into play in companies of diverse sizes can build a foundation for continually boosting employee motivation in your company as it grows.

Extrinsic Advantages in Big Businesses

Tall hierarchies with numerous and increasing managerial positions can provide a measure of extrinsic motivation in big businesses. Having a clear job-advancement path and tough competition for pay raises and promotions can spur employees to work harder to achieve rewards, but this can be challenging to emulate in small businesses. Staffing a smaller number of people creates fewer opportunities for advancement, making it more likely that top performers will simply take on additional job duties rather than advance to new organizational levels. The formalized incentive programs of big businesses, such as individual performance bonuses, can provide further motivation for employees to excel in their jobs, but the relatively volatile nature of smaller companies' income can make it challenging to guarantee incentive amounts in the same way. Formal disciplinary procedures in big businesses can keep people on-task and motivated to avoid the consequences of violating company policies, while disciplinary procedures in small businesses are less likely to be formally written and communicated.

Extrinsic Advantages in Small Businesses

Extrinsic motivation for small-business employees can be more directly tied to a company's survival and growth than in big businesses, since small companies are at an earlier and more volatile stage of growth than more established organizations. Small-business profitability relies to a much greater degree on each individual's performance than companies with thousands of employees and complex departmental redundancies. Regular profit sharing for employees in a fledgling company can motivate everyone to work extra hard to see the company succeed, since everyone's individual performance truly matters. Personal encouragement from business owners can extrinsically motivate employees, and this types of connection is much more common in small businesses, especially when company founders work right alongside front-line employees.

Intrinsic Advantages in Big Businesses

The career stability offered by big businesses can fuel employees' intrinsic motivation. Due to their more established track record and larger payrolls, big businesses can appeal to the desire to earn a stable income with reasonable job security. The desire to further one's career by padding one's resume with achievements at reputable firms can spur motivation in highly ambitious employees, and the established brand reputations of big businesses are more likely to enhance professionals' resumes than credentials from an unknown company. Personal pride in being associated with a well-respected organization can spur one's passion for working in a larger organization, as well, especially when that organization is widely known for staffing top performers in its industry.

Intrinsic Advantages in Small Businesses

The close-knit team nature of small-business employees can increase feelings of camaraderie and intrinsically motivate employees to achieve success for the group. Sometimes, developing personal relationships with small-business owners can boost intrinsic motivation just as much as extrinsic. While verbal encouragement can boost extrinsic motivation, the very fact that employees work closely with executives in small businesses can boost their inner motivation to put forth their best effort and exceed expectations. This phenomenon is rarely found in big businesses, in which front-line employees often never interact with executives. Passion for the work and the organization can come into play in small businesses, but in different ways than larger companies. Passion for small organizations can revolve around a feeling of continuous achievement and overcoming obstacles as an "underdog" organization, rather than pride in association with a well-known company.