Intrinsic motivation (satisfaction with the task) seems to work better than extrinsic motivation (carrot and stick). Studies with college students that provided the students with cash incentives to perform interesting tasks eventually caused the students to lose interest in the activity. A keynote address by Deci and Ryan at the 5th conference on Self Determination Theory discussed the main points of Self Determination Theory.
Basically people are motivated by Autonomy, Mastery, and Relatedness. Working autonomously a person can decide how, when, where, and with whom to perform a task. Autonomy does not necessarily mean independent. Mastery or competence is learning to perform a task to the best of one’s ability. Relatedness is the sense of belonging to a group or a connection to something larger than self.
Daniel Pink put the ideas of Deci and Ryan into lay language in his book Drive. The following presentation summarizes his key ideas.
Transformational leadership seems to encourage and prepare workers to become intrinsically motivated. While a transformational leader is charismatic and appeals to followers emotions, they also model desired behaviors. This type of leader also stimulates their workers intellectually by providing engaging, challenging tasks. Employee development is one of the main goals of a transformational leader.
In contrast, traditional transactional leadership uses the carrot and the stick, rewards and punishment. This technique can work for simple repetitive tasks but becomes counter productive when tasks become more complex or require innovation and cognitive skills.