Progress in assumptions about motivation: from agency theory to self-determination theory

Management practices are based on fundamental assumptions about what motivates people. In a recent article, Marylène Gagné and Rebecca Hewett set out two contrasting views on this: agency theory and self-determination theory. Agency theory assumes that people are primarily motivated by external incentives and control, while self-determination theory states that people are driven by the satisfaction of basic psychological needs for autonomy, competence, and relatedness. Although self-determination theory is supported by decades of research demonstrating the added value of autonomous motivation, agency theory is still the dominant assumption in management practices.

Basic Motivation Theories

The two major theories of human motivation that Gagné and Hewett compare are:

1. Agency Theory: Developed by Jensen and Meckling (1976), this theory is based on the idea that individuals are rational beings who pursue their own interests. In an organizational context, this means that managers (principals) must establish controls to ensure that employees (agents) act in accordance with the organization's goals.
2. Self-determination theory (SDT): Pioneered by Edward Deci and Richard Ryan, this theory states that people function best when they experience autonomy, competence, and relatedness. According to SDT, intrinsic motivation and the internalization of goals are crucial for employee well-being and performance.

Contrasting Assumptions and Consequences

The authors highlight the differences between agency theory and SDT:

Criticism of Current Practices

Gagné and Hewett criticize the over-reliance on coercive mechanisms in management practices. They argue that these practices are often counterproductive and undermine the quality of employee motivation. Rather than relying on rewards and punishments, they advocate mechanisms that support autonomy and enable employees to internalize organizational goals. Here are some real-life examples. 

Design of reward systems

The authors explain that compensation systems in organizations, such as performance pay, often have unintended negative consequences. Employees then exhibit undesirable behavior, circumvent rules, or even act immorally to get the reward. A frequently chosen standard solution is to further tighten the remuneration criteria and monitoring. But the authors argue that this is a futile strategy as employees continue to find creative ways to circumvent the system.

► Instead, the authors advocate an approach that encourages employees' intrinsic motivation and internalization of organizational goals. If employees experience autonomy, competence, and connectedness, they will embrace the organizational goals more independently and contribute proactively. Instead of linking compensation only to specific behavior or results, it would be better to communicate the values ​​of the organization through clear communication and role models. In this way, employees internalize those values ​​themselves instead of being purely extrinsically motivated by rewards and control.

Unemployment and reemployment

According to the authors, unemployment policies and programs are often based on the agency theory assumption that people are lazy and lazy. Therefore, many programs include strict control and sanction mechanisms to force the unemployed to look for a job. But the authors argue that most unemployed people are actually motivated to work and experience this coercive approach as humiliating and stressful. It often leads to poor job matches and attrition.

► Gagné and Hewett argue for starting from the assumption that people naturally want to work to meet their basic needs. This would lead to a completely different policy that supports the unemployed with training, childcare, and transport instead of sanctioning them. Research shows that a supportive approach, in which autonomy and personal motivation are stimulated, leads to better outcomes such as higher job retention and well-being. The authors argue that internalizing the value of work is more effective than coercive measures.

Why we need to change our assumptions about motivation

The authors indicate that organizations should take seriously the assumptions about human motivation from self-determination theory rather than those from agency theory to:

• ethical reasons: based on self-determination theory reduces unethical behavior because people are then more connected to higher organizational goals. Moreover, it creates more meaningful work , which should actually be a basic requirement.
• social reasons: to tackle major challenges such as the climate crisis and pandemic, more democratization and employee participation in organizations is needed. This requires different assumptions about their motivation. Autonomous motivation also stimulates more pro-environmental behavior and social involvement of employees.
• socio-economic reasons: Developments such as gig work (such as temporary jobs and freelance assignments) and AI lead to more algorithm control and uncertainty and vulnerability of working conditions. The assumptions about motivation then determine the quality of this type of work. Research also shows that self-determination and autonomy are becoming more important for identification with the organization and acceptance of AI among employees.

The authors argue that by abandoning the dominant agency theory assumptions and instead taking self-determination theory as a basis, organizations can better respond to the ethical, social, and economic challenges of our time.

Conclusion

The authors conclude that the assumptions of agency theory, in which employees are only considered to be extrinsically motivated and need to be controlled, are outdated. They advocate taking the self-determination theory as a starting point:

• People can internalize goals in a supportive work environment in which their basic needs are met.
• This means that control mechanisms from agency theory must be avoided or designed in a more supportive manner.
• Motivation is not static (intrinsic or extrinsic), but moves fluidly depending on the work environment.
• Self-determination theory strives for human well-being through satisfaction of basic psychological needs, in contrast to agency theory.

► Gagné and Hewett challenge conventional management thinking by asking: Why not create a work environment that promotes autonomous motivation? The evidence is clear that this supports not only individual, but also organizational well-being and solves many of the problems of agency theory. They call on researchers, educators, and managers to critically reconsider their assumptions about what motivates employees using self-determination theory.