Proposed by Chip Heath in the late 1990s, the extrinsic incentive bias describes our incorrect belief that others are working for extrinsic gain, most often money, rather than intrinsic reasons, like building skills or enjoying the task.
This bias is most often applied in organizational settings, relating to employee motivations. It is notable for being a deviation from the fundamental attribution error, which states that people tend to assume that the behavior of others is motivated by disposition, while believing that their own behavior is situationally motivated. The extrinsic incentive bias assumes the opposite, which is that people are motivated by rewards (a situational characteristic). This bias is important to understand when hiring, as the offers one makes should consider intrinsic as well as extrinsic factors.
In contrast, when attributing their own motivations, people are more likely to attribute it to intrinsic incentives rather than extrinsic.
For example, a study showed that when MBA students were asked to attribute the motivations of Citibank service representatives, they attributed extrinsic incentives as most important and intrinsic as least important. However, when the service representatives were asked to rank their actual motivations, they indicated that intrinsic factors (e.g. learning new skills, accomplishing tasks etc.) were more important motivators than extrinsic factors (e.g. money, job status etc.).
