Extrinsic and intrinsic rewards as strategic drivers of employee performance: The mediating role of motivation

This study examines the effects of extrinsic and intrinsic rewards on employee performance in private enterprises, with motivation tested as a mediating mechanism. Reward systems are treated as strategic human resource management practices rather than narrow compensation tools. A quantitative research design was applied, using data collected from 300 employees of private enterprises through a structured questionnaire. The data were analyzed through Exploratory Factor Analysis, Confirmatory Factor Analysis, and Structural Equation Modelling. The results confirmed a four-factor structure consisting of extrinsic rewards, intrinsic rewards, motivation, and employee performance. Findings show that both extrinsic and intrinsic rewards positively affect motivation, while motivation positively affects employee performance. Extrinsic rewards also have a significant direct effect on employee performance, whereas the direct effect of intrinsic rewards is not statistically significant. However, motivation significantly mediates the relationship between both reward dimensions and employee performance. These results indicate that extrinsic rewards influence performance both directly and indirectly, while intrinsic rewards affect performance mainly through motivation. The study contributes to reward management literature by showing that different reward dimensions operate through different performance pathways. Practically, private enterprises should design balanced reward systems combining financial incentives with recognition, autonomy, feedback, and development opportunities.