What do millennials really want? : A study on how reward systems affect organizational commitment in generation Y

This new economic era is characterized by organizations managing a diverse workforce across different generations. These generations have different work values, goals, and expectations on their employer, which poses various challenges for human resource managers in managing and retaining employees from different generations. The most recent generation that is currently entering the workforce is generation Y, and they are described as the younger generation with high employee turnover and reluctance to pledge long-term work commitments. Therefore, it is in the interest of organizations to tailor reward schemes that resonate with generation Yers in fostering organizational commitment. Thus, this thesis aims to examine how extrinsic and intrinsic rewards affect organizational commitment in generation Y. To answer these questions, this thesis reviews previous literature and use the self-determination theory to see how the different rewards affect the organizational commitment of generation Y. This study has been conducted through interviews with employees that are born within the age spectrum of generation Y (1980-1999) to understand how reward systems affect organizational commitment in generation Y employees. This thesis found that intrinsic rewards affect organizational commitment in a far more positive manner than extrinsic rewards. Furthermore, intrinsic rewards resonate to a greater extent with the employees from generation Y and should, therefore, be a priority for organizations. Moreover, this thesis concludes that intrinsic rewards can more easily satisfy the basic psychological needs, which are, as according to the self-determination theory, crucial to foster organizational commitment