Steering and motivating professors with performance-based pay and other rewards - case: Aalto University

The objectives of this study are to understand what drives professors' motivation and what kind of rewarding supports especially their intrinsic motivation. From this point of view, the ultimate objective is to develop a proposal for a new, holistic reward system for tenured professors at Aalto University. In this study, motivational theories are used to approach rewarding because motivation is an important driver of professors' performance and in most cases, it is affected by rewarding. The study was conducted as a part of a project that develops a new rewarding model as a proposal for the management of Aalto University. Because a new model is created as a result of this thesis, it is a constructive case study. The primary data used to support the model consists of a survey targeted to professors at Aalto University, two additional interviews with professors, and eight management interviews. In addition, internal material from the university, material from the project team's meeting, and other discussions about the topic by professors were used as complementary data. The key findings of this study indicate that professors are indeed primarily intrinsically motivated but that their overall motivation is affected by external rewards as well. Moreover, if external rewards are poorly designed, a crowding-out effect occurs. Professors highly value academic freedom and trust and prefer forms of rewarding that enhance those elements in their work. They are also extremely inequity averse; therefore, if they perceive rewarding inequitable, their intrinsic motivation is affected negatively. Both the professors and the management were quite unanimous with the elements that the overall reward system should consist of. They preferred merit increase as the individual form of rewarding for long-term performance and additional resources to acknowledge the achievements of research groups or individual researchers. Finally, more pronounced and visible recognition of extraordinary accomplishments and success was called for. These elements together form a reward system that takes the long-term nature of professors' work into account but on the other hand allows for recognizing single achievements within a short time. It supports their autonomy of work, advances their competence, and enhances their relatedness to the organization if communicated correctly