The Influence of Reward and Punishment on Employee Performance: The Mediating Role of Intrinsic Motivation at the Oil Palm Research Center in Medan

Ardianta Kamis, September 03, 2026
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Fair Reward and Punishment Systems Drive Employee Performance Through Intrinsic Motivation

Fair and transparent reward and punishment systems significantly boost employee performance by strengthening intrinsic motivation at the Oil Palm Research Center (PPKS) Medan. This quantitative study was conducted by Lutfi Hafiz Harahap, Ritha F. Dalimunthe, and Amlys Syahputra Silalahi from Universitas Sumatera Utara (USU). Published in the Indonesian Journal of Economic & Management Sciences (IJEMS) in June 2026, the research provides crucial insights for knowledge-based institutions struggling with declining employee productivity.

Background and Practical Relevance

As a premier agricultural research institution in Indonesia, the Oil Palm Research Center Medan relies heavily on workforce productivity and research innovation. However, internal data revealed a concerning downward trend in average employee performance, dropping from 89.0% in 2023 to 85.6% in 2024, and further declining to 81.8% in 2025. Preliminary surveys indicated that 60% of employees felt their work quality fell short of organizational standards, while 63.3% struggled to meet work targets consistently.

The survey also uncovered widespread dissatisfaction with organizational practices: 66.7% of employees viewed performance bonuses as inadequate, and 56.7% perceived administrative sanctions as unfair. These conditions contributed to low internal drive among staff. Integrating structured rewards and fair disciplinary policies with psychological motivators offers an effective strategy for restoring institutional productivity and research excellence.

Research Methodology

The researchers from Universitas Sumatera Utara conducted an explanatory study involving 124 employees selected via simple random sampling from a total population of 180 staff members at the Oil Palm Research Center Medan. Data collection took place between March and August 2026 through structured questionnaires using a five-point Likert scale.

The study evaluated four key variables:

  • Rewards: Financial incentives, employee benefits, institutional recognition, and career advancement opportunities.
  • Punishments: Verbal reprimands, written warnings, administrative sanctions, and severe disciplinary actions.
  • Intrinsic Motivation: Psychological needs for autonomy, competence, and workplace relatedness.
  • Employee Performance: Work quality, output quantity, timeliness, teamwork, and job responsibility.

The collected data were processed using Partial Least Squares-Structural Equation Modeling (PLS-SEM) executed on SmartPLS 4 software.

Key Research Findings

The empirical analysis confirmed that all hypothesized direct and indirect relationships were statistically positive and significant ($p < 0.05$):

  • Direct Effect of Rewards: Effective reward implementation significantly improves employee performance ($\beta = 0.259, t = 2.849$) and exerts a powerful positive impact on intrinsic motivation ($\beta = 0.672, t = 13.799$).
  • Direct Effect of Punishments: Fair and proportional disciplinary measures enhance overall employee performance ($\beta = 0.346, t = 5.329$) and positively influence intrinsic motivation ($\beta = 0.432, t = 7.078$).
  • Role of Intrinsic Motivation: Internal drive directly propels higher job performance ($\beta = 0.416, t = 4.424$).
  • Mediating Mechanism: Intrinsic motivation significantly mediates the relationship between rewards and performance ($\beta = 0.279, t = 4.028$), as well as between punishments and performance ($\beta = 0.180, t = 4.228$).
  • Explanatory Power: Rewards and punishments collectively explain 61.5% of the variance in intrinsic motivation, while all three factors together account for 61.0% of the variance in employee performance.

Notably, rewards proved to be the strongest predictor of intrinsic motivation, whereas constructive punishments exerted the strongest direct influence on employee performance.

Real-World Impact and Industry Implications

This study provides practical guidance for managers, HR directors, and policymakers in research institutes and knowledge-based enterprises. Rewards should not be treated merely as financial compensation, but as psychological validation of employee competence that fosters autonomy and commitment. Similarly, constructive disciplinary policies should not function to intimidate, but to establish clear accountability, procedural fairness, and professional growth.

Highlighting the importance of psychological mechanisms in human resource management, the authors underscored the value of internal drive. "Fostering intrinsic motivation acts as a critical psychological engine. The effectiveness of organizational rewards and disciplinary policies reaches its maximum impact on employee performance when it successfully nurtures employees' internal drive and personal fulfillment," stated Lutfi Hafiz Harahap, Ritha F. Dalimunthe, and Amlys Syahputra Silalahi from Universitas Sumatera Utara.

Author Profiles

  1. Lutfi Hafiz Harahap, S.E., M.M.: Researcher and alumnus of the Master of Management Program at Universitas Sumatera Utara (USU), specializing in Human Resource Management and Organizational Behavior.
  2. Prof. Dr. Ritha F. Dalimunthe, S.E., M.Si.: Professor and senior lecturer at the Faculty of Economics and Business, Universitas Sumatera Utara (USU), with expertise in Strategic Management, Entrepreneurship, and HR Management.
  3. Dr. Amlys Syahputra Silalahi, S.E., M.Si.: Senior lecturer and researcher at the Faculty of Economics and Business, Universitas Sumatera Utara (USU), specializing in Financial Management and Research Methodology.

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