Too much control? Why HR should be adopting self-determination theory

Despite growing evidence that it’s not a good idea, “agency theory” continues to dominate how organizations structure management and HR policies.

Rooted in the belief that employees act primarily out of self-interest and require external controls — such as performance-based incentives, audits and rigid monitoring — this decades-old theory remains embedded in corporate strategies and business school curricula.

But a recent academic study is arguing for a shift toward self-determination theory (SDT), which suggests employees are more engaged, ethical and productive when they internalize organizational goals and work with autonomy.

“The evidence is incontrovertible – nurturing autonomous motivation not only supports individual wellbeing but organizational wellbeing too, and overcomes many of the challenges which agency theory has been unable to answer,” say the researchers.

“If you are still not convinced, reflect on your own motivation for your work: do you yourself really need to be told what to do, how to do it, and incentivized (or sanctioned) to hammer that message home? Why does collective management wisdom still insist that workers need to be controlled in this way?”

Agency theory proves popular

Research has linked excessive control mechanisms to unethical behaviours, short-term decision-making, and diminished trust between employers and employees, says the study “Assumptions about Human Motivation have Consequences for Practice” in the Journal of Management Studies.

So, why is agency theory still popular?

For one, it’s commonly taught in business schools, says Marylène Gagné, John Curtin distinguished professor at Curtin University.

“It's all over the textbooks... that's our first and foremost problem," she says.

“At the same time, when you look at organizational behaviour classes and business schools, they tend to be a bit more infused with principles that are closer to self-determination theory. So, students get these very conflicting messages throughout the curriculum.”

When it comes to the workplace, many leaders seem to find it easier to try and control people in this way, says Bex Hewett, associate professor of human resource management at Rotterdam School of Management at Erasmus University.

"If you want people to do a certain thing, you give them an incentive to do so, and that’s much easier than spending time nurturing their skills, coaching them, and providing them with general guidance,” she says.

“A lot of managers, if they want something done, they say, ‘OK guys, this is what I want done,’ rather than ‘Here's what we would like to achieve in the future. Let's think together about how we would like to get there.’”

Self-determination and autonomy

The need to control people is often based on the assumption that they’re not going to do a good job — but if someone's not going to do a good job, it's very rarely about that person, says Hewett.

“Most of the time, it's to do with the fact that they don't really like their job… they're not treated very well, they don't have the skills or confidence to do it. So, what we tend to do is we introduce a control, rather than fixing the root of the problem.”

On the other hand, if you leave people to their own devices, they usually find tasks where they feel good and perform well, she says.

“If we help people to find those tasks or we help people to develop the skills so that they can thrive in new tasks, we don't need the control mechanisms, because you have the intrinsic motivation to be able to perform the task.”

It’s also about helping employees to have a shared understanding of what the employer is working towards, says Hewett.

“People have autonomy in how they get there — so it's not chaos, it's not saying to people ‘Do whatever you want to do,’” she says.

“It’s also [about] giving people meaningful feedback, which gives them the opportunity to learn — rather than ‘You didn't do that well’ or a once-a-year performance evaluation. It’s about saying, ‘Let's reflect together on how that went and think about how it could be done differently next time.’”

But role modeling is critical here, from leaders and HR professionals, says Hewett.

“If this kind of behaviour is not role modeled, then you're unlikely to see it permeate throughout the organization… So, investing in developing these skills among the people who have to manage is just so important.”

Advocating for autonomy in the workplace

If we think about the hierarchical structure and the lines of authority, most decisions about access to information are based on the level of trust with employees, says Gagné.

“Self-managed organizations basically have very flat structures, organized around small teams that completely manage themselves, and these teams collectively make decisions at the highest organizational level,” she says.

“At the other end, you have Elon Musk with the very hierarchical, authoritative [approach, and] most organizations probably fall in the middle.”

So, when it comes to advocating for autonomy support, the key is explaining why something is required, says Gagné.

“We call it providing a rationale. And the goal of that is to get people to accept, if you will, the control that's put on them: ‘Why is it there? Why is it good for me?’ Try to make it as participative as possible.”

Lack of trust behind need for control

Self-determination theory suggests that when employees feel trusted, they become more engaged and take ownership of their work.

But when you ask most leaders if they trust they employees, they may say yes but behave in a way that signals no, says Hewett.

“That, for me, is the thing that inspired this paper is that we realized how much we hear leaders say, ‘We want people to be intrinsically motivated, we trust them,’ but they behave in the opposite way. And so I think what we'd like to do more than anything is just inspire people to sit down and… realize that disconnect, and then think about how you can better align them.”

Heavy-handed control measures often push employees to find ways around the system, sometimes leading to unethical behaviours, says Hewett.

"If somebody doesn’t enjoy their job and… they don’t care about their work, you put control mechanisms in place to stop them from deviating — but they will find a way around that," she says.

"That is the part where the unethicality comes in, even if it’s not intentional.”

Boosting ethical behaviour through job autonomy

Agency theory-driven management styles often lead to unintended consequences, such as financial crises and corporate scandals. Hewett cites as an example the 2008 market crash.

"There's evidence… that it was the incentive structures that really had a large impact on some of the behaviours that led to the subprime crisis, because, effectively, the incentive was driving a certain type of behaviour which was not a behaviour that was helping organizations, consumers, the market — it was helping individuals to gain a very big incentive. So that's part of the issue."

On the other hand, job autonomy can stop people from engaging in unethical behaviours, says Gagné.

“If you make your own decisions autonomously, meaning that you feel volitional about that choice, you wholeheartedly embrace that choice, why would you screw it up? It makes no sense,” she says.

“You automatically feel responsible for your own actions when you have autonomy, because you made the choice yourself. No one forced you into it.”

Rather than relying on compliance-based training, organizations can build ethical cultures by reinforcing shared values and autonomy, according to Hewett.

"The difference is starting with the assumption that the majority of people will behave ethically, and that there will be some deviations, which, of course, we need to manage when those happen,” she says.

“That's the problem also with a lot of HR practices, to be honest, is they are set up on the assumption that everybody's going to break the rules, or that everybody needs to be told what to do — rather than the majority of people are fine and you just have occasional exceptions.”

Rethinking compensation to incentivize workers

For many HR leaders, performance-based incentives are standard practice as part of agency theory. However, the researchers argue these systems can backfire by fostering a transactional mindset rather than long-term engagement.

"If you have individualized compensation in the organization, it’s not easy to just suddenly take that away," Hewett acknowledges. "The principle is often about taking money out of the equation, and that does normally mean investing in salaries at a higher level so that people aren’t worrying about money so much."

Pay disparity also plays a role, she says.

"If people perceive that there is a really big ladder, they’re always thinking about how they’re going to get up to the next step. Whereas if you have broader pay bands and closer salaries, then that’s a much easier conversation to be having with people, because then they can think less about money and more about all the other incentives around that.”

Instead of relying solely on financial incentives, organizations can emphasize career development, says Hewett: “So then [employees are] focusing much more on the intrinsic rewards from the job: ‘What am I getting from my job that enriches my life and gives me new experiences, makes every day exciting?’

“Then people think less about ‘Am I going to get a bonus for doing this?’”

How AI can support autonomy

And with the recent surge in AI-driven tools, there are even more possibilities for self-determination and job autonomy, according to Hewett.

“This is a great opportunity to trust people and give them autonomy to say, ‘Look, we've invested in this tool, you've got access to it. Now we're also going to make sure you have time and space just to work out what works for you. And then we want to share that as a community, to think about what we are learning together.’”

On the other hand, employees who may feel pressured to figure out the new tech may struggle, she says.

“It’s about building this principle of trust and autonomy into the use of AI in the same way as you do any other tool.”