Frederick Herzberg's two-factor theory, also known as the motivation-hygiene theory or intrinsic/extrinsic motivation, concludes that while there are certain factors in the workplace that cause job satisfaction, a separate set of factors can cause dissatisfaction. The factors that motivate people can change over their lifetime, but "respect for me as a person" is one of the top motivating factors at any stage of life.
According to Herzberg, intrinsic motivators such as challenging work, recognition, and responsibility produce employee satisfaction, while extrinsic hygiene factors, including status, job security, salary, and fringe benefits – if absent – produce dissatisfaction.
Herzberg's theory appears to parallel Maslow's needs hierarchy. Individuals look for the gratification of higher-level psychological needs having to do with achievement, recognition, responsibility, advancement, and the nature of the work itself. However, Herzberg added a new dimension to this theory, including factors that cause dissatisfaction as well, such as company policies, supervision, technical problems, salary, interpersonal relations on the job, and working conditions. This two-factor model of motivation is based on the notion that the presence of one set of job characteristics or incentives leads to worker satisfaction, while another and separate set of job characteristics lead to dissatisfaction. Thus, satisfaction and dissatisfaction are not on a continuum with one increasing as the other diminishes, but are independent phenomena.
If management wishes to increase satisfaction on the job, it should be concerned with the nature of the work itself – the opportunities it presents employees for gaining status, assuming responsibility, and achieving self-realization. If, on the other hand, management wishes to reduce dissatisfaction, then it must focus on the job environment – policies, procedures, supervision, and working conditions. To ensure a satisfied and productive workforce, managers must give attention to both sets of job factors.