“Rewards” (including money) for performance make employees happier and more productive, right? If we asked this question of your team members and managers, most would agree that giving more rewards is the shortest path to higher engagement and productivity. We give rewards to create value, but research concludes the most consistent thing rewards create is a demand for more rewards. Think back to the last time you witnessed a pizza party or t-shirt giveaway sustainably improve performance after the event was over, and you will begin to see this is true. Before we get too far here, let me be clear that we are assuming everyone in the organization is already being paid an appropriate and admirable wage. This conversation is about motivation beyond sound wages. Researchers Edward Deci and Richard Ryan have demonstrated that rewards can reduce motivation. It may sound bizarre, but stay with me, and I will explain.
Consider the True Story of the $25 Spider:
A mom I know has an incredible fear of spiders. One day, her young children told her there was a “huge spider” in the basement where they were playing. The mom’s reaction was predictable: “Kill it!”, but the kids did not have the courage to confront the hairy intruder. To “drive performance” and “get results," the mom proposed rewards: “$1 to whoever kills the spider!” Still no results. “$5!” was the next offering. The children wanted the money but still could not overcome their fear. This negotiation continued until the mom raised the reward to $25, which precipitated a loud “WHOP!” The spider was gone, and the brave soul who saved the day was rewarded. Problem solved, right? Not so much.
Unfortunately, this generous reward created a demotivational dynamic. What “management” wanted was a dead spider, which motivated “spider slayers”. What she received was a solitary win followed by never-ending negotiations over future spiders. Whenever another spider emerged, the kids’ natural question was, “Is it worth $25?” Even if a spider was worth $24.99, just one cent less than The Big One, the reward would be disappointing. Therefore, if a child saw a smaller spider or did not have a desire for or need for money, the spider would get to live in the house another day. This is not what mom (management!) wanted.
“Give team members context and appreciation for their contributions at work. Never allow employees to believe they are simply trading “minutes for money.”
In the same way, business managers are often tempted to gain urgency and performance through a quick reward or bonus. Their results will generally follow the path of the $25 Spider Story: employees will evaluate the task against the reward and make rational judgments about the opportunity versus their own desires. Alfie Kohn explains this phenomenon in Punished by Rewards. Because rewards are transactional in nature, they have the effect of making people resent the task they had to complete to attain them, which means we make our employees not like their work.
So, if rewards are demotivating, what is the more effective approach? Strategic feedback is the answer, and gratitude is one of the best forms of feedback. Give an employee pizza parties as incentives, and they’ll perform as long as the pizza budget holds out or until they grow weary of pizza. Give the employee strategic feedback, and they will naturally figure out ways to improve and accomplish more. What kind of feedback is best? People want context.
• Why does our work matter, and to whom? (Meaningful Contribution)
• What difference does my own effort make in the larger scheme? (The Importance of My Job)
• How well am I doing against expectations? (My Personal Value)
It is important to understand that “strategic feedback” is not the same as "praise." The difference is that feedback provides context and information to drive performance, while praise is another form of reward that can suffer the same shortfalls as pizza parties and monetary rewards. Children who receive positive feedback often respond by increasing their performance: “Wait until you see what I do THIS time!” This dynamic is still available in adults, and feedback is the mechanism that generates it.
How do we use this information? Give team members context and appreciation for their contributions at work. Never allow employees to believe they are simply trading “minutes for money.” Tell them why customers like your product or service. Share positive feedback about the market’s perception of your company. Remind employees of the benefits customers receive from their efforts.
What about rewards? They are not evil, but they are ineffective motivators beyond short-term, one-time events. Do not use promised rewards to drive (bribe) results that have not yet happened. Rather, give rewards as a surprise and expression of appreciation after the achievement. Celebrating accomplishments with context and authentic gratitude will create sustainable engagement.