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Why gift cards, points, and cash incentives may be doing more harm than good in your organization

Studies have shown that the act of applying extrinsic rewards doesn’t alter an individual’s perennial commitment to their work. Incentives, such as contests or additional reward compensation, are aimed at steering employee behavior toward achievement of short-term gains. This is despite management’s common belief that rewards translate to dedication and determination.

The message that a reward is intended to evoke is one of positivity. Similarly, the presentation of a “if you do this, you get that” strategy aims to establish the energy an individual needs to accomplish tasks and achieve certain top-down goals.

However, the opposite is often found. In fact, many times, goals and the rewards tied to them cause resentment and do far more harm than good.

Short-term gains at the expense of long-term detriment

While some rewards may work in the short term, they’re not sustainable in the long term. Consistent with a long line of research on human motivation and, more specifically, reinforcement theory, or operant conditioning, as soon as an organization stops offering the reward, behaviors not only go back to where they were, the task or initiative itself is now viewed as only worth doing if a reward is tied to it. As a result, these types of extrinsic reward programs can be very costly in investment dollars and demotivating to employees.

So while extrinsic rewards may induce compliance, they clearly do not foster intrinsic passion or motivation to genuinely wanting to achieve personal or organizational goals.

Why motivation is often diminished by rewards

As Alfie Kohn, author and speaker on human motivation and behavior, states, “rewards simply control through seduction, rather than force.”

In addition, extrinsic rewards and punishment evoke a singular way to get the job done and tend to squash creativity. Researchers who study the impact that rewards have on the quality of work produced have often been surprised by their findings. Although it might be assumed that the work would be better when rewards are applied, often the opposite is found.

In explanation, extrinsic motivators often harm intrinsic motivation – engaging in a task for its own sake.

The quantitative reward trap

It’s common for companies to believe that rewards are valid and appropriate when it comes to quantitative measures. Take the following example:

A call center employee who conducts routine outbound calls produces ten calls per hour on average. An organization equates more productivity and profits if fifteen calls per hour are made. So they offer incentives for reaching this new, higher-volume goal.

Naturally, a person desires the reward, so he or she determines how to increase their “productivity” by fifty percent. They manage to make fifteen calls an hour, but now the quality of each call erodes and they’re just getting calls done for the sake of achieving the reward.

A call center operator that previously enjoyed his or her job suddenly experiences the negative impact of churning through work for a short-term incentive gain. As a result, the desire to do good work shifts from intrinsic motivation to do good, quality work and truly connect with their customers to extrinsic motivation to obtain a reward.

Not only does an individual’s innate desire to do the work suffer, along with the quality of the calls, the reward may also create resentment and pit people within the same team against one another. If you’re judged using a “do this, get that” formula, you’re now competing against your colleagues for who can achieve the reward. You’re no longer collaborating or seeking ways to do something better, sharing best practices, or operating as a holistic team working toward a higher level objective.

Where the motivation breakdown occurs

In essence, rewards do motivate people. But they motivate them to attain the reward, by accomplishing the goal or quantifiable metric through whatever means necessary – despite the best interests of customers, fellow employees, or the overall health of the organization.

Managers often present the argument that rewards do work. However, they’re recognizing the very short-term gain without taking the time to analyze the effects on the overall organization’s well-being or the motivational and psychological health of their team.

Those that argue rewards actually work have failed to investigate the positive, beneficial gains that tapping into a person’s intrinsic motivators bring to an organization’s long term success.


Christian Thoroughgood, PhD is an Assistant Professor in the Graduate HRD program at Villanova University. Learn more about him here!

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