The Right Way to Offer Rewards: Intrinsic vs. Extrinsic Motivation

When someone does a good job, it’s just proper to reward them, right? But there’s a growing body of evidence that you should not reward people or give them incentives if you want them to stay motivated. How come?

Extrinsic Motivation: The Wrong Way To Use Rewards

We’ve long been taught to reward good work and create incentives to give people the motivation they need to pursue company goals. On the other hand, studies have shown that doing so changes their motivators from doing the work well to gaining the reward.

Most people come to work with a personal vision of what they want to achieve. These intrinsic motivations can range from the noble ‘help someone one person at a time’ to the ambitious ‘become the next CEO’.

But when you dangle rewards in front of them, you’re actually replacing their long term visions with nearer term rewards. Just like we easily fall prey to procrastination due to its immediate benefits, we’re also more likely to grab short-term bonuses, gifts and prizes over some twinkling fantasy far in the future.

And once you’ve replaced a person’s intrinsic motivators, it’s harder for them to stay connected with the work they’re doing. They’ll feel they are working to acquire the reward, instead of working for their own good. This in turn leads them to start hating the work they were so eager to do at the start. Now you know why used car salesmen act the way they do!

What’s worse is that when you remove those rewards, people tend to perform worse than before. One study showed that people initially spent 26% more time working once a reward was introduced. But when the rewards were removed, they spent 20% less time working than before, when there were no rewards given for work.

The Right Way To Give Rewards

Of course, I’m not saying you should do away with rewards altogether. What I’m trying to explain is that you just need to be careful when incentivizing people. Create a rewards system in such a way that you don’t bulldoze people’s intrinsic motivators when offering them. Here are some ideas that can help:

  1. Offer the right rewards. While external rewards do replace their internal ones, the positive way to look at it is to offer proper external rewards. Instead of just offering cash and expensive goods, why not reward people with something more useful? For example, shoulder their fees when they take online courses. Grant them a day pass to exclusive “management-only” events. Give them one-on-one mentorship time with the CEO.
  2. Inform instead of rewarding. People already have their own reasons for doing a good job at work. Rather than pushing them toward incentives that don’t support their goals, tell them when they are going on the right track. Allow them to stay in control and motivate themselves based on the information they receive.
  3. Connect with your team. To truly motivate them, you need to know why each member comes to work in the first place. Once you know the “why”, you can build each person up by creating a system that helps them fulfill their purpose, instead of going against it.

Your team, especially your top performers, already have their own reasons why they strive to work at their best at all times. Avoid replacing their internal motivators with extrinsic motivation by connecting to their “why”.

If you are having your own personal motivation struggles, you might want to ask yourself these three honest questions.

  • Steven Byers

    Thanks for this. I would say we’ve long been taught that extrinsic motivation is not effective in the medium or long run, but for some reason many refuse to heed the teaching of Deming, Scholtes, Jenkins, Joiner, Lanford, Kohn and many others.

    • Hi Steven – thanks for your comment. It takes a lot of discipline to avoid going for short term rewards and instead to stay true to our longer term goals. I think that’s a significant challenge for businesses as well as individuals i.e. focus. The most successful leaders do it well. Paul