Are Your Business Reward Systems COSTING You?

A lot of businesses use motivators to, well, motivate their staff. You may well be one of them. However, research shows that…

Contingent motivators can do harm

That’s right – carrots and sticks don’t work!

Many businesses give incentives to get tasks done.  If you want a specific task done, this system can still work.

The snag is…

…it won’t work for tasks where you want people to think around a subject. Carrots and sticks make people focus on the task in hand.

Rewards work well for narrow-focused tasks – those from the 20th century (like assembly lines) are most apposite. (I’m not including bankers’ bonuses here – that seems to be a world apart.)

The corollary is that rewards narrow the focus – if want people to see the periphery/see outside of the box, then it doesn’t work.

In these situations, intrinsic motivators – autonomy, mastery and purpose – work better.

Does that sound a bit new-worldy and dodgy? Let’s hear what the economists have to say then:


As long as the task involved only mechanical skill, bonuses worked as they would be expected: the higher the pay, the better the performance. But once the task called for even rudimentary cognitive skill, a larger reward led to poorer performance. In eight of the nine tasks we examined across the three experiments, higher incentives led to worse performance.


We find that financial incentives…can result in a negative impact on overall performance.

According to Dan Pink:

  • There’s a mismatch between what science knows and what business does.
  • Carrots work in a surprisingly small set of circumstances.
  • Those “if-then” rewards stifle creativity
  • The secret to high performance is intrinsic drive.

What this means, is, if you want thinking that will make your business more money, and will keep your employees happy, then reward them by awarding more autonomy. Google does it.

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