I’m a fierce opponent of the reward culture permeating today’s organizations. I rail at the idea of motivating people by throwing monetary rewards, tokens, badges, trips, prizes and incentives at them. When speaking or training, I come armed and ready with scientific proof for the answer to the inevitable question: Are rewards ever appropriate? But recently, I’ve softened my hardline “no,” thanks to compelling new research on the topic.
My original answer is still correct
The evidence is overwhelming that monetary and other extrinsic rewards tend to undermine creativity, innovation, mental and physical well-being, results and sustainable high-performance on both short- and long-term goals.
A case in point: Your HR department sends employees an invitation to enter an incentive program. If they lose enough weight, they win an iPad. They think: What do I have to lose except some weight? What do I have to gain except health and an iPad? They should think again.
Researchers followed people who entered these organization-sponsored contests, rewarding a prize for losing weight. The researchers found that people lost weight and won their rewards. However, they only studied people’s results during the contest period. They didn’t track maintenance.
Independent researchers continued following prizewinners after the incentive program ended. Their findings mirrored what extensive motivational research has proven about incentives: Twelve weeks after winning their prize, people resumed old behaviors, regained their lost weight and added even more weight.
But you know what might be even more disturbing? Study after study verifies that tangible incentives do not sustain changes in personal health behaviors but undermine those behaviors over time. People are so discouraged, disillusioned and debilitated by their failure to maintain their incentivized results that they are less likely to engage in further weight-loss attempts. If they do, they tend to game the system by going through the motions to get their reward but not expecting lasting change.
I stand by the ineffectiveness of monetary rewards to motivate and sustain behavior change. But now I add three caveats to my answer to the question, Are rewards ever appropriate?
Caveat No. 1: The last resort
Rewards may not be appropriate or the best choice for promoting the behavior you need from someone, but you might decide they are necessary.
In April 2022, the FBI announced a $10,000 reward seeking the public’s help to find those responsible for pointing lasers at airplanes in flight near Seattle. The danger posed to pilots, passengers and people on the ground was too great to ignore.
Selling out a friend for $10,000 is sad. But it’s more pathetic not to do the right thing by stopping them or voluntarily turning them in without an incentive.
We might justify bribes when the stakes are high and the timeline is short. But I still contend that rewards are a last resort only when people refuse to do the right thing for the common good through their sense of mindfulness, values or purpose.
But suppose you are still a proponent of monetary rewards. In that case, I think it’s imperative to understand recent studies revealing the difference between financial rewards that support rather than undermine people’s well-being.
Caveat No. 2: A more complex but compelling answer
Can money lead to happiness? Clear evidence suggests that financial aspirations erode mental and physical health. But a few studies find that money can positively affect people’s well-being and mental health.
Seeking to answer this much-studied question, researchers led by Anais Thibault Landry, Ying Zhang and Jacques Forest hypothesized that the answer to the debate hinged on motivation.
They found a series of credible studies where people who professed values based on financial aspirations ranked lower on the scale of self-actualization than those who professed values based on the community’s welfare. But the individuals who intrigued the researchers were a subgroup with financial aspirations who scored high on the self-actualization scale. Digging deeper, they discovered what was different about these individuals.
Using the Motives for Making Money Scale, Landry, Zhang and Forrest validated that people thrive when they pursue money for reasons aligned with satisfying their psychological needs for choice, connection and competence.
On the other hand, people languish when they pursue money to compensate for feeling inadequate or superior, to overcome self-doubt or to improve social comparisons — because those motives erode their psychological needs for choice, connection and competence.
The researchers concluded that money, in and of itself, is not good or bad. What matters most is why people want money. It’s not what you want but why you want it that matters.
If you are determined to change people’s behavior using monetary incentives, I urge you to facilitate people’s understanding of why they are seeking the financial reward. Their reasons — or type of motivation — determine whether the incentive will positively or negatively impact their psychological health.
According to the researchers, achieving financial aspirations may not “constitute an empty victory regarding psychological health and well-being.” When the reasons underlying a person’s economic ambitions are self-integrated and fulfill one’s psychological needs for choice, connection and competence, those ambitions can serve them well.
Caveat No. 3: Thoughtful rewards can be meaningful and relevant
You can read what I think about our current obsession with tokens and badges and helping people reframe incentives. But I thought I’d offer an example of shaping behavior through incentives that I think work.
I often shop at Jimbo’s, a grocery store here in San Diego. Like most retailers, they faced the movement to reduce the single-use plastic bag. Some states banned plastic bags, and some instituted a disincentive by charging extra for a bag.
Jimbo’s went a different route. When you bring your bags, they give you one token per bag. Leaving the store, you drop your tokens into containers dedicated to local charities. Jimbo’s then donates real money to charities based on the number of tokens collected. I can hardly wait to spend my tokens. Sometimes all of mine go to one charity. I can’t decide other times, so I drop one into each container.
Jimbo’s’ simple token program works on multiple levels.
- They get the behavior they hoped for from me because I rarely forget to bring my cloth shopping bags.
- They help me satisfy my psychological needs for
- Choice (I choose not to use plastic or paper bags; I can donate to the charity I choose.)
- Connection (I feel good helping the environment and contributing to local charities.)
- Competence (I leave the store feeling smarter than when I walked in — and grateful for following through on my good intentions.)
- And finally, Jimbo’s reinforces customer loyalty by creating a peak ending to my shopping experience. Research shows that powerful moments that stick have positive beginnings and endings.
Jimbo’s’ simple token program works on multiple levels.
If you are as thoughtful as Jimbo’s about offering rewards to encourage behavior change, I might reconsider my answer to the question, Are rewards ever appropriate?