A Sideways View

New stirrings in business psychology

The Detrimental Effect of Rewards

Do monetary rewards increase or reduce job satisfaction and productivity?

For over 20 years a rather controversial and counterintuitive idea has been around that is simply described by the title of a popular book Punished by Rewards by A. Kohn (Houghton Mifflin, 1993). The idea is that a reward (usually monetary) inherently reduces task interest and creativity. In other words they have the precise opposite effect to that they were designed to have. He lists six reasons for this assumption.

Pay is not a motivator – it has only a transitory impact on motivation. Also too little money can demotivate as it can almost be an insult. It does not mean that more money will bring about increased satisfaction & motivation.

Rewards Punish - this is because they, like out-right punishment, are manipulative. By making a bonus contingent on certain behaviours, managers are seen to manipulate their subordinates. This experience of being controlled is likely to assume a punitive quality over time.

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Rewards Rupture Relationships – Incentive programs tend to pit one person against another, which has negative repercussions .This threatens good teamwork. Rewards bring about internal competition not co-operation.

Rewards Ignore Reasons –Managers sometimes use incentive systems as a substitute for giving workers what they need to do a good job, like useful feedback, social support, and autonomy. Offering a bonus to employees requires much less input and effort.

Rewards Discourage Risk Taking – People working for a reward generally try to minimise challenge and tend to lower their sights when they are encouraged to think about what they are going to get for their efforts. Their focus is wrong.

Rewards Undermine Interest – Extrinsic motivators are a poor substitute for genuine interest in one’s job. If people feel they need to be ‘bribed’ to do something, it is not something they would ordinarily want to do.

Put simply, the thesis is this: people who have been given (explicit) rewards at work (such as performance-related pay) may work harder and produce more but it is of lower quality, contains more errors and reduces creativity. Rewards may make people less willing to take risks, be less playful and experimental and more mechanical.

When people begin to evaluate our work and explicitly reward some measurable output, the creative juices dry up. The creative process is replaced by ‘reward thinking’, which distracts individuals from the activity, thereby reducing the spontaneity and flexibility of performance.

What many popular critics have asserted is that in various educational and workplace settings the introduction of reward systems does more harm than good whenever creative performance is a desirable outcome.

Take the case of the creative writer scribbling at home on a new novel. Local children had for three days played extremely noisily in a small park near his study. The sound of their playing was simultan-eously loud, uncontrollable and unpredictable. What could he do: Ask (politely) that they quieten down or go away?; Call the police or the parents if he knew them; threaten them with force if they did not comply?; or pay them to go away?

Play is fun and can be creative: it is intrinsically satisfying and can be extinguished by rewards. In the story the writer went to the children and said, somewhat insincerely, that he had very much enjoyed them being there, and the sound of their laughter, and he was so delighted with them that he was prepared to pay them to continue. He promised to pay them each £1.00 a day if they carried on as before. The youngsters were naturally surprised but delighted. For two days the writer, seemingly grateful, dispensed the cash. But on the third day he explained that because of a ‘cash flow’ problem he could only give them 50p each. The next day he claimed to be ‘cash-light’ and only handed out 10p. The following day they got nothing.

True to prediction the children would have none of this, complained and refused to continue. They left promising never to return to play in the park. Totally successful in his endeavour, the writer retired to his study luxuriating in the silence.

He had rewarded the children for their creative play and hence stopped it. But is this true? Does pay for performance in R&D people, in advertising agencies and in marketing circles lead to less inventiveness? A recent careful analysis of all the existing data, plus careful experimental work, suggests this is not true. In fact the data show that if a (creative or analytic) person receives a tangible reward (money) that depends on completing a task to a particular quality stand-ard and then subsequently that reward is eliminated, the person spends as much time on the activity as he or she did before the reward was introduced.

Moreover, there are two reliable and robust effects of extrinsic reward on intrinsic interest. With verbal reward (praise), people spend more time on a task following the reward’s removal than before its introduction. Further, most people state that they like the task better after verbal reward or monetary reward that depends on performance quality. Reward for high creativity in one task also enhances subsequent creativity in quite different tasks.

In fact the only time when rewards have detrimental effects is when rewards occur on a single occasion without regard to the quality of performance (actual creativity) or the speed accuracy of task completion. It is alas true in business that there are occasions where people are rewarded irrespective of their real performance. Some compensation and promotion systems are, quite frankly, pretty insensitive to perform-ance so that employees can vary their performance (both ways) with little effect on tangible rewards. This definitely reduces effort and satisfaction and commitment.

For the old-fashioned behaviouralists the news is good. Rewards can be used either to enhance or diminish creative performance, depending on how they are used. Rewards presented occasionally and independent of performance may encourage individuals to believe that they have no control over the reward and they lessen their perform-ance. However, rewards presented repeatedly in a non-salient fashion for genuinely original work increase creativity and positive attitude to entirely different creative problems. A tangible reward that people see for successful work is likely to enhance their feelings of self-confidence.

Explicit promise of reward for creativity does increase that creativity, unless, of course, people believe that level of creativity is beyond their capability. Also, the unattractive combination of a great prize with great time pressure to find a solution may cause such anx-iety and passion that it disrupts the cognitive juices.

All this does not necessarily mean that intrinsic task interest – sheer personal love of the activity, whatever it is – has no effect on creativity or productivity. It is and will always be vital. But there is no such simple evidence that explicitly rewarding creative task perform-ance interferes with that performance. The secret lies in what is rewarded, when and why.

 

 

Adrian Furnham, Ph.D., is a professor of psychology at University College London and the Norwegian Business School.

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