The 6 Rules for Rewards

As I wrote yesterday, handing out rewards to employees is often implemented through bonuses. A contra-productive method that (usually) does more harm than good.

Fortunately, there is some good news. Rewards that trigger intrinsic motivation are more effective and cost way less. Such rewards can work for your organization, and not against it. Just make sure you take the following six rules into account:

  1. Don’t promise rewards in advance.
    Hand out rewards when people don’t expect them, so they do not change their intentions and focus on the reward. When acknowledgement of good work comes as a surprise, research says intrinsic motivation will not be undermined.
  2. Keep anticipated rewards small. If you cannot prevent people anticipating a potential reward, keep the reward small (and make sure they know it’s small). Why? Because the anticipation of a big reward is likely to decrease people’s performance. This might be because the stress of anticipation will interfere with people’s working memory.
  3. Reward continuously, not once. Every day can be a day to celebrate something. When people do useful work all the time, there’s always an opportunity for a reward.
  4. Reward publicly, not privately. Since the goal of giving rewards is to acknowledge good work, and have people enjoy it too, everyone should understand what is rewarded and why. Therefore a regular public reminder works better than an annual private one.
  5. Reward behavior, not outcome. Outcomes can be reached by a shortcut, while behavior is about decent work and effort. So focus on good behavior to learn people how to behave. When you focus on desired outcomes, people may learn how to cheat.
  6. Reward peers, not subordinates. Find a way for people to reward each other, because peers often know better than managers which of their colleagues deserve a compliment.

These six rules for rewards give you the best chance at increasing people’s performance and engagement, while encouraging intrinsic motivation instead of destroying it. In my experience, an incidental compliment during a meeting for a job well done satisfies all six criteria.

It’s not that difficult to make rewards work positively for your organization. And if you do it well, it’s more enjoyable too.

Kudobox-front miniThis post is part of my new article called the
Kudo Box. It has more suggestions for rewards and intrinsic motivation, including a list of literature references. If you want to stay up-to-date and receive all my upcoming articles, feel free to subscribe to my Management Workout mailing list.

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  • Mikko Sorvari

    Really good list, but be cautious with #4. When rewarding someone in public , make sure you don’t miss others that may have done some good as well. It can become demotivating for someone else that feels they done an excellent job as well, but it went un-noticed. I always try to find a way to reward the team rather than one individual in public forums.

  • Collin Rogowski

    I am a bit confused about #5. I read the Wikipedia entry on overcompensation you posted yesterday. It says:
    This study showed that, when rewards do not reflect competence, higher rewards lead to less intrinsic motivation. But when rewards do reflect competence, higher rewards lead to greater intrinsic motivation.
    Isn’t competence something about the outcome and not the behaviour? If I put a lot of effort in but still cannot accomplish the goal, my behaviour may be fine, but my competence isn’t. So I would think that I should *not* reward that…
    Also, is there a tension between your #1 and #3? If there’re regular rewards, aren’t people going to expect them?

  • Glen B. Alleman

    Rewards are not the same as bonuses or even commissions. Small rewards are called “spot awards” in the domain I work. They must be used carefully for actual exceptional performance. But even a $10 Starbucks card can go a long way.
    Many of these suggestions need a domain, are possibly too general, and most likely highly cultural
    #1 is suspect. We use rewards for advance performance – “when we finish this proposal and send it on its way to the customer, all of you get a 3 night stay at the Four Seasons Hotel for you and your significant other.” keeps us focused on a beneficial outcome.
    #2 Small awards are nice, but a “big win” is nice too. “We’ll be having a nice Win Party at Red Rocks in Denver, with Jonn Mayer playing after we’re awarded the $1B contract for our spacecraft. Works just as well as small StarBucks cards at the end of a hard week of proposal writing.
    #4 Public can be an issue if others think deserved the same when in fact they didn’t.
    #5 if the outcome from reached through bad behaviour, that would not be an acceptable outcome would it? Good behaviour wards works great for 7 year olds. From then on, the world expects outcomes. This is the “participant trophy” cultural we’ve created in the US. It’s moved to the workplace. “Gee dad I tried really hard to make the varsity cross country team, and look I got a really nice trophy showing I showed up to run. Get a trophy for the 1st 3 places in the race.

  • Tonino Lucca

    I just want to add that there is also the need to be sure that the rewards mechanism does not comes first.
    Let me quote from “the influencer, the power to change anything”:
    “Stories of well-intended rewards that inadvertently backfire are legion. The primary cause of most of these debacles is that individuals attempt to inflence behaviors by using rewards as their _first_ motivational strategy. In a well-balanced change effort, rewards come _third_. Influence masters first ensure that vital behaviors connect to intrinsic satisfaction. Next, they line up social support. They double check both of these areas before they finally choose extrinsic rewards to motivate behavior. If you don’t follow this careful order, you’re likely to be disappointed.”
    Moreover, experiments by Mark Lepper with childrens suggest that “rewarding people for engaging in an activity that is already satisfying may work against you.”
    It is called the “over-justification hypothesys”: “if people receive rewards for doing something they initially enjoy, they conclude the same thing an outsider might conclude. […] since they’re being rewarded for the task, it must not be all that satisfying (why else would someone offer a reward?), and therefore they’re are doing it for the bonus. […] Once the reward is removed, the person believes that the activity isn’t as much fun as he or she judget earlier, so he or she does it less often.”
    Another source with some examples like this is “Irrationality” by Stuart Sutherland.

  • Lynn Ferguson-Pinet

    I think the list is great, I would also caution #4, to reward publically. Some personalities love to be rewarded in public, some do not. That said a genuine thank you in a meeting for a job well done is likely a public form of acknowledgement all personalities would appreciate.

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