Why workplace reward programs don’t actually motivate employees

TLNT's 'HR essay' series returns - this time with Lisa Sharapata from the Arbinger Institute, arguing that rewards have zero impact on motivation, engagement and performance:

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Apr 23, 2024

When it comes to the perennial problem of keeping employees motivated in the workplace, a firm favorite of HR and people leaders is often gamification and/or reward programs.

Not only does concept seem straightforward – incentivize your team with rewards and employers will be able to watch their productivity levels soar – but many are enticed by the long term potential it provides.

And yet beneath this simple approach lies n inconvenient truth.

What if the tools we rely on to engage our workforce are actually disengaging them?

Insights from trusted sources like Deloitte and elsewhere point toward to this counterintuitive situation – that our reliance on rewards may (in fact), be inadvertently eroding our company cultures and hindering long-term success.

Moreover, the more we lean on these popular methods to engage employees, the more likely CHROs will actually fuel employee disengagement.

The paradox of external rewards

So what’s behind this?

There’s no doubt that at first glance, reward programs do look like a win-win.

But dig deeper, and the problems with them will start to surface.

Harvard Business Review argues that while rewards can deliver a quick boost, they often lead to a decline in interest in the task at hand over time.

This sentiment echoes earlier findings by psychologists Edward Deci and Richard Ryan, who found that external rewards can zap intrinsic motivation – the kind of motivation necessary to catalyze passion and creativity in the workplace.

This should be worrying, because US companies spend over $90 billion on non-cash employee rewards every year – which includes everything from travel to gift cards to points-based systems.

And yet a study by Deloitte found that up to 87 % of employee incentive investments have zero impact on organizational goals – things like fostering employee motivation, engagement, performance, and retention rates.

 Temporary compliance versus lasting commitment

The central issue with rewards is that they lead to temporary compliance, not lasting commitment.

What do we mean by this? Well, when a reward is no longer available, the motivation to perform can vanish as quickly as it appeared.

This is not the secure or sustainable foundation you want to build your team’s performance on.

To cultivate motivation and longevity, HR and people teams should strive to recognize and appreciate employees without turning it into a contest or game.

Blueprint for a reward-independent culture

Ultimately firms should be striving for a reward-independent culture. The reason should become clearer if we recall the main reason why 70% of organizational transformation efforts fail.

The answer is that you can’t change behaviors without changing mindsets first – and rewards programs do little to make headway on this front.

Remember, there’s a psychological toll that comes with a reward-based system.

It’s draining for leaders always to be dangling carrots or wielding sticks.

Employees, in turn, may start seeing their work as merely a means to an end; when the rewards stop coming, the enthusiasm often stops, too.

Backed by stats, an over-reliance on rewards leads to decreased interest in the activity being rewarded at best. At worst, it can lead employees to cheat or even lie.

Which takes us back to mindsets. Without a change in mindset, desired behaviors are often in conflict with our own perspectives, making it difficult or impossible to obtain the desired results.

The root cause of many organizational problems is that people naturally focus inward, prioritizing their own needs, challenges and objectives without an awareness of the impact on others – and the gamification of reward systems only exasperates these problems.

Empowering employees with a sense of accountability and ownership can naturally amplify their engagement with work and colleagues, fostering the desired supportive and collaborative workplace environment without a reward system.

Build connections to goals instead

Seeing the humanity in each person as a unique contributor to the overall success of the organization is key to leveling out reward.

Leaders need to tap into individuals’ strengths and help build a connection to the goals of the organization, their work, and their role within the team.

On a basic level, people need security and purpose, and want to feel they are growing as the organization grows.

Understanding an individual’s challenges and goals to be as important as your own, is much more likely to yield long-term sustainable results, than the short-term effect of a reward.

By addressing employee mindsets and working to collectively transform employees’ views to be more helpful to one another, an atmosphere conducive to productivity and innovation can be unlocked.

Sustaining employee engagement without relying on external rewards requires intentionally meeting the intrinsic psychological needs of a workforce, including autonomy, mastery, and purpose.

Leadership should set the standard 

Effective leadership in a reward-independent culture involves leveraging conflicts as learning opportunities, to fortify team dynamics, prioritizing authentic relationships for collective success, and creating an environment where top-tier talent not only thrives but also actively contributes to continuous growth and success.

Developing a naturally high-performing culture not because of the ephemeral allure of rewards but because of the enduring power of inspired leadership should be eminently possible.

The key to a sustainable high-performance workforce lies in the strength and development of its leaders and their mindset.

By focusing on mindset over behavior, organizations can create an environment where high performance is not achieved by dangling a carrot, but a natural byproduct sustained by a workforce that recognizes and celebrates the inherent satisfaction in work well done.

What we need is leadership that sees the humanity in others, supports the continuous growth and development of its people, and understands the complex motivations that drive high-output teams.

This is how you cultivate a resilient, innovative, and genuinely engaged workforce without the use of gimmicks, gamification, or reward-based systems.

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