Throwing more cash at employees is never the long-term answer to improving engagement and motivation

Many business leaders we deal with ask us time and time again: how can I motivate my workforce when I can’t pay them any additional salary? A very short-sighted approach to dealing with a very complex issue around motivating others.

Behind every unmotivated employee is a leadership problem waiting to be solved. Yet many leaders see motivation as a game of rewards and punishment. Forget the cash. Forget the threats. To engage today’s workforce, a leader is well advised to seek the heart of what moves people: their three basic psychological needs.

A Brief History of Motivation Reward

To glimpse the future of motivation, it may be helpful first to glance at the past. A Brief History of Motivation Reward and punishment are as old as the human race. For our tribal ancestors, survival was a critical motivator. But in today’s workplace, where physical safety isn’t always the immediate first concern, how much do we really know about what motivates employees? In fact, science has explored this question for a hundred years.

In the 1900s, Frederick Taylor developed what became known as Scientific Management, which held that workers are primarily motivated by pay, and the main job of leaders is to set and enforce work standards. Taylor’s work, though it oversimplified human dynamics, set a standard for the rigorous study of motivation in the workplace. In the 1940s, B.F. Skinner offered a different theory of motivation: Behaviourism, often called the “carrot and stick” - Rewards (the carrot), motivate good behaviour, and punishment (the stick), discourages bad behaviour. Behaviourism held that because motivation originates outside the individual, leaders must maintain tight control of employee activities. In the 1960s, Abraham Maslow, Frederick Herzberg, and others began to explore internal motivators—including satisfaction in the work itself. Their work found that while rewards and threats could boost short-term performance, employees wanted more from work. So, these researchers asked, “Is there a better way to motivate employees that doesn’t rely on rewards and punishment?”

Observing these problems, many leaders assume that employees, having secured food and shelter, become passive. So, these leaders try to control employees with threats of punishment or external rewards, including bonuses, wage incentives, or promotions.

While it’s safe to say that many leaders will continue using these methods to motivate employees, literally scores of peer-reviewed studies since the 1970s have confirmed the negative impact of external rewards. Among the startling findings: 1. Rewards consistently undermine sustained, long-term motivation and performance. 2. Rewards for something employees already like to do especially undermine motivation and performance. 3. Rewards make it more difficult for employees to be creative and solve complex problems.

Consider a simple example. In the 1993 Wimbledon final, Jana Novotna led the great Steffi Graf 6-7, 6-1, and was serving at 40-30 for a 5-1 lead in the final set. But Novotna double-faulted, then lost the game, and 10 minutes later lost the match. So what lead to Novotna’s collapse at the end of the match?

Rewards bring heightened anxiety

This Wimbledon championship would bring a major external reward: public adulation for joining an elite group of the greatest players in tennis history. 2. Novotna no doubt enjoyed playing tennis, especially winning tournaments. 3. Surely it was a complex task to beat Steffi Graf, who ended her career winning 107 titles, including 7 Wimbledon championships. As on the tennis court, so it is in the workplace. Attractive rewards— Dr. Deci calls them “seductive” rewards—heighten anxiety, cause people to feel controlled, and erode performance. Studies and daily experience confirm that people will certainly work to earn an external reward (whether money, promotion, perk, or acclaim). Once they achieve the goal, however, motivation falls off sharply. So, in the workplace, any positive short-term effects of bonuses, deadlines, surveillance, threats, and other external motivators often mask their well-documented negative impact on immediate performance and long-term employee engagement.

Do Rewards ensure continuous performance?

Various research over several decades has confirmed a number of surprising facts about the impact on the performance of external rewards or incentives.

  • Rewards consistently undermine sustained, long-term motivation and performance. While rewards give a brief boost, motivation falls off sharply once people get the reward. Further, internal motivation suffers if employees feel controlled by incentives. When employees learn to expect rewards, performance declines in their absence. And excessive monetary rewards can drive unethical behaviour.

  • Offering rewards for something employees already like to do undermines motivation and performance. Employees may feel controlled, not motivated, by rewards offered for something they like to do. These rewards can undermine enjoyment, effectively turning “play” into “work.”

  • Rewards make it more difficult for employees to be creative and solve complex problems. Incentivizing creativity—especially to meet deadlines—can slow progress due to pressure and stress. External rewards narrow employees’ focus to a drive to the finish line, closing off the making of new connections so vital to creativity

So why do many employees feel disengaged at the prospect of job-related growth and development? And why do many leaders believe that developing others is too much effort for too little return? Repairing this disconnect requires a fundamental rethinking of how leaders develop their employees.

To realize potential and achieve business outcomes, it’s vital for leaders to match the employee’s need to demonstrate competence with the organization’s need to succeed. Offering Rewards and Recognition As earlier noted, external rewards—cash incentives, trophies, incentive trips, promotions, time off, and so on—are strong medicine that, if poorly prescribed, undermine internal motivation.

But are rewards always bad? Not at all, if used in need-supporting ways. So effective leaders avoid competitions, for example (where a “loser” may be 1 percent less effective than a “winner”), and offer rewards that:

  • Acknowledge a contribution, rather than control future behaviour.

  • Appear equitable to employees.

  • Appear to employee’s worthy of the effort made or results attained.

The value of Recognition

While rewards can support internal motivation, they pale in contrast to recognition, defined as spoken or written acknowledgment of an individual or team effort or result. To support the three needs, effective recognition is:

  • Genuine

  • Timely

  • Short

  • Interactive

  • Specific

  • Frequent

Like other coaching skills, offering recognition takes reflection, observation, and regular use to realize the business and human benefits of needs-based leadership.

The Payoff of Internal Motivation confirms the many benefits of a workplace in which employees can satisfy their three basic psychological needs. In summary, research demonstrates improved:

  • Job satisfaction

  • Learning

  • Engagement

  • Trust

  • Self-esteem

  • Loyalty

  • Thinking ability

  • Dedication

  • Creativity

  • Performance

To realize these benefits, leaders need not delve deeply into the vast research supporting Self-Determination Theory. It’s enough, really, to understand the basics.

To promote increased engagement, improved performance, and measurable business results, leaders do need to master the practical skills for shaping a workplace in which internal employee motivation can become a daily reality.

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