Giving employees an extra financial incentive or bonus for work has a long history, but is it effective? A study on extrinsic and intrinsic motivation reveals how the carrot and stick approach can backfire.

In the early 1970s, Mark Lepper and his team of researchers at Stanford University conducted a significant study into the impact of extrinsic rewards on performance. Specifically, Lepper tested whether prizes influenced the behaviour of young children.

A brand-new activity was introduced to the children at a nursery. The teachers issued the children with white artist’s drawing paper and brand-new marker pens; the children were given time to draw with these novel materials. They had never done drawings with marker pens before. Predictably, the children took to the activity with relish. But after exactly one hour, the materials were whisked away to the disappointment of the children.

Several days later, one of the researchers returned to the class and randomly divided the class into two groups to continue the new drawing activity. One group of children were taken to another room. They were given the opportunity to continue their drawings, just as they had done before. After an hour, the researcher thanked the children in this group and took away the art material and their drawings.

On the other hand, the second group of children were each offered a prize for drawing their pictures. It was explained to this group that some special prizes would be given to the children who drew excellent pictures. This control group was given the same amount of time (one hour) as the other group to complete their artwork. At the end of the session, the researcher thanked the children as he’d done with the other group and, as promised, he handed out a prize to each child.

One week later the researchers returned to the classroom. The afternoon period consisted of ‘free time;’ the children could choose what they wanted to do with their time. The special paper and marker pens were placed on the tables and easily accessible for the children. However, the children had other options too. They could go outside and run around in the playground. They could play with the toys in the classroom. Or they could return to the drawing activity. The researchers observed the time the children spent on their chosen activities. To what extent would the prizes given to the children in the control group affect their choices and behaviour? The researchers assumed that the children in the control group, who had received prizes, would spend more time on the drawing activity.

But that didn’t happen!

Extrinsic motivation

The result was one the researchers didn’t foresee. Their findings challenged conventional wisdom about parenting and education. The children who received the extrinsic rewards for their art work, chose to spend less time drawing than those who weren’t rewarded. Conversely, the children who didn’t receive a prize chose to spend more of their discretionary time on the drawing activity. The children who were rewarded seemed reluctant to continue with the activity without the promise of a further reward. The initial reward paradoxically reduced the children’s motivation rather than increase it.

Intrinsic motivation

But what was even more surprising is this: The artwork of all the children was evaluated by a group of independent judges with no knowledge of the experiment. The result was that the pictures drawn by the children who were rewarded were evaluated as less competent than the pictures drawn by the unrewarded group.

So, in summary: The children who received an extrinsic reward spent less time drawing when given a choice and when they were rewarded, they put in less effort too.

The limit of rewards

Extrinsic rewards are limited in their ability to promote higher levels of performance. In some cases, they’re even demotivating. Most people want more from their work than promises of a bonus. For many, it can be a vehicle for personal growth, wellbeing, cultivating a sense of belonging, and providing a sense of purpose and direction in one’s life.

When incentives are used to improve performance, they can unintentionally take the employee’s attention off the work the reward is designed to enhance. The promise of a bonus, shifts the employee’s focus from the task to the prize. The work, in other words, becomes the means to the outcome – a reward.

With a bonus top-of-mind, it’s common for the employee to cut corners, do whatever it takes, or even cheat, to get their hands on the prize. As well intended as extrinsic rewards are – and as effective as they can sometimes be – they have a chance to backfire.

Using monetary incentives to induce greater performance is, however, part of the DNA of many workplaces where employees are seen as cogs in the machine. The carrot and stick are the levers to reinforce orthodox work practices.

Despite evidence to the contrary, we continue to see this motivational strategy as the answer to extracting higher performance. We still endeavour to motivate employees with a suite of inducements and apply sanctions when predetermined behaviour is not met. Work has transformed. But the way we try to kindle performance hasn’t.

This article is an edited exert from Dr Tim Baker’s latest book, “Performance Management for Agile Organizations: Overthrowing the Eight Management Myths That Hold Businesses Back”.