Why Financial Rewards Are Detrimental to Performance

January 19, 2011 Katharina Lochner

The Surprising Truth About What Motivates Us

If you reward something, you get more of the behaviour you want, if you punish something, you get less of it. So rewarding the top performers in an organisation makes sense in order to improve their performance. Right?

Dan Pink says no. According to him, this is only the case when it comes to mechanical tasks. As soon as cognitive skills are involved and the task gets complicated and involves some conceptual, creative thinking, this scheme does not work at all. Therefore, Dan Pink suggests paying people enough to get the issue of money off the table. Once this is done, there are three factors that lead to a better performance and personal satisfaction:

  • Autonomy: the desire to be self-directed.
  • Mastery: the urge to get better at stuff.
  • Purpose: making a contribution.

Pink cites a number of studies from various research fields. The findings are also in line with many other studies on intrinsic and extrinsic motivation, as conducted for example by Edward L. Deci (1971), and with theories like the Self-determination theory by Deci and Ryan.

So, in order to improve employees’ performance, it is definitely important to pay them enough money so that they can live on it. But beyond, employers should create an atmosphere that allows their employees to be autonomous, to achieve mastery at what they are doing, and to make sure that they can find meaning in what they do.

About the Author

Katharina Lochner

Dr Katharina Lochner is the former research director for the cut-e Group which was acquired by Aon in 2017. Katharina is now a researcher and lecturer at the University of Applied Sciences Europe in Iserlohn, Germany. In her role at cut-e, she applied the research in organizational and work psychology to real-world assessment practice. She has a strong expertise in the construction and evaluation of online psychometric tools.

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