Reward Incentives: 20 Reasons They Don’t Work

This article is an excerpt from the Shortform book guide to "Carrots and Sticks Don't Work" by Paul Marciano. Shortform has the world's best summaries and analyses of books you should be reading.

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What are the top 20 reasons why employee reward incentives don’t work? What are the different types of reward incentives that employers offer?

In his book Carrots and Sticks Don’t Work, Paul Marciano argues that traditional employee reward incentives such as bonuses and recognition programs don’t actually improve employee performance. Marciano compares reward incentives to dangling a carrot in front of a mule to get it to move.

Here are the 20 reasons why employee reward incentives don’t work.

Reward Incentives Don’t Work

The book Carrots and Sticks Don’t Work covers 20 reasons that traditional employee reward incentives fail to improve employee performance. As defined here, rewards are primarily monetary and given to select top performers for meeting metrics (picture bonuses for exceeding sales quotas). They’re also commonly considered performance bonuses. Rewards can also be recognition programs, including recognizing employees publicly or giving awards.

In simple terms, think of rewards as carrots designed to lure people into performing the desired behavior.

1. Rewards fail because they are short-term.

Rewards programs accomplish specific goals in a short period of time. They don’t set up longer term impacts. Diets don’t lead to long term behavior until they become ingrained as healthy eating.

2. Rewards don’t work if the person doesn’t want them.

If the worker doesn’t want the carrot, the behavior won’t be reinforced. For instance, someone may get vacation days she doesn’t use, or she doesn’t want to be recognized as the Monthly Peppiest Employee. In some cases the worker may intentionally lower effort to avoid the reward.

3. Rewards are too narrowly focused.

Rewards programs often target specific narrow goals rather than broader behaviors. For instance, companies often reward making sales at the expense of teamwork, trust, and customer satisfaction. 

(Shortform note: recall how Wells Fargo paid narrowly-focused bonuses for creating new accounts, leading employees to defraud bank customers. Had they focused rewards on larger goals like customer satisfaction or word-of-mouth referrals, they would have better avoided the bad behavior.)

4. Rewards focus on the wrong dependent variable.

They focus on the results of behavior, rather than the systems and processes that lead to success in the first place. Imagine rewarding a basketball team for winning games rather than the fundamentals of teamwork, communication, and physical training. The team might be motivated, but they lack the foundation to succeed.

5. Goals can limit performance.

Fixed goals like sales quotas suggest an upper limit. Once an employee reaches the goal, they have little reason to push harder. Instead, you want workers to keep improving and pushing past their limits.

6. Rewards are often administered inconsistently and unfairly.

Inequity is especially frustrating to employees. For managers, having to choose how and to whom to dispense rewards invites criticism of favoritism. Some people have an unfair advantage (like seniority) and take the rewards. 

So why not use a % improvement metric, like rewarding people for the % improvement on their performance rather than an absolute improvement? This is demotivating to top performers, who are already squeezing out all they can, and % on their already high improvement can be hard. It also invites manipulation of sinking your sales numbers one quarter to get a big boost the next. 

Often, reward program guidelines are unclear. If your company gives out an award for being a team player, what does being a team player actually mean? If you try your best one time to get a reward, but don’t get it because of unclear guidelines, then you’re going to stop that good behavior.

7. Rewards add stress for supervisors.

Managers already work hard. Now you add something else that risks politics and dividing the team to their plate. 

8. Reward programs foster cheating.

The higher the stakes, the more you invite unethical behavior. 

(Shortform note: recall again how Wells Fargo paid narrowly-focused bonuses for creating new accounts, leading employees to defraud bank customers. 

9. Rewards destroy teamwork.

Limited rewards invite a zero-sum game approach. If your colleague wins, that means you lose. This promotes competition and undermines teamwork. 

What about team based programs? This may work within a team, but it doesn’t reduce inter-team competition. Also, the top performers will feel annoyed at picking up the slack for underperforming colleagues.

10.  Rewards cover up ineffective managers.

Effective supervisors don’t need programs to motivate their employees. If your employees are unmotivated, this is a management problem. Once you remove the rewards program, the bad managers will find it hard to get their teams to do anything.

11. Rewards programs often offer a weak reinforcement schedule.

Rewards in operant conditioning work best when they are tightly coupled in time to behavior. A good behavior rewarded immediately is established more firmly (think of giving your dog a treat immediately after he obeys a command).

However, most companies separate rewards far from the behavior, such as end-of-year bonuses. Even if it may reward work done in January of that year, it’s too far to solidify the behavior in the employee’s mind.

Furthermore, rewards work best when they’re given unexpectedly and have an unknown amount. If employees come to expect rewards, like a standard end-of-year bonus of 20% of their salary, this will cease to reinforce the behavior as strongly. 

12. Giving gifts is not a reinforcement program.

Giving sudden gifts not conditional on behavior is not reinforcement. They don’t change behavior since they’re not tied to behavior.

13. Rewards reduce creativity and risk taking.

People tend to be risk averse, and if trying out a new strategy means losing out on a reward, they’ll stick to the tried and true.

14. Extrinsic rewards reduce intrinsic motivation.

Increased rewards diminish the perceived value of the task. The worker more thinks that she’s doing the work for the rewards, rather than for the work itself.

In the opposite direction, if the worker is paid little for the task, they tend to enjoy the task more (they must resolve the cognitive dissonance that they’re doing the work for such little pay, that they must love the work instead). 

15. Rewards encourage the wrong behaviors.

Humans are endlessly creative at meeting incentives. Often you may find that you’re reinforcing unintended behaviors. For instance, rewarding top sales may encourage stealing of sales leads.

(Shortform note: A common antidote to this is use of countermetrics, like rewarding both efficiency and quality so neither comes at the expense of the other.)

16. In some programs, everybody’s a winner and gets rewards.

In some programs, everyone gets a similar sized bonus, regardless of how well they do. If the bar is set so low that everyone wins, then you draw everyone down to the lowest common denominator. Why work harder if your extra efforts are not valued?

17. Rewards programs can feel manipulative.

Your top employees are often motivated to do a good job as a moral quality. They want to do a good job for its own sake, and they feel manipulated when you dangle awards in front of them. The top performers also recognize that rewards are used to incentivize worse performers to do better, which is frustrating to high performers.

18. People who build rewards programs are generally not experts.

HR practitioners tend to be generalists and aren’t deep experts on workplace psychology. Thus it’s hard for them to determine the most effective workplace practices.

19. Rewards programs have no impact on workplace culture.

Culture is a set of communal values and expectations that are long-lasting. By virtue of being short-lived, programs do not improve culture.

20. Reward programs decrease overall motivation.

Who tends to win performance rewards? The top performers. Do they need more recognition and motivation to do well?

What does this do to the rest of the performers? It lowers performance – what’s the point of trying if you’re not going to get the reward?

Reward Incentives: 20 Reasons They Don’t Work

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  • How to motivate your employees and teammates to do a better job
  • How to know if you're a terrible manager
  • Why the carrot and stick motivation model doesn't work anymore—and what to do instead

Hannah Aster

Hannah graduated summa cum laude with a degree in English and double minors in Professional Writing and Creative Writing. She grew up reading books like Harry Potter and His Dark Materials and has always carried a passion for fiction. However, Hannah transitioned to non-fiction writing when she started her travel website in 2018 and now enjoys sharing travel guides and trying to inspire others to see the world.

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