The Role of Extrinsic Rewards in Motivation

This article is an excerpt from the Shortform book guide to "Drive" by Daniel H. Pink. Shortform has the world's best summaries and analyses of books you should be reading.

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What role do rewards play in motivation? Have you ever done something purely for fun, then started getting paid for it? How did getting paid change how you felt about the work, and how motivated you were?

According to Daniel H. Pink, the author of Drive, rewards—specifically, extrinsic rewards—are only effective when the job is low-skill, routine and, monotone. However, when the job requires creativity and intelligence, extrinsic rewards actually diminish motivation and performance.

In this article, you’ll learn about the psychology behind rewards and motivation. Specifically, we’ll discuss why extrinsic rewards are ineffective in motivating performance in the long-term.

Rewards Decrease Intrinsic Motivation

Given a task without promise of pay, you might think it’s kind of interesting and worth doing just for its own enjoyment. Get paid to do it, and suddenly it’s not as fun any longer.

We’ve already seen research studies supporting this idea in the Introduction. 

Remember Tom Sawyer’s fence painting experience, when he’s punished with whitewashing a fence. When another boy walks by, Tom pretends to be loving his time. Painting the fence isn’t a punishment – it’s a privilege, something to be mastered only by artisans. The boy begs to help, but Tom refuses, further stoking the boy’s interest. Tom finally relents when the boy gives him an apple, and soon the neighborhood boys are all whitewashing.

Mark Twain wrote, “Work consists of whatever a body is obliged to do, and Play consists of whatever a body is not obliged to do.”

This idea is counterintuitive – if you enjoy something when you do it for free, then wouldn’t adding money only make it better?

Rewards require people to forfeit some autonomy – if a person is doing something by herself, she’s fully in control of her behavior. But once she starts doing it for money, someone else is pulling her lever, and she no longer feels fully in control of their lives.

Extrinsic rewards also quash the cognitive dissonance that comes with unrewarded work. Cognitive dissonance works like this – when volunteering, a person subconsciously reasons, “well I’m not getting paid for this work, so if I’m working hard, I must enjoy it.” Once a person starts getting paid, she instead reasons, “well, I don’t really enjoy the work, but it’s fine since I’m getting paid.”

Rewards Decrease High Performance

Researchers have found that financial incentives can decrease overall performance.

In one experiment, economists paid workers in rural India to play several games requiring motor skills (like throwing tennis balls at a target), creativity (unscrambling anagrams), or concentration (recalling a large number). Workers were given different levels of rewards – 4 rupees (one day’s pay), 40 rupees, or 400 rupees (5 months’ pay).

Surprisingly, the 40-rupee group performed no better than the 4-rupee group, and the 400-rupee group actually performed worse.

Rewards Decrease Creativity

In many jobs, creativity is important to find unobvious solutions to difficult problems. Research suggests that rewards decrease creativity, possibly because rewards narrow our focus – they speed us up when there’s a clear path (like doing a routine job on an assembly line), but they blind our peripheral vision.

In one experiment, participants were given a puzzle requiring creativity to solve. Here it is. You’re seated at a table and given a candle, tacks, and a book of matches.

Your goal is to fix the candle to the wall so that wax doesn’t drip on the table. (You can give it a try before reading on).

One experimental group was promised a reward if their times were in the top 25% of research subjects. The other group received no reward.

Surprisingly, the reward group took 3.5 minutes longer to solve the puzzle. Getting paid more seemed to cloud their creativity.

Here’s the suggested solution:

More examples:

  • Paintings that were commissioned were rated as less creative than non-commissioned works, despite being rated equally in technical quality.
  • Artists who were surveyed as less extrinsically motivated achieved greater success in professional art, possibly because they had more internal drive to push through tough times where rewards didn’t come easily.
  • Different funding styles lead to different rewards. The NIH evaluates projects independently, uses regimented controls like pre-defined deliverables and renewal policies. HHMI, on the other hand, awards investigators guaranteed support for 5 years, encouraging early failure and long-term success. HHMI investigators produce many more high-impact papers than their similarly-accomplished NIH counterparts.
    • (Shortform note: this may suffer from the confound that HHMI is far more selective in its funding than the NIH (selecting only 20-30 researchers per year), and this may not be properly controlled for in the study.)

Rewards Decrease Good Behavior

People naturally want to do good things. Counter-intuitively, paying them for good behavior reduces their morality.

A study of Swedish blood donors found that paying people about $7 for each donation reduced the percentage of women who were willing to give blood to 30%, down from 52% in the control unpaid group. (Men were unaffected by pay.)

  • Interestingly, a third group was given the option of donating the $7 to charity. Here the donation rate remained unchanged, at 53%. 
  • A related study found that giving blood donors a day off work increased donations.

What explains these effects? Donating blood is an inherently altruistic task, giving a “feeling that money can’t buy.” Removing barriers to altruism, like giving a day off, increased its success rate. But directly paying for it reduces internal motivation. 

Rewards Increase Bad Behavior

Rewards can promote cheating. Rewards narrow focus to whatever it takes to get the reward, at the expense of the bigger picture.

Examples:

  • Corporate scandals seem to be driven by short-term rewards  – Enron cooked its books to meet short term revenue goals. (Shortform example: Wells Fargo imposed sales quotas and bonuses for opening accounts, and frontline workers were caught without customer permission)
  • A classic study showed that when child care centers charged parents for picking up their child late, the delinquency rate increased. One explanation is that previously, parents were driven to treat the caretakers fairly, partly in return for caring for their precious children. But a fine reduced the relationship to a transactional level, where parents could now make a rational decision that the fine was worth their time in being late.

In contrast, intrinsic motivation views the task as a reward in itself. When the goal is to do one’s best and grow, it’s impossible to act unethically or chat, because the person you’ve disadvantaged is only yourself.

Rewards Create Addiction

Just like a drug, short-term rewards can induce a large effect initially, but two perversions happen over time: 1) people habituate to the reward and need more of it to induce behavior, and 2) when the reward is withdrawn, the intended behavior shuts off.

From a physiological standpoint, this is unsurprising, since task rewards trigger the same dopaminergic system that respond to drugs.

Like Tom Sawyer realized, giving a reward for doing something inherently signals that it’s an unpleasant task (people need to get paid to do this). And once you’ve given a reward to someone for doing something, there’s no going back – the person won’t agree to do the task unpaid from that point on.

Studies also show that activation in the brain’s nucleus accumbens, part of the dopaminergic system, increases risky choices and risk-seeking mistakes. This may partly explain why casinos give their participants rewards (free drinks, surprise gifts) to further spur risk-seeking in gambling.

Rewards Encourage Short-Term Thinking

Extrinsic rewards can narrow the focus of our decision making to short-term effects, ignoring long-term benefits.

Researchers found that public companies that devote more resources to quarterly earnings guidance deliver lower long-term growth rates. The causes are unclear but may include:

  • Earnings-obsessed companies invest less in R&D, especially cutting R&D to avoid missing forecasts
  • Companies that focus on short-term growth do so at the expense of long-term stability
  • Companies that focus on quarterly earnings reports do so because they are already in ill health, and they want to continue building confidence

(Shortform note: contrast this with the company Amazon, which famously largely ignores quarter-to-quarter earnings to reinvest into further growth and market domination.)

This short-term thinking is important when rewarding people for activities that are ideally done over the long term, like education and personal health. If students get a prize for reading three books, they may focus more on the short-term reward and less on the benefit of long-term love of learning.

The Role of Extrinsic Rewards in Motivation

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Like what you just read? Read the rest of the world's best book summary and analysis of Daniel H. Pink's "Drive" at Shortform.

Here's what you'll find in our full Drive summary:

  • Why you may be feeling unmotivated and unsatisfied at work and in life
  • Why financial rewards aren't enough to keep employees motivated anymore
  • The three components of intrinsic motivation

Darya Sinusoid

Darya’s love for reading started with fantasy novels (The LOTR trilogy is still her all-time-favorite). Growing up, however, she found herself transitioning to non-fiction, psychological, and self-help books. She has a degree in Psychology and a deep passion for the subject. She likes reading research-informed books that distill the workings of the human brain/mind/consciousness and thinking of ways to apply the insights to her own life. Some of her favorites include Thinking, Fast and Slow, How We Decide, and The Wisdom of the Enneagram.

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