Editor’s note: You know we love incentives here at PeopleScience. It’s a whole thing for us. Organizations’ use of Behavioral Science has mostly focused outward – product design, user experience, consumer decision-making – but its potential to explain, impact and change internal, organizational issues is the real holy grail. Where do we see the science of human behavior every day? The place we spend 8 or so hours… every day. What motivates us, why and how can we do better – as employees, managers, teammates and organizations – to help everyone live a happier, healthier and more productive professional life? Good questions. Let’s find some answers.

Let’s start with an experiment: We offer you something of value to do a task like reading this article to the end. You could get money! Or pizza! Or praise! Hurrah! You say “OK.” You do the task. You get the reward. And then… what happens?

Did that offer make you work harder, read closer, perform better? Did it make you feel more engaged, happier, driven, accomplished, motivated to do more over time? Or will you wind up simmering with a growing sense of disillusionment, disinterest, and even…resentment for being offered anything at all?

The short answer: It depends. We’re all motivated by different things, after all.

The question of how to incentivize humans to perform — and to perform better — is probably as old as the concept of work itself. And it often looks like this: A company wants more sales, so it dangles a sweet carrot as reward for salespeople who hit their targets. If those targets are met, the incentive appears successful…But things can quickly sour.

Because it’s extremely difficult to know if incentives are as effective as we think they are. What people think they want — whether that’s more money, more praise or more vacations to Aruba — isn’t always what they really want. Surprise! And sometimes, the promise of reward can have insidious and devastating consequences. Like rubbing a genie’s lamp, you gotta be careful what you wish for.

It’s extremely difficult to know if incentives are as effective as we think they are.

Which is to say, this knot isn’t easily untangled. Incentives can be really effective for motivating the completion of simple tasks. Like getting vaccinated, for example: A review of multiple studies across the UK, the U.S. and Nicaragua reported that groups receiving incentives “were up to three times more likely to be immunised and had overall immunisation rates up to 17% higher than comparison groups.”

You can see this value exchange at play in everyday life. Tell nephew Timmy to take out the trash and he might grumble or perform a dramatic strike. Tell him there’s ten bucks in it for him, and suddenly there’s a pep in Timmy’s garbage-escorting step. And now you’re his favorite aunt …that is, until you’re not.

What people think they want isn’t always what they really want.

What about money?

Money can be a really powerful incentive. A good salary offer can attract great talent. But beyond meeting our basic need to feel we’re getting paid a fair amount for the work we do, money can cause a lot more harm than good over time. As Daniel Pink puts it in Drive: The Surprising Truth About What Motivates Us, “If someone’s baseline rewards aren’t adequate or equitable, her focus will be on the unfairness of her situation and the anxiety of her circumstance…You’ll get very little motivation at all. The best use of money as a motivator is to pay people enough to take the issue of money off the table.” (Rain check on that universal basic income discussion, though we’d love to have it — Jeff wants us to stay on topic. [Editor’s response: If you pay me to let you have the discussion…])

Just how bad could money-as-motivation get? Well, remember Wells Fargo, circa 2015? Executives wanted a way to measure how well employees were maintaining great — and long-lasting — relationships with their customers. They had an idea: measure how many new accounts an existing customer opens. In theory, a customer who comes in for a mortgage will be so satisfied with the bank that they’ll come back when they need to refinance, open a savings account or start a college fund.

New accounts? It’s an easy thing to measure. And employees understood the charge: get as many new accounts open with existing customers as possible. Logical on paper? Perhaps. But you know where this is going.

The results were disastrous. Agents secretly opened fake email accounts. Applied for 565,000 credit cards. All without customer consent. The cost? At least $185 million in fines, over 5,000 employees fired, and additional criminal and civil suits growing to $3 billion. There is also, of course, the more devastating and impossible-to-measure decay in consumer trust and confidence.

Were these actions illegal? Yup. Unethical? You bet. Were these employees bad people? It might be tempting to jump to that conclusion. But, as Pink puts it, "Bad things can happen ethically when motivated by money...crappy products, lame services, uninspired places to work."

As in, when money is on the table, you might not want to look in the mirror.

OK. OK. It’s not all bad

There is good news. “Research suggests that the desire to help others is a need deeply rooted in human nature,” says Lilan Anik and team. We want to do good. And there are of course times when money can be a motivator for good. When that money isn’t for you, and it moves through you. It’s basically “reciprocity by proxy,” where you feel more motivated to donate your bonus to a charity, for example. (Editor’s note: Open the super-relevant “Generosity’s Bottom Line” in another tab to read later.)

Researchers from Harvard Business School, the University of British Columbia and the University of Liege found that bank employees who were given vouchers worth $25 or $50 to give to a charity of their choice “were happier and more satisfied with their jobs” compared to people who did not get — and hence did not give — the charity vouchers.

So, we want to do good, but bad habits can be hard AF to break. Like forgetting to wash our hands. (OMG, wash your hands tho!) Even when we promise to wash our hands, and our very lives or life depends on washing our hands — and even if WE ARE BEING WATCHED — we STILL find it hard to do what we promise.

That was the case for medical staff in one experiment. Staff were told to wash their hands before seeing patients. Everyone knew hand-washing was important. Everyone agreed they would do it. And around the workplace, signs told workers about the dangers of NOT doing it.

The staff were even told cameras would be installed to observe their compliance…and still, only 10% (?!) washed their hands before seeing patients (!?!?!).

It took an unexpected intervention to change behavior.

We want to do good, but bad habits can be hard AF to break.

Digital signage was installed in the hallways, and when employees washed their hands, they’d see notes of praise (“Good job!” “You did it!”). Within four weeks, compliance reached nearly 90%. And why would that be? “Positive feedback triggers a reward signal in the brain, reinforcing the action that caused it, and making it more likely to be repeated in the future,” says Tali Sharot in Harvard Business Review. Plus, when you see your peers doing it, you’re more likely to do it too — thanks to the power of social proof.

Praise or recognition — being seen and acknowledged for your work — might be the most powerful motivator of all, but that praise still looks different for everyone. For instance, while some argue men perform better when rewarded with personal status/recognition, others argue that women are more collaborative and prefer team-based pay incentives. Still others “see sex differences in various settings, including the workplace — but those differences are not rooted in fixed gender traits.” Turns out, there is no one-size-fits-any-specific-group formula.

“Positive feedback triggers a reward signal in the brain, reinforcing the action that caused it, and making it more likely to be repeated in the future.”

Praise can be effective… or a death-knell to performance

In a study conducted by Duke University, praise turned out to be the most effective performance enhancer for workers tasked with creating a specific number of chips within a week. (Fun fact: Pizza, second to praise, was a better motivator than money – and money-as-motivator led to a 13% drop in performance by the end of the week.) 

But praise can backfire when people are performing something they love in exchange for any reward at all. Let’s say you’re a kid who likes to draw. One day, you’re offered a reward, a "Good Player" certificate for drawing. You draw, you get the certificate. And two weeks later? You just. Don’t. Feel. Like. Drawing. That’s what researchers discovered with actual kids, and what happens is what Pink calls the Sawyer Effect: When that supposedly fun thing gets rewarded, it’s no longer fun. The dangling carrot can kill (or crowd out) our intrinsic motivation.  (Editor’s note: You should definitely read our piece on motivation grounded in youth sports, “It’s Not Whether You Win or Lose, It’s How You Coach the Game.”)

Or when the task requires more cognitive load than something more straightforward. Pink calls these simple, straight-forward tasks algorithmic. Once tasks are more complicated, a simple reward can also take you off your game.

Trust us, we don’t have all the answers.

There is one thing that every human fundamentally craves and requires to perform at their best: psychological trust.

“People don't give a sh*t about foosball and beer on tap if they don't feel psychologically safe,” Lori Eberly, licensed clinical social worker and executive coach, told us when we asked her about incentive programs. (We’d also love to discuss the workplaces Silicon Valley has unleashed on us all, but you know, there’s Jeff. [Editor’s sigh: Just Venmo me.])

Case in point: After a two-year study on team performance, Google noticed that the highest performing teams “have one thing in common: psychological safety, the belief that you won’t get punished when you make a mistake.” And what happens when you feel safe to speak your mind, get creative, and experiment? “Just the types of behavior that lead to market breakthroughs.”

Google noticed that the highest performing teams “have one thing in common: psychological safety.”

When you trust people to use their time well, they just might surprise you. In the case of Atlassian, a software company, employees are given one day a week to work on anything they want. That single day of pure autonomy leads to fixes, software updates and new product ideas that “would never otherwise emerge.” As, Wendy Smith, Global Director of Talent Enablement of Sigura puts it, “People want to feel like they’re learning something, like they have control over their day--and are trusted to do what they need to do.”

This autonomy of choice can apply to your incentive programs, too. Like using a points system allowing workers to select a reward most valuable to them. In the words of BMC Public Health, “Offering people a reward/incentive helps them align to their action with such preferences. In this way, incentives enhance their autonomy to act according to their true underlying preferences.”

At Carlson Companies, employees were given the choice of rewards for which they could redeem points. VP of Human Resources, Charlie Montreuily, told the SOURCE that replacing certificates with a point program “In the first year of the point program, participation tripled.” And what did employees choose most? Time off. “It’s the ultimate reward.”  (Editor’s note: See also our whole Rewards category.)

Even the case of Wells Fargo, one might argue, came down to a lack of psychological trust. “Its a psychological safety story because from what I learned, people really did not feel it was safe to push back,” says Amy Edmondson in this HBR interview. Had they felt free to speak up, maybe the metrics might have changed. Maybe lines wouldn’t have been crossed…

Bottom line on boosting performance? Trust in your people. Let workers manage at least some of their own time. Allow them to improve skills they’re already interested in. Give them a sense of purpose. (Editor’s note: Why am I even here? Also, read the related article, “Why Am I Even Here?”)

Profit isn’t everything, and cash isn’t king… at least not when it comes to getting the best out of people. (Editor’s note: On point! Read “How We Tested Whether Cash is King” for more.)

“Start treating people like people,” Pink says. “They’re not horses. Stop looking at carrots and sticks. We can make us better off, and make the world a little better.”

And sorry to break it to you. There’s no pat answer to finding an incentive program that works – or works over the long term – for everyone. Because humans aren’t robots, and we’re all wired a little differently. In a 2015 study conducted by the Incentive Research Foundation, 99% of 425 respondents possess a unique set of reward preferences. 

There’s no pat answer to finding an incentive program that works – or works over the long term – for everyone.

In the end, to find what works best for the humans who work with you, you’ll just have to start experimenting.  (Editor’s kaboom: “Lead Like a Scientist.”)