How Rewards Can Backfire and Reduce Motivation

Charlie Munger often talks about the importance of setting proper incentives for aligning management with shareholder interests. As Charlie would say humans have a tendency to “rig systems”. Below is an article on how rewards can often backfire and reduce motivation.

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Introduction (Via PsyBlog)

Surely one of the best ways to generate motivation in ourselves and others is by dangling rewards?

Yet psychologists have long known that rewards are overrated. The carrot, of carrot-and-stick fame, is not as effective as we’ve been led to believe. Rewards work under some circumstances but sometimes they backfire. Spectacularly.

Here is a story about preschool children with much to teach all ages about the strange effects that rewards have on our motivation.

Excerpt (Via PsyBlog)

It’s not only children who display this kind of reaction to rewards, though, subsequent studies have shown a similar effect in all sorts of different populations, many of them grown-ups. In one study smokers who were rewarded for their efforts to quit did better at first but after three months fared worse than those given no rewards and no feedback (Curry et al., 1990). Indeed those given rewards even lied more about the amount they were smoking.

So Whats Going On?

So, what’s going on? The key to understanding these behaviours lies in the difference between intrinsic and extrinsic motivation. When we do something for its own sake, because we enjoy it or because it fills some deep-seated desire, we are intrinsically motivated. On the other hand when we do something because we receive some reward, like a certificate or money, this is extrinsic motivation

Click Here To Learn About How Rewards Can Backfire and Reduce Motivation