Author Alfie Kohn, described as America’s most outspoken critic of competition, writes: ‘Punishment and rewards are two sides of the same coin. Rewards have a punitive effect because they, like outright punishment, are manipulative. “Do this and you’ll get that” is not really very different from “Do this or else!”

For something that is meant to motivate and inspire people, this sounds pretty bleak. Are employee incentive programmes back-firing?

Studies show that plenty of companies increase their productivity by implementing reward programmes. True, but most of these studies are quantitative in nature: rewards motivated employees to do things faster or to do more things.

When it came to the quality of the performance, however, studies found no indication that incentive programmes had made a difference. In fact, sometimes people performed worse when they were motivated by an external reward such as money.

Too often, these carrot-and-stick systems end up achieving the opposite of what they were created to do. Rewards end up stifling creativity, creating bottlenecks, and reducing efficiency.

If you think about it, the kind of rewards offered at our workplaces don’t sound very different from the ones we are offered in school. You excel in something, you get a reward. You perform badly at something, you don’t get a reward.

In designing ways to motivate and engage employees, many companies miss out on what bestselling author and career analyst Daniel Pink calls “our innate need to direct our own lives, to learn and create new things, and to do better by ourselves and our world.” When people are motivated by intrinsic factors, their drive comes naturally and sustains itself.

How can businesses who want to stay ahead of the curve rethink the idea of rewarding employees – while keeping employees satisfied, happy, and engaged? Here are some ideas:

1. Meet their real needs.

Most people would rather take flexible hours or a more understanding boss instead of a pay rise. Usually, it’s not about giving people the money to allow them to live lavishly, but it’s about understanding and respecting their current lifestyles.

You can do this by providing rewards that cater to different types of lifestyles, such as free babysitting for working mums, free credit to spend on errand running services for young busy professionals, free eye check-ups for those who spend long hours in front of a computer screen, free yoga classes to help manage stress, free fitness memberships for those with primarily desk-bound jobs to stay fit, and so on.

It’s not about how cool the perks sound – it’s about how relevant they are to your team.

2. Allow them to give back.

There are few things more truly rewarding than doing good and giving back. Why not allow employees to use their paid working time to volunteer for causes or charities of their choice as a reward for doing well? Scientists have long known that the act of giving or doing good activates regions of the brain associated with pleasure, social connection, and releases feel good endorphins.

3. Give the gift of learning.

Self-motivated, high performing talent usually have one thing in common: they are passionate about what they do. You don’t need to reward them for doing it – the pleasure of seeing a job well done is satisfaction enough for them.

So one of the best gifts you can give people like them that says, “Good job, you’re doing amazing – please keep producing these amazing results!” is letting them pick out training and development courses, premium software, equipment, and other tools they’ve been eying that will help them do their jobs better.
People who already love what they do only want to get better at it.

4. Give more responsibility and a bigger challenge.

Have a talented leader you want to reward? Instead of a “Leader of the Year” trophy, why not give him the names of three younger executives who you want him to coach? If there’s a new, ambitious project she’s been hoping to be able to drive, why not assign it to her and get someone else to take some other things off her plate? People who perform well are people who are always eager to keep growing and being exposed to new situations.

With all of that said, there are two caveats to designing alternative incentive structures: firstly, it takes effort. It is easier to dangle a 3-month bonus in front of someone and wait for the desired performance. It is much harder to customize rewards that meet a person’s innate need to learn and grow, or to take the time to understand a person’s real wants, dreams, and goals.

Secondly, while money is not everything, it is a basic “hygiene factor”. A basic wage that is enough to live on and that is a fair market salary for the position is important to keep employees from being demotivated. Ultimately, it is the effort you put into designing rewards that matter that will motivate, engage, and inspire your people.