Receiving rewards is thought to have a positive effect on motivation. In some instances though, rewards may actually have a demotivating effect.
It seems counterintuitive doesn’t it? That a substantial gift or pay rise, may lead to less job satisfaction or disinterest.
Scientific psychological research has extensively studied this theory. In one study, they explored the effects of rewards and motivation on children. They divided a group of children into three groups and monitored how long they would play with colourful felt pens for. An activity that most children highly enjoy. 
One group were instructed to play with the felt pens and they would receive a certificate, gold star and red ribbon. Another group would receive a reward but they were not advised of this, and a third group would receive no reward. A week or so later, the same groups of children were asked to play with the felt pens again. The group who received their reward were no longer as interested in playing. The group who received the unexpected reward, and the group who received no rewards, maintained a similar level of interest.
The theory has even been further tested with 20 month old babies. In the experiment, a person would drop a pen on the floor and seem unable to reach it. The babies would help, reach for the pen and hand it across. In exchange, some babies received a toy cube, others received verbal praise and others received nothing at all.
In the second test phase would the babies continue to help?
The babies who received verbal praise and nothing at all continued to help. For the babies who received a toy cube, helping declined.
Does this mean I shouldn’t reward others?
Not quite.
This phenomena can be explained in terms of intrinsic and extrinsic motivation.
Intrinsic motivation – when the rewards of the activity are for your own interest or enjoyment
Extrinsic motivation – when the rewards are outside of the activity. Example money, recognition or praise.
How do rewards create a loss of motivation?
Put simply, rewards can create a loss of motivation mostly if the activity was intrinsically motivated. If you were simply listening to that music because it sounds great, or if you were eating that pizza because it tastes delicious then the reward is intrinsic.
If you were to receive an external reward for listening to music or eating pizza, then two things would happen. The first is that the person has now confused your motives. You were once intrinsically driven to perform this activity and an external reward has been offered and caused conflict and confusion. Secondly, you have now been over-rewarded. Your behaviour was already rewarding and by receiving both an intrinsic and extrinsic reward your behaviour has been over-rewarded or over-justified.
Hopefully, you can see here how someone performing a task purely for extrinsic benefit probably won’t lose motivation through receiving monetary reward. This is exactly what they are striving for, so they’ll probably be very happy.
There should be examples you can think of though, maybe a labour of love, being a good parent, a hobby, or dutifully paying for and collecting figurines, where if someone were to offer you money as a reward, you would hold your hands up and insist that you could not possibly accept it. And truth be told, you really couldn’t.
Motivation and Reward Systems for Employees
It’s best to find out how a person is motivated. If an employee states, “I live to work, I don’t work to live. I just love doing this stuff!”, then they may be intrinsically driven so a good choice of reward may be verbal praise for a truly superior performance.
If another employee states, “At the end of the day I’m here to make money and make the company money” then perhaps they’re extrinsically motivated and a bonus could be well-received.
Historic Fact on the Reward System
Written in the 1800’s, The Adventures of Tom Sawyer by Mark Twain has received numerous accolades including being one of the most famous books of all time.
One accolade that has slipped through unnoticed is Mark Twain’s understanding of ‘motivation’.
‘There are wealthy gentlemen in England who drive four-horse passenger coaches 20 or 30 miles on a daily line, in the summer, because the privilege costs them considerable money; but if they were offered wages for the service that would turn it into work then they would resign.’
Mark Twain has given an example of the phenomena, that sometimes a reward for an activity may actually reduce the person’s interest in the activity.
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References
Burton, L., Westen, D., & Kowalski, R. (2015). Psychology: 4th Australian and New Zealand edition. Milton, Qld: John Wiley & Sons Australia.
Kassin, S., Fein, S., Markus, H.R., McBain, K.A. & Williams, L.A. (2015). Social Psychology: Australian and New Zealand edition. South Melbourne, Vic: Cengage