It’s widely accepted that rewards and recognition can motivate people. But does that mean they’re effective in every context? Motivation is generally categorized as either intrinsic or extrinsic. Intrinsic motivation comes from within—a natural drive to do something simply because it’s enjoyable or satisfying. Think of someone who exercises regularly because they genuinely love it, or someone who plays music for the sheer pleasure of it. Extrinsic motivation, on the other hand, is driven by external rewards like money, recognition, or praise. For example, if someone is motivated to lose weight only to fit into a tux for a friend’s wedding, that’s extrinsic motivation.

While rewards and incentives can be powerful motivators, research has shown that they can sometimes backfire by reducing intrinsic motivation—a phenomenon known as the Overjustification Effect, or “crowding out.” When people receive external rewards for activities they’re already intrinsically motivated to do, their brains start associating the activity with the reward rather than the satisfaction it brings. This shift can make them dependent on the reward, so when it’s removed, they may lose the motivation to continue the activity at all.

The Overjustification Effect: When Rewards Undermine Motivation

The Overjustification Effect suggests that once an external reward is introduced, the brain may start to focus on that reward rather than the pleasure or satisfaction associated with the activity itself. Experiments have shown that when external rewards are given for tasks people already enjoy, their intrinsic motivation can diminish. Essentially, the brain begins to interpret the task as something being done for the reward, not for its inherent value.

Imagine someone who loves reading. If they start getting paid to read, their brain may gradually shift to seeing reading as something they’re “doing for the money.” Take the payment away, and their enthusiasm for reading may wane. This is why experts caution against using rewards for activities people are already motivated to do—when the reward is removed, it’s challenging for the brain to “unlearn” that connection and reignite the original motivation.

Does This Apply to Everyone? Children vs. Adults

Early studies on the Overjustification Effect primarily used children to test the idea that external incentives could diminish intrinsic motivation. Children, who are still learning about what they like and why, may be more susceptible to this effect. For example, if a child is given rewards for completing a puzzle, they might conclude that the puzzle isn’t inherently enjoyable, since they’re being “paid” to do it. This perception could lead them to lose interest in the activity once the reward stops.

However, newer research shows that adults, who generally have a clearer understanding of why they engage in specific tasks, may experience this effect differently. For most adults, a salary or incentive for doing a job doesn’t reduce motivation because they understand that the reward is part of the reason for doing the work in the first place. In fact, salary increases or performance-based incentives can often boost morale rather than “crowding out” intrinsic motivation. The difference here lies in adults’ conscious awareness of their motives—they understand they’re working for both satisfaction and financial reward, so a higher paycheck is more likely to signal success and appreciation than to reduce engagement.

Task Completion vs. Quality of Performance

A closer look at the Overjustification Effect reveals that it only tends to diminish intrinsic motivation if the external reward is tied to merely completing a task rather than performing it well. When rewards are given for simply finishing an activity, it can send a message that the task itself isn’t meaningful—only the reward matters. However, when rewards are tied to the quality of performance, the external incentive can reinforce intrinsic motivation rather than undermining it.

This distinction is essential in workplaces where incentives often focus on task completion rather than excellence. If employees are rewarded for meeting quotas or deadlines without regard to quality, the focus may shift to simply “getting it done,” which can reduce engagement and lead to burnout. On the other hand, if rewards recognize exceptional performance, employees may feel that their effort and skill are valued, reinforcing their intrinsic motivation to do well.

Incentivizing the Right Behaviors: Learning from Common Mistakes

Even when companies understand the importance of motivating quality over mere completion, incentive programs can sometimes encourage the wrong behaviors. There are plenty of cautionary tales where incentives, intended to drive productivity, ended up backfiring:

The Cobra Effect: In colonial India, the British government attempted to control a cobra infestation in Delhi by offering people financial incentives to kill cobras. While the initial impact was positive, it didn’t take long for locals to start breeding cobras solely to claim the reward. When the government canceled the program, the released cobras led to an even worse infestation than before. This illustrates how incentives, when poorly designed, can create unintended consequences.

The Banking Scandal: At a prominent bank, employees were incentivized to sell more products and open accounts to meet sales targets. The pressure led some employees to open unauthorized accounts in customers’ names to hit their quotas. Instead of driving genuine customer engagement, the incentive plan led to unethical behavior and significant reputational damage.

The Daycare Dilemma: An Israeli daycare tried to reduce late pickups by fining parents who arrived after hours. Surprisingly, the late pickups increased. Parents began to treat the fine as a “late fee” for extra childcare, rather than seeing lateness as socially undesirable. Here, the financial penalty unintentionally reframed the behavior, making it more acceptable.

These examples highlight how easily incentives can go wrong. When incentives focus on the wrong metrics, they can drive behavior that, while technically aligned with the goal, doesn’t truly benefit the organization. It’s a reminder that incentives need to be carefully aligned with the outcomes and values an organization wants to promote.

Incentives in a Remote Work Era: Productivity vs. “Busyness”

In today’s remote work environment, employees are under increasing pressure to “prove” they’re working. A recent survey found that remote employees feel compelled to spend an extra 67 minutes online each day to demonstrate their presence to colleagues and managers. This pressure to be constantly visible is an example of how incentives can sometimes measure the wrong thing. Rather than rewarding genuine productivity or valuable outcomes, it rewards “busyness,” making people feel they have to appear active even when it may not be contributing to their actual work.

Incentive programs, when focused on the wrong metrics, can easily lead to a culture that values time spent “on” rather than meaningful accomplishments. For remote work, where visibility is harder to measure, it’s crucial to consider whether the incentives are truly aligned with productivity or simply encouraging employees to look busy.

The Bottom Line: Aligning Motivation with Meaningful Rewards

Incentives and recognition programs have the power to motivate and engage, but they’re not universally effective in every context. The Overjustification Effect teaches us that incentives can sometimes crowd out intrinsic motivation, especially if they focus on task completion rather than excellence or when they encourage behaviors that aren’t aligned with organizational goals.

Understanding these nuances is critical to creating an effective incentive program. Rewards work best when they reinforce a sense of purpose, acknowledge quality over quantity, and align with the values and outcomes that genuinely matter.