Why money is the great demotivator

last updated 8 January 2015

Shankar Vedantam

The Washington Post

Economists agree on very little, but they all take it for granted that people are motivated by monetary rewards and punishments, said Shankar Vedantam. They may need to rethink that assumption. Psychological experiments reveal that “paychecks and pink slips” are “surprisingly ineffective—and even counterproductive—in getting people to perform at their best.” Years ago, psychologist Edward Deci studied some college students who solved puzzles for fun. He divided the students into two groups, and offered one group a small cash reward for each puzzle solved. The others continued to solve puzzles just for fun. To his surprise, Deci found that “people given a financial incentive were now less interested in solving puzzles on their own time.” External rewards “seemed to kill their internal drive.” Later psychologists who have studied Deci’s experiment theorize that the cash payments implied that the puzzle solving had no intrinsic value and thus required an external reward. Believing that solving puzzles was essentially meaningless, the students lost their motivation. There’s a lesson in there for employers: Next time you need peak performance from your workers, don’t offer them money—offer meaning.