Traditional thinking about rewards is backwards. Rewards don't work unless the task is primarily physical or mechanical. If the task needs any creative thought, rewards will impair performance.
This is opposite of what you'd expect. Typical expectation would have larger rewards lead to better results, but it turns out that the opposite is usually true. Larger rewards lead to poorer results.
Why? The reward narrows your focus on what's possible. For mechanical tasks, that's no problem - and you crank harder. For tasks involving creativity, it narrows your exploration of possible solutions.
The practical upshot? Don't try to offer rewards or competitions for creative tasks. They're counterproductive. Not only do they not work, they give you a result that's worse than if you hadn't started meddling.
Then what works? According to Drive by Daniel Pink, three things drive engagement in a task: Autonomy, Mastery, and Purpose.
Autonomy: People need to feel in control of their lives. For tasks, give the employees control over what they do, when they do it, how they do it and who they do it with. That doesn't sound like traditional management at all, but it will engage the staff. After all, you want results right?
Some progressive workplaces are moving towards a Results Only Work Environment (ROWE). Just like it sounds, we just want results. Get the work done. We don't care where, when, or how. It means people are less distracted by putting in time at work and more focused on accomplishing the task. It also reduces staff turnover because they love the flexibility of being able to control their schedule.
Mastery: People want to be good at what they do. Some things, like musical instruments or sports, people play with no intention of making a living at it. They do it because it's fun. Progressive improvement makes things interesting. It keeps people coming back.
Purpose: People want to work on things that make a difference. Be clear about the larger purpose of what you're doing. If others buy into the purpose, even if it's a boring task, people will enjoy it more and perform better.
Being conscious of how you engage people will improve your results.
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