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Management Workout

How to Reward Employees

Rewards that trigger intrinsic motivation are more effective, and cost a whole lot less, than bonuses and other forms of extrinsic motivation.

Rewards can work for your organization, and not against it, when you take the following six rules into account:

  1. Don’t promise rewards in advance. Give rewards at unexpected moments, so that people don’t change their intentions and focus on the reward. When acknowledgement of good work comes as a surprise, research says intrinsic motivation will not be undermined.
  2. Keep anticipated rewards small.Sometimes you cannot prevent people anticipating a potential reward. In such cases, according to research, big rewards are likely to decrease the performance of people. This might be because the stress of anticipation will interfere with people’s working memory.
  3. Reward continuously, not once. Do not look just once per month or once per year for something to celebrate. Every day can be a day to celebrate something. When people do useful work every day, every day is an opportunity for a reward.
  4. Reward publicly, not privately. Everyone should understand what is rewarded and why. The goal of giving rewards is to acknowledge good work, and have people enjoy it too. To achieve this, a regular public reminder works better than an annual private one.
  5. Reward behavior, not outcome.Outcomes can often be achieved through shortcuts, while behavior is about decent work and effort. When you focus on good behavior, people learn how to behave. When you focus on desired outcomes, people may learn how to cheat.
  6. Reward peers, not subordinates. Rewards should not come just from the manager. Find a way for people to reward each other, because peers often know better than managers which of their colleagues deserve a compliment.

These six rules for rewards give you the best chance at increasing people’s performance and enjoyment, while encouraging intrinsic motivation instead of destroying it. Notice that an incidental compliment addressed at a colleague in a meeting, for a job well done, satisfies all six criteria. A well-aimed kiss, blown carefully across a conference table, can also do wonders, I’ve noticed. (Just kidding!) It’s not that difficult to implement rewards well.


Money is only advised as a reward when you need to motivate people to do an uninteresting or repetitive job. And even in the case of creative work it’s OK for rewards to cost a little bit of money, as long as you don’t overdo it.

Paul Klipp, president and Scrum coach at Lunar Logic Polska in Poland, told me how he created a rewards system. He explained that his employees can give anyone a gift worth 20 euro. They call it kudosand it can be implemented as an email to a central mailbox, or slipping a note in a cardboard box. (They started out with movie tickets, but since not everyone enjoys airborne popcorn, the gifts can now be anything with a similar value.) The management team never questions why someone is rewarded. When anybody in the company feels someone deserves a reward, he or she gets it. Paul will personally bring a handwritten kudo note, and a tray of gifts, from which the receiver can pick one item. And everyone will hear about it, on Facebook and on the internal chat system. Paul told me these gifts work extremely well, and he loves the fact that all employees are involved in catching people doing good things. It is a low cost reward system, and trust is never abused.

But what if people cheat?
I noticed there is always somebody to ask, “What if people don’t play fair? What if two people give each other free movie tickets with the kudo box? What if someone just wants to kiss the boss’s ass with a kudo card?”

To these questions I have just one reply: “What if people see such risks because they have a low level of trust and respect in the organization? What if the kudo box is exactly the kind of practice to start changing that culture, in a relatively harmless way?”

A similar system was implemented by Philip Rosedale, former CEO of Linden Lab, creators of the virtual reality platform Second Life. Rosedale called it the LoveMachine. It was a tool that enabled employees to send notes of appreciation to their colleagues. According to Rosedale, recognizing each other’s hard work makes everyone feel great. And because everything is transparent, managers gained useful insight into which people were performing well, and which people never received a compliment.

No matter if you call it a Kudo Box or a LoveMachine, a public system that enables people to give each other small unexpected tokens of appreciation for doing a good job, meets all six basic principles of good rewards.

The evidence is overwhelming. Therefore it’s sad that many managers still haven’t figured out what’s wrong with their rewards systems. Maybe they are too busy thinking about their own bonuses?

This post is an excerpt from Kudo Box, a Management Workout article.