There is a great deal of controversy over the effectiveness of rewards. Cognitive phenomena differ on how effective rewards are. For example, the motivating uncertainty effect suggests that we’re willing to invest more of our time into achieving uncertain rewards compared to certain rewards. The effect suggests that for reward power to be effective, a manager should not tell employees exactly what the reward will be. Using this effect, they may say that anyone who submits work early will receive a mystery bonus.
Other cognitive biases warn us against the use of external rewards to incentivize individuals. The overjustification effect describes our tendency to become less intrinsically motivated when we are offered an extrinsic motivator like a reward. While we may enjoy the work we do, if our boss attaches that work to a promotion, we can lose our inherent passion for the project. Although we may be motivated to work hard short-term, in the future we are unlikely to complete the same behavior without a reward. SImilarly, a study conducted by psychologist Dr. Robert Eisenberg found that the overjustification effect is less prominent when individuals are rewarded for a successful performance, not for just completing a task.8
Even if reward power is effective, it is not suitable in all instances. Even Raven understood the limitations of reward power, as he recognized that it could only be leveraged when a manager could tell if an individual had completed a task. Employees will only comply if they believe their boss will be able to determine whether compliance has been achieved.7
Moreover, offering one employee a reward for their work and not another could cause the other employee to feel as though they are not recognized for their work, potentially demotivating them.9 Competition for a reward could increase motivation, but there is a thin line between healthy and unhealthy competition. Employees might sabotage one another or diminish their relationships. As Herzberg’s motivation theory identifies, work relationships are an important factor of work satisfaction – negative relationships prompted by competition could have adverse impacts on employee wellbeing.
As these controversies demonstrate, rewards are useful in particular circumstances, but it can be complicated to identify when they will be effective and when they might be detrimental. The reason for reward, as well as the type – tangible or intangible, certain or uncertain – all impact its effectiveness.
Social Exchange Theory and Reward Power
Social exchange theory suggests that behavior is the result of an exchange process. An exchange relationship includes both economic exchanges, like a salary from your boss for completing your work, as well as social-affect exchanges, like respect, support and power. Positive exchanges can therefore increase affective commitment (an individual’s attachment to an organization) and result in increased loyalty and performance from employees.
Rewards are seen as a form of exchange that brings subordinates closer to their leaders. Associate professor of management Dr. Haidi Teimouri believed that when an organization used reward power, employees responded by developing affective commitment.10 These good relations enable employees to have greater access to information, mentorship, resources, and support, which increases productivity and employee effectiveness.
Teimouri wanted to show that managerial power, like reward power, has a positive impact on affective commitment. With her team, Teimouri collected questionnaire responses from line and staff personnel in a Social Security Organization in Iran. The questionnaire asked respondents about the different kinds of power their manager demonstrated and about their own affective commitment.10
Teimouri et al. found that the greater overall power a manager demonstrated – which involved a combination of the five bases of power French and Raven initially identified, the greater attachment employees felt to their organization. Coercive power had the smallest impact on affective commitment and referent power had the greatest positive impact on affective commitment. Reward power fell somewhere in the middle. From these results, Teimouri et al. concluded that managers can improve their employees’ affective commitment by proper and timed use of their bases of power.10 Reward power is one useful tool to mobilize affective commitment.
The Influence of Reward Power in Private and Public Sectors
Using reward to increase motivation only works in specific instances. Cognitive biases like the overjustification effect or the motivating uncertainty effect demonstrate that when used inappropriately, reward power can backfire.
- Faiz, a political researcher in Pakistan, conducted a study that showed that the effectiveness of reward power and coercive power is different in public and private sectors.11 He identified that these two bases of power were the most common types managers used in order to nudge employees to be obedient and responsible. In particular, Faiz examined the correlation between employee satisfaction and these two bases of power by surveying employees working in public colleges and employees working in private colleges. He was interested in the differentiation because in Pakistan, public and private sectors exhibit very different practices, especially when it comes to their Human Resource and Management policies.11
Faiz collected data from 130 respondents working in these two sectors to test whether employees’ perception of manager’s reward power would have a positive effect in both the private and public sector, and whether employees’ perception of manager’s coercive power would have a negative effect in both the private and public sector.11
Faiz found that there were notable differences between the two sectors. Employees working in private colleges and universities reported that their managers exercise more supervisory powers and have more control over their subordinates. Supervisory powers like reward power had a positive correlation to employee job satisfaction in the private sector. Alternatively, employees working in public colleges and universities reported that reward power had a negative impact on their job satisfaction. Faiz speculated that these results might reflect the fact that individuals in the private sector often change jobs more frequently than individuals in the public sector, as the public sector offers job security to their employees. Research has shown that when rewards are used for a long period of time, they are less effective and can lead to employees feeling manipulated. Coercive power was shown to have a negative effect on employee satisfaction in the public sector but was found to be neutral or inconclusive in the private sector.11
As Faiz’s study demonstrates, rewards are finicky and can have different effects depending on the sector in which they are used. Reward power must be used tactically and sparingly.