Punished by Rewards: What truly motivates your team? It’s not rewards.

Through running businesses and working in both large corporations and startups,
one thing is clear to me: people make a business move forward or backward.
So, it’s key to (1) hire the right people and (2) manage the team right.

In my first startup, I was obsessed with hiring the right people, believing that once you hire the right ones, they will succeed.
In retrospect, hiring the right people is necessary but not sufficient for success.

After stepping away from the hectic founder life, I had the chance to nurture my entrepreneurial spirit through books.
In this writing, I’m going to summarize my takeaways from the book Punished by Rewards by Alfie Kohn, to remind my future self of its insights.

The book’s focus is on how to motivate employees (and similarly, students for educators or children for parents).
It’s proven that both rewards and punishments are harmful to genuine motivation — supported by hundreds of research references.
Rewards include things like bonuses tied to KPIs. If bonuses are inevitable, they should not be announced beforehand, but rather given unexpectedly — so employees don’t work just for the money.

While reading the 200+ pages (in a few days), I kept asking myself: if rewards are bad, what can a leader use instead?
The author argues that intrinsic motivation is the true driver of lasting success.
The main reason is simple: no company can provide infinite (more and more) financial rewards.
Moreover, when the bonus amount is small, performance actually drops.
When the bonus is large, it motivates temporarily — but once it’s removed, performance falls sharply.

The author calls this the “If-Then” trap — “If you do this, then you’ll get that.”
This is not just about money; it’s about any conditional reward, including praise, perks, or privileges.
The real problem is not the reward itself, but the message behind it: that people must be controlled.
When rewards are used to manipulate behavior, they kill genuine interest and trust.

The problem with financial incentives isn’t that people are offered too much money; the problem is that money becomes too salient.
It’s driven by the principle of “Do this, and you’ll get that.”
You can’t just remove the carrot and stick; you must rebuild the system so people have genuine reasons to care.

So, what creates intrinsic motivation?
We need to focus on the 3Cs: Collaboration, Content, and Choice.

Everyone feels great and motivated when collaborating with others — in business, that means with colleagues.
If your support helps your colleague get a bonus while you don’t, it’s natural to feel less eager to prioritize helping next time, even if it benefits the business overall.

If what you’re working on is meaningful to you, you’re naturally motivated.
That’s why, when I was running an agriculture startup, my team was deeply motivated — we were solving problems related to food and the planet.
I believe NGOs can attract top talent for the same reason: the work itself is fulfilling.

Another critical point is autonomy, or the power of Choice.
True motivation flourishes when people feel they have control over their work — how they do it, when they do it, and what problems they choose to solve.
Leaders often think they need to “motivate” others, but as Kohn says, you actually can’t motivate people.
You can only create conditions where they can motivate themselves.
The leader’s role is to remove obstacles and build an environment where people feel trusted, capable, and connected.

In business, the founder (or leader) should set the company vision and major milestones.
Otherwise, there’s too much noise — and it’s the founder’s role to think deeply about long-term goals. (It’s your company; you gain the most from its success.)
At the same time, when it comes to achieving each milestone, it’s crucial to listen to your team’s voices and reflect their decisions.
When people make their own choices, they not only feel more motivated but also take natural ownership.

Kohn also highlights another consequence of reward-driven systems: creativity loss.
When people work for rewards, they focus on doing just enough to earn them — not exploring, innovating, or taking risks.
Studies show that rewards make people play it safe. Ironically, systems meant to boost performance end up discouraging curiosity and experimentation.

As a remark, this doesn’t mean people will work for free.
The book clearly states that fair monetary compensation is essential — but pay for performance is not recommended.
Here are the key principles:
Pay people generously. Do your best to ensure they don’t feel exploited.
Then do everything possible to help them stop thinking about money.

Finally, it’s worth noting that rewards aren’t limited to money.
Even praise, when used as a tool to steer behavior (“Good job!” said too often), can have the same negative effect.
People start working for approval rather than curiosity or pride in their craft.

This book reminded me that the best teams aren’t built on incentives but on trust, purpose, and shared ownership.
The goal of leader is not to hand out rewards but to create a space where people genuinely want to do great work.