Why Small Incentives Can Work Better Than Big Ones

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Common sense suggests that one of the best ways to motivate behavior change is to offer sizable rewards. If you want your employees to work harder, excite them with considerable bonuses. If you want your girlfriend to say yes, buy her a big diamond ring. If you want your customers to become happy owners of brand-new cars, hand out cash discounts with zero-interest financing. Big rewards change minds and make for satisfied customers, right?

Internal Motivation Not External Manipulation

Psychologists have long known that the exact opposite is true. While bigger rewards can indeed motivate action, smaller rewards can be more effective at generating deeper, lasting change by inspiring larger shifts in favorable attitudes and positive emotions. Social psychologist Leon Festinger observed this phenomenon over half a century ago when he proposed his theory of cognitive dissonance. According to this theory, humans are inherently averse to the underlying psychological tension of conflicting drives. Did I just want that bonus, or do I really enjoy my job? Did I marry him for the money, or do I really love this guy? Did I buy this car because it’s cheaper, or because it’s better? To resolve this contradictory information, we feel compelled to expend a great deal of mental energy to reduce the discomfort of these inconsistencies. We do this by justifying our decisions and changing our previously held attitudes to be consistent with our new behaviors.

The more we conclude that our actions were driven by external rewards, the less likely we are to change our internal mindset. If the reward is bigger, we are more likely to conclude that we did it for the benefit of the reward itself. But if the reward is smaller, we are more likely to believe that we did it because we like it better and enjoy it more. We did it for its own sake, rather than what we’ll get out of it. This is the crucial difference between internal motivation and external manipulation. Psychologists call it intrinsic motivation and it’s the key to making people feel more satisfied with their choices and better about their experiences.

We Are Not Rational; We Are Rationalizers

Festinger demonstrated his theory with J. Merrill Carlsmith in a classic experiment in 1959. In this study, 71 students from Stanford University were asked to participate in excruciatingly boring and repetitive tasks for an hour. The experimenters then offered subjects either $1 or $20 to persuade another awaiting subject that their upcoming task was fun and interesting. Consistent with his cognitive dissonance theory, Festinger found that the participants who were paid $1 for lying to others in the waiting room later evaluated the boring tasks as more enjoyable than those who were paid $20. Because they lacked external justification, these individuals rationalized that they must have enjoyed the dreadful tasks to reconcile the psychological tension of having lied. We are not rational creatures. We are rationalizers. So much so that we can convince ourselves that we enjoyed something that was excruciatingly boring in the first place!

The Overjustification Effect

Similarly, research has demonstrated that offering children rewards like free pizza to incentivize them to perform tasks like reading more often, reliably backfires among some students. The problem is that the children who enjoyed reading at the outset now tend to convince themselves that they are voracious readers for their love of pizza not books. Social psychologists label this the overjustification effect. Sadly, these children now underestimate their intrinsic desires for reading, falsely justifying that it was the pizza all along that was motivating their behaviors. The unfortunate consequence is that the loyal reader, loyal employee, loyal girlfriend, or loyal customer you are trying to motivate will lose interest in the activities you are attempting to reinforce. And when the reward is removed and the incentive discontinued, the desire to participate in the behavior is diminished. It’s essentially a lose-lose proposition for everyone involved.

It's The Little Things That Count

If you encourage your employees through bonuses alone, you may undermine their very interest in working for your company. If you try to bribe your girlfriend with a flashy diamond ring, she may enjoy your company less and question her loyalty more. And if you deep discount your brand, you may also devalue it while undermining the satisfaction of your best customers.

If you want others to comply with your requests and truly value your brand or what you bring to the party, be authentic and consistent in small yet meaningful ways. It's the little things that count. Try offering a steady stream of thoughtfully authentic acts. After all, there is no overhead cost to a heartfelt smile or a genuine thank you. It’s a win-win for all parties.