Ineffective Employee Rewards: Top Mistakes & Proven Solutions

Ineffective Employee Rewards: Did You Know Some Employee Rewards Can Make Performance Worse?
If you have ever led a team, you know an uncomfortable truth: not all employee rewards drive better performance. In fact, some rewards can unintentionally:

• Reinforce the wrong behaviors.
• Reduce motivation.
• Undermine the very outcomes they were designed to improve.

Our work assessing organizational cultures consistently reveals that ineffective employee rewards often create unintended consequences. Instead of encouraging accountability, collaboration, innovation, or customer focus, poorly designed incentives can:

• Distort priorities.
• Encourage short-term thinking.
• Weaken organizational performance.

Employee Reward Research Reveals a Surprising Reality
Research from Harvard Business School and Washington University highlights a counterintuitive finding: rewards do not always produce the behavioral changes leaders expect.

In a widely cited study involving a commercial laundry company, management introduced monthly gift card drawings to reward perfect attendance. The logic seemed sound. Better attendance should lead to better productivity.

It did not.

While attendance improved among employees who remained eligible for the drawing, overall productivity declined significantly. The incentive successfully influenced one metric while simultaneously undermining the broader performance outcomes management hoped to achieve.

The study serves as a powerful reminder that incentives rarely operate in isolation. Employees respond to what is measured, rewarded, and consequenced but not always in the ways leaders anticipate.

Ineffective Employee Rewards: Common Pitfalls and Proven Solutions

The analysis uncovered several mistakes that frequently appear in reward and recognition programs. These same pitfalls can derail even well-intentioned efforts to improve performance.

1. Employees Learned to Game the System
   
   Pitfall
   The attendance incentive did little to improve the quality, efficiency, or effectiveness of employees’ work. Instead, it encouraged workers to focus narrowly on maintaining eligibility for the reward.Once employees were no longer eligible, absenteeism and tardiness quickly returned to previous levels.

   The program changed surface-level behavior without addressing the underlying drivers of poor performance.

   Solution
   Strategic talent management leaders expect employees to optimize for whatever is rewarded. That is not a flaw in human behavior; it is a predictable response to incentives. The goal is to ensure that employees are optimizing for outcomes that advance the organization’s strategy, culture, and values.

   In this case, management treated attendance as the problem when it was merely correlated with performance. The lesson is simple but often overlooked: reward the behaviors and outcomes you want to improve, not the easiest metrics to track.

2. High Performers Saw Little Value in the Reward
   
   Pitfall
   For employees who already demonstrated strong attendance and consistently delivered results, the gift card incentive offered little additional motivation.

   Rather than feeling recognized for their contributions, many high performers viewed the program as rewarding basic expectations rather than meaningful achievement.

   This is one of the most common examples of ineffective employee rewards. Programs designed primarily to correct poor performance often fail to recognize and reinforce exceptional performance.
   
   Solution
   Many leaders devote disproportionate attention, energy, and incentives to underperformers in an effort to raise them to acceptable standards. High-performing cultures take a different approach.

   They establish clear expectations for everyone while ensuring that the most meaningful recognition is directed toward the individuals and teams whose behaviors drive business success. When top performers see a clear connection between contribution and recognition, the organization strengthens the very behaviors it wants to replicate.

3. The Reward Was Not Meaningful Enough
   
   Pitfall
   Another challenge was the reward itself.A small chance to win a gift card may not have been sufficiently valuable to influence sustained behavior, particularly among employees who were already engaged and committed. Effective rewards are meaningful, relevant, and perceived as worth the effort required to earn them.

   Solution
   The most successful recognition programs align rewards with what employees genuinely value rather than what management assumes they value.

The Bottom Line
Not all employee rewards drive better behavior, and some can unintentionally make performance worse. To be effective, rewards and recognition programs must reinforce the specific behaviors that drive strategic success, provide meaningful value to employees, and be perceived as fair, relevant, and proportionate. When thoughtfully designed, employee rewards strengthen culture, improve performance, and accelerate business results.

Don’t let misaligned rewards, behaviors, and culture undermine your strategy. Download The High-Performance Culture Playbook: Turn Strategy into Results to learn how high-performing organizations create the alignment, accountability, and execution needed to achieve exceptional business results.

by Tristam Brown: CEO

Tristam Brown is an executive business consultant and organizational development expert with more than three decades of experience helping organizations accelerate performance, build high-impact teams, and turn strategy into execution. As CEO of LSA Global, he works with leaders to get and stay aligned™ through research-backed strategy, culture, and talent solutions that produce measurable, business-critical results. See full bio.