If you're still relying on carrot-and-stick performance management strategies, it might be time to join the 21st century. Given the complexity of many business operations today and the innovative thinking these require, motivating employees with rewards and incentives usually just doesn't cut it. And what's more, taking this approach might actually be detrimental to performance.

Why rewards fall short

During a TED Talk on the psychology behind motivating workers, career analyst Dan Pink noted that it seems like common sense, at first glance, to encourage employees to meet goals and deadlines by offering them incentives.

"If you want people to perform better, you reward them. Right? Bonuses, commissions, their own reality show. Incentivize them. That's how business works," he said. "But that's not happening here. You've got an incentive designed to sharpen thinking and accelerate creativity, and it does just the opposite. It dulls thinking and blocks creativity."

This insight is backed by scientific research. The Harvard Business Review described several studies that demonstrated how rewards can actually undermine the same processes they're designed to enhance. Pink explained that this happens because when people focus on a reward and envision a set path to that prize, their mind is actually narrowed and restricted. Consequently, they're not thinking creatively. Under this condition, it might take them longer to come up with the best solution, or they might settle for a less-than-optimal result in order to get to the reward faster. Additionally, HBR explained that incentives are good at fostering temporary compliance, but fall short when it comes to developing commitment. The same could be said for the inspiration and passion that can revolutionize employee culture.

That doesn't mean that employee rewards and prizes are entirely out of the picture, however. Pink noted that there are some types of work - "20th-century tasks" - for which reward systems can serve as effective motivators. These activities are more mechanistic, centered around set processes, quotas and volume, rather than creative thinking or problem solving.

Motivation, not mere incentives

Working toward similar insights, Fast Company contributor Clayton Christensen explained the distinction between incentives and motivation. The latter, he noted, has potential to truly transform a workforce and create sustainable success, whereas the former is more a matter of hygiene factors. In other words, perks and benefits can be added to the same category as general compensation and other work environment conditions. These factors are important and can certainly play a strong role in attracting, supporting and retaining talented employees, but they're not likely to be core motivators that foster workers who are passionate about their projects and apply themselves creatively to challenges.

Instead, Pink suggested a new "operating system" for performance management that fosters in employees a desire to excel because they care about their work and think it matters, it's interesting and it makes them a part of something important.

"That new operating system for our businesses revolves around three elements: autonomy, mastery and purpose," he explained. "Autonomy: the urge to direct our own lives. Mastery: the desire to get better and better at something that matters. Purpose: the yearning to do what we do in the service of something larger than ourselves."

These are the types of elements that next-generation employee engagement programs encourage. They strive to energize workplaces by giving team members an environment that sets their creativity and ideas free, inspiring them by helping them to see their work as an important part of the bigger picture.

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