Reward systems are a powerful tool in behavioral design, and their appeal is clear—rewards can influence behavior, drive engagement, and help achieve desired outcomes. Whether it's students receiving gold stars for good work, employees earning bonuses for hitting targets, or app users collecting badges for consistent use, rewards are everywhere.

However, designing effective reward systems is not as simple as it seems. There are paradoxes inherent in reward systems that can lead to unexpected, even counterproductive, results. Rewards can motivate—but they can also demotivate. They can drive short-term engagement but undermine long-term interest.

The Intrinsic vs. Extrinsic Motivation Dilemma

At the heart of reward systems lies the tension between intrinsic and extrinsic motivation. Intrinsic motivation refers to doing something because it’s inherently interesting or fulfilling, such as pursuing a hobby you love. Extrinsic motivation, on the other hand, arises from external rewards like money, praise, or recognition.

While extrinsic rewards can effectively influence behavior, they also run the risk of overpowering or even replacing intrinsic motivation. Consider this common scenario in education: A child loves drawing because it's fun and creative (intrinsic motivation). However, when rewards like stickers or prizes are introduced for creating artwork, the child may begin to focus solely on the reward, losing interest in drawing for its own sake. This phenomenon, where external rewards erode intrinsic motivation, is referred to as the overjustification effect.

The same dynamic unfolds in the office. Employees might initially approach their work with intrinsic motivation, finding it fulfilling to solve problems or contribute to a meaningful project. However, introducing bonuses for specific performance metrics—such as meeting “x” number of sales—can cause employees to fixate on the reward. Over time, they may lose their passion for the work itself and shift their focus purely to “checking boxes.” Ironically, the reward system that was meant to elevate performance can backfire, leading to decreased creativity and engagement.

Rewards and Short-Term vs. Long-Term Engagement

Another paradox of reward systems is their potential to boost short-term engagement at the expense of long-term sustainability. Rewards tend to be most effective when they provide immediate gratification. A clear example can be found in the realm of gamification on digital platforms.

Consider a fitness app that gives users badges for completing daily workouts. At first, these rewards create excitement and reinforce the habit of exercising. However, over time, the novelty of these badges may wear off. Users who were solely motivated by external rewards might stop exercising once the rewards become less compelling or disappear altogether.

This phenomenon illustrates the challenge of designing reward systems that stimulate both short-term behavior change and lasting engagement. If users, students, or employees become dependent on rewards, their behavior might lapse when those incentives are reduced or removed.

Social media platforms are another example. Apps like Instagram or TikTok reward users with likes, comments, and algorithm-driven visibility. While these rewards create an initial surge of dopamine, overuse can lead to "reward fatigue," where the same rewards no longer feel exciting. Users may engage less or constantly chase higher levels of rewards, creating a cycle that brands struggle to maintain without redesigning the system entirely.

The Backfire Effect of Rewards

Paradoxically, rewards can also send the wrong message and undermine the very behavior they are intended to encourage. When rewards overshadow the intrinsic value of an activity, it can inadvertently frame tasks as undesirable—or worse, transactional.

Imagine a classroom where students are rewarded with candy for reading books. The implicit message? Reading isn't worth doing unless there's a reward attached. Instead of fostering a love for learning and reading, this system may lead students to associate reading with an external payoff, potentially discouraging reading for enjoyment in the future.

Another example comes from volunteerism. Offering volunteers monetary compensation can reframe their efforts from altruism ("I’m doing this because it’s meaningful") to economics ("I’m doing this because I’m getting paid"). This shift in perception can reduce volunteers’ sense of fulfillment and decrease participation in the long term.

Designing Reward Systems That Work

Despite their paradoxes, rewards are not inherently flawed; when thoughtfully designed, they can strike a balance between motivation and engagement. Here are a few strategies to consider:

  1. Focus on Non-Material Rewards - Not all rewards have to be material. Recognition, constructive feedback, or creating opportunities for personal growth can strengthen intrinsic motivation without undermining it. For example, in workplaces, publicly praising employees or granting them creative autonomy can inspire pride and long-term commitment.
  2. Reward Effort, Not Just Outcomes - Designing a reward system that celebrates effort over results helps keep intrinsic motivation intact. For instance, rewarding students for the process of learning (e.g., asking thoughtful questions, showing persistence) emphasizes the intrinsic value of effort, rather than reducing success to a prize.
  3. Shift to Variable Rewards - Gaming companies and social media platforms use variable reward schedules (rewards provided unpredictably) to sustain engagement. Rather than providing predictable, repetitive rewards, varying the frequency and type of reward can keep users interested without creating dependency.
  4. Transition from Extrinsic Rewards to Intrinsic Goals - For long-term engagement, rewards should be used as a stepping stone to instill intrinsic motivation. A well-designed reward system might start with extrinsic motivators to initiate behavior, but gradually fade them out in favor of fostering internal drivers. For example, a fitness program might initially reward users with points for attending classes but later highlight the health benefits or personal milestones achieved through consistent participation.
  5. Align Rewards with Meaningful Values - Choosing rewards that align with a deeper sense of purpose or values can make them more impactful. At workplaces, creating opportunities for employees to engage in meaningful projects can be a reward in itself, fostering both intrinsic motivation and loyalty.

The paradoxes of reward systems in behavioral design highlight the delicate balance between motivating action and sustaining long-term engagement. While rewards can drive impressive short-term results, their potential to crowd out intrinsic motivation, create dependency, or send unintended messages makes them a double-edged sword.