The important distinction in motivation is whether the motivator is intrinsic or extrinsic. Intrinsic motivators are ones that you feel you can control, such as your level of effort, whereas extrinsic motivators are outside of your control: rewards, punishments, etc.
Pink quotes from a 2005 commissioned by the Federal Reserve of Boston called "Large Stakes and Big Mistakes". Some random excerpts (emphasis added):
"With some important exceptions, we observed that high reward levels can have detrimental effects on performance" (abstract).
"[O]ne mechanism via which increased motivation can backfire is when it leads to greater self-consciousness" (p. 3).
"[T]he performance of participants was always lowest in the high-payment condition when compared with the low- and mid-payment conditions together..." (p. 13).
"Many existing institutions provide very large incentives for exactly the types of tasks we used here – those that require creativity, problem solving, and concentration. Our results challenge the assumption that increases in motivation necessarily lead to improvements in performance" (p. 19).
"[W]e were surprised by the robustness of the effect..." (p. 19).
How do you cater to people's intrinsic motivations?
See Drive: The Surprising Truth About What Motivates Us at Amazon for Dan Pink's book on the subject.
See RSA Animate - Drive: The surprising truth about what motivates us at YouTube for another video.
- See Review: Drive for our review of the book.