The Hidden Cost of Rewards That Buy Loyalty
A reward has a recipient, a source of funds, and a future. Leaders who examine only the first can misunderstand what their generosity has created.
At the sales celebration, the bonus checks receive the applause. The additional implementation work arrives later.
Imagine a company that rewards signed contracts without considering the promises required to secure them. Salespeople respond to the incentive. Revenue rises. Another team inherits custom features, accelerated deadlines, and support obligations that the bonus calculation never counted.
The reward has worked on the behavior it measured. Whether it has worked for the organization remains an open question.
This hypothetical arrangement illustrates what I call the hidden bill in The Psychology of Machiavelli: How Human Behavior Became a Science of Power. A benefit changes more than the recipient’s behavior. It distributes burdens, establishes expectations, and alters the relationships that will support the next decision.
Follow generosity to its source
In chapter XVI of The Prince, Machiavelli examines the cost of maintaining a reputation for liberality. A ruler spends to sustain that reputation, depletes his resources, and burdens his subjects to replenish them. The people receiving the gifts and those paying for them experience the same policy differently. Applause from the beneficiaries offers an incomplete account of the result. Read The Prince, chapter XVI.
The historical setting is princely expenditure and political survival. Its application to a business requires an explicit change of setting. Employees, customers, and departments are not subjects of a Renaissance ruler. Yet the analytical question travels well: whose contribution makes this apparent success possible, and does the evaluation include their cost?
A generous-looking decision can be affordable and justified. It can also consume resources needed elsewhere. The label tells us little until we examine the arrangement.
What has the reward purchased?
Chapter XXII moves the inquiry toward ministers. Machiavelli advises the prince to honor and enrich a capable servant while maintaining a dependence that makes separation unattractive. Reward and fidelity become connected through the subordinate’s continuing interest in the ruler’s position. This is a specific design for princely service. Read The Prince, chapter XXII.
That design creates a question for modern leadership. When a highly rewarded employee stays, what does staying establish? The person may value the work, respect colleagues, anticipate future compensation, lack an attractive alternative, or experience several of these conditions together.
Retention alone cannot reveal the mixture. Nor can gratitude for a bonus establish that someone will challenge a damaging decision by the person who controls the next bonus.
A contemporary organization should also reject making employees helpless as a management objective. Fair compensation and professional development can strengthen a relationship while preserving the employee’s capacity to choose. A leader who treats independent judgment or outside employability as a threat risks designing dependence into the institution’s daily life.
Incentives can work, and their effects differ
There is substantial reason to take financial incentives seriously. Edward Lazear’s study of Safelite Glass Corporation documented a 44 percent increase in output per worker associated with a shift to piece-rate compensation. The analysis considered both productivity and the composition of the workforce. It offers evidence from a particular company and compensation change, rather than a universal forecast for every bonus plan. Lazear, 2000.
Performance itself has different dimensions. Christopher Cerasoli, Jessica Nicklin, and Michael Ford’s 2014 meta-analysis covered 183 studies and 212,468 participants across work, school, and physical-performance settings. Intrinsic motivation better predicted unique variation in performance quality, while incentives better predicted quantity when considered together. Their findings support considering both sources of motivation and the kind of performance being sought. Cerasoli, Nicklin, and Ford, 2014.
Neither study tells a leader to abandon rewards. They encourage a more exact question: what outcome is this arrangement designed to produce, under what conditions, and what else should we measure before calling it successful?
Audit the entire arrangement
Start with the people who finance the reward. The cost may appear in the budget, in another team’s workload, or in a promise that requires future resources. For the hypothetical sales incentive, compare the new revenue with implementation effort, customer retention, and obligations created. Otherwise, the organization can celebrate a gain before the accompanying work has been priced.
Next, examine what happens near the measurement boundary. If speed earns the reward, check quality. If individual output earns it, check whether shared work still gets done. If the current quarter earns it, inspect the commitments being passed into the next one. These checks are design questions, not accusations that employees are behaving dishonestly.
Then ask what expectations the reward creates. An exceptional payment can become part of the recipient’s understanding of normal compensation. A discretionary benefit can become associated with personal favor. Explain the criteria, duration, and review process early enough that people can make informed decisions.
Finally, inspect the distribution of credit and responsibility. When one person receives visible recognition for a result sustained by several teams, the reward communicates whose contribution counts. Recognition should be specific enough to reveal the work behind the outcome, including the cooperation that an individual metric may miss.
Measure what survives the celebration
A useful incentive review takes place after the first improvement. Has the desired behavior continued? Has the cost moved elsewhere? Can someone question the arrangement without appearing disloyal? Would the system still make sense if the manager who introduced it left?
These questions connect to my argument for Machiavelli as the father of organizational psychology through intellectual parentage. His importance lies in the sustained examination of conduct inside relations of authority, dependence, reward, and consequence. Modern research can test those relations with methods unavailable to him.
The leader’s task is to look beyond the pleased recipient and the immediate result. A well-designed reward should survive that broader examination. Its value becomes clearer when the organization can account for the people who receive it, the people who make it possible, and the future it helps create.
Explore the book’s central argument about Machiavelli, behavior, and power.
Published 2026-10-21. Last updated 2026-10-21. For attribution and republication guidance, use the newsroom story desk.