Carrots and Sticks and Money

From VIP (very interesting person) Randi comes this story:

I was head of HR for a 50-person entrepreneurial startup. The CEO—Joe–was a proven big company corporate manager, and a strong believer in traditional management theories like pay for performance, measurement, and financial rewards. I  think they’re tricky, and over-rated.

Once we had a major online product launch, culminating on a Monday. Several folks in the IT group pulled a 48-hour all-nighter to get it all done. We pulled it off, and went live Monday morning without a glitch.

As we all celebrated, Joe decided to introduce his newest motivational tool—spot cash rewards. He went around, quietly handing out fifty-dollar bills to selected people, saying how much he appreciated their contribution to this team effort. 

Some were delighted. Then he gave one to a maintenance crewmember as he came from cleaning the men’s room. The guy’s face quickly reflected two emotions in rapid succession: WTF? And then ‘lemme get outta here before this sucker figures out who I am.’

Joe was a little discomfited. He then went up to one of the key IT folks who had spent the entire weekend in the office, approaching him with a big smile and handing him the $50 with a pat on the back. 

This time the look was different: more like incredulity, as in, “I do 48 hours straight no-pay overtime and you figure I’m worth a dollar an hour? Same as the guy doing his cleaning job on his regular shift?”

I said to Joe later, “now do you see what I meant about carrots and sticks?”

Too many managers automatically assume that carrots and sticks are the primary motivators of worker performance. At a macro level, it’s even worse; TV pundits and economists all overtly say things like “people are motivated by economic opportunity,” using that to justify the dampening impacts of raising marginal tax rates, for example.

It’s just not particularly true. Study after study suggest not only that extrinsic rewards are not only less powerful than intrinsic rewards, but even that the usual “soft” rewards (praise, recognition) are not tops in the motivation department.

An interesting recent study based on 12,000 diary entries suggests that the largest motivator of people is almost absurdly obvious: the sense of making progress in their work. A feeling of progress trumps all the others.

Carrots and sticks have their proponents, and their place; but as Randi suggests—they’re overrated.

8 replies
  1. Paul Hebert
    Paul Hebert says:

    Full transparency – I’ve been in the "incentive" industry for 25 years.

    I don’t think there are "less important" or "more important" influence levers.  All these different behavior influencers act in concert in a portfolio of internventions.  We run into problems when we rely on one lever to the exclusion of the others.

    In the case of Wall Street – huge monetary incentives caused folks to do things they wouldn’t normally do.  Incentives work – sometimes too well.  But it isn’t an indictment of "incentives" as much as it is an indictment of the design.

    The problem I see is that we take a badly-designed incentive program and use it to "prove" incentives are bad.  In reality all we’ve proved is poorly-designed programs are bad.

    If we approach "motivation" from a portfolio approach we can include many different levers, each targeted to the area the makes sense.  Sometimes it’s progress, sometimes it’s purpose, sometimes it is about the incentive and achieve a goal – and other times it’s just simply about being validated and recognized.

    All of them do a job and when designed in concert with goals in mind they work exceptionally well.


  2. Charlie (Green)
    Charlie (Green) says:


    Thanks for your very thoughtful and measured comment; I’m sure you are right in your portfolio approach to motivation–right tool for the job, no one tool is always right etc.

    Still, I think you’d agree your view is in the minority.  Your website states that most motivation companies live by the "old rules," most of which (I’m deducing from your website) are financial in nature.  Boss Joe in the case, in my experience, is the norm out there.  Good people like yourself are swimming upstream against the dominant perception that there is, in fact, one dominant mode, and that it’s financial.  I suspect you’re right; but aren’t we both in the minority?

    And to push it a little further, the HBR article I linked to suggested it is possible, in fact, to stack rank five generic categories of incentives on the effect they have motivation and employee motivations.  The study asked:

    …more than 600 managers from dozens of companies to rank the impact on employee motivation and emotions of five workplace factors commonly considered significant: recognition, incentives, interpersonal support, support for making progress, and clear goals. “Recognition for good work (either public or private)” came out number one.

    Problem was, the same people ranked "support for making progress" dead last.  And, when correlated against a daily diary record of emotions and drive to succeed–that factor was rated first.

    That study’s methodology appears to me to be pretty right: ask people how they’re feeling and how motivated they are, over time, with lots of data.  I’m not at all inclined to say it’s meaningless because it doesn’t correlate tools with jobs; one tool seems to be more of a Swiss Army knife than the others.

    I don’t think that contradicts your broader suggestion that motivation should be broken down into components and dealt with in specific cases; that makes tons of sense too.  But I think it does suggest–along with the story of Joe, and your own website–that most people:

    1. think there is a right answer,

    2. usually think that it’s money or praise, and

    3. they’re wrong.

    Paul, you must run into this all the time.  I do get that the right answer is "it depends;" it usually does, and I think that’s a perfectly good answer.

    But even though the treatment for sunburn may ‘depend’ on what kind of sunburn you have, isn’t there one primary misconception (like, "the sun can’t hurt you"), and one simple basic piece of advice ("first, get out of the sun")?

    More, please, thanks for your commentary.





  3. Paul Hebert
    Paul Hebert says:

    Excellent questions.  When I say "old rules" I’m referring to not only financial but also the traditional toasters and trips (and now debit cards.)  My point of view is that things like measuring progress, behavioral economics, social psychology and other decision influencers need to be part of the solution set and to not just rely on cash (or cash-like) incentives awards to drive behavior.

    This is hot topic now – especially with recent books like Drive, Switch, Predictably Irrational.  I believe we’re seeing more conversation on this since the debacle on Wall Street showed that incentives can cause very bad things to happen.

    As to being in the minority.  I am because of that I have to continually ask – "If all the data shows one thing – but everyone else is doing something contrary… what am I missing."  

    What I (we)  miss is the point of view from those planning the "incentives."  


    • Fall victim to the false consensus effect and assume everyone else thinks like they do.  If I like cash therefore others will too.  This is especially true for senior executives who rarely are rewarded or recognized with anything BUT cash.  These are the folks making the decisions in many cases on the programs to influence behavior.
    • Look for "common denominators" when establishing a system for rewards.  It’s easier (and less costly) to run a system with common data than to try to develop a system designed for each individual.  Cash/compensation is a system that is already in place and can be leverage easily for awards.

    These things make us choose an answer that is easy and defendable to a group – even if it is a bad idea.  

    But… if you think about incentive programs in general – they work because they establish a goal… track progress to achievement and connect that achievement to a reward.  When designed correctly it marries up pretty nicely with the idea that what people want is to see progress – we’ve just added a cherry on top to remind them of that process.

    My point is that we all want the easy answer – and humans are not easy things – we’re messy and contradictory and swayed by a variety of things.  

    As good managers (and there are few out there) we need to pay more attention to the pyschology of influence and less to the functional descriptions of the job.

    As far as the sunburn question… yes… there is….

    People are different.

    Focus on that.




  4. Barbara Garabedian
    Barbara Garabedian says:

    Unlike quantative problems, people (as Paul indicates) are messy and can’t be grouped into a one size fits all category. 2 plus 2 does not always equal 4 when dealing w/ people. What motivates one does not motivate another, hence the current gigantic challenge of engaging the multi-generational workforce of today. Perhaps if we had fewer "beancounters" within the leadership ranks that believe 2+2 always = 4 …there might be more programs in place that can be helpful to the good mgrs that are out there,  trying to figure this out everyday.

  5. Paul Hebert
    Paul Hebert says:

    Your comment about statistics reminded me that we make the mistake of assuming because research can be applied at the individual level.  Statistics explain a group – not an individual – and corporate culture can widely skew results – there is no "representative population" within a company.  Applying statistically valid approaches may get you in the neighborhood – it does not address individual differences.  Guidelines not rules.


  6. Charlie (Green)
    Charlie (Green) says:


    Terrific commentary, many thanks to you.  And to Barbara for further priming the pump.  It always improves blogposts immeasurably when the poster is lucky enough to get involved, interested, smart, point-of-view commenters involved. 

    Thanks for doing the heavy lifting today.

  7. Rob Nelson
    Rob Nelson says:

    The intricacies and depths of what motivates one person versus another is an endless subject.  I am of the opinion that a good manager realizes he/she cannot motivate people.  Rather, he/she inspires them.  Motivation is internal and personal.  So to say one person is motivated by the carrot, another by the stick and a third by the feeling of a job well done, is to say that everyone has their own reasons for doing what they do.  The manager, and entire organization for that matter, must then be focused on what does it take to inspire his/her team members.  The best thing one of my people can tell me is that they love what they do and can’t wait to get to work each day.  Part of that is because their internal motivations (values) are being met and part of it is because they work in an inspiring environment.


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