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Innovation Insights by Stephen Shapiro

the carrot or the stick?Management gurus love to talk about the carrot vs the stick. Which works better, rewarding for positive behavior (the carrot) or penalizing for negative behavior (the stick)?

The answer to this is not cut and dried. Both work in different situations.

However there is some interesting research that shows one method tends to yield better results when it comes to changing particular behaviors. This may give us insights into how to motivate people to change/innovate within organizations.

Weight Loss Without Carrots 

One particularly difficult behavior to motivate is weight loss and health. Company wellness programs have incentivized people to get healthy by giving them “rewards” for achieving their goals.

But is this the most effective strategy?

A recent 13-week study of 281 overweight/obese individuals (published in the Annals of Internal Medicine) tried three different motivation strategies to see which would get people to walk 7000 steps per day:

  1. $1.40 was given to the participants for each day they hit their goal
  2. A lottery approach with an expected average value of $1.40 was given if the goal was achieved on a given day
  3. Participants were given $42 up front each month and then had to give back $1.40 for each day they failed to achieve their goal

 

Each gave an equal financial return over the course of the study. But they were not equally effective.

Which was most successful in motivating people?

The third method was most effective, with 45% of the daily targets being hit. The first and second approaches yielded 35% and 36% respectively. The control group was 30%.

So the carrot (a positive reward) did improve behavior, but not as much as the stick (a loss for not reaching a target).

I’ve seen this in my own life. I recently decided to get life insurance where rates are determined by, amongst other factors, my weight. The loss of money, in the form of higher premiums, has motivated me to get into better shape before the mandatory physical. In the past, getting money to lose weight rarely was a sufficient motivator.

The Bark (of the stick) is Better than a Bite (of the carrot)*

A Washington University study provided similar results, where people were more likely to change behaviors when subjected to punishments.

You can read the details of the research method. The results are what I find interesting, yet not surprising.

The larger the rewards, the more consistent the desired behavior. (Although not mentioned, I suspect that there is a point where an overly substantial reward would have a deleterious effect – see my article on The Performance Paradox)

With losses, the amount did not matter, there was a strong and consistent behavior. In fact, losses drove 2 – 3x the impact over gains.

According to the study’s lead author, Jan Kubanek, PhD, “Objectively, you’d think that winning 25 cents would have the same magnitude of effect as losing 25 cents, but that’s not what we find.”

The article points out that this might be used in education. They suggest that in “some situations it may be better to deduct points when students are wrong than to reward them for correct answers.”

Sticks To Build Innovation Fires

What can we learn from this as it relates to innovation?

Although I suspect we can’t give people money and then deduct their pay when they fail to achieve a goal, the concept could be used in various bonus situations.

For example, many innovation efforts use a points system to reward people when they develop valuable solutions. (I discuss some motivation strategies in an earlier article on the topic)

But to flip it on its head, it might be interesting to give everyone an allotment of points (or money) to start and then deduct points for inactivity or lack of contribution. If you have no points, it is boring to see an account that does not accrue. But if you start with one million points (or a set of bonus dollars), you might want to take action to prevent a loss of those points. That is, of course, if the points are valued by the individual.

I’m sure there are many other applications for this concept. I used some in the development of the gaming engine for my 30-Day Innovation Challenge.

Where else have you seen “loss” as the reward mechanism?

* A play on “his bark is worse than his bite,” just in case that was not obvious…which I suspect it wasn’t 🙂

  1. Brian Walter says:

    Very interesting. I remember doing a video for the HR department of a Fortune 500 company. With the healthcare wellness program they shift from straight carrots to also including some stick. One example was smoking cessation. As a self insured company they cared a lot about this. So, you did NOT have to quit smoking. But you were offered a free smoking cessation class. You could choose not to take it, but then you had to pay a higher insurance premium. Bam, people signed up for the course. It would appear that your insights on this, Stephen, are spot on!

    • Thanks for chiming in, Brian. Of course the answer is a balanced diet of sticks and carrots. No one wants to, in the real world, be punished all of the time. But sometimes you need a little stick to kick start things.

  2. Personnaly, I believed conventional (ancient, not management theory or gurus) wisdom largely favors the stick. On the other side, theory also warns us that both carrot and stick may be closer related to hygiene factors. So, when deciding between two second-class incentives, it just depends.

    • Stephen Shapiro says:

      I guess you are right. Old school was always stick. And you are absolutely right that it depends on the situation and person. For some things I am a carrot person (work) but for other I am a stick person (health). Personal motivation factors are key. Thanks!!

  3. Wonderful article, Steve! “Objectively, you’d think that winning 25 cents would have the same magnitude of effect as losing 25 cents, but that’s not what we find.” Kahneman writes beautifully about this in his book Thinking, Fast and Slow: In behavioral economics losses loom larger than gains, sometimes to the point of very irrational behavior.

    • Stephen Shapiro says:

      Absolutely. I remember many years back I was awarded a large contract with a client. Let’s just say I was paid $100. This was more money than I thought I would get for this work. I would have been happy if I got paid $70 for it. I hired a contractor to do some work for the client. Their work was $20 and the client paid it. In the end, the contractor’s work was subpar, so to make sure my client was happy, I paid them them $20 from my pocket. That was 10 years ago and I still feel the burn of that loss. But had I been paid $80 from the beginning, I would have been a happy camper.

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