Carrot vs. stick... A new study (which I can't help but be skeptical of, simply because it's a psychological experiment!) backs up my own experience as a manager: to modify behavior, punishment works better than reward.
In all my regretted years as a manager and executive, I tried a great many ways to motivate my employees to do what I wanted them to do. Most of these ways were various reward schemes (bonuses, stock options, recognition, etc.).
While these schemes were sometimes effective for a while, they were plagued with problems. The biggest of these problems were that the reward was quickly seen as an entitlement by many people, there was no real general agreement on the criteria for the reward, and a certain class of people (usually about a quarter of them) would immediately start figuring out how to game the reward system to get what they didn't deserve. Every single time, the reward system turned into a management nightmare, and was ineffective anyway. Much time and money was utterly wasted.
On the other hand, I once implemented a remarkably effective punishment system. If any of my ex-employees are reading this blog, all I have to do is say “Mr. Monkey” and they will instantly remember the whole thing. Mr. Monkey was a stuffed monkey with a comically stupid expression on his face. Each week I awarded the monkey to the engineer or technician whom I judged to be the least effective that preceding week. The recipient had to display the monkey on the top of their cubicle wall, and they weren't allowed to hide it. Everybody in the company knew about the monkey, and who had received it – and even why. All this took no work on my part – the news spread by osmosis in moments after each award. I didn't award it for making mistakes – we all do that – but rather for poor work, causing friction on the team, etc. There was only one monkey; I collected it from the previous winner before awarding it to the new winner. My team had 30 to 35 people on it over the period I used the monkey, and nobody wanted to get the monkey. On many occasions I actually heard people refrain from a behavior (say, checking in some horrible code), saying something like “I have to fix this, or I’ll get the monkey!” I never had a problem with people thinking the award was unfair, nor did I have people trying to game the system. It actually worked, over the entire 18 month period I employed it.
As it happened, the job where I used the monkey punishment was the last management or executive role I ever had. I was laid off from that job, and the company failed shortly thereafter. I went from there to a purely engineering job, and never had any opportunity to repeat the experience. I wish now that I had learned the lesson earlier in my career.
I had another experience in the early '80s which should have taught me the lesson. At the time I was an engineer working for a small company in San Diego, with about 200 employees. One of the executives there was nicknamed “The Hammer” because he “brought the hammer down” regularly on misbehaving employees – and it worked. To cite one example he was famous for: he had a rule regarding meeting attendance. If you accepted an invitation to a meeting, you were expected to show up on time. The first time you were late, you got dressed down in front of the entire meeting. The second time you were late, you were fired right then and there. To my knowledge, exactly two employees were fired (one of them a senior manager) – and every meeting at that company started on time. That has never happened to me at any other company I've ever worked at or with. Late-starting meetings are a standing joke everywhere for their tremendous time-wasting. We were all frightened of The Hammer, but somehow I missed the underlying lesson that his methods worked...