What Motivates Employees More: Rewards or Punishments?

The 18th-century polymath Jeremy Bentham once wrote, “Pain and pleasure govern us in all we do, in all we say, in all we think.” Modern neuroscience strongly supports Bentham’s intuition. The brain’s limbic system, which is important for emotion and motivation, projects to the rest of the brain influencing every aspect of our being, from our ability to learn, to the people we befriend, to the decisions we make.

It is not surprising, then, that when we attempt to motivate people, we try to elicit an anticipation of pleasure by promising rewards (a bonus, a promotion, positive feedback, public recognition), or we try to warn about the pain of punishment (a demotion, negative feedback, public humiliation). But what’s not always clear is, which should we be using — the promise of carrots or the threat of sticks? And when?

Neuroscience suggests that when it comes to motivating action, getting people to work longer hours or producing star reports, rewards may be more effective than punishments. And the inverse is true when trying to deter people from acting. For example, when discouraging people from sharing privileged information or using the organization’s resources for private purposes, punishments are more effective. The reason relates to the characteristics of the world we live in.

To reap rewards in life, whether it is a piece of cherry pie, a loved one, or a promotion, we usually need to act and approach. So, our brain has evolved to accommodate an environment in which often the best way to gain rewards is to take action. When we expect something good, our brain initiates a “go” signal. This signal is triggered by dopaminergic neurons deep in the mid-brain and moves up through the brain to the motor cortex that controls action.

In contrast, to avoid bad things — poison, deep waters, untrustworthy people — we usually simply need to stay put and not reach out. So our brain has evolved to accommodate an environment in which often (though not always) the best way to not get hurt is to avoid action altogether. When we anticipate something bad, our brain triggers a “no go” signal. These signals also originate in the mid-brain and move up to the cortex, but unlike “go” signals they inhibit action, sometimes causing us to freeze altogether. Even in situations where real danger is imminent, the freeze response often precedes the fight-or-flight response that may follow it, like a deer in the headlights.

An experiment, led by neuroscientist Marc Guitart-Masip, demonstrates how we are biologically wired such that anticipating rewards elicits action. It was found that volunteers were quicker to press a button (that is, to act) when offered a dollar (anticipating a reward) than they were to press a button to avoid losing a dollar (anticipating a punishment). However, they did a better job when they were asked not to press buttons (to not act) to avoid losing a dollar than they did when were offered a dollar in return. In the latter case they sometimes instinctively pressed the button.

While we should be cautious translating such basic research to real-world situations, it would seem that creating positive anticipation in others (perhaps with a weekly acknowledgment of the most productive employee on the company website) may be more effective at motivating action than threatening poor performance with a demotion or pay cut. Fear and anxiety can cause us to withdraw, and give up, rather than take action and improve. In line with this notion, studies have shown that giving people small monetary rewards for exercising or eating healthily was more effective at changing behavior than warning of obesity and disease.

There is another reason why warnings often have limited impact. Research has shown that the brain encodes positive information (such as learning that the likelihood of obesity is lower than previously thought) better than negative information (such as learning it is higher). In fact, people often assume negative information is unrelated to them, but view positive information as very much relevant, which generates an optimistic outlook.

When we notice others making suboptimal decisions, we automatically fast forward in our heads and visualize their failure, leading us to warn them about the devastation we envision.  The team at Actuate Business Consulting, a knowledge based management consulting firm in India, believes, that it’s necessary to understand and utilize the aforementioned insights, which suggest that we need to consciously overcome our habit of trying to scare people into action, and instead highlight the rewards that come with reaching a goal. In turn, this approach will lead to higher performance and better results.

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