Is the carrot-and-stick approach right for your team?

As a leader, you must seek new ways to encourage your team to meet performance targets. Without motivation, employees could lose sight of the bigger picture they’re working toward or feel discouraged when confronting setbacks. 

Teams often require different motivational models — sometimes individual members even need unique approaches. But one of the most common approaches leaders often tweak to fit each situation is the carrot-and-stick model. 

What is carrot-and-stick motivation?

The carrot-and-stick motivational approach uses rewards and penalties to encourage employees to meet certain objectives. This approach leverages two key motivators — intrinsic and extrinsic — that drive action. 

Intrinsic motivators are internal rewards such as pleasure or companionship that push you to do something. Extrinsic motivators regard factors outside your control — like an obligation, reward, or punishment.

When you’re intrinsically motivated you complete tasks because they benefit you in a meaningful way, like fulfilling a curiosity. When you’re extrinsically motivated you complete tasks because of something outside yourself, like a financial reward or punishment. 

You can use the carrot and the stick model to leverage both intrinsic and extrinsic motivators and encourage action. For example, you might offer an employee a learning opportunity like a computer skills course, which will fulfill their curiosity and growth mindset (intrinsic motivators).

Or you might offer someone a raise if they hit all their quarterly targets (an extrinsic motivator). And you could outline penalties like missing out on a bonus if they don’t meet certain expectations — they would then be extrinsically motivated to act. 

Implement your motivation system: 5 steps 

Most companies work off a carrot-and-stick approach on some level. Even if you’re not explicitly outlining the reward and punishment behind each goal, employees understand there’s something to gain and lose depending on their performance.

But you can intentionally leverage this approach by following these five steps.

1. Set your targets

Begin by choosing small short-term goals you’re confident staff can easily meet. No matter your goals, make them SMART: specific, measurable, attainable, realistic, and timely. Making targets more achievable and understandable during the first phase will encourage rather than defeat employees.

Example: Improve sales team contributions by 5% by quarter’s end.

2. Establish your reward

Your best choice of “carrot” is an incentive that appeals to your employees. This might mean you’ll define different rewards for different staff.

Example: One employee is motivated by monetary rewards, so you’ll offer them a bonus. Another is motivated by learning new things, so you’ll offer them a two-day off-site course. 

3. Set criteria for success

Clearly define how you’ll award the incentive to employees. Determine whether they must meet or exceed a specific target and if you’ll reward them individually or as a team. Consider whether you want to implement a tiered system where, if an employee doesn’t achieve the highest level, there are rewards for being among the top 25% of performance.

Example: If the sales team beats their yearly goal by 15%, they get a catered pizza party. The top 10 performers also receive one day of paid time off anytime during the next quarter. And the person who makes the most sales gets a $500 bonus. 

4. Determine your consequence 

Now that you have the carrot, you need to decide on the stick. It should be sufficiently unwelcome that your staff want to avoid it, but never demoralizing or humiliating. The best consequence is constructive and helps the employee reach their target in the future

Example: Participants who fail to reach sales targets must attend a training workshop. 

5. Decide who receives a penalty

You should also clearly define who receives the consequence. As with your reward, there can be different levels of severity for penalties. 

Example: The five employees with the lowest sales numbers will attend a one-hour virtual training session, and the employee with the least sales overall must also attend a two-day in-person course.

Once you’ve established your goals, reward, and penalty, work on uniting your staff. The last thing you want is for a bit of friendly competition to devolve into a toxic work environment. So watch out for imbalances and promote teamwork whenever possible. 

Reward types

There are four main workplace rewards — the one you choose will depend on what motivates your staff and your company culture:

• Compensation: These rewards are financial, like a cash bonus or an increased commission rate.

• Benefits: This reward type offers employees more autonomy and control over their working conditions. For example, flex-time and remote work options are benefit rewards.

• Recognition: Share your team’s success with the rest of the business by sending an office-wide email offering kudos to top performers or, if they’re comfortable, during your annual general meeting. 

• Appreciation: Gratitude is an effective motivator. Consider offering top-performing individuals or teams a catered lunch, prizes, or the opportunity to go home early one Friday a month to say thanks for a job well done. 

Carrot and stick examples

When determining rewards, studies have found that doing more interesting work or having more autonomy drive motivation better than financial considerations — incentives that play to intrinsic motivators are more effective than those for external motivators.

But you can also figure out what works best by surveying your staff. Whatever you choose, employees must find the reward valuable if they’re going to participate. 

Be aware of the potential negative impacts of your choice of stick. You want your employees to remain engaged, optimistic, and confident. If they become disheartened, it could result in burnout and increased recruitment costs if staff leave your business for a lower-pressure work environment. 

Here are a few examples of carrots and sticks you could choose from: 

Carrots

• Catered lunch from the restaurant of their choice

• Cash bonus 

• Gift cards

• Staff outing

• Create the week’s playlist

• Coveted supplies like an executive office chair

• Swag or other gifts

Sticks

• Missing out on financial bonuses

• Being last to select weekly shifts

• Attending extra training

• Failing to earn a reward

Benefits of the carrot-and-stick approach

When used judiciously and in the right environment — like one conducive to competition or when employees work on a routine, unchallenging tasks — the carrot-and-stick model can produce the following benefits: 

• Increased employee commitment to company goals
• Closer working relationship between employees and team leads
• Shared goals that unite teams and give them purpose

But this model isn’t ideal in all scenarios. For those working in industries that require innovation and creativity, a carrot-and-stick approach might stifle these priorities. In this case, encouraging employees using methods that include challenges, resources, and encouragement might deliver better results.

Additional tips

Before deciding a carrot-and-stick plan is the best way to motivate your staff, here are a few final tips to consider:

• Incentives should be unique: Every employee is unique, and what incentivizes one won’t inspire another. Get to know your team members individually and, where possible, tailor rewards to their motivators.

• Money isn’t everything: Tying performance exclusively to financial compensation can significantly improve an employee's performance, but it can also work against you.

  If a worker makes an effort/reward calculation for their job and finds they’re coming up short, they might seek new employment. Consider adding non-monetary incentives that increase job satisfaction, like enrichment and promotion opportunities, to your reward structure. 

• Prioritize autonomy: Most people are more motivated to do things they actively want to do. For example, adults who feel in control and self-motivated to explore their mental health are more likely to embrace their wellness journey and see results than those who feel obligated by external forces to go to therapy, and healthcare professionals that encourage autonomy see higher success rates in treatment.

  Always give employees the option to participate in reward/penalty programs.

• Managers have a role to play: Your staff can only succeed with input from you. They require feedback and support to stay on track. Be flexible regarding how your staff achieves their goals. If you notice results slipping or a team member's methods consuming too many resources, step in and reassess.

Use the best approach for your workforce

Not every workplace or employee will benefit from a carrot-and-stick approach. If, after careful consideration, you believe it’s the best way to motivate your employees, do so carefully.

Be transparent about the mechanism that triggers the reward or consequence, ensure that everyone has the opportunity to succeed, and make adjustments if the system doesn’t work.

Regardless of your motivation method, your overarching priority should be employee satisfaction. Keep your staff happy and they’ll be plenty motivated.