Rewards and Punishment in Business

Rewards and Punishment in Business

Managers can rely on the carrot or the stick to reward or punish employees. Unfortunately, most managers don’t give much thought about how they reward or punish. In dozens of management development courses I have delivered, I have asked managers, what they use to motivate their employees. Most say money. When asked to think deeper about employee motivations they often realize that they have not really given much thought about what motivates employees, much less given much thought about how they as managers do it.

Few have given much thought to the fact that the wrong type of reward can in fact have the opposite effect. I always share with them the story of the top sales representative at a large pharmaceutical company where I used to work. He was the best the company had. Not only did they reward him with bonuses, but they also had many award trips that representatives could win on a quarterly, semester and yearly basis. He practically won them all! He was winning trips to exotic locations and exciting cities all over the country. I was working in a sales operations position at the time. I visited with him to learn more about his success. During our visit I was shocked when he told me how unhappy he was with the company and how he was thinking of leaving!

I soon learned why. He had a large territory and was constantly “on the road”. He also had several small children. While he realized that he had to travel to be successful, he did not appreciate the fact that almost every 3 or 4 months the company expected him to go on these fancy trips, which took him away from his family even more. He asked, why couldn’t they just give him the money or award him with prize points, rather than force him away from his family! Management had never considered if the type of rewards we were offering was really motivating those who received them. The same is true, if not more so, when it comes to punishment. When working on case studies dealing with difficult employees, attendees at my leadership development programs usually respond first by saying simply “fire them”. They also talk about putting them on “performance improvement plans” or other types of punishment. Few have given serious thought about the type of punishment or the manner in which they deliver the punishment and whether it has impact on improving behavior in promoting the desired type of organizational conduct in the future.

In a study designed to discover if the way managers deliver punishment has a positive impact on behavior within organizations, Ball, Revino and Sims showed that “punishment can positively influence subordinates’ subsequent behaviors (and prevent negative behaviors) if the punishment is conducted in a particular way” (1994, p. 314). They found that positive results occurred when punishment was perceived by the employee to be just and “matching the infraction” they committed and “consistent with what others have received” for similar violations (p. 315). They also found that employees felt the punishment was more fair and consistent, if they had some input into process (p. 315). Just as the representative in my example above wanted input into how he was rewarded, employees feel more motivated by punishment if they are involved in the decision making process regarding punishment. It may seem unreasonable to involve an employee in this discussion; after all, they are being punished. However, their study shows that “individuals with a strong belief in a just world saw punishment as more constructive and as providing them with more control” (p. 316).

Furthermore, individuals who perceive the world as unjust and where they have little control over events “perceived the punishment process as less constructive and as providing them with less control, and they perceived the imposed punishment as harsher” (p. 316). By involving the employee in the discussion about the reasons for the punishment and the standards of said punishment, the manager is building an environment that the employee feels is just and fair and where he/she is involved in the process.

The implications of this study are important. Just as giving a reward is designed to motivate or encourage positive behavior; punishment’s end goal is to change or discourage negative behavior. Therefore, a manager must consider the results of this study to be truly effective when delivering punishment. First, the punishment must be seen as just and fair. To be seen as just, there must be consistency in who is punished and why throughout the organization. Also, the proposed punishment must be consistent with punishment given in the past and not disproportionate to the infraction. Next, the employee must feel that he/she has some control over what is happening to them. Therefore, they must be engaged in a conversation regarding the action and the punishment. The manager should take extra time to ensure that they “influence the subordinate’s interpretation of the event by highlighting its positive and constructive features and by clearly explaining and justifying the imposed punishment” (p. 316).

This engages the employee and helps them perceive that they have control over their future if they change certain behaviors. All of this helps ensure that punishment is done in a way that improves organizational behavior and citizenship and not be perceived as a “big stick” in the hand of a tyrannical manager.


Ball, G.A., Trevino, L.K., and Sims, H.P., (1994). Just and unjust punishment: Influences on subordinate performance and citizenship. Academy of Management Journal. Vol. 37, No. 2, 299 – 322.