As you think over your life, which has motivated you the most:  the promise of a reward or the threat of a penalty?    This is a question I’ve been pondering a lot of late.  Let’s say, for example, I set a goal for myself of exercising at least five times a week.   I have two choices for motivating myself:  I can 1) “incentivize” the process by giving myself a nice treat (let’s say a chocolate bar–yum!) upon each successful work out or 2) administer a stern, self-imposed penalty (perhaps liver and brussel sprouts for dinner–yuck!) for each failed exercise session.

Which do you think is the least and the most effective?

According to a recent article in Inc. Magazine (April 2013) titled “Don’t Reward Failure”, the answer is #2.  Writes the author, “Penalties are far more motivating than rewards”.   The article goes on to discuss a study of 150 public-school teachers in Chicago Heights, Illinois.   The researchers split the educators into two groups and informed them that their bonuses would be tied to their students’ test scores.  Teachers in the first group learned that they’d get a year-end bonus if the test scores improved.  Members of the second group were told that they would receive a check for $4,000 in September and would have to return the money if the test scores didn’t rise by June.

Can you guess the results of the study?

Writes the author:  “The teachers who faced the threat of having to refund their bonuses produced student test scores that were about 7 percentage points higher on average than the scores of students with teachers in the conventional bonus plan.”

Clearly “Loss Aversion” works; it’s worse to get nothing rather than have something desirable, in-hand, be taken away from you.

So what, then, should we do with our employees– give out money and then take it away?    Not so fast. Based on the study above, the researchers in Chicago recommend telling employees up front that they will receive a bonus if they meet their goals, but also that it will be reduced or retracted completely if they don’t make their numbers.  In a sense they saying, “Here’s the carrot.  It’s yours for the taking.  But if you don’t achieve results, you’ll only get half the carrot, or 3/4, or none at all.

An important warning:  Studies show that it can be counter-productive for employers to set the stakes too high. The last thing you want is for people to “choke” because there’s too much pressure.

The article concludes that we can all boost our productivity by setting consequences.  Check out, for example, a web service like    Here you can set a goal, track your progress, and pledge money if you fail to reach your goal.  That money can go to charity — or worse — it can be pledged to an “anti-charity”.   Let’s say you hate guns.  StickK will gladly donate your cash to the National Rifle Association!

And here it is, the end of my work day, and I’m thinking about heading to the gym for my work out.  I would dearly love to blow off today’s routine, plop myself on the couch and crawl into a good book.  But not so fast.  I’ve pledged $100 for each missed work out to the Philip Morris Tobacco Company.   I better put on my sweats and t-shirt.  Talk about motivation!