The Right Ratio of Carrot-to-Stick When It Comes to Incentivizing Your Employees As the old saying goes, you catch more flies with honey than with vinegar!
By Stu Sjouwerman Edited by Jessica Thomas
Opinions expressed by Entrepreneur contributors are their own.
As a leader, you'll figure out pretty quickly that most people are more willing to do what you ask them to do if you give them the right carrots — that is, incentives and rewards. Both psychology and economics back up this approach with nudge theory, which involves presenting positive alternative choices and aiming leaders away from using negative reinforcement, which simply doesn't work. Still, sometimes, after all the carrots fail, you have to pull out the proverbial stick and dish out some appropriate discipline. But get the right carrot/stick ratio, and you'll keep your team motivated and exhibiting the behaviors you want within your organization.
The ideal ratio of carrot to stick
In my experience, I've found that the ideal ratio of carrot to stick is 9:1. As a simple example, take email phishing. Say you want to make sure your team knows what phishing is and how to avoid it, so you send out simulated phishing tests. If they fail one or two tests, then they get some corrective training. If they fail three times, then you chat with them. Four failed attempts means they go chat with human resources. Five is a write-up. Six or seven translates to warnings. Eight or nine leads to two final warnings. At 10 fails, they're out and you let them go. And, along the way, you document everything to ensure consistency.
Related: 7 Ways to Ignite Employee Engagement and Boost Your Bottom Line
Why the 9:1 ratio is so helpful
The 9:1 carrot-to-stick ratio is beneficial for three big reasons.
First, it's a graded, step-by-step process. It lets you gradually turn up the heat on your "trouble children" employees to guide them in the right direction rather than immediately pouncing on them with the harshest punishments you've got up your sleeve. That gives you plenty of opportunities to have open discussions along the way and foster better trust.
Second, it prevents "fear culture," where people are so afraid of making mistakes that they become unproductive or unwilling to try or innovate. People should know they're going to get a chance to learn and try again.
Finally, well-structured, gradual training with the opportunity to learn and correct mistakes in a safe environment creates a better overall awareness of what you want to see and what could go wrong. Your employees know how to stay out of the weeds and get over hurdles, so they're able to avoid causing real problems for the business. Failing a phishing test, for example, isn't the end of the world. Infecting your system with real-world ransomware that hurts the reputation of the business and costs the company hundreds of thousands of dollars because you're shut down for weeks, however, is a totally different ball game. So, using the 9:1 ratio is a basic but very effective risk management strategy, as well.
How to use the 9:1 ratio for success
When you use a 9:1 ratio, you want to encourage your employees along the way. There's plenty of opportunities to gamify what you're doing and offer positive reinforcement with all kinds of fun incentives. For instance, if an employee has important job training they need to complete, an incentive could be that they get $500 when they complete their program. Making it fun in this way can put everyone in the more relaxed mental space they need to be in to enjoy the process and effortlessly remember and apply what they're learning to their work.
When you think about how to make it fun, play fair. You might have issues that really only involve a certain group, but have the outlook that everyone from the mailroom to the boardroom should be able to participate. Make it easy for people to get involved, and work hard to ensure that nobody's left out. Everyone needs a fair chance to win.
The final component of using this ratio the right way is fantastic communication. Having some fun at work is great and necessary. But, employees also need to truly understand why you're asking them to do something and know exactly what all the rules are if they're going to play your game well. Explain each step, what's at stake, and how things can change for the better if they behave the way you want them to. The more they see that your request is doable and has a real rationale and purpose, the more likely they'll be to believe in and drive toward that purpose themselves.
Related: These Are the 3 Most Vital Techniques to Retain Employees
By using the 9:1 ratio to build a positive culture, everyone wins
Good leaders work continuously to help their employees improve and win. This effort includes knowing how much reward and discipline to use to motivate everyone over time. In most cases, a 9:1 carrot-to-stick ratio will serve you well and provide many chances to connect and have fun in a safe culture. Aim for that combination whenever you need to shape your team to ensure that both your connections and results are solid.
