Carrots and Sticks: Unlock the Power of Incentives to Get Things Done

Although the idea is not new, this is in essence what "Carrots and Sticks" is all about. This is a book which applies the lessons learned from behavioral economics, which is the science of rewards and punishments, to teach us about "commitment contracts." A commitment contract is a strategy for setting and achieving the goals and tasks we've failed at before. Although others may have thought of this goal-reaching method before, "Carrots and Sticks" is the first book to really dive into the idea and give it a name.

Think of it like this. Imagine you're chronically disorganized to the point where it's affecting your work. Despite threats from your boss, you've never managed to mend your ways. Finally your boss gives you a commitment contract. Either you get organized, and stay organized, or you're going to lose your job. He's written up a contract with the details and conditions, which you and he both sign.

Sounds pretty extreme, right? Well, it is. But if you knew your job was absolutely on the line, don't you think you could find the time and energy to finally get organized?

You bet you could. And this is, at heart, what "Carrots and Sticks" is all about. In this book we explore the incredible motivating power of commitment contracts, and how we can use them to dramatically change our lives. We can also use commitment contracts to motivate our teams.

The author is the founder of the website stickk.com. The company creates and enforces commitment contracts for people all over the world. Collectively, people have put more than five million dollars on the line to motivate themselves to accomplish their goals.

What are they doing? They're quitting smoking. They're losing weight. They're running marathons, becoming better bosses, and spending more time with their family. In short, they're putting their cash and reputations on the line to accomplish their goals.

"Carrots and Sticks" gives us a fascinating new way to look at rewards and punishments. It's the kind of book we can all benefit from because, let's face it, we all have goals we're not meeting. Here, we learn all about how effective commitment contracts can be, and we get plenty of real-life stories that illustrate why they work. We also learn why having a painful consequence, or a really great reward, is so vital to our success.

What's most valuable about this book is how it can be applied to a work setting. We learn how to use this new motivation strategy with our teams, and we get plenty of real life stories that prove just how effective it is. Companies that have used commitment contracts have seen incredible results from their teams. Whether you're a manager or just getting started in the workforce, you're going to learn some valuable tips here.

So keep listening to find out how to use risk to motivate your team, why offering your team an anti-incentive might actually be more effective than a regular reward, and why you should always set the terms with your team when you create a commitment contract.

The book is relatively short. It's divided into eight chapters, and the author starts out explaining the science behind our motivation. We get some fascinating insight which explains why we're so tempted to take immediate rewards over better, long-term gains. The author quotes several studies in this chapter, and this did get a bit wearing, but the science helps create the foundation for the rest of the book.

Chapter two explores the difference between incentives and commitments, and how the two are used effectively in motivation. Some of the examples prove how powerful the right incentive can be, and how motivated we can get when our hands are tied. This is exactly what commitment contracts are supposed to do.

A good example is the online shoe company, Zappos. The company offers all of its new recruits $2,000 to quit at the end of their training. That's quite a carrot, for the right person – or the wrong person, from Zappos' point of view. The idea is that if someone's willing to take such a short-term gain over the long-term benefit of working for the company, they're the kind of recruit they don't really want anyway. For the company, $2,000 is a small price to pay to put together a team that's truly committed.

The surprising thing is that most people don't take the offer. They'd rather work for the company than get that immediate reward. But this particular carrot has an unexpected benefit. When the employees turn it down, they increase their commitment to their new job, and how much they value it.

Chapter three looks at losses. That is, how big of a loss must we be threatened with if we're going to have the most success?

The author quotes a study involving overweight men who put money on the line to lose thirty pounds.

The scientists split the group into three teams. The first group paid thirty dollars. The second group paid one hundred and fifty dollars, and the third group put in three hundred dollars.

If the men wanted their money back, they had to lose the weight.

Now you'd think that the men who put in the most money, the $300, would be most motivated to lose the weight. And overall, you'd be right. At the end of the study, this group actually lost more than 30 lbs. All the groups lost weight, but 71 percent of men of the group with the most to lose lost the required amount of weight.

What's interesting, however, are the long-term effects. The scientists went back a year later to measure the men, and found that the $30 group and the $300 group had regained their weight back. But the group that had risked $150, as a whole, ended up keeping the weight off.

Which means the moderate risk group actually produced better results long term. The scientists concluded that the more extreme contract created a psychological backlash. The men who risked their $300, and then won it back, likely reveled in their new freedom once the project was done, and returned to their old ways.

The author cites other studies which largely prove the same thing. The more severe the threat, the likelier it is that participants will go back to their old ways after the event is over with.

This is an interesting observation because it can clue us in to how we structure risk and reward with our teams. Sure, a pressing risk or punishment might yield greater short-term results. But creating a more moderate risk can likely give us better results over the long term.

Chapter four looks at nagging. Specifically, why we need other people in order to accomplish our goals.

The author quotes a fascinating study about day care centers. Scientists wanted to see if offering a financial penalty would stop parents from picking their kids up late from daycare. In the test, parents would be fined $3 every time they showed up late to pick up their kids.

What happened? Instances of late pickups skyrocketed instead of going down – and the scientists explained it this way: Before, parents felt guilty when they showed up late. They felt others viewed them as bad parents. But when they had to pay a measly $3, they felt better about being late. This is completely opposite from what the scientists had expected.

But what do you think might have happened if the scientists had changed things just a bit? For instance, instead of a late parent having to pay, what if another parent, who was worse off financially, had to pay the fine instead?

Scientists call this an anti-incentive. And often, it can be far more effective than providing financial rewards or punishing an individual alone.

For instance, the author is friends with a Rob Harrison, a Yale Law professor. And this professor, one of the most beloved on campus, has used the concept of the anti-incentives to break his students out of writer's block.

Students have given the professor checks of up to $10,000, signed and made out to various charities, that Harrison can mail if they fail to turn in their papers for the course by a specific date.

What's fascinating is that the first five years Harrison did this, the charities were all ones the students liked. But then Harrison switched it to charities the students didn't like. For instance, an opposing political party or an organization that clashed with the student's moral values. Harrison has never once had to cash one of these checks, despite the fact that most of students who take part have serious writer's block.

Another chapter worth mentioning is chapter six, which covers what our commitments say about who we are.

The author says that when we talk about committing to a goal, but we're unwilling to pay a price or sign on the dotted line if we fail, then most of the time we don't really mean it. In a sense, a commitment contract can be used as a filter to see whether or not we're truly sincere about our goal.

The author makes a great point in this chapter. He says when people try to convince us they've changed, it's often hard for them to resist making commitments. This is especially true when we let them choose the fallback terms.

Here's a good example. The author purchased some customized modular tabletops for his home office. When he was at the store, he made sure to ask when they would be installed. He'd had some bad experiences in the past with other furniture stores breaking their promise. So the furniture store said they would deliver within two weeks.

The author then said if they weren't delivered within two weeks, he felt he had the right to cancel the contract. And, here's the crucial part. The furniture salesman came back and said if the tables were not installed within two months, the author could buy them at half price.

The author didn't hear from the company for almost two months. Days before the deadline the store called pleading for more time, which the author declined.

The tabletops ended up being installed with a day to spare. But the lesson is a good one. When we let others dictate their fallback terms instead of sticking to our guns, then they're going to feel comfortable and likely not stick to the original agreement.

This is a useful tip managers can use when handling difficult situations with their team. For instance, imagine you have a team member who's always late. You demand he show up on time or he's going to lose his job. He then comes back and says he should have at least a grace period to get used to coming in on time.

If you relent what do you think is going to happen? Chances are, he's going to continue to be late because he was able to set his own fallback terms.

The rest of the book continues in this same vein, exploring how carrots and sticks work as motivators. Each chapter is well sourced with studies and interesting information, and since it's not too long it goes fairly quickly.

So, what's our last word on "Carrots and Sticks"?

Well, there's no doubt this is a fascinating read. And the idea of commitment contracts is inventive and highly useful both in our personal, and our professional lives. The author does a great job convincing us of the effectiveness of commitment contracts, so by the time you're done with the book you're itching to try it out for yourself.

Our criticism of "Carrots and Sticks" has to do with its usefulness. The author has left it largely up to us to figure out how to apply this information. The book is full of studies that back up the author's claims, but not once does he offer any tips or strategies for applying this information to our daily life.

The author also does a great job selling his website, Stickk.com. As you heard earlier, the site's sole purpose is to provide and enforce commitment contracts for people around the world. But we have to wonder if he neglected to put any other practical uses of this information in the book, so more people would be forced to use his site.

Maybe. Maybe not. But the lack of how-to in this book was a major disappointment. As it is, the book is really more academic than practical.

The good news is that figuring out how to use this information is fairly straightforward, especially when you're trying to create effective carrots and sticks for your team. But some additional help from the author would have been nice.

Should you still read the book? Well, we think so, especially if you'd like to learn more about the science behind motivation, as well as what works and what doesn't.

"Carrots and Sticks," by Ian Ayers, is published by Bantam Books.

That's the end of this episode of Book Insights. Click here to buy the book from Amazon. Thanks for listening.