Reward vs. Punishment: How to Motivate Employees to Explore

In order to prosper, companies need to experiment and explore new opportunities beyond their current capabilities and practices. Such exploration activities are driven by individuals’ effort, but social context may motivate it – in particular, the relationship that employees have with their supervisors can influence their exploration behavior. In these relationships, do rewards work better than punishment? What role does power framing play in this relationship? Can leaders alter trustworthiness perceptions to induce employee exploration?

We address all these questions in a new article co-authored with Jonathan B. Evans from the University of British Columbia, “The Power to Reward vs. the Power to Punish: The Influence of Power Framing on Individual-Level Exploration” (Organization Science, 2023). In the studies we conducted, we demonstrate that reward (versus punishment) power framing increases employee exploration behavior, and that the effect of reward power framing on exploration depends on the degree to which the employee is sensitive to power characteristics.

Exploration vs. exploitation

‘Search, risk taking, experimentation, discovery’ are words associated with exploration, while ‘production, implementation, efficiency or execution’ are related to exploitation. At an individual level, exploration can involve searching new possibilities or learning new skills, whereas exploitation pertains to familiar or repetitive activities that can be conducted using existing knowledge and skills. Because the potential rewards of exploration are both distant and uncertain, there is an inherent tendency to prioritize exploitation over exploration, to the extent that lack of employees’ exploration can lead to a loss of competitive advantage.

Exploration in an organization substantially originates from its members, especially middle managers and frontline employees. In our study, we argue that relational characteristics of manager-employee relationships can add significant insight into individual-level exploration. One critical relationship characteristic is power difference between levels in the organization and how such power differences are framed.

Power and trust

We conceptualize power as the extent to which one party in a relationship has control over resources valued by the other party, but these resources can be framed either as reward or (their withholding) as punishment. As such, we define reward power framing as a power holder emphasizing the ability to reward through providing positive outcomes, and punishment power framing is defined as emphasizing the ability to punish through providing negative outcomes.

Supervisors have considerable leeway to frame power as the either the ability to reward or to punish, as they usually have control over resources such as decision-making authority, performance reviews, salaries, and opportunities for desired assignments. For example, when a manager controls opportunities for highly desired assignments, he or she could emphasize to employees that good performance will result in a recommendation to receive one of those assignments; or that bad performance will result in a recommendation not to receive them.  In this sense, reward power framing is likely to generate a focus on the presence of positive outcomes, that are desirable, long-term oriented and may involve risks. It also has the potential to broaden the range and novelty of cognition and action

The mediating role of trustworthiness

In the employee-manager relationship, along with power framing, perceived trustworthiness can also influence exploration.  The mechanism of trust – understood as the willingness to be vulnerable to another person — may help to motivate employees to innovate.

When assessing trustworthiness, people view authorities through the lenses of benevolence (want to do good) and integrity (has acceptable principles). We propose that reward power framing is positively related to both benevolence and integrity. When managers communicate the intention to provide positive outcomes, they signal a desire to do good to the employee, so they are perceived as benevolent. And by focusing on rewards, they are seen as integer leaders, signaling dignity and respect. Conversely, punishment power framing is often perceived as unfair by the power-disadvantaged party.

When employees feel confident that managers will provide support for creative work, they will be less likely to worry about potential negative outcomes associate with new and untested ideas. Thus, benevolence perceptions can foster exploration-related behaviors.

Our findings—from both an experimental study and a survey study—demonstrate that employees assigned to a manager who emphasize their resource control as the ability to provide valuable rewards were more likely to engage in exploration at work, and this effect can be explained by increased trust in the manager. So, by altering how power is framed, managers can shape the likelihood of employees’ exploration within the organization.

The author is Distinguished Visiting Professor in Leadership and Effective Organizations at EGADE Business School.