The carrot-stick theory or stick-carrot theory is officially called “Theory X and Theory Y.” It is an established theory on motivation, which explores whether people are motivated by incentives or by fear of punishment. Expressing the theory in terms of the carrot and the stick derives from the two options to get a donkey to move -- one is to lure it from the front with a carrot to get it to move forward, while the other is to beat it with a stick from behind.
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Douglas McGregor, a professor at the Massachusetts Institute of Technology propounded Theory X and Theory Y in his 1960 publication The Human Side of Enterprise. McGregor did not set out to define how to treat people in the workplace. Rather, he identified different characteristics of people in their attitude towards work. These two groups represented extreme view points, with most of the population fitting somewhere into the space between them.
Theory X people don’t like their job, or just don’t like to work at all. They invest most of their energy into avoiding work wherever possible. These people do not want to attain authority and they have no ambition. They seek structure in their work, otherwise they would slack off. Theory X people prioritise job security over all other incentives to work.
Theory Y people enjoy their jobs and like working. They invest their enthusiasm in the workplace and feel rewarded when the business is a success and take failure of any part of the business process as a personal disappointment. Theory Y people seek responsibility; they are loyal to their own priorities and work best when those are aligned with the goals of their employees.
The theory proposes that Theory X people need to be controlled and directed. They need strict rules and expect those rules to be enforced by punishment where necessary. The main motivator for these people is fear of unemployment and the consequences of losing their job. Theory Y people don’t respond well to threats. They respond best to dynamic, flexible working practices that enable them to use initiative and maybe also compete with each other. Rewards of bonuses, promotion and training work best to encourage Theory Y people. So Theory X people need the stick and Theory Y people need the carrot.
Few workplaces are staffed by strongly Theory X people or Theory Y people. As most of the population falls between the two extremes the staff of any business will include a range of attitudes. However, Theory X people are more likely to be drawn to the public sector with its rigid career paths and they value time-serving when considering promotions. Factory work is also a suitable environment for Theory X people where workers are just expected to do the same thing repetitively and not deviate. Theory Y people are more likely to be attracted to creative or highly skilled jobs. An unskilled Theory Y person is always going to be dissatisfied with his opportunities and an over-promoted Theory X person will suffer from stress and uncertainty.
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