Content uploaded by Petya Puncheva-Michelotti
Author content
All content in this area was uploaded by Petya Puncheva-Michelotti on Apr 23, 2021
Content may be subject to copyright.
1
McNamara T, Meloso D, Michelotti M, Puncheva-Michelotti P. ‘You are free to choose . . . are
you?’ Organisational punishment as a productivity incentive in the social science literature. Human
Relations. Copyright © 2021 (SAGE). doi:10.1177/00187267211007891
‘You are free to choose…are you?’ Organisational
punishment as a productivity incentive in the social science
literature
Tom McNamara, Debrah Meloso, Michelotti Marco, Petya Puncheva-Michelotti
1
‘The generality of men are naturally apt to be swayed by fear rather than reverence, and
to refrain from evil rather because of the punishment that it brings than because of its own
foulness.’ Aristotle
1 Introduction
There has been a renewed research interest to better understand the role of punishment at
the workplace and its relationship with employees’ performance (Gonzalez et al., 2020; Doellgast
and Marsden, 2019; Jirjahn, 2016; Moore, 2018; Crane, 2013). As such, the aim of this paper is to
explore how and the extent to which the use of punitive incentives (punishment), and their effects
on workers’ productivity, is construed in social science.
In order to achieve this objective, we investigate the theoretical and empirical contributions
in disciplines that stem from or are associated with organisational psychology including human
resource management, organizational behaviour, and leadership. We also compare these
1
Authors in alphabetical order. Corresponding author email: petya.puncheva@rennes-sb.com
2
perspectives with insights originating in labour economics and industrial relations/labour process
theories.
We found that theoretical research on this issue is scant and fragmented and that
punishment per se tends to be stigmatised as a negative technique in management. By contrast,
some studies in leadership seem to suggest that in specific instances, individual punishment may
have a positive effect on a number of employee outcomes including motivation, loyalty and more
rarely performance. There is also a considerable lack of empirical research investigating the
effectiveness of punishment on productivity. Most of this research work indicates that punishment
has a negative effect on productivity and is far less effective than other incentives such as positive
and negative reinforcement.
In comparison, we have also found that the relationship between punishment and
productivity is receiving research attention in the domain of labour economics. This body of
research work almost invariably shows that punishment incentive schemes have a positive effect
on employee performance and productivity. We believe that this divergence is due mostly to
conceptual issues and that the two disciplines complement rather than contradict each other. In this
paper we highlight the contribution of both motivation and learning theories to research
investigating the relationship between punishment and productivity in labour economics and
management.
A central argument is that the divergence in findings can be explained by the conceptual
perspectives adopted. In particular, the study of punishment in the management literature is driven
mostly by learning and motivation theories with the latter assuming that punishment will have a
negative impact on productivity by lowering intrinsic motivation and also increasing employee
3
turnover. Labour economics, on the other hand, is informed not only by the aforementioned
theories but also by other conceptual frameworks such as agency and prospect theories.
Labour economics is more focused on exploring the best organisational practice or
combination of practices that may spur productivity. Punishment and rewards, in personnel
economics, are defined at the conceptual level as ‘incentives’ framed in penalty and bonus
contracts that define the consequences of employees’ actions (Lazear, 1991). Since employees are
assumed to be free to choose the actions that would avoid punishment, there is no prejudice against
the use of punishment as a productivity incentive. This definition highlights a central issue that is
that the discrepancies observed between the management and the economics literatures are very
often caused by issues associated with the adoption of specific definitions of incentives. In
addition, the approach of economists is also affected by some of the underlying assumptions it
rests upon, such as an underplaying of the link between the workplace and the broader economy
or problems that may arise after workers are or feel punished.
We add to this debate in two distinct ways. First, while reviewing the contributions of
management and labour economics, we highlight key similarities and differences as well as
strengths and weaknesses. There is merit in this approach as it underscores the overlapping
research interests of these two disciplines (Kaufman and Miller, 2011; Kaufman, 2020). This is
highlighted by the fact that when the two bodies of research work use the same conceptual
frameworks (i.e. learning theory), the findings are remarkably similar. Second, we develop three
themes that may be salient in informing future research on a topic that still remains understudied.
The paper is structured as follows. The next section investigates a number of
conceptualisations of organisational punishment and defends our choice of definition. Section
three focuses on exploring key theoretical contributions seeking to explain the link between
4
punishment and productivity. Section four highlights and describes how these contributions
produce a number of sometimes contradictory empirical results. Section five aims to bring together
the previous discussion by developing the following key themes: 1) freedom of choice and the role
of contract completeness
i
1; 2) perception of punishment, monitoring and productivity; and 3)
punishment, productivity and exogenous variables.
2 The study of punishment and productivity
Research concerned with the use of punishment to enhance employees’ performance has
traditionally originated in organisational psychology. This discipline has in turn influenced
scholars in management and economics. In particular, the study of incentives (including
punishment) has been the focus of investigation of learning and motivation theories. Grounded in
these conceptual frameworks, incentive ‘schemes’ in management have been defined in a number
of ways. Informed by motivation theory, research in performance management has been very
prolific on this issue and the use of rewards and punishment is generally conceptualised as a single
incentive plan where employees receive rewards for desirable behaviours and sanctions
(punishment) when their performance falls below expectations (Cerasoli et al., 2014; Greene,
2018). These insights are echoed, to a large extent, in economics as a distinction is often drawn
between bonus (“carrot”) or punishment (“stick”) incentives schemes (Sutter et al., 2010; Christ
et al., 2012; Gonzalez et al., 2020; Imas et al., 2017).
5
However, while punishment as a feature of incentive schemes is invariably integrated in
the overall performance management process, orthodoxy in economics very often conceptualises
punishment as a stand-alone incentive scheme that is separate from rewards schemes (Sutter et al.,
2010; Christ et al., 2012; Gonzalez et al., 2020; Corgnet and Hernan-Gonzalez, 2019). More rarely,
studies in economics also recognise that punishment incentive schemes can coexist with bonus
incentive schemes (Brink and Rankin, 2013). We follow the approach of mainstream economists
here by assuming that punishment can exist in isolation and be separate from bonus schemes. We
therefore do not focus on the performance management process as the issue of
managing/improving employee performance under a punishment incentive would fall outside the
scope of this paper. Similarly to other research of punishment incentive schemes (Gonzalez et al.,
2020; Hannan et al., 2005; Christ et al., 2012; Brink and Rankin, 2013; Dickinson, 2001), our level
of analysis is the firm, and we place particular emphasis on individual and firm choices of
punishment incentive schemes over other alternatives.
Within performance management research, incentives are defined as “rewards” provided
only after employees’ performance appraisal (Schleicher et al., 2018). This conceptualisation of
the performance management system implicitly assumes that organisations have adopted bonus
incentive schemes or a combination with penalty schemes when low performance appraisal is
associated with negative outcomes for the employee. While this may not be necessarily intentional,
the definition of the performance management as a system is incompatible with the adoption of a
punishment incentive scheme. This is so because research in performance management is mostly
grounded by motivation theory which assumes that punitive actions that are intentionally used to
spur productivity will be ineffective (Gagné and Deci, 2005).
6
This is not to say that studies in ‘performance management’ are oblivious to the use of
punishment but rather, that punishment per se is often conceptualised as a combined incentive plan
where employees receive rewards for desirable behaviours and sanctions when their performance
falls below expectations (Cerasoli et al., 2014; Greene, 2018). This is particularly the case in
research grounded in learning theory which lies at the foundation of a definition of punishment
pioneered by Skinner (1953) as the presentation of an aversive event or the removal of a positive
event following a response, designed to eliminate or decrease the frequency of that response.
Three assumptions are central to this definition. First, it assumes a direct link between an
act that is considered wrong - which in turn requires a pre-existing definition of wrong - and a
disciplinary response. Second, there is some form of authority delivering the disciplinary act.
Third, the punitive action is only aimed at decreasing the probability of an undesired behaviour
rather than encouraging the occurrence of a desired behaviour.
Acts of punishment can occur at the individual or organisational levels. Individual acts of
punishment are those administered by managers in the form of negative feedback (Gottfredson and
Aguinis, 2017; Lin et al., 2016; Podsakoff and Todor, 1985; Ball et al., 1992; Judge and Piccolo,
2004; Podsakoff et al., 2010; Restubog et al., 2006; Podsakoff et al., 2006). We distinguish these
from organisational acts of punishment, which are firm-level practices specifying the conditions
when the performance of employees will be associated with losses of value for the employees as
defined in punishment incentives schemes (eg. Hannan et al., 2005; Gonzalez et al., 2020).
This definition has been extended and adapted to different work-related situations (Kazdin,
1975). For instance, in acknowledging that punishment is not always directly linked to an act of
wrongdoing, research in leadership have made a distinction between punishment that is
administered contingently - where there is a deterministic relationship between the disciplinary
7
action and the employee behaviour - and non-contingently - when punishment is administered
randomly (Judge and Piccolo, 2004; Podsakoff et al., 2006; Podsakoff et al., 1982; Hinkin and
Schriesheim, 2008; Hinkin and Schriesheim, 1994). Others have emphasised that there is a
difference between just and unjust punishment with the former embracing those disciplinary
actions that are perceived as fair by subordinates at the workplace in terms of both procedures
(procedural justice) and substance (distributive justice) (Ball et al., 1994; Wang and Murnighan,
2017). Moreover, punishment can be defined as formal, which means somehow accepted by the
organisation, or informal depending on the discretion of the supervisor (Arvey et al., 1984; Brief
et al., 2001; O'Reilly III and Weitz, 1980; Tenbrunsel et al., 2003). Informal punishment, can
appear in different guises that include an unstated management practice, a leadership style (Arvey
et al., 1984; Judge and Piccolo, 2004; Podsakoff et al., 2006) or abusive supervision (Mackey et
al., 2017).
The above definitions acknowledge that punishment can be informal and subjective, in that
the recognition of its occurrence may depend on the perceptions of the receivers or their colleagues,
and that it is multi-layered, embracing both procedural and substantive features. Still, individual
perceptions of punishment are not adequately captured. While the perception of punishment in
terms of fairness, justice, organisational commitment, and personality traits have all been studied
(see for example Arvey and Jones, 1985; Ball et al., 1994; Greenberg, 1990; Gottfredson and
Aguinis, 2017; Tremblay et al., 2013; Mackey et al., 2017; Wang and Murnighan, 2017), the
punishment act is always assumed to be explicit. This approach thus underestimates instances in
which an implicit action or lack of it could also be construed as punishment such as when an
employee is not rewarded even though she/he believed that such reward was deserved (i.e. lack of
8
recognition, unfulfilled promises etc.), or when an employee is asked to perform demeaning duties
(Schleicher et al., 2018).
This deficiency is partially addressed by research on organisational justice. However, while
recognising the importance of investigating the subjective perceptions of any punitive event, this
body of scholarly work very rarely defines a vexatious act as punishment. Rather, these actions
are classified as workplace mistreatment (Salin et al., 2014; Hershcovis, 2011), abusive
supervision (Tepper et al., 2009), or employer retaliation (Rehg et al., 2008).
In sum, stemming from Skinner’s initial conceptualisation, and grounded in learning
theory, definitions of punishment found in the management literature focus on individual acts of
punishment rather than organisational punishment incentive schemes. Moreover, punishment
tends to be associated, in performance management research with rewards in a bundle of practices
that aim to ‘manage’ productivity. This is not to say that acts of punishment are not considered,
but rather that by excessively narrowing the focus of investigation to specific instances (i.e.
employee mistreatment and retaliation) scholars in various fields of management have also
excluded from their research those punitive actions that are intentionally used to spur productivity.
2.1 Organisational punishment, individual preferences and choices
Definitions of punishment found in economics tend to indirectly capture the organisational
or institutional dimensions of punishment and their relevance to increase productivity. Rooted also
in learning and motivation theories, as well as in the rational choice tradition, the study of
organisational incentive schemes, which encompasses both punishment and rewards, is a central
concern of the fields of labour and personnel economics. In these disciplines the term ‘incentive
scheme’ denotes broadly any set of explicit or implicit organisational policies and associated
consequences linked to employee behaviours, that are known to employees before behavioural
9
choices are made (Lazear, 1991). Incentive schemes are designed to maximise firm profits and,
thus, are directly linked to performance.
Definitions of punishment incentive schemes in the labour economics literature (Fenoaltea,
1984; Chwe, 1990; Lazear, 1991) differ from those found in management in two key aspects. First,
labour economists are focussed on the terms and conditions of the contract rather than their
implementation and assume that employees will choose the contract that maximises their return
irrespective of whether it is a punishment or a bonus (gain) contract (Gonzalez et al., 2020: ,p.205).
In other words, and unlike research in performance management, economists seem to be less
interested in studying how contracts are applied while placing more research attention on employee
contractual choices. Second, the meaning of punishment is provided with respect to a norm or a
reference point. This means that the same incentive scheme may be framed as a punishment or
reward scheme depending on the worker’s point of view. Firms may be able to do so by explicitly
setting a reference point in the incentive scheme (Fryer et al., 2012; Christ et al., 2012; Luft, 1994;
De Quidt, 2018; Lazear, 1991) or by affecting the social norm that surrounds them (Akerlof, 1982;
Aron, 1990; Aron and Olivella, 1994; Rey‐Biel, 2008; Sliwka, 2007). If, for example, most
workers obtain a yearly bonus, the normal payment in the firm is the base wage plus the bonus
and, thus, earning only the base wage may be perceived as a punishment (Sobel, 2005; Casoria
and Riedl, 2013; Bowles and Polania-Reyes, 2012).
The labour economics literature contributes to definitions of punishment in three distinct
ways. First, it emphasises, to a certain extent, the organisational dimension of sanctions. Second,
it highlights the importance of contracts and their relevance to stimulate effort and productivity.
Third, it assumes that contracts are fully enforced and that employees are rational and free to
choose the contract that maximises their return. The organisational nature of punishment is also
10
echoed by labour process scholars who insist that ‘retribution’ should be defined as those bundles
of organisational practices used by firms to extract surplus value from workers to counteract the
tendency, inherent in capitalism, for marginal profits to decrease over time (Braverman, 1974;
Burawoy, 1979). Amongst the techniques used by management to control production, labour
process specialists claim, are deskilling the workforce, intrusive monitoring, cutting wages and
extensive use of bonuses schemes (Burawoy, 1979; Gandini, 2019; Thompson, 2003; Thompson,
1983). Our focus here is on organisational rather than individual punishment and its relationship
with employee productivity. While neither management nor labour economics develop fully
satisfactory definitions of organisational punishment, industrial relations specialists have
attempted to do so.
Scholars in this field have often referred to institutionalised organisational practices that
aim to increase productivity by means of punishment (sanctions). Doellgast and Marsden (2019),
for example, in comparing performance management schemes across national jurisdictions
describe a number of organisational sanctions that can be used by management to spur
productivity. Such sanctions include demotions, threat of dismissals, intensive monitoring, and
pay-cuts. We build on industrial relations and economics insights to define organisational
punishment as:
Organisationally mandated performance-based sanctions, which aim at
increasing employee performance by means of punitive actions or threat of
punitive actions that include, but are not limited to changes in workloads,
intensive monitoring, pay-cuts, demotions, task reassignments and dismissal.
The critical feature of this definition is that punishment is an a priori institutionalised
practice that is imposed by the organisation with the objective to increase productivity; it is
11
independent from any individual(s) administering it and is not necessarily associated with a
specific performance management scheme.
3 ‘Deus ex Machina’
ii
: Punishment, employee motivation, and productivity
As previously mentioned, the effects of management practices on employee motivation,
productivity and performance are informed, in the management literature, by learning and
motivation theories. Research in leadership tends to draw on learning theory (Skinner, 1953;
Weiss, 1990), where punishment is conceptualised as a form of reinforcement technique used to
decrease the probability of future undesirable behaviour. In this theoretical approach, the subject
learns through experiencing the consequences of her/his own actions (Weiss, 1990; Pate, 1978).
By providing rewards, organisations can encourage desirable behaviours while by applying
sanctions they can deter undesirable behaviour as the individual learns to respond to different types
of stimuli (McElroy, 1985; Pate, 1978). This particular approach to management is inherent to
transactional leadership styles and has been questioned extensively by leadership studies (Hinkin
and Schriesheim, 2008; Judge and Piccolo, 2004; Podsakoff et al., 2010).
A different set of theoretical mechanisms is proposed by motivation theory which
postulates that performance depends on intrinsic and extrinsic rewards that are expected to accrue
as a consequence of a desirable behaviour or upon the achievement of a goal (Pinder, 2014;
Cerasoli et al., 2014; Deci and Ryan, 1985b). Unlike learning theory, motivation theory assumes
that workers do not need to experience rewards or sanctions as they have the innate capacity to
project the pleasure/displeasure they will receive from performing the act. It is associated with the
earlier development of expectancy theory, which highlights that individuals make conscious
choices to change their behaviour according to the subjective value and the anticipated likelihood
to achieve desired rewards (Vroom, 1964). Intrinsic rewards come from the enjoyment of the task
12
or activity per se while extrinsic rewards are instrumental to obtaining other benefits sought by the
individual like material improvements. In this context, punishment has been to a large extent
ignored as it is deemed to be incompatible with some of the key premises of cognitive evaluation
theory (Deci and Ryan, 1985b; Deci, 1972).
According to these theoretical perspectives, the individual feelings of autonomy and
competence drive intrinsic motivation and employee performance (Gagné and Deci, 2005).
Negative feedback that is perceived as punitive decreases the perceived competence of employees
and thus negatively affects their intrinsic motivation (Deci and Ryan, 1985a). An example of
punitive feedback is when call centres use computerised programs to assess the performance of
workers against targets and provide negative feedback linked to penalties for missing these targets
(Tweedie et al., 2019). The negative reactions to the punishment event may be mitigated by
procedural and distributive justice evaluations (Ball et al., 1992), the timing of the punishing event
(Arvey and Ivancevich, 1980) and the intensity and consistency of the disciplinary action (Arvey
et al., 1984; Arvey and Ivancevich, 1980; Greer and Labig, 1987). Still, under the auspices of
motivation theory, punishment is considered useful only to decrease the probability of an undesired
behaviour, while positive and negative reinforcement are utilized to increase the likelihood that an
employee will behave as expected (Pate, 1978; Tenbrunsel and Messick, 1999; Deci et al., 1999).
These views are somehow echoed by work on high performance workplaces that very often
lament that the theoretical study of motivators and reinforcers on employee performance fails to
adequately consider the subjective perceptions of employees (Schleicher et al., 2018). This
shortcoming is particularly detrimental to the study of punishment and productivity in
organisations. For example, employees may perceive the value of their performance feedback, pay
and the setting of performance goals as punitive due to factors such as lack of procedural justice
13
(Levy et al., 2015; Thurston Jr and McNall, 2010) and development (Kuvaas, 2007) or as a
discrepancy between the outcomes of the performance evaluation and their expectations (Kluger,
2012). While the latter factors are well known to affect employee satisfaction during, for example,
the performance appraisal process (Culbertson et al., 2013), their potential influence on
employees’ motivation and productivity is understudied both theoretically and empirically.
3.1 ‘There is nothing either good or bad, but thinking makes it so’
iii
Importantly, the theoretical assumptions underpinning research on the relationship between
punishment and productivity in labour economics are also grounded extensively in learning and
motivation theories. This is the case because the study of incentives at the workplace has
traditionally been the prerogative of ‘personnel economy’, a branch of labour economics which
has been the domain of psychologists and micro-economists (Kaufman and Miller, 2011).
However, scholars in economics are more prone to explore the direct effects of punishment on
productivity than their management counterparts. The main reason for this difference, we believe,
is the methodological approach of agency theory, which also informs the study of incentive
schemes. Punishment envisioned in an incentive scheme is assumed to not occur at all or only
rarely since employees are expected to choose actions to avoid it. Hence, punishment schemes are
neither good nor bad and their study is not hindered by any considerations other than efficiency
and rational choice assumptions.
When agency theory is applied to the study of punishment, the main assumption is that
neither the skills of employees nor their effort are completely observable. Firms must thus rely on
workers’ free choice of effort and verify these choices only indirectly, through some observable
performance indicators (Holmstrom and Milgrom, 1987; Lazear, 2018; Ross, 1973). Firms are
assumed to maximise profits and worker effort is also assumed to be beneficial for firm profits,
14
making the inducement of effort the main objective of any incentive scheme. Also, in classical
economics, workers are assumed to maximise their expected utility (Samuelson, 1947;
Morgenstern and Von Neumann, 1953), which is affected by both monetary and non-monetary
incentives. However, worker preferences are fixed and cannot be influenced by framing or social
norms. Therefore, any incentive scheme creating the same connection between performance and
worker outcome will induce the exact same worker behaviour (Holmstrom, 1979; Prendergast,
1999), regardless of whether it is presented as one that ‘rewards’ good performance or one that
‘punishes’ bad performance. In this sense, in classical economics the distinction between
punishment and reward is irrelevant for both the employee and the firm. In echoing insights of
motivation theory (Deci and Ryan, 1985a), expected utility maximisation implies that incentive
schemes function without necessarily the need to reinforce behaviour through experience. Workers
project the pleasure/displeasure they will receive from the reward or punishment stemming from
each outcome and make their choices accordingly, because the workers’ decision is independent
of how the incentive scheme is presented and by the employee’s decision to exert effort. The
irrelevance of the distinction between punishment and rewards also extends to the firm. To pursue
the objective of high worker effort, the firm does not have to define a priori any form of deviant
behaviours worthy of punishment or virtuous behaviours worthy of reward. All that matters is the
creation of a link between effort and worker payoffs (Holmstrom, 1979; Prendergast, 1999).
Assumptions about choice. The blending of psychological and economic theories has also
informed more recent research work focussed on choices and motivation in labour economics. The
most prevalent notion of punishment used in economics draws extensively on prospect theory to
analyse worker choices in relation to a given incentive scheme (Kahneman and Tversky, 2013).
Prospect theory assumes that decision makers evaluate outcomes as either gains or losses with
15
respect to a reference point, and that they are loss averse, which means that losses loom larger than
gains (Imas et al., 2017; Tom et al., 2007). Under this approach, the way in which an incentive
scheme is presented affects a worker’s reference point and may, via loss aversion, lead to different
choices for equivalent schemes that are differently framed (Bulte et al., 2020; Christ et al., 2012;
De Quidt, 2018; Hannan et al., 2005; Levitt et al., 2016). It is important to emphasise that under
the prospect-theoretical approach, the incentive scheme serves to manipulate the worker’s
reference point through framing or social cues, thus effectively ‘teaching’ the worker how she/he
should value different outcomes. This is an important departure from classical economics that
greatly expands the role of the incentive scheme. It also underscores the connection with learning
theory by acknowledging that incentives modify a worker’s attribution of valence to outcomes.
Assumptions about incentive types. Besides loss aversion, there are other variants to the
theory of expected utility such that, by changing the way in which workers evaluate their options,
the effects of incentive schemes may differ from those predicted by the classical approach. An
important group of studies focuses on the consequences of crowding out, which occurs when
monetary incentives erode other motivators. This body of research work draws extensively on
motivation and self-determination theory (Deci, 1972). However, in studying the effect of
monetary incentives on motivation, economists do not usually make a distinction between
monetary punishment and monetary reward because both are considered equally capable of
crowding out worker intrinsic motivation (Bénabou and Tirole, 2006; Bowles and Polania-Reyes,
2012) or creating anxiety (Ariely et al., 2009). Monetary incentives may also affect the gift
exchange nature of the worker-firm relationship. Models of wages as gift exchange suggest that
workers are affected by moral sentiments and reciprocal behaviour when they choose the level of
effort in the workplace. Workers react to firms giving high compensation and freedom by exerting
16
high effort, while they reciprocate negatively to rigid monetary schemes (Bolton and Dewatripont,
2005; Fehr et al., 2009; Fehr and Schmidt, 1999; Sliwka, 2007; Sobel, 2005; Casoria and Riedl,
2013). However, in echoing the insights of motivation theory, there is a recognition, in the labour
economics literature, that punishment and rewards may have different effects on workers’ moral
feelings (Fehr and Gächter, 2002a; Gächter et al., 2009), with punishment having a larger negative
effect than rewards (Rey‐Biel, 2008).
The economic context. There are two important issues somehow affecting the approach of
both management specialists and economists. First, the economic and institutional environment -
within which the organisation operates is seldom considered. For example, when labour markets
tighten employees tend to have more bargaining power since it is easier to quit and find another
job (Tope and Jacobs, 2009; LaLonde and Meltzer, 1991; Addison and Hirsch, 1989; Goldfield,
1989). Under this scenario, it would be less likely for firms to use punishment practices since the
risk to lose valuable employees may outweigh its benefits. The influence of the labour market
constrains the choices available to employees and directly questions the assumption of free
‘choice’ embedded in most of the theoretical models. Also, the level of embeddedness of laws
and institutions, such as trade unions or various forms of employee representation, that would
restrain employers’ power to sanction employees is not adequately captured. Second, the
distribution of power within the firm and society at large is understudied.
The study of the interplay between the economic cycle, institutions, regulations and
changes in management practices has traditionally been the domain of industrial relations and
labour process theories (Gandini, 2019; Kaufman and Miller, 2011). Despite its almost complete
demise as an academic discipline, there has been a long standing awareness in industrial relations
as well as economics that the interplay between the state and features of labour markets and
17
institutions regulating the employment relationship affect management practices and employee
outcomes and power (Boxall and Purcell, 2016; Kaufman and Miller, 2011; LaLonde and Meltzer,
1991; Goldfield, 1989; Addison and Hirsch, 1989; Tope and Jacobs, 2009; Kaufman, 1998;
Akerlof and Yellen, 1990). This insight highlights the need to contextualise the use of various
organisational management practices within the broader economic context and the set of
institutions, rules, and regulations that affect power relations and ultimately management practices.
4 Now you see it, now you don’t see it: Punishment and productivity in the empirical
literature
One of the most difficult epistemological challenge is to identify a coherent narrative
binding together the diversity in empirical results. While studies in management almost invariably
show a negative correlation between the use of punishment and employees’ productivity, research
in economics suggests, to a significant extent, the contrary. This, we believe, is the result of the
different theoretical stances previously explained. Table 1 outlines the key premises underlying
the study of punishment within economics and management.
<Insert Table 1 about here>
4.1 Empirical focus of investigation
The main body of empirical research work in management that has investigated the
relationship between punishment and productivity is mostly focussed on leadership. Grounded in
learning theory, these studies have considered the relationship between various leadership styles
and subordinate performance. With some remarkable exceptions, research in this field in the 1970s
and 1980s suggests that the relationship between leader contingent punitive behaviour and
18
subordinate performance is null at best (Sims and Szilagyi, 1975) and negative under normal
circumstances (Podsakoff et al., 1993; Podsakoff et al., 1984; Podsakoff and Todor, 1985;
Podsakoff et al., 1982). However, considerable variance exists within this body of scholarly work.
For example, contingent punishment may have a positive effect on group productivity (Podsakoff
and Todor, 1985), a weak positive effect on some elements of performance and a larger effect on
job satisfaction when administered simultaneously with rewards (Atwater et al., 1997; Podsakoff
et al., 2006; Podsakoff and Todor, 1985; Podsakoff et al., 1982). Non-contingent punishment, by
contrast, has invariably been associated with negative effects on performance and productivity,
job satisfaction, bullying and harassment (Atwater et al., 2001; Podsakoff and Todor, 1985; Hoel
et al., 2010; Tremblay et al., 2013).
These valuable contributions are firmly focused on investigating the effects of specific
leadership styles on performance/productivity. They neither explore the effects of different
punishment techniques on productivity nor the extent to which punishment can be institutionalised
as a management practice to enhance productivity. This feature is also not addressed by research
on abusive supervision focused as it is on individual managerial behaviour. Informed by
motivation theory, empirical studies on abusive supervision provide compelling evidence that
abusive supervisors have a detrimental effect on a number of employee and organisational
outcomes including stress (Wheeler et al., 2013), job satisfaction (Kernan et al., 2011),
organisational citizenship (Zellars et al., 2002), and performance (Mackey et al., 2017; Walter et
al., 2015; Xu et al., 2012).
While research in leadership and abusive supervision is firmly focused on individual
behaviour, some studies of performance-related sanctions place limited emphasis on
organisational punishment. Importantly, this body of research work is informed by learning theory
19
and its findings echo, to a significant extent, research in leadership. For example, there seems to
exist a negative relationship between specific personality traits, punishment and subordinate
performance (Ball et al., 1994), the latter being less affected when punishment is administered on
a continuous (predictable) rather than on a variable (non-predictable) schedule (Bennett and
Cummings, 1991). Further, managers tend to perceive punishment as a necessary and a relatively
effective technique in terms of a) respect learned by the supervisor, b) vicarious learning on part
of other employees and c) organisational learning (Butterfield et al., 1996; Malouff et al., 2009).
However, the effectiveness of vicarious learning has been questioned in some instances when, for
example, vicarious punishment is administered to prevent or correct unethical behaviour (Trevino,
1998).
In sum, empirical evidence testing the relationship between punishment and productivity
in the management literature is scant. This relationship is investigated mostly in terms of leadership
styles, abusive supervision and performance management with research in these areas finding
almost invariably a negative effect of punishment on productivity/performance (Tepper et al.,
2009). These conclusions are supported by a limited number of studies on organisational
punishment which also find, in the main, a negative relationship between organisational
punishment and productivity/performance.
4.2 Methodological choices and findings
It is important to highlight that the theoretical perspectives informing empirical research
play a central role in determining both the relationships to be explored and the outcomes of such
relationships. While learning theory is centred on the likelihood that a disciplinary action will
achieve a pre-established aim, motivation theory focuses on the recipient perceptions of such
action. Hence, it is reasonable to assume that research based on motivation theory will be more
20
likely to find negative perceptions of punishment than studies informed by learning theory
particularly when participants in experiments are given different scenarios. It is also important to
underscore that differences in methodologies may have an effect on the results. While motivation
research in management uses surveys, a mix of experiments and surveys are more likely to be
deployed in learning theory - based inquiries (Neale et al., 2020; O'Reilly III and Weitz, 1980;
Podsakoff and Todor, 1985; Podsakoff et al., 1982; Ball et al., 1994; Rollinson, 2000).
The use of experiments allows for more creativity and flexibility when testing for multi-
layered relationships. Interestingly, experiment-based research in management grounded in
learning theory yields very different results than empirical studies based on surveys. For example,
although still limited to individual matters or leaderships styles, conditional positive relationships
between punishment and productivity were found in experiments investigating the effectiveness
of threats of dismissals (Probst et al., 2007) vicarious learning (Schnake, 1986; O'Reilly III and
Weitz, 1980; Rollinson, 2000) and continuous punishment (as opposed to sanctions inflicted on a
variable ratio) (Bennett and Cummings, 1991).
Similar results are also found by the economics literature where multi-scenarios
experiments are widely used. As previously mentioned, labour economics investigates norms
embedded in contracts to directly stir productivity rather than post factum performance appraisal
policies or leadership styles. Research in economics can be grouped as follows: framing effects,
trust effects and choice reasoning.
Framing effects. Grounded in prospect theory, a handful of studies that directly compare
incentive schemes framed as either punishment or rewards, focus on settings where extrinsic
incentives are used, and where social feelings are of low importance. This body of research work
aims to test the assumption that workers are loss averse and will exert more effort under a
21
punishment than a reward incentive scheme. Field experiments using teachers (Fryer et al., 2012),
grade school students (Levitt et al., 2016), permanent or temporary workers (Armantier and Boly,
2015; De Quidt, 2018; Hossain and List, 2012), as well as various types of laboratory experiments
(Armantier and Boly, 2015; Christ et al., 2012; De Quidt, 2018; Van de Weghe and Bruggeman,
2006) support this assumption. While this literature is small, it covers a large number of controls
and robustness checks that include non-monetary rewards (Levitt et al., 2016), the effects of the
withdrawal of the incentive scheme over time (Hossain and List, 2012), and the role of the type of
task being performed, ranging from simple (Armantier and Boly, 2015; Christ et al., 2012; De
Quidt, 2018) to complex (Fryer et al., 2012; Levitt et al., 2016; Van de Weghe and Bruggeman,
2006; Hannan et al., 2005; Marchegiani et al., 2011).
Trust effects. A separate strand of empirical research, informed by motivation theory,
focuses on environments where the social feeling of worker-firm trust plays a significant role in
production. As with research in management, results in this case are less polarised. Fehr and
Gächter (2002b) found that the introduction of punitive monetary incentives in a setting previously
reliant on employee-employer mutual trust, damages trust more than the introduction of reward
monetary incentives, thus leading to worse outcomes for the firm. The use of punishment (penalty)
incentive schemes in incomplete contracts can be perceived as a signal of mistrust on the side of
the employees resulting in lower effort on tasks not regulated by the contract (Christ et al., 2012).
This effect is known as extra-role behaviour in studies of psychological contract (Kiazad et al.,
2019). By contrast, the use of penalty incentive schemes in complete contracts tends to be
perceived as a signal of trust resulting in higher effort on contracted tasks (Hannan et al., 2005).
Contrary to these results, Gächter et al. (2009) finds that framing a newly introduced
monetary incentive scheme as either punishment or reward is irrelevant in the short term and only
22
marginally relevant in the long term. While results are mixed, this literature suggests that the use
of punishment may erode worker-firm trust more than the use of reward incentive schemes. This
erosion may be detrimental for the firm, particularly for extra-role behaviour on tasks where effort
and output are difficult to be formally included in contracts.
Choice reasoning. While the empirical finding that workers under a punishment incentive
scheme exert more effort and are more productive has a solid theoretical foundation under the
auspices of prospect theory (Kahneman and Tversky, 2013), matters are less clear when the worker
is able to choose the incentive scheme. This problem is known in economics as adverse selection
where employees are attracted to certain types of incentive schemes based on their perceived
abilities (Lazear, 2018). Will workers accept punishment incentive schemes? Will workers who
accept punishment incentive schemes be less talented? These are the salient questions that
economists exploring employee choices seek to address.
The lack of conclusive theoretical answers to these questions is mirrored by the mixed
empirical evidence. At a general level, laboratory experiments find that workers tend to prefer
reward schemes (they require compensation to switch to punishment schemes) when given a
choice between reward and punishment (Brink and Rankin, 2013; Luft, 1994; Hannan et al., 2005;
Gonzalez et al., 2020). Evidence also suggests that employees with greater abilities prefer bonus
incentive schemes than flat rate pay, which they perceive to reward them better for the extra effort
(Lazear, 2018). These insights are to a certain extent echoed by De Quidt (2018), who, in
investigating unskilled workers’ choice of a unique contract (versus rejecting the job), found that
employees were more willing to accept a job when the offered contract was punitive. In this setting,
punishment contracts also generated higher effort, and their additive effect compared to reward
contracts was particularly positive. Workers who are more talented may have greater bargaining
23
power with employers who in turn may offer bonus incentive schemes to attract them. However,
further empirical research is needed to fully ascertain if companies which use bonus incentive
schemes without bundling them with punishment schemes (as in Fehr and Schmidt, 2007) are
likely to be more attractive to talented workers.
Empirical research in economics contributes to the debate on punishment and productivity
in two distinct ways. First, it highlights the organisational rather than the personal aspects of
punishment. Second, experiments in economics envisage different scenarios giving the recipients
the choice to select the most suitable contract to their situation (Andreoni et al., 2003). However,
the empirical approach of economists is also beset by the assumption that employees are free to
quit anytime if they do not like any of the choices that are offered. This may prove to be difficult
when macro-economic indicators such as unemployment and underemployment rates as well as
the capacity of the economy to generate comparable jobs are taken into account. It is reasonable
to assume that individual choices may be considerably different when, for example, unemployment
rates are high, and quitting would result in significant losses and uncertainty.
5 ‘It was a black and hooded head; and hanging there in the midst of so intense a
calm, it seemed the Sphynx’s in the desert’
iv
: Developing a research agenda for the future
In this section we develop a set of themes that may be useful in informing future research
on the relationship between punishment and productivity. We do so by leveraging the considerable
overlapping between the various bodies of reviewed literature. Some of the gaps are specific to
either the management or the economics literature while others are common to both fields.
Emerging from our previous discussion, we identified two issues that are peculiar to management,
one to economics and three that are common to both.
24
The first issue in management relates to an insistence to focus on individual, rather than
organisationally mandated punishment. Second, there is a lack of management research directly
investigating the relationship between punishment and productivity. Productivity is usually
bundled together with other dependent variables such as employees’ turnover and various
indicators of employees’ satisfaction. On the other hand, the main shortcoming affecting research
in economics is the lack of an exit option made available to participants in experiments (with few
exceptions). We believe that if appropriate exit options are offered, the results may be significantly
different because participants may have an incentive to select a different set of options or forfeit
all choices. Finally, the shortcomings that are common to both disciplines are: First, the absence
of any reference to exogenous variables such as the economic, legal and institutional environments.
Second, the debate has been dominated by psychological theories and in particular by motivation
and learning theories. Third, multiple input and output measures are used in different studies
making any cross-study comparison difficult. We believe that this debate could be significantly
advanced if other perspectives were also considered. In particular, insights stemming from
industrial relations and labour process theory may be beneficial since these disciplines have
investigated how changes in the aforementioned macro variables have the potential to affect
management practices.
In order to develop these themes, we focus on two main shortcomings that are common to
economic and management: freedom of choice and the relationship between the economic context
(labour markets and economic growth) and the likelihood of using punishment.
Theme A: Freedom of choice and the role of contract completeness
Employees’ choice of performance incentive schemes (rewards or sanctions) remains
under-researched in management and a source of debate in economics (Schleicher et al., 2018).
25
While almost absent in management, the study of workers’ choice between incentive schemes
framed as rewards or punishment bears mixed results with some of these findings indicating that
employees may voluntarily choose a punitive rather than a reward scheme (Brink and Rankin;
Luft; De Quidt, 2018; Kaur et al., 2010). We believe that the reasons why employees may choose
a punishment rather than a reward contract should be investigated in more detail. In particular, the
assumption of free choice and the relationship between contract choice, perception of punishment
and productivity should be the subject of closer scrutiny. Most of the experiments investigating
how individuals select a contract provide for very disadvantageous exit options, such as non-
participation in the laboratory or field experiment, no hiring, or exclusion from the incentive
scheme (Fehr and Gachter, 2000; De Quidt, 2018; Fryer et al., 2012: , amongst others). It is
therefore reasonable to assume, given the loss aversion tendency inherent in the majority of people,
that when confronted with a tripartite instead of a binary choice individuals will either choose a
reward contract or quit, everything else being equal.
Bounded rationality and freedom of choice are also linked to the information that is made
available to employees. In the reviewed literature, the extent to which consequences of worker
actions are known from the onset appear to play an important moderating role on the effect of
punishment on productivity. In personnel economics, the role of this anticipation of punishment is
discussed in terms of incentive schemes and contract completeness (eg. Christ et al., 2012). By
comparison, in leadership research the role of the anticipation of punishment is discussed in terms
of contingency of the application of sanctions by supervisors. Specifically, evidence suggests that
punishment may have a weak positive effect on performance only when administered contingently
(Atwater et al., 1997; Podsakoff et al., 1995; Podsakoff et al., 2006; Podsakoff et al., 1982), and
that managers regard the application of punishment as an effective technique to induce vicarious
26
and organisational learning (Butterfield et al., 1996; Malouff et al., 2009). While not explicitly
focusing on punishment, the psychological contract literature recognises that the fulfilment of
employer obligations as anticipated by employees can lead to positive or adverse consequences to
employees and their performance (Birtch et al., 2016; Kiazad et al., 2019; Ng and Feldman, 2012).
This insight is echoed, in the economic literature, by implicit contract theory which emphasises
how long term agreements (either explicit or tacit) between an employee and the firm very often
outweigh price adjustments that would be otherwise dictated by the interaction of supply and
demand (Shapiro and Stiglitz 1984; Stiglitz 1987).
Analogously, all studies in economics that find a positive effect of punishment on
productivity, look at incentive schemes, where, by definition, punishable behaviours or outcomes
can be anticipated. We believe that the more the consequences of the contract are made clear to
employees, whether it is punishment or rewards, the more freedom of choice will be enhanced.
This direction can be useful to better understand employees’ perceptions of employer obligations
in a psychological contract where the link between contract completeness and perceived
psychological contract has not yet been explored. We therefore encourage more research attention
being placed on the relationship between the level of contractual information made available to
employees, their intention of choosing a punishment or a reward contract and the associated effects
on productivity. Further, in the case of incomplete contracts, the employers may legally have the
freedom to renegotiate and change the incentive types from bonus to penalty (Christ et al., 2012;
Ulph and Ulph, 2001). The effects of these changes on employees’ perceptions of the
psychological contract and associated performance on tasks that are difficult to formally be
included into contracts also need further research attention.
27
Theme B: Perception of Punishment, Monitoring, and Productivity.
The relationship between employees’ perceptions of punishment, the level of firm’s
monitoring and control remains understudied in both management and economics particularly at
the empirical level. While Aron and Olivella (1994) theoretically argue that if firms choose to
closely monitor employees, productivity is likely to be high, both research in economics and
management point out that close monitoring will be perceived as punitive and that it may erode
intrinsic motivation and task enjoyment (Hofeditz et al., 2017). However, these assumptions
should be investigated in more detail at both theoretical and empirical levels. In particular, research
attention should be placed on the extent to which employees perceive monitoring as a punitive
action and whether high levels of monitoring would be associated to increases in productivity. A
possible implication of a positive relationship is that highly productive organisations with good
monitoring capacity are more likely to be perceived as punitive than either their unsuccessful or
unable to monitor counterparts. This is a particularly important issue to investigate when
employers have nearly unrestrained access to new performance monitoring techniques using big
data and people analytics.
Closely linked to this theoretical argument is another critical issue that emerges from our
analysis, which is to question the link between worker satisfaction and productivity. Our review
in management and labour economics suggests that the extant measurement of employee outcomes
is inconclusive for understanding the effects of punishment on firm outcomes. Specifically, while
research in leadership finds that punishment is detrimental to some employee outcomes such as
job satisfaction and stress levels (Atwater et al., 2001; Hoel et al., 2010; Podsakoff and Todor,
1985; Tremblay et al., 2013), research in experimental economics suggests that even when
punishment is negatively perceived and accepted by employees, it may still be productivity-
28
enhancing (Hannan et al., 2005; Marchegiani et al., 2011; Van Eerde and Thierry, 1996; Imas et
al., 2017; Gonzalez et al., 2020).
We believe that a more nuanced analysis of this relationship is necessary with particular
emphasis being placed on the conditions under which an employee is willing to accept the
systematic use of punishment and its relationship with effort and productivity. While negative
workplace sentiment may coexist with increased productivity, we do not expect sentiment to be
neutral. The type and intensity of punitive actions prescribed by the incentive scheme will possibly
influence the likelihood that the scheme will be successful. However, while different forms of
punishment have been researched in the literature, we found no comparative analysis except for
the work of Levitt et al. (2016), where punishment is implemented by removing either a monetary
advance or a symbolic prize from individuals (students). This finding is compounded by insights
originating in motivation theory suggesting that negative feedback that is perceived as punitive
leads to the erosion of the sense of competence and pride of workers as well as a loss of intrinsic
motivation (Gagné and Deci, 2005). We believe that punishment when associated with a loss of
income is more likely to have a positive effect on productivity than punishment that is associated
with losses of psychological or social value, but of course these relationships should be explored
in greater detail.
Theme C: Punishment, Productivity and Exogenous variables
The last theme that should be the object of further investigation concerns the influence of
exogenous variables on the likelihood that firms will adopt punitive managerial practices. Macro-
economic and legal variables such as the state of the labour market, the extent to which employee
representation (i.e. trade unions) is institutionalised and laws and regulations constraining
employers’ choices would be obvious starting points. As previously stated, industrial relations and
29
labour process theory have long underscored how these variables may influence the choices
available to employers. Industrial relations scholars have argued that during long waves of market
expansion, and as labour market tightens, workers will gain an increasing capacity to bargain and
negotiate management unilateralism. Such capacity to bargain would institutionalise trade unions,
endorse protective labour laws and encourage employers to offer rewards rather than using
punishment as the scarcity of available employees would induce firms to choose management
practices that are less detrimental to workers (Boxall and Purcell, 2016; Clegg, 1981; Braverman,
1974; Kaufman and Miller, 2011). These assumptions are largely theoretical in character and are
based on findings of various economic models (i.e. efficiency wages, implicit contract models)
exploring the relationship between the elasticity of wage adjustments to unemployment levels
(Akerlof and Yellen, 1990; Newbery and Stiglitz, 1987; Hallock, 2009).
As previously mentioned, macro-economic variables are seldomly considered by the
management literature, focussed as it is on individual matters such as abusive supervision or
leadership styles. This is well captured by Kaufman (2020) who alerts about the dangers inherent
in the ‘psychologisation’ of strategic HRM. Kaufman (2020) insists that the problem is not
psychology itself, but rather a tendency to explain macro‐level HRM outcomes by means of
individual‐level psychological‐behavioural factors and individual differences. The same is true for
studies in labour economics, which are dominated by micro-economic and psychological
perspectives. We believe that a better engagement with industrial relations, macro-economics and
labour process theorists could help to foster a better understanding of the relationship between
punishment and productivity. In particular, it would be interesting to investigate the following five
relationships. First, whether the economic conditions (unemployment and economic growth) have
an effect on firm decisions to offer rewards or punishment contracts. Second, whether labour
30
market conditions have an effect on employees’ freedom to accept or refuse a punishment or
reward contract. Third, whether market conditions (unemployment and economic growth) affect
employees’ choice to exert more effort under a punishment or reward contract. Fourth, whether
the presence of trade unions would have a moderating role for firms to offer punishment contracts
and for employees to accept it. Fourth, whether punishment contracts, endorsed by trade unions,
have a positive or negative effect on productivity. Fifth, whether punishment contracts endorsed
by trade unions have a stronger effect on productivity than when a union is absent or opposes them.
6 ‘A Rose by any other name would smell as sweet’
v
: Conclusion
The aim of this paper was not to pitch two different academic fields, management and
economics against each other but rather to highlight how the two disciplines complement each
other and to seek to bridge the gaps that emerge when the theoretical and empirical foundations of
the relationship between organisational punishment and productivity are analysed. We also sought
to develop an agenda for future research by identifying three main themes.
At the theoretical level we found that learning and motivation theories have driven the
research agenda although some differences in the approach between management scholars and
economists persist. First, motivation theory with its singular focus on the effects of punishment on
the recipients is more widely used in management than economics. Second, learning theory is
blended in economics with other theoretical constructs such as agency and rational choice theories.
This has enabled economists to focus more on the study of the effectiveness of organisational
punishment also providing a larger array of hypotheses to be tested than their management
colleagues. We have also noted that when similar theoretical constructs are used, results tend to
converge. For example, when researchers in management use learning theory (mostly to study
31
leadership styles), weak links are found between punishment and productivity while the same
applies to economists using motivation theory.
However, given the sometimes contradictory nature of the empirical results, we believe
that more research work is needed. We identified two common issues that, if addressed, have the
potential to inform future studies. First, the relationship between the economic contexts (in
particular unemployment rates and economic growth) and their relationship with the use of
punishment techniques. Second, the fact that the debate has been dominated, in the past 40 years
by psychological and micro-economic research. The absence of references to macro-economic
variables is particularly salient since it has the potential to affect the choices available to managers,
firms and workers.
We believe that the themes developed here may contribute to bridge the gaps in knowledge
and foster further research on the use of punishment as a performance incentive. We would like to
emphasise that in no way we agree with or condone the use of harmful methods in the workplace
or society at large. Our intention here was simply to reflect on some of the reasons that explain
why organisational punishment has been used not only as an instrument to extract obedience, but
possibly as a means to realise higher employee productivity.
Table 1 Disciplinary perspectives in the study of the relationship between punishment and productivity
Economics
Management Studies
Objective/ Rationale
for application
High productivity
Stop poor or declining performance;
Decrease the likelihood of future poor
performance
Measurable
behaviour
Productivity measures
Employee performance changes;
Intrinsic motivation;
Employee wellbeing;
Team cooperation;
Vicarious learning;
Organisational citizenship;
Job satisfaction;
32
Economics
Management Studies
Interpersonal relations;
Tools
Punishment incentive scheme
Application of an aversive event by the
supervisor following a behaviour (poor
performance)
Decision-maker
The firm (organisation)
The supervisor, not always clear
Method of application
of tools
Contingent
Contingent, non-contingent; informal
/formal
Focus
Study the threat of punishment on
productivity
Study effect on the individual and
groups after application
Factors influencing
the effectiveness of
the tool
Monitoring, fine-tuning of incentives,
frequency and sequencing; nature of
punishment (eg. symbolic, reputational or
monetary)
Intensity;
Timing;
Justice perceptions;
Contingency;
Job security;
Key theory
Agency theory
Prospect theory
Rational choice theory
Learning (reinforcement) theory
Motivation theory
Expectancy theory
Justice theory
Industrial relations/ labour process
theory
References
Addison JT and Hirsch BT (1989) Union effects on productivity, profits, and growth: has the long run
arrived? Journal of Labor Economics 7(1): 72-105.
Akerlof GA (1982) Labor contracts as partial gift exchange. The Quarterly Journal of Economics 97(4):
543-569.
Akerlof GA and Yellen JL (1990) The fair wage-effort hypothesis and unemployment. The Quarterly
Journal of Economics 105(2): 255-283.
Andreoni J, Harbaugh W and Vesterlund L (2003) The carrot or the stick: Rewards, punishments, and
cooperation. American Economic Review 93(3): 893-902.
Ariely D, Gneezy U, Loewenstein G, et al. (2009) Large stakes and big mistakes. The Review of Economic
Studies 76(2): 451-469.
33
Armantier O and Boly A (2015) Framing of incentives and effort provision. International Economic Review
56(3): 917-938.
Aron DJ (1990) Firm organization and the economic approach to personnel management. The American
Economic Review 80(2): 23-27.
Aron DJ and Olivella P (1994) Bonus and penalty schemes as equilibrium incentive devices, with
application to manufacturing systems. Journal of Law, Economics, & Organization. 1-34.
Arvey RD, Davis GA and Nelson SM (1984) Use of discipline in an organization: A field study. Journal
of Applied Psychology 69(3): 448.
Arvey RD and Ivancevich JM (1980) Punishment in organizations: A review, propositions, and research
suggestions. Academy of Management Review 5(1): 123-132.
Arvey RD and Jones AP (1985) The use of discipline in organizational settings: A framework for future
research. Research in Organizational Behavior 7: 367-408.
Atwater LE, Camobreco JF, Dionne SD, et al. (1997) Effects of rewards and punishments on leader
charisma, leader effectiveness and follower reactions. Leadership Quarterly 8(2): 133-152.
Atwater LE, Waldman DA, Carey JA, et al. (2001) Recipient and observer reactions to discipline: Are
managers experiencing wishful thinking? Journal of Organizational Behavior 22(3): 249-270.
Ball GA, Treviño LK and Sims HP (1992) Understanding subordinate reactions to punishment Incidents:
Perspectives from justice and social affect. The Leadership Quarterly 3: 307-333.
Ball GA, Trevino LK and Sims Jr HP (1994) Just and unjust punishment: Influences on subordinate
performance and citizenship. Academy of Management Journal 37(2): 299-322.
Bénabou R and Tirole J (2006) Incentives and prosocial behavior. American Economic Review 96(5): 1652-
1678.
Bennett RJ and Cummings LL (1991) The effects of schedule and intensity of aversive outcomes on
performance: A multi-theoretical perspective. Human Performance 4(2): 155-169.
34
Birtch TA, Chiang FF and Van Esch E (2016) A social exchange theory framework for understanding the
job characteristics–job outcomes relationship: The mediating role of psychological contract
fulfillment. The International Journal of Human Resource Management 27(11): 1217-1236.
Bolton P and Dewatripont M (2005) Contract theory. MIT press.
Bowles S and Polania-Reyes S (2012) Economic incentives and social preferences: Substitutes or
complements? Journal of Economic Literature 50(2): 368-425.
Boxall P and Purcell J (2016) Strategy and Human Resource Management. 4th ed. London: Macmillan
Education.
Braverman H (1974) Labor and monopoly capital. New York: Monthly Review Press.
Brief AP, Buttram RT and Dukerich JM (2001) Collective corruption in the corporate world: Toward a
process model. In: Turner ME (ed) Groups at work: Theory and research. Mahwah, NJ: Erlbaum,
pp.471-499.
Brink AG and Rankin FW (2013) The effects of risk preference and loss aversion on individual behavior
under bonus, penalty, and combined contract frames. Behavioral Research in Accounting 25(2):
145-170.
Bulte E, List JA and Van Soest D (2020) Toward an understanding of the welfare effects of nudges:
Evidence from a field experiment in the workplace. The Economic Journal 130(632): 2329-2353.
Burawoy M (1979) Manufacturing consent: Changes in the labor process under monopoly capitalism.
Chicago: University of Chicago Press.
Butterfield KD, Treviño LK and Ball GA (1996) Punishment from the manager's perspective: A grounded
investigation and inductive model. Academy of Management Journal 39(6): 1479-1512.
Casoria F and Riedl A (2013) Experimental labor markets and policy considerations: Incomplete contracts
and macroeconomic aspects. Journal of Economic Surveys 27(3): 398-420.
Cerasoli CP, Nicklin JM and Ford MT (2014) Intrinsic motivation and extrinsic incentives jointly predict
performance: A 40-year meta-analysis. Psychological Bulletin 140(4): 980-1008.
35
Christ M, Sedatole K and Towry K (2012) Sticks and Carrots: The Effect of Contract Frame on Effort in
Incomplete Contracts. The Accounting Review 87(6): 1913-1938.
Chwe MS-Y (1990) Why were workers whipped? Pain in a principal-agent model. The Economic Journal
100(403): 1109-1121.
Clegg S (1981) Organization and control. Administrative Science Quarterly. 545-562.
Corgnet B and Hernan-Gonzalez R (2019) Revisiting the trade-off between risk and incentives: The
shocking effect of random shocks? Management Science 65(3): 1096-1114.
Crane A (2013) Modern slavery as a management practice: Exploring the conditions and capabilities of
human exploitation. Academy of Management Review 38(1): 49-69.
Culbertson SS, Henning JB and Payne SC (2013) Performance appraisal satisfaction. Journal of Personnel
Psychology 12(September): 189-195.
De Quidt J (2018) Your loss is my gain: A recruitment experiment with framed incentives. Journal of the
European Economic Association 16(2): 522-559.
Deci EL (1972) The effects of contingent and noncontingent rewards and controls on intrinsic motivation.
Organizational Behavior and Human Performance 8(2): 217-229.
Deci EL, Koestner R and Ryan RM (1999) A meta-analytic review of experiments examining the effects
of extrinsic rewards on intrinsic motivation. Psychological Bulletin 125(6): 627-668.
Deci EL and Ryan RM (1985a) The general causality orientations scale: Self-determination in personality.
Journal of Research in Personality 19(2): 109-134.
Deci EL and Ryan RM (1985b) Intrinsic motivation and self-determination in human behavior. New York:
Springer Science & Business Media.
Dickinson DL (2001) The Carrot vs. the Stick in Work Team Motivation. Experimental Economics 4(1):
107-124.
Doellgast V and Marsden D (2019) Institutions as constraints and resources: Explaining cross‐national
divergence in performance management. Human Resource Management Journal 29(2): 199-216.
36
Fehr E and Gachter S (2000) Cooperation and punishment in public goods experiments. American
Economic Review 90(4): 980-994.
Fehr E and Gächter S (2002a) Altruistic punishment in humans. Nature 415(6868): 137-140.
Fehr E and Gächter S (2002b) Do incentive contracts undermine voluntary cooperation? IEER. Zurich.
Fehr E, Goette L and Zehnder C (2009) A behavioral account of the labor market: The role of fairness
concerns. Annu. Rev. Econ. 1(1): 355-384.
Fehr E and Schmidt KM (1999) A theory of fairness, competition, and cooperation. The Quarterly Journal
of Economics 114(3): 817-868.
Fehr E and Schmidt KM (2007) Adding a stick to the carrot? The interaction of bonuses and fines. American
Economic Review 97: 177-181.
Fenoaltea S (1984) Slavery and supervision in comparative perspective: A model. Journal of Economic
History 44: 635-668.
Fryer R, Levitt S, List J, et al. (2012) Enhancing the efficacy of teacher incentives Through loss aversion:
A field experiment. NBER Working Paper Series, 18237.
Gächter S, Kessler E and Königstein M (2009) Performance Incentives and the Dynamics of Voluntary
Cooperation. Discussion Paper.
Gagné M and Deci EL (2005) Self-determination theory and work motivation. Journal of Organizational
Behavior 26(4): 331-362.
Gandini A (2019) Labour process theory and the gig economy. Human Relations 72(6): 1039-1056.
Goldfield M (1989) The decline of organized labor in the United States. University of Chicago Press.
Gonzalez GC, Hoffman VB and Moser DV (2020) Do Effort Differences between Bonus and Penalty
Contracts Persist in Labor Markets? The Accounting Review 95(3): 205-222.
Gottfredson RK and Aguinis H (2017) Leadership behaviors and follower performance: Deductive and
inductive examination of theoretical rationales and underlying mechanisms. Journal of
Organizational Behavior 38(4): 558-591.
37
Greenberg J (1990) Organizational justice: Yesterday, today, and tomorrow. Journal of Management 16(2):
399-432.
Greene RJ (2018) Rewarding performance: Guiding principles; custom strategies. Routledge.
Greer CR and Labig CE (1987) Employee reactions to disciplinary action. Human Relations 40(8): 507-
524.
Hallock KF (2009) Job loss and the fraying of the implicit employment contract. Journal of Economic
Perspectives 23(4): 69-93.
Hannan RL, Hoffman VB and Moser DV (2005) Bonus versus penalty: Does contract frame affect
employee effort? In: Rapoport A and Zwick R (eds) Experimental Business Research. Boston, MA:
Springer, pp.151-169.
Hershcovis MS (2011) Incivility, social undermining, bullying… oh my!”: A call to reconcile constructs
within workplace aggression research. Journal of Organizational Behavior 32(3): 499-519.
Hinkin TR and Schriesheim CA (1994) An Examination of Subordinate-Perceived Relationships Between
Leader Reward and Punishment Behavior and Leader Bases of Power. Human Relations 47(7):
779-800.
Hinkin TR and Schriesheim CA (2008) An examination of" nonleadership": from laissez-faire leadership
to leader reward omission and punishment omission. Journal of Applied Psychology 93(6): 1234-
1248.
Hoel H, Glasø L, Hetland J, et al. (2010) Leadership styles as predictors of self-reported and observed
workplace bullying. British Journal of Management 21(2): 453-468.
Hofeditz M, Nienaber AM, Dysvik A, et al. (2017) “Want to” versus “have to”: Intrinsic and extrinsic
motivators as predictors of compliance behavior intention. Human Resource Management 56(1):
25-49.
Holmstrom B (1979) Moral Hazard and Observability. Bell Journal of Economics 10(1): 74-91.
Holmstrom B and Milgrom P (1987) Aggregation and Linearity in the Provision of Intertemporal
Incentives. Econometrica 55(2): 303-328.
38
Hossain T and List JA (2012) The behavioralist visits the factory: Increasing productivity using simple
framing manipulations. Management Science 58(12): 2151-2167.
Imas A, Sadoff S and Samek A (2017) Do people anticipate loss aversion? Management Science 63(5):
1271-1284.
Jirjahn U (2016) Which employers regard the threat of dismissal as a suitable incentive to motivate workers?
Applied Economics Letters 23(9): 614-617.
Judge TA and Piccolo RF (2004) Transformational and Transactional Leadership: A Meta-Analytic Test of
their Relative Validity. Journal of Applied Psychology 89(5): 755-768.
Kahneman D and Tversky A (2013) Prospect theory: An analysis of decision under risk. Handbook of the
fundamentals of financial decision making: Part I. World Scientific, pp.99-127.
Kaufman BE (1998) John R. Commons: his contributions to the founding and early development of the
field of personnel/HRM. Proceedings of the Annual Meeting-Industrial Relations Research
Association. Citeseer, 328-341.
Kaufman BE (2020) The real problem: The deadly combination of psychologisation, scientism, and
normative promotionalism takes strategic human resource management down a 30‐year dead end.
Human Resource Management Journal 30(1): 49-72.
Kaufman BE and Miller BI (2011) The firm's choice of HRM practices: Economics meets strategic human
resource management. ILR Review 64(3): 526-557.
Kaur S, Kremer M and Mullainathan S (2010) Self-control and the development of work arrangements.
American Economic Review 100(2): 624-628.
Kazdin AE (1975) Behavior modification in applied settings. Homewood (IL). Illinois, Dorsey.
Kernan MC, Watson S, Fang Chen F, et al. (2011) How cultural values affect the impact of abusive
supervision on worker attitudes. Cross Cultural Management: An International Journal 18(4): 464-
484.
39
Kiazad K, Kraimer ML and Seibert SE (2019) More than grateful: How employee embeddedness explains
the link between psychological contract fulfillment and employee extra-role behavior. Human
Relations 72(8): 1315-1340.
Kluger AN (2012) Feedback-expectation discrepancy, arousal and locus of cognition. In: Erez; M,
Kleinbeck; U and Thierry; H (eds) Work motivation in the context of a globalizing economy. New
York: Psychology Press, pp.117-126.
Kuvaas B (2007) Different relationships between perceptions of developmental performance appraisal and
work performance. Personnel Review 36(3): 378-397.
LaLonde RJ and Meltzer BD (1991) Hard times for unions: Another look at the significance of employer
illegalities. The University of Chicago Law Review 58(3): 953-1014.
Lazear EP (1991) Labor economics and the psychology of organizations. The Journal of Economic
Perspectives 5(2): 89-110.
Lazear EP (2018) Compensation and Incentives in the Workplace. Journal of Economic Perspectives 32(3):
195-214.
Levitt SD, List JA, Neckermann S, et al. (2016) The behavioralist goes to school: Leveraging behavioral
economics to improve educational performance. American Economic Journal: Economic Policy
8(4): 183-219.
Levy PE, Cavanaugh CM, Frantz NB, et al. (2015) The role of due process in performance appraisal: A 20-
year retrospective. In: Cropanzano RS and Ambrose ML (eds) The Oxford Handbook of Justice in
the Workplace. pp. 605–619.
Lin B, Mainemelis C and Kark R (2016) Leaders' responses to creative deviance: Differential effects on
subsequent creative deviance and creative performance. The Leadership Quarterly 27(4): 537-556.
Luft J (1994) Bonus and penalty incentives contract choice by employees. Journal of Accounting and
Economics 18(2): 181-206.
Mackey JD, Frieder RE, Brees JR, et al. (2017) Abusive supervision: A meta-analysis and empirical review.
Journal of Management 43(6): 1940-1965.
40
Malouff J, Thorsteinsson E, Schutte N, et al. (2009) Effects of vicarious punishment: A meta-analysis. The
Journal of General Psychology 136(3): 271-286.
Marchegiani L, Reggiani T and Rizzoli M (2011) How Unjust! An Experimental Investigation of
Supervisors' Evaluation Errors and Agents' Incentives. IZA Discussion Papers.
McElroy JC (1985) Inside the teaching machine: Integrating attribution and reinforcement theories. Journal
of Management, 11(1): 123–133.
Moore PV (2018) The threat of physical and psychosocial violence and harassment in digitalized work.
Geneva: International Labour Organization, CTRAV Bureau for Workers’ Activities.
Morgenstern O and Von Neumann J (1953) Theory of games and economic behavior. Princeton: Princeton
University Press.
Neale NR, Butterfield KD, Goodstein J, et al. (2020) Managers’ restorative versus punitive responses to
employee wrongdoing: A qualitative investigation. Journal of Business Ethics 161(3): 603-625.
Newbery DM and Stiglitz JE (1987) Wage rigidity, implicit contracts, unemployment and economic
efficiency. The Economic Journal 97(386): 416-430.
Ng TW and Feldman DC (2012) Breaches of past promises, current job alternatives, and promises of future
idiosyncratic deals: Three-way interaction effects on organizational commitment. Human Relations
65(11): 1463-1486.
O'Reilly III CA and Weitz BA (1980) Managing marginal employees: The use of warnings and dismissals.
Administrative Science Quarterly. 467-484.
Pate LE (1978) Cognitive versus reinforcement views of intrinsic motivation. Academy of Management
Review 3(3): 505-514.
Pinder CC (2014) Work motivation in organizational behavior. Psychology Press.
Podsakoff NP, Podsakoff PM and Kuskova VV (2010) Dispelling misconceptions and providing guidelines
for leader reward and punishment behavior. Business Horizons 53(3): 291-303.
Podsakoff PM, Bommer WH, Podsakoff NP, et al. (2006) Relationships between leader reward and
punishment behavior and subordinate attitudes, perceptions, and behaviors: A meta-analytic review
41
of existing and new research. Organizational Behavior and Human Decision Processes 99(2): 113-
142.
Podsakoff PM, MacKenzie SB, Ahearne M, et al. (1995) Searching for a needle in a haystack: Trying to
identify the illusive moderators of leadership behaviors. Journal of Management 21(3): 422-470.
Podsakoff PM, MacKenzie SB and Fetter R (1993) Substitutes for leadership and the management of
professionals. The Leadership Quarterly 4(1): 1-44.
Podsakoff PM and Todor WD (1985) Relationships Between Leader Reward and Punishment Behavior and
Group Processes and Productivity. Journal of Management 11(2): 55-73.
Podsakoff PM, Todor WD, Grover RA, et al. (1984) Situational moderators of leader reward and
punishment behavior: Fact or fiction? Organizational Behavior and Human Performance 34(1):
21-63.
Podsakoff PM, Todor WM and Skov R (1982) Effects of leader contingent and noncontingent reward and
punishment behaviors on subordinate performance and satisfaction. Academy of Management
Journal 25(4): 810-821.
Prendergast C (1999) The provision of incentives in firms. Journal of Economic Literature 37(1): 7-63.
Probst TM, Stewart SM, Gruys ML, et al. (2007) Productivity, counterproductivity and creativity: The ups
and downs of job insecurity. Journal of Occupational and Organizational Psychology 80(3): 479-
497.
Rehg MT, Miceli MP, Near JP, et al. (2008) Antecedents and outcomes of retaliation against
whistleblowers: Gender differences and power relationships. Organization Science 19(2): 221-240.
Restubog SLD, Bordia P and Tang RL (2006) Effects of psychological contract breach on performance of
IT employees: The mediating role of affective commitment. Journal of Occupational and
Organizational Psychology 79(2): 299-306.
Rey‐Biel P (2008) Inequity aversion and team incentives. scandinavian Journal of Economics 110(2): 297-
320.
42
Rollinson DJ (2000) Supervisor and manager approaches to handling discipline and grievance: a follow‐up
study. Personnel Review.
Ross SA (1973) The economic theory of agency: The principal's problem. The American Economic Review
63(2): 134-139.
Salin D, Tenhiälä A, Roberge M-É, et al. (2014) ‘I wish I had...’: Target reflections on responses to
workplace mistreatment. Human Relations 67(10): 1189-1211.
Samuelson PA (1947) Economic foundations of economic analysis. Cambridge: Harvard University Press.
Schleicher DJ, Baumann HM, Sullivan DW, et al. (2018) Putting the system into performance management
systems: A review and agenda for performance management research. Journal of Management
44(6): 2209-2245.
Schnake ME (1986) Vicarious punishment in a work setting. Journal of Applied Psychology 71(2): 343.
Sims HP and Szilagyi AD (1975) Leader reward behavior and subordinate satisfaction and performance.
Academy of Management Proceedings. Academy of Management, 161-163.
Skinner B (1953) Science and human behavior. New York: MacMillan.
Sliwka D (2007) Trust as a signal of a social norm and the hidden costs of incentive schemes. American
Economic Review 97(3): 999-1012.
Sobel J (2005) Interdependent preferences and reciprocity. Journal of Economic Literature 43(2): 392-436.
Sutter M, Haigner S and Kocher MG (2010) Choosing the carrot or the stick? Endogenous institutional
choice in social dilemma situations. The Review of Economic Studies 77(4): 1540-1566.
Tenbrunsel AE and Messick DM (1999) Sanctioning systems, decision frames, and cooperation.
Administrative Science Quarterly 44(4): 684-707.
Tenbrunsel AE, Smith-Crowe K and Umphress EE (2003) Building Houses on Rocks: The Role of the
Ethical Infrastructure in Organizations. Social Justice Research 16(3): 285-307.
Tepper BJ, Carr JC, Breaux DM, et al. (2009) Abusive supervision, intentions to quit, and employees’
workplace deviance: A power/dependence analysis. Organizational Behavior and Human Decision
Processes 109(2): 156-167.
43
Thompson P (1983) The nature of work: An introduction to debates on the labour process. Salisbury, GB:
The MacMillan Press Ltd.
Thompson P (2003) Fantasy Island: a Labour Process critique of the ‘age of surveillance’. Surveillance &
Society 1(2): 138-151.
Thurston Jr PW and McNall L (2010) Justice perceptions of performance appraisal practices. Journal of
Managerial Psychology 25(3): 201-228.
Tom SM, Fox CR, Trepel C, et al. (2007) The neural basis of loss aversion in decision-making under risk.
Science 315(5811): 515-518.
Tope D and Jacobs D (2009) The politics of union decline: The contingent determinants of union
recognition elections and victories. American Sociological Review 74(5): 842-864.
Tremblay M, Vandenberghe C and Doucet O (2013) Relationships between leader-contingent and non-
contingent reward and punishment behaviors and subordinates’ perceptions of justice and
satisfaction, and evaluation of the moderating influence of trust propensity, pay level, and role
ambiguity. Journal of Business and Psychology 28(2): 233-249.
Trevino LK (1998) Punishment in Organizations: Descriptive and Normative. In: Schminke M (ed)
Managerial ethics: Moral management of people and processes. Mahwah, NJ: Lawrence Erlbaum
Associates, pp.99-114.
Tweedie D, Wild D, Rhodes C, et al. (2019) How does performance management affect workers? Beyond
human resource management and its critique. International Journal of Management Reviews 21(1):
76-96.
Ulph A and Ulph D (2001) Strategic Innovation with Complete and Incomplete Labour Market Contracts.
The Scandinavian Journal of Economics 103(2): 265-282.
Van de Weghe P and Bruggeman W (2006) The impact of uncertainty on incentive framing effectiveness
in a multidimensional task environment. Working Paper. Ghent University, Faculty of Economics
and Business Administration.
44
Van Eerde W and Thierry H (1996) Vroom's expectancy models and work-related criteria: A meta-analysis.
Journal of Applied Psychology 81(5): 575.
Vroom VH (1964) Work and motivation. New York: John Wiley & Sons.
Walter F, Lam CK, Van Der Vegt GS, et al. (2015) Abusive supervision and subordinate performance:
Instrumentality considerations in the emergence and consequences of abusive supervision. Journal
of Applied Psychology 100(4): 1056-1072.
Wang L and Murnighan JK (2017) The dynamics of punishment and trust. Journal of Applied Psychology
102(10): 1385.
Weiss HM (1990) Learning theory and industrial and organizational psychology. In: Dunnette MD and
Hough LM (eds) Handbook of industrial and organizational psychology. Consulting Psychologists
Press, pp.171–221.
Wheeler AR, Halbesleben JR and Whitman MV (2013) The interactive effects of abusive supervision and
entitlement on emotional exhaustion and co‐worker abuse. Journal of Occupational and
Organizational Psychology 86(4): 477-496.
Xu E, Huang X, Lam CK, et al. (2012) Abusive supervision and work behaviors: The mediating role of
LMX. Journal of Organizational Behavior 33(4): 531-543.
Zellars KL, Tepper BJ and Duffy MK (2002) Abusive supervision and subordinates' organizational
citizenship behavior. Journal of Applied Psychology 87(6): 1068-1076.
i
The notions of incentive scheme and contract completeness are closely linked. If the incentive scheme is
explicit and covers all tasks a worker is expected to perform, the worker-firm contract is considered complete. By
contrast, a contract is incomplete if some of the worker’s tasks are left out of the incentive scheme, meaning that the
worker’s duties are unclear and the link between worker outcomes and compensation is only partially or implicitly
specified Bolton P and Dewatripont M (2005) Contract theory. MIT press..
ii
A god introduced by means of a crane in ancient Greek and Roman drama to decide the final outcome.
iii
From Shakespeare's play Hamlet
iv
“The Sphynx,” Chapter 70 of Herman Melville’s Moby-Dick
v
From Shakespeare's play Romeo and Juliet
