Carrots and Sticks: Can They Move Elephants?

4 Feb

A drab yellow coat of paint covered the walls of my childhood room, a color chosen by the home’s previous owner.  The worn, faded appearance of the room didn’t bother me; the color did.  I yearned for blue walls, my favorite color (both then and now). To convince my parents to allow me to paint my room, my strategy at age seven consisted of crying and insisting that blue walls were essential to my survival.  Not surprisingly, this strategy failed completely.  As I grew older, I continued to ask for a blue room, but my tactics became increasingly sophisticated.  I only asked when my parents seemed to be in good spirits. I phrased my request as delicately as possible.  I even concentrated my efforts during times that would be best suited for a painting project (such as during school vacations).  Despite over ten years of planning and strategizing, I did not get my blue paint until the air conditioning unit leaked and damaged my walls.  Ironically, by then I had moved out of my bedroom and into my dorm room.

Convincing others to do things that they do not want to do is usually a difficult task, and the recent political wrangling by our elected officials may be the most visible example of this fact.  Earlier this week, President Obama unveiled his plan to allow millions of homeowners to refinance their mortgages.  Political analysts believe that there will be significant congressional opposition to the proposal due to funding concerns, partisan bickering and disagreement about the proper role of government intervention in the economy.  What is most striking about the President’s proposal is the two-pronged approach he is using to push his initiative.  To use a clichéd term, it appears that President Obama is using the classic carrot-and-stick approach to win over Congress.

The Carrot

The key to a successful carrot in a policy proposal is offering an approach that one’s opponents will find appealing.  The carrot in President Obama’s mortgage refinance proposal is the responsibility requirement, specifically that the only homeowners who will qualify for refinancing support are those who have paid their mortgage each month for the prior six months and who have not missed more than one payment in the six months prior to that. This carrot alleviates some of the Republican fears by limiting the risks of bad loans as well as decreasing the total amount of funding needed.

The Stick

Of course, the carrot-and-stick technique works best when there is a threat offered as the alternative to the carrot.  In the example of President Obama’s new mortgage plans, the stick is his threat to push through measures that do not need the support of Congress.  These proposals include a borrowers bill of rights that would simplify the process for homeowners, and an auction system that would sell off foreclosed houses in bulk.  President Obama knows that measures such as these will not fix the housing crisis, yet he is able to use them as a threat to persuade Republicans to back the bill he will send to Congress.  In other words, President Obama’s message to Congress is “If you do not pass this bill, I will unilaterally enact many smaller proposals which you will find even more unacceptable than the bill itself.”  Only time will tell if this strategy will work as President Obama hopes it will. Perhaps if I’d used a simple carrot-and-stick approach like President Obama’s I could have had blue walls much sooner.

The same basic carrot-and-stick approach can work in the business world, so long as you know your audience.  President Obama’s approach is feasible because he promised Congressional Republicans something they liked, and threatened to enact a policy they disliked.  If a manager is able to find an enticing enough carrot and a threatening enough stick for his employees, he should be able to convince them to be more effective.

by Jennifer Glick

Sources: Obama Announces Refinancing Plan – The Wall Street Journal

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One Response to “Carrots and Sticks: Can They Move Elephants?”

  1. Julia Millot February 6, 2012 at 5:44 pm #

    Really great comparison between your situation and Obama’s plan. The intro really drew me into the rest of what you were saying. (Sorry that you never got your blue walls!)

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