I'm reading a pretty interesting book about motivation right now called Drive by Daniel H. Pink. So far, I've really only skimmed through the highlights, but essentially, the book explains how and why using the classic "stick and carrot" method of penalties and rewards doesn't work well as motivation for most modern endeavors. The stick and the carrot might work pretty well for strictly physical tasks completed while being constantly monitored, but for any work that requires mental investment or work that needs to be completed without being watched the whole time, the stick and carrot method actually becomes very demotivational. This "bad motivation" idea really rings true to me, and Pink even backs it up with citations of scientific studies.
Some of the studies include experiments on children, experiments in workplaces, and experiments in societies. With children, researchers tried giving a group of children rewards for drawing. Pretty quickly, the children lost interest in drawing for fun, and would only half-ass draw for rewards. In workplaces, a daycare tried instituting a fine for parents who pick up their children late. After instituting the fine, parents were actually *more* likely to be late; the reasons were hypothesized to be that the parents no longer felt the social pressure to be on time and now thought of it as a business transaction where they paid more money for their children to be looked-after for longer. In society, Great Britain stopped paying people to donate blood, and actually found more people donated blood. These studies all showed instances where a penalty and reward system actually demotivated the desired behavior.
The book goes on to describe some of the bad effects of the stick and carrot motivational method. It describes how the reward and penalty method encourages people to only perform a task for their reward. They stop performing for their own enjoyment, for their own betterment (other than the reward), for the betterment of society or the organization. People feel like they are one entity and society and the organization and the provider of the reward are all the "other." People don't think about goals as "our goals" but as the reward-giver's goals. People begin to lie, cheat, and steal (or at least cut corners) in order to maximize their reward and minimize their penalties. People no longer enjoy their work, and never perform above and beyond unless their is a clear reward for doing so. Rewards and penalties really don't seem to motivate beyond a minimal point.
Even better than describing what's bad about the penalty and reward motivational method, the book also attempts to describe better motivational methods. I'm still reading this part, but so far the big concept seems to be that people are naturally driven to perform and complete tasks when the tasks have a clear purpose that a person cares about. People perform best when given more control to optimize the 4 T's: Time, Task, Technique, and Team. Another big concept in the good motivation section is "flow." Flow appears to be the state of being when people are focused on a task, undistracted, and therefore maximizing their performance. Oh, and also when in flow, a person is *enjoying* their focused task-performance. Flow is something that is maximized by optimizing the 4 T's above. For the best motivation, a person or an organization needs to capitalize on the natural drive of the individual.
So, in summary, stick and carrot--mostly bad. Capitalizing on the individual's drive to complete purposeful tasks--good. Finding flow: focused, undistracted, and enjoyable optimal performance--essential.
This book should be required reading for PI's. Or, at least for my PI.