Giving out a raise, bonus or promotion for a job well done can make a small business owner feel a little like Santa on Christmas morning. Of course, Santa doesn’t just reward good boys and girls. He also brings coal to those who don’t live up to performance standards. It falls to the owner to give out those lumps of coal to problem employees, not only as a consequence, but also as a deterrent. Though punishment is most unpleasant for the employee on the receiving end, it’s a negative experience for other employees and the owner as well. Because of its negative affects, punishment should be used sparingly.


Punishment cannot be used to spur good behavior. It only works to eliminate undesirable actions. Typically, negligence or disobedience merits punishment. In either case, the employee must know the expected behavior in advance; otherwise, the punishment has not been earned. Effective use of punishment means consistent application and instituting the punishment as soon after the offense as possible. It should be done privately, while praise should be given out publicly. An owner should be careful in punishing subordinates, since ineffectively-applied discipline can cause ill will, poor morale, and employee passivity and alienation.

Kinds of Punishment

Punishment is meant to be so disagreeable that it prevents or stops certain behaviors. It comes in two forms: positive and negative. Positive punishment involves actually doing something unpleasant to the employee. Verbal reprimands and written warnings are examples of this kind of punishment. Negative punishment takes or withholds something valuable from the employee, including promotions or the job itself.

Punishment and Leadership

The power to mete out punishment and reward is called coercive power. Coercive power relies on employee compliance instead of inspiration. It is typically a component of leadership styles that emphasize tasks or that are leader-centric. These styles include authoritarian or autocratic leaders and the transactional leader, who assumes an agreement between employer and employee: in return for money, the employer will expect a certain standard of work. These leadership styles find use in organizations that have top-down power structures.

Discipline Without Punishment

The discipline-without-punishment approach rejects the cop-criminal dynamic of traditional methods. It first reinforces good behavior by telling employees what they’re doing right. When an employee goes astray, the employee and manager have performance improvement discussions. Improvement reminders follow if necessary, escalating to paid leave for an employee who still has not improved. During leave, the employee decides whether he wants to quit or stay on. If he stays, he does so knowing another violation will result in immediate termination.