Lately my kids have been less than angels. I don't know if it is because we have all been suffering from a cold and not had enough sleep or we have watched too much TV because of that cold or some combination of those things, but we have been having a hard time. If one kid isn't fussing the other one is, or fighting with each other or sassing Jeff or I. Sometimes I wish I could warn them by saying Santa and his elves are watching, but we don't do that.
When Jason was young we decided that we weren't going to threaten the kids with the possibility that Santa wouldn't give them any gifts. I can't imagine a scenario that we would go ahead and return the kids gifts. We try not to threaten consequences we wouldn't make good on. My mom told me a story about her brother that one Christmas he had been so bad on Christmas Eve that there weren't any gifts for him on Christmas morning. His parents said that if he was very good at Christmas Mass then Santa may come back with his presents. He was the best little boy ever and there were gifts when he got home.
The most important reason we don't focus on naughty or nice is because it really isn't in the spirit of Christmas. I mean Christ came into the world and died for our sins independent of us being naughty or nice. God gives us his grace and there is nothing we can do to earn it, no matter how nice we are. It feels disingenuous to say be nice or else.
We haven't gone as far as to do away with Santa and we even still move the Elf on the Shelf every day, but we try to avoid saying things like "Santa is watching" or make Christmas morning threats. Of course we want our kids to be good, we just want them to behave and obey to make us and God happy not to receive presents. While I will be working with the kids on improving their attitudes they know that Santa will come on Christmas.