The dictionary definition is:
A thing that motivates or encourages one to do something.
I think that’s clear enough to understand.
Working Backwards From The Results You Want.
The best way to understand what type of incentives you need to give other people, it’s best to work backwards from the behaviour you are looking to encourage, and the results you wish them to generate, and also what they care about. After all, for an incentive to work as a motivator, it needs to be something that people desire.
This is slightly upside down thinking from the normal incentive scheme, and quite rightly so, as we will see that many good natured incentives schemes fall flat on their faces because they have unintended consequences.
The Simplest Incentive: Recognition
The easiest (and cheapest!) way to incentivize someone to do a great job, is simply to recognize that they have done a great job after the fact, with a genuine smile and a short conversation. While this is simple, you would be amazed in how many organizations and situations this is simply missed out, and in fact the opposite is done, and that other people will claim the credit for the good job, which is a huge demotivating factor.
Trust & Independence
Positive And Negative Incentives
Not doing something, means doing something. Inaction is the action of non-action.
Prison as a incentive not to commit crimes. It both works and doesn’t. Most criminals don’t begin to commit a crime thinking that they will be caught, but on the other hand, many people wouldn’t even consider crime as a career option because there is the threat of prison.
Unintended Side Effects
With all the positive benefits of incentives, we still have to be really careful about how we go about giving them because they can have catastrophic unintended consequences.
Let me give you a simple example.
Let’s imagine that you are the Chief of Police in a major city. You decide to reward each individual police precinct based on the number of arrests they make. They will have larger budgets for new equipment, higher pay, and multiple extra non-financial bonuses.
On the surface, this sounds like a great idea. After all, the officers working there are going to be really motivated to go after criminals and bring them in, which is exactly what the city needs.
However, as soon as we dig a little deeper, we realise that there are some troubling oversimplifications with this incentives model that will ultimately cause it to fail.
The only metric used to judge whether the precinct should receive the bonuses is the number of arrests. This is a very arbitrary value, and doesn’t actually fit with the complex way that modern policing work.
Before we go any further, let’s continue the thought experiment and launch this bonus scheme, and see what happens.
It’s Monday morning, and all the officers receive a memo with the multiple targets levels for the number of different arrests, and the compensation and bonuses they will receive for each level.
The first shift leaves on Monday mid-morning, and by Tuesday afternoon, every single person in their catchment area who has committed even the slightest offence, which may include things like jaywalking, swearing, or riding a bicycle without a helmet, has been arrested. Of course, true criminals such as the type of people who hang out on street corners selling drugs will also have been apprehended, but they will be in the minority.
So what has happened? Well, it’s a simple case of incentives being used in a shallow, ill-conceived way. The officers needed arrests, and arrests they created.
This completely ignores that high profile arrests can take weeks or months to make and that arresting a generally law-abiding citizen for jaywalking will only cause resentment of the police force, instead of actually improving the community.
It also ignores the fact that there will be some awesome officers out there who can break up fights, arguments, and general civil disorder in an intelligent manner, which doesn’t require arresting any of the parties involved.
However, these police officers are not incentivized to continue doing this great police work, because it’s not something that can be noted on a spreadsheet and tallied up at the end of the month.
So, we need to think carefully both about the goals we set, and the incentives that we create to hit those goals, otherwise we’ll discover than things won’t go quite as we planned!