Wednesday, August 25, 2010

Incentives - Everybody gets it...

It was sign written in Hindi, probably an untrained hand, and it said “Ek kilo meat ke saath, Ande free…”. Which translates into “Eggs free with One kg meat”. I couldn’t help but smile.

It was a small shop, likely to be run by somebody who isn’t a marketing graduate. But the owner certainly understood basic the principal of “Incentives”.

For some very primary ingrained reason, humans respond “better” to incentives.

A cranky child wailing at the top of the voice, has an incentive to do so…attention from Mother.

We all love to shop when we get a discount…an incentive to pay less.

Teenagers rebel, to satisfy the incentive of “being their own self” and “imposing their own free will”. A break from the past, where parents were the masters.

Of course, every organization has incentives built into the system.

You may have a job to do, but you’ll do it much better when there are incentives built into performing the job.

Incentives aren’t always monetary, although, it’s easier to create a monetary incentive, for example, Bonuses offered by organizations and discounts offered by retailers. The more powerful incentives are of the ‘Moral’ or ‘Social’ kind.. Which appeals to the inner self, and satisfy at a much deeper level.

When trying to understand somebody’s behavior, Ask yourself “What is his/her incentive…” in behaving so.

Or, if you’d like a certain behavior or action from somebody, attach an incentive to it.

Here’s a great video that demonstrates the power of incentives: The Piano Stairs

PS: I recommend the book “Super Freakonomics” by Steven D. Levitt and Stephen J. Dubner. A great collection of some very interesting case studies.
The piano stairs blog post from the authors:


  1. Practical challenge is to figure out the "incentive" that will bring out the desired outcome - even with Maslow's theory as your framework.

  2. Very true....Lyk da following lines da most.....

    "When trying to understand somebody’s behavior, Ask yourself “What is his/her incentive…” in behaving so.

    Or, if you’d like a certain behavior or action from somebody, attach an incentive to it".

    Its Lyk Maslow's Pyramid Explained in a more simpler way

  3. In the context of incentives, we have to first, understand humen psychology.
    An incentive is an exception that motivates people to behave in a certain way because human beings are purposeful creatures.
    In my opinion, one of the major factors for moral or behaviour-related incentives also depends on our cultural and social values.
    The cultural and social values may influence a person's decision/inclination on adopting the moral incentives.
    I don't think that Maslow's Need Hierarchy law emphasizes on the moral- or behaviour-related incentives.

  4. Maslow does address the morality and behavior related aspects. Morality is reflection of self-actualization and behavior relates to all levels. Framework does address these aspects, challenge is to figure out the definition these terms since that resides in the eye of the beholder. Same goes for regional cultures. Problem with Maslow's theory is that it only tells you the psychology of the human being's motivational drivers. How to use and determine those drivers depends on the individual.

    Simple example I have is - stock option, seems to be the best way to improve productivity (get the best people and motivate them), which should theoretically positively influence the stock price. Unfortunately, empirical data does not support this assumption even though granting options remains in the industry.

  5. Nice explanation Kishore...thanks for clarifying.
    I too agree with your example.

  6. Very nice post ! :) An awesome read.