Incentives
Let us specifically talk about people in groups → Teams. Rewarding systems or incentives play a role as catalysts in many cases. How incentives can drive results and how one should be aware of their effects on the long-term view.
What moves people
Incentives are the tools that can persuade people to take an alternate route to what might have been the original course. The intrinsic motivations and ambitions change with time. Humans are dynamic in their motivations as well. A well-known example is a parable that if you dangle a carrot in front of a donkey, providing it with an incentive to move ahead, and also thwack its rump with a stick, delivering a disincentive to remain still, it will most likely begin to walk forward. To encourage good conduct and discourage poor behaviour in their children, parents often provide both incentives and punishments.
Temporary compliance
According to a Harvard Business Review report, incentives or rewards temporarily but surely, change what we do. Although punishment also has the same effect.
When people in teams start competing for internal incentives, it pits them against each other. For each person who wins, many others carry with them the feeling of having lost.
This can also damage the rapport between teams and become a cause of envy.
Drains energy
Humans generally set out on a task taking a foundational axiom around which our purpose of doing the task operates and thus energy gets concentrated to.
Now when rewards are introduced. It is a human tendency to observe the world in what is in front of the eyes so a short-term view is what is available in plain sight. Thus it is the rewards that occupy our mind and thus become the axiom to which then we start concentrating our energy to.
This causes the focus to get set on the prize not what we might have started from, draining a major chunk of energy.
Privatise wins , Socialise losses.
Energy drain happens because, unlike value creation, the reward system is the inner takes.
It gets harder and harder approaching the top leaving a singular winner. To devote energy to such an endeavour blurs our vision of value creation.
This also becomes a place for envy which further drains energy since virtue signalling takes centre stage.
Discourage Risk-taking
“Give them something they can’t deny”.
If rewards are big enough they will signal people to do as much as it is asked to achieve them. This leaves less space for exploration. Creative endeavours require block-by-block building and therefore are another source of major consumption of energy. When energy gets drained in the above entanglements there is no scope left to pursue any creative pursuit.
Rewards and punishment are similar in the way that they both set the minimum bar.
Several studies have discovered that those who labour for a reward typically aim to reduce difficulties. It’s not that people are inherently lazy or that it’s a terrible practice to let individuals have a say in the standards that will be applied. Instead, when encouraged to consider what they might receive in return for their efforts, people prefer to set lower goals.
This is explained better by Thorndike’s law of effect.
Thorndike’s Law of Effect
It is studied in psychology about the law of effect given by Edward L. Thorndike. In an experiment conducted where a cat was kept in a box.
A cat could escape from the box by pulling a string or pushing a pole, however when first restrained, the cats took a long time to break out. With repeated trials, failed answers became less common and good responses became more common, allowing the cats to flee more rapidly. Thorndike expanded this observation in his law of effect, which argues that activities that result in pleasant outcomes are more likely to be repeated, whereas behaviours that result in unpleasant consequences are less likely to be repeated.
INCENTIVES OFTEN GO WRONG
Let us travel to the period of the British Raj in India. During the colonial period in Delhi, there was a rampant increase in the number of venomous cobras. To keep them in check the government instituted a reward system for every dead snake brought to the officials resulting in monetary compensation. This backfired as the locals started breeding snakes. In light of this failure when this reward was abandoned the snake population escalated more than it was.
This has been widely observed that incentives are often taken for granted. When there is a disinclination toward creating more value. There is a transactional approach and the incentives offered then become a byproduct of the transaction.
The meaning of creating a team isn’t to divide work but rather to help multiply it. The transactional approach thrives (or at least survives) based on reciprocation between the two parties. When there is a division of value on both sides excess value isn’t created. In such a case when material compensation is offered then it is also among the deal of the transaction.
This approach also damages the rapport between the team as trust erodes. Trust is one of the main pillars in the operation of teams. When teams set out to grow multi-fold, the foundation of trust is necessary.
When you are on opposite sides of a table, you can point a gun under the table.
Transactions allow this to happen. Incentives work when these relationships start becoming collaborative; not competitive.
The transformation from self-serving to mutually benefit. When they have been done through “intention”.
These relationships are continual and built over time. As mentioned in the previous chapter, There is very little scope to put work into these during a period of wartime in your lives.
Then when exactly is the time???
