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Incentives vs Motivation

👉 What makes us tick? What drives us? Carrot & stick? Or something else?

[AKA Incentive theory vs Motivation theory]

In the 1970s, the prevailing wisdom about what makes us tick was ‘Incentive theory’, i.e. carrot and stick. Aligning incentives (pay, bonus etc) to the company’s objective was the silver bullet. But we all know how that story panned out: it resulted in bloated executive compensation but didn’t solve for the underlying employee retention issues. Nor did it explain some powerful anomalies; e.g. some of the most hardworking, driven people on the planet are employed in non-profits.

Then came the more wholesome ‘Motivation theory’, AKA ‘Two factor theory’. It made an interesting observation / discovery: Pay, bonus, and other incentives are only a part of the story, they are what we now call ‘hygiene factors’. They are necessary but not sufficient conditions for happiness at work. 💡 The other (probably more important) part is what we call ‘motivation factors’. These include challenging work, recognition, responsibility, growth, etc.

These show that we all have an inherent drive to become better versions of ourselves, and more often than not, this internal drive matters more for great performance than external incentives.

💡 So if you are a people manager, please remember, your team has an inherent deep desire to excel, to evolve, to grow. Enabling this will unlock performance like no other incentive can.

p.s. The same applies to parenting as well. Start with the assumption that children are wired for curiosity and self growth, you just need to give them the environment and encouragement to flourish. Incentives are important, but they are only necessary but not sufficient.