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In this blog, we talk about a lot of about incentives and how with right incentives we can nudge people to do more of things we value and less of things we don’t need. It is often assumed amongst ourselves that if you want people to be more productive, you incentivise through promises of bonuses or increase in salary or promotion. But is this what psychologists have learnt over the last half of century?

By now, you would have guessed that the answer is: it depends. I am currently reading Daniel Pink’s Drive: the surprising truth about what motivates us, so in the next few posts, I will talk about some lessons I have learnt from it and post some interesting questions of my own. Please use the comment to start asking questions.

Background

It is worth starting by analysing what motivates us as human beings. Before industrial revolution, our daily existence was overwhelmed by the need to survive in order to pass on our genes to the next generations. That is what Pink called Motivation 1.0. It is the most basic level of motivation; our desire to have our basic needs met including food, shelter, comfort, sex and security — to name a few.

When industrial revolution got under way, many managers realised that they needed ways to improve productivity of their workers, whether by improving access to better technology or by providing the right incentive. The modern idea of motivation is often attributed to Frederick Taylor who sought to improve productivity of workers through his idea of scientific management. This is what Pink called Motivation 2.0.

Motivation 2.0 can be summarised as follow: stick and carrot, where good behaviours are rewarded and undesirable behaviours are punished. We all are used to this idea. In most workplaces, we are rewarded financially — like getting bonuses — when we perform well, and when we screw up, we are threatened with dismissal. Our legal system works in a similar way. When we commit a crime, we are expected to be punished through fines and/or time in prison. However, unlike workplace it often does not provide us with incentive to do good, and perhaps that is a good thing as you may see why.

Motivation 2.0 works quite well, but as we shall see, psychologists have documented an increasing number of incidents where Motivation 2.0 fails to yield the desirable results. Further, in some cases, it encourages more of the opposite.

Getting more of what we don’t want

In 2000, economists Uri Gneezy and Aldo Rustichini studied a group of child care centres in Israel. The centres usually experienced a problem of parents being late to pick up their children. That meant the teachers had to stay for longer. Under the hypothesis of Motivation 2.0, we should expect that the introduction of a monetary fine for late-coming parents should deter parents from being late. That is, the threat of punishment should deter people from doing the deed.

However, the opposite occurred. “After the introduction of the fine, [they] observed a steady increase in the number of parents coming late”.

The main reason is that without a fine, social obligations are formed between parents and the teachers. To parents, teachers are taking care of their children and therefore they should be treated fairly. Parents have what Pink called intrinsic desire  — desire from within — to be courteous.

However, with the introduction of a fine, that relationship changed. It shifted the decision from “a partially moral obligation to a pure transaction”, from intrinsic desire to be good to extrinsic disincentives. With a fine, the relationship becomes of economic in nature: Is the cost of a fine justified the extra money I can get by staying at work for a little longer? Or, is the cost of a fine better than me getting a babysitter?

Hopefully, this example should prompt us to think carefully about how we are encouraged to do something or deter us from doing other things. It is not as simple as throwing money at people.

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