Poison Carrot: Why Monetary Incentives Don’t Work

I started my company 27 years ago. Then, I had the idea that giving someone a gift would make that person do what I asked. If I dangled that carrot, the horse would go for it.

Twenty-seven years later, I know that idea, when applied to humans, is just as insulting and wrong-minded as it sounds. Turns out, the only time that carrot works is in a short-term-behavior bump gained in the course of destroying your relationship with your fundraiser. That short-term bump is camouflaged and misleading.

Let’s note some of the carrots we’ve thrown at our constituents:

• Air travel tickets
• Opera tickets for prospective donors
• Gala tickets
• Discounted registration fees
• Grills, TVs, iPads, etc.
• High-quality sports equipment complementing your event activity, like cycling
• Name-brand anything

I could go on. The list above represents money. It is a basket of carrots. These are things constituents can monetize in their heads. And once you monetize, you are in an ugly conversation. Here’s how that conversation runs: “Wow, I could get a grill if I raise/donate $10,000!” Later, “Cool, I got my grill. Ya know, I spent a lot of hours to get that grill. Let me see, if the grill cost $500, and I spent 80 hours working toward it, I made $6.25/hour. I feel rotten.” You can see where that internal conversation takes your fundraiser, donor or volunteer—to the door and out of your life.

Here’s where your organization gets misled—you will see a similar income bump as if you were using recognition instead of a monetized incentive. The change is measurable after the first year, after you instigated that internal dialogue with your payment (a monetized gift) for service (of fundraising, donating or volunteering).

You put them in an awkward spot with your payment offer. To quote our human behavioral specialist Otis Fulton, "It's like you just offered someone you know from your office $50 to go on a date with you. It’s not going to end well. You imply with your offer of 'payment' that the person is not genuinely motivated to go out with you, and is instead interested in the 'payment' of the gift. They internalize this idea and lose any interest they might have had. Poor decision on your part."

Another way your organization is victimized and misled is by what your constituents tell you they want. Trust me (and a bunch of actual scientists), here is how they will prioritize the rewards they tell you they want:

• Money (unless they are too embarrassed to say so)
• Stuff money can buy (Grills, TVs, iPads, etc.)
• And, dead last, recognition (stuff that is not monetized)

Data and social science tell us that in terms of effectiveness at driving desired behavior, that list is upside down and dead wrong.

Why do they answer that way? Because humans are poor predictors of their future behaviors. Our rule of thumb at Turnkey is, “Ignore what they say, measure what they do.” What they do is respond incredibly well to recognition, which we define as non-monetized acknowledgement of a desired behavior.

I’m pushing hard on this because there are resources available to help nonprofits better understand the proven social science that can help them design better systems to accomplish each of their missions more quickly, but these often aren’t leveraged.

Daniel Kahneman, the author of “Thinking, Fast and Slow,” wrote in the foreword of that magnificent work that he wanted to elevate water-cooler conversation. Instead of saying, for example, “My boss is brilliant, but an idiot on some simple stuff,” one who has been enlightened might say, “My boss is suffering from some decision-making heuristics that lead her to poor decisions.”

In nonprofit, a person enlightened with new information about human decision-making might say, “My registration is low, but I can’t discount my registration fee because then I might flip my registrants into a market relationship, which will have long-term negative impact.”

Human behavior management, isn’t that really your job at the end of the day? Isn’t that everyone’s job? Doesn’t it make sense to study it?

Let’s start here—got any poison carrots at your organization?