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Incentive Theory In The Workplace: How To Optimise Initiatives And Maximise Motivation

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The carrot and stick analogy might be overused in business. However, the concept itself is far from clichéd. If we leave aside the idea of punishing negative behaviour with a stick, the carrot has some value. Motivating people, particularly in the workplace, can be a great way to optimise operations. In fact, a whole area of psychological research was dedicated to this back in the 1950s. Building on the work of Clark Hull, incentive theory proposes that motivation is driven by external rewards. Put simply, we embrace behaviours that lead to rewards and shy away from actions that have negative consequences.

Incentive Theory

Reward Productive Behaviour

Incentive theory is the counter to intrinsic motivation. Now, in the interests of parity, it’s fair to say that motivation isn’t a singular concept. Our drive to do something comes from internal and external stimuli. However, if you’re someone who’s trying to optimise workplace productivity, incentive theory has a lot to offer. The question, therefore, becomes one of how to incentivise people. More specifically, how can you optimise workplace initiatives so that the proverbial carrot is tasty enough to warrant chasing?

An in-house rewards scheme is, perhaps, the most obvious answer. The criteria for earning reward points can be based on performance, attendance, communication or something as abstract as attitude. The rewards themselves can be tangible, such as money, gifts or vouchers. Or, they can be intangible rewards, such as extra days off or the chance of promotion. Whatever the rewards are, people need a clear path to victory. They have to know how points are earned and over what time period activity is assessed. As long as people understand the rules, they’ll embrace the initiative.

Create a Vested Interest In Success

Another way to optimise workplace initiatives and motivate members of staff is to offer corporate benefits. Flexible working has become popular in recent years. Find out if people prefer the idea of working from home and, if so, for how many days per week. Taking the idea of corporate benefits a step further, you could offer employees share options as incentives. Naturally, this isn’t something you can do in half a day. If your company doesn’t already have a share in place, you need help. The good news is that help is readily available these days. If you’re a start-up or a new business, this process will be a lot easier than it would be for more established companies.

Indeed, with little more than an online service backed by legal experts, you can create a share option scheme and offer employees the option to buy a piece of the company in future. Ideally, you’d put this type of initiative into place before you raise seed funding and it would require accountants and lawyers. Today, you can do almost everything online. From getting an EMI valuation for your company to creating an options scheme (based on the EMI valuation), the process is less complex and time-consuming than it used to be. There are different types of options schemes, so almost any business, regardless of its size, can create an equity incentive scheme. Doing this gives employees the opportunity to buy a direct stake in the company, and because options usually vest over a few years, this should motivate them to commit to your company’s mission and work hard for its future.

Find Ways To Keep People Motivated

The final way to reward people and improve workplace productivity is by investing in their mental health. A happy workplace is a productive workplace. According to the World Health Organization (WHO), depression and anxiety cost the global economy $1 trillion every year. Much of this cost stems from decreased productivity at work. Therefore, it can be worthwhile to invest in initiatives that promote mental wellbeing.

In fact, WHO data shows that, for every $1 spent on the treatment of common mental disorders, there is a $4 return, thanks to increased productivity. So, instead of simply motivating people, you need to find ways to keep them happy, which in turn leads to them being more motivated. This means fostering an environment where open communication is rewarded. You can also prioritise a positive work-life balance, offer employees more breaks throughout the day, and bring mental health out into the open. If you can create a healthy place for people to work and offer the right incentives, you’ll find that optimising productivity becomes a lot easier.