Mastering Incentives at Work
Understanding people’s incentives is crucial to success.
Incentives matter!
YouTube creators want to create exciting videos that attract many views.
Salespeople want to sell their products, no matter what they are selling.
Financial advisors have an incentive to make investing seem more complicated than it actually is, so people need their services.
Software Engineers have an incentive to create custom solutions with their preferred stack instead of selecting off-the-shelf products that might not need coding.
When these incentives are aligned with the incentives of their users, subscribers, or clients then it is fine. It is a win-win situation. The problem is when one side is losing.
Understanding the incentives of people with whom we are interacting with is key to understanding how they are behaving. Both in life and our work.
Engineering Manager’s Practice
There are at least three perspectives from which we can approach incentives:
When cooperating with other teams.
When mentoring your team.
When planning your own career.
Cooperating with Other Teams
When people ask me what I do as an Engineering Manager, I answer that I manage conflicts between groups of people having misaligned objectives.
The business team was pushing for one of our engineers to be permanently transferred to the CTO's role on the client's side, to be directly hired by our client. However, this move would hurt the sense of fairness in the team, as we did not allow such transfers. Despite this, due to the high stakes of the project, I had to ‘disagree but commit’ and handle the communication. I left that meeting shrugging my shoulders, wondering why people behave in seemingly irrational ways. However, later when I was analysing the business team's incentives, it became clear that their actions were aligned with their goals.
Each time you spot a situation in which someone is doing something that you do not understand, think of their:
Incentives and motivations.
KPIs (Key Performance Indicators).
OKRs (Objectives and Key Results).
If something is unclear, nothing helps me more than having an honest conversation, where active listening plays a crucial role. You can directly ask the following questions to gain clarity:
What is important to you?
What are your measures of success?
Understanding the motivation of different groups is like a magical trick that instantly helps you comprehend why they behave in a certain way.
Your responsibility is to communicate your findings to your teams. By understanding the perspectives of other teams, you can reduce friction and encourage cooperation, even if a common ground is not found.
Mentoring Your Team
Looking at incentives and motivations is critical in our roles as mentors.
One of my team members felt like he was not contributing to the company's success while focusing solely on programming. During our annual company meetup, he listened to presentations about how the company is growing thanks to workshops with clients that attract new projects. The main motivation for him was to have a direct impact on business growth. I crafted a role for him supporting pre-sales activities, and he was happy with it.
Personal growth can be enhanced with the right incentives. Some individuals seek recognition, while others are motivated by financial benefits, and some are interested in opportunities to learn new technologies.
Understanding what motivates your people will serve as great leverage for helping them grow:
If recognition is their driving force, organising a company-wide event could address it.
If it's money that motivates them, providing them with opportunities to earn more may address it.
If their focus is on learning, ensuring they have ambitious goals that allow them to explore new technologies may address it.
Planning Own Career
To shape our careers, it is important to understand what drives us.
One of my biggest motivations is to grow outside my comfort zone, trying new things and taking on increasing responsibilities as a manager. However, I needed a reminder to do so, and my leader was able to assist me with this; I was answering ‘Yes’ to all the new challenges presented by him. I was fortunate to have a mentor and leaders who could use this as leverage, from which I benefited hugely.
Incentives can change. I valued a stable income, but I decided to change this and, during my gap year, focus on exploring new areas as much as possible. And while explaining this, some people find my decision irrational — because they do not understand my incentives.
Summary
While cooperating with other groups, mentoring our teams, or focusing on our own growth, it is important to understand what matters.
Incentives matter — If you want to understand someone's behaviour, remember to think about their incentives first.
Thanks for reading!
Michał
PS I'm a frequent listener of The Rational Reminder podcast, where I recently heard about incentives of financial advisors. In the episode about 'Most Important Lessons in Investing' (episode #299) one lesson resonated with me in particular: Incentives Matter.
Post Notes
Discover Weekly — Shoutouts
Articles that might help you explore new perspectives which I have read this week:
“How can developers become more business oriented" from
— described why it is beneficial to get to know your client’s domain, to speak the same language, and, more importantly, understand the client’s incentives (Thank you, Anton, for reviewing drafts of this article and sharing your perspective)"The Path to Software Engineer" - from
— defined Coder, Developer and Engineer roles, including dynamics between them and path for growth. This is something I’d link to when explain Developer vs Engineer.”How to quickly verify and build your idea” - from
— shares his valuable lessons from recent product launch with tips for building faster and better.”Become a Great Engineering Leader in 12 Months” from
— has made a massive effort to create a detailed catalogue that provides a clear path for everyone who would like to grow their skills in Engineering Leadership.
The part about planning our own career is so relatable for me.
When you choose to take a brave step like you did, many people will find it hard to understand why you choose to leave your cozy, well paying job to "earn nothing".
Even if you don't earn any money, you learn a lot about yourself, you develop new habits and you become a better you.
You are on a good path, my friend. Keep it up.
Great article Michał.
I think a big part that leaders miss, is that you can create incentives, and not only financial ones.
You shares a great example for that here are some additional ones that come to my mind:
For some people, competitions are great incentives. So you can gamify some boring tasks, or organize a competition with another team.
For other people a great incentive might be learning about other parts of the business, so you can pair them to PMs, or help them meet customers.