Definition
Incentives are the rewards and punishments — financial, social, emotional — that make some behaviors more attractive than others. They are one of the most reliable forces in any system involving people: to predict what people will do, look at what they are rewarded for doing.
Crucially, the real incentive is what the system pays out, not what it announces. An organization can declare one priority while its bonuses, promotions, and recognition quietly reward the opposite. Behavior follows the actual payoff.
Why it matters
How it works
To use this model, ask of any situation: who is being rewarded for what? When behavior puzzles you, the answer is usually a hidden incentive doing exactly what incentives do. When you design a rule or a metric, anticipate how people will optimize for it — including the ways you did not intend.
Well-aligned incentives make the desired behavior the path of least resistance. Misaligned ones guarantee that smart people will, rationally, do the wrong thing.