Incentives can buy more of a behavior, but rarely create it

Many leaders, almost by default, reach for incentives when they want to improve performance. But while incentives obviously matter, they are not the most important driver of human behavior.

Imagine walking down the street. You find a wallet on the ground. You look around. No one is watching. Do you pocket the money, or do you try to return it? The incentives are basically the same for everyone. And yet people make different choices, because they have internalized different habits as normal.

Let’s see another example. If someone already smokes ten cigarettes a day, you might be able to pay them to smoke a few more. But if you pay them to stop, that is much harder. And if you pay a non-smoker to start, that is hard too.

So, incentives can amplify behavior, but habits decide it.

We see that everywhere. Bonuses can shape intentions, but it’s habits that shape actions. And performance depends on actions, not intentions. After all, if intention were enough, everyone would go to the gym, eat well, and never procrastinate.

Let’s see one last example, this time in business. A leader sees poor sales performance and changes the bonus scheme. A month later, nothing important has changed. That’s because the bottleneck was not compensation, but that people still avoided hard calls, still postponed follow-ups, still softened the ask, still failed to prepare, still interpreted rejection emotionally.

When habit is the bottleneck, changing the incentive rarely changes the outcome. At most, incentives can get you a few more calls. But the quality stays the same. The hesitation is still there. The preparation is still weak. The conversation still follows the same pattern. So you get more of the same behavior, not better behavior.

Again, incentives can buy more of a behavior, but rarely create it.

So before you change the incentive, ask: do you have an incentive problem or a habit problem? Different problems require different solutions.

How great managers shape habits

If the bottleneck is habit, the job is to shape habits directly. Toyota achieved great quality not just with incentives, but mostly by creating the habits that ensure it. Ryanair did the same to drive costs down: it worked not just on incentives but mostly on habits, such as “question every expense,” “look for cheaper alternatives,” and “challenge assumptions.”

The best managers do not just set targets. They shape what people repeatedly notice and do. They shape their mental habits, and they do it with three levers.

The first is repetition. They keep asking the same questions over and over, until those questions become a mental habit that directs attention.

The second is feedback. What happens when someone suggests an idea? Is it explored or dismissed? The person quickly learns whether, next time, they should raise their hand or stay quiet. Feedback shapes not only the likelihood of a behavior, but also the questions people ask themselves when deciding what to do: “Is this a good idea and how can I make it better?” or “Should I say it, or will I get blamed?”

The third is immediate and consistent reinforcement. Gregg Popovich, the coach with the most wins in the history of the NBA, famously benched players for taking bad shots, even if they went in. He focused on the behavior, not the outcome. That brings attention to the behavior, which is a prerequisite for changing it.

So if you want to change behavior, instead of starting with incentives, or on top of them, ask three questions:

1. What is the default habit?
2. What question are people asking themselves when deciding what to do?
3. What feedback are they getting when they act?

Incentives only work when the habit is already there. This is also why the same bonus often moves a senior person, who already has the habit, yet does nothing for a junior one, who still has to build it. When the habit is missing, the habit, not the incentive, has to be the target.

Habits need competence

There is one more ingredient, and it is the one most often missed. A behavior becomes a habit only if repeating it feels good enough. And that usually requires a minimum level of competence.

Imagine trying to build a habit of going to the gym when you do not know how to lift weights properly. It is going to be awkward and uncomfortable. And an awkward, uncomfortable experience rarely becomes a habit, not until it becomes pleasant or useful.

Or consider a salesperson told to improve conversion by asking questions during sales calls. In training, everything seemed clear. But on the first real call, she realizes she does not know which questions to ask. She feels awkward, so she asks poor questions in an uncertain voice. It cannot go well. And when something goes badly and feels uncomfortable, it does not become a habit.

This is why so many well-intentioned interventions fail. Managers ask for new behaviors. Individuals set new routines. Incentives are adjusted. But the underlying competence is lacking, so each attempt reinforces failure or wasted time rather than progress. What gets reinforced is not the desired habit, but avoidance.

Habits are not just about repetition. They are about repeatable good experiences, and good experiences require a baseline of skill. Competence is what makes repetition viable. It turns friction into flow, hesitation into confidence, and effort into something that at least feels manageable.

So if you want to build a habit, ask a different question. Not “how do I do this more often?” but “how do I make this easier to do well?”

This does not apply to every habit. Some require almost no competence to start, like brushing your teeth. But for most habits at work, where the experience depends on skill, it usually means:

• increasing guidance and structure,
• teaching the principles behind the behavior,
• lowering the difficulty of the first repetitions,
• limiting the number of things to keep in mind,
• and ensuring early feedback is immediate and useful.

A beginner at the gym does not need more motivation. They need to understand what should happen during an exercise for it to work, and how to read feedback (muscles failing after 8 to 10 repetitions are not a sign of weakness but of effectiveness). A salesperson does not need more pressure. They need better scripts, concrete examples, and perhaps a few roleplays before the first real call.

Once competence crosses a certain threshold, repetition becomes natural, and the habit takes root. Until then, pushing harder rarely works. It just makes the experience worse, and therefore less repeatable.

So when behavior is not changing, resist the reflex to reach for a bigger bonus. Ask instead: is the habit there, and do people have the competence to make it stick? Build those first. Then, and only then, do incentives start to pay off.

Want help putting this into practice?

Diagnosing whether you have an incentive problem or a habit problem, and then building the habits and competence that make new behavior stick, is one of the most common things leaders ask me about. If your incentives are not moving behavior and you want that to change, that is the kind of problem I work on with leaders. Here is how to start.