Incentive Theory

If you want to motivate yourself or someone else and are struggling, incentive theory might be something you can try.

In this article I will explain what incentive theory focuses on, how to use the right type of incentives and some things to watch out for.

You will also get a step by step guide to implement it, and a little bit about it’s history.

How Does Incentive Theory Work?

Incentive theory says people will do things when they know they are going to get a reward for it or if it will help them avoid something negative.

It says people act mainly on outside influences not internal ones.

So a person will not do something because their own sense of purpose but because of an external reward or avoidance of a loss.

You can be apply incentive theory to many domains including,  education, health, relationships, work and business.

Types of Incentive In Incentive Theory

The theory suggests two types of incentives, positive and negative.

Positive incentives are external rewards you will get when you act in a certain way.

Negative incentives are external negative outcomes and losses that you will try to avoid by your behaviour and actions.

In order for the incentive to be effective they must have certain qualities…

Not all incentives will work, if you decide you use this theory for yourself or someone else, make sure the incentives are…

External Rewards

The primary rewards have to be external. People do have internal reasons for doing things but incentive theory says external rewards take priority. So these are what you must focus on.


The rewards or punishment must be obtainable and realistic. You can tell your adolescent child that you will disown them if they do not clean their room, it’s not going make a difference. If you say, you will stop their allowance starting now, you are using an immediate incentive that is realistic.

The rewards must also be obtainable. If you want an employee to hit their sales targets, you must offer a bonus that is realistic and is in their contract.

If a person can’t anticipate the pain or pleasure then the incentive won’t work.


The incentive has to be important to the person. There is a big difference in the motivational value of something that is important versus something that would be nice to have, but no big deal if it does not happen.

People are Different

Linked to the previous point, the theory says everyone is different. What motivates you will not motivate me.

So if you are using the this theory for others then you will have to adjust the incentives. How obvious an incentive might seem to you, to someone else it could be low in importance or not important at all.

Examples of Incentive Theory

A man getting recognition with a trophy

We can split the rewards into three types. Monetary, recognition and Safety.

You can apply these types to yourself, others and in many situations.

  • Use them in the workplace to motivate employees. Have a bonus incentive structure that is clear and people are aware of. Have a clear route to promotion, so people know what they do will get noticed and rewarded.

  • You can use incentive theory to motivate yourself to have a healthier life style. Reward yourself with something you really wanted if you go to the gym three times a week for a month. Or if you eat well for 6 days, reward yourself with a guilt free desert at the end.

  • Give students recognition and praise with certificated and rewards for achieving certain land marks.

Some examples of rewards that will motivate people to certain behaviour are…

  • A teenager cleaning his room so he can spend time with his friends.

  • An employee hitting her targets to get a her bonus.

  • Someone working hard to win a tournament for recognition

  • A man training in martial arts to protect his family and himself from danger.

  • Making sure you dress appropriately for an occasion so you are not ridiculed or avoided by people.

How To Use Incentive Theory

Incentive theory being used in the work place.

Here is a step by step guide to implement incentive theory….

1. Identify Desired Behaviors

Determine the specific behaviors you want to encourage. This could be improving productivity in the workplace, enhancing student performance, encouraging healthy habits, or increasing customer engagement.

2. Choose Appropriate Incentives

Choose incentives that are meaningful and motivating to the target group. These could include monetary rewards, recognition, privileges or social approval.

3. Clearly Communicate Expectations and Rewards

Clearly outline what behaviors are being encouraged and what the rewards will be. Transparency is key to ensuring that the incentives are understood and effective.

4. Ensure the Incentives Are Attainable

The goals set should be achievable and the rewards attainable. If the target audience believes the incentive is out of reach, motivation will decrease.

5. Implement the Incentive Program

Roll out the incentive program with clear guidelines and support. Ensure that all participants have the resources and support they need to achieve the desired behaviors.

6. Monitor Progress and Provide Feedback

Regularly monitor progress towards the desired behaviors and provide feedback to participants. This can involve tracking performance, offering constructive feedback, and adjusting strategies as needed.

7. Evaluate and Adjust the Program

Assess the effectiveness of the incentive program in changing behavior. Collect feedback from participants and use this information to make necessary adjustments to the incentives, goals, or communication strategies.

8. Reinforce and Sustain Desired Behaviors

Continue to provide incentives for positive reinforcement.

9. Respect Ethical Considerations

Ensure that the incentive program is ethical and does not encourage harmful competition, undue stress, or unfair advantages. The rewards and the process to achieve them should be equitable and just.

10. Document and Share Successes

Document the program’s successes and challenges. Sharing these insights can help refine the approach and inspire others to implement similar strategies.

Incentive theory can be a powerful tool when used thoughtfully. Tailoring the approach to the specific context and audience is crucial for its success.

What Critics Say About Incentive Theory

Critics say incentive theory ignores the importance of intrinsic motivation

Like many theories, incentive theory has valid criticisms.. These critiques generally focus on the theory’s limitations and the complexities of human behavior that it may not fully account for.

Here are some key criticisms of incentive theory….

1. Incentive Theory Overemphasises on External Rewards

Critics argue that incentive theory places too much emphasis on extrinsic motivation , such as money or prizes, at the expense of internal motivations.

This focus can neglect intrinsic motivations that drive people to perform tasks for their own sake, such as interest, enjoyment or personal satisfaction.

The alternative theory, drive reduction theory focuses on the idea that people want to keep their internal world in balance. When it is not they will try to get it it back to a balanced state.

2. Diminishing Intrinsic Motivation

Related to the overemphasis on external factors, research has shown that providing external incentives for behaviors that are already intrinsically motivating can actually reduce intrinsic motivation. A phenomenon known as the over justification effect.

3. Short-Term Focus

Incentive theory has been criticized for encouraging a short-term focus on rewards, which may lead to neglect of long-term goals or values.

This can be particularly problematic in settings like education or work, where long-term development and internal motivation are crucial.

4. Potential for Unethical Behaviour

A focus on achieving specific rewards can sometimes lead to unethical behavior, as individuals may focus solely on the ends rather than the means.

This criticism is particularly relevant in business and education, where intense focus on rewards such as bonuses or grades can encourage cheating and cutting corners.

5. Incentive Theory Ignores Complexity of Human Motivation

Incentive theory is sometimes criticized for its simplicity, as it may not fully account for the complexity of human motivation.

People are motivated by a wide range of factors, including but not limited to external rewards. Social, cognitive, and emotional factors also play significant roles in motivating behavior, which the incentive theory may overlook.

 A Brief History of Incentive Theory

Incentive theories foundations started in 19th century by early economists and philosophers, but it gained scientific footing with the rise of behaviorism in the early 20th century.

Behaviorists like John B. Watson and B.F. Skinner emphasized the importance of external stimuli in shaping behavior, through rewards and punishments.

The cognitive revolution of the 1950s and 1960s then added a layer by considering how mental processes influence the perception and valuation of rewards.

The theory has been further enriched by advancements in neuroscience, which have identified specific brain regions and neurotransmitters involved in reward processing and motivation.

Take Away

Incentive theory proposes that people are motivated mainly by external rewards and punishments.

So if you want to motivate yourself or others make sure you set external incentives. You can have a positive incentive or a negative one.

Make sure they are obtainable, realistic and also important to the individual.

Although is is useful and works in many domains, incentive theory does take a simplistic view of motivation. It ignores many other known and unknown reasons why people will do something.

The theory minimizes the importance of intrinsic motivation and can encourage unethical behaviour by focusing too much on the external rewards and punishment.

It can also encourage people to move away further from intrinsic motivation, taking away people’s ability to find satisfaction on the process not just the rewards.

Just keep in mind that people are complex and varied. We cannot pinpoint their motivations down easily. However, incentive theory is useful as part of the tool kit of motivation. it is worth considering along with other theories, like drive reduction theory or instinct theory.

See also Elephant and Rope Mindset