We’ll start this chapter by examining a mistake committed by a rather large consulting firm. Since this particular firm made money only when the consultants were working in the field and billing for their time, the senior partners came up with a plan to keep them on the road: “The Road Warrior of the Year.” This title was awarded to the consultant who logged the most billable days. To give the award real kick, the partners threw in a substantial cash prize.
For four consecutive years, “Road Warriors” gladly accepted the prize, took the generous cash reward, and then quit the firm—citing (you guessed it) work-life balance issues. It seems the winners were away from home too often.
So, what went wrong here? The incentive system, of course. The partners had long learned that if they wanted to motivate their consultants to act in new and different ways, they had to link the targeted behavior to perks, or bonuses, or hefty prizes of some kind. Cash money got and kept their attention.
But that same cash award also caused the firm unwanted turnover. In this case, the cash award motivated a behavior that couldn’t be sustained. On other occasions incentives motivate a behavior that can be sustained, but it’s the wrong behavior. This is probably the case with many of your own unhealthy habits.
For example, walk into a fast-food restaurant and a clerk cheerfully gives you a frequent-eater card. It rewards you for eating more, not less—consume eighty thousand calories and get a free meatball sandwich. The more you use certain credit cards, the bigger the cash award or travel points they give you at the end of the year. You can almost feel yourself getting closer to your dream vacation every time you swipe the card!
Sometimes it’s the pricing itself that drives the wrong behavior. For instance, over the past thirty years the price of unhealthy food has declined while the price of fruits and vegetables has risen substantially. Guess what we’re buying more of?
On other occasions it’s the timing of the expenditure that keeps us in the dark. Consider how many of the long-term costs of our bad habits remain distant and out of mind while the pleasurable benefits show up in vivid, living color right now.
For example, obesity costs the average person an extra $1,429 per year in increased health care costs.1 But since we’re not required to set aside money for every burger we consume (to cover the real financial cost of the burger), the long-term costs of carrying extra weight remain invisible.
What if we turned this all around? What if we inverted the economy? Imagine how different our choices might be if our PayPal account were instantly charged for every unhealthy action we took or credited for our healthy behaviors—based upon the real economics of the situation. For example, if an insensitive comment moved us a step closer to divorce, we’d get dinged a thousand dollars. (Research shows that a breakup reduces an individual’s net worth by an average of 77 percent.)2
Or what if each time we failed to address development needs from a performance appraisal, our next paycheck were docked 5 percent? (Eighty-five percent of the people we recently polled said they have lost out on promotions or pay increases because they didn’t adequately address a boss’s concerns.)3
Would inverting the economics in such a bizarre way help us behave in more healthy ways? Yes. For instance, recovering cocaine addicts were 23 percent more successful at adhering to a medical regime when given a small gift certificate for every week they passed a drug test.4
Or watch what happens to tobacco usage as excise taxes increase. Tax smoking, and it drops—along with its effects. The American Cancer Society Cancer Action Network recently announced that a federal tobacco tax increase of a dollar per pack “would prevent more than 1 million smoking-related deaths and deter nearly 2.3 million U.S. children from becoming lifelong tobacco users.”5
What’s equally fascinating is the fact that it’s not just others or the government who can use incentives to change our behavior. We’re also more likely to change if we invert the economy ourselves. We can actually bribe and threaten ourselves to change.
Here are some tactics you can use to get Source 5 working for you.
Consider how incentives gave a real career boost to Rudy K., one of our Changers. When Rudy first took a job as the IT support guy at a small import company, he felt lucky. He and his high school buddies hadn’t exactly been preparing themselves for the future.
Rudy explains: “While the kids who were going on to college studied physics, calculus, and the like, my friends and I preferred to travel to Azeroth, where we pretended to be Orcs while ruling the World of Warcraft. And we had no intention of changing. We’d stay away from college, live in our parents’ basements, and play video games until our thumbs exploded.”
This all changed rather suddenly the day Rudy landed a job in IT support, and then it took an even larger turn when Rudy’s boss told Rudy that he was gifted with all things computer related and encouraged him to move from fixing e-mail problems to helping perfect the company’s customer-support software. Designing software would be a better job, but in order to qualify, Rudy would have to take several college classes—both at night and on weekends—and that would cut into his game time.
However, when Rudy’s boss suggested that Rudy was “a bit of a math whiz” and that he could eventually qualify for a more interesting and higher-paying job, Rudy decided to take classes—despite the fact that he’d have to trade in his Orc battle-ax for a textbook. Listen in as Rudy explains how several sources of influence (including incentives) helped him become a person he’d never imagined he could be.
“When my boss told me I had a gift for working with computers, it gave me a whole new view into myself. Maybe I could turn my gaming passion into something useful. Maybe I could even take college classes. And then when my boss found out that school intimidated me, he helped me improve my study habits. He even got permission for me to borrow a laptop that the company was no longer using. Eventually when he saw me heading off to classes each night, my boss assigned me to work for an hour a day with a top software engineer from his team, who became my mentor.
“But it still wasn’t enough. The thought of studying nights and weekends was discouraging. Plus the better job seemed so far off. Then I built in an incentive. I set goals for attending class and doing homework each week, and every time I hit the goal, I would take my girlfriend to a restaurant I really liked.
“All of the help and encouragement focused attention on my long-term goal of bettering my career. But it was the date at the end of the week that helped me make it to every class, get up early to do homework, succeed in school, and eventually get the promotion.”
This next concept draws from a Nobel Prize–winning idea. For years, Daniel Kahneman6 and other behavioral economists have demonstrated that we humans have a bizarre quirk hardwired into us. That is, we are far more motivated to avoid loss than we are motivated to receive an equivalent gain.
The Change Anything Labs found the same thing recently when we interviewed customers salivating around an Apple store while waiting for the release of a new iPhone. On average, those who just got a phone wouldn’t part with it for a dime less than $1,218 over the purchase price. Those who were worried the phones might sell out before they got to the front of the line wouldn’t pay more than an average of $97 over the purchase price to get one. In a sense, these typical customers were twelve times more motivated to avoid losing an iPhone than they were to get one. Strange, isn’t it?7
This propensity to place a higher premium on a loss than on a gain is known as “loss aversion.” The implications to personal change are quite clear. If you put something you value at risk, you might be more likely to change than if you merely rely on bonuses, prizes, and other incentives.
But how could this be? Where did this focus on the negative come from in the first place? When you think about it, loss aversion has served human beings quite well. In fact, it has actually kept us alive. Imagine an unfortunate prehistoric being who paid more attention to, say, a heavy-laden fruit tree than to an attacking saber-toothed tiger.
“Oh, look! A tree filled with lovely fruit.”
“Growl. Crunch. Gulp.”
No such fellow would have lived long enough to pass on his genes. But the guy who first looked for danger and then looked for pleasantries would have lived to tell about it. So that’s what we modern-day humans do. We give heightened attention to any potential loss.
Change agents have been taking advantage of this human idiosyncrasy for decades. A powerful example comes from Yale behavioral economist Dean Karlan. He invited smokers in the Philippines who were trying to quit to slowly cut back the number of cigarettes they smoked each day. He also had them place the money they would have spent on the additional cigarettes into a savings account.
Six and twelve months later they were given urine tests to determine whether they had stopped smoking. Those who failed the test would have to turn their savings over to charity. Compared to a control group that did not use this self-imposed financial punishment, experimental subjects kicked the habit 50 percent more frequently. Not surprisingly, the more money the subjects put at risk, the higher their likelihood of changing.8
So, how can you use loss aversion to your own advantage? Put something you care about at risk. Bet on your own success. Here’s how Changer Kyle N. used loss aversion to become more physically fit.
“I was having trouble exercising regularly, so I hired a fitness expert to meet with me once a week, teach me how to use the gym’s equipment, and provide me with dietary assistance. The guy helped me learn the various exercises, and that made it easier, plus there’s no doubt that having someone to chat with helped keep me motivated as well.
“But do you know what the real incentive was?” Kyle continues.
“I came to realize that the biggest reason I showed up week after week was because I couldn’t stand the thought of paying for an expert and then not taking advantage of the resource. The idea of losing money always propelled me back into the gym. Plus my wife felt the same way. ‘It’s Monday!’ she would exclaim. ‘What do you mean you’re not going to the gym? You already paid for it!’ ”
The power of loss aversion hasn’t gone unnoticed by those who currently design personal-improvement websites. For example, the website stickK.com pioneered the practice of inviting participants to set up goals and pony up some amount of money; participants lose a portion of that money to the recipient of their choice each time they fail to meet a goal. Like others who have made use of loss aversion, stickK users have found that when they invert an existing economy, good behavior becomes a bit easier to embrace.
As you watch TV programs that showcase real people who are practically tortured into losing weight—for enormous prizes—you’re left wondering how well their over-the-top methods actually work. Sure, when the stakes are high enough, you can get people to put themselves through a grueling boot-camp-like regime, but what happens when the contestants return home? Once they face their old circumstances—and huge incentives are no longer in play—won’t they revert to their old ways? Many do.9
In a similar vein, when a rather well-known movie star became a weight-loss spokesperson and was paid a lot of money for each pound she lost while using the advertised product, you had to wonder—What would happen when she hit her goal and the massive incentive was removed? Wouldn’t she revert to her previous habits and weight? She did.10
Actually, the idea that a heavy reliance on external rewards just might backfire has long been a topic of research. In the early seventies, renowned scholar Mark Lepper conducted a pivotal study at Stanford University’s famous research lab—Bing Nursery School.11 Lepper and his team wanted to know if offering extrinsic rewards for a task that is already intrinsically pleasing might make the task itself seem less satisfying.
So Lepper rewarded nursery school children with their favorite snack every time they played with their favorite toy. As the kids continued to receive a goody for playing with a toy that they obviously liked, it wasn’t long until they chose to play with their favorite toy less often. Why? Lepper concluded that it was because when you give the kids a snack for playing with something that used to be fun, they’re left wondering, How fun can the game be if I have to be rewarded every time I play with it?
With this in mind, we’d like to add a caveat to our advice that you ought to use incentives. Don’t fall for big incentives thinking that they’re more likely to yield big results. A large incentive often becomes an end in itself, and when it’s removed, so goes your primary source of motivation.
So, use incentives, but use them in moderation. It typically takes only small rewards to work their magic. For instance, you hit a weight-loss goal and buy a new blouse; you stick to your exercise regimen and you reward yourself with a fly-fishing afternoon with your son.
Changer Rachel C. illustrates how simple rewards are best used not only in moderation but also in combination with social and personal motivators.
Here’s Rachel’s story. After years of alcohol and drug addiction, she decided to faithfully follow a twelve-step program. At her first group meeting Rachel’s sponsor gave her a plastic poker chip and explained that this small token was a bet on her sobriety. Her sponsor would give her a genuine chip when she made it through the next six months sober. With all her heart and soul Rachel wanted the real chip and all that it meant—and after six months of hard work, she stood in front of a cheering crowd and was awarded her chip for six months of sobriety. It was a solid, heavy, brass medallion.
Later that day while sitting in her room, Rachel gazed at the medallion, turned it over in her hand, felt its weight, and wept with joy. That chip meant the world to her. Of course she didn’t endure all her sufferings and effort for the six-month chip alone—she desperately intended to be sober for all the right reasons. However, earning the medallion symbolized her success in becoming the person she wanted to be (her personal motivation). Plus she proudly shared it with her friends, who celebrated her progress (her social motivation). Rachel’s brass medallion was the perfect example of using incentives in moderation (it cost very little) and in combination (it worked hand in hand with—rather than overshadowed—both personal and social motivators).
For our final tactic, let’s return to one of the concepts we shared earlier—large, long-term goals become far more effective when they’re broken into smaller, short-term ones. This idea of using proximal goals has been around for decades but for years was never actually proven in the lab because whenever researchers gave one group of subjects a series of short-term goals and compared them to another group that received one long-term goal, subjects who were given the longer goal always broke it up into pieces in their minds, making short-term goals of their own and destroying the elegant design of the experiment.12 They did the math in their heads and eliminated the experimental effect.
Fortunately, the research problem was eventually solved when Albert Bandura gave long-term goals to people who didn’t know how to divide. That’s right; he used children who were struggling with basic arithmetic. He gave them either long-term goals (finish all forty-two pages of subtraction problems by the end of the seventh session) or short-term goals (finish six pages of subtraction problems every session). The kids who were given the long-term goal couldn’t divide, so they couldn’t mentally break the task into shorter pieces in order to motivate themselves. Sure enough, they finished far fewer problems.13
The now-proven tactic of using many small goals rather than one huge goal is especially important when it’s applied to incentives. Never make the mistake of attaching rewards to achieving your ultimate goal (“When I get that promotion, I’ll buy a new car” or “I’ll buy a complete new wardrobe when I drop fifty pounds”). After all, your biggest risk with any long-term change project is not that you’ll fail at the end but that you’ll drop out at the beginning.
As you reward yourself frequently and in small increments, also take care to reward the right thing. Reward your actions, not your results. Results are often out of your control (at least in the moment), so link your incentives to something you can control—your vital behaviors. Reward what you do, not what you achieve.
For example, Jose G. found that the most noxious parts of his new exercise regime weren’t the jogging or swimming—those days he sort of liked—it was the weight lifting that bummed him out. So Jose built a special reward into the two days a week he pumped iron. He found a chocolate-flavored protein shake he thought was delicious (and was approved by his coach) and appointed Tuesdays and Thursdays as his “Chocolate-Shake Days.”
Rather than waiting until he lost five inches off his waistline or until he could bench-press 250 pounds, Jose rewarded the vital behavior of simply completing his weight-lifting day. He looked puzzled when he explained, “I guess I could have a chocolate protein shake any day I wanted, but the fact that I give it to myself just for completing my weight-lifting day made me feel more in control and able to meet my goals.”
As we’re doing our best to improve our lives, few of us think to use incentives as a means of motivating healthy behavior. Either we forget all about them or we do recall the importance incentives play in motivating behavior—but for others, not for us. We figure we’re above such a transparent and simple tool. We think to ourselves, “I don’t need incentives. I can tough it out on my own!”—falling once again into the willpower trap.
This needs to change. It needs to change not only because incentives can help but also because the current “economy” is probably either subsidizing or rewarding your bad habits—or both!
As part of a six-source change plan in which you develop your own incentives, remember the following.
Use Carrots and the Threat of Losing Carrots. Be honest. Are you thinking that adding your own incentives or creating your own losses won’t do you much good? If so, reconsider your stance. Bolster willpower and peer pressure with extrinsic rewards.
Use Incentives in Moderation and in Combination. What are some inexpensive but meaningful rewards you might use to your benefit?
Reward Small Wins. What are your vital behaviors? What specific actions that are under your control should you reward? How long should you go before creating a small celebration? What can you do within that time frame?