Poison Carrot: Why Monetary Incentives Don’t Work
I started my company 27 years ago. Then, I had the idea that giving someone a gift would make that person do what I asked. If I dangled that carrot, the horse would go for it.
Twenty-seven years later, I know that idea, when applied to humans, is just as insulting and wrong-minded as it sounds. Turns out, the only time that carrot works is in a short-term-behavior bump gained in the course of destroying your relationship with your fundraiser. That short-term bump is camouflaged and misleading.
Let’s note some of the carrots we’ve thrown at our constituents:
- Air travel tickets
- Opera tickets for prospective donors
- Gala tickets
- Discounted registration fees
- Grills, TVs, iPads, etc.
- High-quality sports equipment complementing your event activity, like cycling
- Name-brand anything
I could go on. The list above represents money. It is a basket of carrots. These are things constituents can monetize in their heads. And once you monetize, you are in an ugly conversation. Here’s how that conversation runs: “Wow, I could get a grill if I raise/donate $10,000!” Later, “Cool, I got my grill. Ya know, I spent a lot of hours to get that grill. Let me see, if the grill cost $500, and I spent 80 hours working toward it, I made $6.25/hour. I feel rotten.” You can see where that internal conversation takes your fundraiser, donor or volunteer—to the door and out of your life.
Here’s where your organization gets misled—you will see a similar income bump as if you were using recognition instead of a monetized incentive. The change is measurable after the first year, after you instigated that internal dialogue with your payment (a monetized gift) for service (of fundraising, donating or volunteering).
You put them in an awkward spot with your payment offer. To quote our human behavioral specialist Otis Fulton, "It's like you just offered someone you know from your office $50 to go on a date with you. It’s not going to end well. You imply with your offer of 'payment' that the person is not genuinely motivated to go out with you, and is instead interested in the 'payment' of the gift. They internalize this idea and lose any interest they might have had. Poor decision on your part."
Another way your organization is victimized and misled is by what your constituents tell you they want. Trust me (and a bunch of actual scientists), here is how they will prioritize the rewards they tell you they want:
- Money (unless they are too embarrassed to say so)
- Stuff money can buy (Grills, TVs, iPads, etc.)
- And, dead last, recognition (stuff that is not monetized)
Data and social science tell us that in terms of effectiveness at driving desired behavior, that list is upside down and dead wrong.
Why do they answer that way? Because humans are poor predictors of their future behaviors. Our rule of thumb at Turnkey is, “Ignore what they say, measure what they do.” What they do is respond incredibly well to recognition, which we define as non-monetized acknowledgement of a desired behavior.
I’m pushing hard on this because there are resources available to help nonprofits better understand the proven social science that can help them design better systems to accomplish each of their missions more quickly, but these often aren’t leveraged.
Daniel Kahneman, the author of “Thinking, Fast and Slow,” wrote in the foreword of that magnificent work that he wanted to elevate water-cooler conversation. Instead of saying, for example, “My boss is brilliant, but an idiot on some simple stuff,” one who has been enlightened might say, “My boss is suffering from some decision-making heuristics that lead her to poor decisions.”
In nonprofit, a person enlightened with new information about human decision-making might say, “My registration is low, but I can’t discount my registration fee because then I might flip my registrants into a market relationship, which will have long-term negative impact.”
Human behavior management, isn’t that really your job at the end of the day? Isn’t that everyone’s job? Doesn’t it make sense to study it?
Let’s start here—got any poison carrots at your organization?
Otis Fulton, Ph.D., spent most of his career in the education industry, working at the psychometric research and development firm MetaMetrics Inc., Pearson Education and others. Since 2013, he has focused on the nonprofit sector, applying psychology to fundraising and donor behavior at Turnkey. He is the co-author of the 2017 book, ”Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising,” and the 2023 book, "Social Fundraising: Mining the New Peer-to-Peer Landscape," and is a frequent speaker at national nonprofit conferences. With Katrina VanHuss, he co-authors a blog at NonProfit PRO, “Peeling the Onion,” on the intersection of psychology and philanthropy.
Otis is a much sought-after copywriter for nonprofit fundraising messages. He has written campaigns for UNICEF, St. Jude’s Children’s Research Hospital, March of Dimes, Susan G. Komen, the USO and dozens of other organizations. He has a Ph.D. in social psychology from Virginia Commonwealth University and a Bachelor of Arts from the University of Virginia, where he also played on UVA’s first ACC champion basketball team.
Katrina VanHuss has helped national nonprofits raise funds and friends since 1989 when she founded Turnkey. Her client’s successes and her dedication to research have made her a sought-after speaker, presenting at national conferences for Blackbaud, Peer to Peer Professional Forum, Nonprofit PRO, The Need Help Foundation and her clients’ national meetings. The firm’s work is underpinned by the study and application of behavioral economics and social psychology. Turnkey provides project engagements, coaching, counsel and staffing to nonprofits seeking to improve revenue or create new revenue. Her work extends into organizational alignment efforts and executive coaching.
Katrina regularly shares her wit and business experiences on her and Otis Fulton's NonProfit PRO blog “Peeling the Onion.” She and Otis are also co-authors of the books, "Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising" and "Social Fundraising: Mining the New Peer-to-Peer Landscape." When not writing or researching, Katrina likes to make things — furniture from reclaimed wood, new gardens, food with no recipe. Katrina’s favorite Saturday is spent cleaning out the garage, mowing the grass, making something new, all while listening to loud music by now-deceased black women, throwing in a few sets on the weight bench off and on, then collapsing on the couch with her husband Otis to gang-watch new Netflix series whilst drinking sauvignon blanc.
Katrina grew up on a Virginia beef cattle and tobacco farm with her three brothers. She is accordingly skilled in hand to hand combat and witty repartee — skills gained at the expense of her brothers. Katrina’s claim to fame is having made it to the “American Gladiator” Richmond competition as a finalist in her late 20s, progressing in the competition until a strangely large blonde woman knocked her off a pedestal with an oversized pain-inducing Q-tip. Katrina’s mantra for life is “Be nice. Do good. Embrace embarrassment.” Clearly she’s got No. 3 down.