Incentives: The Most Powerful Force In The World

Aviral Vaid

Hatched by Aviral Vaid

Sep 28, 2023

4 min read


Incentives: The Most Powerful Force In The World

When it comes to understanding how the world works, people are not calculators; they are storytellers. The sheer volume of information and the countless blind spots make it impossible for individuals to calculate every aspect of life. Instead, we rely on stories to simplify complex problems into a few simple sentences, allowing us to make sense of the world around us. However, the power of storytelling goes beyond just providing a framework for understanding; it extends to the incentives that drive our behavior.

While financial incentives can certainly motivate people, they often pale in comparison to cultural and tribal incentives. People are more likely to support certain things not because of monetary gain, but because they don't want to upset or become banished from their social group. These cultural and tribal incentives are deeply ingrained in us and have a profound impact on our decision-making.

It's important to recognize that even good and honest people can be incentivized into engaging in crazy behavior. When faced with the right set of incentives, individuals may act in ways that seem irrational or unexpected. This is why it's crucial to consider how our own views and beliefs could change if our incentives were different. By asking ourselves this question, we can gain a deeper understanding of the forces that shape our behavior.

Set Better Product Goals with NCTs — Reforge

When it comes to product strategy, the biggest failure point often lies not in the strategy itself, but in the execution of meaningful goals. Goal-setting is a complex process that requires teams to excel across opposite ends of the strategy-vs.-execution spectrum. It involves having a clear understanding of the strategy, making thoughtful decisions about objectives, and creating a pragmatic plan for achieving those goals.

To avoid falling into the trap of wishful thinking, it's important to frame goals effectively. This means knowing what the right things are to do in the first place. One way to achieve this is by setting discovery goals that deliver insights to inform an impactful strategy. Additionally, input goals help secure reliable resources to make progress, while output goals ensure flawless execution. Finally, outcome goals prove that the strategy has the intended impact.

In order for cross-functional teams to work together effectively, it's important for them to collectively set goals and co-own the outcome. When each function owns their own goals, it often leads to competition rather than collaboration. OKRs (Objectives and Key Results) have become a popular framework for goal-setting, but they are not always sufficient for cross-functional product teams. This is where NCTs (Narratives, Commitments, and Tasks) come into play.

NCTs provide a three-part framework for setting better goals. The narrative is a qualitative description of what the team wants to achieve and why it's important to the business. Commitments are objectively measurable goals that the team commits to achieving, and tasks outline the work that needs to be done to fulfill those commitments. By using NCTs, teams can ensure a strong connection between goals and strategies, while also having a coherent and actionable plan.

When it comes to goal-setting, it's important to have a long-term perspective. Narratives help provide a big picture of what matters most, reducing the amount of uncertainty teams experience quarter-to-quarter. Well-crafted tasks help define milestones and necessary resources, ensuring a believable plan. While tracking progress is important for accountability, it is even more crucial for adaptability. Teams need to know when they're stuck and be able to ask for additional support to move forward.

In conclusion, incentives and goal-setting are two powerful forces that shape human behavior and drive organizational success. By understanding the role of incentives, we can gain insight into our own decision-making processes and better understand the actions of others. When it comes to goal-setting, using frameworks like NCTs can help teams set better goals, align strategies, and execute with precision. To apply these concepts in practice, here are three actionable pieces of advice:

  • 1. Reflect on your own incentives: Take the time to consider how your current views and beliefs would change if your incentives were different. This exercise can provide valuable insight into the forces that drive your behavior and help you make more informed decisions.
  • 2. Embrace cross-functional collaboration: Instead of each function owning their own goals, encourage cross-functional teams to collectively set goals and co-own the outcomes. This fosters collaboration and ensures that success is achieved through teamwork rather than competition.
  • 3. Utilize NCTs for goal-setting: Consider implementing the NCT framework for setting better goals. By using narratives, commitments, and tasks, teams can ensure a strong connection between goals and strategies, as well as create a coherent and actionable plan for execution.

By understanding the power of incentives and implementing effective goal-setting strategies, individuals and organizations can unlock their full potential and achieve meaningful success.

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