Why do people act as they do? How do they make decisions that may not seem rational to us?
Why do companies behave as they do? Why do some organization innovate and adapt, while others struggle to make a change?
There are often three crucial elements with high explanatory value playing just beneath the surface of many human behaviors and decisions:
- Incentives: Some obvious, many less apparent.
- Status: Individuals seeking to affirm, maintain and signal their status within a perceived group or hierarchy, or (less often) looking to change it.
- Story: The stories (some valid, many made up), belief systems, and personal narratives that we all carry with us. These are the sound bites that play again and again on repeat in our minds. Teams, social groups, departments, and companies also often have stories, or shared beliefs about how the world works, what’s possible, and more.
Rather than become frustrated or annoyed at why people, groups, or enterprises make different decisions than we would, we can shift to becoming curious about it. Why people act as they do becomes its own fascinating area of study.
Learning to see and understand these better will greatly increase your knowledge of people, and over time, influence your success.
A Closer Look: Incentives
As mentioned above, some incentives are obvious and surface-level. They’re transactional, easier to spot, and perhaps shorter-term in nature. Examples are a quarterly sales goal target with a cash bonus attached, or a discount code that must be used by midnight.
Others are more subtle and play out over time. A banker or salesperson may give up a small commission now to make sure that they maintain a good relationship with a valued client for years to come. Here the game is much more iterative and long-term.
Where do we see this concept at work? Let’s say that a company’s management wants employees to be much more flexible and innovative so that the company can evolve its offerings and remain a leader in its industry. To be successful, company leadership would be well served to evaluate the role of incentives.
The question for executives trying to make this change is: What are the true incentives at work for individual employees to switch their behaviors from what they’ve always done? Particularly in cultures where maintaining the status quo has been incentivized and rewarded for years (which is very common in large companies).
A contest with short term cash prizes for great ideas might work. Many companies employ such programs. However, what if management is looking for a broader, more dramatic culture shift? How do they convince employees to make the switch? Which changes make sense depend on the organizational goals and context, but some examples might be:
- making innovation a component of performance reviews (at least for some employees) with consistent good scores leading to higher long-term incentive pay
- regularly (and publicly) praising individuals who demonstrate novel thinking
- visibly promoting innovators
- payment structure for innovators to share in the upside economics of ideas that make (or save) the company money
In the absence of true incentives for employees make the switch, management shouldn’t expect much change in behavior.
A Closer Look: Status
Status* – our place in a perceived hierarchy – is at play in so many human decisions and choices. Look more closely, and behind many of our decisions and actions is the desire to signal or express status.
When wondering why someone chooses to make a certain purchase, live in a particular neighborhood, wear a certain brand of clothing, foster certain relationships, etc., it can be very useful to ask: What status is this person looking to affirm (or change)?
For example, why does one 38-year-old lawyer that just made partner decide to spend $100,000 on a brand new BMW X7 SUV? Assuming it wasn’t an impulse purchase, it may be because this particular lawyer is seeking to affirm and signal their status as successful lawyer.
In contrast, why might another 38-year-old successful partner at the same firm, who makes about the same amount of money, purchase a non-luxury SUV at the same time? Why the different choice? What status affects are taking place? Perhaps this partner is seeking to affirm their status as a successful yet “practical” lawyer that also makes practical and conservative financial decisions in their personal lives.
Neither is wrong. They’re just different choices, with status likely playing a role. And both of these choices are closely related to story…
A Closer Look: Story
Because that’s how I was raised…
Because that’s what people like us do in this situation…
Because that’s the way its always been done…
Because that’s how you’re supposed to treat people…
Story, which can also be thought of as our personal (or group) narratives or beliefs, inform so much of human behavior.
The subjects of where our beliefs come from, their accuracy, and whether they serve our best interests are critical questions. But for our purposes here, we just need to keep in mind that we all have stories that play on repeat in both our conscious and subconscious minds. Some are shared human tendencies towards systematic behavioral and cognitive biases, but many are personal and individual to us.
Useful questions to ask when trying to explain or predict someone’s behaviors, choices, or decisions: How does the decision this person made (or we predicgt they’re going to make) fit into their personal story? What must stay true to this person as they’ve evaluating their options?
In the example above, the luxury SUV buyer may have the story that successful lawyers like them demonstrate their status by purchasing a certain tier of vehicle. Or, perhaps the family vehicle was always BMW in their household, and they absorbed a belief that quality engineering and design are valuable characteristics.
Alternatively, the non-luxury SUV buyer may have a story (or belief) that a successful lawyer with their particular background is best served purchasing a less expensive vehicle. Their personal story in this context may include beliefs around thrift, safety, and or practicality.
Again, neither story is wrong. But it’s incredibly intriguing and useful to start to see the differences in personal stories, beliefs, and narratives at work.
Additional thoughts – and an important caveat
Incentives, status, and story don’t come close to explaining all human behavior. No one framework can do that. Underlying human actions and decisions are many other factors, including cognitive, neurochemical (dopamine and rewards systems), psycho-emotional, and more. Entire branches of behavioral science and psychology are devoted to trying to untangle the factors behind human behavior and decision making.
Also, an important caveat to keep in mind: We can never know for sure what’s going in the minds of others. We don’t live in their heads, and will never fully know. We need to be careful about making assumptions or over-generalizing.
However, learning to “see” the three factors of incentives, status and story at play in our daily interactions with others can greatly improve our understanding of human nature, be endlessly interesting, and positively affect the trajectory of our careers and personal relationships.
What did you think? Feel free to email me at gordon@gordonstransky.com with your thoughts, comments, or any examples you’ve seen in your own life!
*To learn more about “seeing” different groups and behavior patterns in the context of marketing, Seth Godin’s book “This is Marketing” is excellent.