Human Psychological Tendencies - Reinforcement and Incentives

Nov 9, 2016 -

Most people understand the power of incentives in reinforcing human behavior. It's definitely nothing new, however, I am constantly surprised as how many of us don't realize this phenomenon to its fullest potential.

A guy named Joe Wilson couldn't understand why Xerox's new and better machine was selling less units in comparison to the older and inferior model. His curiosity led him back to Xerox. Lone behold, what he discovered was that the commission arrangement favored the inferior machine.


In 2005, Symantec bought Veritas in a $13.5 billion stock deal and instantly the employee headcount jumped from 6,300 to 15,000. Whenever you have a change in company's structure of this magnitude, people worry about whether or not they will still have a job. One method that Symantec used to reestablish and educate its new and existing employees is they recognized their employees' performance through thank you notes and gift cards. Recognition programs are a great way to incentivize employees to increase sales and be more productive.

It is no surprise that the best places to work are also some of the most profitable companies. According to Business Insider for 2016, Google (Alphabet), Facebook and Apple all made the list. These are three of the largest companies by market capitalization. Alphabet and Apple combined hold over $200 billion in cash. After all what is a company anyways? A group of individuals who have come together to help move the group towards common goals. In the investing sense, we hope that these common goals are to make the company profitable.
 
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